It turns out that the hard work is just beginning for the council, as they attempt to steer the city back onto the course of fiscal discipline. Last week, led by Mayor Joe Krovoza, the council initiated a bold plan to restore fiscal sustainability.
This week, with sweltering heat, ineffective air conditioning and a packed house, the council faced the music. The anger was apparent in signs from the employees that included “Welcome to Wisconsin” and “I’m More Than an FTE.”
That approach was exemplified by Stephen Souza’s over-the-top comments, “We have the best darn employees on earth,” as he thanked them for making this community what it is and keeping the quality of life what we enjoy.
Mr. Souza continued to attempt to kick the can down the road, acknowledging the need to make these changes, but stating repeatedly that our task now is to balance the budget by the end of the month.
The Council does not have a plan yet, but Interim City Manager Paul Navazio laid out several different road maps to get to the various aspects of the Mayor’s sweeping proposal.
Mr. Navazio showed the council the impact of across-the-board cuts. Then he noted that he was not inclined to go across-the-board. However, one thing to note in the chart, while the general fund impact is just under $2.5 million with such a cut, the all-funds impact is $4 million.
The city has a range of options for developing reduction proposals that do not include across-the-board type cuts. One component would be re-organization and consolidation of city services in the fire department and public works.
There is the merger with UC Davis that is pending, but another likely step would be the reduction to three-men fire crews. There are also needed reorganziations at the public works department.
The city will also be looking at public/private partnerships, shared services and contracting out.
Finally, as Mr. Navazio noted, the lion’s share of the work will be on prioritization, the decisions on what are the core services that need to be retained and what are discretionary services that need to be cut.
Here are possible savings that can be accrued. It seems like that there needs to be a mixed strategy here, otherwise the city faces about 33 layoffs (which everyone has made a huge deal about and is by no means ideal, but pales in comparison to what has occurred at the state or the school district).
The other options would be the 8 to 9 percent salary roll-back that would generate about $4 million for all funds and $2 million for the general fund. There are various mixes of the retirement contributions that could produce savings. Finally, there is capping the Cafeteria Cash-out that could save about $1.67 million.
What these numbers show us is how a mixed strategy could work to rather easily get us to where we need to get. The problem is that the employees would have to go along with it, and that is going to be a challenge.
The council offered an initial round of comments.
Councilmember Souza offered that he did not think an adversarial relationship was conducive to good solution. “It’s a real problem and it’s all of our problems,” he said. “We can close deficit without having to hit very hard the community pocketbook and your pocketbook,” he offered.
However, the rest of the council seemed to acknowledge the obvious, the budget is over 70% compensation to city employees, and despite claims to the contrary, any solution must necessarily burden them.
As Mayor Pro Tem Rochelle Swanson put it, “This isn’t easy and it’s tough. Everyone is going to have to give something.” She added, “If everyone can give some, we can preserve the whole.”
She argued that this is not balancing the budget on the backs of the employees. But it will undoubtedly feel like that to some employees, who seem to forget all of the gains they got in the last decade and seem to somehow lack a true appreciation of how deep a hole we truly are in.
Councilmember Dan Wolk said that he is a public employee and that he has had cutbacks in Solano County and now the council is facing the same wrenching decisions in this city.
He said that he can relate to how people are feeling and he understands how what happened last week caused a stir.
However, he boldly stated that the old ways of doing things are not viable. This is an era of shrinking revenues and unfunded liabilities. “This is an era of shared sacrifice,” he said.
Then he backed off some, stating that it shouldn’t be an era of labor strife. What council needs to do is not have a combative approach with employees, and not have a top down approach. Layoffs should be the last resort, he said.
It was Joe Krovoza on this issue who was most eloquent.
“What we’re doing here is trying to make sure we’re building a sustainable city not in an environmental sense but in a budget sense,” he said.
He said that the city has been working on this budget since November. “It became very clear to us last week that we have an unfunded liability of your benefits that we can’t pay for, for you and the longer we go in putting the right amount of money away for your benefits it digs the hole deeper which only means worse cuts later when come to reality,” he said strongly adding this is true for retiree health and pensions alike. “This is an attempt to start to get square.”
