Is the Window Closing For Real Fiscal Reform?

Fiscal-CliffCommentary – June 30 was when the recent contracts for city bargaining units expired and now here we are five months later, two weeks from a winter break, and none of the major bargaining units have agreed to a contract.  If the results of one of the few contracts that was signed – with the individual police management – are any indication, we will likely fall short of the goals laid out this June.

The problem is that as time goes on, the temptation will be, with the negotiators and ultimately with the council, to seek compromise.  Impasse is difficult.  We learned that last time around when the old council could not get DCEA (Davis City Employees Association) to even agree to the terms of the meager contract concessions offered back in 2010.

This is a road fraught with danger, as we learned in June when the community was up in arms about the layoff of tree trimmers.

The stakes could not be higher for this community.  As we reported again last week, $65 million is the unfunded liability for retiree medical coverage.  If we do nothing to change things, we are looking at a quarter of payroll going to fund medical coverage for current and future employees.

Roads and infrastructure, with the loss of federal and state monies coupled with the loss of redevelopment, continue to decay, building up tens of millions in deferred maintenance that has been avoided for years in categories of unmet needs.

As we have noted a number of times, the culprit of this crisis is comprised of several different factors that coalesced.  During the last decade, the city saw a vast increase in compensation – salaries more than doubled, pensions were increased, health care costs rose.

The city managed to stay afloat because of a double-digit increase in property tax revenue fueled by the real estate bubble, and a half-cent sales tax that was quickly eaten up with fire salary increases.

When the supply of revenue was cut off in 2008, the city could no longer sustain the salaries, benefits, pensions and other benefits that had been put in place.

So what happens if the council does not hold the line on critical structural reform?  Well, we saw what happened when it failed to achieve what was needed in 2009 – the costs to the city and employees only increased.

In better times, will the toxic brew be more manageable?  Only perhaps if we can assume double-digit increases in property tax again, something that most analysts do not believe will occur.

Moreover, it is not clear that the city can hold the line on salaries and benefits.  Once the market starts to improve, there will be pressure by the city to increase salaries that have been largely held in place the last five years.

The argument will be made, as it has been with recent management hires, as it continues to be made at UC with the hiring of chancellors, that quality takes money and that we cannot afford to get out big for quality city staff.

If we do not fix OPEB (Other Post-Employment Benefits), we face our own fiscal cliff, as we argued last week.  The city will increasingly have to absorb salary into employees who are no longer currently working.

In good times, our budget will be increasingly constrained and it will be the taxpayers and residents who have to pay, with increased demands for revenue along with decreased provisions of service.

That is, if we even get that far.  Without concessions from city employees, the city may have to go a more stringent route – layoffs.

The lesson of DCEA is a curious one.  DCEA employees fought the system back in 2009 when the stakes were far lower.  The city, following poor advice from legal counsel and perhaps overreacting to a stressful negotiating environment, short-circuited the process way too quickly.

When PERB (Public Employment Relations Board) overturned the impasse last year, the DCEA employees were ordered to receive back pay and benefits – $10,000 checks.

The lesson?  Fight the system.

The problem with fighting the system is unfairness.  Unfairness in the form of layoffs, for some.  Unfairness in the form that while everyone else had to take concessions, DCEA employees were cut substantial checks.

The city had no choice, when the impasse imposition was overturned, to lay off employees to recoup the money that the city was going to have to pay in back pay and future pay from the loss of their savings in the previous MOU.

If the city has to compromise on the current bargaining contracts, the city still has to balance its budget.

The result will likely be more layoffs, more outsourcing, more privatization, more consolidation of city services.

Is that where we want to head?   It certainly would not be my choice.  I got into to this wanting to see the structural problems solved – not employees laid off, not jobs privatized and outsourced.

The council needs to stand firm for our future and the future of all city employees.  It is a tough task, but one that you were elected to do.

—David M. Greenwald reporting


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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9 thoughts on “Is the Window Closing For Real Fiscal Reform?”

  1. hpierce

    [quote][b]salaries[/b] more than doubled[/quote]
    [quote][b]salaries[/b] that have been largely held in place the last five years[/quote]
    Which is it, or do you mean [u]total comp[/u], including changes due to costs for retirement (inc. formula change)?
    Salries basically doubling in 5 years, then being pretty static? Not true for the vast majority of city employees. Hyperbole?

  2. David M. Greenwald

    You are correct I meant total comp. Total comp for employees (not salaries) rose from $27 million to $49 million in 2007-08. So not quite double over an eight year period.

  3. Rifkin

    In case anyone is interested in my take on the status of labor talks with the City of Davis, my column, which will be published in paper form tomorrow, is now up on The Davis Enterprise website ([url][/url]).

    Here is a brief excerpt* from my piece: [quote]A fear expressed to me by two members of the council is that their colleagues may go wobbly. The unions are not budging, not accepting the compromises necessary to allow the city’s expenses to match its revenues. And they worry there may not be a majority on this council willing to declare an impasse and impose terms.

    Instead, the majority prefers to wait. But waiting comes with real risks.

    … In the meantime, none of the seven employee groups without contracts has a strong incentive to accept a new deal that reduces the amounts their members are getting under the old agreements. Short of mass layoffs, the workers who hold out the longest probably will suffer the fewest consequences.

