CLT UPDATE
Wednesday, December 29, 2010
The next fiscal crisis has arrived
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"The most alarming thing about the state issue is
the level of complacency," Meredith Whitney, one of the most
respected financial analysts on Wall Street and one of the most
influential women in American business, told correspondent Steve
Kroft.
Whitney made her reputation by warning that the big banks were in
big trouble long before the 2008 collapse. Now, she's warning about
a financial meltdown in state and local governments.
"It has tentacles as wide as anything I've seen. I think next to
housing this is the single most important issue in the United
States, and certainly the largest threat to the U.S. economy," she
told Kroft.
Asked why people aren't paying attention, Whitney said, "'Cause they
don't pay attention until they have to."
Whitney says it's time to start....
[New Jersey] Gov. Christie acknowledged that's a lot of jobs. "I
canceled it. I mean, listen, the bottom line is I don't have the
money. And you know what? I can't pay people for those jobs if I
don't have the money to pay them. Where am I getting the money? I
don't have it. I literally don't have it."
Asked if this is going on all over the country, Christie told Kroft, "Yes. Of course it is. It's not like you can
avoid it forever, 'cause it's here now. And we all know it's here.
And the federal government doesn't have the money to paper over it
anymore, either, for the states. The day of reckoning has arrived.
That's it. And it's gonna arrive everywhere. Timing will vary a
little bit, depending upon which state you're in, but it's comin'."
...
"This is unsustainable, right?" Kroft asked.
"Totally unsustainable. We have a benefit problem," Christie said.
"It's not an income problem from the state. It's a benefit problem.
And so we gotta change those benefits."
Asked what the reaction to that has been, Christie said, "Well, it
depends on where you sit. I mean, I think the general public thinks,
'I can't believe anybody gets a pension anymore. I've got a 401(k).
It got killed in the stock market. I don't know what I'm gonna do
for my retirement. I can't believe people get a pension anymore.' So
I think amongst the broad, general public, they've said, 'Amen.' And
I think among the public sector unions, they are yellin' and
screamin'."
And Christie is yelling back. He provoked a very public fight with
the teachers union, which is one of the most powerful political
forces in the state of New Jersey....
Asked if he wants the public employee unions to share the pain,
Christie told Kroft, "You bet. I want them to share in the
sacrifice. And this is what I say to public sector unions: 'Listen
you can boo me now, but I'm the first governor who has walked into
this room in ten years and told you the truth. And here is the
truth. If you don't partner with me to get this done in ten years
you won't have a pension.' And that's the truth."
CBS News
60 Minutes
Sunday, December 19, 2010
The Next Financial Meltdown
Defenders of public employee pension systems
often make the case that pension benefits are not all that
generous. The outrageous cases you see on the news — Long Island
police retiring in their 40s with pensions in excess of base
pay, administrators “retiring” with six-figure pensions and then
going back to work with another government agency, one ex-FDNY
firefighter running marathons on his $86,000 “disability”
pension — are the exceptions, they say.
The data, however, tells a different story. According to the
Census Bureau, the average New York retiree receiving a
corporate or union pension — a retiree from the private sector —
was receiving an annual benefit of $13,100 in 2009. For state
and local government retirees, that figure was more than twice
as high: $27,600. And that average figure includes retirees who
were part-time workers or only spent part of their careers in
government; full-career retirees often do far better....
The only way to protect New York taxpayers is to make it
impossible for the legislature to give away the farm. That will
require abandoning the defined benefit model and adopting 401(k)
— and bringing the value of public sector retirement benefits
closer into line with the private sector.
The New York Post
Saturday, December 18, 2010
Public vs. private retirements
Like most city workers, Boston teachers enjoy
generous health benefits that would be the envy of many
private-sector employees struggling with rising insurance costs.
But teachers can count on even more: A taxpayer-funded trust
provides dental and vision coverage better than the plan for most
city workers. In recent years, the trust paid some $45,000 annually
for funeral expenses, hearing aids, a softball league, and other
extras, according to recent tax filings.
