Vanguard Analysis: City Budget and Pension Crisis and How New Budget Fixes It

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pension-reform-stockDavis city employees flocked into the council chambers on June 21, many perhaps for the first time, and appeared to be stunned and shocked at what they were hearing.  In part, this was due to lack of outreach and communication.  In part, this was due to the fact that the previous city manager and city council kept the true nature of the problem hidden from public employees and the voters alike.

In order to understand why the seemingly sudden $2.5 million in personnel cuts is necessary, we need to look at a number of factors that led to this policy.

 

 

I argue that the need for these cuts is fostered in unsustainable fiscal policies from the middle part of the previous decade.  These policies worked on paper so long as the city experienced property tax growth, and from 2003-04 to 2007-08, property tax revenues nearly doubled from $7.4 million in 2003-04 to $14.3 million.

The city also took advantage of $3 million in sales tax from the 2004 half-cent sales tax hike.

Empl-Comp-Inc

As a result, during the same period employee compensation grew dramatically, particularly on the public safety side, where the city expenditures for fire personnel increased from $5.9 million to $8.4 million in four years, and police personnel expenditures increased from $8.8 million to $12.9 million.

However, following the collapse of Lehman Brothers and the Real Estate Market, the city was unable to keep up with the tremendous gains in salary and benefits.  At this point, both sales tax revenues and property tax revenues are flat, but somehow the city is going to have to pay increased costs from retiree health and pensions.

How big are we talking?  Let us look.

At the same time, we see an explosion of commitments to employee pensions and health benefits.  In the year 2000, CalPERS was superfunded, meaning that they had enough money to pay current pension obligations without taking much money from employers or employees.  This was due in part to the dot.com boom in the stock market.

However, at roughly the same time, local governments began increasing pensions to public safety and then later all employees.  Public safety began to retroactively receive 3% at 50, and later all employees 2.5% at 55.  Once they made it retroactive, the money had not been paid into the system, thus creating an unfunded liability that has only increased over the last decade.

We had no unfunded liability in 2000-01.  Two years ago the number was $25 million.  Now we are looking at a $45 million in unfunded liability, due to rate smoothing by PERS.

Couple that with decreasing earnings expectations, and cities like Davis will have huge bills that will come due at a future point in time.

Pers_Conts.jpg

In this chart, which was actually created back in 2009, we can see the explosion in PERS contributions from 2000-01 when it was superfunded, to the present.  Even ignoring the superfunded period, from 1990 to 1999, the average PERS contribution was $1.8 million, and by 2010-11 it was approaching $7 million.

The last years on that chart were projections, but what actually happened is that CalPERS did a “rate smoothing” so that it flattened the actual costs, pushing them off to future years in hopes that things will improve.

The question is, where are things going.  CalPERS currently projects that they will make about a 7.75% return.  However, most analysts believe that rate is too high.  Last year, they voted narrowly to continue at 7.75%.   Most believe that they will drop that to 7.5% or 7.25%.

Paul Navazio has calculated that for each .25% drop in the assumed annual rate of return (ARR), the city would have to pay out $1 million all-funds to cover it.

Back in January, the council discussed this issue.

Councilmember Sue Greenwald told the council, “Starting two and a half years from now, when the permanent increases start to kick in, how much more per year in absolute dollars will we have to pay out in pensions and retiree health over what we pay today, assuming a one-half percent decrease in the return rate assumptions?”

The answer is scary.

“We will be paying $7 million more than we’re paying today,” Councilmember Greenwald said.

“That’s every year, pretty much forever, that we’ll have to readjust our budget pie,” she said.  “This is huge and you can just see that in the 53% in four years, in the absolute value of our benefits.”

pensions-1.png

Assuming a linear impact, you can see that for every quarter percent, you are looking at about a 3% impact on miscellaneous employees and a 5% impact on safety.  The numbers get scary pretty quick when you understand those numbers are additional percentages of payroll over and above what we are paying now.

 

pensions-2.png

Here you can see the impact of just moving from 7.75 to 7.5% ARR.

