Who Gives Up What

Kenneth R. Feinberg in 2012 wrote Who Gets What which is something of an autobiography with a focus on five cases he was involved in where a pot of money generated to ease the impact of a tragedy was allocated without recourse to standard legal procedures.

These days Mr. Feinberg is engaged in overseeing the fund for victims of the Orlando shooting while also involved in a polar opposite case where he is charged with deciding how and how much participants in six (and counting) multiemployer pension plans will have taken away from them.

After reading these excerpts:

Who would get what? The answers were outside the traditions of established law and up to me to decide. (page xv)

Though existing law may be capable of addressing these tragedies, in the context of a mounting public uproar, its machinations seem too complex, too time-consuming, too inefficient, or too uncertain. (page 188)

The case has not been made for wholesale replacement of the existing tort system. Piecemeal reform aimed at specific flaws in the system – limiting multiple punitive damage awards in the same litigation, enforcing more consistency in compensating for paid and suffering, providing administrative alternatives to deal with medical malpractice claims – is worthy of consideration, and model programs might be implemented to test the merit of such proposals. But radical changes – modifying the burden of proof at trial, federalizing state tort laws, adopting the “English rule,” which requires the losing party in a tort lawsuit to pay the legal fees of the successful adversary – are unwarranted. (page 193)

Efficient and speedy individual compensation determinations will be made through an administrative system that will bypass conventional legal proceedings. Procedural niceties, lawyer advocacy, and courtroom due process yield to the necessities of the moment – getting pay out the door to thousands of eligible claimants with a minimum of fuss and bother. (page 195)

Whether it is immediate cash in the wake of a national man-made calamity, or a compensation program traceable to populist anger over business excesses, these programs are established only because the public, acting through its elected representatives and agents, cries out for some type of government response. Not tomorrow, but today. Procedural niceties will follow later, along with an after-the-fact debate about the wisdom of delegating such awesome responsibility to one person. But for now, get the money out, fix corporate pay, and respond immediately and effectively to the crisis. (page 196)

I constantly remind individuals affected by these payment programs to channel their anger and frustration at policy makers, not at me. As an administrator, I simply do what I am told – relying upon statues, agency regulations, court orders, escrow agreements, or other enabling directives. The law establishes my jurisdiction. And I follow the law. (page 197)

What struck me was that if the Special Master concept works so well for these cataclysmic tragic situations that can’t afford the time to wait for resolution or the money to transfer half the available funds to maintain a tort system then why can’t we use it for all cases?

For participants in multiemployer plans, most of whom will lose on average about 60% of their ‘promised’ benefits some time over the next ten years, either system will  yield similar outcomes though the road the participants are on likely means more money but fewer answers for them.

22 responses to this post.

  1. Posted by Eric on July 11, 2016 at 12:37 am

    John:
    In NJ, we do not have to worry about giving up the “niceties of the law”, since there is no law. In the Berg case, I remember listening to the oral argument, that you posted, and,Justice Patterson, was so grossly unprepared, that she did not even know the class of plaintiffs appearing before her. She stated that the plaintiffs had notice of the law having been changed. The class of plaintiffs, in Berg, all had retired PRIOR to 2011, when Ch.78 was enacted. The first footnote, of the political opinion, memorialized that all of the plaintiffs had retired prior to the law having been changed. It was a joint stipulation, even agreed to by the state, aka cc.
    How could Patterson bellow that all had notice? How could a justice be so unprepared in such a major case? This is beyond mind boggling. I had to replay the sound track, to make sure that I was not mistaken. I played it 3 times! No mistake.
    Perhaps Ken Feinberg is a “breath of fresh air”, since things could not get any worse in NJ.
    Eric

    Reply

    • Posted by lFor fairness on July 11, 2016 at 1:12 pm

      The current NJ Supreme court is a joke and an embarrassment to both the state and all of its citizens and to its members. The state made promises to those plaintiffs and should live up to them. If they want to make changes going forward, fine. I would love to be able to do business that way. sign a contract for work to be done, then renegotiate after the work has been completed. I guess maybe you can do that from now on in NJ.