City employees were clearly angered by the cuts.
One of the chief culprits in creating the budget mess in the first place, Firefighters Union President for 25 years, Bobby Weist was one of the loudest complainers about the Council taking back the city’s budget from the special interests.
Mr. Weist said that they have been watching the council and the discussion about laying off five people in order to keep the 15 percent reserve. He said that gave him 
heartburn, he thought they could go about it a different way, but he kind of understands.
“You see a sign here and it says ‘welcome to Wisconsin’ and that’s exactly what it sounds like,” he said as though the council were planning to end collective bargaining rights for union employees. “It sounded like the Governor of Wisconsin and what they were doing to the employees there.”
He said that first the council asked if they could cut 10% off department heads and management without negotiating. He said he’s been around for years, and “I’ve never seen it like this.”
He added, “I understand we’re in tough times but the approach that has been taken is shameful. These employees have stepped up every single time to help the city get through.”
“We want things to work out,” he said, “but the way you’re going about it is just wrong.”
“You’re talking about basically ruining people’s lives to basically get more money to some roads right now,” he added, apparently unaware of the hyperbole. “I didn’t hear one dime of that $2.9 million going into retiree medical or anything else. I heard it going into roads and infrastructure, nothing else.”
We will get into the factual problems with that statement later, but for now we’ll point out most of that money is covering either future pension hikes or past wage and pension hikes.
Mr. Weist was not alone. Jeff York from the Davis Police Officers Association argued that they had already given up a lot in their contract and for the council to say that they had not taken any reductions was “ridiculous.” He reiterated Mr. Weist’s point saying, “You will ruin lives.”
He said that all of the unions have stepped up and had a joint meeting, that they are all in this together. That the DPOA is not just concerned with themselves, they are concerned with all employees and the community. He argued that they are responsive to community calls for services and that the people of this community have it so well.
Larry, another employee, implored the city council to “think outside of the box.” He said on the graphs, all he saw was boxes.
There were more touching moments as well. For instance, Josie chose the City of Davis because of the schools and the quality of life. She took a job with the city for not much pay, but because of the attraction of the city, that pay was fine.
“The irony is that though I have worked for the City of Davis since 1992, I still cannot afford to buy a house in the City of Davis,” she said. She uprooted her kids to move somewhere else because she cannot afford to live here. “I am proud to be a City of Davis employee and City of Davis residents are very lucky to have the level of service that Davis city employees provide us.”
The meeting went late into the night, and it diverted into topics like the closing of a pool, a major issue for some 200 residents who wrote in, but a minor issue for the budget.
We will analyze this more and more as we move toward the final budget. I understand the angst of the rank and file employees, many do not get huge pay, do not get huge pensions. That is why I have always pushed for cuts at the top rather than across the board, and hopefully the council can pass a budget that does what we need it to fiscally while projecting the jobs, pay and benefits of the people like Josie. If we look at the numbers and employ a mixed strategy, I think we can get there without any layoffs and with minimal impact to people like Josie.
I have far less sympathy for people like Mr. Weist, who are making well over six-figure salaries, who got a 38% pay increase last decade, and who received a pension bump to 3% at 50. That is what we need to fix and if we do not, none of these people will have their jobs.
I heard a lot of talk about sitting down and thinking outside of the box, but what I did not hear was how to deal with the real issues the city is facing, understanding that we put 70% of our general fund into employee compensation and the ratepayers are being asked to triple their water rates.
—David M. Greenwald reporting
While I am appreciative of the council’s responsible approach to fiscal accountability, I can definitely see one needless cause of frustration and anger. That is the incongruity of a group of relatively financially well off individuals attempting to convince workers like Josie that this is “not about balancing the budget on the backs of the employees.” Of course it is. And it is probably necessary and it is probably the right thing to do. But that does not mean that cut backs will not disproportionately impact the workers like Josie while leaving the people making the decisions relatively unscathed. To say that everyone will have to sacrifice, when the sacrifices will not affect the speaker substantially is a recipe for discontent. My recommendation would be for the council members to continue to act fiscally responsibly and to avoid statements that make it clear that they do not really understand what this means for the lower paid workers and that statements to the contrary appear to be window dressing.
