Camden NJ: a poor city will replace its unionized police force

Here’s an interesting NYT article – yet another American city can no longer afford the lavish public employee union costs: To Fight Crime, a Poor City Will Trade In Its Police

Janiah Rosas, 8, and her brother Jaden, 3, playing outside an abandoned house in Camden, N.J., where crime is rampant.

CAMDEN, N.J. — Two gruesome murders of children last month — a toddler decapitated, a 6-year-old stabbed in his sleep — served as reminders of this city’s reputation as the most dangerous in America. Others can be found along the blocks of row houses spray-painted “R.I.P.,” empty liquor bottles clustered on their porches in memorial to murder victims.

The police acknowledge that they have all but ceded these streets to crime, with murders on track to break records this year. And now, in a desperate move to regain control, city officials are planning to disband the Police Department.

The reason, officials say, is that generous union contracts have made it financially impossible to keep enough officers on the street. So in November, Camden, which has already had substantial police layoffs, will begin terminating the remaining 273 officers and give control to a new county force. The move, officials say, will free up millions to hire a larger, nonunionized force of 400 officers to safeguard the city, which is also the nation’s poorest.

Hardly a political battle of the last several years has been fiercer than the one over the fate of public sector unions. But Camden’s decision to remake perhaps the most essential public service for a city riven by crime underscores how communities are taking previously unimaginable steps to get out from under union obligations that built up over generations.

The new force will be introduced in blocks of 25 officers so the new guys can train with the union officers still around (if they show up, 30% don’t show up for work).

Continue reading…

American Airlines Wants to Terminate Its Pension Plan, Lay Off 13,000

Interesting. Somehow these deals have to be recut or the jobs just go away. Megan McArdle:

Details of the American Airlines bankruptcy are emerging. And the details are that AMR wants all of its creditors to take a deep haircut, especially the workers:

The company aims to cut labor costs 20% under bankruptcy protection, and will soon begin negotiations with its three major unions. Some management jobs would also be cut.

AMR also proposes to end its traditional pension plans. The move has been strongly opposed by the airline’s unions and the U.S. pension-insurance agency.

CEO Thomas Horton said the company hopes to return to profitability by cutting spending more than $2 billion per year and raising revenue by $1 billion per year.

. . . Horton said cost-cutting will include restructuring debt and aircraft leases, grounding older planes, and changing labor contracts.

This is just the opening salvo in what promises to be a bruising negotiation with the unions. It’s not clear that the company actually expects to be allowed to terminate the pension plan. But the threat certainly gives them leverage with the unions, especially the pilots, because if the plan is terminated and taken over by the Pension Benefit Guaranty Corp, the payouts will be capped at around $50,000 a year–far less than pilots get from the current plan.


Read the whole thing »

Employees at Just One Paris Hospital Are Owed 2 Million Vacation Days

Yikes! from the Atlantic Wire!

(…) The French government is currently in negotiation with unions to keep hospitals open and in the midst of economic downturn French society is debating the merits of the 35-hour work week, now in its 12th year. But that isn’t stopping President Nicolas Sarkozy, who campaigned on too much vacation time in 2007, from attacking it. “I tell you this because it is a pure fact: lowering the retirement age to 60 and the 35-hour work week were serious mistakes that we are still paying heavily for.”

How the public employee unions took over California

{Photo credit Wikimedia Commons, Johnny Freak}

Former Wall Street denizen Michael Lewis is fairly dependable as a source of finance info that you need to know. Example: I enjoyed his essay California and Bust more than anything else I’ve read in the past 60 days. Michael delivers straight talk from Meredith Whitney, former governor Arnold Schwarzenegger, who explains why the Golden State has cratered, San Jose mayor Chuck Reed and [bankrupt] Vallejo city manager Phil Batchelor.

Being an optimist, I used to think that strong leadership could educate and persuade voters to vote for measures that benefit the public at large. I thought Arnold Schwarzenegger was giving California that kind of leadership. See what you think after reading Michael’s research. My take is that Schwarzenegger was that kind of leader, but both the unions and California voters just want their free lunch.

