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The Effort to Gut Metro Employee Benefits Fails!

Close to 200 Metro employees and SEIU members packed the Howard School Building to hear Pew's proposal for benefit changes for city employees.

Close to 200 Metro employees and SEIU members packed the Howard School Building to hear Pew’s proposal for benefit changes for city employees.

After a nearly two-year struggle, we are happy to report that the Metro Employee Benefit Board has rejected any cuts to the pension or retiree health benefits for Metro employees!

At their meeting on Oct. 6, the Benefit Board weighed the proposal from Mayor Dean’s Study and Formulating Committee as well as the input from SEIU and decided that it was unfair for firefighters and police to be allowed to keep their medical coverage upon reaching Medicare eligibility while the rest of the city’s employees would be cut off from health insurance when they retired. The Benefit Board voted against the Study Committee’s recommendation, despite a major P.R. push by the Mayor and his allies to convince the public of a “crisis” in unfunded liability for employee benefits which SEIU debunked.

Unless the new mayor or Metro Council decides to revisit this issue, major changes to employee benefits are now effectively dead. You’ll remember that SEIU was able to get any cuts to the employee pension stopped over the summer by an aggressive campaign against the Pew group and the Dean Administration. That victory was only possible because our members turned out and they were vocal about protecting the benefits they earned.

Meanwhile, the Benefit Board did vote in favor of a new lump-sum payout option that the union supports. There are pros and cons to this new option, but the important thing is that the final decision about whether to use it is up to the employee and it is not mandatory. We urge city employees to get more information about this benefit as details are rolled out – assuming it gets approved by the Metro Council.

Thank you to our members who turned out to meetings and talked to their elected officials about these issues and helped secure a major victory. Please tell your non-union co-workers that the reason their benefits are secure is because your Union fought hard to protect them!

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Fact Check: SEIU Responds to Pew Presentation on Pension & Retiree Medical Benefits

David Draine presents Pews findings to the Study & Formulating Committee in Nashville.

David Draine presents Pew’s findings to the Study & Formulating Committee in Nashville.

On a Friday afternoon, while city employees were still at work and unable to attend, the Study & Formulating Committee met to hear a presentation from Pew Charitable Trusts about the pension and health benefits of Metro employees. And as usual, the committee chair carefully chose questions that fits with the adminstration’s narrative which wrongfully suggests that there is some kind of funding or solvency crisis because of employee benefits that requires “reform”.

Tennessean columnist Frank Daniels, a Dean booster who fretted back in November that the committee might not get to finish its work (even though their work was technically completed back in late summer when they delivered their recommendations on a domestic partner benefit), was contacted by SEIU after the committee met with information that was not brought up or was misrepresented by administration and Pew officials. Here is the statement that SEIU’s Mark Naccarato sent to The Tennessean’s Frank Daniels, which as you can tell by the column Daniels wrote, was largely ignored:

With respect to the $2.4B unfunded liability from medical costs that Pew talked about and which The Tennessean reported on in September, here is some important context missing yesterday:

  • Virtually all cities and states have unfunded liabilities for retiree health care benefits. Unfunded liabilities of this type do not affect a municipality’s credit rating since they ordinarily operate on a “pay as you go” basis. By failing to place these liabilities in context, the committee and Pew are creating  a manufactured crisis over “the Big Scary Number” of unfunded medical liability costs (in this case, it’s $2.4 billion). The truth is that worrying over an unfunded liability for medical costs is no different than panicking because you have a mortgage on your house. If you pay your mortgage every month as you go and don’t miss payments, you are fine. You would only be in a financial crisis if suddenly the bank asked you to pay the entire balance of your mortgage at once with cash. That’s the same thing with unfunded medical liability costs – they are only a concern if for some reason, the entire city workforce retired or got a serious illness at the same time. This is a statistical impossibility, so again, the Big Scary Number is in fact, not so scary.
  • Mr. Riebeling did not address the fact that, in the last two years, Metro employee health insurance premiums have not gone up. This is due to several factors, including the Affordable Care Act, but it is worth asking Mr. Riebeling and Mr. Shmerling: If health care costs are so explosive and are such a large concern, then why have employee premiums decreased over the last two years? The fact that this important positive trend was ignored yesterday reinforces our belief that there is a political agenda, not a policy agenda, at work. Also indicative of a political agenda: this is the third “study” of employee benefits in five years, all during the Dean Administration.
  • It is also worth noting that retiree health care benefits don’t enjoy the same legal protections that say, pension benefits do, so future governments do have the ability to adjust them than they do accrued pension benefits. Having said that, we have to come back to the notion that the Big Scary Number – unfunded medical liability – is not expected to affect the long-term fiscal health or credit rating of the city in and of itself.

