Sneaking Suspicions
Archives--December 1-31, 2008

This page includes posts from December 1-31, 2008 in the usual reverse order.

Each posting on the home page is perma-linked to these archive pages.

December 30, 2008
A Doggie Samaritan Cautionary Tale

One of the newest members of Delaware’s Superior Court issued a decision this month that reminds us all that no good deed goes unpunished.

Judge John A. Parkins, Jr. is a former Deputy Attorney General and a past partner in one of the state’s old line law firms, and began his first term on the state’s general trial court in August. 

Sometimes I think the senior judges have a role in determining which cases the newbies will be given to handle. That’s the best explanation I can give for how Judge Parkins soon found himself dealing with a summary judgment motion in a dog bite case. 

Fortunately, this is not your everyday doggie lawsuit, because it involved a good Samaritan of sorts. 

Ms. Paloni, a veterinary technician at an upstate vet hospital found out that a female dog named Toots had recently been brought to her place of employment and was to be euthanized. Toots, of an undisclosed breed or combination of breeds, had broken a leg when she fell out of a truck owned by a Wilmington firefighter. Some months before the firefighter had rescued Toots from a fire scene, and had the dog under her care when the accident happened. 

Unable to pay the surgery costs to repair Toots’ broken leg, the firefighter had (apparently reluctantly) concluded that Toots had to rest forever instead. At that point Ms. Paloni stepped in, and signed paperwork suggesting that she owned Toots—a move that created enough of an employee discount for the cost of the surgery to make it affordable.

Toots’ leg was successfully repaired, and a few days later the technician dropped Toots off at the firefighter’s house.

Unfortunately, Toots’ recovery didn’t do someone else any favors. A few months later Toots bit a man named Smiley when the man was in Toots’ neighborhood. 

Smiley then sued the firefighter, the firefighter’s fiancé/husband, and the veterinary technician, courtesy of the ownership papers she signed to save Toots’ life. 

The vet tech’s lawyers argued that under the circumstances, she couldn’t be held responsible for Toots’ decision to gnaw on poor Smiley.

Judge Parkins agreed:

Ms. Paloni was listed as the “owner” in [the hospital]’s records solely for the purpose of receiving a discount on Toots’s surgery. Perhaps more importantly, it is undisputed that Ms. Paloni promptly delivered Toots to [the firefighter]’s house after the surgery in May 2004 and had no further contact with Toots…. [N]o reasonable jury could find that Ms. Paloni owned Toots at the time of the alleged bite.***

Therefore, Ms. Paloni’s motion for summary judgment is GRANTED.

The end result in this case was not hard to see coming. Nonetheless, I also think that the next dog to come to that hospital with a broken leg had better have its own insurance card handy.

December 26, 2008
A new Claude award candidate for a classic budget riddle

Like many other states, Delaware is going through a tough budget time right now. Revenues from major General Fund sources such as personal and business income taxes are falling off, and the two major automobile assembly plants that have been the backbone of upstate’s blue collar workforce are shuttering their doors, one permanently.

These and other money problems are leading to a current fiscal year projected deficit of over $100 million and a projected deficit for FY09 of over 500 million, about one-sixth of the state’s budget.

That’s why the online edition of today's News-Journal produced a wry smile at the sheer banality of the headline for a story discussing the options facing the incoming Markell administration and the General Assembly:

Larger deficit may lead to harder decisions

No kidding.

That one earns four Claudes.

Even so, the real difficulty for the state will be if those in charge do not address the deficit issues. Legally, that’s not possible, because the state’s constitution requires a balanced budget. Even so, under less dire circumstances legislators in prior General Assemblies showed a decided reluctance to either cut programs or raise revenues—but when hundreds of millions of dollars are not showing up in the state’s coffers, that attitude does no one any good.

The News-Journal story itself is pretty thorough, and worth reading. It goes through some of the options currently available to the administration and the legislature, such as program cuts and personnel cuts.

These options produce their own challenges, of course. For example, any sane person reading the state’s Merit Rule on layoffs and bumping rights should conclude that the process is currently designed to discourage any such form of budgetary relief from ever being adopted.

The story also mentions that a half-point increase in the top rate of the state’s personal income tax was estimated to produce over $100 million. I’d like to see that number recalculated again under current conditions before I put too much credence in that suggestion.

My own preferences include using furloughs as an option. However, there’s nothing now in the Delaware Code or the state’s personnel regulations that deals with furloughs, and any involuntary furlough arrangement must be negotiated with the unions.