To give you a taste of why you need to read the Lewis essay, here are four excerpts on each of these participants:

Whitney: What Meredith Whitney was trying to say was more interesting than what she was accused of saying. She didn’t actually care all that much about the municipal-bond market, or how many cities were likely to go bankrupt. The municipal-bond market was a dreary backwater. As she put it, “Who cares about the stinking muni-bond market?” The only reason she had stumbled into that market was that she had come to view the U.S. national economy as a collection of regional economies. To understand the regional economies, she had to understand how state and local governments were likely to behave, and to understand this she needed to understand their finances. Thus she had spent two unlikely years researching state and local finance. “I didn’t have a plan to do this,” she said. “Not one of my clients asked for it. I only looked at this because I needed to understand it myself. How it started was with a question: How can G.D.P. [gross domestic product] estimates be so high when the states that outperformed the U.S. economy during the boom were now underperforming the U.S. economy—and they were 22 percent of that economy?” It was a good question.

Schwarze­neg­ger: Two years into his tenure, in mid-2005, he’d tried everything he could think of to persuade individual California state legislators to vote against the short-term desires of their constituents for the greater long-term good of all. “To me there were shocking moments,” he says. (…) “When you want to do pension reform for the prison guards,” he says, “and all of a sudden the Republicans are all lined up against you. It was really incredible, and it happened over and over: people would say to me, ‘Yes, this is the best idea! I would love to vote for it! But if I vote for it some interest group is going to be angry with me, so I won’t do it.’ I couldn’t believe people could actually say that. You have soldiers dying in Iraq and Afghanistan, and they didn’t want to risk their political lives by doing the right thing.”

Home of the Free . . . Lunch

A compelling book called Cal­ifornia Crackup describes this problem more generally. It was written by a pair of journalists and nonpartisan think-tank scholars, Joe Mathews and Mark Paul, and they explain, among other things, why Arnold Schwarze­neg­ger’s experience as governor was going to be unlike any other experience in his career: he was never going to win. California had organized itself, not accidentally, into highly partisan legislative districts. It elected highly partisan people to office and then required these people to reach a two-thirds majority to enact any new tax or meddle with big spending decisions. On the off chance that they found some common ground, it could be pulled out from under them by voters through the initiative process. Throw in term limits—no elected official now serves in California government long enough to fully understand it—and you have a recipe for generating maximum contempt for elected officials. Politicians are elected to get things done and are prevented by the system from doing it, leading the people to grow even more disgusted with them. “The vicious cycle of contempt,” as Mark Paul calls it. California state government was designed mainly to maximize the likelihood that voters will continue to despise the people they elect.

But when you look below the surface, he adds, the system is actually very good at giving Californians what they want. “What all the polls show,” says Paul, “is that people want services and not to pay for them. And that’s exactly what they have now got.”

(…) In Paul’s view, Arnold Schwarzenegger had been the best test to date of the notion that the problem with California politics was personal, that all the system needed to fix itself was an independent-minded leader willing to rise above petty politics and exert the will of the people. “The recall was, in and of itself, an effort by the people to say that a new governor—a different continued from page 183 person—could solve the problem,” says Paul. “He tried every different way of dealing with the crisis in services. He tried to act like a Republican. He tried to act like a Democrat. He tried making nice with the legislature. When that didn’t work he called them girlie men. When that didn’t work he went directly to the people. And the people voted against his proposals.”

Chuck Reed: It’s late afternoon when I meet Mayor Chuck Reed in his office at the top of the city-hall tower. The crowd below has just begun to chant. The public employees, as usual, are protesting him. Reed is so used to it that he hardly notices. He’s a former air-force officer and Vietnam-era veteran with an intellectual bent and the clipped manner of a midwestern farmer. He has a master’s degree from Princeton, a law degree from Stanford, and a lifelong interest in public policy. Still, he presents less as the mayor of a big city in California than as a hard-bitten, upstanding sheriff of a small town who doesn’t want any trouble. Elected to the city council in 2000, he became mayor six years later; in 2010 he was re-elected with 77 percent of the vote. He’s a Democrat, but at this point it doesn’t much matter which party he belongs to, or what his ideological leanings are, or for that matter how popular he is with the people of San Jose. He’s got a problem so big that it overwhelms ordinary politics: the city owes so much more money to its employees than it can afford to pay that it could cut its debts in half and still wind up broke. “I did a calculation of cost per public employee,” he says as we settle in. “We’re not as bad as Greece, I don’t think.”

