Why Public Employee Unions Love Collective Bargaining

They own the table.

Perhaps it’s more obvious in Union County with less citizen oversight and solid one-party rule but here the governing body openly roots for greater benefits for their staff (even when they’re not family members).  For example, in February of this year Union County fully subsidized retiree health insurance for future non-union retirees (they had been 41% subsidized) with the rationale that those employees had forgone raises for a couple of years.  They gladly accepted an actuarial study showing a correlation between providing this $102 million benefit and the forgone raises.  This is the county’s negotiator:

On page 8 of the study Mr. Salemme refers to there is a spreadsheet showing savings for one year’s worth of salary increase forgone.  The second column starts with the number $968,375.45 (even extending to the penny for the appearance of exactness) which represents 3% of the average salaries of the 541 employees impacted.  The rest of the column simply multiplies that first number by 1.03 finally getting to $2,027,563.14 in year 25.  The third column accumulates the numbers to arrive at a ‘savings’ of $52,716,641.74 which is being touted as the total savings over 25 years of forgoing that 3% raise in 2011.  Total bullshit.

The group is closed, meaning that we are only dealing with 541 employees.  New employees would have their salaries unaffected since they were not around to get that 2011 raise.  However those 541 employees in the population WOULD leave and it is doubtful that even 10% would still be here 25 years from now since many would reach retirement age and be motivated to go in part because of that defined benefit pension and 100% subsidized health care for life.  All 541 employees could possibly be gone in year 25 which would result in a total ‘savings’ of $0 in that year.

There needed to be decrements to take into account those who leave which would likely result in $20 million as a more accurate projection than the $52 million provided.  Alternatively, each participant could have been valued separately with their salary increase forgone compared to the benefits received.  For example, one of the first beneficiaries would have been newly retired Finance Director Lawrence Caroselli who gave up $1,328 in salary for about $250,000 in benefits.

Why didn’t the freeholders catch this?

  1. They weren’t motivated to since it’s all a dance to fool the taxpayers.
  2. They’re innumerate.
  3. They don’t care since the real cost will only be obvious when they’re long gone.
  4. All of the above

Why would the actuaries provide such phony numbers:

  1. They’re in on the scam and know what’s expected of them
  2. They’re incompetent for the job
  3. $9,000
  4. All of the above

4 responses to this post.

  1. Posted by Tough Love on June 24, 2011 at 11:05 pm

    Why not forward this comment to the AAA’s ABCD (cc’ing the actuary that prepared it).

    You don’t have to “accuse” him/her of anything. Perhaps an accompanying note, something like …. “I believe the ABCD should be aware of this and judge whether it is, your opinion, consistent with good and professional atuarial practice”.


    • I would if I had more (any?) confidence in the ABCD.

      I realize there’s a certain amount of secrecy necessary and I haven’t been following ABCD actions closely (barely) but if there were one concrete example of where the ABCD did any good, I might take a chance. As it is, I have a concrete example (my own complaint filed in 2002) where they were useless when they could have easily taken action that could have obviated a court case (which I won but had to spend $10,000 to do so).


  2. Posted by Tough Love on June 24, 2011 at 11:11 pm

    By-the-way, the absurdity of the equivalence between the missing raise and the free healthcare is that it assumes that salaries over time do NOT migrate (reflecting cumulative raises) to where they need to be vis competition. It’s as thought the actuary is assuming this group REMAINS 3% underpaid (plus it’s compounding impact) forever. This is patently absurd.


  3. Posted by bpaterson on June 27, 2011 at 5:57 pm

    its interesting that the chart shows only the first and second years of no raises, and yet it comes up to a payroll savings in 25 years of $101 million. The union county freeholders actually said that the workers had a third year of no raises. Does that mean that $101 million would actually turn out to be a payroll savings bonanza of $150 million? Whats your actuary book say, john. I can’t believe that the union county freeholders are wonderfully helping the county taxpayers with such huge huge savings. I must thank them next meeting. After all county taxes ONLY doubled since year 2000.


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