 

pensions-3.png

Imagine what a $7 million budget hit looks like.  That is what is actually coming for the city.  Add in the increased PERS costs, the reduction of .25% in ARR, continued flat revenues for both sales and property taxes, increased payments toward the unfunded retiree health liability, and increased transportation costs stemming from the need to put general fund money into road repair. Add in the loss of money from redevelopment, and finally add in the potential loss in revenue from the parks tax due to huge increases to water, and you are easily looking at $7 million, if not $10 million by 2015.

What this budget attempts to do is move us in the direction of funding that $7 to $10 million, incrementally.

What it purports to do is to put $850,000 into transportation to pay for road repair.  The road repair issue stems from the loss of state and federal grants and other one-time funds.  Even with that funding, the city was only at $850,000 per year in funding for road repairs.  This was creating a backlog of deferred maintenance.  At the present rate of trajectory, the city was looking at roughly $15 to $20 million in deferred maintenance costs.  This puts the city back on track to at least keep up with current demands.

Second, it takes $500,000 and puts it towards pensions.  Some argued that this was premature, but why wait when you know it is coming?  At worst you are cushioning the blow, and if you do not need it, it could be put into retiree health.

Retiree health is the last part of this equation.  The city has moved toward fully-funding what is now a $60 million unfunded liability.  It will take at least 30 years funding it at $4 million additional in funds to fully fund the retiree health program.  $1 million will now go toward that, which will help close the gap sooner and reduce the city’s costs.

What has happened is a perfect storm, with increased employee compensation, increased obligations to pensions and retiree health, combined with the collapse of revenue streams, which have necessitated the city to get a handle on future costs or risk bankruptcy and massive job loss.

Unfortunately, the city employees make up 80% of general fund spending and $7 million represents roughly 20% of the spending.  That means that other than perhaps a few cost-cutting measures that the city has not employed outside of employee costs, most of the reduction will have to be borne by the employees.

Employees can do their part to reduce the need for layoffs.  I have already laid out ways for the city to reduce costs through an across-the-board ten percent pay cut to department heads and managers along with reduction in fire personnel staffing.  Employee concessions could include taking up a greater share of PERS costs and a second tier for PERS rates, which would be a longer term solution to this problem.

Had the council not acted now, the problem would have been worse and the impact to city employees more severe and sudden.  Previous councils and city management did little favor to the employees by deferring the costs and thus the pain of cuts.

—David M. Greenwald reporting

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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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27 thoughts on “Vanguard Analysis: City Budget and Pension Crisis and How New Budget Fixes It”

  1. E Roberts Musser

    [quote]What has happened is a perfect storm, with increased employee compensation, increased obligations to pensions and retiree health, combined with the collapse of revenue streams, which have necessitated the city to get a handle on future costs or risk bankruptcy and massive job loss.[/quote]

    And this is it in a nutshell. Now city staff have to fully understand what has actually come to pass whether they want to believe it or not – “the perfect storm” has arrived full force – and decide just how they are going to deal with the dire budgetary crisis. The “new kids on the block” (Krovoza, Swanson, Wolk) have thrown down the gauntlet, and challenged city staff to come up with creative solutions, which is something never done before. Let’s see if city staff can come up with some answers that don’t involve layoffs, or at least minimize them. It is incumbent on citizens and City Council members alike to sit back, and let things play out, and trust that city staff will come up with some interesting suggestions. We will never know unless we let city staff try 🙂

  2. Observer

    I believe this cycle of Boom and Bust is almost inevitable in our current political system. When revenues are high, it difficult for civic leaders to not pass on some of the bounty to city employees. In addition, as we have seen in recent years past, keeping the public employees happy is necessary if you hope to collect the donations you need to get re-elected. Other than a well informed electorate, I don’t have a solution to this problem, but I do know that many cities throughout the US are moving to contracted services and keeping only essential services in house. Compensation then becomes the responsibility of the contractor, and the city can seek bids for service. I have no idea of how this would go over in Davis, but I think it is an option to smooth expenditures.

    David, thank you for this report. It is informative.

  3. medwoman

    Observer

    I also do not pretend to have solutions, but would like to offer a cautionary note on contracting out services. Borrowing from the expertise of rdcanning, this has not proven financially advantageous in the case of contract prisons and has the disadvantage of loss of control over operations. Before considering this path, I would hope that a very careful analysis of how this played out financially over a number of years for similar cities would be made.