As part of the package, taxpayers also contributed almost $1.3
million in the last school year for teachers’ legal services
unrelated to the classroom, helping with wills, bankruptcy, real
estate, name changes, and defense against some misdemeanor criminal
charges.
The perks cost taxpayers $1,423 per teacher and $887 per
paraprofessional this year, for a total of almost $8.4 million. That
figure is above and beyond the $86.2 million the city will
contribute for teachers’ life and health insurance, which includes
below-average premiums and copayments as low as $10....
“It’s time to rethink health and welfare and treat teachers exactly
as other employees in terms of benefits, and eliminate the
expenditures for these other services,’’ said Samuel R. Tyler,
president of the Boston Municipal Research Bureau, a fiscal watchdog
funded by businesses and nonprofits.
The Boston Globe
Monday, December 27, 2010
Fund gives Hub teachers $8m in perks
Union defends trust that dates to 1968
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Chip Ford's CLT
Commentary
For over a decade CLT has been warning of
"The Ticking
Time Bomb" of "public employee unions" pensions and benefits but
far too few have bothered to listen, or again chose to kick the can
down the road hoping they're not in office when it explodes, or can
still grab a chair when the music stops.
It's now apparent that "unfunded public
employee benefits" are quickly becoming the next "housing bubble"
that's about to burst, the next dot.com
crash -- the next national financial crisis adding to the recent
economic debacle. The smoldering
embers have caught spark at last, the explosion will likely ignite
this coming year, in 2011. What's the
possible solution for this impending crisis -- is there one this time? Even China
is balking at loaning the USA more of its capital, and without more
of China's cash infusion where will the feds get the money this
time to bail-out the states' political profligacy?
"Congressional Republicans appear to
be quietly but methodically executing a plan that would a)
avoid a federal bailout of spendthrift states and b) cripple
public employee unions by pushing cash-strapped states such
as California and Illinois to declare bankruptcy. This may
be the biggest political battle in Washington . . ."
Secret GOP plan: Push states to declare bankruptcy and smash
unions
Reuters News Service
Tuesday, December 7, 2010
Chris Christie, the hard-nosed and outspoken
governor of New Jersey, is only the first governor to
confront this crisis-of-crises head-on. The rest will soon follow, I
expect in the year ahead. This is about to become the top
story of 2011.
Gov. Christie said it best to the so-called "public
servants": "If you don't partner with me to get this done in
ten years you won't have a pension."
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Chip Ford |
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CBS News
60 Minutes
Sunday, December 19, 2010
The Next Financial Meltdown
The day of reckoning is at hand. Steve Kroft tells us what we
need to know about the looming financial crisis that almost no one
is talking about.
"The most alarming thing about the state issue is
the level of complacency," Meredith Whitney, one of the most
respected financial analysts on Wall Street and one of the most
influential women in American business, told correspondent Steve
Kroft.
Whitney made her reputation by warning that the big banks were in
big trouble long before the 2008 collapse. Now, she's warning about
a financial meltdown in state and local governments.
"It has tentacles as wide as anything I've seen. I think next to
housing this is the single most important issue in the United
States, and certainly the largest threat to the U.S. economy," she
told Kroft.
Asked why people aren't paying attention, Whitney said, "'Cause they
don't pay attention until they have to."
Whitney says it's time to start.
California, which faces a $19 billion budget deficit next year, has
a credit rating approaching junk status. It now spends more money on
public employee pensions than it does on the state university
system, which had to increase its tuition by 32 percent.
Arizona is so desperate it sold off the state capitol, Supreme Court
building and legislative chambers to a group of investors and now
leases the buildings from their new owner. The state also eliminated
Medicaid funding for most organ transplants.
Then there's New Jersey. It has the highest taxes in the country, a
$10 billion deficit and a depressed economy when first-year Governor
Chris Christie took office. But after looking at the books, he
decided to walk away from a long-planned and much-needed project
with New York and the federal government to build a rail tunnel into
Manhattan. It would have helped the economy and given employment to
6,000 construction workers.
Gov. Christie acknowledged that's a lot of jobs. "I canceled it. I
mean, listen, the bottom line is I don't have the money. And you
know what? I can't pay people for those jobs if I don't have the
money to pay them. Where am I getting the money? I don't have it. I
literally don't have it."
