Category Archives: Public Sector

The Plot Against Pensions: The Pew–Arnold campaign to undermine America’s retirement security – and leave taxpayers with the bill

Source: David Sirota, Institute for America’s Future, September 2013

From the press release:
The Institute for America’s Future released a new report authored by David Sirota (The Plot Against Pensions: The Pew–Arnold campaign to undermine America’s retirement security – and leave taxpayers with the bill) that examines how former Enron executive John Arnold is partnering with Pew Charitable Trusts’ Public Sector Retirement Project to fund an effort to undermine retirement security and slash public pension benefits.

The report reveals how the Pew-Arnold partnership has distorted the conversation about public pensions and created a movement to convert traditional public pensions into riskier and costlier schemes.

The report exposes how:
– Conservative activists are manufacturing the perception of a public pension crisis in order to both slash modest retiree benefits and preserve expensive corporate subsidies and tax breaks.
– The amount states and cities spend on corporate subsidies and so-called tax expenditures is far more than the pension shortfalls they face. Yet, conservative activists and lawmakers are citing the pension shortfalls and not the subsidies as the cause of budget squeezes. They are then claiming that cutting retiree benefits is the solution rather than simply rolling back the more expensive tax breaks and subsidies.
– The pension “reforms” being pushed by conservative activists would slash retirement income for many pensioners who are not part of the Social Security system. Additionally, the specific reforms they are pushing are often more expensive and risky for taxpayers than existing pension plans.
– The Pew Charitable Trusts and the Laura and John Arnold Foundation—the latter run by conservative political operatives and funded by an Enron billionaire—are working together in states across the country to focus the debate over pensions primarily on slashing retiree benefits rather than on raising public revenues.
– The techniques used by conservative activists to gain public support to privatize the public pensions that public workers have instead of Social Security are, if successful, likely to be used in efforts to privatize Social Security in the future….

An Analysis of the Treatment of Employee Pension and Wage Claims in Insolvency and Under Guarantee Schemes in OECD Countries: Comparative Law Lessons for Detroit and the United States

Source: Paul Secunda, Marquette Law School Legal Studies Paper No. 13-21, November 6, 2013

From the abstract:
To put the plight of the Detroit city employees into an international and comparative context when it comes to considering how their pension and wage claims should be treated in bankruptcy, it is instructive to consider how similar employee pension and wage claims would be treated in corporate insolvencies in other countries. It is necessary to focus on corporate insolvencies in other countries as the relevant comparison because most other countries do not have government systems in which municipalities have the same financial independence to borrow money and take on debt as municipalities do in the United States as part of the municipal bond market. Additionally, exploring the corporate bankruptcy systems in other countries provides a beneficial way to consider how to approach municipal bankruptcy situations in the United States, especially since corporate and municipal bankruptcies in the United States have a number of features in common when it comes to employee creditor claims.

This article therefore undertakes a comparative analysis of the treatment of pension and wage claims in insolvency proceedings and under guarantee schemes in the thirty-four member countries of the Organization of Economic Cooperation and Development (OECD) to understand whether the United States’ approach to employee claims in bankruptcy (in both the corporate and municipal context) is consistent with international norms. After completing the comparative analysis (which is comprehensively set out in the Country-by-Country Appendix at the end of this paper), this article then highlights common approaches to these issues, as well as important distinctions, setting up a number of tables to summarize the results.

All in all, most OECD countries have adopted hybrid systems which combine both some form of priority for both pension and wage claims, as well as some form of guarantee fund to complement the insolvency system. It is especially important to have these guarantee funds in place because insolvency processes can last for years, while the guarantee schemes are more likely to pay employees their claims within weeks or months. Unfortunately, the United States provides only limited priorities in most bankruptcy proceedings (and no such wage or pension priorities in Chapter 9 municipal proceedings), a guarantee system under the Pension Benefit Guaranty Corporation (PBGC) that is limited to pension plans, and then only to private-sector defined benefit pension plans. Neither private-sector defined contribution plans nor public sector pension plans come under a guarantee scheme in the United States.