Just a note on the proposed closure of Community Pool :
The reason so many folks wrote in to request a one year moratorium on the closure is simple. There are about 1700 of us who participate in swimming programs in Davis. That’s one participant for every ten households. It’s getting tough to find a time slot to swim in. The lanes are crowded. So the swim community is scrambling to figure out how to maximize the available pool time that is currently available.
Perhaps, to the Council, closure of Community Pool is a small step toward closing the budget gap, but to the swim community, the closure will create massive problems trying to serve all those folks.
I swim for fitness every other day and pay $47. per month for my participation in the Davis Aquatic Masters, much of which goes to the City for the use of the pools. Davis has the largest Masters program in the U.S. Here is a partial list of groups who pay the City for use of the pools. Davis Aquatic Masters (DAM)
Davis Aquadarts, Springdarts & Summerdarts
Davis Aquastarz
Davis Water Polo Club
Davis High School Water Polo team
Davis High School Swim team
Davis Aquamonsters
Davis Swim America
Those of us who stay fit by swimming recognize that exercise is every bit as important as keeping the pot holes filled! Davis’ excellent swim programs are a very real reason why we choose to live here.
Community pool should stay open- just have the users increase what they pay for it. If they can’t afford it, I guess it isn’t needed.
I have zero sympathy for the city workers- they have been so massively overpaid for so long its hard to feel any concern about getting the budget back under control. Its like apologizing to a bunch of drunks that they have to go through a hangover.
[i]”I have [b]zero sympathy[/b] for the city workers- they have been so massively overpaid for so long its hard to feel any concern about getting the budget back under control.”[/i]
I am sympathetic to the city workers who are going to be laid off* and lose 100% of their salaries and 100% of their medical coverage (post-COBRA). It is not the case that most of them will have an easy time finding work elsewhere, now. If they are lucky enough to get a new job, it will probably pay much less.
But getting laid off is exactly what will happen to a good number of city employees over the next few years, if we don’t seriously restrain the growth of the cost of total compensation.
And while it’s easy to state the facts about what we need to do, it obviously [i]will harm the interests[/i] of those who stay on as workers in Davis. Restraining total comp growth, in a world of rising medical costs and the explosion of costs to fund pensions, means cutting back on their salaries every year for the next 5-6 years, starting July 1, 2012. Making this change will not come without serious pain.
Yet if we don’t do this very soon, we will have to decimate the police force and we will have much worse city services in most departments, including parks, streets, etc.
————–
*I am 100% sympathetic to the firefighters who must be let go, once we go back to normal staffing at the fire department, meaning 3 on a truck (as opposed to the 4 we now employ). I wish we could make the transition by attrition. However, there is no other way at this point. We need the $1 million and more a year the extra staffing is costing us in order to maintain our streets on an ongoing basis.
I should add that the tactics of Bobbie Weist and his union–funding the campaigns of council candidates and worse, and getting indefensible benefits like union bank hours–have made the firefighters seem like a bunch of d!ckwads who are only here to rip-off the taxpayers. However, the truth is, their jobs, when they have fires to fight, are extremely dangerous. I respect all of them immensely. It is human nature to run away from danger, to get away from a fire or a hazardous spill. And these folks do just the opposite in order to protect our community. And on a human, family level, I feel terrible for anyone who is working hard, doing his job well and still gets fired for financial reasons beyond his control.
[quote] My recommendation would be for the council members to continue to act fiscally responsibly and to avoid statements that make it clear that they do not really understand what this means for the lower paid workers and that statements to the contrary appear to be window dressing.—medwoman[/quote]You must not have been watching council meetings over the last decade, because I for one have continually emphasized the need for progressive labor compensation practices and flatter pay structures.
[i]” Its like apologizing to a bunch of drunks that they have to go through a hangover.”[/i]
LOL. Gunrock you crack me up!
I have empathy for any employee loosing a job or having pay and benefits cut, but there is a bigger picture at play here. We cannot afford the cost of government at this point, and certainly when we trend the costs rising in the future. We have to cut back. Working in the private sector this is the reality that employees deal with on a regular basis. Public sector employees need to just accept that their time has come to experience the same.
