Monday, February 8, 2010
More On Public Employees Pensions
Some people in St. Louis do not have jobs. Many more are working, but are barely making enough money to make ends meet. Others are lucky enough to have good jobs, but with little or no money set aside by their employer for retirement. For these people, talk about a pension, 401-K, or retirement fund is merely theoretical. A fortunate few have both good jobs and retirement funds set up by their employers. Yet, even these people have noticed that the stock market has eaten the value of their retirement funds by a third or more. It is a fact of life for most St. Louisans – and most Americans - that it will take a very long time for their earned pensions and retirement funds to grow back to what they would have been without the global recession.
One exception is public employees, many of whom have guaranteed, pre-set pensions – and many of them can retire early – despite the fact that their pension funds lost the same amount or more than everyone else’s. In most cases in the City of St. Louis, the benefits given to our employees, including pensions, are currently more generous than those in most local private sector jobs. After paying salaries, some public employees’ health care costs, pension costs, paid time off and other fringe benefits currently cost taxpayers an additional 50 to 70 percent. (To see what this means for city services, imagine that standing next to each firefighter on the fire truck is an "invisible firefighter" equal to two-thirds of a salary.) And that cost will grow next year because pension costs continue to go up.
This is not a surprise. For the past three years, I have worked closely with a task force of government and private sector experts looking at pension costs.
There is no legal way - or fair reason - to change the pension system for public employees who have already retired. And that is at it should be. But, without benefit adjustments soon for current employees and major changes for future employees, almost all states, most other cities, and St. Louis will spend more money on pensions than any service. The City of St. Louis, for example, already pays more for pensions and health care for its employees than it does for trash collection, parks maintenance, road repair, traffic signals, snow plowing, public health, street lights and the operation of the Downtown Justice Center combined.
There are a few things the Board of Aldermen can do right now to address the pension costs and benefits of the City’s civilian employees. But, unlike almost every other city and county in the country, the City of St. Louis does not control the level of its police and fire pension benefits. There is nothing the City can do about the rising costs of police and fire pensions without approval from the State of Missouri. That does not seem fair to City residents or to taxpayers who will have to face fewer services or higher taxes to meet the pensions’ costs.
It is certainly true that the public employee pension system problems in Missouri are less acute than those in California, where statewide collapse is probably inevitable without drastic, immediate changes. But, the problems in Missouri – and in most Missouri cities – are still dire – and made more so by last year’s stock market losses It is no consolation that Missouri and its cities will not be the first states to be bankrupted by public employee fringe benefit costs, because the problems of others only tell us where we are headed.
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Thursday, February 4, 2010
Budget Process
Between now and the beginning of the City’s next fiscal year, I will be working with St. Louis aldermen – and with President Lewis Reed and Comptroller Darlene Green — to build a new City government. It will be smaller and less expensive than the government we now have. It will have to be smaller and cheaper because revenues have declined in St. Louis the same as they have in every city and state in the country. It will have to be smaller and cheaper, because you cannot reasonably be asked to pay much higher taxes.
Here’s some history:
Until the global economy collapsed, the City of St. Louis did not have a revenue problem. According to the federal Bureau of Labor Statistics, the City of St. Louis from 2006 through 2008 experienced an eight percent increase in private sector employment. That is higher than Franklin, Jefferson, St. Charles, and St. Louis counties in Missouri and higher than Madison, Monroe, and St. Clair counties in Illinois. Between 2000 and 2008, the poverty rate dipped in the City of St. Louis. At the same time, it grew in the suburbs.
We did, however, have a pension and health care problem. In the last decade, the City budget—not counting the airport and the water division, which have their own budgets by law — grew from $376-million to $520-million. That is almost a 40% increase. During the same time, the cost of pensions and health care grew from $18-million to $75-million, a more than 400% increase. Obviously, that was a trend that was going to have to be addressed no matter what sales and property tax revenues where doing. The economy made the problem more acute: and it gave the budget process a real focus. We have to find $45-million of cuts from government spending RIGHT NOW, without cutting so many services that we drive away the residents, jobs, and visitors that comprise our revenue base. And we have to make the City ready for the global economy’s recovery.
This is not going to be an easy task, but it is necessary, inevitable — and sort of exciting.
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Wednesday, February 3, 2010
Match Making
In this economy, some local businesses have been tentative about hiring new employees. That is probably a mistake. Because of downsizing and layoffs in some sectors, the available workforce is more able, capable, and qualified than it has been in a while. There are plenty of St. Louisans well suited to do the jobs that local companies need to be done.
To tip the scales of indecision towards hiring, the City’s St. Louis Agency on Training and Employment is providing incentive to local businesses. SLATE will pay (from the State of Missouri’s 15% funds) up to half of new employees’ salaries for up to six month to offset training costs associated with new employees.
