Public Safety Compensation and Public Safety

Public sector unions are by far the most powerful special interest in California. And they are united in their goal to pay themselves as much or more than public agencies can afford, which shields unionized public servants from the worst effects of the laws (which they almost always support) that have made California’s cost-of-living the highest in the nation. But there are also significant differences between the various public sector unions in California.

Whatever else one might say about public safety unions, they have not undermined the quality of their profession. To the extent public safety in California is compromised, for the most part that is caused by policies the public safety unions unsuccessfully opposed including Prop. 47, Prop. 57, AB 109, and AB 953.

This is in sharp contrast to California’s teachers unions, which by their opposition to charter schools and desperately needed union work rule reforms such as attempted in the Vergara lawsuit, make unconvincing their claims to care about results.

Any criticism of public safety unions should be in this context. Nonetheless, the case must be made that police and firefighter compensation in California has reached a level where at the least it is appropriate to replace their services whenever possible with less expensive solutions.

With respect to firefighters, an example of this can be found with private ambulance services which can, and often do, replace firefighter personnel to respond to medical emergencies. This solution can save municipalities millions […] Read More

How Wall Street Bought the Public Employee Unions

Earlier this week, on December 7th, 2011, as reported by the San Jose Mercury, the “San Jose City Council votes 6-5 to place pension reform on June ballot.”

This plan is drawing fierce resistance, but there are two financial considerations that most critics of pension reform don’t take sufficiently into account when making their arguments:

(1) Pension contributions are very sensitive to how much the fund can earn. A pension that earns 3% per year, i.e., allows someone who works for 30 years to retire with a pension equivalent to 90% of their final salary, will require a 10% increase in annual required contributions (as a percent of pay) for every 1.0% the earnings on the pension fund drop. That is, if the contribution to a firefighter’s pension is currently 35% per year (based on employer and employee contributions combined), and CalPERS lowers their expected rate of annual return by just 1.0%, from 7.75% to 6.75%, then the required annual contribution as a percent of salary goes up to 45% per year.

(2) The rate of return being currently maintained by most pension funds, 7.75% per year, is much higher than can be sustained going forward. A key reason for this is because equity growth over the past 20-30 years, and especially over the last 10-15 years, was fueled by increasing debt. By enabling massive borrowing – consumer, commercial and government – more consumer spending was […] Read More

The Price of Public Safety

There is nothing wrong with paying a premium to public safety personnel because of the risks they take. And while it is true there are other career choices that are riskier than public safety jobs, and while it is also true that on average, public safety personnel in California – according to CalPERS own actuarial data – have life expectancies that are virtually the same as the rest of us, it is still appropriate to pay public safety personnel a premium. After all, we never know when these people may stand on the front lines when something extraordinary happens – such as what occurred in New York City on Sept. 11th, 2001. People who work in public safety live with this knowledge every day, and they should be compensated appropriately for that.

The question is how much of a premium is appropriate, and how much of a premium can we afford as a society? Should a fire fighter make more than a medical doctor? Should a police officer make more than an engineer?

In order to get an idea of what public safety employees in California actually make, I obtained a roster that showed the total compensation paid to each employee of a Southern California city. Out of respect for the employees noted on this roster, I won’t identify the city, much less reveal the names of these individuals. And it is fair to state this city probably has a median income somewhat higher than the average for California. It […] Read More