For the second year, taxpayers are screaming about the end-of-year bonuses provided to Wall Street executives.

While the pile is money is much lower, career firefighters are encountering taxpayer anger. Let’s look at two issues:

TIME-TO-RETIRE

In the last half of the 20th century, some IAFF locals and state associations were successful in reducing the time required to qualify for a pension. Part of the argument was the punishing work conditions as a city firefighter in the 1940s and 1950s.

For example, if I was hired by Prince George’s County in the early 1970’s I could get a full pension after 20 years of service, instead of the 25 years needed to retire from Fairfax County. My ex, a civilian professional working in the fire department, always reminds me that she needs to work 32 years to get her county pension when she turns 55.

Chief Kenneth Ellerbe

Some departments have multiple retirement plans, based on when you started work. A person hired in PG today does not have the same generous retirement program enjoyed by the firefighters hired in the 1960s.

The issue with DCFD Chief Ellerbe on leave with out pay while working as the Sarasota County fire chief is an example of the nuances. When Ellerbe started with the District of Columbia fire department he needed to complete BOTH 25 years of service AND be 50 years old to start receiving a pension. Other DCFD members just need to achieve 25 years of time-in-service. Dave Statter, STATter911, provides the details HERE.

A December 26, 2009 Wall Street Journal article looked at the impact the recession has on local government. Conor Dougherty, writing in “As Slump Hits Home, Cities Downsize Their Ambitions” makes this observation:

More likely to be union members, government workers tend to be better paid and have greater job security than many of the taxpayers who pay their salaries. Benefits are often better, too. Virtually all full-time state and local workers have access to retirement benefits; in the private sector, about 76% of full-time employees had retirement benefits. Employment in local government peaked in August 2008 and has fallen by 117,000 since then, or less than 1%, compared with a 6.3% fall in private employment from its December 2007 peak. (full article HERE)

RETIREMENT BENEFITS

We posted an article about “Gilt-Edged Pensions” in response to an article published in the February 16, 2009 issue of Forbes magazine. Stephanie Fitch’s opening paragraph was designed to get your attention:

Your 401(k) isn’t doing too well, is it? But you’re footing the bill for some lucky stiffs who don’t have to worry about market crashes, medical costs or inflation.

The article featured police chief Glenn Goss. Goss retired as a Delray Beach police commander at 42 and took a job as the Highland Beach police chief. He gets a lifetime pension of $65,000 from Delray and, assuming he lives to the actuarial age of 78, represents a $2 million liability to Florida taxpayers. Fitch points out that there are “millions” of public safety employees with defined-benefit retirement programs.

Defined-benefit plans provide pension income to retired employees on the basis of a formula that accounts for a worker’s years of service at a firm and earnings. Distributions are typically made for the remainder of the employee’s life, making the plan similar to an annuity. Definition from Tax Policy Center of the Urban Center and Brookings Institution HERE

Forbes article HERE, Fossilmedic column HERE.

Sarasota’s reporting on Chief Ellerbe points out that the combination of DCFD pension and county salary approaches $250,000 a year. There is nothing illegal or improper about this situation, but generates the same anger as the federal government payout of Wall Street bonuses.

WHEN THE MONEY RUNS OUT

Forbes, The Wall Street Journal and The Economist have a pro-business, anti-labor editorial point-of-view.  Even with this bias, they make a couple of points that we cannot ignore.  A December 10, 2009 article in The Economist, makes the following observation in “Welcome to The Real World“:

… public-sector workers are spoiled rotten. Government employees earn 21% more than private ones and are 24% more likely to have access to health care. Only 21% of private workers enjoy a defined-benefit (DB) pension, which guarantees retirement income based on years of service and final salary. But 84% of state and local workers still receive DB plans. Article HERE

Defined benefits retirement program obligates the municipality for decades. To meet that obligation, local governments are reducing health benefits, laying off employees and reducing expenditures. It may not be enough.

The City of Vallejo filed for Chapter 9 bankruptcy on May 06, 2008 (HERE). One of the goals of filing for bankruptcy was to break existing public safety labor contracts and pension obligations.

I am sad that 50 years of efforts to improve the working conditions of career firefighters is crumbling in the face of the 2008 recession.

Even if the economy starts to grow today, we are two to three budget cycles away from significant increases in local government revenue. Some think that we will not see a rapid return to the growth and revenue during the 1990’s.

The experts interviewed in The Economist article say it time for a fundamental restructuring of work conditions, pay and benefits.

What do you think?

Mike “FossilMedic” Ward