With regards to the pension, it seems that there is a concerted effort to try to persuade the public and legislators that any changes to the current Defined Benefit (“DB”) pension plan would only affect new employees. This is not the case and when Mr. Draine from Pew was asked about this yesterday, he dodged the question. If the city creates a separate system and puts its new employees into a Defined Contribution (“DC”) plan or a hybrid plan (similar to the State of Tennessee’s), several things will happen:

  • Paying benefits of current employees in the DB pension plan will become more expensive as a result of what pension actuaries call “transition costs.” Without new young members (and their contributions) coming into the existing pension fund, the pension plan would have only older and retired workers in it. Over time, the investment horizon of the plan managers would shrink and more assets would have to be in liquid form, ready to convert into pension checks. These shifts would lower investment returns and require more taxpayer contributions to meet pension obligations. This raises a serious concern in the future that employees who have retired or close to retirement would have their pension checks cut.
  • The switch to a DC plan would mean higher fees (charged by investment firms who manage DC savings plan options) than with a DB pension pool and lower investment returns. There is a large research literature (e.g., by Towers Watson) on the great cost effectiveness of DB plans. The National Institute on Retirement Security estimated in a  2014 study that DC plans cost nearly twice in contributions to achieve the same retirement benefit.
  • The city is about halfway through a comprehensive pay study and what they already know is that retirement and health benefits – especially the DB pension plan – are the primary attractor for (and retainer of) talent in Metro. If Metro stops offering a DB plan, what is it going to do to keep attracting talent? Especially now that the economy is improving and workers have more job options? Will the city have to increase pay to offset its cut to benefits? How do you explain to someone who’s been working for Metro for 30 years that the new employee who just got hired is making more money than they are? Despite the politically expedient comments offered up yesterday, cutting the DB plan or changing to a hybrid or a DC plan will absolutely affect recruiting and employee morale in a negative way. This has already happened in cities and states where they have closed DB plans for new employees and it will happen here as well.

All of the topics I just mentioned above about the pension plan were discussed at the last meeting of the Study & Formulating Committee in September which you were not at. I can assure you that everyone in the room – including Pew and the city’s actuaries at BPSM – all agreed that putting new hires into a new plan gives the city the same or increased costs and less security. At the last meeting, the tone of the committee and everyone else involved was basically that changing the DB plan (even for future employees) was a non-starter. Which is why all of us were shocked yesterday when Mr. Shmerling brought this up again and seemed to act as if all of that discussion never happened.

I’m not sure if Mr. Riebeling or Mr. Shmerling have made you aware of this, but Nashville’s pension fund is well-funded and in 2013 it had nearly 19% ROI which puts it in the top five pension plans in the U.S. of all cities and states. Some of that has to do with getting out from under the losses that everyone took during the Great Recession, some of it has to do with savvy investment decisions by Metro, and some of it has to do with the minor changes that the unions agreed to that were proposed by the last Study & Formulating Committee. The point is… why would you want to fix something that isn’t broken? Even Mr. Draine agreed (both yesterday and at the last committee meeting in September) that the city’s pension plan was not a major cause for concern from a cost or sustainability perspective. His charts and graphs showed as much yesterday. Again, we see a political motive here, not a case that can be justified from a financial or policy standpoint.

