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Health care: Palo Alto's painful dilemma

Original post made on Mar 22, 2013

In 2009, Palo Alto's elected leaders and top management responded to the financial walloping of the Great Recession by embarking on a path toward benefit reform. The effort is about to enter its next phase as management and labor unions prepare for tough negotiations over ways to rein in rapidly rising health care costs.

Read the full story here Web Link posted Friday, March 22, 2013, 9:14 AM

Comments (55)

Posted by James Hall, a resident of Mountain View
on Mar 22, 2013 at 10:37 am

Hey - wouldn't it make sense to look at the issue of health care as providing a means for employees to care for their health as needed. People in lower pay classifications should be paying the least for their own coverage, those in the upper pay brackets should be paying the most. Perhaps the number of dependents needing coverage could be factored in as well. Is it rational for someone making something like $150,000 to be getting coverage for the same contribution as someone making less than 50,000? Perhaps there should be an upper limit, such as if you're making more than $175,000 you buy your own coverage. Same thing could be applied to retirees.
Just an idea.


Posted by David Pepperdine, a resident of Another Palo Alto neighborhood
on Mar 22, 2013 at 10:50 am

It's high time we got away from defined benefit plans to defined contribution plans. Corporate America did it in the 80s. We're 30 years behind but it needs to be done. We should have a known liability today for services delivered today. The idea that we should have an undefined liability for defined services makes no sense.

Let's get our city aligned with the current realities we all live with.


Posted by Voter, a resident of College Terrace
on Mar 22, 2013 at 1:11 pm

The private sector has solved this problem, because it's not able to keep kicking the can down the road like government. If the public sector can't solve this, services need to be outsourced to the private sector as soon as possible.


Posted by Madame de l'Enfer, a resident of Another Palo Alto neighborhood
on Mar 22, 2013 at 2:30 pm

The insurance companies need regulation. The raise their rates horribly to individuals and small businesses, and they do it annually. We have had our coverage downgraded twice because it saves the employer money, but costs us an arm and a leg. The insurance companies have huge profits and do not mind allowing people to die to continue them.

The hospitals and their administrations also make ridiculously huge profits, especially the non-profit ones who pay no tax ( see TIME mag from two weeks or so ago). It is absolutely criminal what they charge the public and the insurance companies. THEY need regulating immediately, as they have sick people totally over a barrel!

The pharmaceutical companies raise the rates of their drugs once or twice a year. My medicine for rheumatoid arthritis has gone Fromm $350/mo to $2800/mo in just four years! My copay is now Nearly $1000/mo, yet if I stop taking the shots, I will become crippled and unable to work. Cheaper drugs have been far less effective Nd do nothing to inhibit disease progression. Again, they have sick people over a barrel, and THEY need some regulation.


Posted by Mr.Recycle, a resident of Duveneck/St. Francis
on Mar 22, 2013 at 2:58 pm

@Madame de l'Enfer - You think insurance companies aren't heavily regulated?

Spend some time here at the California Dept. of Insurance site - all those rate increases you see get the government stamp of approval.

Web Link

And it is no coincidence that the biggest hikes in rates have come after the biggest moves to regulate the industry over the last 4 years.


Posted by Resident, a resident of Another Palo Alto neighborhood
on Mar 22, 2013 at 6:01 pm

Health care costs in the USA are a disaster and the Time piece, "Bitter Pill" by Steven Brill, ought to be required reading for everybody.

That said, the Paly Online article's title, "City vs Labor," is a misnomer. Private-sector unions may still be Labor, but public-sector ones aren't; they're political organizations, kind of for-profit super-PACs, whose only real function is to transfer ever more cash from everybody else to themselves. Having the rest of us protect them from the healthcare tsunami is just one more, very disturbing, front in the War on Residents.


Posted by Madame de l'Enfer, a resident of Another Palo Alto neighborhood
on Mar 22, 2013 at 7:24 pm

I have had to engage the California State Insurance Commisioner's office before....when my then-insurance company tried to keep me from the medication I desperately needed. I was told that the insurance company HAD to respond to them.....they would charge and fine them a whopping $200/day for not responding.

That really must have hurt the insurance company, because they took 20 working days to respond to the Insurance Commissioner!

They are completely ineffectual and useless! They ended up blaming our insurance broker!


Posted by Resident, a resident of Barron Park
on Mar 22, 2013 at 9:34 pm

Congratulations Palo Alto Weekly for your continued one sided smear on Palo Alto employees and desire to perpetrate resident ire. Employees are apparently a lesser class of humans for the Palo Alto Weekly, and perpetrates the "noblesse oblige".

Former council member and Palo Alto resident Yoriko Kishimoto left after PT work on council with $1,800 a month in healthcare benefits for life after telling employees " they just needed to tighten their belts".

Our city manager Jim Keene makes over $300,000 a year. Plus a home financed by the City of Palo Alto.

We have no oversight or board for for hiring top managers who move themselves up the ladder based on their "good old boy buddy system". Face it it's like a private club.

Managers continue to return to the city after retirement to double dip.

We call ourselves "green" when we refuse to provide affordable housing for police, fire, and civic employees who commute 1/3 hour to 2 hours to work?

Congratulations Palo Alto Weekly. You have succeeded in lauding the entities that support you: Overpaid city management, Real Estate sales , developers, and oppressive prop 13ers on a fixed income with multimillion dollar homes.