The problem, he explains, pre-dates the most recent financial crisis. “Hell, I was here. I know how it started. It started in the 1990s with the Internet boom. We live near rich people, so we thought we were rich.” San Jose’s budget, like the budget of any city, turns on the pay of public-safety workers: the police and firefighters now eat 75 percent of all discretionary spending. The Internet boom created both great expectations for public employees and tax revenues to meet them. In its negotiations with unions the city was required to submit to binding arbitration, which works for police officers and firefighters just as it does for Major League Baseball players. Each side of any pay dispute makes its best offer, and a putatively neutral judge picks one of them. There is no meeting in the middle: the judge simply rules for one side or the other. Each side thus has an incentive to be reasonable, for the less reasonable they are, the less likely it is that the judge will favor their proposal. The problem with binding arbitration for police officers and firefighters, says Reed, is that the judges are not neutral. “They tend to be labor lawyers who favor the unions,” he says, “and so the city does anything it can to avoid the process.” And what politician wants to spat publicly with police officers and firefighters?

(…) “You start to ask: What is a city? Why do we bother to live together? But that’s just the start.” The problem was going to grow worse until, as he put it, “you get to one.” A single employee to service the entire city, presumably with a focus on paying pensions. “I don’t know how far out you have to go until you get to one,” said Reed, “but it isn’t all that far.” At that point, if not before, the city would be nothing more than a vehicle to pay the retirement costs of its former workers.

Phil Batchelor: Back in 2008, unable to come to terms with its many creditors, Vallejo declared bankruptcy. Eighty percent of the city’s budget—and the lion’s share of the claims that had thrown it into bankruptcy—were wrapped up in the pay and benefits of public-safety workers. Relations between the police and the firefighters, on the one hand, and the citizens, on the other, were at historic lows. The public-safety workers thought that the city was out to screw them on their contracts; the citizenry thought that the public-safety workers were using fear as a tool to extort money from them. The local joke was that “P.D.” stands for “Pay or Die.” The city-council meetings had become exercises in outrage: at one, a citizen arrived with a severed pig’s head on a barbecue grill. “There’s no good reason why Vallejo is as fucked up as it is,” says longtime resident Marc Garman, who created a Web site to catalogue the civil war. “It’s a boat ride to San Francisco. You throw a stone and you hit Napa.” Since the bankruptcy, the police and fire departments have been cut in half; some number of the citizens who came to Phil Batchelor’s office did so to say they no longer felt safe in their own homes. All other city services had been reduced effectively to zero. “Do you know that some cities actually pave their streets?” says Batchelor. “That’s not here.”

(…) Having failed to convince its public-safety workers that it could not afford to make them rich, the city of Vallejo, California, had hit bottom: it could fall no lower. “My approach has been I don’t care who is to blame,” Batchelor said. “We needed to change.”

(…) In August 2011, the same week that Standard & Poor’s downgraded the debt of the United States government, a judge approved the bankruptcy plan for Vallejo, California. Vallejo’s creditors ended up with 5 cents on the dollar, public employees with something like 20 and 30 cents on the dollar. The city no longer received any rating at all from Moody’s and Standard & Poor’s. It would take years to build the track rec­ord needed to obtain a decent rating. The absence of a rating mattered little, as the last thing the city needed to do was to go out and borrow money from strangers.

