By Chip Maxwell- Omaha Alliance for the Private Sector
Thank you, City Council, for listening when the Omaha Alliance for the Private Sector and other voices urged you in 2011 to stop the business-as-usual fire contract moving through city hall. You took over negotiating authority and produced a contract that is better in numerous ways.
However, the fire contract still is not where it needs to be. Firefighters will pay something for health insurance and more toward their pensions, but it’s not enough considering the financial hits taxpayers have taken because of the national recession and disastrous policies at city hall.
Disputes about rates of return on pension funds and whether pay raises are fully
covered are relevant, but that’s nibbling at the fringes of the main problem. There will be no fiscal justice in Omaha until current firefighters, not just new hires, accept a significant reduction in pension benefits.
Sometimes employees have to accept reductions in various forms of compensation to keep their jobs and allow their employers to remain fiscally healthy. It happens all the time in the private sector. It needs to happen more in the public sector.
A typical annual fire pension is $60,000. With early retirement and immediate payout, it’s likely a retiree will collect that pension for at least 30 years, which is
nearly $2 million in guaranteed income.
The projected total cost fluctuates based on investment performance and the number of people in the system. Currently it’s $680 million to cover pension payments for everybody in the pension pipeline, retirees and current employees. It’s called “unfunded” liability because Omaha doesn’t have that $680 million. The restaurant tax and taxpayer pension contribution required in the new contract help fund that liability.
About that taxpayer pension contribution. Private sector employers typically contribute 3 percent to employee pensions. In Nebraska state and local government, 10 percent is typical.
The fire contract requires 33 percent. Contract supporters downplay it by saying
only 7 percent of that is an employer match for current firefighters, while the
remainder is for overall unfunded liability. Nonetheless, taxpayers contribute
33 percent to a pension system that includes current employees who will retire and receive most of that 33 percent pension contribution.
The contract’s financing plan works only if the pension fund has an annual rate
of return of at least 8 percent for the next 50 years. If the rate falls short of
8 percent and projected returns are not realized, unfunded pension liability could
grow to more like $1 billion.
Omaha already is losing citizens and businesses because of fiscal pressures. What if pension performance falters and taxpayers are forced to make up the difference with an even higher pension contribution?
Instead of asking taxpayers to pay more, city hall must say to the union: Agree
to reduce the pension formula for everybody or we lay off X number of firefighters. One way (lower pension rate) or the other (fewer employees), we’re bringing down the cost of this pension system.
The Commission of Industrial Relations (CIR), the state panel that resolves labor
disputes in the public sector, has ruled that the city has authority to decide how
many firefighters to employ. It’s the only real leverage the city has in these negotiations. Use it.
We’ll jeopardize fire and emergency services, contract supporters say, if we reduce staff levels.
We disagree. There are credible studies, plus practices of other cities, indicating
that Omaha can succeed with fewer employees and better management.
It’s hard to make changes, say supporters, because 80 percent of the fire contract is mandated by the CIR.
Then abolish the CIR, or make its recommendations optional rather than mandatory. Let the city write contracts that make sense for Omaha, not for a state panel that doesn’t consider what Omaha can afford.
The new contract runs through December 2014. The Alliance will seek promises from 2013 mayoral and city council candidates to 1) help generate a 2014 blitz on the state legislature to free the city from CIR mandates, and 2) negotiate a January 2015 contract that reduces pension benefits for all employees.
There will be no long-term solution until the state neutralizes the CIR and the
city uses staffing leverage to lower the cost of the pension plan.
You can check out our new WEBSITE HERE [http://r20.rs6.net/tn.jsp?e=
.
You can become a member before the event by clicking HERE [https://www.paypal.com/cgi-
Check out our FACEBOOK HERE. [http://r20.rs6.net/tn.jsp?e=
Good article.
Good job for the Alliance! When the contract expires again, there will be another round at it.