WeHo city workers paid 47-62% above market, but council says that’s not enough!

Robert Fellner Blog

The West Hollywood City Council formally abandoned even the pretense of representing taxpayers when it recently voted 4-1 to “add a student loan forgiveness program” to the list of benefits available to WeHo city employees.

In explaining her lone vote against the proposal, Councilmember Lauren Meister gave voice to reason, when she reportedly told WEHOville that:

“I don’t think we should be negotiating for the union… I think we should be looking out for our residents.”

Kudos to Ms. Meister for her willingness to put residents ahead of the city’s most powerful special-interest group.

In an excellent op-ed penned after the proposal was first announced, area resident Alan Strasburg questioned why the council felt the need to further inflate city workers’ compensation packages, which were already among the richest in the area.

Strasburg observed that the median earnings for WeHo city government workers were above those in comparable cities, while city executives earned some of the highest base salaries in the state — with the WeHo’s director of communications making more than her counterpart in the White House!

A review of compensation for other city employees reveals that the excess extends beyond just top executives.

Analysis

The Bureau of Labor Statistics reports average wage data by occupation and region, making it is possible to compare the compensation received by certain WeHo city workers to the market as a whole, not merely other governments.

The BLS wage data for the greater LA-area[1]had four occupations that matched perfectly with the job classifications of WeHo city workers: Accountants, Civil Engineers, HR Specialists, and HR Managers.

The chart below reflects the average wages[2]of these four occupations, for both the greater LA-area and for those employed by WeHo City Hall:

Average wages, WeHo vs market (2017)
 Job Title LA-Area WeHo City Hall WeHo above Market (%)
Civil Engineer $106,750 $123,352 16%
Accountant $82,670 $98,044 19%
HR Specialists $73,180 $93,540 28%
HR Manager $133,630 $171,034 28%

In addition to receiving wages that are significantly above the market average, West Hollywood city workers also receive benefits that are dramatically greater than what the average private-sector worker receives.

For example, while the average private-sector worker receives a combined 30 days worth of paid holiday, sick, vacation and personal leave annually[3],West Hollywood city workers receive 41.5 days of paid leave annually.[4]

Government workers also receive significantly greater levels of job security than private workers, which has previously estimated to be worth between 3-10% of wages. This analysis will omit that variable, which means the findings here understate the compensation premium received by WeHo city workers.

Employer-paid health benefits for WeHo city government workers are about 50 percent richer than what the average private-sector worker receives[5],while retirement benefits are many multiples greater, and can as much as 5 times richer than what a comparable private-sector worker receives.[6]

When wages, paid leave, and health and retirement benefits are all considered, the average compensation for the four WeHo city job classifications 62% above the market average:

Average value of total compensation package, WeHo vs market (2017)
Job Title    LA-Area    WeHo City HallWeHo above Market (%)
Civil Engineer$137,950$202,659                  47%
Accountant$108,874$164,362                  51%
HR Specialists$97,418$157,547                  62%
HR Manager$170,405$274,814                  61%
Job Title Wages Total Compensation Civil Engineer 16% 47% Accountant 19% 51% HR Manager 28% 61% HR Specialist 28% 62%

The below charts look at the breakdown of each compensation variable and total dollar amount of compensation by each job title:

Conclusion

Wages and benefits for WeHo city government workers are significantly above market levels. The City Council’s desire to further inflate that gap — at the expense of city residents who earn far less themselves — cannot be attributed to a legitimate public policy interest. Instead, it appears likely that the council is simply using other people’s money to curry favor with the government union or otherwise signal their progressive bona fides. 

Yet, there is little that is genuinely progressive about taking from those with less in order to give to those with more. 

One of the most compelling arguments for limiting the size and scope of government is the recognition that elected officials are actually  rewarded for furthering the inequity described above.

This is because the cost can be spread over many taxpayers — who might only have to pay an extra $100 or so in annual taxes — while the benefits are bestowed on a concentrated minority. 

It’s easy to see why the much smaller group — which receives compensation packages around 50% above market levels — would be much more politically invested than the much larger, dispersed group who may never even realize why their taxes are going up.

Add government unions to the mix, and you get a scenario exactly like what is playing out all across California today: lawmakers raising taxes on those earning less, just so they can further inflate government pay packages that are already well above market levels. 

