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.

Except...

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.