Read the whole thing »

Is there anything that can be done to break the stranglehold the public employee unions have on every level of American government? I used to believe that bankruptcy was the mechanism that allowed government to shed the un-payable obligations. Perhaps, but the Vallejo experience is not encouraging. And I keep remembering what happened to GM and Chrysler. If allowed a normal bankruptcy they could have re-negotiated the un-payable benefits under the supervision of the bankruptcy judge. But the American administration intervened, quickly taking almost 70% of what was due to the senior secured creditors and giving to the unions. Something similar is probably what will happen when cities like San Jose start declaring bankruptcy. But where does it stop?

Public Unions Force Taxpayers to Fund Democrats

Nothing new here, though there are some signs that US taxpayers are catching on. Michael Barone explains

(…) Enormous contributions, yes — to the Democratic Party and the Obama campaign. Unions, most of whose members are public employees, gave Democrats some $400 million in the 2008 election cycle. The American Federation of State, County and Municipal Employees, the biggest public employee union, gave Democrats $90 million in the 2010 cycle.

Follow the money, Washington reporters like to say. The money in this case comes from taxpayers, present and future, who are the source of every penny of dues paid to public employee unions, who in turn spend much of that money on politics, almost all of it for Democrats. In effect, public employee unions are a mechanism by which every taxpayer is forced to fund the Democratic Party.

(…) But what are the contributions that public employee unions make to our states and our citizens? Their incentives are to increase the cost of government and reduce down toward zero the accountability of public employees — both contrary to the interests of taxpaying citizens.

An argument can be made that higher pay, generous benefits and lavish pensions will attract better people to public employment. But where are the studies that show that citizens of states with strong public employee unions get better services than citizens in states without?

What citizens of states with strong public employee unions do get are higher taxes and enormous pension burdens that threaten to squeeze out funds for ongoing services, as even Democratic governors like Andrew Cuomo of New York and Jerry Brown of California have figured out.

(…) It was Franklin Roosevelt who said, “Action looking toward the paralysis of government by those who have sworn to support it is unthinkable and intolerable.”

Smoke and Errors

Northwestern University professor Fred S. McChesney wrote this essay June 2002:

Following last September’s horrifying events, polymath Paul Krugman informed readers of the New York Times that he had “identified a government agency that, by the usual criteria, should be a prime target for downsizing—maybe even abolition.” That agency’s work could be outsourced to private companies, with “no question” that the costs of using private companies would be lower. “In fact, many of the agency’s employees are paid considerably more than people with equivalent qualifications in the private sector.” That agency? The New York City Fire Department.

But all this was just a tease. For Krugman, government is good, so more government is better. (Krugman was just using the fire department to argue his main claim, that government should take over airport security.) Lest Times readers think he was serious about downsizing the public sector, Krugman immediately indicated why in fact fire fighting should not be privatized. “The basic answer is that the city can’t write a contract to cover all eventualities, and so a private firm would always have an incentive to pinch pennies at the expense of public safety.”

Those of us who caution students against the nirvana fallacy, the logical error of comparing the performance of actual private firms with that of a hypothetically perfect government, always welcome new examples. Today’s students, working on their self-esteem, can’t help but feel better about themselves when new examples of the fallacy come right from Princeton’s tenured ranks. Of course a city cannot write a fully-specified contract with private fire-fighting firms, any more than it writes one with the unionized firemen now found in most big cities. I doubt whether Professor Krugman works with a fully-specified contract, but his Ivy League institution manages nonetheless to soldier on without becoming a government agency.

So why do big cities put firemen on the public payroll? An interesting question, because there are at least two alternatives observed in the marketplace. Many towns employ private firms to provide fire-fighting; economists have studied their performance, with favorable conclusions.1 More prevalent, however, are volunteer fire departments, which used to dominate America, even in large cities, and still are the principal fire-fighting force in most smaller cities and towns. (They also are commonplace in many European countries.)

In fact, the displacement of volunteer fire companies by paid union firemen is a comparatively recent development. For most of our history, only volunteers served American cities.2 Even at zero pecuniary wage, voluntary labor was plentiful, given the more than sufficient compensating differentials: camaraderie, adventure and consorting with the best and brightest. Almost all the Founding Fathers were volunteer firemen.

