Search This Blog

Loading...

22.10.09

Excuses to retain old pay system paint sorry picture

If the comments being received (at civilservicecommission@la.gov and apparently subject to release on request) about revisions to Chapter 6 of Louisiana’s Civil Service rules are any indication, these changes to be reviewed by the Civil Service Commission on Nov. 4 are more desperately needed than ever.

The changes would more closely tie pay adjustments to actual performance and move away somewhat from declaring almost every single classified civil service employee in the state worthy of a flat 4 percent raise every year, and very few deserving of nothing. But from the comments received about the changes, you wonder just how well served Louisiana’s citizens from a group of people who appear to show a tremendous ability to come up with all sorts of straw men and red herrings in their arguments, but with little ability to think critically.

Summarized, the comments, virtually all negative, argue the new plan:

Places too much power in the hands of supervisors to allow for favoritism and does not really reward people for doing a good job. Now, let me get this straight, the evaluation system – the validity of which must be severely questioned when almost every employee is judged as at least adequate many of which are ranked even higher – is not going to change, just the distribution of pay raises, yet it’s actually argued that it is this change that would affect the ability of supervisors to play favorites? How in the world can one argue that the present system is any less susceptible to favoritism, and therefore meaning the change cannot possibly increase it? If “favoritism” is the problem, the real change needs to be in the evaluation method itself which has nothing to do with the distributional method of the raises.

And this new system would not reward for doing a good job? By contrast, as it stands now, an employee just scraping by gets exactly the same percentage raise as an outstanding employee. You tell me how the current system would do a better job of motivating and rewarding than what is proposed, and thereby deriving more efficiency.

Lets agencies use this as a way to deny raises to their employees to save the agencies money. See above; that is a problem with the evaluation system, not the new proposed distribution. Under the present system, the same thing can be done simply by handing out (which would be more realistic in any event) more of the two lowest categories of evaluations. How would the proposal change this in any way?

Allows some agencies to have more capacity to provide pay raises than others that creates an uneven playing field among employees from agency to agency. If so, wouldn’t that be happening now under the current regime where agencies with fewer resources would have to give out more two lowest evaluations? So how would this be any different, if it is actually the case, under the new regime?

But, more to the point, so what? Employees should be concerned about their own performances, not what others are getting. Further, job classifications operate within certain bands so the same kind of job being performed in different places, if one gets more in raises, eventually it levels as the top of the band is reached. And it is the job of the Department of State Civil Service to review pay among classifications to make sure it is appropriate for the job being done. If some are getting out of whack by many salaries in an agency hitting the top, it needs to go in and make adjustments. Again, this has nothing to do with the proposed plan itself.

Cannot possibly tie successfully performance to pay increases. Meaning it shouldn’t be attempted at all? Certainly the new plan will not perfectly accomplish this. But there’s no doubt it will do a much better job than the current in which only in the most tenuous fashion does pay get linked to actual performance.

None of these objections, upon analysis, hold any water. But that doesn’t mean that implementing the new plan by itself, as explained elsewhere, accomplishes the objective of greater performance for less money. Two other things must happen.

One, the evaluation system must be made realistic. It should be obvious that no organization, especially one not facing market pressures, has almost no inadequate employees, and so many good ones. The Commission must investigate ways in which to have evaluations performed that more genuinely reflect the true performances of classified employees, and implement necessary changes based on this.

Two, supervisory training of the new system must be adequate. Supervisors who will be doing the evaluating must have a clear idea about how do it: knowledge of benchmarks, how to measure those benchmarks, how to translate those benchmarks into ratings, and the like. As an example of where there may be a gap that can be addressed by this, in academia unclassified employees often supervise not only other unclassified employees (such as faculty members), but classified employees as well (such as secretaries). Civil Service must rigorously train every supervisor in the proposed plan should the Commission wisely adopt it to make sure proper implementation produces valid results.