  4. E Roberts Musser

    Very interesting discussion on “contracting out for services”. It certainly is an option that should be up for debate… all possibilities need to be on the table…

  5. Rifkin

    Headline: [b]City Budget and Pension Crisis and [u]How New Budget Fixes It[/u][/b]

    I cannot understand how your story lives up to your headline. All you say in the body of your column is “What this budget attempts to do is move us in the direction of funding that $7 to $10 million, incrementally.”

    That’s it? That is your fix?

    Your charts and graphs expose the fact that we have spending problems. But you don’t show how this September plan will “fix” the problems.

    You write: [i]”What it purports to do is to put $850,000 into transportation to pay for road repair.”[/i]

    Just where is that $850,000 coming from this September?

    [i]”Second, it takes $500,000 and puts it towards pensions.”[/i]

    Once again, where is this $500,000 coming from? And how does $500,000 fix our $93 million in real dollar underfunded pension debt?

    [i]”Some argued that this was premature, but why wait when you know it is coming?”[/i]

    Premature is the least of it. When the unions say “no dice” to making any reforms before they have to, your September plan falls apart. That’s not premature. That’s preposterous.

    [i]”Retiree health is the last part of this equation. … $1 million will now go toward that, which will help close the gap sooner and reduce the city’s costs.”[/i]

    Again, you have no reasonable way to get this $1 million, other than by decimating city services. And you would have to agree that when you have a $54 million debt, knocking off $1 million in September gets us nowhere.

  6. Rifkin

    [i]”Employees can do their part to reduce the need for layoffs.”[/i]

    You know they won’t, David. You saw what the DTA did when they had a choice to take a 4% pay-cut or keep all their money but let dozens of teachers lose their jobs. That’s the way all unions work.

    It’s nonsense to start from a premise that in the next two months human nature will suddenly change.

    [i]”I have already laid out ways for the city to reduce costs through an across-the-board ten percent pay cut to department heads and managers along with reduction in fire personnel staffing.”[/i]

    You need to do a little research to understand that we won’t be able to change the fire department’s staffing model in two months. And second, you are again pretending that human nature will change if you think the employees in the management group are going to agree to the wage cut you propose before their contract expires.

    [i]”Had the council not acted now, the problem would have been worse and the impact to city employees more severe and sudden.”[/i]

    The council actually has not yet acted. All they have done is to propose a September plan which is based on multiple fallacies. If they follow through with their plan, we will not have made any of the necessary reforms, but our city services will be in terrible shape. That’s not fixing anything.

    For anyone interested in a substantive analysis of why the September plan is not a sensible approach, read my column in this Wednesday’s Davis Enterprise.

  7. Observer

    Rifkin said [quote]That’s the way all unions work.[/quote]
    That’s usually true, but not quite fair. Unions usually tell the members what the options are, and then the members vote. It may be splitting hairs, but it is the members of the union, not the “union,” as some form of external beast, that make the decision. Human nature being what it is, most workers determine what their number is on the seniority sheet and vote accordingly. But over a career in public service, I HAVE seen unions vote to take a cut to save jobs. If a majority agrees to give up a little, no one has to give up everything. I hope that happens this time.

    Rifkin, I look forward to reading your article.

  8. David M. Greenwald

    Rich:

    I’m fine with the title of this article, although clearly the new budget does not fix it, it moves toward fixing it.

    A few other points.

    Losing 20 city jobs is not likely to decimate city services. Through reorganization, I think the impact on the public can be minimized.

    Is it necessary that we lose all of those job? No, but you may be right that the employees will choose that as their ideal. That said, I fail to see how doing this in September as opposed to next September makes things all that different. Imposition of impasse is not nearly as clean as people wanted to believe as witnessed by the fact that DCEA still has not signed the last MOU and the city has still not seen the savings. So I fail to imagine that things are going to be all that different, except that we get about a year headstart on reorganization.

    I’ll be interested in reading your column on Wednesday and responding in-kind.

