Gallery

Workers File Suit After Company and Union Violate Utah’s Right to Work Law | National Right to Work Legal Defense Foundation

Workers File Suit After Company and Union Violate Utah’s Right to Work Law Union officials confiscate nearly $10,000 in illegal union dues Salt Lake City, UT (February 25, 2013) – Four Progress Rail Services Corporation workers have filed a lawsuit alleging … Continue reading

Link

Commentary: House GOP Halts Transformational Pension Reform; Real World Examples Disprove Their Claims  By JACK MCHUGH | Aug. 13, 2012

Michigan’s school pension system has already imposed $22.4 billion in unfunded liabilities on taxpayers, an amount that may be greatly understated given pension fund investment growth assumptions widely regarded as overly optimistic.

Senate-passed reform contains the underfunding problem and eventually eliminates it by closing the system to new employees, who would instead get 401(k) contributions. This is transformational, because it’s the largest component of putting the state on a glide path to eventually eliminating most government employee legacy costs  — a policy initiated in a major way by the 1996 Legislature, under the engaged leadership of Gov. John Engler.

In contrast, a House-passed alternative continues to create more long-term taxpayer liabilities every time a new school employee is hired.

In not embracing the opportunity represented by the Senate vote, it appears that key House members have bought into flawed analyses from state pension bureaucrats, whose position is also shared by the MEA teachers union.

Specifically, they claim converting to a defined-contribution retirement system will force the state to pay more than a billion dollars over the next few years to “catch up” on all those unfunded liabilities with a more front-loaded payment schedule.

This claim is not correct. Front-loaded amortization “transition cost” payments are not required under Government Accounting Standards Board rules. In June the standards board itself  published a statement that affirms this.

Legislators rightly care about those accounting rules because, if the pension bureaucrats’ interpretations were correct, the bond market might inflict higher lending costs on a state that doesn’t frontload the amortization of the unfunded liabilities.

To address this concern, recent Mackinac Center articles have cited examples of states that closed their defined-benefit pension systems to new members without paying “transition costs,” and if anything, were rewarded with improved credit outlooks due to the magnitude of that reform.

  • Alaska started converting to a defined-contribution retirement system for government employees in 2005. Policymakers initially chose to pay those transition costs, but after one year they stopped, and reverted to a non-front loaded amortization schedule for paying down unfunded pension liabilities. The state’s credit outlook did not suffer.
  • Utah closed its open-ended defined-benefit pension system to new government employees in 2010, offering them instead either a defined-contribution plan or participation in a pension plan that caps employer costs. They did not pay any “transition costs.” The state assessed the unfunded liability amortization costs against total payroll, not just that of workers covered by the closed system, and as its own financial report stated: “Therefore, this law had no effect on this actuarial valuation.” Utah’s positive credit outlook was not changed by this action.
  • Michigan closed the school pension system in 1995 to new employees at seven state universities which had been participants. Policymakers chose to amortize the unfunded liability over 40 years with no front-loaded “transition costs,” and assess each university its share on the basis of total payroll, not just the “covered employees” portion. The state did not suffer any bond market consequences.
  • Michigan also closed its defined-benefit pension to all new state employees hired since 1997, saving taxpayers between $2.3 billion to $4.3 billion in unfunded liabilities since then. At the time, however, there were no unfunded liabilities, and so there were no “transition costs” from a front-loaded payment schedule.

To recap: House Republicans are basing their refusal to enact a transformational reform on an accounting rule interpretation that the makers of those rules themselves say is wrong, and on fears of credit rating consequences that specific real world examples show are misplaced.

It should be noted that government pension managers and school employee unions who support this claim have strong incentives for preferring to keep a defined-benefit system open and growing rather closed and shrinking.

Nevertheless, some Republican House members continue to actively promote the claim. They defend their plan to perpetuate defined-benefit pensions by mischievously comparing the cost of unnecessarily high 401(k) contributions in the Senate-passed bill to the demonstrably inadequate pension fund contributions their own proposal relies upon.

This flawed apples-to-lemons comparison ignores a history of chronic underfunding to make the House plan appear “less costly.” It also ignores the fact that a pure defined-contribution system for new employees creates no new layers of long-term taxpayer liabilities to potentially underfund.

In addition, key House Republicans claim their plan is superior because it proposes prefunding health care benefits the Legislature has chosen to give school retirees (who are also eligible for federal Medicare at age 65). However, unlike monthly pension checks, the state has no obligation to keep providing a retirement health benefit that few outside of government receive.

Yet while prefunding is problematic for various reasons, it’s not a big deal compared to blowing the opportunity to close the defined-benefit pension system. If legislators feel money can be spared to prefund optional future health benefits, then doing so is tolerable as long as the pension system is closed.

