When the city council voted by a 3-2 margin to approve the 2009-10 budget, we were critical that the effort was heavily reliant on more positive assumptions for future revenue and economic recovery than perhaps was warranted. To add to that concern was the heavy reliance on cutting city services as opposed to dealing with the longer term and more pervasive structural problems that the city faces in the form of employee compensation and a variety of unfunded liabilities.
To make matters worse, the state in creating a bigger mess than necessary out of their own budget quagmire, decided to transfer a portion of their debt, roughly $2 billion, from the state to local government. The staff estimated impact of the city’s budget is roughly $4.5 million. However, before you completely fall out of your chair, only $1.3 million will impact the general fund. The $3.2 million is coming out of the Redevelopment Agency. This by itself could be a huge problem should it continue down the line.
Assuming successful implementation of the FY2009/10 budget-balancing plan, the city’s budget would potentially be structurally balanced through the five-year forecast planning horizon. However, the City’s budget forecast remains highly sensitive to several assumptions, including revenue growth assumptions, ongoing savings from measures being implemented with the FY2009/10 budget, and long-term personnel costs, including salaries, health and retirement benefits (including both CalPERS contribution rate volatility and funding requirements of retiree medical benefit liabilities).
We could probably write several separate articles on each of these points packed into one tiny paragraph that appears at least to this observer to acknowledge that the city’s budget rests on a house of cards and that one card being pulled could cause the entire structure to collapse.
We have had considerable discussion about CalPERS in recent weeks, they are really taking a huge risk with their current projections. One might think a logical course of action is for the city to ignore the ratesmoothing plan of CalPERs and implement a more fully funded model which will anticipate real costs and save money in the short-term to pay for the likely impact in the long term. The alternative to this, much as we have done with the unfunded retiree health benefits program, is to pay as we go. In that case we would be at the mercy of CalPERS ability to invest and could accrue a huge unfunded liability that will result in huge rate hikes down the line. Unfortunately, it does not even appear that we are thinking in these terms right now.
The shorter term issue that will be decided Tuesday, is how to deal with the loss of $1.3 million from the state. There is a huge problem here that will become immediately evident.
“The adopted State budget includes an 8% borrowing of local property tax revenues to be re-paid by the State in 2013, with interest rates to be disclosed in late September. The direct impact on the City of Davis is a loss of nearly $1.3 million in property tax revenues.”
The problem is actually worse than it might appear because I think everyone would agree that the chance we get that loan back in 2013 is next to zero. The bigger problem is that the state is going to have to maintain the same level of funding next year AND likely cut even more as the economy continues to slow down in California and revenues continue to fall. There appears to be no short-term end in sight. So the state is going to not borrow money next year? The state is not going to extend the term of the loans? The state is not going to make the loans actual permanent payments?
I actually believe the last possibility is unlikely but the first two are quite likely.
There is a way out for the city of Davis from this part of the mess that they have not created themselves. The League of California Cities and the California State Association of Counties (CSAC) have put together a loan consolidation plan.
“Under the proposed program, cities, counties and special districts would receive funds equal to 100% of their Prop 1A loan, with the State covering all interest and transaction costs associated with the program.”
All of this sounds good, but there is probably a small degree of risk, which is that the state could suspend Prop 1A. Still that action would trigger legal action by the League of Cities and CSAC, but if times get tougher they may just take that risk.
The city’s alternative to taking a loan would be to draw-down the General Fund reserves or implement additional General Fund budget reductions.
The staff report recommends that the city participate in the loan securitization program.
“It is recommended that the Council direct staff to pursue participation in the statewide securitization program, and return to Council with any formal actions that would be required by the City in order to mitigate, to the greatest extent possible, the impacts of the State’s borrowing of FY2009/10 property tax revenues.”
In this case, that approach makes the most sense, but there should be contingencies in case the state does not repay the money and in case they have to raid more or the same next year.
