Wednesday, February 05, 2014

Scheller's "Let Them Eat Cake" Moment

Lisa Scheller, who was just elected Chair of Lehigh County's Board of Commissioners and is thought by some to thinking about running for Executive, has come up with an idea that every shallow-thinking conservative will just love. It screws no-good public sector workers and saves money, too. Basically, Scheller, along with Vic Mazziotti, wants to reduce county payments to the pension fund from 5.5% to just 4%, as explained in a recent Morning Call story. Any thinking conservative would reject this notion out of hand. Let me explain.

Lehigh County's public sector pensions are made up of two different kinds of plans, defined benefit and 401ks.

Under the defined benefit plan, taxpayers guarantee the benefit, regardless whether the economy tanks. This is the pension plan that has most municipalities in trouble. But Scheller and Mazziotti won't mess with that plan. They can't. It is illegal to a pension plan once it is set.

The solution here is to limit defined benefits for future hires, as Mayor John Callahan did in Bethlehem. Scheller has proposed something similar to this in Lehigh County, and it certainly sounds reasonable.

Where Scheller and Mazziotti really go astray is with the 401k pensions. Under this kind of plan, which is much kinder to the County budget than a defined benefit plan, employees kick in 5% of their salary. The County matches the employee contribution. Legally, they can go anywhere between 4.0% and 5.5%, but the County's pension board has always stuck with the higher amount.

Why? It's not because County officials are padding their own pensions, as Scheller suggests. The reason is to encourage employees to participate in a 401k type plan for their retirement over the defined benefit. It helps to sell that to the employees if they know the County's match won't be touched or subjected to political manipulation.

How much money would the County save by reducing its contribution from 5.5% to just 4%?  By my calculation, the will save just $47,000 to generate a great deal of bad will and ensure that everyone stays in the defined benefit plan.

In 2014, the gross wages covered by County real estate property taxes is around $62 million. Using the 5% required employee contribution times 1.5% (the difference between 5.5% and 4.0%) the reduction would be less than $47,000.

What really frosted me was when Scheller told The Morning Call that, unlike those wealthy County workers, has no guaranteed pension fund.

I believe her. She doesn't need one. And since she brought the subject up, let's go into what she does have.
- For one thing, a 7,100 square foot, 15 room, 6 bath mansion.
- For another, ownership of a family business successful enough to allow her father to donate $50 million to a college in 2012.

Yet she wants to deny those that are saving for retirement the ability to earn an extra 1.5% on their contributions. She is actually encouraging employees to stick with defined benefit plans.

Brilliant.

Scheller also complains it's a conflict of interest for pension board members to vote on these matters because most of them participate in the pension.

Under that reasoning, she can't ever vote on a Budget because it affects her tax bill. Under that goofy logic, she certainly had a conflict of interest when she voted for reassessment that reduced her tax bill by $3,400.

To save a  $47,000, Scheller and Mazziotti would guarantee that County workers avoid the 401k like the plague.

Sure, $47,000 is a lot of money. But guess what? Lisa and her husband donated more than that ($65,000) to two candidates last year - Ott and Mike Schware.

This is no reform. This is nonsense. Allentown blogger Michael Molovisky claimed she had the "taxpayer's back," but quite the reverse is true. He plan would alienate the workforce, drive thm into the wrong kind of pension and save a mere $47,000 in a $360 million budget.

If Scheller wants to close the $8 million deficit that she helped create, all she has to do is find 170 more items like this.

57 comments:

Anonymous said...

MM is sure full of bull waddle this time.
This woman is full of the stuff.
Poor Miss Richie Rich---- ask any of her domestic staff how she bad raps the common folk.
She just may buy her way to the top of LC politics, and MM will support her 100% percent. Don't confuse h with the facts.

Bernie O'Hare said...

This post is not intended as an attack on MM, so let's drop what he will do or say bc you don't know. One of his points, and I respect this, is that someone's wealth should not be an issue. But I believe she made it an issue with her attempt to compare herself to LC workers. Also, perhaps bc of her wealth, she has no clue what a disaster it would be to reduce the county contribution to the 401k. It is very short-sighted, and will drive workers away from them into defined benefits.

Anonymous said...

