Pittsburgh firefighters sue city to protect its pension benefits

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Terrified that the City of Pittsburgh might slip into insolvency and be unable to pay full retirement benefits, the firefighters union filed a lawsuit aimed at preventing the state from taking over management of its pension plan.

As it stands, Pa. officials are set to take control of the pension fund if it is not at least 50 percent funded by Dec. 31. Currently, the plan is only 27.5 percent funded. Under a state law passed last year, the Pennsylvania Municipal Retirement System would manage the fund and require the city to make much larger annual payments to the fund in order to achieve certain minimal levels.

The city paid about $56 million into the firefighters retirement fund this year. If the state takes over the fund, it’s estimated that the city would be required by the state to dramatically increase payments, reaching $91 million by 2015, and averaging $120 million for the next 30 years. City officials and union leaders fear that the new payment obligation would render the city insolvent.

If the city becomes insolvent, the firefighters collective bargaining agreement could be thrown out and its retirement benefits likely reduced.

The union said that city leaders should raise taxes if necessary to head off the takeover of the retirement fund by the state. Doing so would allow the city to sell tax-anticipation notes, and offset the fund deficiency.

Pittsburgh currently employs 625 firefighters, and is paying retirement benefits to 1,340 individuals, including retirees and widows.

Pittsburgh Post-Gazette

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San Diego pension fund has $2.1 billion deficit, city happily pays out $5.2 million in retiree “bonuses”

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San Diego paying retiree pension bonuses, as city slips into financial meltdown

While the City of San Diego is scrambling to figure out how to manage its massive $2.1 unfunded pension liability, including a possible bankruptcy filing called for by some critics, bonus checks were just mailed to 6,630 retirees, thanks to a known flaw that’s been in the retirement system for over 30 years.

The bonus checks, on average of about $784 each, are part of calculation that provides for a so-called 13th check to be paid out, whenever the current year’s investment returns in the pension fund exceed 7.75 percent. Read more

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L.A. police union wants more overtime, not more officers

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In what appears to be a sharp turnaround from a standard union position, the Los Angeles Police Protective League is telling the city to stop hiring new officers, and instead, pay its existing members more overtime.

In an interview and article submitted to the Los Angeles Times, union president Paul M. Weber is asking the city to not replace retiring or resigning police officers. Weber’s reasoning for his suggestion is that officers used to earn as much as an additional 50 percent compensation for overtime work. Ever since the financial crisis hit the city two years ago, officers are now required to take time off as compensation for scheduled overtime.

Matt Szabo, Mayor Antonio Villaraigosa’s deputy chief of staff said, “It’s hard to imagine how the union is motivated here by the public’s safety.” Since Villaraigosa was elected and began increasing the headcount of police officers, crime has fallen significantly. Despite the city’s extreme financial crisis, the mayor is committed to hiring more officers to maintain the level that it’s been at since he took office.

The union says that the money would be better spent on fewer officers and allowing them to routinely rack up overtime, and hiring civilian workers to do office jobs that police officers are currently handling.

Not mentioned by either party is the issue of overtime and how it affects the retirement pay of those officers about to retire. Since overtime is used in the calculation that fixes the base salary for purposes of retirement pay, critics say that the department routinely funneled overtime assignments to officers in the final year before their retirement, in order to boost their retirement benefits by as much as 20 to 30 percent.

Los Angeles Times

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Six retired San Diego educators out-earn U.S Secretary of Education

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San Diego’s pension problems are nothing new, and lawmakers continue to search for answers on how it got into its mess and how to get out of it. The state’s pension system for retired educators has its own version of the problem, with an estimated $40.5 billion budget deficit over the next 34 years.

The San Diego Union-Tribune took a survey of pension payments made by the California State Teachers’ Retirement System to some of the local top administrators, looking for insight into how the fund pays its retirees, and found examples of outsized pensions paid to recent retirees.

Despite the fund’s financial woes, the amount paid to some of the retirees seem excessively generous.

The survey looked at educators’ pensions from the county’s 42 school districts, five community colleges and other educational institutions. Surprisingly, six of the county’s retired executives are collecting more that U.S Education Secretary Anne Duncan’s 2009 base salary of $197,000.

The county’s six highest paid educators are:

  1. Rudy Castruita, retired in 2006 as superintendent to the San Diego County Office of Education, receives $281,034 or 107 percent of his salary.
  2. Kenneth Noonan, retired in 2007 as superintendent of the Oceanside Unified School District, receives $249,011 or 92 percent of his salary.
  3. Larry Maw, retired in 2005 as superintendent of the San Marcos Unified School District, receives $229,326 or 98 percent of his salary.
  4. Ralph Cowles, retired as superintendent of Vista Unified School District in 2006, receives $223,632 or 97 percent of his salary.
  5. Sherrill Amador, retired in 2004 as president of Palomar Community College, receives $218,511 or 113 percent of her salary.
  6. Warren Hogarth, retired in 2003 as superintendent of the La Mesa-Spring Valley School District, receives $216,348 or 105 percent of his salary.

