Government logic: we have savings - now how do we spend it?

From WSPD News:

Now that a TPPA contract is finalized, city leaders are looking into using savings derived from the deal to beef up Toledo's police force. Contract concessions will save the city four million dollars per year. The police union president is asking that money be used for more cops, to not only replace retiring officers, but add to police ranks.

So the goal of reducing the costs to the city and the taxpayers was realized in the new union contract with the Toledo Police Patrolman's Association, but now 'city leaders' want the city to spend those savings adding more police officers?

What's the point of 'savings' if you're just going to spend them again?

This is faulty logic.

There isn't enough money to meet the current budget.  The city has planned to take another $12 million out of the Capital Improvements Program Fund (CIP) in order to balance the 2012 general fund which pays for everyday expenses.  If they transfer the full amount as planned, they will have diverted over $62 million out of CIP over the last several years.

For those of you who don't do math, this means that the city is $62 million OVER BUDGET for those years - spending money they didn't have and often on things that are *wanted* rather than *needed*.

This would be the equivalent of you creating a savings account to pay for the new roof you need because your current one is leaking and then raiding that fund to pay for your new boat.

Now along comes some idiot who wants the city to spend the savings from their new contract increasing the overall cost of government by adding new police officers.

Can you say "stuck on stupid"?

Don't get me wrong...I think we probably need new officers.  But the problem is that council spends so much money elsewhere they don't have the funds for the necessities like police officers.

I suppose I shouldn't worry, though.  The last time the city found 'additional' money, they spent it rather than reducing the amount they planned to raid from the CIP.  And they didn't spend it on necessities:

• they hired extra staff that a department didn't want, but a councilwoman did;
• they bought themselves a new filing system and temp to fill it for them;
• they hired a consultant to create a historic preservation plan; and
• they hired an executive director for a previously-eliminted Youth Commission.

My expectation is that they'll do the same types of things this time around.

Sorry, TPPA, I believe that money is already spent - and it isn't on you.

Prime example for banning 'me-too' clauses in union contracts

I've previously written about 'me-too' clauses in public sector union contracts - how they distort the give-and-take of a negotiation process and lead to increased costs for taxpayers.

Nearly all the government union contracts in Lucas County contain them, in effect guaranteeing that any benefit negotiated by one union will be shared by others - without the corresponding concession that resulted in the first union gaining the benefit.

Whether wages, pensions, educational reimbursement, or any other term that can be negotiated, it is likely that you will find such benefits are identical across the governmental jurisdiction because of this clause in the contracts.

My position when in office was that 'me-too' applied to concessions as well as benefits. I often told unions they could have the benefit if they were willing to give up whatever had been traded to get it, which effectively ended all such discussions on the matter. While I believe such clauses distort the negotiation process and are bad in a significant number of ways, today we have a prime example (an 'unintended consequence' effect) showing why they should be banned.

The Toledo Police Patrolman's Association (TPPA) has filed a grievance with the City of Toledo over the merger of the Toledo and Village of Ottawa Hills Fire Departments. You're probably wondering why in the world police would object to this merger. They're not objecting, they just want their 'me-too' clause enforced.

In 2009, Toledo City Council approved a contract extension for the TPPA and it included the following:

Other Bargaining Units The City will provide the TPPA with any greater economic benefits provided to the Toledo Firefighters and/or the Toledo Police Command Officers Association that they may receive either through settlement or impasse proceedings including fact finding and/or conciliation.

So the city - meaning council and the mayor - have previously agreed that any 'economic' benefit that the Firefighters or the Command Officers may negotiate, regardless of what they give up in order to get it, must be given to the members of the TPPA. These are the legally-binding terms the city must meet as they approved the contract and the language.

One of the things negotiated in the fire department merger was protection of seniority for the Ottawa Hills employees. When they become Toledo employees, they will earn wages and vacation time based upon their number of years with Ottawa Hills.

And that's a problem for the TPPA because they have members who previously worked in other jurisdictions who did NOT get similar credit when they became Toledo police officers. They are making the logical case that this is an economic benefit afforded to another union and they are, per their contract, guaranteed the same.

"The TPPA demands that each affected member be properly reimbursed for their back wages and annual vacation accrual. The TPPA further demands the affected members continue to receive the appropriate rate of pay and annual vacation accrual according to the steps they should have began with had they been properly credited with their prior service."

