On Conflict of Interest – Part 1

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OPEBby Doby Fleeman

Increasingly, folks around town have been asking how the City could be continuing to have such deep budget problems even after shedding 100 staff, or twenty percent of the workforce, over the past five years. They are curious. How can this be, when the economy is improving everywhere around us, the housing market is back on its feet, and the recession is fading in the distance? And, yet, this year, with the 2014 budget, the situation appears to be even worse.

The simple fact is that our 2014 budget is really not about just our current expenses and current cost of living issues – in large measure it is about paying back our legacy debts – debts accumulated over the past two decades as our local governments refused to put aside the contributions necessary to fund either their essential infrastructure components or the retirement promises they had made to their employees. More startling yet, even with the current council’s refreshing embrace of fiscal conservatism, our newest budgets are still not fully funding what’s required to keep up with these legacy debts.

The city’s recent budget projections through FY 2018 show our retiree medical expense rising from $3.8MM in 2014 to $4.38 in 2018 – when in fact our most recent annual report indicates our “all in” retiree medical costs should have been at least $S.8MM in 2014 and for each year thereafter. In other words, and unlike West Sacramento which has been fully funding its annual retiree medical contributions since 2011, Davis has actually fallen behind in its 10 year “ramp up phase” first begun in 2008.

For perspective, it’s important to keep in mind that the 10 year ramp-up is just to get us to the point where we would begin our 30 year amortization of the unfunded balance. And, on top of that liability is the city’s underfunded pension program, which (if our state were to get real with its expectation of market returns on its pension assets), would be facing an even deeper budget shortfall for years to come.

So, how did we get to a place where our government and elected officials have the latitude to simply ignore basic laws of actuarial accounting and default on their responsibility to put aside the necessary savings each year to pay for promised benefits down the road? Isn’t that the real question?

As a business owner, friend, and fellow neighbor in a community founded upon and committed to public service – it may be up to me to ask the question, but shouldn’t the entire community be wondering the same thing? When did this tradition, which defies every tenet of California’s County Employee Retirement law (generally considered the standard for public defined benefit pension plans), first begin and why was it allowed to metastasize during recent decades?

Part of the problem can and must be placed at the feet of the Government Accounting Standards Board (GASB), for it is they who have been charged with establishing the rules and guide lines for “presumably” transparent reporting standards in public annual financial reports. Sadly, however, they have done a very poor job in the area of re porting for deferred expenditure categories related to employee compensation and benefits. As case in point, GASB regulations can neither require nor compel annual contributions be made to existing retirement programs.

Very unlike guidelines established under ERISA, which govern funding of retirement plans in the private sector, GASB’s rules serve solely as recommendations or guide lines. As if to further emphasize their agnostic position, last year GASB changed even the name of their guidelines for annual contributions from “Annual Required Contribution” to “Annually Determined Contribution.”

As one might expect, all of this lack of requirements does offer some political advantages – providing complete and total flexibility for local governments and local politicians to prioritize their funding without concern over their ability or need to make those pesky contributions to employee retirement plans.

How our laws governing behavior of public sector employers were allowed to become so toothless is a story for another day. So, how does this OPES turn out to be an issue in our day-to-day issues in managing the city? Or, more bluntly, why should you care about this part of the budget discussions?

To illustrate, let’s take a look at two very current examples: 1) Recent discussions of merging programs between the City of Davis and the University Fire Departments, and 2) the case of our City Manager who has recently been selected to head the Incline Village Improvement District.

Let’s start with the case of the City Manager who is now faced with a decision – do I stay or do I go? Yes, there are the personal aspects to the story, and then there is the compensation aspect to the story. And, what thus far has appeared to elude conversation is a resolution of the current status of his qualifications to partake in the City’s generous, post-retirement OPEB (Other Post Employee Benefits Program).

On the surface, it may be assumed to be just another detail, but digging deeper and it is far from simple.  Without knowing all the ins and outs of the current Davis policy on OPEB qualifications at retirement, it would appear that Mr. Pinkerton does not meet the minimum 5 years of service requirement to be eligible to take his OPEB benefits with him if he elects an early retirement.