We are very concerned that the state of the city’s benefit system is being portrayed as being in some of kind of crisis situation when it is anything but. There are ideologues – including John Arnold, who is funding Pew’s work – who have an interest in seeing public employee benefits weakened. There are several motives for this, one of which is that it is in the interests of private employers to see benefits diluted so that businesses are not forced to keep up to attract talent. Metro is the county’s second largest employer and if their benefit package is less enticing, then there is no reason for say, HCA or Vanderbilt to keep theirs as competitive – that’s money in the bank for them.  And I think you know by now since SEIU has already talked to Tennessean reporters about this that this “review” by Pew isn’t specific to Nashville. Thanks to funding by Mr. Arnold, Pew has a whole division that is barnstorming the country giving reports to cities and states just like what we heard yesterday.

We believe that this is a campaign to scare taxpayers into thinking that public employee benefits are unsustainable and that there has to be a change. In Nashville, we see little to no justification for “fixing” employee benefits, though we do see a financial motive (access to new capital for risk-prone investors) a business motive (diluting the benefits of a large city workforce benefits private companies’ bottom line), and a political motive (weakening benefits weakens the bargaining position of the labor unions and employee associations who represents the workers) to “reform” the benefit package. Simply put, there is no objective reason to accept these proposals from Pew. Now, there is a whole other discussion to be had about Nashville’s fiscal health over the coming decades as a result of the fiscal policies of the Dean Administration, but we strongly believe – and I think most people would if they had all the facts – that working families should not have to pay for irresponsible spending decisions made by politicians. Especially when those decisions have resulted in nearly $1 billion in tax breaks and subsidies being handed out to corporations that are already located in Nashville and who are making big profits.

Keep in mind too that most of the “reforms” that were suggested yesterday would only affect General Government employees, not public safety employees. You should know if you don’t already that General Government workers don’t make as much money overall as public safety employees and they are made up of more minority workers as well. What kind of message does it send to the community that the city is considering cuts (and yes, we are talking about cuts here – not improvements) to the benefits of a workforce which is lower-paid and has a higher percentage of minorities?

Mr. Daniels, when we read your column about this topic back in November, it seemed as if you were only getting one side of the story on this discussion. I know you are on deadline to try and write a column, but at some point, we really would like to have a conversation to go deeper on these issues as the stakes are high for thousands of hard-working city employees and their families, not to mention the citizens who expect high-quality services.

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Nashville Public Employees Respond to Pew Report on Benefits

Close to 200 Metro employees and SEIU members packed the Howard School Building to hear Pew's proposal for benefit changes for city employees.

Close to 200 Metro employees and SEIU members packed the Howard School Building to hear Pew’s proposal for benefit changes for city employees.

Workers on Public Employee Pension and Health Systems: “It Ain’t Broke… Don’t Fix It”

Hundreds of Nashville firefighters, nurses, law enforcement officers, librarians, water technicians, school employees, and other public service workers and retirees spoke out against a proposal by Pew Charitable Trusts to cut public employee and retiree benefits at a meeting of the Study and Formulating Committee.

Pew issued an interim report that explored a proposal for Metro Nashville to close its existing defined-benefit pension plan and shift future employees into a state pension plan that is a combination – or “hybrid” – of a traditional pension and a 401(k)-type defined-contribution plan. A hybrid proposal would shift more of the costs onto employees, who make on average about $33,000/ year according to a recent compensation study. “A lot of us have to take second jobs to make ends meet and many of us are single moms,” said Vanessa Sanders, a labor and delivery nurse at General Hospital. “After taxes, transportation, health insurance, and all the other necessities, we just cannot afford to have more money come out of our paychecks for a retirement contribution.”