To make matters worse, I understand that TPPA, as well as the Toledo Police Command Officers (TPCOA), Firefighters Local 92 and the Battalion Chiefs union all told the city ahead of time that they would pursue such a grievance if the city went forward with their plan for granting seniority to the Ottawa Hills employees.

If the TPPA wins the grievance, it will cost the city millions to pay back wages and vacations for 200-300 police officers (estimated number affected) and the other related employees, since they were first hired into the city. It will also dramatically increase the 2011 budget and, accordingly, our projected deficit. Remember - last year they deferred overtime payments into 2011 to help 'balance' the 2010 budget and pay out the time at a higher rate of pay. Those payments will be even more if TPPA wins.

When they calculated how much the merger could cost us, did the city include the cost estimates of how much more it would be if they lost the grievances they were told would be filed? I certainly don't remember hearing about them.

Now, you could say (and I'm sure the city will argue) that a merger is a much different circumstance - and they should be correct. But this is a union contract and arbitrators and judges who decide such things are not bound by common sense - or even taxpayer interest. They are bound to examine the terms of the contract before them and TPPA can make a strong argument under their me-too clause.

But you just never know when it comes to deciding a grievance, which is why such terms should not be in contracts in the first place.

Unions should not expect to get something they didn't bargain for simply because someone else did. Unions should negotiate their own terms and be willing to abide by them. If they like the terms in another union's contract, they can seek to include them when their contracts expire.

But it is the elected officials who make the final decision and they should 'just say no' to any contract that includes such unfair terms - and they should be replaced if they don't have the will to do so.

In the meantime, Toledo administrators will spend time to fight the grievance and hope for a favorable outcome. Should they lose, they will be forced to either grant the seniority, vacation and back pay to hundreds of employees, or renege on the terms of the merger.

Either way, I believe the real losers are the Toledo taxpayers.

New TPPA agreement just postpones the inevitable

In March, the city of Toledo declared exigent circumstances and, as a result, stopped certain compensation for unionized workers. One of those items was the pension pick-up - the employee portion of their pension plan that the city has been paying for quite some time.

Following the declaration of exigent circumstances, several unions reached agreement with the city for new terms of their contracts and the city then revoked the exigent circumstances for those unions. After the voters approved (in the May 4th Primary) a diversion of the 3/4% payroll tax capital improvement allotment to the general fund, the fire fighter unions got their concessions back. The mayor had promised, as one of the terms of that approval, that the fire fighters would be reimbursed for the pension pick-ups they'd gone without and the city would, again, pick up the employee portions for the rest of the year.

The Toledo Police Patrolman's Association claimed the exigent circumstances were actually an unfair labor practice and ended up before SERB - the State Employment Relations Board. SERB found 'probable cause' to believe that the city had committed an unfair labor practice and the city and the union reached an agreement that was approved yesterday by the union. As it is a memorandum of understanding, it does not require city council approval.

That's too bad because, for the life of me, I can't see how this new agreement is good for the city - and especially for the taxpayers.

From the news reports so far, the agreement calls for the city to again pick up the employee portion of the pensions beginning May 27; no police officers will be laid off through April of 2011; the police will get their scheduled 3.5% pay increase beginning January 1; and the overtime that officers earn will not be paid until March 2011, though when it is paid out, it will be paid at the increased pay rate being earned at the time.

This means that the only 'savings' for taxpayers is the amount of the pension payments paid by the employees between the declaration of exigent circumstances and May 27th. That amount is estimated to be about $520,000, according to a quote from TPPA President Dan Wagner (link). However, the administration is claiming they're still saving $2.6 million as a result of this agreement.

How can that be?

I don't think it can. Perhaps they mean that there will be roughly $2.6 million that the city won't have to pay out in 2010. That could be. Deferring the overtime payments would result in a reduction in the amount of money expended this year. But there are no 'savings' if the money still has to be paid in 2011.

In fact, deferring the overtime payments to 2011 and then paying it at the 2011 increased pay rates means that this little deal will actually cost the taxpayers 3.5% more than it would cost us if we just went ahead and paid it when earned!

That's not a savings!

The city may have found itself in a difficult position with the SERB ruling. Declaring exigent circumstances and then revoking it upon partial concessions from the other city unions may have also weakened the city's position. Using the exigent circumstances as a bargaining chip to get minor - temporary - concessions from the other unions proved that the city wasn't serious about the major concessions being sought from the TPPA.