This just illustrates the degree of my larger concerns with the city finances. We are really on the edge of having to make massive cuts to city programs and staffing. We are extremely vulnerable even with our vaunted general fund reserves of 15% to external forces. And most of all we are vulnerable to our own assumptions which seemed rather optimistic and could end up being far worse than projected.
Currently the city is engaging in labor negotiations in a process that is behind closed doors, the public has no way of knowing how those are going, what progress is being made. I have no problem with the law mandating closed door process, but I have begged from the beginning to implement a meaningful system by which to have periodic public updates. Those calls went unheeded and there is zero transparency in the process.
The bottom line is that we are likely going to survive this hit, but how many more hits can we take before the boat fills with water?
—David M. Greenwald reporting
CC: do not assume that you can continue to dodge the employee compensation and golden benefits programs, yet skate to victory when you attempt to renew the sales tax increase. That increase was not supposed to fund additional golden packages, but that is exactly what the CC did in 2005 to date. We taxed ourselves more, and then you guys turned around and paid off the firefighters who delivered your literature for free.
Time to cut, or we will do it for you.
I’m with Sales Tax Revenue. No renewal of sales tax increase, if there is not some responsible labor negotiations. I would also like to point out Lamar Heystek noted the state/city budget assumptions by city staff were probably too optimistic. Sue Greenwald has been harping on overly generous city employee salaries/benefits for years. The CC majority had better get their act together and do some tough negotiating, OR ELSE…
Or else what?
How many police or fire personnel should we lay off? Which park should we leave unattended? Which services should be shut down?
Don’t think that just voting someone out of office is really going to fix anything? Would any of the current council members really suffer that much if they didn’t have to deal with all of this any more? Sue has achieved her lifetime health benefits and could still be involved in local issues if she were not on the council. Ruth could move on to other things – her family and her trips abroad. Saylor is headed for the County. Lamar may wish to be re-elected, but it wouldn’t be the end of the world if he wasn’t.
Ryan Kelly: We are not talking about laying off public safety personnel. We are merely talking about bringing comp and benefit packages in line with reality. Cut the filet mignon, and live on hamburger for awhile. No one has to be laid off.
i wonder whether the public can by initiative set a cap on salary and benefits for future contracts at teither the local or state level. I seriously doubt whether the public will put up indefinately with higher taxes or reduced services to fund salaries and benefits that significantly exceed the private sector
The City has to contract-out the work. We need to know what other options are available. Without firm bids from other city service providers, we don’t know how much the services are worth.
Since the City Council refuses to do the work necessary to control the budget, it is difficult to know how to issue Requests for Proposals from other service providers? I guess we have to wait for a bankruptcy filing by the City. Which creditor is going to be the one to file?
the widespread financial meltdown at least prevents the city and University from using the argument for over-generous compensation “we have to remain competitive”… The next time an official uses this pathetic statement to justify their decision, I think people should be free to hang them from a doorknob by their underwear.
ps- there is absolutely NO good reason to have salary negotiations with public employee groups from not being completely public. I think it is hidden just because we would be astonished to see just how chummy things really are and that the “negotiations” are mostly an ass-covering session.
[i]We are not talking about laying off public safety personnel.[/i]
If there’s such a big crisis looming, then why aren’t you? Maybe David is right that the city is living on the edge. I wouldn’t know. But the other part of the message has never fit with it: “We’re the ones who predicted a financial crisis, and we were right. Therefore you should also listen to our demand not to cut city services.”
Maybe the mistake all along was to decide compensation on the basis of social justice, and not on the basis of supply and demand. The CalPERS 3% at 50 formula for firefighters is fairly recent. It was apparently approved in 2000. Curiously, the only place that I found this momentous change so far in the minutes is on the consent calendar. It makes the impression that the city council didn’t think that this momentous change was all that big of a deal, and felt abstractly that the fire fighters deserved the benefit. Did anyone then check carefully whether the city was having trouble recruiting firefighters?