I like my wife’s suggestion of a voluntary furlough program, which would also require new legislation to implement. A voluntary furlough could act as a loan by the employees, who would have their loan “repaid” by an equivalent number of vacation days added to their benefits, if the state’s economic picture improves in a few years.

For every furlough day taken by all state employees, the state would save a minimum of $5 million, so some kind of furlough arrangement should be considered.

As for tax changes, I prefer a return to the notion of shared sacrifice, instead of simply taking a whack at the folks who now pay the top rate in Delaware’s income tax system.

For example, why not take another look at past tax legislation decisions from the past two decades, such as those that removed thousands of Delawareans completely off the income tax rolls? A relatively small return to the notion that “everybody pays something" could produce a decent increase in the state’s coffers, and also show that the politics of envy do not trump everything.

How about re-reading the Delaware Tax Preference Report, available online? Re-discovering how the effective income tax rates are altered by the series of special deductions and credits trailing the law like the chains and boxes lugged by Marley’s ghost might produce some real reforms in the state’s tax system, and raise a bit of needed cash at the same time.

Lots of folks are making their own suggestions, and sending them in to the Markell transition web site. I sent in the voluntary furlough idea already, so we’ll see.

December 1, 2008
Vested Rights and Postponed Retirements for Government Workers

There’s a fairly simple explanation for Brian Sullivan’s open question, Why Isn’t Anyone Talking Later Retirement for Government Workers? (Hat-Tip to Glenn Reynolds).

Here’s how Sullivan put it:

Much of the debate around whether to put more government money into [the Big Three auto makers] tends to come back to the issue of pension and health care payments to those companies millions of retirees.   Private workers may end up working longer to balance out the good news that they are living longer.   Yet there is virtually no discussion of this with regard to government and public sector workers.   I imagine that is because government workers tend to be the ones who vote on their own retirement ages.

It’s not just a matter of politics and voting blocs, although the eventual solutions, if any, will certainly be affected by those factors.

It’s a matter of property rights.

Under State and Federal constitutional law, a government worker’s rights to a statutorily-created contributory pension system become vested at some point, under the terms of the particular plan. That means that the legislature cannot institute any changes in those pension plans that significantly affect the pensions of those who have already obtained vested rights in the system.

See, for example, In Re State Employees' Pension Plan, 364 A.2d 1228, a 1976 Delaware State Supreme Court case in which the General Assembly attempted to provide special pension benefits for persons who did not meet the normal conditions for a state pension. The Court ruled that the General Assembly could only provide those special benefits by also providing the state pension system with the necessary additional funds to pay for the special pensioners, so as not to affect the vested rights of the other pensioners. In so ruling the Court noted the Federal impairment of contracts clause (Article 1, Section 10 of the U.S. Constitution), as well as its prior decisions that recognized contributory public pension plans as an integral element of the employment relationship between a government and its employees.

If a state legislature wants to reform a state pension plan for government workers, it certainly can. However, a cost- or benefit-cutting fix that affects current pensioners, or government employees with vested pension rights, is not really an option under most circumstances. To do so would violate the employees' contractual property rights.

That doesn’t mean a government that wants to reform its defined benefit pension system has no options. What it means is that any changes that adopt Sullivan’s suggestion or similar cost-saving or cost-sharing elements can only be enacted to affect state employees whose pension rights have not yet vested.

With many such systems, full or partial vesting occurs after five years’ service, so the immediate fiscal benefits of such changes are not as impressive as one might hope.

Nonetheless, Sullivan is right to point out the need for fully funding these public pension plans, and to make the sometimes painful political decisions to do so. For example, when I was the City of Wilmington’s labor lawyer, I worked with my clients to negotiate changes to the police and firefighter’s pension plans with the FOP and the IAFF. The 1984 plans were not quite as generous as the plans they replaced, and so reaching agreement on these new changes was difficult.

Any new police officers and firefighters were covered by the new plans, which were fully funded from the beginning. The City dealt with the ongoing unfunded pension liability for the old public safety pension plans by eliminating any new participants, and letting nature take its course with respect to the old plans’ participants.

I imagine that by now, almost 25 years after the change, that the City’s funding exposure for those old plans is quite a bit smaller than it once was.

Time does march on, after all.

Sullivan’s suggestion certainly has merit, and is a far better approach to public policy than the funding holiday recently suggested by New Jersey’s Governor Corzine. Even so, the legal limitations to extending retirement ages for public pensioners mean that any significant pension cost reductions are for the long term, and not something to see any time soon.


Contact Information:

Fritz Schranck
P.O. Box 88
Nassau, DE  19969

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© Frederick H. Schranck 2002-2008