Tuesday, March 16, 2010

Employee benefits sequel

Last year, the city council was very close to taking action on reforming city pensions and other benefits. We took some short term steps, like putting a hold on employee raises and longevity pay for the current fiscal year. However, we did not manage to take action on large scale reforms; instead opting to have a study of pay and benefits (the Mercer study).

Study results

The study came back. It showed that in most areas city employees receive similar ("competitive") benefits compared to the other survey respondents. [Note that the study included mostly other local governments and governmental agencies. According to the US Bureau of Labor and Statistics, in 2008 total compensation, salary and benefits, for state and local workers was $39.25 an hour — $11.90 more than in private business.]

There were a number of areas where we were more generous ("highly competitive"):
  • paying longevity (in essence a pay raise based on years worked)
  • leave accrual
  • spousal benefits for retirement
  • and calculation of salary for pension (two year vs five year averaging).
Our benefits were poor ("non-competitive") compared to other survey participants in
  • employee health insurance costs
  • and the types of health insurance we offer.
Additionally, our salary ranges for most jobs compared poorly to the other respondents.

We knew going into the study the areas where we were "highly competitive"--I had urged changes in these areas last May. (For a discussion on these changes, see my May blog post. I had not included changes to longevity in that proposal, since the then-proposed FY2010 froze longevity.)

The Proposal

Now that the study is back, it is time to take action. On Tuesday (today), we will have a special committee meeting at 4 pm to respond to the city manager's proposal for reforming employee pay and benefits. The proposal, roughly is:
  • no pay increases for FY 2011
  • eliminating longevity
  • capping leave accrual and paying out excess over two years
  • change spousal benefits for new employees
  • switch to five year averaging for calculating pensions
  • strive to increase city's contribution to health insurance premiums.
This proposal is responsive to the study results.

Retirement and leave accrual
The proposals regarding retirement benefits and leave accrual largely mirror the suggestions I made last May. The main difference from my suggestion last year is making the spousal benefit change only apply to new employees, leaving current employees with the spousal benefits they anticipate.

Longevity freeze and salary range adjustment
In addition to the retirement and leave changes, the proposal includes abolishing longevity going forward, rather than freezing it. With that change, also, there would be a change in the maximum of all salary ranges by 10%. Currently, an employee's longevity pay is over and above the salary range for their job. This change will bring most of our pay ranges into line with other survey participants (though it will not have an effect on our current budget since it won't change the pay of individual employees).

Health insurance
The other addition to the proposal for discussion Tuesday beyond what was proposed last year is a response to health insurance. The proposal is to gradually increase the city's contribution to family health insurance from the current 55% toward the 72% average of the survey participants. While health insurance gets into some big political philosophy questions (hence the national debate), it is desirable to have insured employees for a variety of reasons. This is simply setting a goal, and we will annually need to work toward that goal when we renew our health insurance program.

Time for Action

As I've said before, it is hard to look at our hardworking, dedicated employees and say, "We can't give you what we want to give you, what we think your effort is worth, because the taxpayers can't afford it." On the other hand, I don't want to look at our taxpayers and say, "Sorry. Couldn't do it. We can't handle the hard decisions."

We are in the midst of one of the worst economic downturns in history. Businesses throughout our community are laying off employees, forcing furloughs, or instituting pay cuts. Our citizens are facing double-digit unemployment. In better times, councils of the past have responded to the economic situation, sometimes raising salaries or benefits in order to attract qualified employees. This council, too, must be responsive to the economic situation, the challenges our local businesses and citizens are facing.

I am ready to act, and I hope that my fellow council members are ready, as well. We need your feedback on this issue so we know that we are making the right decision on this challenging issue. I know we will hear from the employees; I hope we will hear from other taxpayers as well.