” If we look at the numbers and employ a mixed strategy, I think we can get there without any layoffs and with minimal impact to people like Josie.”
Seems overly optimistic, especially in the hostile environment created by the press toward public employees .
“I have far less sympathy for people like Mr. Weist, who are making well over six-figure salaries, who got a 38% pay increase last decade, and who received a pension bump to 3% at 50. That is what we need to fix …”
That’s what won’t happen, because, shockingly, the bosses hardly ever cut their own pay and benefits. The dogs change, but the kennel stays the same.
[i]” If we look at the numbers and employ a mixed strategy, I think we can get there without any layoffs and with minimal impact to people like Josie.”[/i]
[img]http://www.archiecomics.com/s/img/2009/characters/josie.png[/img]
I don’t know what you mean by ‘minimal impact,’ but I think in a best case scenario, workers of this sort are going to be hit hard.
Right now, they pay about 1% for the employee share toward their pensions. The actual employee share is 8% for those on 2.5% at 55. I cannot see any circumstance in which we don’t end up making all miscellaneous employees (save those who are laid off) pay the full employee share.
Second, we have no money to pay the increased costs of her medical coverage and her retiree health care benefits. So we have a few choices (assuming we don’t fire a lot of employees): we can reduce the value of the benefit; or make the employees pay out of pocket for the added cost; or reduce salaries in order to retain the benefit. Whichever one we choose will very much hurt people like Josie. It is simply dishonest to say it won’t.
Third, our pension costs–the employer side–are going to go through the roof. They got a lot more expensive beginning July 1 of last year. They will go up severely in price next week when the new fiscal year starts. And they will keep rising dramatically for at least the next 5-8 years. Anmd that assumes that salaries for Davis workers are not rising at the same time. If the salaries go up, the cost of funding pensions goes up even more. With no added revenues, we are faced with similar choices as seen above: we fire employees; we leave many positions unfilled and get far less in services; or we reduce salaries substantially, so that the total compensation costs for labor grow only at the rate revenues to the city grow. I strongly favor the last approach and believe the council will eventually come around to my way of thinking on this topic. But, again, I would never suggest that doing the right thing for Davis will not seriously harm people like Josie. It will. We just have no better choice.
People like Josie are not overpaid. People like Bobby Weist are. People like Bobby Weist is the reason that people like Josie will be laid off or have their salaries slashed.
Its obvious people pocketing money because they don’t use medical coverage through their employer is the first thing that should go. This is an archaic benefit that was once small but has grown as fast as has medical insurance. Getting rid of this benefit will not result in anyone losing a job or a health benefit and it seems to be quite a bit of money. This should have been done long ago and it is outrageous that it has remained such a lucrative perk for those using it. Capping it is not enough. Kill the sucker and see what happens to the rest of the budget. It was always free money to those who got it and it seems its just not going to last forever nor should it. C’est la vie.
As for being in Wisconsin its a little over the top. The members of the council aren’t being vindictive. They are not doing this so they can cut taxes, privatize services or bust unions. There is no other agenda here beyond balancing the budget.
[quote]As Mayor Pro Tem Rochelle Swanson put it, “This isn’t easy and it’s tough. Everyone is going to have to give something.” She added, “If everyone can give some, we can preserve the whole.”[/quote]
[quote]Councilmember Dan Wolk said that he is a public employee and that he has had cutbacks in Solano County and now the council is facing the same wrenching decisions in this city.
He said that he can relate to how people are feeling and he understands how what happened last week caused a stir.
However, he boldly stated that the old ways of doing things are not viable. This is an era of shrinking revenues and unfunded liabilities. “This is an era of shared sacrifice,” he said.
Then he backed off some, stating that it shouldn’t be an era of labor strife. What council needs to do is not have a combative approach with employees, and not have a top down approach. Layoffs should be the last resort, he said.[/quote]
[quote]It was Joe Krovoza on this issue who was most eloquent.
“What we’re doing here is trying to make sure we’re building a sustainable city not in an environmental sense but in a budget sense,” he said.