Certainly if you vote down the sales tax, then you’ll get reduced services, no matter what you care to talk about. If you think of it as a way to punish the city council, that’s nonsense. You don’t have a way to punish the city council, because they’re practically volunteers. You can take their advice or reject it, and that’s all.
[i]the widespread financial meltdown at least prevents the city and University from using the argument for over-generous compensation “we have to remain competitive”[/i]
You have it slightly wrong, Mike. We don’t have to remain competitive; the question is whether or not we want to.
In other words, you’re really not being clear on whether you don’t want the city and the university and so on to have competitive salaries; or whether you think that they could cut salaries and still be competitive.
For those who are suspicious of the concept of competitive salaries, the prison system ought to be a cautionary tale. On the one hand, compensation for California’s prison guards is much better than competitive, in fact it’s the highest of all 50 states. On the other hand, compensation for the prison doctors was far below competitive. Prison medical care came crashing down with bad doctors and unfilled positions. It was starvation in the midst of plenty, until the federal receiver ordered the state to pay prison doctors more. In issuing that order, they did not order the state to pay prison guards less, although it looks like they should.
I think that supply and demand should dictate the need to be competitive. In the example you give, there was no lack of willing prison guards, but a lack of physicians. The state compensated the group with the bigger union. Union demands distort the fair market… this is particularly true with public employee unions.
[i]I think that supply and demand should dictate the need to be competitive.[/i]
Sure, then we can agree.
[i]Union demands distort the fair market[/i]
To the extent that unions can be on both sides of the negotiating table, yes that does distort the market. But I don’t know that that description fits any city union other than the firefighters. Moreover, a lot of city employees aren’t unionized at all.
[quote]But I don’t know that that description fits any city union other than the firefighters.[/quote]In Davis, that is true, in the sense that none of the other unions finance council campaigns. The Davis police union — it’s actually an “association” — raises funds for political campaigns, but has not bought friends on the council. [quote]Moreover, a lot of city employees aren’t unionized at all. [/quote]Except for the city manager, every permanent, full-time* city employee is represented in a bargaining group. Not all of those groups are technically unions. Some are associations or just bargaining groups. But for the purposes of negotiating contracts, they act essentially the same as any union.
*I don’t know if temporary or part-time employees have similar representation. I doubt they do.
[i]Except for the city manager, every permanent, full-time* city employee is represented in a bargaining group. Not all of those groups are technically unions. Some are associations or just bargaining groups. But for the purposes of negotiating contracts, they act essentially the same as any union.[/i]
There are unions and then there are unions. I can be as anti-union as anybody, but the fact is that some bargaining units/unions have a lot more bargaining power than others. If a bargaining unit only provides a token amount of bargaining power, then it is only of token interest in this discussion.
In fact David already made the comparison in another post: fire fighters seem to have a lot more bargaining power than police.
To come back to another point, there is one aspect of Lamar’s old budget stuff that is the fishiest of all. Namely, his argument to the city council majority and the city staff, “Your budget is too optimistic, therefore let’s undo your service cuts.” That win-it-all philosophy did not creep very much into today’s post from David, but I have the feeling that it is still there.
And certainly, if you vote down the sales tax, don’t expect to win it all after that.
[quote]But for the purposes of negotiating contracts, they act essentially the same as any union. [/quote]
Here’s an example where Rifkin does not tell an “untruth”, but implies ‘facts’ that don’t exist… unions charge dues (my dad HAD to belong to one to have a job)… at least one employee group does not have any dues/fees… Greg is closer to a “truth-teller”
Who of the posters who think City employees compensation is too high, have been qualified to serve the City? Sour grapes?
BTW… what does/did Stan Forbes pay or give benefits to his employees? What was/is his “compensation”?
[quote]Here’s an example where Rifkin does not tell an “untruth”,[/quote]Commenter, why not just say, “Here’s an example where Rifkin tells the truth”? [quote](Rifkin) implies ‘facts’ that don’t exist… [/quote]I’m ready to here those facts, “commenter.” [quote]unions charge dues (my dad HAD to belong to one to have a job)… at least one employee group does not have any dues/fees… [/quote]Oh my, what an evildoer my implication makes me. Obviously, I implied that one employee group does not have any dues/fees when I said, “… for the purposes of negotiating contracts, (bargaining groups) act essentially the same as any union.” I don’t know how to express my deep sorrow for that implication.