Let’s hope for the sake of reassurance of quality in Louisiana’s civil service that the comments received as of a week prior to the deadline are reflective of an unrepresentative set of individuals comprising present and former employees in the classified service, and for the future’s sake that the Commission understands the vapidity of a great many of them.

21.10.09

Suggestions great, but need right budget paring strategy

As twin deadlines of statutory natures draw closer for Louisiana, the time for talk should recede and the time for planning for difficult action must commence with the leadership to do it as a budget catastrophe looms.

Both of the state’s temporary panels to find ways of reducing state government expenditures, the Commission on Streamlining Government and the Postsecondary Education Review Commission, are coming the point where they need to spit out recommendations for legislative action, by Dec. 15. About the same time, the state’s Revenue Estimating Conference will certify the status of the balance of the budget as state agencies for months have been taking actions, and continuously talking of additional ones, to pare expenses to stave off a deficit being declared.

With just 55 days to go, the various scattered suggestions and responses must coalesce into a particular strategy that determines what gets recommended and what can be implemented immediately, in order to allow for action by the Legislature and agencies to commence. The optimal strategy should concentrate on four items.

First, personnel is the key area. The largest single area of expenditure in government, or any organization, is in salaries and costs associated with them. No meaningful reduction in the cost of government can occur without much taking place here. Even if it shed no functions (but see below), efficiencies in the number of positions required and in job performances must be addressed.

One lawmaker, in a recent commission meeting, wondered whether the tactic of offering early retirement with some inducement could really trim expenses that much, because it could be that those positions would have to be filled in any event. This is a partial concern, because while many jobs can be eliminated with duties apportioned out, some cannot. But it also is an opportunity in many cases to be able to promote capable subordinates into these positions. Chances are disproportionately that their retiring bosses, because of looming changes that will better match pay to performance, went early because they were coasting underperformers. They may have had capable subordinates bottled up behind them who will do a better, more efficient job.

Second, reductions cannot be indiscriminate. Across-the-board cuts may work, but not well, because they lump in the necessary with the peripheral (see below). The Gov. Bobby Jindal Administration has the right idea in moving to an outcome-based budgeting regime, because it will create priorities of functions, and the least important can be identified for cutting. This also means review of dedicated funding must occur to ensure appropriate amounts are going to appropriate things.

Third, taxes cannot be raised as a solution. As the recession continues with no clear signs of ending, the worst thing to do is to raise taxes to sap economic recovery. Fee raising for the most part also should be off the table, unless there can be demonstrated a strong connection between a particular service being performed and the quantifiable amount of resources going into it can be demonstrably shown as significantly lower than this, such as potentially with college tuition.

Fourth, politics must be minimized. Politics breeds inefficiency which sometimes must be tolerated, such as with devoting huge resources to the disabled, but too often can keep programs benefitting too few people who have little real need going when they need to be shut down. It also gets used as an escape from responsibility to make hard and/or unpopular decisions. The idea of across-the-board cuts is an example, for it spreads pain of cutting around assuming everybody will hurt some. But as it attenuates both the necessary and the peripheral, it is not the best use of resources and still promotes the use of some less efficiently than if the cuts fall on the least needed activities, allowing those really necessary to get more funding. Cowardice of this nature must be avoided.

The Jindal Administration needs to adopt these ideas, if it hasn’t already, and articulate to the Legislature that they will guide Jindal’s actions in his budgeting, while also employing commission recommendations, and use of veto powers. Failure to do so will not avert the crisis and just make future solutions harder and less achievable.

20.10.09

Independent entrance could alter radically race dynamics

Already shaping up to be interesting, Louisiana’s Third Congressional District contest which selects nominees in a little under a year may be getting even more fascinating if state Rep. Jerome “Dee” Richard enters the fray.

Richard, who has run as an independent, would join a declared field of state Rep. Nickie Monica, a Republican, another in businessman Kristian Magar, and attorney Ravi Sangisetty, a Democrat. Others, like Richard, ponder entering but Richard’s entry, should he choose to run as an independent, would alter the contest’s dynamics more seriously than probably anybody else.