Many questioned the need for any changes after the city conducted a similar study of employee benefits in 2012 in which several key adjustments to the plan were already made. Recently, Metro’s actuaries revealed that the city’s defined benefit plan is 83% funded, putting it in the top tier of public pension funds. CNBC reported that in 2013, the Nashville plan’s investment returns were the fifth highest of all city and state plans in the U.S. In other cities and states that have shifted to a “hybrid” type like the one proposed by Pew, costs to taxpayers increased while benefits for beneficiaries decreased. “If changing the system is actually going to cost the city more money and deliver less of a benefit to workers, why the heck would we do it,” asked Rick Beasley, a 911 dispatcher. “It sounds to me like Pew is creating a “lose-lose” situation that leaves taxpayers and employees paying more and getting less.”

“It ain’t broke, and we don’t need Pew fixing it,” said Jack Byrd, a corrections officer. Pew’s work has been funded by a foundation organized by billionaire John Arnold, a former Enron executive and hedge fund manager. Some have criticized Arnold’s efforts, saying that hedge fund managers like Arnold collect generous sums in fees for managing the funds while workers are left with reduced pension benefits.

The Service Employees International Union, Local 205, which represents thousands of Metro employees across dozens of city departments, agencies, and in Metro schools, made it clear that it opposes any changes to employee benefits. “Pew and their allies are proposing a solution to a problem that doesn’t exist,” said Doug Collier, president of Local 205. “If there are any cuts that need to happen in Nashville, it should be to the tax breaks and corporate welfare being handed out to millionaires.”

Pew officials ultimately admitted in their interim report to the Study & Formulating Committee that Metro’s pension is in “solid financial shape,” but did find significant concerns with the unfunded liability the city has as a result of its retiree medical program. The Committee announced that Pew’s work in ongoing and another report is expected in the coming months to examine some remaining issues. The Committee’s next meeting date has not been announced yet.

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Pew/Arnold Study on Metro Benefits Causes Confusion and Controversy

(Nashville)  Representatives from Pew Charitable Trusts caused confusion and controversy at a meeting of the Study & Formulating Committee when they revealed data about the Metro employee pension fund that conflicted with data presented by the city’s actuaries.

On multiple occasions, members of the Study & Formulating Committee attempted to get a straight answer from Pew representatives on the amount that Metro’s pension plan is funded at – a number which is crucial in determining if any reforms to the retirement system are even necessary. In a memo to the Committee on July 22, Pew/Arnold stated that Metro was funded at 77%, a number that was debunked by representatives from Bryan, Pendleton, Swats & McAllister, the independent actuary that serves Metro Government. According to BPS&M, Nashville’s open pension plan was funded at a healthy 85% (13% higher than the average state-level pension plan) in 2013. “I want to make sure we aren’t sounding alarms that don’t need to be sounded,” said Glenn Farner, one of the members of the Study & Formulating Committee, to the crowd in attendance.

“It is very disappointing to see an organization like Pew risk its reputation with this kind of fuzzy math in order to push an ideological agenda that puts the retirements of thousands of Middle Tennessee working families at risk,” said Doug Collier, President of SEIU Local 205. SEIU represents public employees in Metro government departments as well as Metro schools support staff, nearly all of whom are covered under Metro’s benefits plan.

Despite its credible name, Pew is partnering with the John & Laura Arnold Foundation to push a particularly dangerous plan to cripple public pensions all across the country. The Wall Street Journal identified Texas billionaire and former Enron executive John Arnold as one of the major forces behind efforts to cut worker pensions at the city and state level. Arnold, who was the subject of a Department of Justice investigation related to his work at Enron (including accusations of insider training and his role in wiping out the retirements of thousands of Enron employees) has funneled massive amounts of money to pension-gutting politicians and their super PACs. His foundation has also directed $4.85 billion to Pew Charitable Trusts’ “Public Sector Retirement Systems” project, which has produced anti-pension research used by state lawmakers to justify cutting into public workers’ retirement benefits, often replacing them with more expensive, less reliable and widely-discredited 401(k) plans or their newer cousin, “hybrid pension plans,” which bring with them hefty bank fees and unnecessary risk for seniors.