Now District 2 Councilman Mike Collins wants the city to give the exempt city staff the same 'give backs' the unions have received.

All this puts the city back into the exact same position we were in at the beginning of the year: unsustainable compensation terms, too much spending and not enough revenue - and no willingness from voters to give the city any more, especially when the voters don't have it in the first place.

So how has any of this helped? Well, the administration claims that they've got a balanced budget for 2010 even with all the concessions that didn't carry through to the end of the year. But that's because they're raiding the CIP account and they increased our trash tax to cover it.

The bottom line is that the unions won and the taxpayers lost. The unions are getting their employee portion of their pensions paid by the city - meaning you and me - and we're paying more in a trash tax in order for them to have this perk. Furthermore, the 2011 city budget will be much higher than in 2010 because of already agreed-upon pay increases as high as 3.5% - and especially because the police overtime earned this year will be paid out in 2011 at that higher rate.

In the meantime, being self-employed, I have to reduce the amount I put into my pension because my taxes have increased. I won't be getting a pay increase next year and I expect the 'trash tax' will again rise because the city just won't have the money to meet its obligations without it.

But don't expect the same bargaining tactics to work again next year. Wagner has already warned of the TPPA's concern about whether the city would again ask for concessions for 2011. And having just 'won' on the terms this year, they'll be much less likely to make such concessions in the future.

This is not a good deal for the taxpayers - all it does is postpone the inevitable. Eventually the city and the unions will have to face reality: the compensation terms are unsustainable. Something will have to give and when it does, it will be very ugly.

How is this a good deal for taxpayers?

According to the Journal of the City of Toledo, when city council approved Ordinance 373-09 (beginning on page 8), the contract with the Toledo Police Patrolmen's Association (TPPA), it also agreed to the following:

Other provisions - Grievance Settlement.
The City agrees to pay $25,000 to the TPPA to withdraw any and all outstanding grievances filed prior to June 24, 2009 with the exception of grievances on employee parking, eliminating of the tax officer position, on call compensation/payment for fuel, sergeant-at-arms position, permanent shifts, and layoff grievances.

Tax Payment. A one-time payment will be made by April 15, 2010 based on the sliding income tax collection schedule as follows: if the 2009 audited books reflect an income tax collection greater than $148 million, the employee receives 2% of his/her base rate; if the 2009 audited books reflect an income tax collection greater than $150 million, the employee receives 4.5% of his/her base rate; if the 2009 audited books reflect an income tax collection greater than $152.5 million, the employee receives 7% of his base rate; if the 2009 audited books reflect an income tax collection greater than $155 million employee receives 9% of his base rate.

So, let's get this straight: the city is going to pay the union - not the members, but the organization - $25,000 to get them to drop a bunch of grievances? Since when did taxpayer money get to be used to buy off settlement of grievances - many of which the union never should have had to file in the first place?

And how much are we really saving if the city has to pay up to 9% (based upon income tax collections) in a lump sum? Police - and firefighters who have the same terms in their contract - are going to be financially rewarded if the city collects more than it estimated? Of course, there is the chance that the city doesn't collect more than it budgeted in income, but history indicates the unions have a safe bet on this one. However, a lump sum is just a one-time payment so there is no cumulative effect on the base wage.

How 'bout if the city, after balancing the expenses based upon the project income, REFUNDS any extra income to the taxpayers who paid it in the first place, rather than pay off the unions????

Oh - but the city hasn't yet balanced the 2009 budget. Even with the 'savings' from these contracts, the mayor is still estimating an $8 million budget deficit for the remainder of the year - with no source of extra funds to the cover the shortfall.

And if the administration's projections for next year are even remotely accurate, there is no money to pay for 2010 basic services, much less a lump sum for police and fire fighters.

Yet council approved both these contracts with no idea whatsoever of how they were going to pay for the terms they agreed to.

Are taxpayers just supposed to hope that the city doesn't collect more than the budgeted $145 million in income taxes so we don't have to pay out the lump sum? And if we don't get more than that, we still have an $8 million budget deficit to pay for, which is why Carty Finkbeiner is asking council to increase the trash tax and eliminate reciprocity for people who live in Toledo but work in another city.

What it boils down to is this: the city has no money, but if it collects more money than it budgeted, police and fire will get lump sum payments (of up to 9% depending), reducing the amount of 'extra' money that could be used cover the deficit.

