Category Archives: Public Sector

Employee Turnover and Organizational Performance: Testing a Hypothesis from Classical Public Administration

Source: Kenneth J. Meier and Alisa Hicklin, Journal of Public Administration Research and Theory, Vol. 18 no. 4, October 2008

Empirical studies of public employee turnover, particularly using turnover as an independent variable, are rare; and most of the literature assumes turnover to have a negative impact on organizations. This study examines a provocative but little supported hypothesis that has recently emerged in the private sector literature–that turnover may provide positive benefits to the organization, at least up to a point. Using data from several hundred public organizations over a nine-year period, we test the proposition that moderate levels of turnover may positively affect organizational performance. We find that while turnover is indeed negatively related to performance for the organization’s primary goal, it does have the hypothesized nonlinear relationship for a secondary output that is characterized by greater task difficulty.

Report on the Hispanic Employment Challenge in the Federal Government

Source: U.S. Equal Employment Opportunity Commission, Federal Hispanic Work Group, October 23, 2008

From the press release:
The U.S. Equal Employment Opportunity Commission (EEOC) has released a comprehensive report to Chair Naomi C. Earp from the Federal Hispanic Work Group. The report contains an extensive number of practical recommendations that address a broad array of contemporary federal sector employment issues, including hiring, leadership development and retention.

Prudent Investors: The Asset Allocation of Public Pension Plans

Source: Christine Weller, Jeffrey B. Wenger, Political Economy Research Institute, July 2008

From the abstract:
After 2000, the vast majority of defined benefit (DB) pension plans encountered a decrease in their funding ratios, largely due to a drop in asset prices. It is possible that public sector pension plans may have acted imprudently by chasing returns, once they encountered underfunding. We identify four indicators for DB plans’ imprudent investment behavior: no portfolio rebalancing, employer conflicts of interest, trustee conflicts of interest, and failure to implement best investment practices.

To see if public sector pension plans rebalance their portfolios, we use data from the Federal Reserve’s Flow of Funds, dating from 1952 to 2007. To test for the remaining three hypotheses, we use data from the Census’ State and Local Government Employee Retirement Systems data base, where consistent data for state and local government plans are available from 1993 to 2005. Our results suggest that there is no evidence that public sector plans systematically engaged in imprudent investment behavior and that this did not systematically differ after 2000 from the earlier period.

The Vesting, Modification, And Financing of Public Retiree Health Benefits In Light of New Accounting Rules

Source: John Sanchez, John Marshall Law Review, Summer 2008

New accounting rules being phased in between 2006 and 2008 will require state and local governments, for the first time, to report the full cost of public retiree health benefits (“PRHBs”) for both current employees and retirees. … While strictly speaking the case narrowly involves public pension plans, any decision is likely to influence all public employment retirement benefits, including health benefits that offer different benefits packages for different age groups. … On the minus side, some public employers fear that pre-funding will change the nature and status of retiree health benefits from unvested to vested. … But in the public sector, what if a statute forbids the vesting of PRHBs but the contract includes a promise of lifetime retiree benefits? … An oversight board arbitration award aimed at altering retirees’ medical benefits was challenged as: 1) a breach of contract; 2) an ultra vires act; 3) a taking under the state and federal constitutions; and 4) an impairment of contract rights in violation of the federal constitution. … While nothing in the new accounting rules forces states to switch from pay-as-you-go financing, several factors will exert pressure on states to increasingly pre-fund PRHBs: (1) failure to pre-fund may result in a downgrading of a state’s creditworthiness, making it more expensive to borrow money; (2) the decreasing ratio between the numbers of active employees to retirees will increase the cost of PRHBs; (3) the aging workforce and financial incentives to retire at younger ages will increase the cost of PRHBs; and (4) if recent trends in the development of medical technology continue, the costs of healthcare will continue to outstrip inflation for the foreseeable future.

To “Re-Hatch” Public Employees or Not? An Ethical Analysis of the Relaxation of Restrictions on Political Activities in Civil Service

Source: James S. Bowman and Jonathan P. West, Public Administration Review, Vol. 69 no. 1, January/February 2009
(subscription required)

From the abstract:
This study examines the ethical content of legislation regulating the political activities of civil servants. The analysis is done using the “ethics triangle,” a tool that encompasses the interdependence of results-based utilitarian ethics, rule-based duty ethics, and virtue-based character ethics. The discussion begins with the importance of the problem, followed by its evolution and current status. After describing the methodology, the central section investigates the values at stake. The conclusion provides a synthesis of the findings, explores the implications of the study, and attempts to answer the question posed in the title of the paper.

Financial Crisis Shouldered by City Workers

Source: Paul Abowd, Labor Notes, No. 358, January 2009

Last summer’s meeting of the National Conference of Mayors foresaw grim days for American cities — and that was before finance markets folded up in the fall. Now urban governments confront budget deficits that stem from falling tax revenues and the ongoing credit crunch.

More than a quarter of American cities hemorrhaged jobs in 2008. Mayors now propose to add to the jobless by firing yet more city workers. Wall Street’s collapse has opened a $4 billion hole in New York’s $60 billion balance sheet over the next two years–and support from state and federal coffers is less than forthcoming.

Estimating State and Local Government Pension and Retiree Health Care Liabilities

Source: Stephen T. McElhaney, Pension Resarch Council, WP2008-22, October 2008
(registration required)

Liabilities for pension and retiree health-care benefits provided by U.S. state and local governments are causing concerns for taxpayers and for those holding government bonds. Many question whether the methodology used to calculate these liabilities is appropriate, since the private sector calculates retirement system liabilities using different methods and assumptions. This chapter reviews and critiques current actuarial and accounting standards under which governmental retiree liabilities are calculated and compares and contrasts these standards to those used by private-sector employers.

Benefit Cost Comparisons Between State and Local Governments and Private Industry Employers

Source: Ken McDonnell, Pension Research Council, WP2008-21, October 2008

It is often argued that compensation patterns for public sector employees are higher than in the private sector. This chapter examines some of the reasons for the observed differences in total compensation costs between US state and local government employers and private industry employers. We examine compensation costs by industry, occupation, union status, and employee benefit participation.

In It for the Long Haul: The Investment Behavior of Public Pensions

Source: Christian Weller, Jeffrey Wenger, National Institute on Retirement Security, November 2008

A new NIRS report finds that public pensions exhibit prudent investment behavior, even during turbulent markets. The results are contained in the study, “In It for the Long Haul: The Investment Behavior of Public Pensions” released on November 24, 2008.

The analysis is based on U.S. Federal Reserve and U.S. Census Bureau data from 1993 to 2005 and concludes that public pension plans are prudent investors because they:

  • Actively rebalance investments in response to price changes.
  • Do not get caught up in a “herd mentality,” but rather follow the best investment practices in the industry.
  • Hold higher risk assets when funding levels are higher, and assess their financial situation before modifying the plan’s asset allocation.
  • Hold smaller amounts of stocks when employers face higher contribution rates.