Why this matters is very relevant to this conversation. Particularly for a relatively young employee (not yet 55), the prospects for living another 30-35 years are fairly high (particularly given the premium quality of healthcare afforded under the city’s OPEB program). To simplify the problem, let’s assume that Mr. Pinkerton retires now, but lives to age 85 (and hopefully longer as I particularly like and respect Steve) .

Let’s just say that works out to 30 years at $20,000 per year or a $600,000 PV benefit (based on the assumption that healthcare will rise at the same rate as the state’s theoretical investment return). from a practical matter, this means that the city might as well be prepared to hand Steve a check for $600,000 on his last day on the job. Everybody get that? You see, if Steve successfully qualifies as “retiring” from the City of Davis – then he qualifies for lifetime healthcare insurance coverage courtesy of the citizens of Davis – even if he goes on to work for Incline Village, Nevada (where, by the way, all they offer a much more basic healthcare program that does not appear to offer lifetime, employer-paid benefits as does Davis .)

So, that’s one of the major issues of having “defined benefit programs” with no associated pre-funded assets – it’s not like one finds with a pension where the investment value of his pension asset follows him to a new job. Then comes the other side of the ledger, which comes into play when we go to interview for the manager’s replacement.

How, exactly, do we evaluate as between two candidates one aged 35 with ten years of background and experience and a good twenty years before retirement, and one aged 5O, with a much higher price tag but an impressive record of achievements in prior positions and with many good years ahead, but maybe only interested in working for the next five?

Because of the unique aspect of the unfunded OPEB program, one has to ask: “Is candidate two worth the signing bonus of $600,000 associated with the future liability for his lifetime healthcare?” Or, another way of looking at it, if we want to go to a “fully costed approach”, are we willing to impact the city operating budget to the tune of $120,000 a year for the next five years to match what will owe the manager at the end of his or her term of service?

But in reality that is not how these things are handled. Rather, and under the current “pay as you go system” as practices by most jurisdictions he re in California, there would only be the current year’s cost impacts that would impact the city’s budget – i.e. $20,000 per year – while the balance of $600,000 in future benefits would land on the books and impact subsequent city budgets – year after year for 30 years – extending far, far after the employee’s term of service is over and done.

And, mind you, just as soon as that manager retires, we will be replacing them with another and we will be back paying that same base line premium every year for that new employee.

Hopefully, this example makes sense to those who are not financially inclined. If not, then perhaps the case of the proposed merger of UCD and COD Fire Departments would make it easier to understand. It is the same basic exercise, only multiplied by the number of staff involved.

Because neither the university or the city has accumulated any investment asset to fund the defined benefit being discussed, when employees transfer from UCD to the City – and unlike the instance of their PERS-asset backed pension retirement account – there would be no “asset transfer” (since there is not associated “account” involved) to help fund their future post-retirement health ca re benefits when they subsequently retired from the city of Davis. Bottom line, we are forced to begin evaluating each employee on the basis of their potential impact to our balance of unfunded liabilities.

The candidate who is only 30, with another 20 years of service, would have far less impact on our current budgets than a more senior candidate, with perhaps five years before retirement. In the case of the younger employee, we could amortize the cost of funding their future benefits over a 20 year service life (or an additional $30,000 per year) versus the older candidate with a projected service life of only 5 years (or an additional $120,000 per year).

From a financial standpoint, which candidate would you favor? Is this fair to the older, more experienced candidate? Is it legal to make decisions on this basis – i,e. the employees fully burdened cost to the city? This approach may sound odd to the average citizen (or city employee) but this is the exact same analysis faced by professional football teams every year as the contemplate next year’s roster and the possibility of trades and new player acquisitions. It’s not a personal thing – it’s about the dollars and sense involved in managing a successful franchise.

Doby Fleeman is a local Davis businessman and former solar contractor with an MBA in Finance & Accounting from UCLA and BA from Stanford in Environmental Biology.

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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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47 thoughts on “On Conflict of Interest – Part 1”

  1. iPad Guy

    “…Pinkerton does not meet the minimum 5 years of service requirement to be eligible to take his OPEB benefits with him if he elects an early retirement.”