Posted by Bill, a resident of College Terrace
on Mar 22, 2013 at 10:40 pm

It's long over due for Palo Alto, and most cities, to stop the excessive benefits lavished on it's employees. Defined benefit pensions, health care, or just about anything have all proven to be excessively costly to tax payers. It is unfortunate, but a reality of the world today. Palo Alto city govt is teetering on basically existing to fund their pensions. This is not right. Scrap the defined benefits plans, all of them, and switch to a defined contribution system. Sadly, even those are plans are becoming scarce, but again, the world has changed. It's time for local govt employees everywhere to pay their fair share for their retirements and health care. I do.


Posted by common sense, a resident of Midtown
on Mar 22, 2013 at 11:52 pm

The Palo Alto Weekly failed to talk about how the city failed to address this problem from 2006; Here is the proposal from city management in November 2006: Web Link

They proposed enriching the retirement benefit from 2%/55 years (ie. 2% per year worked, retire at 55) to 2.7%/55 years in exchange for modifying what the city pays for medical benefits. So an employee who use to get 60% of their salary for working 30 years and retiring at 55, instead gets 84% of their salary.

Well, this was probably the worst deal of all time, as pension costs have skyrocketed and as this article highlights, the city still faces a problem with medical benefits payments. The vote on the city council was 6-3, the six in favor were: Larry Klein, Barton, Beecham, Cordell, Drekmeier, Morton; the 3 against were Kishimoto, Kleinberg & Mossar.


Posted by Resident, a resident of Barron Park
on Mar 23, 2013 at 12:23 am

...and Kishimoto retired with 1,800 a moth in healthcare for herself. How heroic.


Posted by Resident, a resident of Barron Park
on Mar 23, 2013 at 12:40 am

Keene brougth this on himself. The weekly repeating city press releases doesn't explain that the rash of retirees was due to a change in city policy - the city made employees pay for their healthcare out of their pension DURING retirement if they didn't retire by a certain date. Yes, Keene brought this on himself and the city coffers.

"The city's ratio of early retirees to actives is so high that it is a barrier to obtaining coverage quotes from the open market, based on input from insurance representatives," the report states. "Early retirees incur higher health care costs compared to active employees, which insurers specify as a reason to charge higher insurance premiums."

What makes matters worse is that many of these retirees have just left and remain too young to qualify for Medicare, a factor that further ups the city's costs. Of the 860 retired employees, 377 are "early retirees," according to the report. Things are likely to get worse before they get better. According to Shen, about half of the city's workforce is set to retire in the next decade, further expanding what Keene called the city's "shadow organization."


Posted by A Noun Ea Mus, a resident of Professorville
on Mar 23, 2013 at 2:02 am

Well I've had several interactions with city workers of late. Basically I have to start by apologizing to be a citizen of Palo Alto and try to distance myself from the disgusting attitudes and stances as evidenced by the Palo Alto Weekly and it's Ann Ryand minions. And when I do, boy ya all did create a ton of ill will and contempt. Yea reap what ye sow! Ditto for police officers.


Posted by It isn't insurance company's fault, a resident of Fairmeadow
on Mar 23, 2013 at 9:36 am

Umm...them more regulations/mandates our Feds put on our medical insurances, the more it costs us to insure and the more it costs in care.
Search the New York Times article on the San Diego Bakery which will lose half its profits because of the mandates of Obamacare and is now faced with the 3 choices: 1) Lay off enough workers from 95 to 49 to get under the magic 50 number 2) Pay the penalty for not insuring, which is more than insuring or 3) bring down full-time employees to the magic number of 29 hours per week to not have to comply with the new law.

Mind you, before Obamacare, these employees had insurance, and jobs...but with Obamacare, the mandates are so immense the costs rise to eat up 1/2 the profits the bakery now makes.

Great job, folks. Good luck. We will all suffer from the kindness of the Dems on this one, and I have no idea how public employees will fare and how we, the taxpayers, will bear the brunt as we lose our jobs or hours.


Posted by Wondering?, a resident of Another Palo Alto neighborhood
on Mar 23, 2013 at 9:56 am

> Basically I have to start by apologizing to be a citizen
> of Palo Alto and try to distance myself from the disgusting
> attitudes and stances as evidenced by the Palo Alto Weekly

With all this hovelling and grovelling .. where did you find the time to actually discuss your problem with the City employees that you seem to rever so much?

When did City employees shift from being "servants of the people" .. to their "overlords"?


Posted by Wondering?, a resident of Another Palo Alto neighborhood
on Mar 23, 2013 at 9:58 am

> Search the New York Times article on the San Diego Bakery

San Diego-based businesses can always relocate to Tiajuana .. and kiss ObamaCare goodbye.


Posted by Mr. Recycle, a resident of Duveneck/St. Francis
on Mar 23, 2013 at 10:52 am

>> Basically I have to start by apologizing to be a citizen
>> of Palo Alto and try to distance myself from the disgusting
>> attitudes and stances as evidenced by the Palo Alto Weekly

>With all this hovelling and grovelling .. where did you find the
>time to actually discuss your problem with the City
>employees that you seem to rever so much?

>When did City employees shift from being "servants of the
>people" .. to their "overlords"?

Seriously, the attitudes and the cost can be replaced with private contractors.


Posted by Resident, a resident of Barron Park
on Mar 23, 2013 at 1:28 pm

Yes Palo Alto Weekly - love the illustration!
You have succeeded in planting the continued hostility and ire of the community on the least paid public employees, as if public services should be for free and the overpaid city management club that gifts itself jobs, benefits, and double dipping after retirement - must be a great leadership.