She is looking out for the taxpayer. You don't get that. You are a funny guy. When John Stoffa and Ron Angle made cuts to employees and retirees to balance the budget you got it and praised it but now you attack.
You don't like this woman so you attack. You like Muller so you attack her.

She is doing what your heroes' in Northampton County did.

michael molovinsky said...

bernie, unfortunately, now both you and muller made her personal wealth an issue, which you're correct, it shouldn't be. those personal family details you reveal are in the realm of oppositional research. although math's not my strong suit, using your figures, i believe that you're off $883,000.00 on the savings scheller proposed.

Bernie O'Hare said...

I believe your math is off, MM. I explained my math above. Also, Scheller made her wealth an issue by stating she does not have this kind of pension. It is a ridiculous idea that would drive workers away from 401k.

Bernie O'Hare said...

1:53, Stoffa made no cuts to retirees. In fact, he pushed thru COLAs. He never laid off a worker. Not one. You are being dishonest. There were cuts in benefits to Gracedale workers. The unions agreed to those.

This is about pensions.

Anonymous said...

Stoffa laid off and cut employee positions in Northampton County. He hurt pensioners None of that it was the state's fault bushtit. You can claim that for any job. At the end of the day it is the county's decision to keep or end a job.

Stop covering or people you love while unfairly attacking those you hate like this young and attractive lady.

Bernie O'Hare said...

Even with state cuts to human services, not one person was cut under Stoffa's watch. He found jobs for every person in other areas. But now you have a human services director who will show you cuts. Congrats.

Anonymous said...

She is doing the heavy lifting that Muller is too incompetent to do.
You attack her because she is a young and attractive woman.

Bernie O'Hare said...

If I wished to attack her, believe me, this would have been far more harsh. I am attacking her idea, which is counterproductive, penny wise and pound foolish.

Anonymous said...

Defined benefit plans take an unfair rap from everyone where management of the plans has undermined their financial security. First, you cannot permit plan participants to hop into higher paying jobs prior to retirement and pay the pension based on the last paycheck. Contributions from the employee and employer will never permit that to work. You cannot reduce terms of service as Allentown did. You cannot reduce the actuarial assumption for rate of return like school teachers or cities without causing major shortfalls in funding-millions of dollars. Social security contributions have to be part of the package since they cost the employer 8%. In fact, in many older defined benefit plans participants were required to reimburse municipal governments for the employer's portion of the social security benefit. The whole problem is that unions were permitted to seek changes to benefits with little understanding of the actual costs to the plans. Add state actions such as early retirements for teachers only added more expenses that were never properly funded. Defined benefits work and are less costly than people want to recognize. In most cases employee contributions alone can make these plans work.

Anonymous said...

One more problem with municipal pensions that needs to be eliminated. You cannot extend a lifetime benefit to a spouse. I don't know whoever thought of this concept, but it is too costly. The spouse should get a ten or fifteen year payout. Our federal government is still paying one civil war pension to a disabled child and one state was paying a civil war pension to a spouse in 2004.

Anonymous said...

Does Mr. Mazziotti receive a public pension from Northampton County? If so, I think every County employee should be entitled to those same benefits.

What Ms Scheller does not tell you is that in the last 20+ years the benefit of lifetime medical and 20-years-and-out are no longer available.

Ironically, we still see the same Cranks ranting how the next employee should be denied the same benefits that they are eligible for.

More Teapocisy.

Anonymous said...

Question is, what is the County doing with employee contributions? I think the point Muller was saying is that it was not tucked away in a money market making minimal interest.

What was done with all interest earned on employee contributions when the market was booming and interest rates were high?

Anonymous said...

I find it ironic that the same person that considers denying pass through grants for municipalities and meals on wheels......but then has no issues with accepting a $340k stimulus grant in lieu of tax credits for 871 solar panels installed on two buildings at a manufacturing complex. The kicker is, the the equipment was foreign made.

Just an observation.

Anonymous said...

MM - I think you made an easy to make mistake by confusing whether the County's 4% to 5.5% contribution is applied to gross salary or the amount the employee contributes. It is latter not the former. As an example, take an assistant DA and assume his or her salary is $62,000 for 2014. That person would be required to contribute 5% or $3,100 to the defined contribution portion of the pension plan. Lehigh County would then match between a low of 4% ($124) or a high of 5.5% ($171) for 2014. I believe it is the difference between those two numbers applied to the 2014 salaries for County employees that give the 2014 savings Bernie presented.

