NEW YORK, July 29 (Reuters) - Pharmacist Michael Nastro is
full of admiration for how police responded to a deadly robbery
in his suburban New York neighborhood in 2011.
A gunman walked into a pharmacy near his own on Long Island,
killed four people and fled with a stash of painkillers. Police
in the area, which is part of wealthy Suffolk County, best known
for the exclusive Hamptons beach towns, boosted patrols and gave
advice on what to do if the robber hit again. They caught him
three days after the shooting.
But Nastro, 50, admits he's torn about police officers' pay
and retirement benefits. "I'd be lying to you if I said I wasn't
conflicted," he said. "I want good police work, but I'm a
taxpayer too. There's got to be a middle ground."
The average annual pension for Suffolk County cops who have
retired since 2007 was $86,702, according to figures from the
Manhattan Institute, a public policy think tank, against $37,270
for other county employees, excluding teachers. The county,
facing a three-year deficit of $530 million, declared a fiscal
emergency in March.
Traditionally, U.S. voters have backed generous pay and
benefits for the cops and firefighters willing to risk their
lives to keep citizens safe. That was especially so after the
deaths of many emergency workers in the Sept. 11, 2001, attack
on the World Trade Center in New York.
But as economic conditions have worsened and many local
governments have run into severe fiscal problems, that attitude
has started to change. Since the 2007 recession, some cities
have tried to roll back pension benefits and pay, among the most
rigid and, in some cases, highest expenses in municipal budgets.
From New York to California and points in between, cops and
firefighters have been drawn into pitched battles over their pay
and benefits.
In San Diego and San Jose, California's second and third
biggest cities, voters in June overwhelmingly backed sweeping
pension reforms. In San Jose, all employees will have to choose
between reduced benefits or higher retirement contributions.
In the mid-sized California cities of Stockton and San
Bernardino, officials say public safety costs were among the
factors that forced both to declare bankruptcy. In Vallejo, a
former U.S. Navy town near San Francisco that emerged from a
three-year bankruptcy last year, public safety pay and benefits
were consuming three-quarters of the city's general fund.
Detroit, plagued with one of the highest crime rates in the
country, nonetheless cut pay and healthcare benefits for city
workers, including police, by 10 percent just over a week ago, a
move the mayor says will save the cash-strapped city $102
million a year.
A legal challenge by the Detroit Police Officers Association
failed, even as union President Joe Duncan publicly complained
of what the cuts would mean for Detroit's ability to hire
police, noting that the city is "already 50th on the list of pay
for the biggest 50 cities in the United States."
St. Louis this month approved an overhaul of the firefighter
retirement system that rolls back decades of increases, while
Miami officials trying to plug a $60 million budget gap this
week declared "financial urgency," which will let them alter
employee contracts. Among the city's proposals: limit overtime
for firefighters and require higher health care contributions.
According to an analysis by New York-area newspaper Newsday
published last month, police and sheriff's department employees
in Nassau and Suffolk counties reached nearly two-thirds of each
county's payroll.
"That is why a lot of municipalities are choosing bankruptcy,
because it's the only way - other than getting a state control
board - of getting out of these salary and pension
requirements,'' said the former top official of Suffolk County,
Steve Levy.
SAVINGS AND SAFETY
Striking the right balance between savings and safety is a
touchy business, though.
While it's become almost routine for voters to rail against
fat paychecks and generous benefits for teachers, transit
workers and other public employees, cops and firefighters have
in the past been largely spared such anger.
For example, in Wisconsin, where most public workers were
stripped of their collective bargaining rights and made to pay
more to fund their pensions, firefighters, cops and other public
safety workers were given an exemption.
Still, Jim Carver, president of the Nassau County Police
Benevolent Association, says politicians have started to target
cops and firefighters. The state seized control of Nassau
County's finances after the county failed to balance its budget
and had its credit rating cut last year.
Carver bristles at the notion that police and firefighters
don't deserve what they earn.
"After 9/11, you couldn't find a politician that wasn't
rushing to put his arms around a cop or a firefighter," he said.
"Ten, 12 years later, we are to blame for everything.
Politicians have made us the enemy. We didn't put a gun to
anybody's head. These were fairly negotiated contracts."
"EVERYBODY'S COMPLICIT"
To be sure, it took decades of bad decisions and poor
management by local authorities to put many communities in
fiscal dire straits. In countless cases, cities, counties and
states over-promised benefits to retirees but neglected to set
aside sufficient reserves to cover their liabilities.
When the economy and stock market were booming, cities often
sweetened pension benefits, confident the money would be there
in the end. After 9/11, the cops and firefighters' heroic status
with the public meant that they were in a particularly strong
bargaining position.
But the 2007-2008 recession and the impact of the housing
bust on real estate taxes hammered municipal revenues and badly
hurt pension funds' investment returns.
The Pew Center on the States said the gap between states'
pension promises and liabilities was $757 billion in 2010.