      Reply

      • Posted by MJ on July 11, 2016 at 2:14 pm

        Ifor I have news for you…in real life, contracts are renegotiated all the time between parties as circumstances change. Contracts are also negated or or renegotiated all the time due to economic downturns, financial constraints, lack of available capital, mergers etc. In real life, businesses and companies must stay within their budgets based on profits and income and pay their employees fair market wages and benefits and reward employees for their productivity….and sadly in real life, sometimes for whatever reasons things do not work out as planned and businesses and companies are downsized or bankrupted by economic forces beyond their control…….unlike our public sector friends who will drive the gravy train into the ground before admitting the unsustainability of their “promises”

        Reply

        • Posted by PS Drone on July 11, 2016 at 6:32 pm

          An obscenely generous contract in favor of one party would definitely be “renegotiated” as onerous facts came to light. I think the Pentagon does it all the time.

          I love how there is never any mention by offended drones (who keep talking about “deferred” compensation) about how ridiculous the pensions, created by negotiations between corrupt politicians seeking to remain in office and crooked Unions looking to increase their dues base) are. It is always “you promised, now pay up”. No, we did not promise. Crooks and liars “promised” for us; “we” had no say in the matter.

          Reply

          • Posted by MJ on July 11, 2016 at 7:55 pm

            Yes and all of the unconstitutional non voter approved debt should be repudiated as taxpayers are under no obligation to pay for any of it

          • Posted by lFor fairness on July 12, 2016 at 1:09 pm

            Whjat a bunch of BS PS DRone. Nobody complained at the time when salaries were held lower and the pension funds were raided to provied huge tax cuts to the wealthiest by Whitman and the average Joe ended up with more modest cuts as well. It was Whitman’s slight of hand, a tax cut without budget reductions that the general public should have known would have to come back to bite them. But they elected her because they wanted to believe they could get something for nothing. In the end they got enormous debt and the bill has come due..

          • Posted by S Moderation Douglas on July 12, 2016 at 1:21 pm

            “An obscenely generous contract in favor of one party…”

            The ghost of Tough Love past? (Very much alive and kicking on other boards, by the way. John must have really pissed her/him off.)

            You paint with such a wide brush. Police and fire… I don’t know. It’s like the weather: everybody talks about it, but nobody does anything. In most cities, Public Safety is probably the biggest personnel expense, yet often when there are pension reforms, police and fire are exempted. Are they overpaid? I don’t know. I wouldn’t take either job, even if I were qualified. In California, at least, most safety workers got sizeable raises after Sept 11, 2001. Highway Patrol, specifically got a three year contract in 2004 to “catch up” to recent city raises. Their pay went up thirty five percent, plus cost of living raises. Are they overpaid now? Were they underpaid before? I don’t know.

            If that thirty some percent raise is typical across the country, then reducing that pay back to where it was, which would ultimately reduce pensions by a similar percentage, would go a long way toward balancing city budgets. Are you sure you want to do that?

            As far as the rest of the employees, it gets trickier. If all the experts are correct, you’re probably getting a bargain. The city manager with a $250,000 salary and $150,000 pension probably could make more money in the private sector. Doctors, lawyers, accountants, engineers, IT, even with their, yes, “deferred compensation”, like them or not, they likely could make more in the private sector.

            As far as the public sector janitors, gardeners, clerks, laborers, etc., tricky again. They are not living high on the hog, with $25,000 to $40,000 incomes. Most are just getting by, with nothing left over to save for retirement*. But if they do spend a full career as a public worker (most don’t), they might have pensions of $15,000 to $20,000. …with subsidized healthcare …for life. Some, who are also in Social Security, may actually have total retirement income higher than their final salary.

            *”nothing left over to save for retirement”. Yes, I know, this is true for lower level private sector workers, also, who will not have the advantage of a pension and healthcare.

            But this is where the dollars add up. When Tough Love asks the famous question: “Taxpayers, what would YOU do with 23% higher income?” These are the guys/gals that drive up that average. On average, for full career workers, their “advantage” over the private sector janitors, etc., is probably well over the 23% average*.

            Want to save more money? Totally eliminate pensions and retiree healthcare subsidies for these lower skilled, less educated workers. Then they will be roughly equal to private sector gardeners, janitors, etc. You may save only $15,000 to $20,000 each, annually, but there are a lot of them. It adds up to serious savings. Is that what you want to do? Tough Love would do it in a heartbeat.

            * “23% average”… Take that with a grain of salt. It’s based mainly on the debatable use of “risk free rate” discounting, and based on data four to eight years old.