Why is it that Mountain View and Sunnyvale do not treat employees like dirt in the media, and the BEST SKILLED PALO ALTO EMPLOYEES are leaving and going to better places, or retiring early?... Retiring early, and leaving Palo Alto with the bill for their retiree healthcare
rather than having them employed in Palo Alto with their full range of skills and knowledge working FOR PALO ALTO?

How is losing your best employees and "knowledge base" INNOVATIVE?

Can we expect another season of the same pandering of the Weekly to the creation of a hostile city environment, and the failure of the Weekly to acknowledge the economic and cultural value of skilled, dedicated, and knowledgeable employees?



Posted by pat, a resident of Midtown
on Mar 23, 2013 at 3:27 pm

Here's the TIME article plus 2 others:

Bitter Pill: Why Medical Bills Are Killing Us Web Link

Pharmaceutical Companies Spent 19 Times More On Self-Promotion Than Basic Research
Web Link

We spend $750 billion on unnecessary health care. Two charts explain why.
Web Link


Posted by It isn't insurance company's fault, a resident of Fairmeadow
on Mar 24, 2013 at 6:56 am

Pat: Ask yourself WHY it is more profitable to NOT create new medicines now...
Ask yourself WHY there is so much wasted time and resources in medical care.
Ask yourself WHY medical care costs have risen so much in the last 30 years.

I have been in medical care for over 30 years and have seen why. The constant fear of silly lawsuits make us protect ourselves by ordering many more tests than are necessary. The bills for liability insurance keep rising. The federal and state regulations on documentation keep rising so that more time is spent documenting than treating.The pay for each patient keeps lowering, if not in actuality, in practice as the pay scales stay the same and inflation continues. Patients have become highly divorced from the actual costs of care, gone are the days of each person having to pay "per visit" a fraction of their costs, encouraging them to choose wisely ( which is why the PPO model works so well, but this is disappearing.)

What does that mean to us, in the medical care fields? How can we survive? We have to see more and more patients for less and less time per patient, but still using expensive tests to treat them...or simply not see them and not test them.

The result is, frankly, less care per patient.

How to fix it?

It is not yet MORE mandates and regulations and price controls. It is the opposite, let people choose the level of care they want to contribute to, not force them, as now, to choose between cadillac or nothing.

It is tort reform to protect us, the medical care providers, lower our cost, give us back the professional ability to help patients decide what next with our knowledge and wisdom, without expensive tests to back us up.

It is putting the patient in the middle of choosing what care he will get by putting at least some of the cost choices into his pocket.

It is greatly lowering the horrific paper work/computer work requirements to allow us to see more people in a day.

As for medicines: Give pharmaceutical companies back the profit incentive to create new medicines, and they will. There is little profit to be made in creating such life saving medicines as warfarin or quality of life medicines as amlodipine any more. So we will have less innovation. And we will suffer more than needed.

In the meantime, we keep rolling down the tracks to a trainwreck, aka French style medical care. If we had a brain, we would learn from the mistakes of others who have gone this route before us, but we are arrogant and think that somehow, we are smarter than all the people and countries before us who have been there, done that, and now are failing.

I recommend reading anything by Sally Pipes to understand the roots of what works, and how to pull out of the mess we have created.

In the meantime, we are stuck dealing with skyrocketing costs and lowered medical care, not only for each of us as private citizens in the private world, but for our public employees. A heavy, heavy burden.


Posted by Dan, a resident of Another Palo Alto neighborhood
on Mar 24, 2013 at 11:14 am


Private sector employees pay for health insurance, and they are on their own when they leave the employer, including retirement. Why shouldn't it be the same for government employees (including managers and administrators)? Why do taxpayers have to pay for benefits they themselves don't get?

The issue isn't whether government employees are good people -- it is just that their benefits are totally unaffordable, and it is time for them to pull their own weight, like those in the private sector.


Posted by pat, a resident of Midtown
on Mar 24, 2013 at 12:05 pm

I agree that medical care is a disaster for many reasons. But I take issue with this statement: "Give pharmaceutical companies back the profit incentive to create new medicines, and they will."

Did you not read the article I posted, "Pharmaceutical Companies Spent 19 Times More On Self-Promotion Than Basic Research"?

Just how much profit does a pharma need to make? "In Forbes' list of the world's leading companies, pharmaceutical companies have profit margins averaging 20 percent, whereas the average profit margin for the 2,000 leading companies worldwide is 8 percent." Web Link

Check out Fortune's 2012 list: Web Link
And how much goes into lobbying? "The pharmaceutical industry as a whole spent $69.6 million on lobbying in the first three months [of 2012] alone." Web Link

Sally Pipes is part of the Pacific Research Institute for Public Policy (PRI), a politically conservative "free market think tank" which promotes "the principles of individual freedom and personal responsibility" through policies that emphasize a free economy, private initiative, and limited government. It has been associated with the American Enterprise Institute, The Heritage Foundation, The Fraser Institute and the Cato Institute.


Posted by Wondering?, a resident of Another Palo Alto neighborhood
on Mar 24, 2013 at 2:26 pm

> Did you not read the article I posted, "Pharmaceutical Companies
> Spent 19 Times More On Self-Promotion Than Basic Research"?

Is this necessarily a bad thing? The Pharmaceutical companies have to see the medicines that they have created. How do you do that without "self-promotion"?

But, let's ask another question—just how many more medicines need to be developed? Presumably there is some sort of drug registry which we could interrogate in order to learn an answer to that question? How many do we have now—and how many do we need to develop, say, every five years?