One possible approach to employee claims in both municipal and corporate bankruptcies would be to pass pension and bankruptcy reform laws similar to what Canada enacted in 2008 as part of its Wage Earner Protection Program Act (WEPPA). Unlike the American system, WEPPA provides limited absolute priorities for pension contributions and a broad array of wage claims in insolvency, as well as a robust wage guarantee scheme. As to the policy reasons supporting this approach, it appears that greater emphasis is placed on the need to protect the weakness of employees creditors in the insolvency process as opposed to focusing on the need to ensure the existence of cheap, accessible credit for companies and governments.

This article concludes that given the relative vulnerability of employees and the sophistication of most lenders, the United States should balance these interests to provide increased protection for employment claims during municipal and corporate insolvency proceedings through giving heightened priority treatment to employees pension and wage claims in bankruptcy in tandem with a federally-operated guarantee scheme for both pension and wages claims.

The Strangely Unsettled State of Public-Sector Labor in the Past Thirty Years

Source: Joseph E. Slater, Hofstra Labor and Employment Law Journal, Vol. 30 no. 2, Spring 2013

From the abstract:
This article, part of a symposium on the history of various areas of labor and employment law, gives an overview of public-sector labor law and labor relations in the past thirty years. The public sector has for decades been central to labor relations in the U.S.; increasingly, it has also acquired a high profile in the political world. Despite great successes in organizing by public-sector unions, public-sector labor law has long been in a state of tumult (including, but not limited to, high-profile laws passed in 2011 gutting the rights of such unions). Although by the 1980s, it seemed as if public-sector collective bargaining was widely (if not universally) accepted, and that it functioned fairly well, the next three decades featured surprising upheavals. Because there is so much variation within the public sector (it is mainly state and local law), there is no single story of the past three decades. This article discusses illustrative events in this period, events which helped shape the broader history of labor relations. It starts with early history of public-sector labor law, then moves to the last three decades. For the 1980s, it discusses two key (and contrasting) events of the early part of the decade: the crushing defeat of the PATCO strike, and the enactment of the Ohio public-sector labor statute. It then discusses some significant twists and turns in the 1990s. Moving to the twenty-first century, it discusses some (mostly positive) trends for public-sector unions in the first decade of the century, but then turns to the wave of anti-union legislation in 2011 and beyond — although even here, there are some developments in the other direction, e.g. union rights for TSA employees. These events feature defeats and victories over issues as basic as whether public employees should have the right to bargain collectively at all, and they have shaped the entire U.S. labor movement, including the public sector. The also show how public-sector labor relations remains a strangely unsettled issue. The final sections discuss the practical and theoretical policy issues at stake, and attempt to make some predictions for the future.

Is U.S. Public Sector Labor Relations in the Midst of a Transformation?

Source: Harry C. Katz, ILRReview, Vol. 66 No. 5, October 2013
(subscription required)

From the abstract:
In this article the author assesses whether a fundamental transformation is underway in public sector (state and local government) labor relations in the United States by revisiting the arguments made by the author and Kochan and McKersie (1986) regarding the transformation of labor relations in the private sector. The author argues that the economic pressures that led to a transformation of private sector labor relations starting in the 1980s have not played a comparable role in recent developments in the public sector because of the political nature of labor relations in that sector. Other insights are drawn from a comparison of recent developments with events that occurred during the mid-1970s, an earlier taxpayer revolt era. The author concludes that a fundamental transformation in public sector labor relations has not occurred, attributable to some degree to the limited decline in public employee union membership and the fact that a majority of the public has favorable attitudes toward public sector employees and union collective bargaining rights. Factors that might lead to such a transformation in the future are highlighted.

Gauging the Burden of Public Pensions on Cities

Source: Alicia H. Munnell, Jean-Pierre Aubry, Josh Hurwitz and Mark Cafarelli, Center for Retirement Research at Boston College, SLP#35, November 2013

The brief’s key findings are:
– Media stories suggest – especially since the bankruptcy of Detroit – that pensions are the major expense of American cities and could lead to widespread collapse.
– A comprehensive measure of the cost burden considers how much city taxpayers pay for the pensions of city and county general government workers and teachers.
– For a sample of 173 cities, these overall pension costs equal 7.9 percent of the total revenue base.
– The cost burden ranges from 12.3 percent for the highest cost quintile to 2.7 percent for the lowest cost quintile.

The Great American Ripoff: The High Cost of Low Taxes

Source: Joshua Holland, Moyers & Company, October 29, 2013

Editor’s note: This is the first in a series on the high cost of low taxes.