With the advent of closed primaries for federal office in Louisiana’s last election cycle, Richard could be the only candidate that would avoid any kind of runoff or runoff primary to make it to the general election in a little over a year. This would give him a small advantage in terms of resource conservation and make him less likely to attract negative attention from opponents.

But of more tantalizing concern for the major parties’ nominees is this would alter the trajectory of the general election in unpredictable ways. Chances are slim he could win in a three-way matchup with the other two nominees – around his little corner of the bayous independence plays well as an alternative to the GOP in the historically loyal Democrat area, but it will be a disadvantage district-wide especially with major party financial support – but his presence would guarantee no candidate could get a majority and he would siphon votes off from them.

The question is, will a Republican or Democrat suffer more defection because of his presence? That really can’t be answered until the actual nominees win their spots and we can see the various experience and personalities of the pair. For example, if voters are really in an anti-politician mood, if he is matched up against other officeholders he would probably draw more from them than against political newcomers.

Still, some reasonable, general inferences may be drawn. If it’s going to look like a big election year for the GOP, the national Democrats probably won’t put much into this seat and Richard’s intervention won’t amount to much. Compounding that will be Democrats realize even if they pull it out, that could trigger the redistricting away of that seat after just a couple of years, another thing which may put a damper on quality Democrats from pursuing the spot and reducing its competitiveness an thereby Richard’s effect.

Only if it looks like Democrats could be competitive in the district might Richard’s presence make a difference. In that case, all other things equal, he may detract more from the Republican candidate. National Democrats have attained a level of some toxicity in the district, with incumbent Rep. Charlie Melancon’s duck-and-cover, gallivanting style of the past few months disappointing many voters not helping, he will attract some of the disaffected. But national Republicans only now are beginning to regain their conservative credentials so for those still turned off by their straying from them who were never fans of Democrats in the first place, Richard might be an attractive alternative especially if he tries to sound some conservative themes in this putative campaign.

In short, those who became alienated enough typically voting Republican who took a flyer on Melancon over the past few years and are not ready to come back to the GOP likely outnumber those usually voting Democrat disgusted enough to flop over to an independent but not ready to touch a screen for a Republican. But there’s so much else that could happen between now and then that the only sure thing about a Richard entry would be an intriguing race would become that much more.

19.10.09

Bossier City officials to bill citizens for their mistakes

Even as the Shreveport political corruption circus grows alarmingly vaster, there's another set of clowns who legally have squandered far more money than apparently illegally disbursed under Shreveport Mayor Cedric Glover’s watch – Bossier City’s Mayor Lo Walker and its City Council.

Budget inattention aside, the latest buffoonery on their parts has them coming to the citizenry to make it pay tens of millions of dollars for their exercises in economic ignorance and ego-stroking. Last week, the Council signaled its intent that in the near future it was going to almost double the fees for water and sewerage service for the average user. The typical household that directly pays on these things under the announced hike would cough up nearly $250 more a year.

This increase is designed to offset about $38 million in costs for a $106 million upgrade and expansion of the city’s sewer system. Of the remainder, $60 million will come from conventional bond debt (at 20 years at current rates costing the citizenry about $1.36 million a year in interest) and another $8 million from special low-interest loans (at an assumed .95 percent interest for that term another $40,000 or so a year). This means you can add about $50 more a year interest payments to each Bossier City household on top of the average fee increase, or about $300.

18.10.09

Move to compulsory defined-contribution best for LA

Tomorrow, Louisiana legislators will look at the possibility of converting the major retirement systems of the state into compulsory defined-contribution plans and no longer give the option for a defined-benefit program. It’s sure to create controversy, but needs to happen.