Asked if this is going on all over the country, Christie told Kroft,
"Yes. Of course it is. It's not like you can avoid it forever,
'cause it's here now. And we all know it's here. And the federal
government doesn't have the money to paper over it anymore, either,
for the states. The day of reckoning has arrived. That's it. And
it's gonna arrive everywhere. Timing will vary a little bit,
depending upon which state you're in, but it's comin'."
And nowhere has the reckoning been as bad as it is in Illinois, a
state that spends twice much as it collects in taxes and is unable
to pay its bills.
"This is the state of affairs in Illinois. Is not pretty," Illinois
state Comptroller Dan Hynes told Kroft.
Hynes is the state's paymaster. He currently has about $5 billion in
outstanding bills in his office and not enough money in the state's
coffers to pay them. He says they're six months behind.
"How many people do you have clamoring for money?" Kroft asked.
"It's fair to say that there are tens of thousands if not hundreds
of thousands of people waiting to be paid by the state," Hynes said.
Asked how these people are getting by considering they're not
getting paid by the state, Hynes said, "Well, that's the tragedy.
People borrow money. They borrow in order to get by until the state
pays them."
"They're subsidizing the state. They're giving the state a float,"
Kroft remarked.
"Exactly," Hynes agreed.
"And who do you owe that money to?" Kroft asked.
"Pretty much anybody who has any interaction with state government,
we owe money to," Hynes said.
That would include everyone from the University of Illinois, which
is owed $400 million, to small businessmen like Mayur Shah, who owns
a pharmacy in Chicago and has been waiting months for $200,000 in
Medicaid payments. Then there are the 2,000 not-for-profit
organizations that are owed a billion dollars by the state.
Lutheran Social Services of Illinois has been around since 1867 and
provides critical services to 70,000 people, mostly the elderly, the
disabled, and the mentally ill. The state owed them $9 million just
before Thanksgiving, and they nearly had to close up shop.
Asked how long his organization can go on like this, Rev. Denver
Bitner, the president of Lutheran Social Services of Illinois, told
Kroft, "Well, we wonder that too because we really don't know."
He says they were forced to tap their entire line of credit and all
their cash reserves before the state would finally pay them as a
hardship case.
"It has to be that you've sold off all your assets, you have
borrowed from everybody that you can borrow from, and then, we'll
think about it," Rev. Bitner explained.
And according to Bitner, that's even though the state owes his
organization the money.
"The first words out of my mouth are usually an apology, because
they have been you know put in this situation, that is really
unacceptable. And you know there is very little I can do or say
other than apologize," Comptroller Dan Hynes said.
It's not just the social safety net that Hynes has to worry about:
there have been Illinois legislators that have been evicted from
their offices because the state didn't pay their rent, and stories
about state troopers being turned away from gas stations because the
owners refused to take their state credit cards.
"The state's a deadbeat," Kroft remarked.
"Yeah. I mean, the state of Illinois is known as a deadbeat state.
This is a reputation that has taken us years to earn and we've
reached, you know, the heights of, I think, becoming the worst in
the country," Hynes said.
Not all of the problems that Illinois and other states are facing
right now can be traced to the recession. But the precipitous drop
in tax revenues did expose decades of financial irresponsibility,
reckless spending, unrealistic benefit packages for public
employees, and the use of political gimmicks to cover up hidden
deficits. It's forcing state governors and the public to confront
some harsh realities.
"This is different, isn't it?" Kroft asked New Jersey's governor,
Chris Christie.
"It is very different," Christie said. "The reason it's different is
because the only choices left are choices that people previously
have said were politically impossible, that you couldn't do. You
couldn't cut K to 12 education funding. You couldn't do those
things. They were, you couldn't talk about pension and benefit
reform for the public sector unions. That were third rails of
politics. We are now left with no alternatives."
"Just the third rail?" Kroft asked.
"Yeah, that's it. I'm just gonna grab it and go, and let the chips
fall where they may," Christie said.