[1]Specifically, the Los Angeles-Long Beach-Anaheim metropolitan area.

[2] Average wages reflect full-time, year-round workers.

[3] Bureau of Labor Statistics’ Employee Benefits Survey, March 2017

[4] Job classification, salary and compensation section of the West Hollywood website

[5] Ibid.

[6] The value of WeHo city workers’ retirement benefits were calculated using the method employed by the Congressional Budget Office, as explained here, and will thus differ slightly from the actual cost.

Growth in teacher pay dwarfed by soaring health, retirement benefits

Robert Fellner 2018 , ,

A rapid rise in the cost of retirement and health benefits is dwarfing wage growth at many California school districts, according to an analysis of newly released 2017 public pay data from TransparentCalifornia.com.

Last year, the Los Angeles Unified School District spent $1.3 billion on health and retirement benefits for its employees, which represents a 25 percent increase from 2014.

The $4.2 billion the district spent on wages, however, represented only an 11 percent increase from 2014.

Both Fresno Unified and San Diego Unified also saw their cost of retirement and health benefits grow by more than twice their wage growth, as shown in the table below:

Growth in wages and benefits from 2014-2017 for California’s largest school districts

School District

 Wages Benefits Benefits/Wages

Los Angeles Unified

 11% 25% 2.20
San Diego Unified 10% 25%

2.50
Long Beach Unified 17% 29%

1.71
Fresno Unified 20% 44%

2.20
San Francisco Unified 22% 36%

1.64

As health and retirement costs consume an increasing share of school funds, there is less available for things like raising teacher pay. Making matters worse, most of the increase in benefit costs are for pension debt, which means current and future teachers are being penalized for past funding failures, according to Transparent California Executive Director Robert Fellner.

“For years, experts have warned that California’s government-run pension plans would one day foist the cost of their funding failures onto future taxpayers and public workers. Unfortunately, that day has now arrived. Tax dollars that should be spent on improving education will instead go towards pension debt, which obviously provides no value of any kind to current and future students.”

To explore the individual data sets further, please click here or on the name of the school district listed in the table above.

Top LAUSD earners

Former LA Unified Superintendent Michelle King received $410,497 in pay and benefits last year, the most of any LAUSD employee. The next four highest compensated LAUSD employees were:

  1. Assistant General Counsel Terry Cheathem: $350,025.
  2. General Counsel David Holmquist: $345,885.
  3. Chief Facilities Executive Mark Hovatter: $327,888.
  4. Chief Academic Officer Frances Gipson: $308,993.

The average full-time, year-round LAUSD teacher received $80,102 in wages and $103,420 in total compensation last year, according to the data.

Transparent California will be continually updating the site with new, 2017 data from the remaining school districts in the coming weeks. Be sure to follow our blog and Twitter accounts, or sign up for our mailing list, in order to receive the latest updates.

For more information, please contact Transparent California Executive Director Robert Fellner at 559-462-0122 or via email at Robert@TransparentCalifornia.com.

Transparent California is California’s largest and most comprehensive database of public sector compensation and is a project of the Nevada Policy Research Institute, a nonpartisan, free-market think tank. The website is used by millions of Californians each year, including elected officials and lawmakers, government employees and their unions, government agencies themselves, university researchers, the media, and concerned citizens alike. Learn more at TransparentCalifornia.com.

140-hour average workweek boosts Orange County firefighter’s compensation to more than $1 million over the past two years

Robert Fellner 2018, Press Releases , ,

For the fifth year in a row, Fire Captain Gregory Bradshaw has topped the overtime pay list at the Orange County Fire Authority (OCFA), thanks to a $267,618 overtime payment which boosted his total compensation to $534,079 last year.

Bradshaw’s large overtime pay reflects a staggering 7,270 hours worked — 4,358 of which were overtime, according to the agency.

Remarkably, this is Bradshaw’s 2nd year in a row logging over 7,000 hours of paid work, as he worked a similar schedule in 2016 when he collected $508,495 in pay and benefits.

Overtime pay at the agency has been an issue since at least 2014, when one OCFA board member expressed frustration over “an accounting gimmick used to generate significant overtime costs,” according to an Orange County Register report.