On another note, while Lisa fits the classic definition of someone who was born on third base and believes they can hit triples, I don't think anyone can reasonably fault her for her wealth. Unless she chooses to make that an issue by comparing herself with the rank and file County workers. And she did exactly that by justifying her actions with the statement that she doesn't have a defined benefit plan like the assistant DA or a prison guard or a clerk in Human Services. That is both bone headed and tone deaf.

Anonymous said...

There's nothing wrong with the proposal she made. Your chronic hatred for people who are more fortunate than you is obvious and oozing with undercurrent rage directed as successful, intelligent people.

Had she made a motion to discuss a sale of cedarbrook to save money, you be cheering out loud.
Do you realize what a hypocrite you are?

Anonymous said...

Anons 6:58 and 7:12 are dead on with their comments.

Ott/Scheller/Maziotti are nothing more than disingenuous frauds and hypocrites.

Anonymous said...

Bernie- the employee portion of the county pension is not a 401k type plan. It is also a guaranteed benefit, and the 5% payroll deduction is mandatory. When an employee leaves county service or retires, he or she has the ability to leave their portion in the fund and receive a guaranteed payment based on actuarial calculations, similar to an annuity. However, the County has the benefit of any investment returns on that money over the 5.5% interest accrued annually. In 2013, the county earned over 15% on the employees money. This excess interest has accrued to the county's benefit for the vast majority of all the last 30 years. Employees do have the option to put an additional 10% into their portion of the pension fund, over the mandatory 5%. The interest credited on that is the same as the 5% contribution, so you are correct- Scheller would discourage employees from putting this extra amount in. Those extra contributions would benefit the county by giving it a larger pot to earn excess money with.

Lehigh County employees have a separate deferred compensation option known as a 457 plan, which is akin to a 401k, and its payout is dependent on the investment returns and is in no way backed by the county. If employees can only earn 4% on their money in the pension fund, employees would be better off putting the money in the 457, where they can invest in index funds and make a much higher rate of return than 4-5.5%.

Anonymous said...

@4:15AM - Come on Bernie, admit it, you abhor young attractive women. I didn't notice it before, but Anonymous has made it crystal clear.

I was going to suggest reducing the match to 100%, but hey what's the big deal about leaving it at 110%? You're right on this one.

Anonymous said...

Anon 8:39

Good comments. I've worked at companies where their 401k "match" was just 5% of what the employee contributed so the County plan being discussed here is more like a 401K than it is like a defined benefit which is based on salary and years of service. However, debating that point obscures the real issue which is that the public sector needs to move away from defined benefit plans and have employees assume more responsibility for their retirement. There will be a huge political battle to make that transition. And one could argue that process will be made more difficult if public employees believe their savings will be a political football.

It would seem that Scheller and Maziotti have followed their typical approach taking ideological shots first and asking questions and considering implications later. In addition to considering the impact on the ability to convince employees to move to a 401k only plan, some questions that should have been asked and debated are:

1. Besides the savings based on the 2014 salaries, what would be the savings if the reduced interest rate was applied to previous contributions, i.e. the money the County has on hand from prior contributions?
2. How much of that savings would be associated with the County's gross payroll covered by real estate property taxes (about 55% for 2014)?
3. Would any of those savings go to reduce the annual required contribution for 2015 or would it go to reduce the unfunded liability portion of the defined benefit plan?

None of these questions seem to have been considered. Rather it appears that it has suddenly dawned on the Ott block that they actually increased the deficit when they reduced revenue by $3 million on a year over year basis without making sure that year over year spending was reduced by a similar or greater amount and that those chickens will come home to roost with the 2015 budget. Again, another example of them shooting first and asking questions later.

Anonymous said...

Why do you hate women?

Anonymous said...

Anon 9:35

You need to get the math straight as you are confusing the numbers. The match is not 110% - it is 5.5% of the 5.0% the employee contributes. If the employee earns $40,000 their required contribution is $2,000 (5.0%). The County then "matches" by contributing 5.5% of that amount (the $2,000). So in this instance the County's contribution for someone making $40,000 would be $110 (5.5% of $2,000).