  9. Rifkin

    [i]”But over a career in public service, I HAVE seen unions vote to take a cut to save jobs.”[/i]

    I should have been more precise in my language: I don’t believe any union will agree to substantial cuts in pay or benefits for the contracts which have not expired and were just agreed to in 2009 and 2010.

    I concede your point: that unions will accept some cutbacks in new contracts if they have to, once the old contracts expire. My point is that the unions don’t have to accept any cutbacks in the terms and conditions of their contracts this September, so they won’t. I feel very confident about this. As such, I think it is not good public policy to presume that the contracts will markedly change to the point they free up millions of dollars in labor savings.

    Along these lines, I took this analogy out of my column because it didn’t quite work, but it is close to what the September plan calls for: Would you agree to such a deal if you were renting a commercial space–say you had a small store in downtown Davis–and your rent was cheap and your lease did not expire for another couple of years and your landlord, who was having some financial troubles due to his excessive spending habits, came to you and said, “Let’s re-open our negotiations for your lease agreement. The commericial rents in Davis today are double what you are paying and I need the money. How about we meet in the middle and I only increase your rent by 50%?” I cannot imagine there is a business in Davis which would agree to those terms. So why should we think the labor groups for the City of Davis would be any different?

    I do think the next time the contracts are up and the City has real leverage, the terms of the contracts can be changed in favor of the taxpayers. But even that is not a certainty, if the members of the City Council don’t fully understand what they need to be doing.

  10. Rifkin

    [i]”Losing 20 city jobs is not likely to decimate city services.”[/i]

    It will if the jobs we lose are police officers and parks workers and the people who run programs for kids and the elderly.

    [i]”Through reorganization, I think the impact on the public can be minimized.”[/i]

    Can you explain this reorganization you are speaking of? I am with you that there are administrative and managerial jobs which can be cut. I think, however, you are underestimating the role seniority and politics will play in which jobs get the axe.

    [i]”I fail to see how doing this in September as opposed to next September makes things all that different.”[/i

    My answer is in two parts:

    1. I don’t think any of the cuts made this September will have any chance at fixing our real systemic problems of A) excessive fire staffing; B) retiree medical plans which encourage early retirement which ends up costing us a boatload of money down the road; C) getting rid of the 3% at 50 and 2.5% at 55 pension plans for new hires; D) reducing the costs of cafeteria cash-outs, particularly for all employees hired prior to August, 2009; E) lowering the cost to taxpayers of the greatly increasing costs of funding pension; and F) managing properly the inflation of our total comp costs; and

    2) By reducing labor costs by $2.5 million this year, we remove the urgency of reforming how the City does business next year. Whereas this year we can fire a couple dozen people who lack political power to keep their jobs, next year we can fundamentally reform the labor contracts and in doing so accomplish all the goals A-F laid out in part 1.

  11. J Brown

    Keeping it real: The budget is balanced and now we must try to rebuild the reserve without cutting services. Folks services have been cut already! Some city crews are operating on a little over 1/2 the personnel that they had 2 years ago. Doing twice the work, with no raise in over 2 years. Personnel have retired, quit, been re-orged, and left in other ways. Have you noticed the equipment sitting in the yards during the day? Have the citizens noticed that some city crews that used to do ‘routine’ maintenance are no longer out there? I think if council ever did a ‘realistic’ look at trimming the fat, we would all be better off.

  12. Greg Kuperberg

    By sheer coincidence, the total salary of the players of the Sacramento Kings is about the same as the payroll part of the City of Davis general fund. So, if compensation keeps going up — of course it will never catch up with the Kings but let’s say that it could — the city staff will be down to 11 people. The only question is who will be assigned what. Maybe John Salmons will be the fire department and DeMarcus Cousins will be parks and grounds. And what will Pooh Jeter do?

