A Different View of City Employees and Benefits

Davis-city_hallOn Wednesday following the Measure O election, the city’s Chief Innovation Officer offered a very interesting analysis of city employees and the pension issue.

It bears further reading.

Rob White posted the following:

I won’t disagree that there are many facets to this issue. But I will also note that most employees working for the City are not actively looking to ‘gouge’ the community. Maybe not all, but certainly most. I can only speak to what I witness every day.

Over the last 7 years, City staff have seen co-workers laid off, shifted to new roles, and retire early. Previously, the focus has been to reduce ranks to address the revenue shortfall. It is difficult to work in those conditions and maintain a happy countenance… Anyone who has worked in a financially struggling org knows how this looks and feels, and it’s not good. And employee morale is critical in delivering effective services, especially with reduced staff and revenue. So we arrive at the perfect storm of downward pressures.

As someone who only recently arrived in Davis, and who works with cities and counties across the State, I want to take a moment to note several points about the pensions, since this seems to be a topic often visited on this blog.

First, Davis is not out of the norm for most local government agencies. The calculation rates and retirement ages are commensurate with a majority of the 480+ CA cities, and are most certainly not an upper tier. Not even in the Sacramento region. The problem with current pensions is that EVERYONE (cities, counties, the State, special districts) ratcheted up the pension calcs during the late 90s and in to the early 2000s for two primary reasons – 1) competition with the dot bomb private sector to get and retain quality employees (which was futile anyway, but was a dramatic concern back then) and 2) CALPERS was telling all of these orgs that the cash machine of the stock market and land development increases would never run out… essentially, a world without end.

True, someone should have checked the accounting… but there was the problem, many of the brightest financial minds were being wooed to high paying jobs in the tech sector and those remaining were overwhelmed by the workload and scale. Actuarial tables should have been the core to decision making, but the grasshoppers were saying “no need to work, just come enjoy the summer sun!” Our state leaders were on board and it was a race to the top. We know how this turned out. It was colossal groupthink in the extreme and is now a common case study for failure points in many Public Admin programs… or how not to make financial policy decisions.

Second, pensions are primarily regulated by entities that are NOT under the control of the Council, senior management, nor employee. The only way any of the current Davis city staff (including exec management) can reset their pension calcs going forward (as everything earned to this point is a “right” that the state has made clear they don’t plan to mess with) is to quit public service all together. Even if a local government employee goes to another local govt org, most of us will be earning similar calcs (with only a few exceptions). This is due to the recent state pension “reform” rules which set the processes by which current and new employees earn their pensions. New local government employees (never worked in govt before) will earn less in their pension (in many cases) due to the second tier rates, but this also brings about a fairness discussion about the same jobs getting paid different amounts (even if base pay is the same, the pensions are very different).

In my own personal case (I don’t mind sharing), I came from a city using pension calcs of 2.7% per year of service times the highest single year. In Davis, I now get 2.5% (new state rules on existing CALPERS employees that switch cities) times highest single year. So a small decrease, but not one that is going to fix revenue shortfalls in any city or local government. My base salary remains the same over the entire 3 year period of my contract (No CPI). I now pay about $350 per month for a substantially smaller package of medical, dental and vision benefits than what I previously received. I also used to get $550 per month cafeteria benefit cashout, so we are talking real dollars lost to my personal budget of $900 monthly. Yes, you read that right… I get less calculated pension and took a $10,800 real dollar pay cut.

This gets at the heart of why I am explaining all of this… Why would I do such a thing? Because I believe that Davis has an incredible set of opportunities. I am often told (and I believe) that my skills are something that are a strong supplement to activities occurring in Davis and I bring a unique set of insights and networks to the task. I have the quals and broad accolades to prove that I know what I am talking about, and I am willing to take each and every challenge headon and weather the continuous cycle of second guessing and Monday morning quarter-backing that seems to be a main stay in Davis. I believe that the majority of City staff feel the same way. They want to work hard for this community and make Davis the best place on the planet.

I can share that the mood in City Hall today is one of relief. There is a palatable positive attitude change. Why? Because many of the people I sit near and work with daily now have a little more certainty in their lives about the future (at least for now) due to the passage of Measure O. Staff are noting that the majority of voters believed in them and are energized to prove that the money will be well spent. This is very different than a few days ago when it was a lot of breath-holding and stress. many now admit that they were certain they were losing their jobs.