[quote]In fact David already made the comparison in another post: firefighters seem to have a lot more [u]bargaining power[/u] than police. [/quote]The source of the bargaining power of the firefighters is their political power. It is not the case that their relative productivity, the needs of the citizenry or a lack of supply of qualified replacements generates greater bargaining power for the Davis ff’s than for Davis cops. In fact, on the basis of those three factors, the firefighters would have less bargaining power than the police.
By contrast, upper management personnel for the City had (the perception of) bargaining power* — now gone — by dint of competing cities. They used that effectively, arguing (with evidence) that unless this position received a 10 or 20 or 30% raise with benefits worth 10 or 20 or 30% more, our people would leave for (fill in the blank) Fairfield, Elk Grove, West Sacramento, Roseville, etc. The reason that bargaining power is gone is because all of these so-called competing cities are in as bad or worse financial shape as Davis is. In other words, Walnut Creek cannot bid away one of our many deputy city managers with a higher pay package.
*The problem with thinking, “We have to pay more to Employee Q, lest we lose her to Redding,” was not just that Davis did not have the money to sustain these endlessly higher compensation and retirement packages; it was also the presumption that there ever was something special about Employee Q. If Rancho Cucamonga wanted her more than we did, then let her go to Rancho Cucamonga. We never lacked for qualified replacements, either from within or from smaller cities in our area which had less to offer their current employees. One huge mistake we have made over the years — perhaps the byproduct of using our city staff as our negotiating team — is that in many cases, even with poorly performing city employees, we have bargained with them as if they are wonderful at their jobs. Without naming names, my guess is many of our $150,000 a year city staffers could not make half their income in the private sector, if they performed at the level they do for the City of Davis.
Correction: [i]”I’m ready to [u]hear[/u] those facts …”[/i]
“Local government bankruptcy (SB 88)
This bill pits local labor groups – particulary firefighters – against cities. By making it harder for local governments to declare bankruptcy, it eliminates a key weapon locals have in negotiating union contracts. City officials say it will hasten the fiscal demise of local governments, while
The original version ofthis bill, AB 155, died in the Senate Local Government Committee. But since this is the resurrection season, it has been stuffed back into a Mark DeSaulnier bill for the final week.”
http://capitolweekly.net/article.php?1&_c=y956nym0u21iik&xid=y954npnvj1hasf&done=.y955c9ozqagd2h&_ce=1252380604.ebec4db54216f00c2d3c53f49ed43f39
Capitol Weekly appears to believe that firefighters are at odds with the City! I guess the battle is between the City Council and the citizens who elected them.
[i]The problem with thinking, “We have to pay more to Employee Q, lest we lose her to Redding,” was not just that Davis did not have the money to sustain these endlessly higher compensation and retirement packages; it was also the presumption that there ever was something special about Employee Q.[/i]
I don’t know a whole lot about what David might call the “inside baseball” of how Davis hires managers. For all I know, the city does sometimes hang on tooth-and-nail to people that it should let go. I have seen an employer do that. But I have also seen the other end of things, what happens when a management position becomes a revolving door. First off, recruitment itself is expensive; that by itself can wipe out what you gain from stinting on salary. Then, the loss of continuity is even more expensive; it usually takes most of a year for a new manager to develop intuition for subordinates and for institutional needs. And what is most expensive of all is to have to fire a manager for doing a bad job. At the city-wide level, that can easily cost millions of dollars.
So for instance, when John Meyer quit, the city had a triple whammy of recruitment costs, loss of continuity, and firing a city manager. I don’t know if a 20% raise could have prevented all of that, but if so, it might have been well worth it.
In that sense, even a so-so manager could be “special”.