In some ways, Christie is the political canary in the coal mine of
the state fiscal crisis. He slashed New Jersey's budget by 26
percent, including a billion dollars in cuts to education, forcing
the layoffs of thousands of teachers. He got rid of 1,300 state
workers and drastically reduced funding to New Jersey cities,
counties and villages which have their own financial problems. And
he's still facing another $10 billion deficit next year.
Long term, the situation is much, much worse.
"Okay. Let's talk about the pension obligations. Forty-six billion
unfunded liability for pensions? Sixty-six billion unfunded for
healthcare liability?" Kroft asked.
"Yes, Sir," Christie said.
"That's a lot of money," Kroft remarked. "That's a lot of money,
even for the federal government."
"That's a lot of money," the governor agreed.
When Kroft pointed out that there are people who think it's worse,
Christie said, "Yeah, I think that's an optimistic view. I think
that's an optimistic view. Listen, at this point, if it's worse,
what's the difference? I mean, it's bad enough as it is, so what's
the difference? I mean now, we're talkin' about money that none of
us can really get our arms around."
"This is unsustainable, right?" Kroft asked.
"Totally unsustainable. We have a benefit problem," Christie said.
"It's not an income problem from the state. It's a benefit problem.
And so we gotta change those benefits."
Asked what the reaction to that has been, Christie said, "Well, it
depends on where you sit. I mean, I think the general public thinks,
'I can't believe anybody gets a pension anymore. I've got a 401(k).
It got killed in the stock market. I don't know what I'm gonna do
for my retirement. I can't believe people get a pension anymore.' So
I think amongst the broad, general public, they've said, 'Amen.' And
I think among the public sector unions, they are yellin' and
screamin'."
And Christie is yelling back. He provoked a very public fight with
the teachers union, which is one of the most powerful political
forces in the state of New Jersey.
When one teacher told him at a public hearing, "And you're not
compensating me for my education and you're not compensating me for
my experience. That's all," the governor replied, "Well you know
what, then you don't have to do it!"
It's a scene that is starting to play out all over the country.
Governors of cash-strapped states are beginning to cajole or bully
public employee unions into making concessions on what are
considered to be gold-plated retirement and health care packages,
which are now collectively underfunded to the tune of $1 trillion.
"Some union leaders have suggested that you're running the state
like Tony Soprano," Kroft told Christie.
"Well, as an Italian American, I take great offense to that," he
replied, laughing. "Listen, you know what it is? I'm the first
person to expose them for what they've been doin' to the public."
Asked if he wants the public employee unions to share the pain,
Christie told Kroft, "You bet. I want them to share in the
sacrifice. And this is what I say to public sector unions: 'Listen
you can boo me now, but I'm the first governor who has walked into
this room in ten years and told you the truth. And here is the
truth. If you don't partner with me to get this done in ten years
you won't have a pension.' And that's the truth."
It's also the truth that some of the responsibility for New Jersey's
pension woes lie at the doorstep of the governor's mansion. Christie
and his predecessors have failed to contribute to the state's share
of its pension obligation in 13 of the last 17 years, one of the
reasons the fund is going broke. Christie says it's ancient history.
"We spent too much on everything. We spent too much. We spent money
we didn't have. We borrowed money just crazily. The credit cards
maxed out, and it's over. It's over. We now have to get to the
business of climbin' out of the hole. We've been diggin' it for a
decade or more. We've gotta climb now, and a climb is harder. Gotta
do it," he said.
The problem with that, according to Wall Street analyst Meredith
Whitney, is that no one really knows how deep the holes are. She and
her staff spent two years and thousands of man hours trying to
analyze the financial condition of the 15 largest states. She wanted
to find out if they would be able to pay back the money they've
borrowed and what kind of risk they pose to the $3 trillion
municipal bond market, where state and local governments go to
finance their schools, highways, and other projects.
"How accurate is the financial information that's public on the
states? And municipalities," Kroft asked.
"The lack of transparency with the state disclosure is the worst I
have ever seen," Whitney said. "Ultimately we have to use what's
publicly available data and a lot of it is as old as June 2008. So
that's before the financial collapse in the fall of 2008."
