Category Archives: Public Sector

An Analysis of Risk-Taking Behavior for Public Defined Benefit Pension Plans

Source: Nancy Mohan, Zhang Ting, Upjohn Institute Working Paper No. 12-179, November 18, 2011

From the abstract:
This paper investigates the determinants of public pension plan risk-taking behavior using the percentage of total plan assets invested in the equity markets and the pension asset beta as measures of investment risk. We find that government accounting standards strongly affect public fund investment risk, as higher return assumptions (used to discount pension liabilities) are associated with higher equity allocation and beta. Unlike private pension plans, public funds undertake more risk if they are underfunded and have lower investment returns in the previous years, consistent with the risk transfer hypothesis. Furthermore, pension funds in states facing financial constraints allocate more assets to equity and have higher pension asset betas. There also appears to be a herding effect in that a change in CalPERS portfolio beta or equity allocation is mimicked by other pension funds. Finally, the results offer mild support of a public union effect.

In Defense of Defined-Benefit Pensions / Modest Reforms to State Plans Are Best Option for Taxpayers

Source: David Madland, Nick Bunker, Center for American Progress, February 2012

From the summary:
Because many states’ public-employee pension plans are currently underfunded–meaning that current assets are less than promised retirement benefits–proposals to drastically reshape public-sector pensions or eliminate them in favor of 401(k)-style retirement plans are expected to once again be introduced this coming year in statehouses across the country. While proponents argue that these alternative defined-contribution plans are good for taxpayers, in most cases taxpayers are better off making relatively minor reforms to the current defined-benefit pension system rather than scrapping it entirely.

Debating Public vs. Private Employment

Source: Dave Senf, Minnesota Department of Employment and Economic Development, Minnesota Economic Trends, December 2011

From the summary:
Are public sector employees overpaid or underpaid? A newly published article, “Debating Public vs. Private,” in Minnesota Economic Trends, takes a look at the issue. The analysis includes a list of public sector compensation studies; some of the studies found public sector workers to be underpaid and some found public sector workers to be overpaid. The article also compares the standard sources of state and local employment data in a chart and analyzes why the numbers vary.

Just how many public employees are there in Minnesota? The public sector is the second largest employer in Minnesota, but state and local government employment has decreased as a percentage of total employment in the last 35 years.

2010 Comparative Study Of Major Public Employee Retirement Systems

Source: Wisconsin Legislative Council, December 2011

This report compares significant features of major state and local public employee retirement systems in the United States. The report compares retirement benefits provided to general employees and teachers, rather than benefits applicable only to narrower categories of employees such as police, firefighters, or elected officials. Generally, the report has been prepared every two years since 1982 by the Wisconsin Retirement Research Committee staff or the Legislative Council staff.

The Great Recession and Compensation Practices: New Rules for Compensation?

Source: Bruce J. Perlman, State and Local Government Review, Vol. 43 no. 3, December 2011
(subscription required)

From the abstract:
This article introduces the Governance Matters essays for this issue. It discusses the Great Recession and its effects on Labor Relations and Collective Bargaining and the effects of these on compensation practices in State and Local Governments. The Great Recession is an enduring event in American government and politics. It has had marked impact on the structure and operations of State and Local government especially on budgets. Given, the large proportion of state and local government budgets devoted to compensation the Great Recession’s economic and political effects may be greatest there. This article asks of the essays, whether changes in labor relations and collective bargaining due to the Great Recession are changing the rules for government compensation practices at the state and local level in the U.S. It concludes that they are, but the durability of these rule changes and the political impact is yet to be determined.