He said that the city has been working on this budget since November. “It became very clear to us last week that we have an unfunded liability of your benefits that we can’t pay for, for you and the longer we go in putting the right amount of money away for your benefits it digs the hole deeper which only means worse cuts later when come to reality,” he said strongly adding this is true for retiree health and pensions alike. “This is an attempt to start to get square.”[/quote]
Nicely done by the “new kids on the block” (Krovoza, Swanson, Wolk)! The CC needs to stand fast FOR THE SAKE OF EVERYONE, INCLUDING THE CITY EMPLOYEES. Just give city employees time to digest the ugly budget numbers and their implications, and the room to come up with innovative solutions.
I have worked with many City of Davis employees, from police, fire, planning, etc. If any one of them gets laid off, it will break my heart. Today’s budget nightmare is a grim reality and not a pretty picture. My hope is that the bargaining groups will soften their stance on pay cuts, in exchange for some guarantees when fiscal times are better. But let us never get to such a point ever again, of such fiscal unsustainability.
“City employees were clearly angered by the cuts.”
I worked for a public agency for many years, and of course people are angry and frightened at the thought of losing their jobs. For some, it may mean losing a home, a car, a kid’s tuition. It can mean the lose of a marriage, and in extreme cases, the loss of a life if depression sets in. It is a very big deal. But it is what is happening and what has been happening all over the nation. A city, like any public agency, is a service operation, and spends almost all its revenue on salaries and benefits. There is not enough “outside the box” to make a whit of difference. The choice is not that complicated: 1. Increased taxes to maintain status quo. (Not gonna happen.) 2. Deep concessions by the employee unions. (Unlikely.) 3. Layoffs. (Usually what happens.)
I hope this council can do what has to be done. If not, the pain will be greater down the road.
[i]”Its obvious people pocketing money because they don’t use medical coverage through their employer is the first thing that should go.”[/i]
The issue is more complicated than this, and therefore your solution would cause other problems.
The first thing to understand is that the actual dollar value of the medical benefit varies considerably per employee, depending on which plan they choose, in which locale they are served, if they have a spouse or domestic partner, and how many dependents are covered under their plan.
At the low end, you could have a single, miscellaneous employee with no children who has chosen coverage in the PERS-Select plan for the Sacramento region. It costs the City (currently) $458.27 a month ($5,500 per year) for this person’s medical coverage.
At the other end of the spectrum, we have employees who cost the City $1,756.33 each month ($21,076/year) for their coverage under the Bay Area Blue Shield plan for the employee and spouse + child or employee + 2 children.
For all employees, the benefit is essentially set at the maximum. The reason you do that is because the medical benefit is, in effect, a component of every worker’s total compensation. You don’t want to have two people doing the exact same job which, say, pays $28,000 a year in salary, but one worker gets $49,000 in salary plus medical while his equal gets $33,500 for the same amount of work. If you did that, the latter employee would effectively make 32% less money than the former. It would also give the employer a very strong incentive to discriminate against people who are married and have children.
(Note that the Bay Area coverage is much more expensive than the Sacramento coverage. The difference is in the range of $500 to $1,000 more per year. In between, we have one public safety employee whose plan is for “Northern California,” which I assume means he lives in Yuba City or Marysville or somewhere north of there.)
So what happens* is that the amount less than max $21,000 per year which is used for medical coverage (for those who use the City’s medical benefit) is converted into taxable salary. Thus, everyone who does the same job makes the same income, regardless of which medical plan he is on and where he lives.
For those who are covered by their wife’s or husband’s plan and not one of the City’s plans, up until recently they got a 100% cash-out. It meant that their total comp from the City of Davis was the same as someone else who took the medical coverage from the City.
Recently, the medical cash-out has been lowered, so that instead of getting the full $21,076 per year in cash, they get a high percentage of that, depending on which bargaining group they are in.
Now, if you reduce that percentage substantially–especially if you reduce it to $0, as Toad suggests–no employee will have an incentive of any sort to use their spouse’s coverage. They will just get their insurance–which is probably a better plan–through the City, saving no money for Davis.
The other, related complication is that since medical coverage is a substantial portion of total compensation, if we give very small cash-outs to employees who don’t use the City’s coverage, those employees will shortly be making a much smaller income than their peers who do the same job at the same level of competence. Over time, that is not a sustainable model.