Whitney believes the states will find a way to honor their debts,
but she's afraid some local governments which depend on their state
for a third of their revenues will get squeezed as the states are
forced to tighten their belts. She's convinced that some cities and
counties will be unable to meet their obligations to municipal bond
holders who financed their debt. Earlier this year, the state of
Pennsylvania had to rescue the city of Harrisburg, its capital, from
defaulting on hundreds of millions of dollars in debt for an
incinerator project.
"There's not a doubt in my mind that you will see a spate of
municipal bond defaults," Whitney predicted.
Asked how many is a "spate," Whitney said, "You could see 50
sizeable defaults. Fifty to 100 sizeable defaults. More. This will
amount to hundreds of billions of dollars' worth of defaults."
Municipal bonds have long been considered to be among the safest
investments, bought by small investors saving for retirement, and
held in huge numbers by big banks. Even a few defaults could affect
the entire market. Right now the big bond rating agencies like
Standard & Poor's and Moody's, who got everything wrong in the
housing collapse, say there's no cause for concern, but Meredith
Whitney doesn't believe it.
"When individual investors look to people that are supposed to know
better, they're patted on the head and told, 'It's not something you
need to worry about.' It'll be something to worry about within the
next 12 months," she said.
No one is talking about it now, but the big test will come this
spring. That's when $160 billion in federal stimulus money, that has
helped states and local governments limp through the great
recession, will run out.
The states are going to need some more cash and will almost
certainly ask for another bailout. Only this time there are no
guarantees that Washington will ride to the rescue.
The New York Post
Saturday, December 18, 2010
Public vs. private retirements
By Josh Barro and E.J. McMahon
Defenders of public employee pension systems often make the case
that pension benefits are not all that generous. The outrageous
cases you see on the news — Long Island police retiring in their 40s
with pensions in excess of base pay, administrators “retiring” with
six-figure pensions and then going back to work with another
government agency, one ex-FDNY firefighter running marathons on his
$86,000 “disability” pension — are the exceptions, they say.
The data, however, tells a different story. According to the Census
Bureau, the average New York retiree receiving a corporate or union
pension — a retiree from the private sector — was receiving an
annual benefit of $13,100 in 2009. For state and local government
retirees, that figure was more than twice as high: $27,600. And that
average figure includes retirees who were part-time workers or only
spent part of their careers in government; full-career retirees
often do far better.
To understand what sort of public pension you might be eligible for,
the Empire Center for New York State Policy has created a Pension
Calculator, available at nypensionbomb.org. Simply enter your age at
retirement, years worked and final average salary — typically, the
average of your wage earnings in your last three years worked — and
you can see what benefit you would be entitled to, if you were lucky
enough to work for the government.
You can also find out that pension’s present value — how much cash
you would need on hand to buy an annuity making payments equal to
the pension. But sit down before you read it — in many cases, that’s
an amount well into the seven figures.
What the calculator will show you is that New York pension benefits
can be extremely rich for typical employees. Consider a teacher in
Albany County, retiring at 59 after a 37-year career, with a final
average salary of $89,000. That teacher is eligible for a pension
benefit starting at $62,745 (70.5% of final average salary) with an
annual cost-of-living adjustment.
Is your 401(k) as rich as that? Consider that a private-sector
worker seeking an equivalent annuity would need a whopping $1.25
million on hand at retirement to buy it.
The richness of benefits is even more astounding in some downstate
communities. A Yonkers teacher with a master’s degree and some
additional coursework could expect a final average salary just over
$110,000 after 37 years worked. That translates into an annual
pension of $78,255 — exempt from state and local income tax — with a
present value of more than $1.5 million, assuming retirement at 59.
Police and firefighters, famously, get to retire earlier with even
more generous benefits.
These calculations don’t include the value of retiree health-care
benefits. While health benefits for retirees are nearly unheard of
in the private sector, New York public employees may keep their same
health insurance in retirement nearly for free — or absolutely for
free in many cases, as workers can use accumulated sick time to pay
their share of the premiums. This is a benefit worth approximately
$14,000 per year for family coverage.
