This week, Alan Pryor forcefully pushed back against the council placement of two MOUs on the consent calendar and the agreement of an annual two percent cost-of-living adjustment (COLA) for the duration of the contract. While I understand Alan Pryor’s concerns, I find myself in disagreement with his points in this context.
First, addressing the issue of the consent calendar, I agree with Brett Lee – I don’t believe that the council was trying to hide anything, but, for the sake of transparency, I think it is better to have MOUs on the regular agenda even if it ends up being a quick discussion. I understand that, from the council’s perspective, by the time the item comes up for ratification they have already discussed it to death, but this is really the first time that the public has had a chance to weigh in.
There are at least two new concepts here that the council and city have brought to bear and they needed public discussion. The notions of thinking about the contract in terms of total compensation and using the contract to mitigate risk are highly innovative and the council deserves a lot of credit.
On the other hand, I will focus my comments here on the issue of the two percent annual cost-of-living adjustment.
Alan Pryor raises the point that, every time the voters have approved a parcel tax or sales tax measure, “the council has turned around and given all of that tax money and then some to the employees.”
On the surface there is some truth to this. I think the council did a good job of pointing out that city employees are the ones hired to carry out the service increases. So when the public approves a parks tax, some of the money will go to pay parks staff.
But in a way what Alan Pryor is doing is taking something extraordinary and trying to make it commonplace. The original reference comes from the Vanguard reporting, probably starting in 2008. The city council in 2004 put a sales tax measure on the ballot. It was of course a general tax, so, while it was billed to go to save parks and public safety programs from state budget cuts, the money, as the Vanguard demonstrated, went to massive across-the-board pay increases.
The largest of these was a 36 percent pay increase going to fire from 2005 to 2009. But across the board, every bargaining units over a four- to five-year period received at least 15 percent in pay increases.
The effect of this was devastating to the city. It exploded the city’s compensation structure. It created huge unfunded pension liabilities. The economy and real estate market then collapsed in 2008, which made the impact all the worse.
The magnitude of what happened was not effected previously and will probably never be done again. You just can’t compare the impact of a 36 percent pay increase with an 8 percent pay increase that barely keeps up with inflation. This is a key point we need to discuss.
We really are operating in a different world than we were in 2004. There is much more transparency from the council. You have citizens well aware of what happened from 2004 to 2008. We have things like GASB (Governmental Accounting Standards Board) to help us better understand the impact of post-retirement systems. We brought in Bob Leland to help us model the impacts of spending decisions over a 20-year time horizon.
In 2008, the Vanguard began warning the community that the city compensation system was unsustainable. We pounded the issue of benefit reform. We got some of what we needed in 2009 and a lot more in 2013. But the other thing we called for at the time was to allow inflation to help bring salaries back in line with where they had been historically. And, for the most part from 2009 to 2017, there were very few increases to salaries, and what there was took the form of COLAs.
What I would like to see is for the city to produce a chart showing salaries in real dollars over the last ten years. Total compensation has gone up in real terms, but what is happening here is that our employees are actually getting less in the way of benefits, it’s just unfortunately costing us more to provide those benefits.
That brings us to the question of the two percent annual COLA. As I mentioned previously, one of the big changes is that this council brought in Bob Leland to look at our long term fiscal picture and create a model by which to understand our ongoing needs and their impact on the budget. One of his key assumptions was that we would have an annual two percent COLA for city employees.
All of his models were built around the assumption that employees would get a two percent increase in salary each year. The remarkable thing about these MOUs is that the council found a way, and got the employee groups to agree, to make increases in total compensation predictable.
Bottom line at this point, given that we know the impact of a two percent COLA, the fact that it basically keeps pace with current salary levels, and the fact that salary levels have been decreasing in real dollars over the last decade, means I do not believe we should get upset by a two percent annual COLA.
Finally, there are some who believe we should look at another 15 percent reduction in city spending. While I understand where that impulse is coming from, I believe that further cuts to city spending will reduce quality of life and city services. Thus, at this point, I think our focus should be on growing our revenue base – which long term means economic development rather than trying to squeeze more blood out of an old turnip.
Even as early as 2014, former City Manager Steve Pinkerton made the argument that we have a revenue problem in this community at this point, not a spending problem.
What we cannot afford to do is go back to the days of the Wild Wild West of spending increases like we did from 2000 to 2009. We need to be mindful of spending and contain any cost increases.
But to fix the rest of the problem we need revenue. Short term, we may need to figure out ways to raise revenue through tax measures, but, in the long term, it has to be economic development.
—David M. Greenwald reporting