Finally, policymakers are also concerned about retirement system assessments that are breaking the backs of local school district budgets. The House itself has offered one method to provide relief: Pay some of the costs directly out of the School Aid Fund, without first cycling the money through school districts.

This approach raises some questions, but isn’t a “deal-breaker” if it helps realize the overarching goal in all this: Protecting taxpayers from unfunded liabilities by gradually getting Michigan schools out of the defined-benefit pension business.

~~~~~

See also:

Study Finds That Teacher Pension Plan Unlikely to be Fully-Funded – Education group disputes House GOP projections

Fix the Real Problem of the Pension System

The Legislature Must Fix Teacher Pensions the Right Way

GOP-Led House Passes New ‘Tax’ On Private Contract Workers To Pay For Retirement System Liabilities

Commentary: Shifting School Employees to a 401(k) Is the Most Important Thing

The Salt Lake Tribune :: Mobile Edition

Thirty-six officers who worked in transportation and one SWAT unit member at the Utah State Prison allege in a newly filed complaint that the Utah Department of Corrections breached a pay agreement that assured they would receive higher wages.

The officers are seeking back pay, retirement fund contributions and interest on the earnings they claim they should have received under a long-standing agreement.

According to the lawsuit filed Wednesdayin 3rd District Court, a former deputy warden implemented a higher pay rate for transportation officers because corrections had trouble attracting and retaining such employees. The agreement adopted in 1996 provided an 11 percent salary incentive, equivalent to a four-step pay differential, to transportation and SWAT officers on the basis of the complexity of the assignment, knowledge and specialized training required. The Utah Department of Corrections also agreed that if an officer was within three or fewer steps of the top pay scale, it would provide an incentive increase to close that gap.

But Tom Patterson, current corrections director, subsequently did away with the pay differential, the lawsuit says. The transportation officers subsequently filed a grievance, which led to adoption of a new agreement in 2000 between the currently employed officers and the Utah Department of Corrections that, among other things, reinstituted the pay differential. The department also agreed to extend essentially the same deal to newly hired transportation officers.

In 2008, the department shifted the transportation unit into a straight-line career ladder pay scale like that used for other corrections’ employees, the lawsuit states, once again eliminating the pay differential. Transportation officers did not become aware of the policy change until the fall of 2010, when the unit again filed a grievance alleging the department had breached its agreement.

About a year later, Patterson rejected the grievance, denying any basis for the workers’ complaint, the lawsuit says. Attempts to resolve the dispute failed, leading to the lawsuit.

In their lawsuit the officers bolster their claim by pointing to the fact that back in 2008, shortly after the pay scale was altered, Patterson provided back wages and retirement fund contributions to another officer who filed an individual grievance about his earnings.

The department “breached this covenant of good faith and fair dealing by unilaterally changing the terms of the agreements and failing to abide by the promises it made in the agreements,” the lawsuit states.

Mike Haddon, the department’s executive coordinator, declined to comment because the litigation is pending.

Attorneys for the officers were not immediately available for comment about the lawsuit.

via The Salt Lake Tribune :: Mobile Edition.

Utah Corrections breached contract, former officers allege | The Salt Lake Tribune

Thirty-six officers who worked in transportation and one SWAT unit member at the Utah State Prison allege in a newly filed complaint that the Utah Department of Corrections breached a pay agreement that assured they would receive higher wages.

The officers are seeking back pay, retirement fund contributions and interest on the earnings they claim they should have received under a long-standing agreement.

According to the lawsuit filed Wednesday in 3rd District Court, a former deputy warden implemented a higher pay rate for transportation officers because corrections had trouble attracting and retaining such employees. The agreement adopted in 1996 provided an 11 percent salary incentive, equivalent to a four-step pay differential, to transportation and SWAT officers on the basis of the complexity of the assignment, knowledge and specialized training required. The Utah Department of Corrections also agreed that if an officer was within three or fewer steps of the top pay scale, it would provide an incentive increase to close that gap.

But Tom Patterson, current corrections director, subsequently did away with the pay differential, the lawsuit says. The transportation officers subsequently filed a grievance, which led to adoption of a new agreement in 2000 between the currently employed officers and the Utah Department of Corrections that, among other things, reinstituted the pay differential. The department also agreed to extend essentially the same deal to newly hired transportation officers.

In 2008, the department shifted the transportation unit into a straight-line career ladder pay scale like that used for other corrections’ employees, the lawsuit states, once again eliminating the pay differential. Transportation officers did not become aware of the policy change until the fall of 2010, when the unit again filed a grievance alleging the department had breached its agreement.