And the benefit doesn’t stop at 65. Once retirees become eligible
for Medicare, taxpayers generously pick up their Medicare Part B
premiums and pay for high-quality Medigap coverage.
These benefits are almost entirely funded by taxpayers. Public
employees in New York state do make pension contributions of 3% of
their salary, but only for their first 10 years of work.
Last year’s “Tier V” pension reform will force most new employees to
make 3% contributions throughout their careers — maybe. The state
enacted a similar reform in the 1980s, and then undid it at the
unions’ behest when the stock market performed well.
So, how do private sector retirement benefits look in comparison?
Even if you’re one of the lucky few private-sector workers who gets
a defined benefit pension (just 16% of workers in private industry
do, as of 2009) your benefit is likely about half as generous as a
government worker’s. And in New York, you must pay state and local
income tax on pensions over $20,000, while public workers are
entirely exempt.
The vast majority of private sector workers receive their retirement
benefits in the form of a defined contribution plan, such as a
401(k) with employer match. These benefits are, on average,
significantly less generous than the pensions provided to government
workers.
The average American private sector worker receives 99 cents per
hour worked in retirement benefits, mostly in the form of an
employer-paid 401(k) contribution. The average state and local
government worker gets $3.26, mostly in the form of pension
benefits, according to the Bureau of Labor Statistics. But those
figures actually understate the public-private gap.
You may have read that public pension plans use rosy accounting
rules that understate the size of their true liabilities. These same
rules also understate the value of benefits accrued by workers. One
study from the American Enterprise Institute found that, in the case
of California workers, official estimates understated the value of
pensions by nearly half — that is, California workers receive
pension benefits worth 16% of their salaries, not the official 8.2%.
So, the average government worker is receiving retirement benefits
several times richer than his or her counterparts in the private
sector. This fact — not abusive practices like “pension spiking” and
“double-dipping” — is the reason that public pension costs have
become unsustainable.
Over the next five years, state and local governments’ payments to
New York state pension systems will nearly triple. For school
districts, they will more than quadruple, driving an 18% increase in
school property taxes just to pay for rising pension costs. New York
City has already seen this explosion — pension costs have grown
tenfold in the last decade — and pension costs in the city will
continue to rise going forward.
State lawmakers will only get a handle on this problem when they
admit that public employee pensions have not simply been mismanaged
and abused. The root driver of exploding costs is legislators’
willingness to make unsustainable promises to be paid by future
taxpayers — a proclivity as fundamental to a legislator’s brain as
the will to breathe is to yours or mine.
The only way to protect New York taxpayers is to make it impossible
for the legislature to give away the farm. That will require
abandoning the defined benefit model and adopting 401(k) — and
bringing the value of public sector retirement benefits closer into
line with the private sector.
Josh Barro is the Walter B. Wriston Fellow at the Manhattan
Institute, where E.J. McMahon is a Senior Fellow.
The Boston Globe
Monday, December 27, 2010
Fund gives Hub teachers $8m in perks
Union defends trust that dates to 1968
By Andrew Ryan
Like most city workers, Boston teachers enjoy generous health
benefits that would be the envy of many private-sector employees
struggling with rising insurance costs.
But teachers can count on even more: A taxpayer-funded trust
provides dental and vision coverage better than the plan for most
city workers. In recent years, the trust paid some $45,000 annually
for funeral expenses, hearing aids, a softball league, and other
extras, according to recent tax filings.
As part of the package, taxpayers also contributed almost $1.3
million in the last school year for teachers’ legal services
unrelated to the classroom, helping with wills, bankruptcy, real
estate, name changes, and defense against some misdemeanor criminal
charges.
The perks cost taxpayers $1,423 per teacher and $887 per
paraprofessional this year, for a total of almost $8.4 million. That
figure is above and beyond the $86.2 million the city will
contribute for teachers’ life and health insurance, which includes
below-average premiums and copayments as low as $10.
The Boston Teachers Union makes no apology for its trust fund,
saying that it agreed to the benefits decades ago instead of a pay
hike. Payments to the fund are set at a fixed rate per teacher,
union officials said, so the expense to taxpayers is capped and will
not rise unexpectedly like other health-care costs.