In my opinion, the only viable solution is to address employee compensation on a total cost basis. Davis pays its employees in salary, medical benefits, funded pension contributions, unfunded retiree medical coverage and other smaller expenses, including life insurance, survivor’s benefits, long term disability coverage and a few other federal mandates. Our great problem, budgetwise, is that total compensation per employee has inflated faster than revenues have grown.
Since 2000, this is mostly due to rapidly rising medical insurance costs, rapidly rising pension contribution costs, and to a lesser extent a larger percentage of retired employees.
Going forward, we don’t know how fast medical insurance costs will inflate. It’s possible (but unlikely) they will inflate at the same rate as revenues into the City grow. However, we do know [i]ceteris paribus[/i] that pension contribution costs are going to grow much faster than they have grown the last 11 years. The City will not be able to keep up with these added costs, unless it lays off a large segment of the current workforce and stops filling all unfilled jobs.
Thus, we have no good choice but to manage our total compensation costs by having contracts–like our current fire contract–which adjust downward salaries to account for an unaffordable increase in the non-salary expense of labor. Doing that, we won’t have to worry so much about medical cash-outs or the like. Some bargaining groups might want to have a choice in which they can drastically reduce their members non-salary benefits, so their members don’t lose so much in salary. That should be perfectly acceptable to the City.
But what is not acceptable–or rather, impossible–is to keep a flat-line or a slow rise in salaries, let pension and medical costs skyrocket and keep anywhere near the number of City employees on the payroll. That math does not work.
———————–
*If a City employee knows I have this wrong, please correct me. This is how the system was explained to me some years back.
Sue
I am sorry that you felt my comment might be directed at you personally. I thought by including the quote that I found likely to come across as less than true, and less than sensitive, namely “this is not balancing the budget on the backs of employees”I was being clear about what I feel some might find objectionable. I am unaware of any comments that you have made that could be characterized this way.
Okay my experience has been that my district gives everyone a flat stipend for med insurance and you pay the difference.
Do a lot of the office workers (i.e. not police, fireman, gardeners.arborists) have the option to retire at age 60?
Seems to me office workers shouldn’t be eligible for benefits until age 67-68; I’m in the private sector and personally plan to keep working until my early 70s.
I think early retirement and the bloated retirement packages for management/high-end employees are eventually going to bankrupt the system.
Also, at some point in their mid-to-late 50s; can’t police and firefighters transition to desk job roles; so they can earn their keep on the public dole until their mid to late 60s?
The golden age of USA, including early and easy-street retirement is over for most people.
Within the decade when our new era of austerity begins to bite the upper middle class (doctors, lawyers,etc) that’s when the howling is really going to start.
Toad, that is the way it works with the City of Davis. The “stipend” is essentially the maximum amount. This year that is $21,076. If you only spend $5,500 on your plan, you get to pocket the rest ($15,576), though that money is taxable.
The tricky part is dealing with those who have other coverage. Do you give them 100%, as we mostly have for many years?
We can certainly give them less. But at some point, if the amount less we give them is too low, they will have a strong incentive to start using the full stipend, and it costs Davis more than letting them keep a larger cash-out.
Personally, I am not offended as a taxpayer by the cash-out. (I realize others in Davis are.) My opinion is that the medical benefit, the pension benefit, the salary and a few other things add up altogether to represent a compensation package. The two big questions about the package are: 1. How much can we afford to pay in total comp for our city staff; and 2. Are we paying too little or too much for certain jobs.
When I see hundreds of qualified people lining up for a firefighter job in Woodland, I have no doubt that the jobs open pay too much. However, if employees are quitting and moving to similar jobs in cities roughly the size of Davis, then we are probably paying too little for some jobs.
There were times in the past when the latter was occurring. However, no other cities in California (roughly our size) can bid away any of our employees now. The City of Davis has never had this much bargaining power. I think we need to exercise that power (in 2012 or earlier, if possible) to set Davis on a sustainable budgetary path.
[b]Do a lot of the office workers (i.e. not police, fireman, gardeners, arborists) have the option to retire at age 60?”[/b]
Much younger than 60.