"Everybody's complicit in this,'' said Lawrence Levy,
executive dean of the National Center on Suburban Studies at
Hofstra University.
Noel DiGerolamo, head of the Patrolmen's Benevolent
Association in Suffolk County, has harsh words for the public
officials, saying they should be bearing the blame for fiscal
woes.
"Rather than being responsible leaders of government and
saying, 'We have these pension obligations that we're going to
have to pay,' and saving towards those obligations, they are
being politicians," DiGerolamo said. "And when the bill comes
due, blaming employees who have worked towards and earned these
pensions for 20 or 25 years."
BROKE IN CALIFORNIA
Of course, scores of municipalities are managing to balance
their budgets even as costs rise. Only a few of the 90,000
issuers in the municipal debt market are in true distress.
Even many with escalating pension costs can meet their
current obligations. It's keeping up with promises to aging
citizens who are living longer that keeps officials up at night.
In some cases, contracts that may once have seemed fair are
helping to bankrupt cities and leading to severe cuts in
services, including fire station closures and reductions in
police forces. Eight municipalities have sought protection from
their creditors so far this year, following 13 that filed in
2011, and many others are having to slash their budgets.
San Bernardino, a city of 210,000 some 65 miles east of Los
Angeles that has been hit hard by the collapse of the housing
market, says public safety spending eats up 73 percent of its
general fund budget, with overtime for firefighters especially
onerous. Pension costs are expected to reach $25 million this
year, double the 2006 level.
The city imposed a temporary 10 percent pay cut, but the
firefighters' union successfully challenged it in court and is
entitled to back pay. The city council voted last week to
suspend debt payments and quit paying into a retiree health
fund.
Some 350 miles to the north, Stockton, the biggest U.S. city
ever to file for bankruptcy, allows police officers to retire at
50 with pensions based on 3 percent of final pay for each year
in service.
When he signed the bankruptcy filing in June, Stockton city
manager Bob Deis said a 1996 decision to provide firefighters
with free health care in retirement, later expanded to all city
employees, was a "Ponzi scheme" that saddled the city with a
$417 million liability.
Because their jobs are dangerous and physically taxing, cops
and firefighters typically retire after 20 or 30 years on the
job, and that's as it should be, said Michael Coleman, a policy
adviser for the League of California Cities, an association of
municipal officials from the state.
But that's why it's important to keep pensions reasonable.
"I don't think anyone disagrees that these are dangerous
jobs. But how much is enough? Unfortunately, I think it's gone
too far," Coleman said.
The contrast between benefits in the public and private
sectors is stark.
Only 26 percent of U.S. companies offer retiree healthcare
benefits, compared with 66 percent that did so in 1988,
according to the Kaiser Family Foundation.
Most private sector employees bear the brunt of providing
for their retirement by saving money in funds known as 401(k)
plans, with companies typically also making contributions.
After the 2007 recession, some firms stopped making
contributions altogether.
It can all add to tensions as some taxpayers question why
their services are being cut or property taxes raised so a city
or county can find the money for generous retirement benefits.
In New York, a 2010 investigation by then-attorney general
Andrew Cuomo, now governor, found widespread incidence of
"pension padding" - public employees working extra overtime in
their last year on the job to boost pay and retirement income.
That's especially costly when it comes to well-paid public
safety workers. The Manhattan Institute estimates nearly 10
percent of New York State cops and firefighters who retired in
2011 will receive six-figure pensions, from 2 percent in 2001.
NO QUICK FIXES
Quick fixes, however, are unlikely.
Efforts to revamp public pension plans face stiff legal
challenges. Each state has its own constitution, courts and case
law that affect how it can go about changing retirement systems.
Firefighters in San Bernardino have filed seven legal
actions against attempts to scale back pay and benefits since
2007.
In many municipalities, public salaries and pensions are
pegged to those offered in comparably sized regional cities. In
New York, pensions, once set by the state, cannot be negotiated
through collective bargaining.
At the same time, alternative ways to tackle deficits, such
as raising taxes, are politically unpopular.
In the small Southern California city of Stanton, voters
recently rejected a proposed utility tax hike that would have
raised $1.1 million. The city instead cut back on active police
and fire staff, which account for 77 percent of its spending.
"Will there be some impact on response time? There could
be," said city manager Carol Jacobs. "But this city is not going
to go bankrupt."
In some cases, unions have preferred layoffs to reduced
retirement benefits. Two troubled cities in New Jersey are cases
in point. Camden, one of the state's poorest and most
crime-plagued cities, recently cut its police force by about
half, and Newark cut its force by a third after unions declined
concessions demanded by their city governments.
In New York, former Nassau County Executive Thomas Suozzi, a
Long Island Democrat who has clashed with police unions, gave a
stark assessment. "We're facing a problem that will be faced by
every town in America.
"You can't raise property taxes anymore - people won't go
for it. There's no more money. So, do you cut services, which
will result in the death of the suburbs, I think, or do you make
these salaries and pensions more rational than they've been?"
