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| Last telegraph out from Titanic |
“CQD.
CQD.” - the
distress code sent out by the telegraph operator aboard the RMS
Titanic
on April 14-15, 1912 which means “all stations: distress” (it was
only after the sinking of Titanic
that SOS became the universal Morse code of distress)
On
April 14, 1912 the RMS
Titanic
collided with an iceberg and within a few short hours the unthinkable
occurred: the reportedly unsinkable boat lay in pieces at the bottom
of the Atlantic. Central States Pension Fund, one of the largest
pension plans of its kind with over 400,000 members nationwide,
including five of our own public works employees, like the Titanic
has
hit something massive and is rapidly taking on water. In a
comparitively few short years the thing will be “sunk”. Currently
it is $28 billion
dollars insolvent and Congress, unlike in 2008 when they bailed out
the auto industry, is planning on doing nothing to stop the
catastrophe. With nothing to be done the best possible thing for all
parties involved is to make it to a lifeboat before the thing goes
under completely. Which is exactly what the City of Chetek is
currently doing.
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| The letter I received |
A
few weeks after taking office last year I received a letter from
Central States informing me in dry legal syntax of the status of the
fund and of the unwillingness of Congress to do anything about it. I
didn't realize it at the time but essentially it was the equivalent
of the CQD distress signal that was sent out repeatedly from Titanic
on
the night and early morning of April 14-15, 1912. But unlike in that
instance there was no Carpathia
sixty miles away to race to the rescue. Peel away the legalese and it
pretty much reads how Titanic's
last
telegraph read: 'WE HAVE STRUCK ICEBERG SINKING FAST COME TO OUR
ASSISTANCE.' This past April we received the annual assessment of the
fund that read very much the same way the previous letter read only
to add that their “rescue plan” was rejected by the Treasury
Department. Thus we're back to square one and the sea water continues
to pour in.
This is not a new problem. This is not a fiasco you can blame on
Trump or Obama or even Bush. If only it were as simple as that. This
is about a menagerie of things that, yes, include elected officials
who appear to lack political courage to do anything and federal
judges who seem, at best, indifferent. It has to do with the change
in the industry as well as the demographics of the baby boomers who
are now exiting the labor force in droves. Back in 1980, for every 5
guys coming into the work force, one was retiring. These days it's
totally reversed: for every 5 guys retiring only one guy is coming to
work. Even a rube like me understands math like that.
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Central States is the pension fund
of the Teamsters |
Central States was created to benefit the guys it served who were
involved in the transportation and warehousing industries (how our
public works' guys became a part of the Teamsters is maybe a question
for local historians John Banks or Bill Waite because no one I know
seems to have the answer for that.) Which was great until the truck
industry was deregulated back in the 1980s. According to one on-line
source I read back in the 70s more than six in 10 “for hire”
truckers belonged to a union. By 1996 only two in 10 were union
members. Again, it's simple math.
Deregulation and competition from nonunion businesses accelerated the
declining health of the fund. Throw in union mismanagement, the Great
Recession of 2008 and some other series of unfortunate events and we
are where we are today. A year ago, Lee Schafer, a columnist for the
Star Tribune, wrote an excellent article about Central States wherein
he comments,
This fund is going to fail because
of an upheaval put in motion more than 35 years ago in the principal
industry that employed its participants, trucking and warehousing.
That makes this coming crash a little like a truck careening into the
gorge after the driver repeatedly blew past “Danger! Bridge out
ahead” signs — with the first one maybe 1,000 miles back. (Doomed to Fail)
At
the present time, the City takes $155 a week out of the paycheck of
our union members (Mike, Joe, Rod, Brandon and Aaron) and sends it
off to Central States. Former employee Tim Berning retired in May and
at June's council meeting, Waste Water Treatment Operator Mike
McGinnis announced he would be retiring in September. Both those guys
will receive their pension benefits until the fund is defunct eight
years from now. If he wanted to, Joe could retire today and begin
receiving his pension check. But Rod, Brandon and Aaron are way too
young to do so and yet by law we are required to continue to deduct
$155 from their weekly pay check and send it off to Central States.
Using Central
States' own estimate by the time they are of retirement age that fund
will no longer exist and these guys will never see a
penny of what is owed them. Ever.