But with the rise of municipal machines after the Civil War, city politicians discovered in volunteer fire companies a ready source of patronage appointments who thereafter were reliable voters. (“Boss” Tweed, for instance, was a former volunteer fireman.) Simultaneous with the rise of public education and its teacher unions, volunteer companies were legislated out of existence in favor of public fire-fighting units. City pols were not the only heavies in these episodes. The volunteers themselves typically connived in the shift, since those who chose to go on the public payroll were grandfathered into the new municipal unions. Thus, they henceforth would be paid for labor they had previously provided for free.


Read more » to discover why a 40% reduction in fires to fight results in a 20% increase in public employment. Hint: “Only in government firms does employment go up as demand and output decline.”
Highly recommended – excellent footnotes and resources.

America's Public-Sector Unions are bankrupting the states

A 2009 study by economists Robert Novy-Marx and Joshua Rauh, published in the Journal of Economic Perspectives, estimated that these government pensions are underfunded by $3.2 trillion, or $27,000 for every American household.

The fiscal damage done by the unions is fairly obvious if one examines the data on the public-collective-bargaining states such as California, New York, New Jersey and Hawaii.

The political rent-seeking is very simple: unions invest heavily to get friendly state politicians elected. Those politicians repay the unions with continuously increasing wages and benefits that are totally out of touch with the market.

The Cato Tax and Budget Bulletin has an up to date report dated March 2010 [PDF]. And do not miss the Capital Hill Briefing Are Unions Good for America? available as video or audio podcasts.

These unions have one purpose: to extract from taxpayers above market compensation for their members. This purpose is implemented via a suite of destructive policies all of which are designed to increase inefficiencies in government (which means more union members and bigger union budgets). Example union policies are blocking school choice, privatization, and free trade.

In Unions, the Rule of Law, and Political Rent Seeking, Armand Thieblot outlines the threat — a threat which has become especially troubling in the short history of the Obama administration.

Consider that there are no market constraints on the power of unions to award themselves an increasing share of the nations production. No business fails due to excessive costs, the obvious constraint on private-sector unions — the government just borrows more or expropriates more from taxpayers. Thieblot writes:

They do this as economic rent seekers— hoping to secure for themselves and their members rewards greater than the value society accords them in a free market. Second, they dishonor the very principles of the rule of law by engaging in a corrupt, symbiotic relationship with lawmakers. They do this as political rent seekers—hoping to secure rewards of their own choosing, independent of economic or market restraint

Public employees salaries average 28% higher than private workers, and benefits are 70% higher.

This means that for every $1 in pay and benefits a private employee earned, a state or local government worker received $1.45.

This is all due to the compensation of union employees as non-union employees are compensated at about the same as the private sector. The WSJ editorial has a few shocking examples:

The Orange County Register reports that California has 3,000 retired teachers and school administrators, who stopped working as early as age 55, collecting at least $100,000 a year in pensions for the rest of their lives.

Illinois’s pension obligations are so costly the state had to issue $3.5 billion of bonds merely to meet its mandatory contribution to the worker retirement program, which faces $85 billion, or three years of state tax revenues, in unfunded liabilities. Near-bankrupt New Jersey would have to pay $7 billion a year if it properly accounted for its pension and health benefits.

Wouldn’t you like to be able to retire and rehire?

California, Nevada New Jersey and Ohio all allow double dipping, which lets government workers retire in their 50s and then work another full-time job while collecting retirement checks. In Ohio, police, firefighters and teachers can retire after 30 years on the job, collect a full benefit each year and go back to work full-time doing the same job. This is called retire and rehire.

As the Columbus Dispatch reported last year: “Across the state, Ohio’s State Teachers Retirement System paid out more than $741 million in pension benefits last school year to 15,857 faculty and staff members who were still working for school systems and building up a second retirement plan.” Some teachers can earn nearly $200,000 a year in pensions and salaries.