    So the employees prefer to wait.

    [b]–Rich Rifkin, Lexicon Artist[/b][/quote] *After writing the word ‘excerpt’ I was uncertain if I had spelled it correctly. It looks weird to my eye. Thanks to the wonders of the Internet, I also found that it has an interesting etymology.

    Excerpt comes to English from the Latin [i]’excerptus'[/i], which means ‘plucked out.’ The prefix ‘ex-‘ means ‘out’ and the root ‘carpere’ is ‘to pluck.’

    Carpere also is the origin for ‘carpe diem,’ which means ‘seize the day,’ where seize and pluck are synonyms for grab or take hold of. The word carpet is another of carpere’s derivatives. It likely came in to use because early carpet fabrics had a plucked appearance. Also, ‘to carp’ likely came from carpere, where ‘to pluck’ was used to mean ‘to pick out’ and in a sense ‘to find fault with.’ Finally, the online etymology dictionary says o harvest’ has carpere etymological origins by way of German and Greek and other languages: carpere > karpos > herbst > haust > harvest.

  4. Rifkin

    [i]”Moreover, it is not clear that the city can hold the line on salaries and benefits. Once the market starts to improve, there will be pressure by the city to increase salaries that have been largely held in place the last five years.”[/i]

    For three reasons I don’t believe this:

    1) Without exception the total compensation paid to public employees in California is currently inordinately high. Workers with similar private sector jobs make much less money; and public sector employees in almost all other states make much less than their counterparts in California.* As a result, there is no way that cities and counties in California will be losing their good employees to better opportunities elsewhere;

    2) Without exception every city and county in California is in dire fiscal straights and none has the ability now to significantly increase compensation rates without severely cutting services or going bankrupt. As a result, there is no way that cities and counties in California will be losing their good employees to better opportunities at other public agencies; and

    3) An improving economic climate in California will not change the realities faced by California cities and counties for a long time. They all face massive and (in most cases) rising unfunded retiree healthcare costs and massive and rising underfunded pension liabilities. Also, most of them have severely cut services over the last 4 or 5 years. As a result, if any new cash is coming into California cities and counties as a result of an improving economy, that money will go to fund debts or to restore services. Any agencies which don’t do that will face insolvency very quickly.

    *This is not quite true of public school teachers in California. We are no longer the highest of all states. The mean salary here is the fourth highest of all 50 states (trailing only New York, Massachusetts and Connecticut). Only seven states (Alaska, Arizona, Florida, Illinois, Montana, & New Jersey), however, have fewer minimum required hours of classroom instruction per year than the 840 hours we have. Some, like Texas (1,260 hours) have a lot more. And five states (Colorado, Connecticut, Massachusetts, New York and Tennessee) just announced they will be adding 300 more hours per year of instructional time ([url][/url]).

  5. Rifkin

    [i]”Wobbly meaning cave or do nothing?”[/i]

    To go wobbly means to lose resolve or to buckle. If you click on my column you will see I added a comment below about the current use of that term. I think it is interesting who tends to use ‘go wobbly.’

  6. David M. Greenwald

    Rich: And yet, look at what Davis and Sacramento paid to their city managers in the height of the economic crisis. That’s why I’m still skeptical about long term the ability to hold costs down. Look at UC’s pay to its executives at the same time they are cutting to their rank and file employees and raising tuition.

  7. Rifkin

    David: [i]”Moreover, it is not clear that the city can hold the line on salaries and benefits. … look at what Davis and Sacramento paid to their city managers in the height of the economic crisis.”[/i]

    I don’t know much about the situation in Sacramento. But if you look at what might be called ‘the true cost’ of Davis city manager Steve Pinkerton, it includes not only his salary and benefits but also the marginal additions or subtractions to the city’s total labor bill.

    One of Pinkerton’s marginal subtractions has to be his move to outsource some of the tree/park maintenance labor. Not only is Davis paying 80% less per tree, now, for example, but for those 9 jobs he cut we no longer have any retiree medical liability or pension underfunding liability and for the contract workers (whose wages and benefits are about the same) we will not have to pay anything for pensions for them or for retiree medical.

    So just including that one example, you can say we are paying about $1 million less for Pinkerton’s services than we were paying for Emlen’s. Yes, Pinkerton’s compensation package is about $40,000 higher per year. But Emlen would never have saved us the $1 million or more that Pinkerton did in that single move with tree/park maintenance. And the long-range savings that Pinkerton is going to put in place will save us much more compared with the status quo ante.

  8. SouthofDavis

    David wrote:

    > Moreover, it is not clear that the city can hold the
    > line on salaries and benefits. Once the market starts
    > to improve, there will be pressure by the city to increase
    > salaries that have been largely held in place the last
    > five years.”

    Then Rich wrote:

    > For three reasons I don’t believe this:

    I don’t believe it either and we (as a city) should just wait until people actually start leaving for higher pay and we have a hard time finding qualified people before we raise salaries. As I’ve said before we could cut firefighter pay by 25% and still have 100+ qualified candidates for any vacancy we might have (I’m betting that not a single firefighter would “quit”).

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