        • Posted by Anonymous on July 11, 2016 at 8:33 pm

          Hmm all equates to a no vote in NJ, right MJ b/c you’ve mentioned you’re a sunshine state resident?

          Reply

          • Posted by MJ on July 12, 2016 at 8:59 am

            Anon, I have no idea how the votes will go in November but my thought is that NJ is screwed one way or the other……..so what does it really matter other than more drama and theatrics?

        • Posted by lFor fairness on July 12, 2016 at 1:01 pm

          No, contracts are never renegotiated after the job has been completed, only before it is finished. If you had your driveway paved or your roof replaced, do you think you could tell the contractor after finished that you could no longer aford to pay the price you agreed to? I don’t think so. You would end up in court and forced to pay the agreed upon price. Try telling the bank you can no longer pay your mortgage. Foreclosure would happen. There would be no renegotiation of the home price and you couldn’t get the former owners to send you some of your money back either.

          Reply

          • Posted by dentss dunnigan on July 12, 2016 at 3:38 pm

            Retirees were quick to take the 9% boost in pension payments after the contract was completed ..

          • Posted by MJ on July 12, 2016 at 4:28 pm

            iFor….yes contracts are renegotiated “after the job” is done if the job is not done correctly for the person who is paying and since this pension “job” has turned out to be such a boon doggle it needs to be renegotiated to the new normal financial and economic conditions. BTW the unions did go to court, sued and it was decided that the state didn’t have to pay……….and what about that 9% increase that was accepted after the contract was completed ……..or does it just go one way for you as I don’t recall anyone going to court to change the existing contract. I’m sure someone will correct me if I am mistaken

    • Posted by Anonymous on July 11, 2016 at 1:15 pm

      Well good news bad news; only thing constant is change – yes even in NJ. A couple Senate seats and Governor’s race later, not to mention one or two NJSC nominres – hey who knows anything goes!

      Reply

      • Posted by lFor fairness on July 15, 2016 at 1:49 pm

        I repeat, contracts are never renegotiated after the work is completed. and there was no contract finished when 9% raises were instituted. That was a new contract where Whitman exchanged non payment of pension contributions for a 9% pension increase. Why would a contractor accept a lesser amount than an agreed upon amount after completing the job ? He wouldn’t. and the pension case for retirees would equate to the contractor having to give back money years after the work was completed and the contractor had already retired. I don’t think you will find that ever happened.

        Reply

  2. Posted by S Moderation Douglas on July 12, 2016 at 1:55 pm

    My favorite story. Stop me if you’ve heard it before. One of the extremely generous contracts.

    Michael Genest was Finance Director under Arnold Governor Schwarzenegger. When Schwarzenegger left office, Genest retired and started a consulting business in Sacramento. One of his first contracts was to do a study comparing public and private pay in California. In a nutshell, his study determined that, with pensions and benefits, and job security, public sector workers earned about thirty percent more than equivalent private sector workers.

    When asked about his own pay, however (pay over $200,000 a year, pension over $100,000), he said “We could have made a lot more money in the private sector. We are making more money.” – 
    He was almost certainly correct.

    And yet…

    If the janitor in his state office building retires after forty years with a $25,000 pension, he is almost certainly overpaid. And maybe by much more than the 30% “average” from Mr. Genest’s study.

    I friggin’ love the irony of the “extremely generous contracts”… for the janitor!

    Like the weather: we talk about it, I just don’t know what to do about it.

    __________________________________________________
    I hope this post qualifies as on topic under the heading “Who gives up what?”

    The janitor or the MBA …or the policeman?

    Reply

  3. Posted by MJ on July 12, 2016 at 4:22 pm

    SMD, I am almost sure that the janitor who worked for 40 years and is receiving a 25,000 a year pension (plus full health benefits?? and other perks, overtime, generous sick days, limited accountability) is making out way better than the private sector janitor who is probably making around 25,000 a year as current salary maybe with modest health benefits………..the answer is that everyone except the politically connected will be giving up something and some will be giving up more than others. I think it is past the point of talking about it other than to prolong bantering back and forth here

    Reply

    • Posted by S Moderation Douglas on July 12, 2016 at 7:03 pm

      “making out way better than the private sector janitor….”

      Precisely.

      That’s the whole point. But generally, when people are talking pension abuse, pension reform, unsustainability, obscene pay and pensions, they are looking at Mr. Genest and other members of the $100,000 club. It’s almost Pavlovian. And it’s almost funny as hell.

