Posted: 01/03/2011 05:09:23 PM PST
Updated: 01/03/2011 05:09:23 PM PST
Tom Huening is San Mateo County's controller. He's also something of a canary in the fiscal coal mine.
As 2010 came to a close last week, Huening issued an eight-page memo, a shortened version of a previously released annual financial report.
Huening pointed out that, once tougher requirements by the Government Accounting Standards Board, an agency that establishes accounting standards for local governments, are implemented, the grim numbers become positively scary.
The county's taxpayers currently are on the hook to provide $150 million toward public employee pensions, he noted. Using the new, tighter (and more realistic) formula, the annual cost balloons to $256 million, an increase of $106 million, or nearly 71 percent.
As Huening put it in his report, the county's projected yearly structural operating deficit of $110 million to $150 million would increase dramatically if the $106 million were taken into account. It would dry up the county's reserves rapidly, to the point where "reserves would be negative at the end of fiscal year 2013."
In other words, the county essentially would be broke without draconian budget cuts. There would be no more wiggle room whatsoever.
Read more...
Posted by Steve Sinai
29 comments:
I just read a article how the government unions want to go after everyones 401k. Can they do that?
Can you cite the article so we can understand what it said and what you're talking about? What are "government unions" and how they would "go after everyone's 401k"?
In the spirit of working through what could happen to in changing government pensions....
1. Change the entitlement formula. This would provide lesser pension payout from governments (Federal, States, Counties, Cities). This year this has begun to happen in California.
At the same time....
2. Establish an equivalent to a private sector 401(k), non-profit 403(b) plan where the employee contributes.
3. Establish an employee paid equivalent to the group "after tax" savings plans and Roth IRA plans which also exist in the private and non-profit sectors.
Beyond pensions, review health and other benefit plan entitlements....
4. Review what is provided and paid-out, keep in line to some extent (where possible) with the private and non-profit sectors...
For example, Pacifica city council. These council members serve in a "part-time" capacity, yet.... they have full health and pension benefits. In about 1996 city council voted themselves an option: CASH in lieu of health benefits. This is a rare benefit. And, I'm not sure when city council voted themselves a pension benefit (I suspect that may have occurred within 8-12 years, because one of the prior Mayors was complaining about it).
Looking at one of these benefits only...
In private, non-profit, and probably 99% of all municipalities, a CASH in lieu of benefits provision does not exist. Why would an employer want to pay such a benefit? And why would our citizens in this self-inflicted "poor city" want to pay for such a benefit? Providing partial cost for health plan (medical and dental or equivalent)in event a council member has none might be reasonable, but duplicating benefits, or providing CASH; plus providing a (probably not tenured) pension our citizens a liable for -- huh?
So, Patty and Anon, this has NOTHING to do with going after "our 401 (k)'s", rather it has to do with just going after our taxpaying pocketbooks. As for unions, they exist privately for the benefit of workers. This city, for example, deals with several.
I work for the county and will get 100k plus pension.
me=happy
kathy meeh=sad no pension
"Sour" the issue is the imbalance of employee benefits which exists between the private and public sector. This is about a 28 year divergence from the time 401-(k) and 403(b)pensions came into existence in the private sector.
As for your "sad" personalized comment = not credible.
Mark Hemingway: Unions target your private retirement savings.
Read more at the Washington Examiner: http://washingtonexaminer.com/op-eds/2010/10/mark-hemingway-unions-target-your-private-retirement-savings#ixzz1A6Q3KgXS
Anon, I read enough of the Washington Post article to know its another tool of the clueless right wing, better described as rumor or spin rather than journalism.
"Will the government outlaw your 401(k) plan?" Really, doesn't that sound at face value totally absurd and design to agitate. Then of course rational Senators Tom Harkin and Bernie Sanders (Democrats of course) and "Labor" (Unions) become part of the conspiracy to rid Americans of their 401(K)s. Why would that happen? What's the point?
Its possible that some form of regulated guarantee accounts are being discussed and could emerge to set along side other forms of retirement plans, including 401(k)s. Unions have vested guaranteed pension plans now, social security is a vested benefit, savings plans, annuities, life insurance all have a vested component. Problems in saving for retirement may occur, however, when individuals (for whatever reason) withdraw and spend the money.
Hide your money! Hide your children! The democrats gambled theirs away and now want yours.
Some of us just want YOUR money Tyrone, LOL.