The Pew/Arnold work has been called “deceptive” by a host of state legislators in Kentucky after the organizations convinced the state of Kentucky to adopt a new “cash balance plan” which the legislators said “will cost taxpayers millions of dollars, will not reduce our state’s unfunded liability, and will diminish retirement security.” Pew also recently dropped into Jacksonville, Florida to provide policy recommendations addressing the city’s retirement challenges. There, Pew provided a flawed actuarial analysis that wildly overstated the Jacksonville police and fire pension fund’s problems. The city ultimately rejected Pew’s advice.

“It seems like everywhere Pew/Arnold goes, their recommendations are the same – to weaken the retirement security of public employees,” Collier said. According to investment research firm Morningstar, Metro Nashville was the seventh-highest ranked public pension fund in the U.S., with an ROI of 18.3% in 2013. “It ain’t broke, so there is no need for Pew/Arnold to try and fix it,” said Collier.

Another controversy plaguing the Study & Formulating Committee is its agenda. The current committee was formed by Mayor Karl Dean at the request of Metro Council members who asked the mayor to appoint a committee “specifically to consider the provision of domestic partner benefits,” according to a letter signed by 26 city council members on Oct. 2, 2013. “It was never the intent of the Council for this committee to be debating and discussing other employee benefits,” said Collier. “The city spent hundreds of thousands of dollars on an exhaustive study like this only two years ago and the changes that needed to be made were made. It is time for this current committee to be dissolved since their work on domestic partner benefits is concluded.”

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The Service Employees International Union is one of the fastest-growing labor unions in the U.S. with over 2.1 million members in North America. In Tennessee, SEIU Local 205 is chartered to represent thousands of public and private sector workers.

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SEIU Local 205 Members Applaud Metro Council Resolution to Invest in Vital Services

Bill sponsor Erica Gilmore (left), with SEIU members Mary Miller and Joan Parmer.

Bill sponsor Erica Gilmore (left), with SEIU members Mary Miller and Joan Parmer.

SEIU Local 205 members stood together and applauded Nashville’s Metro Council action on RS2013-824, which calls on Congress to end the sequester and balance the federal budget in a way that will create jobs and strengthen our communities.

The resolution is another way citizens and elected officials are coming together to invest in vital services, like Head Start, which took a $400 million cut this year due to the sequester. The Chattanooga City Council approved a similar resolution a week earlier.

“Cuts to Head Start, Meals On Wheels, and job education programs are hurting our community,” said Linda Epps, an employee of Metro Action Commission working in the Head Start program. “These days, Congress doesn’t do anything unless we force them to. We thank the Nashville Metro Council for taking a stand for our children and seniors.”

In March of this year, $85 billion in across-the-board budget cuts went into effect. These cuts, known as “The Sequester”…

  • Cut Head Start by $400 million in FY2013, which will result in 1,200 fewer Tennessee children served. Nationwide, tens of thousands of Head Start employees could either lose their jobs or rely on cash-strapped states and localities to pick up their salaries instead.
  • Cut employment services, which connect job seekers with employment opportunities and job training. With cuts totaling more than $37 million, some 830,000 fewer job seekers will receive employment assistance.
  • Threaten the loss of 750,000 American jobs according to the Congressional Budget Office, leaving many middle class Americans vulnerable.
  • Cuts 2 percent from Medicare, which would cost 212,000 jobs in the healthcare industry alone, according to the Congressional Research Service.

“Congress needs to do more to make sure the wealthy and big corporations pay their fair share of taxes,” said Doug Collier, president of SEIU Local 205. “A fair budget agreement should raise more revenue from wealthy Americans and big corporations. There are hundreds of billions in tax loopholes used by big business and the wealthy to allow them to avoid taxes that could give us more revenue and prevent cuts to the vital services our communities need.”

This story got media attention from NBC News and from The Nashville Scene.

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VICTORY! MAC Employees Unite and Win!

At the Metro Action Commission in Nashville, SEIU members showed solidarity when administrators tried to force workers to use emergency leave during inclement weather, even though the agency’s own policy said otherwise. When the MAC employees took action and posted copies of the policy up on bulletin boards all across the city’s Head Start centers, administrators backed off.

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