The controversies, complexities and consequences
The Guild bargaining team and Buffalo News management on Friday discussed a potential buyout the company has proposed to meet its goal of cutting Guild-related costs by $1.8 million.
Every Guild member, young and old, needs to understand the issues involved and the possible repercussions to the newsroom and pension fund.
First, let’s recap. The previous week The News presented a harsh set of plans to cut costs from the Guild.
Management said it wanted to first offer buyouts. If the buyouts did not achieve $1.8 million in savings, they said they would seek an assortment of other cost-cutting measures that could include wage reductions, fewer paid days off, reductions in differentials, less holiday pay, and lower mileage reimbursement. If the buyouts and others measures failed to cut $1.8 million, The News said it will then consider layoffs.
The Guild estimates 20 to 25 employees, mainly from the newsroom, would have to take a buyout to meet management’s $1.8 million goal, further decimating the staff.
All of this is in addition to the necessity of reaching a new agreement on health insurance that will likely require finding more ways to cut the cost of the health plan, an increasingly difficult task. If we don’t, we risk having to pay thousands of dollars a year for the insurance premium.
The negotiating challenges facing the Guild are huge and bargaining could become very contentious. But for the moment, dealings with The News are centered on discussing the design of a voluntary separation agreement.
On Friday, management talked about the pension and the dilemmas it faces in putting together a buyout. How those dilemmas are resolved will be significant to those who consider a buyout and those who remain at The News.
Our pension is a traditional defined-benefit plan in which an employer guarantees an employee will receive a given sum of money per month once retired. The pension is invested in stocks, bonds and other financial instruments. Employers can also make cash contributions to their pension funds.
If not managed properly, a pension could be underfunded. An important statistic is a pension’s “funding ratio.” This is the ratio of assets (e.g. stocks and securities) to liabilities (money that must be paid out to retirees). A ratio below 100 percent is underfunded; a ratio above 100 percent is over-funded. To be safe, there should be more assets in a pension than liabilities.
When the economy falters or the stock market is stagnant, the cash required for future benefits can grow too slowly or even evaporate. In addition, offering buyouts increases pension fund liabilities because the early retirees who take the buyout will likely receive their pensions for longer periods.
Another factor to keep in mind is that struggling companies in the midst of a bad economy often are unable to make cash contributions to improve their pensions’ funding levels if the investments in their funds stagnate or decline in value. Today in the U.S., many pensions are in trouble, and there is not enough money to pay what is owed to current and future retirees.
With all this in mind, let’s review the finances of the pension based on information management presented Friday.
On Feb. 15, 2008 – the pension year begins in February – the fund had assets of $87.5 million and liabilities of $46.7 million. It was funded at a spectacular 172 percent.
On Feb. 15, 2009, it had assets of $67.5 million and liabilities of $47.7 million. It was funded at 160 percent. And, on Feb. 15, 2010, the pension had assets of $78.5 million and liabilities of $49.4 million. Funding was at 155 percent.
However, things have changed since Feb. 15, 2010, mainly the result of the cost of the previous pension-based buyout in 2010 and the financial results of the pension fund investments, according to The News. A pension snapshot on Dec. 31, 2010 found assets of $77.2 million and liabilities of $63.1 million. The funding ratio dropped to 122 percent.
Although the pension remains overfunded, News management said it is worried that the cost of another buyout at this time could lower the fund’s assets too far while simultaneously increasing liabilities. The Guild shares this concern. It is important that the pension be in good shape so that current and future retirees can depend on it.
As a result, The News is considering a plan in which the design of a buyout, as well as how many people could take it, will likely be based on how much the company is willing to spend from the pension.
This is a big deal. If buyout costs are too high, the health of the pension could be threatened, according to The News. But if The News limits how much it spends on the buyout, the company will not reach its $1.8 million cost-cutting goal through buyouts. In that case, News officials have threatened to seek reductions in wages and benefits, and to consider layoffs. The News could add money to the pension plan, but management said that is not something it is keen on doing at this time.
All of this dovetails with The News’ buyout goals.
Earlier this year, The News offered a cash buyout in editorial to nine employees with 40 or more years of service. No one took it. This time, again, The News has expressed a preference to target the most-senior employees in the newsroom. But the company acknowledged that it doesn’t know whether it’s possible to design a voluntary separation agreement that will appeal to those employees.
Instead, The News is talking about a buyout that might also attempt to target the next-oldest group of Guild members – mainly those employees in their mid- to late 50s and early 60s. The downside, of course, is that this would risk eliminating experienced reporters and copy editors that management said, in the best of all worlds, it would prefer to keep.
News managers voiced their reluctance at losing a significant part of the newsroom core. But they also voiced reluctance at having to seek their proposed alternatives – layoffs based on seniority and reductions in pay and benefits.
As several News officials said, they see themselves as being faced with the dilemma of buying out some of the “premier names” and “most productive” reporters and editors in the newsroom, or laying off young journalists who represent the future of the newspaper.
Managers have expressed hope that some of the most-senior employees who rejected the previous buyout offer will consider this one and retire.
Where does the Guild stand on the issue?
It is management, not the Guild, that set a $1.8 million target that can only be realistically achieved by pushing bodies out the door. We believe cutting $1.8 million in costs from the Guild is a Draconian step, and we intend to vigorously fight efforts to significantly reduce wages, benefits and contract rights.
We don’t want to see the newsroom gutted, yet The News has clearly stated its concerns over the state of its finances and its intention to cut costs by diminishing Guild ranks. If that’s the case, we prefer buyouts to wage and benefit reductions, and layoffs.
As a result, the Guild has encouraged News management to offer a buyout that will be as successful as possible toward reaching the $1.8 million goal while also preserving the financial health of the pension fund.
To us, that means a buyout that casts a wide net as far as who is eligible. It means offering different or additional elements in buyouts, such as cash or health insurance, to attract employees with different needs and at different points in their lives. We also have encouraged management to explore the idea of bringing retirees back to work part time in arrangements that are acceptable to the Guild membership.
News managers have listened to our suggestions and presented a variety of theirs.
Management told the Guild that it expects to speak with Warren Buffett this week regarding the pension and their buyout plans. Negotiations resume Friday, and the Guild is hopeful The News will be able to make its offer soon thereafter.
If anyone has any ideas, feel free to approach members of the Guild bargaining team.