Besides, you may have noticed the extension of the Bush tax cuts. 38% of that tax welfare program benefits 1+% of the most wealthy, and who do you think insisted on that other than Republican leadership? Bingo, Republican leadership, and you were all on board for that one.
So, I think you may be confused about this issue Tyrone. In fact, you may be part of a political party that not only does not support you, but uses you as a tool.
I heard the national debt works out to 45k for every man woman and child in the county.
That boggled my mind today.
Also this last congress spent more money then the previous 110 congress's combined
I remember when Ronny Reagan ran for President and he called every Democrat a "tax and spender" well they are all doing a pretty good job "taxing and spending"
"...this last congress spent more money then the previous 110 congress's combined."
Jim, you bring-up some interesting issues. Here's the debt clock which looks realistic and confirms the 45k (which I also heard recently). The official USA debt and GDP source was posted on wikipedia.
See what you make of it. I think the quote above you heard may be spin and needs further consideration. 1st congress was 1789, population about 3.9 million. Today in the USA there are roughly 310 million people, plus over 221 years (in developing a society) a few advances.
Opposite view. Given the continuation of the elective President W. Bush wars, "the worst recession since the great depression" including the need to bail-out large financial/industrial corporations-- the issue may be (or is) that not enough stimulus money was spent to fund jobs and infrastructure. (Much of the financial corporation debt has been paid back as you know, and that may not have been accounted for).
Under President Reagan's administration (1981-1989) there was a whole lot of deregulation (airlines, utilities come to mind) which was controversial. His administration also dropped the top tax rate from 69% to 28%, see Tax Fax. Reagan years was the beginning of when the rich grew much richer, and the rest of us, well?
Okay then the jobs got shipped overseas, Reagan wasn't around for that one.
"For example, Pacifica city council. These council members serve in a "part-time" capacity, yet.... they have full health and pension benefits. In about 1996 city council voted themselves an option: CASH in lieu of health benefits. This is a rare benefit. And, I'm not sure when city council voted themselves a pension benefit I suspect that( may have occurred within 8-12 years, because one of the prior Mayors was complaining about it)."
The council voted themselves a 75 percent increase in salary in 2001. It went from $400 to $700 per month. The vote was unanimous. At the time, that was the second-highest salary in San Mateo County.
Then in 2006 they voted to tie their health benefit to the management contract, giving them the "cafeteria plan" with a cash-out option if they didn't need the benefit. That was worth a cool $1,020 per month until the automatic yearly increases were stopped in 2009. But it still is worth $920 per month to Mr. Vreeland and Ms. Digre, who do not need health insurance from the taxpayer.
They are the second-highest paid councilmembers in San Mateo County.
Remember when George Washington was President his first meeting was all about.
How do we pay off all this war debt?
We're not that old.
CORRECTION "in about 2006 city council voted themselves an option: CASH in lieu of health benefits. This is a rare benefit." referring to my comment of 1/4/10, 10:31am above. Thanks Lionel, I can't fix the "1996 typo" without tearing-down the whole text.
From my view view raising the stipend salary over time is understandable. On the other hand, city council voting themselves a CASH-OUT option in lieu of health benefits in 2006 may be "legal", but seems both excessive and irregular.
BTW, Lionel, saw your picture in the Tribune this week, congratulations on your Rotary award.
CASH PAYMENT IN LIEU OF HEALTH INSURANCE?
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Employees frequently ask employers to pay them a cash benefit if they do not enroll in insured benefits, such as health insurance. The reason for the employee's request may be that s/he is covered on a spouse's insurance or it may be that s/he is simply looking to maximize cash compensation. Whatever the reason, acceding to the request to pay cash in lieu of insurance may have unintended legal consequences.
This issue arose in an arbitration case which was recently reported. (In re Modernfold, Inc. and International Union, United Automobile, Aerospace & Agricultural Implement Workers of America-UAW, Local 2119.) In that case, a union employee opted out of group health insurance and demanded that he be paid the $500.00 per month which was allocated to health insurance under the collective bargaining agreement. The employee argued that the employer's contribution was a negotiated part of an entire monetary package, and that he was entitled to the full value of the package if he did not take the insurance. The employer successfully opposed the demand because doing so would result in adverse tax consequences to all members of the plan.