P.J.Cochran said...

Bernie, I am in a relatively good pension but feel it will not carry us well after the 14th year of retirement with no cola.If I go out at 64 and live to 84 I will have a difficult time. So; I live like a cheapskate-dive my better half crazy with Mr. Cheap "Don't buy Noth'n"! is my motto. I use a 457 about 21% of my income goes in before federal taxes and yes, austerity is a mental issue.Anon 9;35 is correct about his math ,BUT this will not be enough of an employee today w/$40K if retirement anticipated in say 2020. What principle will support the increase pay against pension distributions when the life expectancy has increased sharply in less than 40 years. On the other hand individuals must not remain complacent and EXPECT the government to provide an even element. Want your darling little newborn baby girl to have something at retirement and be comfortable,you must put out $6,500 .00 once at age 0/6 months and she will be a million dollar retiree. Drop the BMW, the Rolex.

Anonymous said...

Bernie... while Vic talked about the hatch act and got other people to circulate petitions and did not officially declare his run for commissioner until March you might note that he left right after his 6th Anniversary with the county. He wanted to make sure he was vested in that pension plan before he declared and had to leave his post in the Stoffa Administration. This should be noted when he attacks others about their pensions and the cost.

I'm sure he sees no problem with this because he consulted his priest as he said it's the Northampton County taxpayers not Lehigh so that is not a mortal sin only a venial one.

Anonymous said...

Someone needs to clear up this match issue. Given the lucrative benefits most public employees normally enjoy, I find it almost impossible to believe that the county match is about 5% of employee CONTRIBUTIONS - industry standard is usually 100% or 50% match. I find it much more easy to believe that the match is about 5% of employee SALARY. If that's the case, MM's numbers above are right and this is a much bigger deal for the county (savings would be $930,000 in dropping to 4%).

The numbers being thrown around don't pass the "sniff test" - does anyone really believe the county only contributes a total $110 annually to the retirement of an employee making 62K/yr, as Anon 10:11 claims? This only makes sense if there are multiple retirement plans in place.

I don't claim to know the facts here - can someone set me straight?

Anonymous said...

Quick correction - in my post above I quoted Anon 10:11 as saying the cost was $110 on an employee making $62,000 yr. It should have been an employee making $40K/year. Apologies for the misquote!

Bernie O'Hare said...

"one state was paying a civil war pension to a spouse in 2004."

Is this supposed to be disgraceful? I am familiar with that matter and it was a whopping $50 a month. That woman was a sharecropper and that $50 kept her alive, not that you give a shit.

Bernie O'Hare said...

7:31, Scheller would sell Cedarbrook in a heartbeat if she could.

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

Anon 1:19 and 1:22

There are indeed multiple components to the plan. The main one being the defined benefit plan that is based on years of service and the three highest years of income. The bulk of the money Lehigh County devotes to the pension plan goes to cover this aspect. The other component (and the subject of Bernie's post) is the one where employees are required to contribute 5% of their pay. This is the component that is analogous to a 401k and where the County "match" is 5.5 cents on the dollar. For the employee that earns $40,000 the County's 2014 contribution for the defined benefit portion of the pension plan would be in the range of $4,800 PLUS an additional $110 for the component of the plan where the employee contributes 5%.

Keep in mind the discussion was kicked off by Scheller's proposal to reduce the County's "match" on the employee 5% contribution from 5.5 cents on the dollar to 4.0 cents on the dollar.

Hope this helps the smell

Bernie O'Hare said...

2:49, if you want to knock someone over his or her physical attributes, please identify yourself so I can make fun of you.

Anonymous said...

anon 11:10, the teabagger are n fact hypocrites. You are right about Mazzootti but he still broke the law. At the time he ran for commissioner the hatch Act was not yet amended. So the mere fact of circulating petitions violated the Act. Ott did not matter that he declared in March. It did not matter if he himself did not circulate. The law was very clear. If someone had contacted hatch officials he would have had to quit his job when the first petition was out there or halt the petitions. That was the law that he flaunted so he could get a pension, run for office and preach to other people.

It is the way of the teabagger!

Bernie O'Hare said...