    Are you sure? He’s got many years of covered service before his Davis time. But, it sounds as if he he gave up rights to OPEB benefits upon retirement before 55 years of age the moment he accepted the Davis job.

    Are you saying the last position held has to be held for at least five years before someone becomes eligible for OPEB benefits in early retirement–regardless of how many years of total service have been completed? What if Bobby and Dan and Louis had been successful in getting the city to dump Pinkerton this year?

    1. Doby Fleeman

      IG – To clarify, all we know is that if Steve were to decide to retire early, that he would not have five years in with the City of Davis. Beyond that point, I’m certainly in no position to know what the particulars might be with respect his contract or his terms of employment. I am merely trying to make the point that our current OPEB program has some serious pitfalls due to its structure and the absence of funding for such an important component of one’s post retirement planning.

        1. Doby Fleeman

          IG – Didn’t mean to ignore your question. As I understand it, you would need to have worked for your last employer for five years – at your time of retirement – in order to be eligible for that jurisdiction’s OPEB program. Viewed from the outside, it appears as a game of musical chairs with where you land when the music stops is where your OPEB stays. Don’t know if that’s a fair analogy – maybe someone more knowledgable can post up.

          1. iPad Guy

            But, does that mean that he would have no OPEB benefits to “take with him” or just that the City of Davis wouldn’t have any continuing burden?

          2. Doby Fleeman

            From my understanding, if you don’t meet the criteria for qualification (whatever they might be and that is part of the question here to be clarified) then you would have no OPEB from the City of Davis. After all, if you don’t even work here for five years and then you expect the City of Davis to pay for your lifetime, employer-paid healthcare after retirement – how reasonable does that seem to you?

            A major part of the issue seems to involve the fact that, even if you have served 20 years in another PERS agency and have 20 years in on your PERS pension – none of your prior employers has provided any funding to create an account with your name on it (at least that is my understanding and appears to be corroborated by the CalPers CAFR reports) that you take with you from employer to employer. Hence, the musical chairs analogy.

            Could I be wrong in this characterization? Absolutely. As I tried to convey, the situation is truly an enigma just begging for an explanation from somebody in authority.

          3. Doby Fleeman

            My previous comment regarding the failure to create an account with your name on it refers specifically to an OPEB account (distinct from your pension account which does follow you from employer to employer).

          4. Rich Rifkin

            “As I understand it, you would need to have worked for your last employer for five years – at your time of retirement – in order to be eligible for that jurisdiction’s OPEB program.”

            There is no requirement by CalPERS to put in 5 years or more at your last agency to qualify for lifetime OPEB. The CalPERS 5-year requirement is simply an employee has to have worked for 5 years cumulatively at one or more affiliated agency upon retirement. That is the same requirement to get a pension.

            Up until about 5 years ago–when I repeatedly made a stink about it in my Enterprise column–Davis had no vesting requirement. What that meant was that they could hire, for example, a 56 year old person who had been in the CalPERS system for 12 years. Then two days after starting work in Davis, that person could formally retire. And for the rest of his life he (and his wife and a dependent child up to age 22*) would get free medical care, and the taxpayers of Davis would have to foot the bill. His age at retirement did not matter.

            However, Davis now has a vesting requirement for all of its employees who are represented in labor associations or unions. (I am unsure if this applies to the current city manager**.) The vesting requirement put in place in the 2009 contracts was a minimum of 5 years with the City of Davis. Also, a person who retired from Davis needed to work 15 years to be fully vested. In between, the City agreed to pay part of the OPEB costs and the retired worker was responsible for the rest. So, for example, someone who was partially vested after 10 years would have paid half the bill.

            There still was a serious problem (which I pointed out multiple times in my Enterprise columns) with the new system: It continued to give city employees a big incentive to retire very young and early retirements were terribly expensive.

            So in the current contracts, the Council partially listened to my advice and changed the vesting system again. I believe the 5 year minimum with Davis still applies to receive any OPEB benefit. However, the step up to 15 years no longer applies. Now the operative number is 25 years.