See, the things we talk about here on the Vanguard and in the broader community dialogue affect everyone, even many that do not comment. The constant complaints about staff and their ‘bloated’ pensions becomes an increasingly heavy burden. Especially since they couldn’t change much of that, even if they wanted to. They came to Davis to work hard, have a career and agreed to a certain wage and benefits package as was comparable to other local governments.

Sadly, as Davis struggles to come out of the recession while other cities are already seeing their revenues return to pre-recession levels (and beyond), we will start to lose some of our best employees to other cities… because they will get raises for moving, possibly promotions, and above all else work for communities that are collaborating with their local government and working in partnership to make great things happen… instead of reading about how they are the reason that parks, roadways and bike paths are not being maintained.

I’m not trying to be an employee salary or pension apologist. Now that the majority of voters have given the City a short breather (and thank you to those that believed in us as employees enough to vote yes on Measure O), I am encouraging the community to discuss solutions based on universal facts and work with those that do have the ability to change some of the issues we face. Pension reform continues to be something that only our state leadership can really address, so continually focusing at the local level is like screaming in to a hurricane and expecting to be heard. And the City gets absolutely no value in having a pension percentage calc or retirement age that is out of alignment with surrounding cities because it just means that Davis would like to attract a lower than average tier of employee.

As you in the private sector can attest, you can’t offer substandard wages and benefits and expect to retain or attract the best and brightest. And a simple review of local government wages and benefits will show that the surrounding cities have either mostly caught up with or surpassed Davis’ wages and benefits. If you are bored, feel free to do your own unofficial salary survey by looking on the websites of the surrounding 10 cities that are comparable to Davis and see what their wages and benefits look like. You will see that in most cases, Davis is not the top and often not even the average.

Our fiscal crisis has resulted in many cities, counties, special districts, etc passing us by while we controlled increases and promotions. Sadly, I am confident that we will see the impact of this in the coming months as we see more and more staff departing to better pay, promotions and less community angst. It has already started and I suspect the announcements will become more frequent as the economy continues to heat up in places other than Davis. Just in Sacramento, there are (and will be) many opportunities as a result of the new arena and the surrounding infrastructure and projects (including a trolley, new bridges, office and residential, new retail… and yes, possibly even a third campus of UC Davis in the railyards or West Sac).

I am committed to trying to help the local dialogue become more constructive and positive. It’s what I can focus on and the only part of the equation I can truly lend help to. I believe in collaboration and partnership. While we tussle with each other in Davis, the region, and other cities (local and global) are getting the opportunities and offering to roll out the red carpet (even for our local businesses). Would it surprise you to know that Dixon and other surrounding cities are opening up strong dialogues with our local companies to try and get them to locate facilities and jobs in their cities? Companies that we have played host to and we deserve the opportunity to try and keep.

Of course, finding places for companies that are coming to do research and share technology with our university is also important. We are blessed with a unique opportunity, one I hope we can seize by using all of our previously spent energy that’s been focused on infighting to secure our financial future with the resources right under our collective noses.

Thanks for listening, I hope this has been informative and gives you a perspective that most don’t usually hear. Feel free to contact me privately at rwhite@cityofdavis.org to discuss how you might assist in a positive approach to our needed solutions.

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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  1. Tia Will


    Thanks for the refreshing alternative view of our city workers. This is a very welcome change from the tone frequently seen on Vanguard posts.

    I do have a cautionary note about balance based on one of your statements.

    “CALPERS was telling all of these orgs that the cash machine of the stock market and land development increases would never run out… essentially, a world without end.”

    For me it really doesn’t matter which group is making exaggerated claims about the unlimited prospects for growth. It was incorrect for CALPERS to make claims that “increases would never run out”. In my mind it is equally inaccurate for those in our business community to make claims that growth is invariably better and who define anything that is not growth as stagnation. This is the critical distinction for many of us who favor slow growth.
    I personally believe that there is a balance to be found between conservation of the value of what is currently in existence and the value to be added by growth. I believe this to be true with regard to both population and business growth since neither are associated with “a world without end” and both entail negative as well as positive outcomes.

  2. Mark West

    It really doesn’t matter if the Davis pensions are in line with other government agencies, or out of the City’s control. They remain unsustainable and un-affordable in our current fiscal situation. The basic problem is that the City Council was overly generous in wages and benefits, including spending the money that should have been used to maintain our infrastructure on increased total compensation. That needs to stop.