Let's drop the bullshit about Mazziotti violating the Hatch Act bc he did not. You could have complained about this at the time. He did not start his campaign until he resigned. Instead of making a complaint to federal authorities which would have been dismissed, you choose to attack him anonymously on a blog. What a brave person you are! At least when I criticize him, I identify myself.

Anonymous said...

You are no coward but he did in fact violate the Act. You are right he got away with it because no one reported him. If they had, he would have had to publically declare his candidacy or resign when petitions were on the street in February. Just the facts!!

This is just part of the argument as to why those of his ilk are such hypocrites when they preach to others.

Anonymous said...

Anon 3:01, thanks for the explanation. It makes a bit more sense now.

I'm split in my opinion - on one hand, you can make the argument that the $110 per year for the hypothetical employee is trivial in the grand scheme of things.

However, on the other hand, the pension plan you already describe is a huge county obligation, and I have a hard time supporting anyone who argues that the county should somehow be obligated to pay more beyond what is required. As Bernie lays out, just about all of the retirement expenses are "untouchable" under the law, so I can't really blame the Commissioners for doing what they can to bring them down.

With the numbers this lopsided, I guess my next question would go back to Bernie's 2nd comment in this thread (12:53AM). I certainly don't see a slight decrease in $110/year in contributions as having ANY effect on county worker's feelings about their primary pension plan. To argue that this change would be a "disaster" or that employees would be more inclined to go to defined benefit plans if it goes away seems pretty farfetched!

Bernie O'Hare said...

Stick to the subject. This is about Scheller's so-called pension reform. It has nothing to do with the Hatch Act, or the false accusation that it was violated. As I pointed out at the time, all anyone had to do was file a complaint. Nobody chose to do that, but instead make anonymous attacks. Additional anonymous commentary along this off-topic line will be deleted.

Anonymous said...


I don't think you're getting interest for your yearly contribution but for how much is in your member account. You can't do the math with yearly wages. An employee that has been contributing for 10 years will have a much higher interest payment then the new hire.

From LC retirement summary:

"Your member contributions receive interest for the entire time the money is in the Fund, up to retirement, death or withdrawal. The Retirement Board determines by Jan. 31st of each year the rate of interest to be credited to your member account.

Bernie O'Hare said...

4:15, obviously, I disagree. NC, which did reduce its contribution, increased COLAs. That can be nearly 25% of a pensioner's check. NC also has not played around with co- pays. I could go along with this if it were a trade off, as it was in NC, but not in a county that does not like to offer COLAs.

P.J.Cochran said...

This should be $110.00 per pay on the 40 G scale add x 26 pays ----I think $110.oo a year buys nothing.

P.J.Cochran said...

Thomas Jefferson when President addressed this issue Bernie. Hatch Act issue. The good employee at say, the licences office is just trying to do their job and already staying out of the MUCK. They are somewhat under payed for their responsibility and want to do a good job because of their personal pride in their work. They should see compensated on the back end, at retirement.Like Wanda at NC criminal division she is a great employee for example.

Anonymous said...

Peter you are not even talking about the Hatch Act but civil service . Try to stay informed an don topic.

P.J.Cochran said...

Right Bernie, This Act is about politics at work ,while being paid as an employee of a Federal, state or local government--Yes?Did I miss your point?

Anonymous said...

Wrong again Bernie - I personally know a LT. in the Sheriff's Department who had his job eliminated by Stoffa for financial reasons. But this is how stupid Stoffa was - he allowed the hiring of 2 additional sergeants and 4 full time deputies one month later. I guess the laying off of this employee doesn't count.

Bernie O'Hare said...

I stand corrected. That would be an instance in which an employee was eliminated with no place to go, but that employee is now working again and as a Lt. I never understood that one.

Anonymous said...

As usual Bernie has left out half the story. The annual savings of lowering the guaranteed rate would have been $1.3 million. The rate isnt simply applied t new contributions but to the whole plan value from the previous year. O'hare is either careless, ignorant or in the bag for the establishment of government. Check it out with the County.

Bernie O'Hare said...

I never said the rate was only applied to new hires. I said that for everyone, the savings would be under $47,000. I also find it outrageous that you seek to balance your own $8 million deficit in the backs of the county worker. I can also see the decline in county services. Thanks to your IT cuts or the ones you made in your own clerk's office, the agenda is not appearing in a timely manner. Way to go.

Anonymous said...