            (Note: there are different vesting systems now in place, depending on when a person was hired. Anyone who started before July 1, 1996 gets his full OPEB covered upon retirement from the City of Davis. Another group covers the hiring period July 1, 1996 to Dec 31, 2012. And a third includes those hired since January 1, 2013.)

            For most, the main change that came in the last round was to say, if a person retires before age 60, and he has worked more than 5 but LESS than 25 years for the City of Davis, the City will pay 50% of his OPEB until he is 60, and then the City will pay 75% of his OPEB until he reaches Medicare eligibility. At that point, the City will pick up the full cost, but with Medicare paying (roughly) half, it is cheaper.

            If a different person retires before age 60, and he has worked MORE than 25 years for the City of Davis, the City will pay 50% of his OPEB until he is 60, and then the City will pay 100% of his OPEB until he reaches Medicare eligibility. At that point, the City will pick up the full cost.

            My recommendation was–and continues to be–to keep the City’s contribution to OPEB at the minimum (3%) for all qualified retirees under age 65; and then have the City plus Medicare pay the full amount after the person is 65.

            Side note: the City of Sacramento and its unions (other than firefighters and plumbers) have agreed in principal to end all OPEB for all new hires.

            ———————-

            *It is now up to age 26.
            **In Bill Emlen’s last city manager contract with Davis, the 5-year to 15-year vesting language was included.

  2. Tia Will

    My counter part on the ideologic right, Frankly, is fond of addressing root causes.

    I would say that the root cause of much of our current situation lies not in the negotiation of specific contracts, not in corruption of politicians at any level, not with dubious accounting techniques, which are all just manifestations of an underlying problem.

    We as a society have chosen to ignore not only “unfunded liabilities” but the basics of human needs. What all of us have that is most critical to our well being and thus to our potential contribution to our society is our time and our health. By artificially linking both of these to employment “outside the home” we have inadvertently created a system which ignores contributions not linked to money generating activity and artificially linked access to health care to this artificial exchange system.

    Why, for example, do we not pay the homemaker for his or her services in raising children to be productive members of our society or to maintaining an attractive and well kept home ? Why do we link health care to employment as though people without a current job, regardless of how many years of service they might have at a job not offering health benefits don’t need health care. And, no, I do not consider “because that is our traditional model”, or “because we are a capitalist society” to be sufficient answers to these questions.

    The root is not the superficial issues of lack of funding within one municipality. The root is how we choose not to support the positive contributions of many while very richly rewarding the contributions of a select, and arbitrarily chosen, few. Are we made stronger as a society by artificially limiting options by perpetuating a system in which a very gifted individual must factor in availability of quality health care in his retirement years into his decision making ?, Would we not be stronger as a society if each individual could make a decision about their best choice based only on personal strengths, interest, skills and lifestyle considerations without fear of having their future basic needs met ?

    1. growth issue

      I agree Tia, I’m currently a pre-medicare stay at home grandpa who maintains my home and at the same time I’m raising a puppy to be a good member of the neighborhood canine society. I believe for doing this I deserve government pay and free healthcare.

    2. SouthofDavis

      Tia wrote:

      > Why, for example, do we not pay the homemaker for his or her services in
      > raising children to be productive members of our society or to maintaining
      > an attractive and well kept home ?

      I give my wife all the money she asks for (and even a little more) as a thank you for “raising children to be productive members of our society and maintaining an attractive and well kept home”.

      Do you want to send us even more money? Do you think I should be giving other homemakers money for “raising children to be productive members of our society and maintaining an attractive and well kept home”?

      1. hpierce

        Interesting concept of “giving” your spouse money… when I was the ‘sole bread-winner’, all the money was family money… when my spouse also worked, all the money was family money… all of our investments, including our home, are in either both names, or having each other as beneficiaries. We never “gave” each other anything but love.

        Giving applies to others, IMO, not direct family. We’ve done a lot of that, willingly. If we were told we “had to”, I suspect we would have felt less generous.

        1. SouthofDavis

          hpierce:

          > Interesting concept of “giving” your spouse money…

          Would you feel better if I used the term “transferring” money I earned in to a family account?