Overtime pay can end up costing the agency twice, as certain forms can be used to inflate an employee’s future pension. These soaring costs are then passed on to OCFA’s member cities, not all of whom can afford such excess.

Recently, the member cities of Irvine and Placentia have begun the process of withdrawing from OCFA, according to a Voice of OC report. If the agency is unable to get its costs under control, other cities may soon follow suit.

Reforms undone

In an attempt to reduce some of the most wasteful and unnecessary factors behind such large overtime payouts, OCFA in 2015 ended the practice of treating paid leave as hours worked for the purposes of calculating overtime. But that cost-saving measure was immediately undone the following year, when the union succeeded in getting the perk reinstated.

Treating vacation days as hours worked is an essentially fraudulent practice, according to Transparent California Executive Director Robert Fellner.

“Overtime pay is for those who work more hours than scheduled. Paying overtime to those who work the normal schedule or even fewer hours, while pretending their vacation days count as actual work, is yet another example of how government unions use their undue influence to force taxpayers to pay for perks they themselves will never get.”

The only lasting reform from that period was a much-touted overtime cap, which was implemented effective April 1, 2015 to “limit the number of overtime hours employees may work per year.”

But the policy, which ostensibly claims to limit the number of overtime hours worked to no more than 1,632 in a single year, is riddled with so many exemptions and loopholes that it has had no effect whatsoever.

In fact, overtime pay has actually soared since the cap took effect, as shown in the chart below:

Year Bradshaw’s OT Hours Total OT Pay # of $100K+ OT Payments OT Cap
2014 2,979 $39,105,580 7
2015 2,924 $39,423,301 15 1-Apr-15
2016 4,096 $46,610,219 44
2017 4,359 $55,664,348 83
% Increase since 2014 46% 42% 1086%

In addition to the explosion in OT hours and earnings for Captain Bradshaw, agency-wide overtime pay increased 42 percent since the cap took effect, and hit an all-time high of $55.6 million last year.

Similarly, the number of OCFA employees who received overtime payments of $100,000 or more is up 1,086 percent since 2014.

An easy way to save $5 million?

Firefighting will always require some degree of overtime, but it is unclear why OCFA assigns so many overtime hours to fire captains, particularly given their job description indicates their duties are primarily administrative and supervisory in nature.

Because of their much higher salaries, overtime hours assigned to fire captains cost 37 percent more than an hour of overtime pay paid to a regular firefighter. In aggregate, if all the overtime hours assigned to fire captains last year were performed by regular firefighters, the agency would have saved nearly $5 million.

Bradshaw not that much of an outlier

While the more than $500,000 in pay and benefits received by Bradshaw in each of the past two years was the most of any OCFA employee, his peers weren’t all that far behind. The chart below displays the average pay and benefits received by full-time, year-round OCFA employees last year:

Classification Average FT Pay + Benefits
Fire Battalion Chief $369,646
Fire Captain $313,529
Fire Apparatus Engineer $260,683
All OCFA Staff $237,876
Firefighter $225,060

Transparent California will be continually updating the site with new, 2017 data from the remaining special districts in the coming weeks. Be sure to follow our blog and Twitter accounts, or sign up for our mailing list, in order to receive the latest updates.

For more information, please contact Transparent California Executive Director Robert Fellner at 559-462-0122 or Robert@TransparentCalifornia.com.

Transparent California is California’s largest and most comprehensive database of public sector compensation and is a project of the Nevada Policy Research Institute, a nonpartisan, free-market think tank. The website is used by millions of Californians each year, including elected officials and lawmakers, government employees and their unions, government agencies themselves, university researchers, the media, and concerned citizens alike. Learn more at TransparentCalifornia.com.

Inglewood police chief gets an extra $61,000 annually for taking a 2-week course

Robert Fellner Blog

Median earnings for Inglewood residents was around $30,000 last year. Those same residents are required to pay for a police chief’s $524,000 pay package, which includes an ongoing, $61,000 annual bonus for completing a two-week training course. 

Here are the opening and closing paragraphs from the Southern California News Group’s just-released story on this absurd perk:

Inglewood Police Chief Mark Fronterotta collected an extra $61,000 last year that was not authorized by the city’s charter, the City Council or his employment agreement, according to an investigation by the Southern California News Group.