And city council and the mayor think this is a good deal for taxpayers???? I think we got screwed...

The union contract 'savings' that aren't

On Thursday, the City of Toledo issued a press release 'documenting' the savings from the tentative contract agreement with the Toledo Police Patrolman's Association:


















As you can see from the chart, the PERS pension roll back is only for six months and only 7% of the 10% employee portion. Any new employees will pay their full portion of 10%, as the chart shows. This also means that the city is counting on hiring new police officers in 2010. If the city does not put on a class after recalling the remaining laid off police, there are no savings in that category.

The co-pay on the insurance is a good move and it looks as if that is included as a provision for all three years. But the elimination of the stipends and tuition reimbursements is only for 2009, which means these will be a continuing cost in future years.

Then there is the overtime deferral, with employees being eligible to use comp time instead. While it's listed as a savings in 2009 and 2010, there is no way the city can know this figure. The administration cannot predict how many patrol officers will choose the time versus the pay or some combination thereof. And it really doesn't matter because general accounting practices require the city to calculate the obligation on the books. The agreement calls for any overtime not converted into comp time to be paid out in March 2010, leaving the expense for the next mayor to deal with in next year's budget.

And there are no guarantees that next year's budget won't be as bad as this year's.

So the real savings in 2009 is only $1,605,785. Technically they're 'saving' more when you add in what they don't have to pay for the overtime, but since that money has to be paid out eventually, it's not a 'savings'.

And the real savings in 2010 turns out to be no savings at all. When you add the cost of the deferred overtime payments of $878,000 to the claimed savings of $774,000, you get a negative $104,000.

This contract's actual savings are about $1.5 million in 2009. And that's good for the '09 budget. But the agreement will actually cost us $104,000 in 2010 and even more in 2011 when the wages are scheduled to go up 3.5% (which also means that overtime and pension costs, because they are calculated upon the wage, will go up).

While we've dodged one of the small bullets aimed at us in 2009, we've done nothing about the cannon balls still coming in from this contract, and others, in the future.

I hope members of council recognize this prior to voting on the agreement tomorrow.

Will police concessions be enough?

The City of Toledo and the Toledo Police Patrolman's Association have reached a tentative contract and the TPPA has voted to approve it. Toledo City Council will vote today.

There were concessions by the union - many were not insignificant. They include no pay increases in 2009 and 2010, but a 3.5% raise in 2011; members paying 7% of their pension from July-December; paying a portion of their health insurance costs; and overtime payments being postponed until March 2010.

While these are probably good compromises, there are still problems for the citizens in terms of the long-term issues of unsustainable government costs.

I'm glad the TPPA will be paying 7% of their 10% pension contribution, since right now they pay nothing with the city (taxpayers) picking up the city's share as well as the employee's share (total of 29.5%). But having the union members make a portion of their own payment for six months does not address the problem that these pension pick-ups are unsustainable, and grossly out of whack with what the private market in Toledo is doing. Additionally, they 'traded' that concession for 6.5 more vacation days to be used over the same time frame.

The best part of the arrangement is that new officers will be required to pay their 10% pension share. Perhaps this is the start of addressing the problem, which exists in all of city government. If so, this is a good thing. However, if this is just a temporary step for the existing employees, we will find ourselves right back in the same mess for each upcoming yearly budget.

The same goes for the overtime. The city is not saving any money, just postponing when it will be paid. In effect, we're incurring costs we cannot now afford with the hope that the money will be available next year. Nothing in the economy or in the decisions about spending being made by the administration and council indicate that our situation in 2010 will be any different than now. In fact, because they've put off maintenance-type actions and removed money from the Capital Improvements Budget to balance the General Fund, we'll eventually find ourselves without the money for our capital needs as well.

Then there is the issue of the trash tax. Included in the tentative agreement is a little clause that says it is in the interest of both the union and the administration that the council address the deficit through revenue enhancements. In an interview with WSPD this morning (podcast will be here when posted), TPPA President Dan Wagner said the union agrees the budget must be balanced with either cuts in spending or additional revenue.

This contract does not solve the city's budget deficit. Neither will similar concessions by other unions who still haven't agreed on new contracts. So the administration is still insisting upon an increase in the trash tax (the equivalent of a 3.91 mill levy) and eliminating the payroll income tax reciprocity for Toledoans who work outside the city, both of which have been rejected by city council.

Stay tuned...