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| Charlie P. Stevens |
So,
if our guys will not benefit from that fund why not just quit sending
the money in? Why not just jump out of the sinking ship before being
sucked under by the undertow? Because we can't. If we were to do that
the Teamsters would legally have the right to take us to court and
would probably win. The only way out is to cough up and pay our share
of the liability. The way Congress wrote the rules a business or (in
our case) a municipality can't just “walk” away – or, to
continue the metaphor – row away. We have to pay our fair share of
the estimated $28 billion dollars of liability. Case in point, in
1997 UPS read the same tea leaves we're looking at now and were
prepared to exit stage right. At that time their portion of the
liability was approximately $600 million. They reconsidered and
continued with Central States for ten more years
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We have to eat our piece
of the pie...even if it smells
like you know what |
by which time their
piece of the pie of liability had grown to – wait for it - $6.1
billion
dollars. In 2007 they paid up and took 60% of the entire Teamsters membership with
them. An international corporation like United Parcel Service can do
some finagling and come up with that kind of cash. We, obviously,
cannot. Which is why we retained the services of Charlie P. Stevens,
a lawyer with Michael Best & Friedrich LLP out of Milwaukee, who specializes in
pension law, to get us out of this disaster as expeditiously as
possible.
We began our conversation with Charlie by phone back in April and
immediately got an education on just how dire things really are. One
of the things I really appreciate about Charlie is that he's plain
spoken and is pretty good at breaking down a very complicated legal
matter into plain English. Here's a quote for you: with regards to
Central States, “Everything they do is diabolical.” Well, that
makes you sit up in your chair. In May we invited him to come to our
monthly council meeting and get the aldermen up to speed on the
situation. We also made sure that all the present employees of the
city's public works department as well as those who are now retired
from it were aware that he was in town. All of them showed and heard
his grim report. When he was done the atmosphere in the council
chambers was tense to the say the least.
“Hubris”
is a word that we derive from the Greek language describing excessive
pride or defiance of the gods that ultimately leads to nemesis. The
accepted moral lesson of what happened on April 15, 1912 is that it
wasn't an iceberg that sunk Titanic.
It
was hubris, overweening pride in man's creation of a supposedly
“unsinkable” ship that was speeding recklessly through an ice
field. And real people died because of it. What Charlie described in
council chambers in May is yet another display of hubris. But where
Titanic
was a tragic yet avoidable accident, the current status of Central
States is, frankly, a robbery in slow motion committed by
unscrupulous individuals and real people with a Chetek zip code will
be affected.
If
the ship cannot be righted and the government will do nothing to
intervene and prevent the inevitable calamity the only option left to
us is to get out as soon as possible.
Every day we stay in our piece of the liability pie grows larger. If
we don't abandon ship, if we choose to join the band playing away on
the deck of the sinking Titanic,
when it finally does goes under not only will we owe more but all the
money we have already sent in will have been wasted. We might as well
have taken that $3,100 a month and literally sent it down the toilet.
So, we're getting out – this week.
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They were heroic and went down with the ship.
We cannot allow that to happen. |
By
Charlie's rough estimate, we need to come up with $1 million dollars
that we can either pay in installments or in one lump sum. The
benefit of paying on the installment plan is obvious – it eases the
pain in small monthly doses over the next twenty years. However, the
risk in that is that in the meantime Congress will come up with some
kind rule that leaves us on the hook to Central States as long as we
owe them anything. So better to pay them off in one lump sum and be
done with them rather than risk future liability. That's what were
going to do. Where are we going to come up with that kind of cash?
Well, potentially we have half that amount on hand already between an
outlay account for Knapp Haven that's never been touched and the
$100K that Atrium still owes us and promises is “in the mail.”
We'd have to take out a loan for the rest.
And
what about our guys? Are they left floundering in the drink? No. The
city will continue to make contributions but through some kind of 457
plan. It would be their money in their account and ultimately would
be of more value than just sending money off to Central States where
more than half of every benefit dollar paid out goes to retirees
whose employers withdrew without ever paying their piece of the pie.
What's more, we're not asking the guys whether or not we can do this.
We're doing it because we believe its in theirs and the city's best
interest but we're not asking for their permission. We're just
informing them. If the union threatens to cut them off, well, they
can rightly argue according to the rules the union lives by that it
wasn't their fault and therefore they are entitled to everything
they're due (until, of course, the money runs out.)
It's
totally unfair and unjust but we have been reasonably informed that
there is just no way to fight this. We would be tilting at proverbial
windmills and end up right back where we started except with
additional legal costs for our efforts. What were we going to do with
the “Knapp” money? We were holding on to it until everything with
the sale was totally wrapped up, more specifically with the $100,000
in receivables that Atrium still owes us in our hands. That money
could have been reallocated for sidewalk replacement, park
improvements, equipment upgrades and the like. It's a darn shame but
it appears it wasn't to be. It breaks the heart but to do nothing
would be irresponsible and we still have to do the right thing and
get everyone to a life boat while we still have time.