Budget Shortfalls, Employee Compensation, and Collective Bargaining in Local Governments

Source: Thom Reilly and Mark B. Reed, State and Local Government Review, Vol. 43 no. 3, December 2011
(subscription required)

From the abstract:
The purpose of this study was to examine how local governments are responding to budget shortfalls and to explore how compensation practices across the United States are correlated to changes in service delivery. One hundred thirty-four of the largest cities and counties responded to a mail survey, for a response rate of 45 percent. A large percentage (95 percent) of local governments reported experiencing budget shortfalls. In response, local governments are reducing their workforces, laying employees off and/or utilizing reserves rather than raising taxes and/or scaling back wages and benefits. Type of government (county or city) and collective bargaining were associated with budget shortfalls. Despite the fiscal distress of governments, average cost of living increases were between 2 and 3 percent for each of the two years surveyed and nearly half of respondents reported increases in employee benefits (fewer than 10 percent reported any decreases). Collective bargaining was significantly associated with higher increases in benefits, increased cost-of-living adjustments, and responses to budget shortfalls.

The Great Recession’s Institutional Change in the Public Employment Relationship: Implications for State and Local Governments

Source: Helisse Levine and Eric Scorsone, State and Local Government Review, Vol. 43 no. 3, December 2011
(subscription required)

From the abstract:
Interest in public sector employee benefits and compensation has resurfaced due to the economic downturn spurring a wave of actions that may threaten a once secure future of millions of public workers. The purpose of this article is to explore the ramifications of compensation and benefit changes on the fiscal health of state and local governments. This article reviews the evolution of labor relations in the public sector, recent institutional changes in employment and compensation, and implications on the fiscal health of state and local governments and their employees. The authors argue that these changes or threat of such changes, including restructuring collective rights, unionization, union dues collection, and the issues that can be bargained, are shifting the playing field for public sector employees and employers. Not since the passage of the right to unionization and collective bargaining in the 1960s have such major changes been on the horizon. These institutional changes will have longstanding effects including cost of government, types of workers attracted to government and even type and quality of services provided. Given also that employee compensation typically represents a major portion of the overall cost of state and local governments, it is not unexpected that political officials will continue to seek to rethink the employment relationship in order to ensure the fiscal health of their governments and those who serve in the public sector.

America’s Public Sector Workers Under Attack

Source: Gerald Friedman, Dollars & Sense, no. 297, November/December 2011
(subscription required)

It’s not about their pay and benefits – it’s about what they do. From California to Massachusetts, from Texas to Wisconsin, whether by fiat or through bargaining, state governments would balance their budgets by taking a meat axe to public employee wages, benefits, and jobs. Behind the headlines, the relative strength of public-sector unions has long made them a target for economists and conservatives hostile to all forms of working-class collective action and any regulation of the capitalist marketplace.

Which governments pay public employees the most?

Source: Diana Lopez, Sunshine Review Issue No. 1, January 2012

Today, Sunshine Review released its first state government salary report, which analyzed public sector employee salaries in 152 local governments spanning eight states. Taking data from the last four years, Sunshine Review investigated benefits information as well as information on government perks like car fleets and cell phones for public sector employees in California, Pennsylvania, Florida, Illinois, Michigan, New Jersey, Texas and Wisconsin.

Sunshine Review’s study showed that of the states analyzed, California had the largest number of public sector employees making over $150,000 with 1332 employees. Illinois followed in second with 867 and Texas is in third with 194.

Toward a New Grand Bargain: Collaborative Approaches to Labor-Management Reform in Massachusetts

Source: Barry Bluestone, Thomas A. Kochan, Boston Foundation, October 2011

In the face of continuing fiscal crisis, the governors of some states including Wisconsin, Ohio, and New Jersey have taken to attacking public sector unions using new legislation to undermine the collective bargaining rights of state and municipal employees. The reaction has been widespread protest and a growing rift between political leaders and civil servants. We believe this painful struggle can not only be avoided in Massachusetts, but that the continuing fiscal crisis facing the Commonwealth and its municipalities can provide the motivation for forging a fundamental change in public sector labor relations that not only could lead to more efficient and effective government service, but in the case of our teachers’ unions, could play a critical role in improving public education and closing the achievement gap.

The approach we put forward in this report is developed on the basis of “interest-based collective bargaining” plus the empowerment of teachers, staff, and principals in the schools where they work. Instead of seeing unions as a barrier to fiscal prudence and better schools, we believe a new collective bargaining framework in the Commonwealth can lead to a “win-win-win” outcome for teachers, students, and taxpayers. The same approach generally can be used for all public sector labor-management relations.