The city is in the same position as any entity with insufficient funds to meet expenses. Something won’t get paid. If the city approaches it sensibly and revisits its priorities, it can direct how it wants to spend its limited funds and try to implement its policy priorities while doing it. If it keeps its proverbial head in the sand, then the cuts will be haphazard, addressed by not filling vacant positions. The city either runs the budget or the budget runs the city.
I know which I’d prefer. Not sure if the CC does. Their inaction is appalling – and I hope they don’t expect the Davis citizens who are pinching pennies and living with furloughs to renew those sales taxes and special assessments or pass anything that smells like a request for $$.
The city’s refusal to hire a negotiator to negotiate its labor contracts is just plain dumb. The results speak for themselves. Other cities and counties use hired specialists to do the job and haven’t had the same sweetheart packages Davis has. It’s hard to work with someone one day and negotiate against them the next – that’s why there are labor specialists who do this. It’s sort of like representing yourself in a lawsuit. Most unwise. (As the saying goes, anyone who represents himself in a lawsuit has a fool for a client. . . .) But Davis doesn’t do that because the city is run by the employees for the employees. The City Council members are just passing through and have no real impact on or interest in the nitty gritty day to day city operations. We need a new city manager who truly answers to the CC – and a CC that will make the city manager do so.
And if you don’t believe this is so, request a list of all the settlements that the city has made with citizens, contractors, employees and others – not the confidential details, but simply the number of settlements, and then ask if there has been any change whatsoever in city practices to prevent the recurrence of whatever issue that formed the basis of the suit (whether it be an employee issue, safety, whatever). You’ll find there’s no connection at all. The city pays the settlements, and there’s no review by the city manager’s office to see that whatever problem caused the suit is reviewed and new training or best practices implemented. Business as usual by the same people. The taxpayers pay. The CC is unaware. The managers are unaccountable. Even the lower level city employees are fed up.
I wish John Meyer were back.
[i]We need a new city manager who truly answers to the CC – and a CC that will make the city manager do so.[/i]
Certainly one problem is that the city council itself is subject to the ultimate in salary populism. Serving on the city council is at least a half-time job, but it pays a whopping $600 a month by state law. (That is, $400 per month plus some 5% increases.)
So if you want a wonderful city council, don’t expect a big applicant pool. It could be the worst job in Davis. I respect city councilmembers just for agreeing to do it, whether or not I agree with their politics.
If the CC majority refuses to employ tough negotiations w the city employee unions, then I will not vote for the continuation of any parcel/sales tax. And if that means cutting services/laying off city employees, then so be it. We as a city must live within out means. Now Lamar Heystek said much the same thing, so let’s see if he and Sue join forces and at least Lamar sticks to his guns.
By the way, Lamar’s suggestion for a revised budget recognized the state budget was going to get worse, not better, a no-brainer. He then suggested a revised budget that was lower overall than the city’s proposed budget. Paul Navazio, the city of Davis’ asst mgr/finance director is clueless, clueless, clueless.
IMHO, anyone that still harps on the idea of “we have to keep up with the Jones” is out of touch with current economic reality, period. Afraid of a revolving door where able city managers/highly paid execs in the public sector will walk if not paid a “competitive salary”? There already is a friggin’ revolving door! Get it?