          > all of our investments, including our home, are in either
          > both names, or having each other as beneficiaries.

          Same with us…

          > We never “gave” each other anything but love.

          Did you ever go in to the back yard take an orange off the tree and after peeling it “give” your wife a slice (or did you just say “I love you go get your own orange)?

          1. hpierce

            A) was not meaning to criticize your choice of words… just musing…apologize if you felt ‘attacked’… not my intention

            B) it’s not about me “feeling better”… see A).

            C) spouse gets her own oranges (she has the green thumb), as do I… we have shared the preparation of the soil, purchase of the plant, but will have to admit she does most of the tree maintenance, as she likes it and is good with it.

            D) paix

    3. Day Man

      Unlike most here, I sincerely agree with you about the root cause, Tia, for a whole host of reasons that I could go into but won’t (unless really prodded). But that root cause is out of our city’s control, so it doesn’t do much to help us answer the question “what can we (the city and/or its residents) do about it?”

      1. Tia Will

        Day Man

        We have had many instances in this county when people thought that change was impossible because ” things were just the way they were” and there was enormous resistance to change.
        A few examples would be the end of slavery, integration, women’s suffrage, all felt to be impossible….all accomplished because some people recognized a need or an injustice and just kept working on it. I simply do not believe that providing a decent living standard is beyond us. I believe that our city and its citizens are prosperous and innovative enough to provide for all of our citizens as a “pilot project ” for what a community can do.

        I think that Robb Davis comment during his interview about facilitation of cooperation between existing services for the homeless, those with mental disorders, and I would expand this to anyone who is unable to provide for themselves would be an excellent first step.

  3. SouthofDavis

    I want to thank Doby for taking the time to write this up.

    I don’t want to bash the schools, but I am amazed at the number of people (even friends with multiple degrees from the schools Doby graduated from) that don’t really grasp basic math (especially exponential growth).

    The rule of 72 (that many may have heard of) tells us that if we invest $1,000 at 7.2% it will double in 10 years. In another 10 years at 7.2% we will have $4,000 as it doubles again.

    Going from $1,000 to $4,000 in 20 years does not seem very hard, but CalPers (that just happens to assume a 7.25% return) will need to go from ~$250 Billion to over ONE TRILLION dollars in the next 20 years. This math worked when the population of Davis and the state were doubling, but with growth a lot slower the numbers just don’t work…

    I just read yesterday that the people with pensions in Detroit may get less than half of what was promised to them. It is unfortunate that many getting (or close to getting) pensions today want to hide the math so they get as much as they can without thinking of those that are younger.

    When Doby wrote:

    > Hopefully, this example makes sense to those who are not financially inclined

    I thought I would give an example that many (that may not have an MBA) can understand. A few years back negative amortization (neg am) loans were popular. The concept of a neg am is that you pay less today and just add what you didn’t pay on to the loan amount. This is what the city (and state and US government) is doing they are not paying their bills today and putting the problem off and if it keeps going it will end up just like the people in Elk Grove that are walking away from homes worth $400K with $800K in debt.

    It is important to remember that most people with government pensions 1. don’t make a lot of money and 2. don’t pay any attention to this stuff, and that the people making the pension decisions 1. make a lot of money and 2. know that they need to hide the real numbers so they can retire with $10K a month + until the system blows up.

    I have been accused of being anti-union, when I am just anti-union bosses hiding the real numbers to screw the vast majority of dues paying members who are going to be in big trouble (like the low pension retired workers in Detroit who are going to be soon getting less every month).

    1. Frankly

      Go to an immediate annuity calculator to see how much a private individual would need to invest at age 50 to secure a monthly payment equal to the benefits that a Davis firefighter would receive at retirement.

      That amount would be over $3 million.

      So, if average Joe worker wanted to live a life like our firefighter, he would need over $3 million dollars in his 401k at age 50.

      And we still have people defending the practice.

      Absurd is the word.

      1. Tia Will

        How much would this individual need to live like Paris Hilton who has done absolutely nothing to earn her wealth ? I agree, there is a great deal of absurdity in our current system !