And of course, how much does it cost to develop a new drug? Do the Pharmaceutical Companies have an obligation to provide the cost of developing a drug for the market to the public? Let's suppose that most drugs cost at least $100M to bring to market. Why would anyone want them to loose money on any of their drug/medicine offerings?


Posted by Wondering?, a resident of Another Palo Alto neighborhood
on Mar 24, 2013 at 3:57 pm

Here's some data about drug development costs--

Web Link


Posted by Resident, a resident of Another Palo Alto neighborhood
on Mar 24, 2013 at 4:37 pm

Whatever you may think of Keane, the wave of "early retirees" isn't his fault; it's the fault of previous city staff and councils who allowed themselves to be maneuvered into contracts which allow ridiculous retirement and benefit packages. Trying to get control of this stuff is just a trigger for things already building for some time. But when you're in a hole, you've got to stop digging.

The real problem is the public-sector perversion of "retirement." A retirement plan for most people is something to support you when you're too old to work. But for the public unions --- and their management --- "early retirement" is just a mooch. Only in the public sector is it a way to get two paychecks for one job, or free healthcare plus one paycheck for no job. All paid for by your same-age-but-still-working, paid-less-for-equivalent-work, future social-security-recipient neighbors; and given to you not by Keane, but by previous city councils and their -- surprise! --- public union contributors.



Posted by Bertie, a resident of Community Center
on Mar 24, 2013 at 7:22 pm

I don't get it. The cost of excessive, though admittedly very desirable, benefits exceeds the future capacity of Palo Alto, and most likely just about every city/town in the state. It's time to scrap the defined benefits program for a defined contribution benefits program. What's the dilemma?


Posted by prop13er, a resident of Los Altos
on Mar 24, 2013 at 9:59 pm

I tried to pay more taxes on our home, but they won't let me...guess we just lucked out and bought at the right time. It is also so unfortunate that we bought the home in '70 for 90k, but now it is worth 2.5m guess that says alot for staying power...
Bitter--party of one?


Posted by cents and sensibility, a resident of Another Palo Alto neighborhood
on Mar 25, 2013 at 2:40 am

We are sitting here arguing over the crumbs, when the way to make a MUCH bigger pie, so to speak, is staring us in the face from all over the advanced world. One has to wonder how hungry we have to get before we decide to get some sense.

The biggest cut we could make with no harm — in fact, it would benefit us — is to simply end investor-owned health insurance and restrict healthcare underwriting to non-profit insurance and consumer-beneficial models of insurance (similar to credit unions). This gets to the root of the biggest corrupting incentive in the system overall.

When insurers have to pay investors, 
1) ***they profit based on a percentage of the overall healthcare economy***, so, the larger that economy is, the more money they make, i.e., for-profit insurers have no incentive to save us money, in fact their incentive is to have as large a healthcare economy as we can bear (surprise! it always is). The Healthcare Affordability Act doesn't solve this.
2) In order to CONTROL the system the way they need to maximize their profits, for-profit insurance fosters a bureaucracy that costs us on the order of HALF TRILLION DOLLARS ANNUALLY (on the order of the pre-war department of defense), i.e., denials today are mainly the result of a need for control to benefit insurers, not to control costs for the system overall. This administrative burden adds to every healthcare dollar spent and pervades the system, there's no way to "opt out".
3) In their need to CONTROL the system, with lack of any incentive to control the overall cost of the system, insurers often end up hurting the advancement of medicine and underwriting more expensive treatments that they can control over less expensive ones they can't. This favors consolidation of care, which in turn makes bigger healthcare players who don't have to compete and can leverage more money. For example, insurers will favor certain pharmaceutical interventions, where they only have to deal with a few large pharmaceutical companies, over paying for a care service involving thousands of individual providers across the nation, even if the latter is better for patients, and the former is more costly, because they can predict the costs with fewer players better and can more easily negotiate for control. Remember, they aren't out to make the system less expensive, just control it best to maximize extraction of their profits. A previous poster has mentioned the precipitous rise in pharmaceutical costs in the last few years -- it was predictable, as dramatically inflated pharmaceutical prices give insurers a buffer for better control in a situation where it's now even more difficult to maximize their profits.
3) In order for non-profit insurers to compete when for-profits dominate, non-profits have to play the same cherry-picking games that feeds into the overall bureaucracy and administrative costs. Our own system worked far better when our own system was dominated by non-profit insurers, the serious price soaring began when for-profit insurers began to dominate.

Please note: I am NOT advocating single-payer or non-profit healthcare delivery!

Currently, no other first-world nation allows for-profit insurers except the US. None of them pay even close to what we pay for healthcare administration, which in our system is so costly largely due to private for-profit insurers. Every other first-world nation pays less per capita, covers everyone, in many cases get better outcome, and in some cases have MORE privatized systems than ours, more advanced care for most people, and far more perks and freedom in their care now.

Let me repeat that, in some cases, those other systems have MORE privatized systems than ours. I don't understand why some people can't get that you can have healthy, productive efficient non-profit sectors in a thriving, privatized, market-based system. I remember discussing this issue with a neighbor, who kept insisting it wasn't possible to do, then he suggested we should have a system like Germany's -- not realizing that Germany also has all non-profit insurance, too, within a more privatized system than ours.

As T.R. Reid pointed out in this book The Healing of America, Switzerland, with a more privatized system than ours, tried allowing their insurers to profit in healthcare underwriting, and costs began skyrocketing and people going bankrupt. So they held a referendum, stopped the profiteering in health insurance, and solved the skyrocketing costs and bankruptcies. 