Toledo and police reach tentative contract agreement

This just in via email:

FOR IMMEDIATE RELEASE
Monday, June 29, 2009

Tentative agreement has been reached between the City of Toledo and the Toledo Police Patrolman's Association

Mayor Finkbeiner and TPPA President Dan Wagner announce a tentative agreement has been reached between the City of Toledo and the Toledo Police Patrolman's Association. The package will be presented to the TPPA for ratification on Wednesday, July 1st.

A special meeting of City Council will be requested on Thursday, July 2nd for Council approval.

###

Things I'd blog about if I weren't shovelling snow

As many readers know, I live on the Maumee Bay. Usually, this is a delightful location that bring cool breezes in the summer and allows for iceboating in the winter.

But every now and then - certainly not a regular event - we get a forecast for snow and Easterly winds. That means that the lake effect snow is greater than just the snow alone ... and drifts begin to form - usually across our driveway, which is about 80 feet in length.

Yesterday, we shovelled the driveway and porch twice. Today, we'll have to do it again - maybe twice...

So here are the things I'd blog about if I weren't required to go shovel about five inches or so...

* As we discussed last night on Eye On Toledo (podcast with interview), the Toledo Police Patrolman's Association filed an unfair labor practice charge against Mayor Carty Finkbeiner and the City of Toledo. I spoke with
Donato Iorio, the attorney for the union, who explained that Carty's press statement from Thursday provided the proof of the charge.

Carty's statement said:

"Second, Toledo Police Patrolman’s Association negotiators, yesterday, asked for a contract calling for a double-digit increase in pay over three years. That pay raise would virtually force the layoff of all Local 7 and 2058 employees, if it were granted."

Iorio said the negotiations were supposed to be confidential and Carty broke the established ground rules by talking about the union's opening position.

Dan Wagner, the president of TPPA, also told me that the union's bargaining team was ordered to return to the streets, thereby eliminating their ability to meet in negotiations and that the union members were under an internal investigation over Carty's claim that they urged another city union, AFSCME Local 7, to reject the contract the city had negotiated with Local 7 leaders.

* In 2001, President George Bush started to discuss the economy and how things were not as good as we would have liked. He was 'reprimanded' by the Democrats and the press for 'talking down the economy' and for being negative.

I can't help but notice the hypocrisy over the last 18 months or so with Democrats and, now, President-Elect Obama telling us how dire everything is, that we might actually be in a depression rather than a recession, and how government spending and them, of course, are the only things that will save the day. Never mind their complaints over the deficit the last several years, if they don't spend and escalate the deficit, doom and gloom will descend and the world will end.

Also, despite their explanation of how bad things are, it's not anywhere near as bad as it's been - and we survived. In the '70s, unemployment hit 9.0%, inflation skyrocketed, we had to ration gas, labor strikes seemed a daily announcement and interest rates hit 12% and the term 'stagflation' hit the vocabulary.

Policies introduced during those years made things worse. By 1980, the prime interest rate had hit 21.5 with unemployment hitting it's peak of 10.8% in 1983. Many of the policies implemented under Pres. Ronald Reagan had the desired effect and things started to improve.

This is not to minimize the struggles that people face today, but they're not as bad now as they were then, no matter what the media and politicians tell us.

* The Wall Street Journal had a terrific article yesterday by Steven Moore that is a must read: 'Atlas Shrugged': From Fiction to Fact in 52 Years. (subscription may be required)

* Back to the snow, can anyone really talk about global warming with a straight face? This article details some of the record cold temps we've been having, but of particular interest is the discussion from the climate scientists over their modelling and how they admit prior models didn't take everything into account.

I believe wholeheartedly in climate change. If the climate didn't change, we wouldn't have glacial grooves on Kelley's Island just a few miles away from me. I just believe that most of the changes are result of geological and astronomical factors, not man-made and that any actions we take as humans need to be balanced, considering cost and amount of impact. Why spend billions and billions to maybe change the temperature by .1 degree? Is a .1 degree change really going to impact us in such a way that we cannot compensate? Personally, I'd love to have warmer temperatures - I love the location of my house and wouldn't mind if I could grow palm trees here...

* Why don't we have good Bugs Bunny cartoons on Television on Saturday mornings anymore? I realize that some of them have been banned - you never see Yosemite Sam because of his penchant for firing his guns - but they're still classics and should at least be available on the Cartoon Network or something.

Okay - I've put it off long enough...off to shovel snow.