The American people pay a similar amount for social services – health care, retirement security, disability and unemployment insurance and the like – as citizens of European countries with supposedly lavish social safety nets.

But there are two significant differences. First, we pay a hugely disproportionate share of the costs out-of-pocket*, through the private sector. And when things go badly – when misfortune hits — the safety net that we fall back on is truly pathetic in comparison. Call it the great American rip-off. …

… Contrary to popular belief, American families and corporations enjoy relatively low taxes – in the OECD, we ranked third from the bottom in total tax burden in 2010 – but it’s almost a wash when you add back what we spend out-of-pocket. The eight OECD countries with the highest tax burdens in 2010 (Denmark, Sweden, Norway, Belgium, Italy, France, Austria and Finland) paid out an average of just over 32 percent of their economic output for social services, while we forked over just under 30 percent.

The difference is that we ranked near the bottom in the OECD (26th out of 34 countries) in terms of public spending on these services. Government-provided services accounted for around 19 percent of our gross domestic product (GDP), compared with 29 percent of GDP in those high-tax countries. The difference was made up from out-of-pocket spending by citizens….

The Legislative Attack on American Wages and Labor Standards, 2011–2012

Source: Gordon Lafer, Economic Policy Institute, Briefing Paper #364, October 31, 2013

From the summary:
Over the past two years, state legislators across the country have launched an unprecedented series of initiatives aimed at lowering labor standards, weakening unions, and eroding workplace protections for both union and non-union workers. This policy agenda undercuts the ability of low- and middle-wage workers, both union and non-union, to earn a decent wage.

This report provides a broad overview of the attack on wages, labor standards, and workplace protections as it has been advanced in state legislatures across the country. Specifically, the report seeks to illuminate the agenda to undermine wages and labor standards being advanced for non-union Americans in order to understand how this fits with the far better-publicized assaults on the rights of unionized employees. By documenting the similarities in how analogous bills have been advanced in multiple states, the report establishes the extent to which legislation emanates not from state officials responding to local economic conditions, but from an economic and policy agenda fueled by national corporate lobbies that aim to lower wages and labor standards across the country….

What happened to workers in 2011 and 2012

Pension Theft Crime Wave

Source: Mark Brenner, Labor Notes, October 21, 2013

…But the fact is that the crisis in funding for pensions, both private and public, is a manufactured one. It’s rooted in the Enron-style accounting and “something-for-nothing” financial engineering that set off the 2008 financial meltdown.

Making wishful assumptions about future stock market performance, corporate execs shortchanged pensions, diverting dollars into outsized dividends and stratospheric bonuses for themselves. Many were long gone by the time the bill came due.

The same dynamic drove politicians—hardwired to tell people what they want to hear—to claim that sure, corporations and the rich could have tax cuts while public sector workers continued to receive their pensions and regular raises.

Now that state and local governments are swimming in red ink because of those tax cuts and the Wall Street meltdown, unions are caught flat-footed. Their erstwhile allies, after testing today’s political winds, now line up to ax their pay and pensions….

Fast Food Workers Win a Union…through Zoolidarity

Source: Shamus Cooke, Labor Notes, October 7, 2013

…Last month 142 mostly part-time food service workers, public employees at the Oregon Zoo, showed it could be done, winning a landslide election to join Laborers Local 483 in Portland. They join 137 already-union admissions and custodial employees at the zoo—about half of these are temps—doubling the size and power of the bargaining unit just in time for contract negotiations…

…One of the tactics Mann suggests is using workplace surveys to agitate about working conditions. When a Local 483 organizer was surveying existing members at the zoo, a food service worker found the flyer on a bulletin board and filled out the survey, leading to contact with several other “foodies.”

The most important aspect of the campaign was, of course, a strong, 27-member worker-led organizing committee that worked hard to recruit and train others. “Their energy infected the rest of the workplace,” said Local 483 organizer Tobias Green—producing a cohesive workplace that began to think and act more united. Workers called their workplace culture “zoolidarity” throughout the campaign.

The campaign also made use of social media, opening up a “secret” Facebook page before the drive went public. This tactic is risky since published information can find its way back to management, but the zoo workers invited people they trusted into the Facebook group. Soon the page was used as an auxiliary tool to share information, support each other, and complain about work—i.e., to build solidarity….