  4. SouthofDavis

    A new site just went live that shows what some of the current California pension payments

    http://transparentcalifornia.com

    ROSE M CONROY Employer: CITY OF DAVIS Pension: CalPERS, 2012 $125,649.48

    Not everyone is making the big bucks:

    RUTH U ASMUNDSON Employer: CITY OF DAVIS Pension: CalPERS, 2012 $1,691.52

    Does anyone know if members of the city council get health care for life after 5 years?

    I’m still kicking myself that I didn’t worth for Stockton for a MONTH (or San Francisco for a YEAR) in the 90’s and get FREE health care for LIFE:

    http://calpensions.com/2012/03/01/stockton-work-month-get-lifetime-health-care/

    For more info check out the “Huffington Post” of the Pension world:

    http://www.pensiontsunami.com/

    1. realchangz

      The point and purpose of the article isn’t pension bashing. Pensions aren’t the issue here at all. Most are well funded. Personally I hate the pension bashing sites. They’re offensive and a personal insult.

      The issue on the table is unintended consequences of non-transparent government accounting and its implications for sustainable local self governance.

      Could we all please respect that.

      1. Nancy Price

        Realchangz: couldn’t have said it better.
        Why have not the Finance and Budget Commission been able to get to the bottom of the income/expenses and budget?

      2. iPad Guy

        What do you consider a “pension bashing site”? The site SoD to which refers us simply lists salaries for current employees and pension amounts for retired employees. This is a remedy to “non-transparent government accounting.” It also makes fascinating reading.

        PS–It’s mind-boggling to consider just how many Davis city employees cost us $150,000 a year or more. These figures, of course, impact subsequent pension and benefit costs for decades to come.

  5. Frankly

    Great VG article Doby!

    I direct a small business non-profit. I have to spend over $30,000 every year for an outside accounting firm to audit my financials. These auditors are bound by GAPP and FASB rules. My company 401k retirement plan is also audited every year by an outside firm, and it is governed by ERISA rules.

    There is no way for me to ever hide any long-term liability. I have to book anything that I know about.

    The accounting rules for non-profits and business in general are always growing, always increasing. The public demands it so that stockholders and other stakeholders are not damaged by unethical business practices.

    But in the public sector we have loose rules or no rules. And in many respects, the rules that we do have continue to grow weaker and accountability grows non-existent. That is why we can have Bell California.

    So, as Doby points out, we have this as a root cause of our fiscal malaise. The lack of rules. The lack of adequate financial controls. The lack of audit. The lack of transparency. A lot of that is just a “fox guarding the hen-house” problem. And on top of that, we have a constantly growing complexity of revenue and expense sources as our deal leaders constantly look for ways to maintain their lack of transparency and slide away from accountability.

    Here is the problem with targeting this root cause problem.

    The only people that can fix it are the same people that benefit from it.

    And so we are back to needing a solution.

    From my perspective the solution is to reduce the scale and scope of government. Because government is good at setting rules for private business, but there is nobody with enough power of control to set rules for government.

    1. Doby Fleeman

      Frankly,

      Thanks for your kind words.

      I’m not sure I agree with your statement: “The only people that can fix it are the same people that benefit from it.”

      Clearly, first and foremost, it is we the residents of Davis that can and must fix it. And, this may not be what you want to hear, but indirectly it has been our generation (at or nearing retirement age) who have also benefited from the situation – for it is we who have kicked the can down the road. It is we who have repeatedly ignored the warning signs. It is we who have failed to act. It is we who have allowed the situation to deteriorate – on our watch.

      We want to blame the council or maybe blame the staff. Tough to do when it we who put them there.

      We don’t like the deteriorated streets? We don’t like the unfunded liabilities?

      We’re also saying – “We didn’t really want to hear about that stuff. That’s what we’ve told our electeds time and time again (I can hear the echo even as I write).”

      That’s what we’ve told ourselves. And, then – lo and behold – the administrators figured out a way, using peanut shells, to defer all those commitments – to shunt them off to the next series of unsuspecting generations.