This is low-hanging fruit that is choking us to death! It's a change that must be made before any other improvements could possibly make a difference, it's the ever-growing elephant in the room that threatens to kill us, yet we cling to it like we can't live without it. When are we going to decide that retaining a certain kind of insurance investment opportunity isn't worth bankrupting our nation? Healthcare is now 20% of our economy! It's painful to think about what will be cut instead.

I realize we can't solve this particular issue by making changes locally -- or can we?...


Posted by simple solution, a resident of Crescent Park
on Mar 25, 2013 at 9:53 am

@prop13er
Just sell your house and buy another one. Then you'll be paying more tax.


Posted by Make, a resident of Crescent Park
on Mar 25, 2013 at 11:36 am

Is it really so bad that a lot of folks will work into old age with no possible retirement if it helps provide our public employees with the best in compensation, early retirement and lifetime healthcare?


Posted by Steve, a resident of Menlo Park
on Mar 25, 2013 at 12:01 pm

Make -
If a person is working into old age with no possible retirement, it's because of reasons far beyond the incremental added cost to their property tax bill due to public employees.
Let's maintain some perspective here and not blame public employees for everything that's wrong in our local economy. After all, Wall Street transgressions contributed far more to the economic collapse that we're all dealing with than public employee compensation ever could.


Posted by musical, a resident of Palo Verde
on Mar 25, 2013 at 12:25 pm

Wow. This looks like a gold mine. I should empty my credit union 0.60% APY fully-taxable savings account and buy shares of health insurance companies and big pharmaceuticals for the tax-advantaged dividends and capital gains.


Posted by Make, a resident of Crescent Park
on Mar 25, 2013 at 12:29 pm

It's disingenuous to refer to Wall Street as a bigger problem.

Cities and towns in Ca and the rest of the US are declaring bankruptcy or contemplating bankruptcy because of public employee comp obligations that cannot be sustained.

We all pay more in fees and taxes here in PA to support our city employee comp, and we also forgo infrastructure maintenance because of a shortage of funds. These are not problems caused by Wall Street. Although many muni bonds will be downgraded by Wall Street if more communities default on their bond obligations in the future.

If you are unaware of the key roles Fannie and Freddie played in our financial problems by pressuring for quotas of sub prime loans you should find out.


Posted by Joseph E. Davis, a resident of Woodside
on Mar 25, 2013 at 12:32 pm

Our public servants are quite underpaid. We must take more money from our citizens to give our public servants what they deserve. Consider:

Web Link


Posted by Wondering?, a resident of Another Palo Alto neighborhood
on Mar 25, 2013 at 12:34 pm

> Let's maintain some perspective here and not blame public
> employees for everything that's wrong in our local
> economy. After all, Wall Street transgressions contributed
> far more to the economic collapse that we're all dealing
> with than public employee compensation ever could.

This is a fair point—up to where it turns out that the Government is siphoning off too much of the GDP for its wealth redistribution programs.

The US has been undergoing de-industrialization since the day after the end of WWII. The East/Midwest (Rust Belt) has seen the worst of it all. As the so-called 3rd World economies began to come on line, core industries—like steel, merchant marine, and auto manufacture started moving to Germany, Japan, and then other countries, like South Korea. The Unions never understood that this. The continued to see the American Manufacturing Sector as "the enemy"—to be destroy at all costs.

The guys never quite seem to get picture that once they destroyed the American Manufacturing Sector—that they would lose their jobs at the same time.

Starting around 1970, Labor Union latched onto the Government Sector—driving up the costs of labor, and driving down productivity.

Before Obama—"government" was consuming about 40% of the US GDP. After Obama—that percentage has jumped to 50%, and may well continue to creep up if Democrats continue to prevail at the National level.

While "government" does recycle money that it extracts for the productive people in our society—giving it to the less productive members, there is only so much money to go around. We have managed to create unfunded debts that range (estimates) from $120T to $200T. These debts are mostly to fund wealth redistribution—not building infrastructure, or providing essential government services.

So—it's not hard to see "government" as more of a burden on the local economy than a benefit.


Posted by Make, a resident of Crescent Park
on Mar 25, 2013 at 12:52 pm

Jos Davis,
By what standards do you conclude our public servants are 'quite underpaid'?

Look at the PA Weekly City of PA salary and comp report just published. Firemen and policemen making around $200,000 annually PLUS health and retirement benefits is underpaid?

Only a public employee union member could think that is underpaid.


Posted by Wondering?, a resident of Another Palo Alto neighborhood
on Mar 25, 2013 at 1:15 pm

This morning Daily Post carried a story about the California Courts System trying to put its records on-line, starting back in 2004. This project ballooned to an estimated $2B to complete, and last year the Office of the State Auditor recommended that this project be terminated. Down a bit in the article, the Post states: "Labor unions have been a driving force against the massive project ..".

Why this project go so out-of-hand is difficult to know, but California has failed in a number of HighTech projects, over the years. So—California State Government technology management is the first culprit. The Unions probably are not one of the key factors in the Courts System failure—but it's hard to believe that they weren't trying to sabotage it from its inception. Now, the Courts want to charge $10/file—which will have a very chilling effect on investigative journalism, and ultimately, the public's "right to know".

We can thank the Labor Unions for this attack on the public's "right to know"—since they will probably be very happy with this new records-access charge, and will no doubt be pushing to double it every couple of years!