      Of course there are exceptions. The researchers try to point this out, like the city manager of Bell, CA with his $500,000 pension (now lowered considerably) and other less blatant abuses. But generally $100,000 plus pensions are going to those who are, overall, underpaid. (Leave out police and fire from this general statement, they are a different metric)

      And yet… almost every major proponent of pension reform I have seen, heard, or read, has their sights set on the biggest targets. A local Marin County California taxpayer group wants to reduce pensions. But they have said several times, the “little guy” with the modest pension (that poor public sector janitor?) isn’t the problem. Its the upper level managers, professionals, etc. with the “obscenely generous” pensions that “we didn’t vote for”.

      Mark Glennon, of Wirepoints, a very staunch supporter of pension reform, who insists that reductions are in order, for future accruals and even for some already retired, makes an exception for those modest pensions to allow a minimum sustenance level (for our janitor? our admittedly overcompensated janitor?)

      The California Policy Center, a “non-partisan” think tank and also ardent pension reform activist, proposes, among other things, that public pensions should be progressive, like Social Security. The lower paid workers should get a HIGHER pension formula and the upper quintile workers should be lowered.

      Our janitor, who you and I agree, already makes out way better than the private sector janitor, according to one of the most conservative think tanks in the country, should get an increased pension, and Mr. Genest, who …every major econometric study… agrees is UNDERcompensated, should have his pension decreased.

      In what universe?

      Lest I be misunderstood, I am not proposing reducing benefits for the lowest paid workers, or increasing benefits for the higher paid, like Mr. Genest. Tough Love is just about the only one I have seen proposing just that. He/she thinks it’s better to reduce the compensation of that janitor, even if he and his family has to go on food stamps or other welfare systems.

      (Got a problem with EQUAL?)

      It is my opinion that this compensation distribution evolved with some unintended consequences that are not necessarily bad. As evidence, it seems that this “overpaid” janitor and “underpaid” professional is not just a phenomenon in New Jersey and California, but is nationwide and repeats itself in virtually every OECD country.

      If you want to “fix” it, you better get a much better understanding of what’s really going on.

      Or, you could just go for the easy target, damn the facts, “that guy makes more than me” is a valid enough argument for some.

      Reply

  4. Posted by Anonymous on July 12, 2016 at 10:35 pm

    While not on point I’d suggest the Feds treat ALL government workers pensions funded through our tax dollars similarily and then let’s see when and where the rubber hits the road. Oh yeah NO exceptions, not in my backyard bull.

    Reply

  5. Posted by MJ on July 13, 2016 at 4:55 pm

    Mod Doug please stop bringing TL into your conversations.. I didn’t say anything about reducing any low paid employee’s salary or pension. In fact I agree with you on this one and I have been saying….stop the double dipping, over paid political hacks, ridiculous disability claims, consolidate school districts and police departments and get rid of all patronage jobs and bogus “authourities, commissions, etc. That should free up a lot of money to start

    Reply

    • Posted by PS Drone on July 13, 2016 at 6:22 pm

      I have stated a number of times that the drones have a legitimate beef that the State has not made appropriate contributions for the past 20 years. That, however, begs the question that if the plans were reasonable [- you know – collect when you are 66, not 53 and a max annual $ amount that could not be exceeded even if you were a triple dipper] maybe, just maybe the over taxed citizens of this shit hole state might lend some support to shoring up the funds. But I would hazard a guess that a lot fewer sand bags would then be needed to get it back to full funding.

      Reply

    • Posted by S Moderation Douglas on July 14, 2016 at 8:03 am

      Mary Pat Campbell, and others have said that spiking, double dipping, and some other issues are not the big problem with pension systems. They are really bad optics, and piss people off, but they really don’t raise the costs that much.

      “Spiking is one of those things, like politicians accruing public pensions that perhaps they shouldn’t be allowed to have, that makes public pensions less popular with taxpayers… but doesn’t boost the pension liabilities all that much (see the less than 4% boost mentioned above) — because generally it’s only a handful of people doing it.”

      “My own interest isn’t the small beer, though. I want to dig into the larger trends…

      ….but that’s for another time.”

      I don’t know yet what she considers the larger trends.

      Reply

    • Posted by lFor fairness on July 15, 2016 at 1:35 pm

      Agee with everything you said MJ about double dippers etc.

      Reply

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