      So, is that to be our legacy: “The Greatest Debtor Generation?”

      Wouldn’t our parents be proud.

      1. Frankly

        I agree and have written similar perspectives.

        Not only would are parents not be proud. Our children should strangle us before we consume any more and increase their debts.

        I don’t disagree with you that it is the voters that are ultimately responsible.

        But let me ask you a rhetorical question… why aren’t you running for city council?

        You are obviously more than qualified to understand city finances, and appear to be the type of fiscal conservative we need on the council.

    2. Tia Will

      When we are discussing setting rules, I think it is important to remember that there would be no need for formal rules or regulations if everyone in both the private and the public sector always did the right thing, never tried to cheat, or take advantage of anyone else, or rig the system to their advantage. I am pretty sure that we can all agree that everyone does not always act in accord with our “better angels”, and thus the need for regulation.

  6. Frankly

    Would we not be stronger as a society if each individual could make a decision about their best choice based only on personal strengths, interest, skills and lifestyle considerations without fear of having their future basic needs met ?

    No system does this better than does a democratic free-market capitalism system.

    You lament the glass half empty without considering the lake.

    And in your egalitarian pursuit of a new remedy to that glass half empty, you drain the lake.

    And in the end, your egalitarian pursuit cause everyone’s glass to become less full.

    But then maybe that feels more right to you.

      1. Frankly

        I guess I started the metaphor thing… =)

        I absolutely disagree. Everyone in this country legally has a glass. And I hope for their sake they never hear from us that they don’t.

  7. SouthofDavis

    Frankly wrote:

    > The only people that can fix it are the same people that benefit from it.

    Then Doby wrote:

    > We don’t like the deteriorated streets? We don’t like the unfunded liabilities?

    The problem is that “we” (most taxpayers) don’t like deteriorated streets and unfunded liabilities, but as Frankly says the people getting paid salary and pensions (who are legally empowered to fix the problems) benefit from putting off street maintenance and funding liability.

    It is not a “surprise” that streets need to be re-paved or that schools need to be renovated. We should be reserving for those expenses every year. Few (if any) governments reserve enough and end up going to the polls for an “emergency” bond measure (or parcel tax or sales tax increase) time and time again.

    1. Tia Will

      “The problem is that “we” (most taxpayers) don’t like deteriorated streets and unfunded liabilities, but as Frankly says the people getting paid salary and pensions (who are legally empowered to fix the problems) benefit from putting off street maintenance and funding liability.”

      Who are you referring to as those “who are empowered to fix the problems” that you feel benefit from putting off street maintenance and funding liability. Do you honestly believe that any members of the current city council are
      benefitting from poor maintenance ? If so, how ?

      1. J.R.

        It’s very simple really. You get votes by spending money, even if irresponsibly. You can buy votes with other people’s money.

        You don’t lose votes when you pass the bills on to future taxpayers to deal with. By the time the bill comes due you have moved on, hopefully to the state assembly.

        Not that complicated, and as long as people don’t pay attention and lack an instinctual distrust of government, it will continue.

          1. David Greenwald Post author

            If you want to talk about national issues so much, why don’t you write a guest piece like Doby has and we’ll run it. Otherwise stay on topic.

  8. WesC

    “Let’s just say that works out to 30 years at $20,000 per year or a $600,000 PV benefit (based on the assumption that healthcare will rise at the same rate as the state’s theoretical investment return).”

    Not exactly true. Lets take the example of someone retiring from the City of San Francisco at age 55 with 30 more years of life ahead of them. The city will pay 1,393.62/month for medical insurance for the retiree until the retiree reaches 65, at which time they will be required with rare exceptions to enroll in Medicare. Once they reach age 65 and enroll in medicare the city’s contribution for health insurance will drop to 384.60/month. Without Medicare the city’s cost would have been 501,811.20 for the 30 years of health insurance (assuming no inflation for simplicity). Because the retiree enrolled in Medicare at age 65, the cost to the city for 30 years of health insurance is now 259,538.40. Calpers with rare exceptions also requires retirees to enroll in Medicare once they reach age 65 with rare exceptions.

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