Included among the most highly-paid San Diego county retirees are 254 teachers and administrators who are paid over $100,000 per year, in addition to health care benefits.

The survey also found that the average retired teacher collects $40,633 per year, amounting to 58 percent of their final salary. That is more than the average San Diego city worker who receives $37,442 but far less than the $67,428 paid to firefighters or $62,098 for police officers.

Educators generally pay 8 percent of their salaries towards retirement, and taxpayers contribute another 8.25 percent from local districts and another 2 percent from the state.

Using the most highly paid retirees as an example, over the course of a thirty-year career, assuming an average salary of $100,000, the most that would have collectively been paid in is roughly at 18 per cent per year is $540,000. Yet based on a 25-year retirement payout for retirees and widows, the total pension benefits could likely exceed $5 million. Predictably, the math doesn’t add up.

It’s a good formula for keeping retirees happy, but with cutbacks and layoffs for currently employed teachers, an overhaul of the existing system is long overdue.

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San Diego officials make a mess of city streets

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A just-released report by City Auditor Eduardo Luna takes aim at the poor state of affairs with the city’s street repairs and maintenance efforts. Even after spending $133 million over the last seven years, the city has a work backlog of $377 million, and roughly 17 percent of city streets are rated as being in poor condition.

The report accuses city departments of poor planning and wasting taxpayer dollars by not coordinating repair work, saying that 18 percent of resurfacing work was done on streets that had the same work done within the previous two years. City departments and private companies, including San Diego Gas and Electric, routinely tear up freshly-paved streets necessitating new resurfacing, and preventing monies from being used elsewhere with more pressing needs.

City Councilman Kevin Faulconer says that “it’s the No. 1 issue among residents I speak with.” He acknowledges that city departments need to do a better job their coordinating efforts.

Over the last several years, the condition of San Diego’s streets have been in a downward spiral, while at the same time, city leaders approved hefty increases in health and pension benefits for fire and police union members. The increased pension benefits have created a massive unfunded pension liability totaling over $2.2 billion, and some experts believe that the city will ultimately need to restructure under bankruptcy protection.

Beginning Jan. 1, the city will fold the transportation and storm water department into a single unit that will handle street operations and maintenance, traffic engineering, utilities undergrounding, storm drain operation and right-of-way coordination. Officials expect that the new department will be better able to handle the coordination of repair and maintenance projects.

A non-profit trade group, The Foundation for Pavement Preservation, recently said that every $1 in well-planned city street repairs helps eliminate $6 to $14 later on rehabilitation projects.

San Diego Union-Tribune

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Post Office Delivers the Seemingly Unimaginable: $8.5 Billion Loss

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How it that a private company that has been around since 1775 and has a virtual monopoly on a service that is used by tens of millions of people and businesses daily, manage to lose so much money year after year?

Once again, the U.S Postal Service has announced a massive loss of $8.5 billion for the current year, on top of the $3.8 billion it lost last year. The company earlier estimated that it would lose somewhere in the neighborhood of $6 billion to $7 billion, but a reduction in the volume of letters delivered and increases in workers’ compensation costs caused the loss to soar. Revenues totaled $67.1 billion in the most recent year, compared to $68.1 billion in 2009.

With declining revenues from the increasing use of premium delivery services for packages and emails substituting for letters, the Postal Service is having difficulty adjusting to modern times and changing technology. Even though the Postal Service has been a private employer since 1983, it operates as an independent agency of the U.S. Government.

While the company receives no financial assistance or subsidies from the government, as of late, it has been borrowing money from the U.S. Treasury to keep afloat. This year it plans to borrow $3.5 billion, tapping out its $15 billion line of credit.

In order to help stem the red ink, last year it eliminated 105,000 full time positions, saving the company $9 billion over a two year period. Chief Financial Officer Joe Corbett said “We will continue our relentless efforts to innovate and improve efficiency,” Corbett said. “However, the need for changes to legislation, regulations and labor contracts has never been more obvious.”

The major obstacle in bringing costs into line has been the requirement to pre-fund future retiree health benefits in the amount of $5.5 billion per year. The obligation was part of a postal reform law passed in 2006.

The Postal Service has recently asked Congress to allow it to scale back its basic services including the elimination of mail service on Saturdays. Without any help from Washington, officials predict the Postal Service will be bankrupt by the end of 2011.

The U.S. Postal Service is the second largest private employer in the U.S. with over 500,000 employees, second only to Wal-Mart. By comparison, in a much more complicated business, with thousands of competitors, Wal-Mart earned in $14 billion last year.

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