[quote]Then, the loss of continuity is even more expensive; it usually takes most of a year for a new manager to develop intuition for subordinates and for institutional needs. [/quote]Insofar as this is true, it should be understood that our retirment packages [i]encourage discontinuity[/i] by rewarding senior managers to retire a full 10 years before they are of normal retirement age (65). [quote]First off, recruitment itself is expensive; that by itself can wipe out what you gain from stinting on salary. … And what is most expensive of all is to have to fire a manager for doing a bad job. [/quote] There are two things which are needed to qualify your assertions above. First, we have hyper-manageria disease. What’s that? That’s when the total workforce remains relatively constant, but more and more people on the payroll take on managerial titles. Thus, don’t fool yourself into thinking someone is really making management decisions when he is largely just a bureaucrat, filling out forms. I don’t discount the fact that it takes some skills and some institutional and practical knowledge to do these bureaucratic tasks. But many of our “managers” and “supervisors” are not responsible for the productivity of large numbers of subordinates. And second, you need to distinguish between a few crucial management positions and all of the rest. The crucial jobs — certainly City Manager, Finance Director, Public Works Director, Community Development Director*, Police Chief and maybe one or two more — fit the bill Greg has described. You want high quality people in these positions; you want to remunerate them sufficiently so that you attract and keep good people; and you benefit from their continuity of service. However, without naming specific titles, there are many other managers — actual department heads and so on — who are more easily replaced and less costly to lose. As it happens, we compensate most of these other title holders just the same as we do the more crucial positions, regardless of their performances.
I want to make clear that I am not disparaging the work of people who are not top decision makers. It’s very important, for example, to have a good City Engineer or Social Services Director. However, the institutional cost of hiring someone new every few years for one of these positions, if our folks leave for greener pastures, is not so high.
*That sounds like a modest job, but in Davis the CDD is quite important. All development projects go through her office.
[i]Insofar as this is true, it should be understood that our retirment packages encourage discontinuity by rewarding senior managers to retire a full 10 years before they are of normal retirement age (65).[/i]
It isn’t quite as cut and dried as that, because it takes time for retirement to become profitable. This argument would only apply to employees who have enough years put into CalPERS in one way or another. But otherwise, I agree: This is a strange benefit to offer managers. I don’t care all that much about any abstract definition of “normal” retirement. But as a practical matter, it’s absurd to call age 55 too old for a management position.
I’m not here to always argue for more benefits for city employees no matter what. What is wrong is an armchair standard of fairness that flips from give-away sympathy to morale-killing exploitation. In general, the city should strike a [b]realistic[/b], [b]market-based[/b] deal.
[i]First, we have hyper-manageria disease.[/i]
Well, the city might. As I said, I don’t know very much about the city’s “inside baseball”. I agree that it can happen.
It might be fair to have a complete on-line list of city employees and their positions and salaries, since after all state employees are subject to this exposure.
Interesting to note that they are a matter of public record in Vacaville, posted right on the city web site:
[url]http://agency.governmentjobs.com/vacaville/default.cfm?action=agencyspecs[/url]
[quote]Interesting to note that they are a matter of public record in Vacaville, posted right on the city web site: [/quote]
Actually, the same info is available for Davis and has been for over 2 years… I can’t “capture” the link, but go to City website, choose Departments, Human Resources, and you can find the link to job specs, which include salary ranges.
Not sure that this meets Greg’s idea of “fairness”, but as many job titles in the city have only one incumbent, it should come close. Of course you can’t determine if someone is at the bottom or top step of the salary range, nor their years of service, nor their marital status, nor how much of the cafeteria benefit they take in cash, etc.
Depending on the amount of transparency needed, we should include the same info for school teachers, administrators and those in the private sector whose firms provide services to government entities, including the city.
These lists of salary ranges are interesting, but they don’t go as far as the state worker salary database ([url]http://www.sacbee.com/statepay/[/url]) maintained by the Sacramento Bee. That database lists people by name with exactly what they make.
[i]Depending on the amount of transparency needed, we should include the same info for school teachers, administrators and those in the private sector whose firms provide services to government entities, including the city.[/i]
I don’t know how much transparency is “needed” for whatever purpose. But what I can say is that the California state employee salaries are at this point as transparent as it gets. It’s like living in a fishbowl. You will certainly not see it for a long time with government contractors in the private sector.
My point is that if people wanted this information for state employees, why not ask for it for municipal employees and K12 employees too?
Greg: After we finish with the contributions database, it is something that we can do. There has been considerable debate over how and whether we should do it however.