  13. Bill Ritter

    [quote][i][b]Vanguard:[/b] What has happened is a perfect storm, with increased employee compensation, increased obligations to pensions and retiree health, combined with the collapse of revenue streams, which have necessitated the city to get a handle on future costs or risk bankruptcy and massive job loss.[/i]

    [b]ERM:[/b] And this is it in a nutshell. Now city staff have to fully understand what has actually come to pass whether they want to believe it or not – “the perfect storm” has arrived full force – and decide just how they are going to deal with the dire budgetary crisis. The “new kids on the block” (Krovoza, Swanson, Wolk) have thrown down the gauntlet, and challenged city staff to come up with creative solutions, which is something never done before. Let’s see if city staff can come up with some answers that don’t involve layoffs, or at least minimize them. It is incumbent on citizens and City Council members alike to sit back, and let things play out, and trust that city staff will come up with some interesting suggestions. We will never know unless we let city staff try :-)[/quote]

    Nicely said by both David Greenwald and Elaine Roberts Musser.

  14. Sue Greenwald

    [quote]Let’s see if city staff can come up with some answers that don’t involve layoffs, or at least minimize them. — E. Roberts Musser[/quote]How can city staff come up with answers that don’t involve layoffs mid-contract? [quote]It is incumbent on citizens and City Council members alike to sit back, and let things play out, and trust that city staff will come up with some interesting suggestions. We will never know unless we let city staff try — E. Roberts Musser[/quote]A bit unfair. Order the interim city manager to cut $2.5 million in labor costs without layoffs mid-contract?

    Of course we can hope that the bargaining groups come forward voluntarily or a slew of employees who are least essential to the organization leave for better jobs. That would be great, but unlikely. There aren’t any other “creative” possibilities, and we can’t order the interim city manager to perform magic.

    If council orders cutting labor costs by $2.5 million by Sept. 30, council has to take responsibility–not “sit back”.

  15. Sue Greenwald

    I should add again that major structural changes are absolutely needed, but they can and must be accomplished through our labor negotiation process.

  16. Rifkin

    [i]”By sheer coincidence, the total salary of the players of the Sacramento Kings is about the same as the payroll part of the City of Davis general fund.”[/i]

    You are off by $15 million.

    The Kings payroll last year–lowest in the NBA by a lot!–was $45 million. The City of Davis’s general fund expenditures for payroll was approximately $30.2 million.

    Samuel Dalembert–$13,428,129
    Beno Udrih–$6,478,600
    Francisco Garcia–$5,500,000
    Tyreke Evans–$3,880,920
    DeMarcus Cousins–$3,374,640
    Marquis Daniels–$2,470,000
    Jason Thompson–$2,178,000
    Omri Casspi–$1,254,480
    Donte Greene–$1,116,840
    Antoine Wright–$992,680
    Luther Head–$992,680
    Darnell Jackson–$854,389
    Jermaine Taylor–$780,871
    Marcus Thornton–$762,195
    Hassan Whiteside–$730,437
    [u]Eugene Jeter–$473,604 [/u]
    TOTAL–$45,268,465

    [i]”And what will Pooh Jeter do?”[/i]

    He won’t be a King. His roster spot is going to be taken by their 2nd rd. draft pick from U-Washington, Isaiah Thomas, another under 6-foot guard.

  17. J Brown

    Of course we can hope that the bargaining groups come forward voluntarily or a slew of employees who are least essential to the organization leave for better jobs. That would be great, but unlikely.

    Kind of speaks for itself. It must be nice for the least essential employees to feel so much love. Least essential? Police? Fire? Public Works? Parks and Recs? Building and Planning?

  18. Observer

    Rifkin Said:
    [quote]I concede your point: that unions will accept some cutbacks in new contracts if they have to, once the old contracts expire. My point is that the unions don’t have to accept any cutbacks in the terms and conditions of their contracts this September, so they won’t. I feel very confident about this. As such, I think it is not good public policy to presume that the contracts will markedly change to the point they free up millions of dollars in labor savings. [/quote]
    I have to confess, I don’t know the details of the contracts the city has with the various unions, but it is fairly common in public service contracts to have “reopeners” if both sides (city and union) agree. I agree with you completely that negotiating salary concessions mid-contract would be a hard sell, and counting on it would be immensely foolish. But unlike teachers, I believe (but don’t know) that municipal employees can be laid off with 90 days’ notice, contract or no, and I have seen unions agree to reopen compensation prior to the end of a contract. It could save a lot of people a lot of pain. It could happen.

  19. medwoman

    Rich

    “would you agree to such a deal if you were renting a commercial space?”

