Saturday, December 13, 2008

Pension cuts or layoffs?

Quite some time ago, I interviewed Dan Wagoner, president of the Toledo Police Patrolman's Association (TPPA) on Eye On Toledo. We were discussing budgetary issues and I asked him a question that has perplexed me for ages:

If given the choice between keeping every union member employed, but at a reduced wage/benefit package or maintaining current wage/benefit package and having some of your members laid off, what would the union do?

His answer: "Unfortunately," the union membership historically has chosen maintaining current compensation levels and accepting layoffs.

I've never been in a union, primarily because I never worked anywhere that there was one to represent the workers. And I've never felt the need for a union to represent me, figuring I could do as good a job as them in that regard. But my understanding of the reason for a union was to work collectively to benefit everyone - not benefit some at the expense of others.

I bring this up because today's paper has a story about Mayor Carty Finkbeiner asking the unions to assume - for one year only - some of the pension costs that the city has, over the years, agreed to pay.

Pension pickups can be a confusing subject. In Ohio, public employees do not participate in Social Security, but in the state's Public Employees Retirement System (PERS). Unlike Social Security, the contributions you and your employer make are in a fund under your name, so you get back everything you've contributed, plus interest earnings, when you retire.

Like Social Security, you contribute an amount and your employer contributes an amount - and they are equal amounts. However, when negotiating contracts with public sector unions, many employers have offered to 'pick up' a percentage of the employee's portion instead of doing a wage increase. This can save money in the short term, but has serious long-term consequences.

In Toledo, some union contracts call for the city to assume ALL the pension costs, with the employees paying none of it themselves. Again - this is negotiated so the union must have given up something in order to get that benefit.


The city's unions often have a me-too clause, so if one union negotiates a benefit, the other unions automatically get to say 'me too' and receive that benefit as well. However, the other unions don't give up anything when they get that benefit ... they just get that benefit. It's a 'me too' on the get portion, but not the give portion, of the contract.

So it is that the city finds itself paying for both the employee portion and the employer portion of the pensions for almost all its workers.

And now, in the face of huge deficits, the mayor wants to have the employees pay only 3% of their portion, for only one year. And the unions are asking questions - like what do we get if we do this.

Proper question for negotiations - do they ensure no layoffs if they agree to this provision? Do they get some other concession they've been seeking in exchange for what is, essentially, a reduction in take-home pay? The article doesn't say.

Additionally, Carty has spent money irresponsibly for non-essentials, so he's not in the best of positions when asking for concessions. Union members will rightly point to flowers and bike paths, lights for trees, and even Carty's bathroom and shower as examples of expenditures that shouldn't have been made and would have resulted in less of a financial crunch than what the city is experiencing. They'll look at the number of employees in the mayor's office and wonder why they must assume the brunt of the impact of the deficit. And they'd be right.

But city unions need to be very careful in their approach to this. The non-public workers have Social Security and most of us are pretty sure it will be bankrupt long before we'll ever collect the measly amount the government deigns to grant us. Others who have defined pension plans with their employers are seeing less and less contributions to those accounts by their employers. And the rest of us aren't counting on anyone but ourselves to fund our retirement and have been saving on our own, paying into IRAs or 401(k) plans without help from anyone else.

So to find that our tax dollars are paying the total cost of public employee pensions will not sit very well with the struggling families of the area who don't have such a benefit.

For the record, I'm in favor of the city reducing its pension pickup back to the mandatory contribution level for the employer. But I'm realistic enough to know that unions will want something in return, since some of them gave up things in order to get that pickup in the first place. Considering the economic condition of Toledo and Lucas County, I think offering them continued employment is a pretty good trade-off ... and there are plenty of unemployed/laid off people who'd gladly accept their positions with such reduced compensation.

But then I go back to the answer TPPA President Wagoner gave me, and I look at the refusal of the UAW to agree to renegotiate their contract in 2009 rather than 2011 in order to get the Detroit 3 bailout, ... and I'm not hopeful.


Casmi said...


This whole situation is something of a nightmare, IMO.

While I don't wish anyone to be unemployed, I certainly don't feel that it is the non-union residents of Toledo/Lucas county that should fund the benefits for union employees. And that's just what is happening.

The arrogance of the unions/union workers to demand that an already failing tax base support their existence, just because they can, is unconscionable. I fail to understand what benefit there is to maintaining income levels while laying people off. It's certain that their income level won't stay the same.

At one time in history the premise of the unions was a valuable tool. But in the world we live in the unions have done nothing more than create a base for greed, unyielding practices and, IMO, corruption - be it financial, moral, ethical or personal.

The "get ahead, co-worker be damned" mindset is a dangerous one. Without cooperation of everyone - and I mean everyone - then those that are laid off will harbor some serious resentment toward those that remain employed. And if those workers say they won't ... well, then they are lying. Plain and simple. The human factor would not allow that action to take place without animosity - consciously or unconsciously.

Why is it so hard for some to comprehend that part of something is much better than ALL of nothing?

Unions - at times can be good, but in times of fiscal emergency aren't worth a hoot, IMO. Greed is an ugly force.

Timothy W Higgins said...


Your posting illustrates clearly why many unions call themselves a brotherhood with the "me too" contract relationship. All the more ironic then is the behavior committed by members content with throwing each other under the bus to maintain the high benefit levels when layoffs are threatened.

As the UAW is finding out (far too late) it is far too easy for the parasite to kill the host while trying to insure its own survival, and doom itself in the process. (Hmmm, seems to me that I wrote a Fairy Tale about this once upon a time) I hope that the local city unions learn from the examples out there, before the finish off the host we share.

Mad Jack said...


I knew things were bad, but I had no idea that labor unions had somehow displaced management.

With unemployment as high as it is and the lousy state of the local economy, I wonder why the city doesn't let the unhappy union workers quit or go on strike and hire a bunch of new people who are willing to work for the offered wage and benefits. We'd all be better off.

Hooda Thunkit (Dave Zawodny) said...


IMNHO the best place the City could save money is by replacing those workers with more than 30 years of service (25 Years for Public Safety) with lower cost new employees.

The trick though, is getting those with enough service to retire to do so. . .

Unknown said...

What's been interesting to discover in digging into some of the fact finding reports is the issue of the pension pick ups and parity is one that has been supported by the fact finders when the City and the various Unions have disagreed.

Maggie said...

Lisa - that's true, primarily because the city has established a standard of doing so. 'Past practice' is a critical point in arbitration and fact finding decisions.

Unknown said...

Agreed, which gives strength to the whole parity issue and all the more reason that care should be taken when giving one union something "different" than another. What initially started out as a small .05 percent additional PERS pick up ended up being 100% of the employee share.

Maggie said...

Very true, Lisa...of course, it's lesson that is learned too late for Toledo...

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