Posted by Steve, a resident of Menlo Park
on Mar 25, 2013 at 1:41 pm

Make -
I don't think I'm being disingenuous at all. The cities & counties are in a pickle because their tax receipts have plummeted as a result of the Great Recession brought on by Wall Street shenanigans. In addition, their employee costs have risen because CALPERS has had to charge them more to cover pension & healthcare costs as their investment returns haven't returned to pre-2008 levels.
Both reduced tax receipts and reduced investment returns are directly linked to the market collapse caused by Wall Street. Beyond that, you probably weren't complaining 15 years ago when the city essentially stopped contributing to employee retirements because CALPERS' returns were so good that they temporarily discontinued employer contributions. If the city had been wise, they would have put that saved money into a rainy day fund to cover the present predicament.
As for your claim that the recession was caused by Fannie & Freddie's easing of credit requirements, that canard has long been disproved. Don't keep repeating nonsense when it can easily be checked for accuracy. Try this link Web Link or the Wikipedia artcle Web Link.


Posted by Wondering?, a resident of Another Palo Alto neighborhood
on Mar 25, 2013 at 2:36 pm

> I don't think I'm being disingenuous at all.

Really? You don't seem to have much of a hold on the economic realities of the past fifty years, or so!

> The cities & counties are in a pickle because
> their tax receipts have plummeted as a result
> of the Great Recession brought on by
> Wall Street shenanigans

There is a grain of truth in this statement, but only a grain. Most of us have to live within our means. Government, on the other hand, seems to have come to a belief that it can spend as much as it wants—simply raising taxes on people.

Government revenues come from numerous sources—property taxes, income taxes, various fees/fines, and so on. These sources are variable. However, government spending has been on auto-pilot for decades now. So, when most of us run out of money—we blame ourselves, and stop spending. Governments (increasingly meaning government workers unions) don't seem to think that they should take pay cuts when there is not sufficient revenues to pay their ever-increasing salaries. Big difference between those who think that they have a right to a guaranteed job, a guaranteed salary, no pay cuts, and a guaranteed pension after retirement (including health care, in some cases).

> As for your claim that the recession was caused by
> Fannie & Freddie's easing of credit requirements,

Fannie/Freddie played a part—but the mess is far more complicated that that. It involved massive fraud on the part of people from local real estate brokers/salesmen through Wall Street. Additionally, Congress voted, in one way or another, to permit Wall Street to act the way it did. Remember—so far no one on Wall Street has been indicted, or convicted, of any crimes. You can thank your local Congressperson for that!


Posted by j99, a resident of Barron Park
on Mar 25, 2013 at 3:41 pm

Palo Alto employees are overpaid and receive too many benefits and their pensions are outrageous. The city should fire them all and outsource the work to a public company.
The City Council needs to stop stealing money from the residents to overpay these people.
Worry about the exploding crime rate in downtown Palo Alto, the excessive utility costs for living in Palo Alto, and the rediculous expansion of buildings and buisinesses in Palo Alto. There is no more parking donwtown. Two of the last three times I went downtown for lunch I could not find a parking place in 15 minutes and went to Mtn. View to ear. Its rediculous. Stop having these illusions of grandure and start working for the residents.


Posted by resident, a resident of Another Palo Alto neighborhood
on Mar 25, 2013 at 4:26 pm

I think Joe Davis was being ironic. As for Steve from Menlo Park, I think he needs to learn to use a calculator.

Palo Alto has an unfunded public pension liability of $500 million or so. The public unions, and their management, howl that by their calculation it's only $300 million. Oh, no problem then.

Steve from MP thinks the problem is Wall Street. Not for example, the Fire Union (basically EMTs nowadays)? Who retire at 55 with a six figure pension, not including health care? Over say 30 years, that's $3.6M each, ultimately out of the General Fund, partially supported in Palo Alto by ... wait for it ... CPAU. Lehman and Bear didn't give them that deal. Maybe Steve from MP has $3.6M in his 401K so it doesn't seem like so much.

Wackenhut's new name is G4S Government Services. Their web site is Web Link Let's outsource.

That would help with Fire, but the rest


Posted by Anna, a resident of Barron Park
on Mar 25, 2013 at 5:12 pm

This is ridiculous. Except for the police, who actually earn their money, cut all of their pay in by 40% to compensate for the ridiculous benefits. When the unions refuse, impose the contract or start outsourcing.


Posted by Steve, a resident of Menlo Park
on Mar 25, 2013 at 5:20 pm

Wondering?
I agree with you that Congress & the White House were responsible for the deregulation starting in the 1990's that contributed to the excesses on Wall Street that produced this Great Recession. I also agree that it's a shame that no one from Wall Street has been indicted, let alone convicted, of these crimes that have hurt so many millions of Americans and permanently scarred the futures of our young people. It's a shame that Anna Eshoo supported repeal of Glass-Steagall, if that's who you're referring to. I expect this is a vote that she regrets in hindsight. I doubt the Phil Graham, the author of the repeal, has any such qualms.
However, I don't agree with your overly broad indictment of government in general. When applied to Palo Alto specifically your criticisms are off base and, often, flat-out wrong:
> Governments (increasingly meaning government workers unions) don't
> seem to think that they should take pay cuts when there is not
> sufficient revenues to pay their ever-increasing salaries. Big
> difference between those who think that they have a right to a guaranteed job, a guaranteed salary, no pay cuts, and a guaranteed
> pension after retirement (including health care, in some cases).
The facts are that, in response to the fiscal crisis, Palo Alto cut 20 city positions in 2009, 40 more in 2010, and another 29 in 2011. Web Link
In 2010 Palo Alto restructured Employee Pensions and Healthcare benefits to make them less generous.
In 2010 Palo Alto reduced employee pay and reduced employee benefits.
All these restructurings and reductions in pay & benefits were achieved in consultation with the employees through their unions.
Claiming that city employees have not cuts & reductions as the city has worked to balance its budget is just not accurate.