…

“I don’t think there’s anyone who would believe there’s a substantive reason to pay someone $60,000 a year extra for a two-week course,” Fellner said. “All these wrinkles just amplify the fact that when a City Council wants to be generous with other people’s money, they’ll find a way.”

Be sure to read the full story here. 

Why is the media treating CalPERS with kid gloves?

Robert Fellner Blog

Yves Smith of the Naked Capitalism blog has presented irrefutable evidence that CalPERS CEO Marcie Frost submitted false information to the pension fund when applying for the job she now holds.

For example, despite only taking writing courses at Evergreen College for two semesters in 2010, Ms. Frost claimed (up through at least the end of 2016) to be actively enrolled in a dual degree program — a program which simply never existed, according to the college.

This is very similar to what happened with CalPERS CFO Charles Asubonten, who was recently fired for severely misrepresenting his work and earnings history.

When those reports first surfaced, CalPERS dismissed them as nothing more than as an attempted “character assassination,” according to the Los Angeles Times.

But when CalPERS own investigators confirmed what Yves had reported, the fund elected to terminate Asubonten’s employment. The fund never publicly explained its dramatic turnaround from blindly defending Asubonten, to moving to fire him.

Likewise, when Bloomberg asked CalPERS about the gross falsehoods and misrepresentations on Marcie Frost’s job application materials, CalPERS Board President Priya Mathur and Vice President Rob Feckner issued a statement declaring that:

The board’s confidence in Marcie Frost and her leadership is unwavering. These continued efforts to tear down Calpers and discredit Marcie and the broader leadership team at the system are nothing more than a spiteful attempt to attack retirees, beneficiaries and the promised benefits of public employees.

This actually reminds me of the culture I’ve observed at some small homeowners associations, where the board is comprised of people who don’t have a solid understanding of the issues they assumed responsibility for, and thus are reflexively and comically defensive when faced with any sort of criticism.

Mathur and Feckner’s claim that reporting on Ms. Frost’s misrepresentations is “a spiteful attempt to attack retirees” is obviously asinine and idiotic.

But their continued willingness to blindly defend those with a documented pattern of misrepresentation — the facts of which they don’t dispute! — suggests that the board’s primary factor in evaluating the fitness of an employee, or chief executive in this case, is their personal relationship with that person.

The relatively sparse coverage over this scandal is also a good example of how the media tends to be much more deferential to government agencies than private actors.

Imagine that California decided to outsource the role of CalPERS to a private business, say Koch Investments, just for the sake of argument.

This private firm is now managing nearly $400 billion in public monies to provide for the secure retirement of California’s nearly 1.9 million public workers and retirees.

Reports then surface that its CEO made demonstrably false statements in the job application process, before ultimately obtaining the position as head of the fund and the nearly $500,000 taxpayer-funded pay package that comes with it.

The media coverage would be relentless — and rightfully so.

Also, I can’t imagine any private firm being as arrogant and dismissive in response to these allegations as CalPERS has been. Remember, there is no dispute that the representations made by Ms. Frost to the recruiting firm were blatantly false, as discussed above.

Even if the owners of the private firm didn’t care about their CEO’s misrepresentations and were just as arrogant and dismissive as Mathur and Feckner are, their public response would at least pay lip service to the idea that it was a problem, with some PR statement about how they want to ensure all of their staff acts with the utmost integrity…etc.

CalPERS instead attacks the messenger and the intelligence of the public at large with its tried-and-true “those who report on serious ethical issues of our top executives are ATTACKING RETIREES!” nonsense.

That willingness to be so publically dismissive stems from the very different incentives facing public and private institutions. Namely, CalPERS knows it’s immune from accountability, as those tax dollars ain’t going anywhere.

While a private firm would fear losing their customers/contract, possible legal actions stemming from fiduciary violations, etc, CalPERS just needs to avoid a public outcry — which makes the media’s silence on this issue all the more troubling.

Ignoring risk hides pension costs from policymakers

Robert Fellner Blog , ,

A new rule currently being considered by the Actuarial Standards Board would finally require public pensions to meaningfully account for risk. In a commentary for the Voice of San Diego, I explain how this would benefit all stakeholders.