[quote]It might be fair to have a complete on-line list of city employees and their positions and salaries, since after all state employees are subject to this exposure. [/quote] The Davis Enterprise and The Vanguard have published this information (as has the Sacramento Bee). [quote]It isn’t quite as cut and dried as that, because it takes time for retirement to become profitable. This argument would only apply to employees who have enough years put into CalPERS in one way or another. [/quote]Save those brought in from other states — as our city manager was prior to Bill Emlen — it really is that cut and dried for most of these senior managers.
Typically, they start their careers in municipal government work in their early 20s. By age 55, they have 30-34 years of service time. Say, for example, a manager’s final salary is $150,000. Say he worked in municipal government in California* for 32 years. With 2.5% at 55, he qualifies for a pension (plus other benefits) of 80% (i.e., 2.5% x 32) of his last salary, $120,000 per year.
The question then is, what does a healthy 55 year old former municipal manager with a $10,000 a month pension (which inflates every year by a cost-of-living formula) do for the next 15 years or so? In many cases, he becomes a consultant, selling his services to other cities or counties directly (that is, working as an interim replacement) or indirectly (that is, performing cost-benefit studies or other studies which benefit from his perspective and experience). Most municipal consulting firms in California, large and small, are staffed with these “retirees.” Depending on how much a retiree wants to work, a lot of these guys make six-figure incomes doing this stuff part-time.
When you combine that money with their pensions and other benefits and more time off, you can see why a manager (with marketable** skills) would want to retire so young.
*They might start in any other city, county or other public agency in California, but regardless of their path, as long as the agency was a PERS-affiliated agency, their years toward retirement moves with them. Thus, someone who comes to Davis at 54.8 could qualify for retirement in a few months at age 55.0, having worked say 34 years under the PERS system. As far as his pension goes, that was funded all along and would not represent any added cost to the taxpayers of Davis. However, we would be responsible (per our current contracts) to pay for his retiree medical (as much as $17,000/year, though falling substantially in real dollars after he reaches age 65) for the rest of his life.
**On the surface of it, you might not think very many of these retirees have highly marketable skills as consultants. However, I have been told that even people who never reached the level of department heads can match or beat their former salaries working as second fiddles in these consultancy groups. What they get paid for, often, is doing the leg-work necessary to complete technical reports the consultant is paid to do.
[i]There has been considerable debate over how and whether we should do it however.[/i]
People have made so much hay from the database of UC salaries, and yet still blasted UC for its supposed lack of transparency. So I don’t see what there could be left to debate for whether it should be done for cities.
[i]Typically, they start their careers in municipal government work in their early 20s. By age 55, they have 30-34 years of service time. Say, for example, a manager’s final salary is $150,000.[/i]
It suddenly becomes clear that CalPERS’ problems are not the same as Davis’ problems. It isn’t in the city’s interest to solve CalPERS’ problems for it. On the contrary, CalPERS has created a financial loophole, and it’s perfectly fair for Davis or any other city to use CalPERS to maximum advantage. It’s a shame, because as you say it undercuts continuity of leadership, but the financial incentive is still real.
CalPERS contributions are a tax based on current salary. However, CalPERS benefits are based on final salary, not current salary, and they are multiplied by the number of years of retirement. Therefore, if a city offers a brief stint at a high salary to an employee near the minimum retirement age, it can offer a lot of extra compensation through CalPERS at relatively little cost to itself.
[i]Most municipal consulting firms in California, large and small, are staffed with these “retirees.” Depending on how much a retiree wants to work, a lot of these guys make six-figure incomes doing this stuff part-time.[/i]
The truth comes out. After so many people have said that many public employees are mediocrities who wouldn’t make the same money in the private sector, now the story is the opposite. To be sure, municipal consulting is a satellite industry around the government, but as far as wage pressure goes, it makes no difference.
It is a public policy disaster when the real compensation for public employees is the consulting that comes after the official public job.