But with a sputtering economy, the city faces intense financial
pressure as it negotiates a new contract with teachers and almost
all of its other 43 unions. The School Department alone must close
an estimated budget gap of $63 million and plans to shutter 10
schools and consolidate eight others to cut costs. Some observers
argue that the time has come for the city to take a hard look at old
collective-bargaining deals.
“It’s time to rethink health and welfare and treat teachers exactly
as other employees in terms of benefits, and eliminate the
expenditures for these other services,’’ said Samuel R. Tyler,
president of the Boston Municipal Research Bureau, a fiscal watchdog
funded by businesses and nonprofits. “It really ought to be an item
on the list in terms of trying to negotiate changes.’’
The fund dates to 1968, when Mayor Kevin H. White sought an
alternative way to compensate teachers, said former members of the
contact negotiating team for both the union and management. The
first year, taxpayers contributed $50 for each of the city’s 4,500
teachers, according to a 1972 decision by the Supreme Judicial
Court.
“It came in lieu of salary,’’ said Richard Stutman, president of the
union, which has about 6,500 members. “It is no extra than saying to
someone, ‘You make 60 grand; two grand of that was extra back when
you got it.’ We were offered more salary, but we took it this way.
[Other unions] got larger salary increases all those years that we
didn’t.’’
The union’s website describes the services as “a generous and
valuable package’’ with “unique ‘extras’ to add to your total
benefits.’’ School administrators have touted the plan in national
recruiting efforts when they try to lure educators to Boston, union
officials said.
About 80 percent of benefits paid by the fund are for dental and eye
care, according to the trust’s most recent tax filings. The money
allows the union to operate a vision center at its headquarters in
Dorchester, employing a full-time optometrist and other staff.
But at $1,423 per teacher, the total cost of the perk is more than
double what Boston pays for dental and vision for most other
employees, who did not gain the coverage until 2001, according to
city officials. The most popular health plan — a Harvard Pilgrim HMO
— already includes very basic vision coverage, city officials said.
The majority of Boston employees are covered by the state’s dental
trust fund, which costs the city roughly $700 per employee each
year.
If the teachers union “was covered by the same plan as other union
members in the city for dental insurance . . . it would save
money,’’ said John McDonough, the School Department’s chief
financial officer, who has done some “ballpark analysis’’ of the
costs. “It is significant.’’
Spending by the trust fund for other perks ranked much lower, with
$9,849 one year for recreation, which includes a softball league and
a fun run. Another year the fund spent $11,026 on funeral expenses
for a benefit that will reimburse up to $1,000 for services when a
teacher dies, according to the union’s website.
The almost $1.3 million that taxpayers spent for the teachers’ legal
services goes to a separate trust fund. Union members use the money
most commonly for real estate transactions, to designate health care
proxies, and to draft wills, according to Patrick Connolly, a union
trustee. The benefit cannot be used to fight felony charges,
Connolly said, or for disputes in the classroom and other
school-related issues. Last year the legal fund paid $672,000 in
benefits for roughly 1,300 claims, according to the union and tax
filings.
“When all of these things were established, it was a totally
different fiscal environment in terms of pay scales,’’ said Michael
G. Contompasis, a former Boston schools superintendent and chief
operating officer who served on the contract bargaining committee
for 15 years. “Every time you ask to get something back in lieu of
something that’s been given, it always comes with a price.’’
The contract negotiated by the White administration doubled the
payment in 1969, giving $100 to the fund per teacher. With each new
contract over the past four decades, the taxpayers’ contribution
increased, often at the same rate as pay hikes. When the city pays
almost $8.4 million this year, the health and welfare fund will cost
six times the original deal cut in 1968 after adjusting for
inflation.
“We view it as part of the total compensation package,’’ said
Connolly, the union trustee, who noted that other unions have their
own benefits, such as uniform allowances. “The city has a certain
amount of money for wages. If we allocate part of that to an
increase in the health and welfare fund, it takes it out of the pot
of money that’s there.’’
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Citizens for Limited Taxation ▪
PO Box 1147 ▪ Marblehead, MA 01945
▪ 508-915-3665
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