    Is this situation the ‘fault’ of City employees? The answer for most City employees is absolutely not, as they are not involved in setting their own wages and beneifts, nor are they involved in creating the budget. Those folks who were involved in negotiating MOUs on behalf of the City, and those who created the budgets that ignored or otherwise hid the costs required for infrastructure repair, etc. allowing for the unabated expansion in City Jobs and compensation, are indeed at fault.

    Placing fault however really isn’t the issue now; finding a way out of our fiscal crisis is. Total compensation is a major portion of our general fund budget, and needs to be a focus of continued cost cutting. Instead of allowing staff reductions through attrition as was used over the past few years, and as Rob implies is continuing, we need to determine what jobs truly need to be carried out by City employees, and which ones can be turned over to outside contracts. We can continue to pay to keep the ‘best and the brightest’ as long as we stop paying for those employees who can be replaced through outsourcing. Will this cause morale problems in the short term? Absolutely, but it will also help to make the City fiscally stronger and better able to provide the services demanded by the citizens.

    1. Sam

      I disagree that Davis would not be competitive in hiring if they posted total compensation when looking for employees. Yes, they might not be competitive with other cities (who are also traveling to bankruptcy), but there are plenty of qualified willing employees to take a generous compensation package even if the current contracts are cut in the next negotiations.
      You have to ask yourself why CALPERS has members pay in assuming an annual rate of 7.25%, but if you want to exit the plan they calculate a return of only 3.8%. The answer is the real rate of return is most likely 6%, but cities can’t afford that. So Davis is willing to “promise” obscene benefits they can’t afford and Rob is saying we should keep doing it or we will lose employees to other cities doing the same thing. Not a great long term plan to running a business.

  3. DavisVoter

    Rob White brings in the valuable point that it really doesn’t matter if government employees in general are “overpaid” relative to private-sector employees. Davis has to compete with other governments, and if we fall below the market we will lose out.

    I am not sure I agree that the problem can be fixed at the state level. As I understand it, our state courts have held consistently that public employee pensions are contractual entitlements that cannot be substantially impaired by the state or local government under the Contracts Clauses of the federal and state constitutions. These decisions may come under pressure if local governments cannot figure out how to fund their pensions (I believe San Jose is litigating these issues now.)

    That takes us to Mark West’s point: public jobs themselves are not protected by the market (like salaries) or sources of law the city cannot change (like pensions). Shedding jobs through outsourcing does seem to become a fiscally attractive option for cities.

    Bankruptcy is another possibility; it may trump state law precedents protecting pensions. If Detroit (and closer to home, San Bernardino) establish precedents that pensions can be cut through Chapter 9 bankruptcy, then cities that don’t have debt or that don’t expect to need to take on more debt may explore this option.

    1. Rich RifkinWDE 73

      “Davis has to compete with other governments, and if we fall below the market we will lose out.”

      Any proof of this? It presumes something we know is not true: That there is a dearth of qualified personnel looking for public sector jobs.

      Take, for instance, the recent recruitment of firefighters. No open jobs were guaranteed. Yet hundreds lined up for more than 24 hours for the chance to reach the interview stage.

      It hardly matters what jobs are listed: They all pay so much more than their market rate, there will be a huge queue of people applying for those jobs.

      Moreover, it is not the case that other comp cities with Davis can “hire away” our people. Every comp city with Davis is going broke, just like we are. There literally are no exceptions to this in our region.

      Ultimately, yes, there is a low-point where it is cost-ineffective to pay a sub-market wage. If that happened, people here who are good would leave, and anyone who came would move on to greener pastures. But the truth is we are still far above that point in total compensation.

      I should add that no matter what we do on the high end–for positions like city manager and some department heads–we can always be outbid by non-comparable cities. If, for example, San Jose or Long Beach chose to hire our police chief, those places will always be able to outbid us. And if we lose a good chief or city manager for that reason, it is unfortunate. But certainly no one who is rational would ever suggest we pay so much that much larger cities could not bid away our executives. If we are smart, we can replace them with good people from smaller cities or junior execs from larger ones.

  4. Frankly

    I really appreciate this piece by Rob. He knows who I am and I am sure he is including me in the group of people connected to his statement “The constant complaints about staff and their ‘bloated’ pensions becomes an increasingly heavy burden.”