Letting employees choose between insurance and cash makes all insurance contributions taxable, unless you have established a Section 125 cafeteria plan. Under the Internal Revenue Code, if a plan offering employees a choice between cash payment and a non-taxable employment benefit, such as health insurance premiums, does not meet the requirements for a Section 125 cafeteria plan, then employees who choose the benefit will be credited with taxable income equal to the amount of the cash alternative. (Internal Revenue Code §125; Prop. Treas. Reg. §1.125-1, Q&A-9.) The Internal Revenue Service has stated in Private Letter Ruling 9406002:
"To the extent that the employee could have otherwise received an amount that is paid to the insurance company, it is includible in the employee's gross income at the time it is paid over to the insurance company... The difference between the compensation paid to an employee who elects health insurance coverage and the greater amount that would have been paid to that employee if he or she had not elected health insurance coverage is includible in the employee's gross income and constitutes wages for employment tax purposes." Private Letter Ruling 9406002 went on to note that when the insurance premium is deemed to be taxable income, that amount is subject to income tax withholding and other payroll taxes, such as FICA and FUTA.
The same result is reached even if the cash benefit is only an occasional exception made by a generous and well-meaning employer and if the cash payment given the employee in lieu of insurance does not equate exactly to the amount of the insurance premium.
Providing insurance benefits to employees generally affords important tax advantages both to the employer and to the employee. Do not jeopardize those tax advantages by making exceptions and allowing cash payments to employees who don't want or need the insurance without establishing a Section 125 plan or consulting with legal counsel.
http://www.sgilaw.com/Read-Our-Newsletters/Issue-2-2003.shtml
"From my view view raising the stipend salary over time is understandable."
Not in my view. The staff report for the 2001 salary increase had no comparison of other city council salaries in the county. It was former city manager Dave Carmany who failed to provide the data.
A 75 percent increase in salary? Not bad if you can do it while no one's looking.
What do you mean "no one was looking"? They can't do that in secret.
Your response "Not in my view", Lionel.
Okay, we could argue the merit of the stipend city council salary increase in 2001, but I don't remember the circumstance 10 years ago. And, you may have a better idea what part-time county and comparable city council members are paid currently.
The issue for me is the additional tax payer burden of providing a NEW $1,000 (+ or -) cash payout in lieu of what had been ordinary employee health benefits. That's not a visible salary, it's an embedded salary increase (taxed as the article from Jim Alex indicates). Its a WHOPPER, a complete departure from what had existed prior.
Unlike most other Bay Area cities, Pacifica is a self-inflicted "poor city" (thanks in most part to the same 8 year part-time city council members). Therefore, why burden the tax payers?
In 2006 the more appropriate medical/dental/health/Cafeteria plan or plan change would have been: "use it or lose it", and if you already have it, forget about duplicating it. Maybe even pay a portion if you do use it (that's the trend in the private sector).
Remember the (2009) Measure D campaign? City council members said they only make $700 monthly? Its more like $700 + $1,100 then + a pension. The salary is visible, unlike CASH in lieu of health benefits.
Why don't you democrats and socialists have a meeting and discuss this. You have created these entitlement problems. I only have one request, don't bill the tax payer.
Let's begin with mowing-down the road to your unregulated house, with no electricity. no water, no sanitation (because no sewer), and you can self-educate your children (good luck). Getting to work, well that's another problem, no roads. No law, no court, and when you get sick: GOODBYE.
300,000 million people out there "doing their own thing" (a regular free-for-all). We all share certain social values and responsibilities. So "get over it", being a Republican is more than giving a 38% tax advantage to the most wealthy 1+%, who BTW just shipped your job overseas.
It's a Global Economy and it will stay that way. Get over it.
Anon, how about closing some of the overseas tax loopholes, like that idea?
Pacifica's cash-in-lieu benefit option is a dirty little secret that costs this city dearly--not just councilmembers take advantage of it so the amount wasted on this is significant. It's particularly disgusting to read/hear our local elected politicians who are receiving this benefit try to explain it away by saying they couldn't otherwise afford to serve in office because of the out-of-pocket costs they would incur to attend all those important functions, etc. Those alleged high out-of- pocket costs should be public record and run through the city's expense system with oversight. Accountability! How much you wanna bet we're actually paying or re-imbursing them for those costs AND giving these ridiculous leeches their cash-in-lieu, too? Wouldn't surprise me. But don't you feel the love with all the hugs and back rubs? Rip off the public with a smile and a hug. They may not all be crooks but that's only because some of them aren't smart enough to know what they're involved in, but they are all greedy. God help pacifica.