Future Taxpayers and Public Employees Are Paying for Past Pension Mistakes

As San Diego County sues its own pension fund for the right to slash benefits for new hires, and while taxpayer costs continue their ascent to record-high levels, understanding the true cause of the county’s pension crisis is more important than ever.

While some blame the stock market crash of 2008-09, the real culprit was an explosive growth in the size of promised pension benefits, and the flawed accounting practices that encouraged such recklessness.

Over the past 30 years, the accrued liabilities of the San Diego County pension fund, SDCERA, increased by nearly 1,300 percent — almost four times more than the growth in the county’s total personal income over that same time period.

The willingness to make such large pension promises stems from accounting practices that understate their cost by ignoring risk entirely.

Specifically, by treating assumed future stock market returns as certain — despite acknowledging their investments will underperform expectations roughly 50 percent of the time — SDCERA can “discount,” or minimize, the estimated cost associated with safely funded employees’ future pension benefits.

Of course, ignoring risk on your balance sheet doesn’t make it go away in the real world, which is why this approach is outlawed in the private sector and rejected by public pension plans in more than 100 countries worldwide, with U.S. state and local public pension plans being the only exception from that consensus.

This also reveals why blaming San Diego County’s soaring pension costs on the Great Recession is so misleading. The cost was created when the promises were made, as indicated by SDCERA’s nearly 1,300 percent increase in accrued liabilities, not when they were exposed by a market downturn.

But because defraying costs to future generations is so politically attractive, there has been little interest in reform, despite the urgings of those like Warren Buffet, Nobel Laureate William F. Sharpe and what seems like the entirety of the economics profession.

Thankfully, after years of fierce criticism by prominent actuaries worried about the harm that would befall their profession as a result of its continued silence, the Actuarial Standards Board proposed a new rule that would finally require pension plans to meaningfully account for risk.

While the proposal would simply require plans to disclose the level of risk associated with their funding strategy, government unions are nonetheless howling in displeasure at the idea, terrified at the consequences of making the full cost of their pensions known.

But this reflexive opposition to honest accounting is short-sighted and destructive. As the experience of San Diego County so aptly demonstrates, the damage caused by overpromising is often borne by government workers themselves, particularly future hires.

After having been lulled into a false sense of security by numbers that overstated the health of the fund while understating the cost of increasing benefits, the County Board of Supervisors in 2002 passed a 50 percent benefit enhancement for all county employees.

But when the inevitable market downturn hit — a certainty for any long-term investor like SDCERA — paying the full cost of the 2002 enhancement fell to today’s taxpayers and public employees, who never received any of the benefits they are now being required to pay for.

In addition to forcing both groups to pay more, while getting less, the county also repeatedly cut the benefits offered to new hires to get its soaring retirement costs under control.

After reducing the retirement benefits offered to new hires in 2009 and again in 2013, the county earlier this year approved a plan to cut new employees’ benefits to the lowest level allowable under law, which are worth roughly half as much as those received by pre-2009 employees.

The current lawsuit that has delayed the implementation of this new, bare-bones retirement plan focuses only on how and when that plan will be implemented, not if.

This makes clear that all groups — including government employees — are harmed by the status quo.

Had the Board of Supervisors been informed of the true cost of the excessive and unnecessary 2002 benefit enhancement — and the degree of risk associated with relying on stock market returns to pay for it — this whole mess could have been avoided.

Requiring public pension funds like SDCERA to meaningfully account for risk will make it much harder for policymakers to force future generations to pay for their past funding failures.

And that’s good news for everyone concerned with the fiscal health of the county and the fair treatment of all its citizens — taxpayers and public employees alike.

Robert Fellner is executive director of Transparent California. This commentary was first published by the Voice of San Diego.

CalPERS sued for withholding complete pension data

Robert Fellner 2018, Press Releases , , ,

The California Public Employees’ Retirement System (CalPERS) is unlawfully withholding information necessary to help safeguard the system from waste, fraud and abuse, a just-filed lawsuit alleges.

The problem of disability fraud has plagued California’s public pension systems for decades, costing taxpayers untold millions.