One last fact: 70% of the 40 states running deficits would have a balanced budgets but for the raid on the taxpayers by the unions. The political reality of Obama’s “Stimulus Package” is that a big portion of it went to state and local governments to pay the inflated wages of public-sector employees. This means that taxpayers in well-governed states like Texas are paying the excessive wages of California employees. The WSJ editorial closed with this:

So if your state is broke, this is a major reason. Eventually, governors, state legislators and city council members are going to have to decide whether protecting America’s privileged class of government workers is a higher priority than funding such core functions of government as public safety. Something has to give. It’s time to close the biggest pay gap in America.

The dues of "Club California"

“… are increasingly to benefit the staff rather than the members.”

I wish I could recall where I heard that quote – in reference to the California financial crisis, brought upon California largely by the public employee unions. Aside, I have heard almost no media recognition of the one-third of the Obama $800B “stimulus” that was specifically targeted at handouts for the state public employee unions. Where do people think the federal taxpayer money given to the states went — library books?

Excerpt from Michael Barone

Public-sector unionism is a very different animal from private-sector unionism. It is not adversarial but collusive. Public-sector unions strive to elect their management, which in turn can extract money from taxpayers to increase wages and benefits — and can promise pensions that future taxpayers will have to fund.

The results are plain to see. States such as New York, New Jersey and California, where public-sector unions are strong, now face enormous budget deficits and pension liabilities. In such states, the public sector has become a parasite sucking the life out of the private-sector economy. Not surprisingly, Americans have been steadily migrating out of such states and into states like Texas, where public-sector unions are weak and taxes are much lower.

Barack Obama is probably the most union-friendly president since Lyndon Johnson. He has obviously been unable to stop the decline of private-sector unionism. But he is doing his best to increase the power — and dues income — of public-sector unions. One-third of last year’s $787 billion stimulus package was aid to state and local governments — an obvious attempt to bolster public-sector unions. And a successful one: While the private sector has lost 7 million jobs, the number of public-sector jobs has risen. The number of federal government jobs has been increasing by 10,000 a month, and the percentage of federal employees earning over $100,000 has jumped to 19 percent during the recession.

(…) Obama and his party are acting in collusion with unions that contributed something like $400,000,000 to Democrats in the 2008 campaign cycle. Public-sector unionism tends to be a self-perpetuating machine that extracts money from taxpayers and then puts it on a conveyor belt to the Democratic party.

More from the American Thinker:

Obama and the Democrats have been well-rewarded for their patronage. Unions contributed up to 400 million dollars to Democrats in 2008 and engage in skullduggery to advance their aims. The latest revelation: a union-funded slush fund secretly targeting GOP candidates through the use of money-laundering and front groups. Unions have funded all sorts of political activity — undoubtedly the major reason Obama, in one of his first acts as president, ended union disclosure rules requiring them to report how their members’ dues were being spent. So much for transparency.
This is one reason why the recent Supreme Court decision leveling the playing field, allowing corporations to exercise their First Amendment rights by contributing to candidates, inflamed unions and President Obama. He violated precedent by attacking the Supreme Court in his State of the Union address. Maybe the title should be changed to State of the Unions.
Franklin Roosevelt, of all people, was alert to the danger of this collusion between politicians and unions. He maintained that “the process of collective bargaining, as usually understood, cannot be transplanted into the public service.” Yet it has been transplanted; today, a majority of union workers for the first time work for the government. And the government has brought good things to them.

Government work is one sector of our economy that is booming (besides pawnshops and bankruptcy lawyers). Rich Lowry noted the paradox: We suffer, and government workers prosper.

For most Americans, the Great Recession has been an occasion to hold on for dear life. For public employees, it’s been an occasion to let the good times roll.

The percentage of federal civil servants making more than $100,000 a year jumped from 14 percent to 19 percent during the first year and a half of the recession, according to USA Today. At the beginning of the downturn, the Transportation Department had one person making $170,000 or more a year; now it has 1,690 making that.
The New York Times reports that state and local governments have added a net 110,000 jobs since the beginning of the recession, while the private sector has lost 6.9 million. The gap between total compensation of public and private workers has only widened during the downturn, according to USA Today. In 2008, benefits for public employees grew at a rate three times that of private employees.