"Okay, we could argue the merit of the stipend city council salary increase in 2001, but I don't remember the circumstance 10 years ago."
Kathy,
We don't have to argue it, it's public record. The council increased its salary 75% from $400 to $700 per month. The staff report provided no context in terms of the county average in salaries for councilpeople. That was then-city manager Dave Carmany's responsibility.
They became, at that time, the second-highest paid council people in San Mateo County.
Should we argue whether city staff was solely at fault? Or whether the council (Carr, Gonsalves, Hinton, Vreeland, DeJarnatt) failed to ask questions about whether this was a reasonable increase? It appears both things were true from the city clerk's notes.
Lionel, "argue the merits" of a 10 year old issue when 2 of my councilmember pals involved are deceased; and, raising stipend salaries from $400 to $700 (75%) when $400 may have been too small, and some expenses may not have been accounted for? This is an issue for which there is no context other than the increase, the deficient city council agenda notes (your reference), and at this point speculation.
We have been through this twice. You have an interest in this increase, I don't. And, I don't care to ask Cal Hinton, Jim Vreeland or Pete DeJarnatt their 10 year old memories of that increase-- or, dig through requested (good luck) old city paperwork. you may. The 2001 stipend increase was YOUR issue.
My concern was stated prior: 2006 cash-out in lieu health benefits. This is a poor city so determined so by those who voted-in this benefit in for themselves.
Remember in 2001 when the prior stipend was increased? Cal Hinton, Maxine Gonsalves and Barbara Carr supported development in the quarry, development in Palmetto/Beach area, the North Pacifica LLC development, a 3rd Fire Station (in Rockaway), Highway 1 improvement. But Gonsalves and Carr were voted-out in 2002.
If the 2006 city council had moved this city forward rather than backward, an increased salary during their term should not have been an issue (from my view). What gets messy is 1) the cross-over (cash for benefits as described prior) and 2) the successful effort by that same 8 year city council to keep this city "poor", and risk city infrastructure through continued decay.
You and I may have a different view of these issues. You are where you are, and I am where I am. Its just another stalemate, mate! Nevertheless, I frequently appreciate your findings, your view and your courage.
So many words used to make so little sense.
The bottom line is that this council a few years ago very quietly voted to more than double their pay by using the cash-in-lieu option. We don't pay them $700 month. We actually pay them between $1600-$1800 per month because they all take cash instead of benefits.
Do you think they're worth it? Do you? If you're not disgusted by those numbers then think about all the other city employees taking advantage of this same scheme. The impact on Pathetica's budget is significant. And this is another of those "only in Pathetica phenoms". Other employers (public and private) follow a use it or lose it policy or put a very low cap on it because they can't afford this scheme. These hidden payroll costs really are Pathetica's dirty little secret. The city attempted to curtail this in some of the recent union negotiations but not very successfully. Kinda hard to take that kind of money away from employees who've become accustomed to the gravy train. Actually, many of our employees know how wrong this is and how it will lead to disaster but they aren't at the negotiating table. And of course those 4 sterling characters on the council (Len, here's a chance to show some character and leadership) well, those 4 just keep taking and you and I just keep paying.
"...use it or lose it policy or put a very low cap on it".
Anon 1:18pm, if you saw the city council last night you know the police (management contract) will drop the "cash in liu health benefits" contract to 50% beginning next year (2012). That's a good start hopefully toward 25% or complete reversal. Will city council do at least the same for themselves?
Got to love the 2002-2010 city council majority voting-in the "cash in lieu of health benefits" managerial plan to benefit themselves-- while at the same time promoting taxes to citizens, land to unproductive "open space", and failing to support significant economic development.
BTW, in a brief pre-2010 election conversation I now recall past city council member Cal Hinton saying he was against the "cash in lieu of health benefits" plan; but once it was passed, he accepted the benefit (and that's only fair). Also remember Cal Hinton repeatedly supported economic development improvement for this city.
Think new city council member Len Stone will do the same as Hinton. Stone verbally wanted to link economic development action to the newly proposed for Spring ballot "Fire Tax". Of course, that conversation got talked around and deferred to the dust bin of "theory". Majority city council members are all for "economic development" (they say)-- just nothing significant to pay needed city overhead in this city that anyone's noticed.
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