You lie like a rug!

Anonymous said...

Many years ago, the County ignored such issues as the 5 1/2 % guarenteed payment on an employees pension investment. That guarantee is on the employees investment of (at that time) 10% of his gross earnings. If the stock market produced an 18% return the county was allowed to use that "excess interest" to offset their contribution to the plan. If the investments were less than 5/12% the County was on the hook for the difference. If you don't have a good manager of your retirement fund, the program can cost you millions of dollars more because the County has the obligation to make sure the employees pensions fund remains actuarily sound.
Since the fall of the market in 2008 the Counties have a lot of dollars to make up. They used the pension monies to offset tax increases in the past, now they have the legal obligation of making up the differences in the fund. This means pouring millions into the fund to again make it actuarily sound.
Cutting the guarantee of 5 1/2% to 4% is extremely minor in this case. Just keep in mind, the employees, many of them who were mandated to put 10% of their gross earnings into a pension fund, sacrificed knowing that at the end of their thirty years they would have a decent pension. How much do you sacrifice for your future years?

Anonymous said...

"She is actually encouraging employees to stick with defined benefit plans."

So, you are saying feeders are currently, and will, opt out of a dbp and go with a dcp, as long as there is a 5.5 cents on the dollar match? And the incentive to do so goes away when the contribution is cut to 4 cents?

They should suspend, if not permanently eliminate, the entire match. That is what private companies, whose employees don't also have a gun-to-the-taxpayers-head dbp, do in lean times. That "Draconian" cut she proposes isn't going to chase anyone from the trough and into the world of real work. And if realizing the same sacrifice their employers have made, and will make in the future, will "alienate the workforce" and cause a "decline in county services", they are free to leave and prove their true worth elsewhere.

She's doing the job they elected her to do, cut where she can. You said yourself she can't touch the golden trough, those who feed from the state and federal versions have made it illegal (now that is rooster in the henhouse bullshit of the most rancid kind).

It is obvious that you hate her, simply because she is rich. Her pop earned that money, had every right to leave it to his blood, and as long as he came by it without manipulating the taxpayer, it's no ones fucking business and certainly no reason for her not to do the job she was elected to do. If the envious class warfare crowd wants the kind of money she has, they should go make it happen instead of demanding redistribution because it's easier.

-Clem

Bernie O'Hare said...

First of all, I don't hate her. Second, she made her wealth an issue with her own remarks. Third, speaking of hate, I think you pretty much hate public sector workers.

Anonymous said...

I hate what they stand for, that they believe they are entitled, that they believe the people exist to be ruled and to supply the government that which the ruled forego themselves, that they extract their demands under the force of law, enact laws which enrich themselves and exempt themselves from the economic risks their employers take every day of their lives.

No doubt there are some in government whose parents may have left them some money. Enough to buy a home larger and nicer than mine. Enough to donate more to the college of their choice than I have been able to donate to mine. I don't hate them for that.

-Clem

Anonymous said...

This young woman is very attractive. Is that the reason for some of the hate?

Anonymous said...

Lehigh County made 16.6 % on the funds invested in the last period. The county gives 5.5% to the employee while keeping 11.1% for other county needs. It is still a good deal for the taxpayer.

Carson Cressley said...
This comment has been removed by a blog administrator.
Anonymous said...

At 448

The county has to make defined benefit payments every year. This year it is a little over 12 million. Half comes from Harrisburg. What Scheller tried to do was significant. 1.3 million in annual savings while the county is running a 10 million deficit .

Muller and Ohare say to the commissioners to find cuts and when they do muller and Ohare criticize and launch partisan attacks. Bernie is becoming a Schill for a coming tax hike and why it's necessary. Sad and pathetic.

Anonymous said...

YO..... I D I O T S......The County is mandated to pay a minimum of 4 1/2% to the employee retirement fund. You are right about one thing. The Counties made almost 20% on their investments last year. When the fund produces more money than is needed to keep the fund actuarily sound, they take that money (called excess interest) and use it to offset their other costs of County Government.
Let's put this in its proper perspective, My personal 401K has more than doubled since 2008. Is mismanagement more of a problem here than someone is willing to admit. The Counties have a retiree plan that is mandated by the state. Thank God it isn't run like the state and school teachers retirement funds.