One of the first documented cases occurred in 1992, when a retired officer drawing a tax-free disability pension was spotted competing in a local rodeo.

As discussed in more detail below, historically lax oversight encouraged such abuses, which continue to this day.

Earlier this year, for example, the Los Angeles Times reported on an allegedly disabled firefighter who had competed in a half-marathon. The Times report ultimately led to an arrest and calls for reform from city councilmembers.

To its credit, and likely in recognition of the fact that the problem extends beyond just those who compete in athletic competitions while on disability, CalPERS encourages the public to report cases of suspected fraud and abuse to its disability fraud tip line.

Yet the fund, which manages over $300 billion in assets and receives nearly $20 billion annually from California taxpayers and public employees, has inexplicably refused to disclose the very information necessary to identify such cases of potential abuse.

Today, the Nevada Policy Research Institute (NPRI) has filed a public records lawsuit against CalPERS to obtain this information for its Transparent California website — the state’s largest and most comprehensive public pay and pension database.

Specifically, Transparent California requested the one-word designation of either “regular” or “disability” that would identify the type of pension received by retirees, so that the public could better assist CalPERS in its efforts to identify cases of disability fraud.

Despite the law’s presumption of openness, and binding case law precedent requiring disclosure of the requested information, CalPERS denied the request by citing a statute that makes confidential employees’ personnel and medical files.

“It’s highly unlikely CalPERS actually believes providing the one-word designation of the type of benefit received by its members is equivalent to providing a copy of their medical records, which is properly exempt from disclosure,” said Transparent California Executive Director Robert Fellner.

“Instead, CalPERS is exploiting the lack of any penalties for governments who unlawfully withhold public records, secure in the knowledge that taxpayers will be the ones required to pay all legal fees incurred.

“Sadly, the lack of teeth in California’s Public Records Act has effectively negated the presumption of openness enshrined in state law. The Legislature must amend the law so that those who violate it are held personally liable, just like any other citizen would be.”

Abuses previously uncovered

Public pension disability fraud in California has been an issue since at least 1992, when investigators uncovered an officer who was drawing a tax-free disability benefit competing in a local rodeo. Further investigation revealed the retired officer had won gold and silver medals in a Police Olympics swim competition the very month she filed for disability, according to an Associated Press report.

In 2005, the Sacramento Bee exposed widespread fraud at the California Highway Patrol Department, where over 80 percent of retiring chiefs would claim injury within 2 years of retirement. Then-Governor Arnold Schwarzenegger appointed a task force to investigate the Bee’s findings, which culminated in multiple arrests.

More recently, the Los Angeles Times uncovered abuses taking place in the city pension fund, like a firefighter who competed in a half-marathon while claiming disability for an injured knee. At least one retired officer has since been arrested on suspicion of disability fraud since the Times published their findings earlier this year.

“These types of abuses are naturally much easier to detect when the pension fund distinguishes disability benefits from a regular pension,” Fellner said.

“In addition to both the city and county fund of Los Angeles, nearly two dozen of California’s independent pension funds do disclose this information, further undercutting CalPERS arguments for secrecy.”

As indicated above, CalPERS itself recognizes the importance of the public’s assistance in identifying cases of disability fraud, and encourages the public to report suspected cases of fraud to its disability fraud tip line.

“Refusing to disclose benefit type prevents the public from providing the very oversight CalPERS claims is essential in order to safeguard against waste, fraud and abuse,” Fellner said.

CalPERS refusal to identify benefit type on the grounds of confidentiality is even more perplexing, given the vastly more comprehensive and invasive information disclosed by the agency elsewhere.

“It’s hard to imagine a coherent legal standard that shields benefit type, while simultaneously making public the vastly more comprehensive information found in CalPERS own public hearings and state Workers’ Compensation reports,” Fellner said.

For more information, please contact Robert Fellner at 559-462-0122 or Robert@TransparentCalifornia.com.

Transparent California is California’s largest and most comprehensive database of public sector compensation and is a project of the Nevada Policy Research Institute, a nonpartisan, free-market think tank. The website is used by millions of Californians each year, including elected officials and lawmakers, government employees and their unions, government agencies, university researchers, the media, and concerned citizens alike. Learn more at TransparentCalifornia.com.