About two decades ago, for some retirement systems the state began to give new enrollees the option of enrolling in a defined-contribution plan, where a certain variable amount of an employee’s salary plus a fixed amount from the employee, tax free at the time go into an investment account that the employee with restrictions can manage. Prior to that, the only choice was a defined-benefit program where after a certain number of years one could get vested into the system and, depending on the length of time in state service, upon retirement (after a certain age) one could get as much as 100 percent of a declared three-year average of salary drawn (usually the last three years since they would be the highest) paid annually in retirement.

Up until this time point, the sole us of the defined-benefit strategy had several repercussions. First, it tended to discourage talented employees who held attitudes of rapid upward mobility. The state civil service being what it is, advancement and especially salary increases were glacial, and since vesting took some years, those really on the go didn’t want to wait around for that benefit to kick in so they would leave state employment. Second, also discouraged may be those talented individuals thinking of state employment but who are put off by having to wait around years to collect the promise of a benefit they can’t enjoy unless they stay awhile, instead of getting part of it immediately even if they can’t get at it immediately. They might already have a defined-contribution plan from elsewhere that they would prefer to see supplemented, not set aside.

Third, it tended to encourage the modestly-talented to stay, as once they got vesting they could cruise along with essentially guaranteed annual increases (a flaw about to be rectified) so the promise of retirement at perhaps full highest salary made them want to hang on as opposed to leaving for similar-paying jobs without such a benefit. Fourth, at the same time it may have trapped others in a sense, in that they come to points in their careers where they would rather do something else but stay only because they have to hit certain marks for retirement purposes and don’t want to “waste” the time already put in.. These less-motivated employees likely would perform more poorly as a result.

Fifth, it aggravated what had become a problem by the time it no longer was compulsory, a burgeoning unfunded accrued liability in the retirement system. Vesting required a certain amount be set aside to pay off retirees claims, but the defined-benefit regime encouraged long tenures and actuarially mistakenly allocated too few dollars and/or at too low of rates of return to full fund all expected claims. Thus, a huge deficit estimated at $12 billion has accumulated, which must be paid off presently by 2029.

Going exclusively to a defined-contribution plan would address positively all of these aspects. Salaries could be increased by the amount set aside statutorily by the state less its contributions to attract better employees. Employees also would not feel that they are hanging on or trapped in the system, as these plans are portable so if there are incentives for them to leave, they can, just as others may be attracted by bringing and perhaps leaving with benefits intact. The nature of the program also would make it easier for the state to manage and, while it would be tough medicine, kick the state into actually dealing with the unfunded accrued liability problem which it barely has done in two decades since the current system of paying retirees with present contributors’ dollars creates disincentives for dealing with it now.

The only real point of concern is that now employees themselves would have to manage their own accounts. For those with acumen, they could end up far better off than under the present system. For those who don’t the plans are administered by nongovernmental entities such as financial services companies where agents are assigned to employees who can dispense with advice. Still, that could go sour as well, and it’s argued that, since investments can gyrate substantially in value, somebody might be unfortunate enough to want to take retirement in a down phase for his investments and get less out than under a defined-benefit system.

However, this should not be a real concern. For example, these plans typically have investments options that are fixed rate that vary with interest rates and have no investment risk. Let’s say that somebody starts working today even with a crummy 3 percent fixed-rate risk-free return, at $30,000 annually and 8 percent is removed from salary, matched 4 percent by the state. Over 40 years, assuming annual 4 percent salary increases in the same job, what begins as $3,600 a year contribution balloons to an annuity paying about $28,500 a year for 30 years. That’s not great, but it’s not bad, either. If the risk-free rate of return was bumped to 5 percent throughout, which is closer to historical norms, that annual annuity figure becomes almost $54,000. In other words, patient investing even in low-risk instruments should yield a pretty decent retirement income from just that source.

Thus, the vast majority of state retirees and certainly its taxpayers will be better off if the discussion tomorrow leads to an eventual decision to make a defined-contribution plan mandatory for all employees hired after July 1, 2010.