The program is available to St. Louis businesses on a first-come, first-served basis. Of course, there are restrictions. This funding, which is part of the 2009 ARRA funding, is only available for businesses who agree to hire new employees who have been laid off or downsized from their previous employer.
For more information for businesses, contact Bonnie Mireles from SLATE at 314 657-3546. If you’re a worker who has been laid off, visit www.stlworks.com.
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Sunday, January 31, 2010
Public Pension Systems Considered
Households throughout St. Louis and the country are tightening their belts because of the bad economy. The same is true for local governments in the St. Louis region and throughout the country. Household or government, we are making hard choices.
One subject that figures prominently in City Hall’s budget discussion is the public employees pension systems. Here are a few things you ought to know about the subject:
City taxpayers support pension systems for three different employee groups: Police Officers, Firefighters, and City Employees.
Pension benefits were increased in the 1990s, generally without enough calculation for future costs.
The City Employees pension cost went from $7 million a year early in the last decade to $61 million a year this year. (For perspective, the entire General Fund budget is $450 million.)
In 2000, taxpayers spent an average $43,000 to compensate each City employee. Today, taxpayers are spending $68,000 per employee, an increase of 58 percent, much of it for increased pension costs (and their cousin, health care costs).
In the recent past, the rising pension and health care costs have eaten up money that could have been used for raises for police officers, firefighters, and other City employees. In the coming years, these same rising pension and health care costs, if unchecked, will eat up money that could be used to keep up employment levels, maintain services, and introduce new programs.
City residents have already tried to help the police officers and firefighters pension systems. Voter approved a half-cent sales tax increase for police and fire pensions; and the City borrowed an additional $145 million.
For the past three years, the City has tried, without much success to which I can point, to engage employee groups to work together to find commonsense ways to control costs.
The City’s $61 million a year pension cost will increase by an additional $11 million next year.
By law, the City cannot control the costs of the City’s police and fire pensions without approval from the State of Missouri. Because of opposition from the employee groups, there has been little inclination on the part of the State to do that. Unless the law is changed or the State relents, the costs borne City residents for these systems will continue to increase without check.
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Thursday, January 28, 2010
Federal EITC
The Gateway Earned Income Credit Community Coalition is offering free tax preparation services to help you determine if you are eligible for the federal Earned Income Tax Credit. In general, if your family’s earned income and adjusted gross income last year were both less than $49,000 lst year you should probably check on your eligibility.
The key element to getting the EITC, which designed to offset some of the burden of Social Security taxes by paying a refund when the EITC exceeds taxes owed, is filing a tax return. And the Coalition can help you do that – and help you set up a bank account so that your refund can be direct deposited.
To locate a Coalition tax preparation center near your home or office in the City, use the United Way’s 2-1-1 telephone hotline.
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Tuesday, January 26, 2010
A Fair Share?
Did St. Louis get its fair share of the funds allocated to Missouri under the American Recovery and Reinvestment Act? I argued here and here and here back in February/March 2009 that we did not – and the St. Louis County Municipal League later made the same point in August 2009.
A report produced for the US Conference of Mayors and the Council for the New American City now concurs. According to a report by HIS Global Insight, the St. Louis region received just 34 percent of the money Missouri was awarded under the ARRA, while accounting for 45 percent of Missouri’s Gross State Product.
Good projects? Maybe. Fair distribution? Definitely not.
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Saturday, January 23, 2010
Blue Line In The Sand
Some of you have asked why the police force does not figure more prominently on my menu of budget choices that I think the Board of Aldermen ought to consider in finding $45 million worth of required savings to balance the budget in the next Fiscal Year. After all, the St. Louis Metropolitan Police Department is our largest cost center – and revenues are still falling behind the Budget Division’s projections.
I do suggest some cops-related savings. Merging police academies and crime labs with the county might save some money; eliminating duplications between the City and the state-controlled police department in purchasing and personnel administration would certainly save money. And addressing the skyrocketing costs of police (and fire and civilian) pension and health care systems now is a critical part of future budgeting.
But, I do NOT propose – and I do NOT support – cutting the number of officers. Crime in St. Louis has steadily decreased. Although much more remains to be done, we have made measurable progress. And police officers – well-trained and correctly deployed – have carried much of the weight of that progress. Federal dollars would be lost if the size of the force were reduced.
When the budget debate begins to heat up, everybody is going to have a pet program or a favorite group of employees. Protecting those programs – most of which do good and positive things - will squeeze the public safety budget. I suspect that most residents – including me – would rather have cops than a cable TV station.
The process is just beginning, but my own line in the sand is drawn around the police force
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