    My answer to this is “it depends”. For example, let’s extend the hypothetical case just a little. Now let’s suppose that as the shop owner, you are aware that the landlord is in so much trouble that is you do not accept the offer, he will lose the building and that you will lose your location. Now how does it play out for you? I suspect the answer would have to do with how important this location was to your business, how long you had been there, what kind of profit you are making, how easy it would be to relocate and a host of other issues. The reason I belabored this is because I feel that Elaine is right about the city workers needing time to sort this all out, not only in terms of what it means for the city and the unions but also on the individual level. I am guessing that there are many employees right now doing the numbers on how much they can cut back and still meet the obligations they incurred when times were economically better. If enough people realize the unsustainability of the city’s situation, I think we might see some movement on the union side.

  20. Rifkin

    OBSERVER: [i]” I believe (but don’t know) that municipal employees can be laid off with 90 days’ notice, contract or no …”[/i]

    I honestly don’t know how many days notice they are granted by law. There is no mention of 90 days or any period of notice in their contracts, as far as I know.

    However, I found this provision in the PASEA contract, which discusses an alternative procedure to layoffs: [quote] The CITY agrees to notify ASSOCIATION prior to implementing an employee layoff which would impact ASSOCIATION represented employees. ASSOCIATION may then request meetings to explore implementation of layoffs and to present alternative cost savings measures which would eliminate or minimize the need to layoff employees. Such alternatives shall include, but not be limited to, voluntary reduced work time, retraining, job sharing, early retirement, unpaid leaves of absences, furloughs, attrition, and revenue increases. Nothing in this section shall prohibit the CITY from laying off employees pursuant to the CITY’s layoff procedure. [/quote]

  21. Greg Kuperberg

    Darn, you’re right Rich, I got my numbers from the wrong page. The Sacramento Kings get paid 50% more than the City of Davis general fund staff. Maybe if the city staff learn to play basketball, then certain people will want more money spent on them instead of less.

  22. E Roberts Musser

    [quote]I should have been more precise in my language: I don’t believe any union will agree to substantial cuts in pay or benefits for the contracts which have not expired and were just agreed to in 2009 and 2010. [/quote]

    [quote]Order the interim city manager to cut $2.5 million in labor costs without layoffs mid-contract?

    Of course we can hope that the bargaining groups come forward voluntarily or a slew of employees who are least essential to the organization leave for better jobs. That would be great, but unlikely. There aren’t any other “creative” possibilities, and we can’t order the interim city manager to perform magic.

    If council orders cutting labor costs by $2.5 million by Sept. 30, council has to take responsibility–not “sit back”….

    I should add again that major structural changes are absolutely needed, but they can and must be accomplished through our labor negotiation process.[/quote]

    First of all, it never hurts to have faith in city employees, to come up with some creative ideas NOW RATHER THAN A YEAR FROM NOW. But city employees have to be given that opportunity, time to digest the situation, cogitate on it, and devolve possible solutions that possibly would not involve layoffs or minimize them. Since the deadline is not until Sept. 30, and the decision has already been made to move forward with the EARLIER THAN LATER model for budget cuts, it does not do anyone any good to say “it cannot be done”; “the sky is falling”; “city employees will act only in their self-interest”; “city employees will only take one way – laying off those most junior”. Frankly this sort of hand-wringing negative talk is a self-fulfilling prophecy. IT DOES NOT HELP THE PROCESS AND WHERE WE NEED TO BE.

    I guess I have a bit more faith in our city employees. I want to at least give them a fighting chance to come up with some innovative solutions. Look at how well the situation involving the closing of Community Pool worked out! It took immense collaboration/cooperation by community members, city staff, and certain City Council members to make it happen – but happen it did. The city saved $140,000 a year, and all the users groups only have to take a minor hit of slightly less pool time.

    The naysayers should sit back and give city staff/employees A CHANCE TO GET CREATIVE/DO THE RIGHT THING. If things don’t work out, the naysayers can then choose to do their victory dance – “Neener, neener, neener, I told you so!” to their hearts content… but to what purpose is it to sabotage the process that is already been voted on and in place? Let things play out, give the process a fighting chance, and GIVE CITY STAFF SOME CREDIT FOR CREATIVITY AND THE WILL TO DO GOOD FOR THIS CITY AND THEIR FELLOW EMPLOYEES.