About a year later, Patterson rejected the grievance, denying any basis for the workers’ complaint, the lawsuit says. Attempts to resolve the dispute failed, leading to the lawsuit.

In their lawsuit the officers bolster their claim by pointing to the fact that back in 2008, shortly after the pay scale was altered, Patterson provided back wages and retirement fund contributions to another officer who filed an individual grievance about his earnings.

The department “breached this covenant of good faith and fair dealing by unilaterally changing the terms of the agreements and failing to abide by the promises it made in the agreements,” the lawsuit states.

Mike Haddon, the department’s executive coordinator, declined to comment because the litigation is pending.

Attorneys for the officers were not immediately available for comment about the lawsuit.

via Utah Corrections breached contract, former officers allege | The Salt Lake Tribune.

Report Card: Best, Worst States for Workers’ Compensation

Iowa, Kansas, Minnesota, Utah and Virginia do the best job handling workers’ compensation injuries, while Louisiana, New Jersey, New York, Oklahoma, Rhode Island, Texas and Wyoming perform the worst.

That’s according to the latest report card from the California-based Work Loss Data Institute (WLDI). The report, 2009 State Report Cards for Workers’ Comp, is meant to help employers, insurers, third party administrators, state governments and consultants answer, “Who is doing well and why?”

WLDI’s State Report Cards are based on data from OSHA that covers recordable injuries and illnesses. The 2009 release adds four more years worth of data (2003-2006), which makes for a total of seven years of data since it includes statistics collected in the last publication, which was released in 2004.

With seven years worth of data, WLDI was able to track trends and not only give states a grade based on most current performance, but also to give them a tier ranking” based on how they performed on average over the seven years, and whether they have an upward, downward or stable trend. There is data available for 43 states, plus Puerto Rico, Guam and the Virgin Islands.

Similar to past reports, the 2009 State Report Cards compare states on five different outcome measures for each year: incidence rates; cases missing work; median disability durations; delayed recovery rate; and key conditions: low back strain.

Iowa performed the best of all the states for 2006 and Minnesota came in a close second. Both states received a grade of “A+” based on an average of their 2006 scores in the five categories above.

Illinois came in last, with Wyoming, Rhode Island and New York very close to the bottom. In total, nine of the 43 states received a grade of “F” in 2006. WLDI prepared a summary of each grade for all states.

In terms of the tier ranking system, the Tier I states are Iowa, Kansas, Minnesota, Utah and Virginia. Tier I means that the state had an average grade of “B+” or better, and a trend going up or level. Those five states were doing great and continuing to improve.

Eight states fell into the opposite category (Tier VI), which means they had an average grade of “D-” or worse, and a trend going down or level. The worst performers for the years 2000-2006 were: Illinois, Louisiana, New Jersey, New York, Oklahoma, Rhode Island, Texas and Wyoming. The report includes a summary of tier rankings for all states.

The full report is available for purchase from WLDI in both electronic and hardcopy formats

Work Loss Data Institute is an independent database development company focused on workplace health and productivity based in Encinitas, California.

via Report Card: Best, Worst States for Workers’ Compensation.

Utah Incurred No Pension Reform ‘Transition Costs’ [Mackinac Center]

Michigan House Republicans should take note

Posted by James M. Hohman on June 11, 2012 at 3:40pm

Republicans in the Michigan House have let alleged “transition costs” attached to closing the state’s defined-benefit school pension system plan to new hires halt what would be a transformational fiscal reform. The issue is how the state “catches up” on current shortfalls in underfunded state pension funds. Paying huge upfront “transition costs” is one way, but it’s not the only way – incurring these costs is entirely optional.

Utah gives a recent example. The state closed its defined-benefit pension plan to all but judiciary employees in 2010, and did not impose “transition costs” on itself. Instead, the state is paying to amortize those pension fund shortfalls by assessing their cost against total payroll for all employees, regardless of whether they are in the old retirement system or the new one.

In its financial statements, Utah’s actuaries write:

Employers will continue to contribute the amortization rate to the current systems on the pay for Tier II members. Therefore, SB 63 did not affect the benefits provided to current URS members, and it creates a mechanism for ensuring that the UAAL is amortized over the payroll for both current and Tier II members. Therefore, this law had no effect on this actuarial valuation.

To read more about Utah’s reforms, see the Arnold Foundation report on transition costs.

Credit rating agencies continue to rate Utah government bonds highly. In fact, its pension reforms were cited favorably in one rater’s affirmation of its triple-A rating.

Michigan legislators should feel free to close the school employee pension plan without fear of large upfront costs, just as Utah did.

via Utah Incurred No Pension Reform ‘Transition Costs’ [Mackinac Center].