Posted by Steve, a resident of Menlo Park
on Mar 25, 2013 at 6:01 pm

Resident -
"Maybe Steve from MP has $3.6M in his 401K so it doesn't seem like so much."
Steve from MP wishes he had one tenth that amount in his 401K so yes, that does seem like a lot.
Where I have trouble with your complaint (ignoring the snide calculator comment for the moment) is that you don't seem to understand that PA employees get their retirement checks from CALPERS, not from Palo Alto. 64% of each pension check comes from CALPERS earnings on their investments. Only 21% comes from the employer contributions with the remaining 15% coming from the employee contributions.
Your $500 million unfunded liability probably comes from the Stanford study, which used standards appropriate for commercial pension plans that call for near 100% funding. This is appropriate because companies can fail and the money needs to be there to cover the retirement needs of the company's current & retired workforce. Public pensions in contrast are generally considered fully funded when they are able to cover 80% of liabilities since, like Social Security, there is always going to be a large contingent of active government workers (teachers, police, firemen) and their employers who are contributing to the fund. Not sure why the Stanford study ignored this basic difference except that the headline looks a lot worse the way they chose to do it.


Posted by resident, a resident of Another Palo Alto neighborhood
on Mar 25, 2013 at 6:34 pm

Palo Alto can't afford its infrastructure and upkeep, never mind new parking garages etc. Even now the City has an crew of consultants trying to figure out how to get another bond measure past the residents next year. Maybe the Cypress banks will underwrite it.

The City's ability to restructure its contracts is constrained by massively irresponsible contracts between previous city councils and the same public unions who funded their election campaigns; and some of whom been pretty darn militant for rich guys. What reforms we have so far are baby steps. Public pension and healthcare costs are still eating more and more of the city's budget, as Sheyner article discusses. The really hard work is still ahead.

It's worth noting that this is -relatively- recent. The public-employee hockey stick boondoggle really took off around the time of Gray Davis. Public pensioners from 30 years ago aren't the problem, and have plans comparable to everybody else.

But today ... it's astonishing that anybody could think it's right for a secretary in the private sector to work for $30K a year until he's 65 and then get Social Security, so he can pay for another one in the public sector to work for $50K a year until he's 55, plus big spiffs like infinite vacation accrual and sick time for days when he's not sick, and then get a retirement plan worth many times more than Social Security. Steve, do you really think this is ok? That so many public sector employees actually do think so is the sign of a massive culture dysfunction.

Although if you go into Safeway and ask a Menlo Park firefighter whether he's on regular time or overtime, he'll sort of look at the ground when he says, "uh, regular time."





Posted by Another Resident, a resident of Old Palo Alto
on Mar 25, 2013 at 9:23 pm

To resident: You can tell which Firefighter (at Safeway) is on overtime. He/she is the one buying dessert.


Posted by Wondering?, a resident of Another Palo Alto neighborhood
on Mar 26, 2013 at 12:32 pm

> The facts are that, in response to the fiscal crisis, Palo Alto
> cut 20 city positions in 2009, 40 more in 2010,
> and another 29 in 2011

The link provided to the City budget is not all that helpful. Can you provide page numbers to the section that documents this point?

The City documented over 1560 Full/Part-time employees for the 2012 financial year. A cut of 30 positions a year is not even 2% a year. "Cuts" in the real world are rarely this benign. It's not hard to find news reports where whole companies have disappeared—for reasons varying from bad management to unsustainable union demands—like the collapse of the Hostess Food Company (Twinkees/Wonder Bread) in 2012.

It's very difficult with this sort of information to determine how many of these positions were "cut", how many were replaced with reorganization, and how many were "deadwood" terminations.

> Claiming that city employees have not cuts & reductions
> as the city has worked to balance its budget is
> just not accurate.

Clearly the City did ask the employees to carry more of their own benefit package. But comments from various sources made it clear that a majority of the employees were not happy about. And let's not forget that often when government employees take a "cut"—they manage to get the lost money back, one way or another. So, in the long run, "cuts" to these people is just a deferral.

In terms of this post-retirement health care, why should the taxpayers be paying for retired employees who are on pensions that push the $100K mark?

The following reports on a Contra Costa County Supervisor who will be paid over 400K, every year, for the rest of her life:

Web Link

Why should anyone in "public service" to paid this much, and for life?

The whole system is out-of-kilter, and needs reform, as quickly as possible.


Posted by Gary, a resident of Downtown North
on Mar 26, 2013 at 1:38 pm

Public sector unions should be banned. FDR, himself a stong union supporter, opposed them. Public sector unions are monopolies of critical public services. They would not pass muster under anti-trust regulators, if they were not protected by leftists.

We are reaping what we have sown. Actually not me, but all the leftists I am obliged to live with in Palo Alto. this problem in not going away, but it should never have occurred in the first place.


Posted by Steve, a resident of Menlo Park
on Mar 26, 2013 at 2:48 pm

Wondering -
You wrote
"Clearly the City did ask the employees to carry more of their own benefit package. But comments from various sources made it clear that a majority of the employees were not happy about."
Excuse me but aren't you asking a bit much that employees should not only take a cut in their benefits and pay more for them but that they should also be happy about it?! What difference does it make to you if they're happy or not? The important thing, from the point of view of balancing the city budget, is that they agreed to the benefit reductions and increased costs.