  23. Rifkin

    If you would like to, my column on this topic ([url]http://www.davisenterprise.com/opinion/our-city-needs-fundamental-reforms/[/url]) is now up on The Davis Enterprise website.

  24. Rifkin

    [i]”I guess I have a bit more faith in our city employees.”[/i]

    You shouldn’t. Doing so is going to harm residents of Davis and won’t put us on a course toward fiscal stability. If the September plan goes through as Krovoza, Swanson and Wolk have proposed, it will be harder, if not impossible, to make the changes we need to avoid bankruptcy. Their plan is a really bad idea, and bad for Davis.

    For those of you who are convinced that human nature is going to change in the next two months and that the labor associations and unions in Davis are going to agree to cuts in pay in September so that the jobs of their colleagues will not have to be lost, you might consider reading about what is going on in Sacramento with their Police Officers Association ([url]http://www.sacbee.com/2011/06/29/3734595/marcos-breton-sacramento-cops.html[/url]).

    The contract with the SPOA expires June 28, 2013. The City of Sacramento is in dire fiscal shape. Mayor Johnson is asking that the contracts be opened up and that the SPOA should agree that its officers, who are on the 3% at age 50 pension plan, start paying their 9% employee share** to fund their pensions. Up to now, the SPOA members pay nothing. The City funds the employer share and the employee share.

    Guess what the response of the SPOA has been? No dice.

    The SPOA would rather 42 officers be fired than the rest of them pay the employee share of their lucrative pensions.

    I can’t say that I don’t blame the SPOA for their intransigence. I do. Just like I blamed the DTA when they refused to take a small pay-cut to save teacher jobs in Davis. But regardless of their avaricious attitudes, it’s pointless to think unions are ever going to willingly give in on an issue like this in the middle of a contract if they don’t have to.
    ==============================
    **In Davis, all cops and firemen on the 3% at 50 plan pay the full 9% employee share. The taxpayers in Davis pay the 25.907% employer share. That percentage for the employer share is set to rise to 30.3% in the next two years.

    By contrast, no employees in Davis on the 2.5% at 55 plan pay the full 8% employee share. Some pay a small percentage of it, depending on which group they are in.

  25. Sue Greenwald

    [quote]The naysayers should sit back and give city staff/employees A CHANCE TO GET CREATIVE/DO THE RIGHT THING. If things don’t work out, the naysayers can then choose to do their victory dance – “Neener, neener, neener, I told you so!” to their hearts content — E. Roberts Musser[/quote]This is a bit of an unfair set-up of the interim city manager. The employees could “creatively” reopen their contracts whether we have a Sept. 20 deadline for making the $2.5 million cuts in labor costs, or a deadline of July 1, 2012 when the current contracts expire.

    When the only two possible options for meeting the Sept. 20 deadline are lay-offs or voluntary mid-contract concessions, “staff”, i.e. the interim city manager, will be accused of being “uncreative” and not solving the problem unless the bargaining groups step forward.

  26. J Brown

    The truth of the matter is, that if you review past group contracts, the employees have made concessions and that results in an “actual” percentage of over 12% being paid into the current 2.5 at 55 retirement plan. The problem is the group is not willing to stick there heads in the sand and forget about this, even if the city is.

  27. David M. Greenwald

    I’m trying to figure out who you are referring to J Brown. DCEA has not accepted a new contract. So I looked at PASEA:

    The PASEA employees have agreed: “to pick up 1% of the employee portion of their CalPERS retirement benefit for the second year of the contract and again for the third year of the contract. Employees also agreed to cover any additional cost of the FY 2008/09 PERS employer contribution rate, up to an additional 3%, for the life of the contract. For Fiscal Year 2009/10, employees will pick up 0.453%. (Employees agreed to pick-up the 0.453% retirement contribution increase for FY2009/10 as part of the interim agreement).”

    So that’s not even close to what you are claiming? The DCEA contract that council attempted to impose is similar. So who are you referring to?

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