[quote]CalPERS contributions are a tax based on current salary. However, CalPERS benefits are based on final salary, not current salary, and they are multiplied by the number of years of retirement. [/quote]That is how it works in Davis. However, I don’t believe that is the norm everywhere in California. PERS-affiliated agencies have the right to base a pension on final year, on an average of the last few years, etc. If a city, like Davis, adopts the final salary model, CalPERS charges that agency higher rates all along to account for a peak payoff. In other words, there is no free lunch to a city which uses the final salary model. My sense (though I don’t have any actual evidence of it, yet, but I’ve been looking) is that this model invites abuse. A Firefighter 2, for example, 9 months shy of age 50, will get a far better pension if he is promoted to Captain and holds down that job for his final 3/4ths of a year. In Davis, a Captain makes $14,000 more in salary than an FF2. Although pension incomes are based on salary, not overtime, it is also the case that Captains, despite being “management,” can make a lot of money in O.T. One Davis fire Captain in particular, has made more in total income than the Fire Chief has over the last few years, because he has made so much in overtime. (The Chief does not qualify for O.T.)
[quote]To be sure, municipal consulting is a satellite industry around the government, but as far as wage pressure goes, it makes no difference. [/quote]You have to look at the consultancy jobs in context. Take a mediocre $180,000 a year city manager. (That’s a mid-range salary, though higher than we pay in Davis.) She might only be worth $75,000 a year in the free market, which of course is not “free enterprise” in any sense. Her services will only be sold to government agencies, and the buyers of these services will be spending taxpayer monies, not their own. That is a huge difference. For that $75,000 a year, she needs to attend a dozen or so municipal meetings — consultants are often put up in hotels and compensated for their travel expenses — and produce, say, 4 (boilerplate) reports a year on topics like, “Outsourcing garbage service” or “Reducing paper waste in city government.” Her total annual time working on these projects is less than half what it was in her old job. So she has a lot of time to improve her golf game, and her total income ($144,000 pension + $75,000 consulting fees) is 121.7% of what she was making working for a city.
By the way, if you think I am overstating the cost of these consultant’s reports or overstating how inane some of them are, keep in mind that 2 years ago, for example, the city council in Davis agreed to pay something like $75,000 to a consultant to tell us what Davis residents want in greenbelts and parks in Davis. I believe Sue Greenwald and Lamar Heystek voted against this expenditure, but cities pay these amounts all the time. Moreover, cities (and statewide statutes) compel the writing of very expensive studies on traffic or environmental impacts or other such things for each development project. These are then shopped to the former public employees (or technical experts who specialize in narrow aspects of EIRs) who make good money collecting fees for this make-work.
[i]If a city, like Davis, adopts the final salary model, CalPERS charges that agency higher rates all along to account for a peak payoff.[/i]
I am not sure how you find out all of these things, but sure, that too could be true. Even so, if it is higher rates “all along”, then these are higher rates in expectation of the peak payoff to come. The perverse incentive to reward people with a one-year boost and then let them retire early would still be there.
While it is useful to research how much people actually make use of these tricks, you can figure out what the system [b]invites[/b] by doing your own calculation. Actually, all systems “invite abuse” in the sense that pay incentives can never be perfectly aligned with intentions. The question is how big is the misalignment.
If nothing else, 3% at 50 or even 2.5% at 55 is a strikingly early-age incentive for management. It says in the the Davis bargaining unit chart that individual managers are a bargaining unit, and department heads are another bargaining unit, both separate from the police and fire unions. Yet even they get 3% at 50 if they are public safety managers. Now again, I am not part of the “just cut their compensation” school, but is this the best way to compensate managers? We could change the way that we pay them, without necessarily paying them less.
[i]She might only be worth $75,000 a year in the free market, which of course is not “free enterprise” in any sense.[/i]
Here you are changing the subject from rational compensation to general disgust with government waste. It maybe true that Davis pays people to retire too early, and it may be true that Davis pays too many consultants too. But these are completely separate decisions. When Davis bids for employees, those people could instead consult anywhere in the region, not necessarily in Davis itself.
The fact remains that there is a big market for consultants in California, and Davis has to compete with it when it hires staff.