You followed that with a totally unsupported assertion: "And let's not forget that often when government employees take a "cut"—they manage to get the lost money back, one way or another. So, in the long run, "cuts" to these people is just a deferral."
Any evidence or references that support this off-the-wall statement?


Posted by Sharon, a resident of Meadow Park
on Mar 26, 2013 at 3:10 pm

"FDR, himself a stong union supporter, opposed them."

Nah, wrong, boyo. You're taking one sentence from one FDR letter.

Now your man-crush, Ronnie Raygun, on the other hand detested unions at times (a self-loathing former union man, of course,) but did sign the law allowing collective bargaining for public unions in California, in 1968.

And president Ronnie did say "Where free unions and collective bargaining are forbidden, freedom is lost" on Labor Day, 1983.

Yup, the Ronster also said while president that unionizing is a human right "...one of the most elemental human rights—the right to belong to a free trade union"

And you're not obliged to put up with us in PA. Texas would love to have you. Lots of minimum wage jobs are open down there, if ya can handle the pollution.


Posted by Steve, a resident of Menlo Park
on Mar 26, 2013 at 3:16 pm

Gary -
Labor Unions are the best thing that ever happened to workers and their families. In many ways, the unions are responsible for the middle class comforts most of us (probably including you) still enjoy such as sick leave, health benefits, paid vacations, decent salaries.
The growth in inequality in this country since the 1970's closely tracks the loss of union power in this country. Without unions, who is there to argue for and protect the interests of the working class?
In my opinion we need more and stronger unions to represent workers' interests.
Corporate power and money has become too big and too powerful. First it 1) bought off Congress and rammed through deregulation, 2) drove the economy off a cliff through greedy and questionable business practices (sub-prime mortgages, derivatives, etc.) and 3) got the government to save their sorry butts through bailouts. And who suffered from their mistakes? Certainly not these titans of banking who caused the mess. In fact, once the economy began to recover, all of the new income gained from 2009-2011 went to the top 1 percent. ALL of the new income! Meanwhile:
- the average middle-class family has seen its income go down by nearly $5,000 since 1999, adjusting for inflation
- median net worth for middle-class families dropped by nearly 40 percent from 2007-2010. That's the equivalent of wiping out 18 years of savings for the average middle-class family
- half of the new jobs that have been created since 2010 are low-wage jobs paying people between $7.80 and $13.80 an hour
- the effective corporate tax is at its lowest level since 1972, yet 1 out of 4 profitable corporations pays nothing in federal income taxes
- the United States has the most unequal distribution of wealth and income of any major country on earth and that inequality is worse today than at any time since the late 1920s
- the top 1 percent owns 38 percent of all financial wealth, while the bottom 60 percent owns just 2.3 percent.
I'd say it's pretty clear that if the middle class expects to have any hope of regaining some of this lost ground, they're going to need unions advocating for their interests. That would be unions in both the private and public sectors.
Gary, who would you have speak for the interests of working people if not the unions?


Posted by Wondering?, a resident of Another Palo Alto neighborhood
on Mar 26, 2013 at 6:09 pm

> Any evidence or references that support this off-the-wall statement?

Off the wall statement? Hardly ..

Web Link

Furloughs and Leave Programs Have Future Costs. Authorizing the administration to impose furloughs or personal leave programs (known as PLPs) allows the state to cut employee compensation costs without reducing the size of the workforce. Data from the SCO suggest that the recent furloughs and PLPs created a liability for the state by greatly increasing some employees' leave balances. As a result, furloughs and PLPs increased out–year costs that offset the near–term savings.

Sacramento Bee/May 10, 2010
Web Link

Service Employees International Union Local 1000 won a similar lawsuit that returned the remaining 7,500 State Fund employees to full hours and pay and restored their lost wages plus 7 percent. The governor has appealed.
------

The examples provided have to do with furloughs of State workers, and across-the-boards pay cuts. However, it would not be hard to find examples of government workers who took pay cuts having those cuts restored at a later time.


Posted by Wondering?, a resident of Another Palo Alto neighborhood
on Mar 26, 2013 at 6:15 pm

> and across-the-boards pay cuts.

and not simple pay cuts.


Posted by lazlo, a resident of Old Palo Alto
on Mar 27, 2013 at 5:37 pm

Too funny! Buried deep in this lengthy verbose press release is the fact that healthcare costs will rise 9-10% by 2014 due to the Democrats voting for the Affordable Care Act (Obamacare). So now the city is somehow trying to blame active and retired employees in their city paid consultant study/report for this extra healthcare cost scenario. Even when you think that the city manager and city council can't possibly stoop any lower....
The current city manager is basically a "yes man" who cordially nods his head in agreement when any council member speaks and who lacks any leadership skills and, thanks to his convincing a misinformed city council that his miscalculated theory of less employees creates less employee costs and would save money, instead, created a mass exodus of the most highly qualified employees into "early retirement". Now he has the gall to label those former public service employees who contributed 20-30-40 years to make Palo Alto a better place to live as "a whole shadow organization". It is no wonder that city employees have no confidence and lack any respect for the current city manager.
Perhaps city council time would be better spent in finding a qualified city manager applicant who posseses leadership and people skills combined along with basic financial skills and knowledge.


Posted by Stanley, a resident of College Terrace
on Mar 28, 2013 at 4:34 pm

Well said "Lazlo"!! It's nice to see that there are other people in this City that can see through the smoke and mirrors that the Council and City Manager like to cast.


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