    Since we are on the topic of sharing.

    I have lived in the area since 1974. Attended high school in Dixon and then moved to Davis in 1978 the year I graduated. I have been working full-time since I was 18. While working, I attended community college in the local area and then complete by Bachelors in business at National University and completed a year toward my MBA before work and family obligations required me to the MBA on hold. National University was the only local 4-year and graduate school at the time that catered to working adults.

    I started working in construction and wanted to be an architect. Then I grew mesmerized with computers and took a job at Pacific Standard Life in the supply department so I could get my foot in the door and transfer to the MIS (Management Information Services) department. That happened quickly, and even more quickly I became a supervisor of a clerical unit of the MIS department. I was 21. I am 54 now. Turns out I had a penchant for corporate leadership. For the next 33 years I worked for a large bank, a large healthcare company, ran my own consulting company and now I am running a non-profit providing financing to small business.

    But for all of those 33 years as a manager, 80% of the time I have been in a cutting mode… constantly having to figure out how to do more with less. That is what we in private business have been doing for the last three decades of globalism. The dot-com boom/bubble certainly was a time of inflated compensation. It was the mid-late 1990s and I was having to pay six figures for employees having certain technical skills in demand. At one point I had responsibility for over 100 employees, and many of the rank and file made greater compensation that I did. But the dot-com period was only temporary. Any company that didn’t adjust from that time of over-heated labor costs is no longer in business.

    There is a broken management-labor-mission mindset with respect to public-sector business. I see it clearly from my decades of experience dealing with the same. And it is a very sticky mindset… and it is cemented with locking mechanisms mentioned by Rob above… the political dysfunction at the state level and legal protections that the unions and Democrat before had had the foresight to establish knowing full well that we would hit this time of fiscal reckoning.

    We are clearly at a point where we need to revision and re-engineer the business model of city government. There is absolutely no question that the current system is unsustainable and returning inadequate returns for what we are paying. Unfortunately what we did with Measure O is to again delay this need. We have just put off the inevitable. Those employee breathing a sigh of relief… I truly have compassion for the stress they would feel for the changes that would have otherwise been necessary. I have compassion because I have lived the same over and over again… and am living it today as my business is down 30% after staffing last year to cover a 30% increase in business. The decrease in business is due to a number of factors that were truly un predictable. What steams me about this constant message that our city is stuck at this burn rate due to every factor that Rob points out… is that we could clearly predict this outcome years ago… and we can clearly predict how much worse it will be years from now. Yet we are still not doing enough about it. We are only nibbling at the edges of a comprehensive solution.

    What I would do as city manager is to do a complete reengineering product… how to do more with less. How to increase service with a smaller and more reasonably-compensated workforce. It can be done. There is a lot of unnecessary fat in our city labor force. We are paying workers more than we need. They are retiring much earlier than they should. They are not contributing enough to their own retirement and healthcare costs.

    Here is the test.

    If we were able to restructure the pay and benefits for every city job to be in line with the general labor market today, and we would require every employee to re-apply for their job at this reduced level along with allowing outside candidates, we would have stacks of job applications including many, many qualified outside candidates.

    We know this to be the case. But for some reasons I can’t understand, we continue most of the status quo.

    Davis will eventually have to claim a fiscal emergency or file bankruptcy. And when we do we will look back on so many missed opportunities to make it right.

    1. Don Shor

      What I would do as city manager is to do a complete reengineering product… how to do more with less.

      I really think that the only way Davis will be able to make these changes is by establishing an outside commission to develop recommendations. City managers, no matter how well-intended, are too close to the staff they’d be cutting. I urge that an advisory commission, including our friend Frankly, be established to review city governance, contracts, and long-term management strategies to start bending the cost curves.

      1. Frankly

        You may be right, unfortunately. But maybe we need to rethink the city manager job and his/her compensation package. Because if the city manager cannot do this work I start to wonder why we need a city manager.

      2. Rich RifkinWDE 73

        The primary problem, Don, has been political will. Davis has never had it. If an advisory commission recommended changes which threatened entrenched interests in our city’s structure, our city council would bow to the wishes of those in place. Just take a look at what the city council did with regard to paid parking, after its advisory commission (and smart members of city staff) studied this issue for 8 or so months and came up with a very well thought out plan: The council heard a few complaints from a few entrenched interests and it gutted the recommendation of the advisory commission.

        1. Don Shor

          I think we have a unique opportunity. In the last two election cycles we achieved an independent majority. This election sustained it. At least three council members are without any ties to the unions, and fiscal stability was a key issue in this election. If ever there was an opportunity for fiscal reform, it is now.
          The last city manager made significant progress — and nearly got his hat handed to him, so I certainly see your point. But there was not a 3-vote majority to fire him, as far as we can tell. An independent commission gives the council members some cover.

          1. David Greenwald

            I’m not a believer that the answer is an independent commission. The counccil either has the will to make th chages or it doesn’t. I really believe the next year is going to be critical – economic development, parcel tax, hiring of the city manager, and the 2015 MOUs.

          2. Rich RifkinWDE 73

            “If ever there was an opportunity for fiscal reform, it is now.”

            Maybe. However, we start with the unfortunate fact that all of the signed labor contracts are locked in until 12-31-15 and almost certainly new contracts, signed or imposed, won’t replace those before 6-30-16, probably later than that.

            Second, don’t be so sure things will be all that different when the new group is seated. I like Robb Davis and I voted for him. However, he replaces Joe Krovoza, who was easily the most courageous member of the current council members. The other four will all be there, and probably won’t behave any differently than they did the last few years. I see no reason to think Dan or Lucas will change. Rochelle and Brett always seemed more than willing to let Joe take all the arrows without ever leading the charge on fiscal matters. Brett, at least, spoke up a few times and had something to say. Rochelle never led on anything. Those two need to grow some huevos and lead. They can’t just sit back and let Robb get killed the way they did with Joe.

    2. Rob White

      Frankly – I didn’t actually have you in mind. But now that you have self selected… 🙂

      To all – We can debate the merits of my thoughts posted here and you can agree or disagree. In reality, I am not involved with the HR decisions for Davis and offer only a simple point – the more we publically diminish our most crucial asset (people) in delivering public/civic/government services by creating environments of blame, the more likely our assets will decide to migrate to other locations. Communities where those with lots to say spend less time expressing opinion as fact and instead utilize that time to find mutual solutions.

      As an qualitative example of my earlier points, today one staff told me they are leaving at the end of the week for a better paying (and equally benefited) job and another staff that the derogatory and public statements are so mentally draining that they have decided to start looking elsewhere. I won’t divulge who these people are, so don’t ask. But an improving economy means that we will see a brain drain. Happens each time we see an improving fiscal condition and is true in every sector. In fact, one of our local business people posted today on Facebook an interesting saying… “If you think it’s expensive to hire a professional, wait until you hire an amateur.” The point being that fixing a mess made by someone with far less skills will always cost more than doing it correctly the first time.

      Let me wrap up this post by laying down a challenge. No matter where you fall on the spectrum of what pay scale, benefits or pensions government employees should receive, the best thing that an engaged community can do for itself is to not act from how we ‘feel’ about the situation… instead, let’s get educated together on the challenges and best practices of cities and frameworks we would like to model. We are an academic community, and as such, we should be using data and facts to make our dialogue less derogatory and more directive to solutions.

      Government is most clearly not a business, and if you are even partially read on the subject of public policy and administration, you will know all about the theory on government services and delivery (i.e market failures, etc). As one who is finishing up a doctorate in public policy, I can think of many resources and I am happy to share for those that want to become educated on the subject. This will help the discussion become one of solutions instead of blame. And lead to new ideas and ways for Davis to move from crisis to fiscal sustainability, without causing yet another community-derived meltdown by forcing our hard working and diligent employees to make decisions to move to more lucrative opportunities because of artificial barriers and constraints.

      For those that think the fiscal crisis continues in most other Sacramento regional cities, I would suggest looking in to their books. Only Davis is experiencing the depth and extent of fiscal struggle we are encountering, and there are about five or six primary reasons why that is true. They are either policy decisions previously made or unintended consequences from policy decisions. But these negative fiscal impacts are not being felt by other cities, and have had the effect of slowing our recovery while others are returning to increased revenue and surpluses.

      We are a smart collective of people here in Davis… City employees AND community members. We should be able to come up with creative ways to get the most beneficial outcomes for all stakeholders while taking care of our collective community.

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