All police and fire, including the chiefs and other top brass, can retire with 90% of their final salary + full medical benefits at age 50, not 60*. There are great numbers of people in our state who are drawing this rich pension who never faced danger in their jobs. Don Saylor, for example, was an admin with the California Youth Authority. He got a big fat police pension (3% at 50), as if he had a dangerous job.
For everyone else who is not a cop or firefighter, they can begin drawing their pension at age 55. However, they only get 2.5% per year. That means if they worked 30 years (from age 25 to 55), they would get 75% of their last salary, not 90% like cops or fire.
*A study done by the Contra Costa Times showed that about half of all CalPERS police retirements in the Bay Area were for retirees under age 50. What they do is build up unused vacation time and unused sick leave and then “buy” added service time with it. So at age 48 they can add two years to their years of “work” and retire on 90% or near 90% of their last paycheck. Further, many of these “retirees” continue working for a new agency which is not associated with CalPERS. They can become, for example, a sheriff’s deputy for a large county or a DA’s investigator or a parole agent. In their second job, they make full salary as long as they work and can then build up a second large pension while drawing the first one.
Rich: Great posts. I agree with you that the only way to look at this going forward is to negotiate labor contracts on total cost. Essentially public sector employees have enjoyed too little personal career and compensation risk and we are paying the price for it.
A big part of the problem here is the dismal job market and our “jobless recovery”. If you think about it, we all have to accept continued pain for the “bubble sins” of our parents and fellow citizens that came before us. The tech stock bubble, the housing bubble… these seemed to contribute to secondary bubbles because stupid people in charge felt rich. With money flowing in, we could afford to approve these generous feel-good public-sector labor contracts. The Davis Police went from a flat 50% at 60 pension (please correct me if I am wrong here), to 3% at 55 (3% of salary per year of service at 55… so assuming 30 years of service it would be 90% of salary instead of 50%… and five years earlier). This happened in just a few short years.
Not only do we need to go back to what is reasonable now that we know the good times were a based on a financial house of cards, we have to learn from our mistakes and make fundamental changes that ensure this does not happen again. One of the most promising changes seems to be your idea that we need to contract labor based on the total cost of employment. We can give the employees cafeteria-style benefits, and let them pick based on their own needs while shouldering more of the financial risks for rising costs.
The other option is to cut services and employees.
I think we must do both, but mitigate the line we would cut for services by renegotiating labor contracts back to reality.
Back to my point about the dismal job market… it is the lack of job options that makes it more difficult to consider laying off employees. As companies flee California, and the nation is still stuck in economic doldrums, I have to wonder if this is some political payback for the public-sector employees that overwhelmingly vote Democrat. Tax-payers are tapped out and there are fewer private-sector jobs. With less revenue flowing to government, now public-sector employees are losing their benefits and jobs. A more robust state and national economy would provide them more career options. It seems their politics has painted them into a corner.
More news on cities making necessary pension changes:
[url]http://online.wsj.com/article/SB10001424052702304887904576399650162046260.html?mod=googlenews_wsj[/url]
[quote]New Front in Benefits Fight, Atlanta May Drop Pensions[/quote]
[b]Rifkin:[/b][quote]”The issue is more complicated than this, and therefore your solution would cause other problems.
The first thing to understand is that the actual dollar value of the medical benefit varies considerably per employee, depending on which plan they choose, in which locale they are served, if they have a spouse or domestic partner, and how many dependents are covered under their plan.” [/quote]
[b]No, It’s Simple[/b]
Go ask UCD to pay out in cash “unused” medical benefit under the above described situation…
[b]UCD Would Laugh You to The Curb[/b]
Paying out cash for “unused” benefits is an outrageous and excessive benefit that no other employer does or would pay…
As a City employee you are provided medical and other benefits. Like UCD there should be a least cost option. Want a higher cost medical insurance option? Go ahead. You can have it with an additional employee contribution, just like UCD offers.
That is how you equalize it. Not by inventing some ludicrous cash compensation scheme that appears nowhere else in reality… cost the City and tax payers $$Millions annually… and is not used by any other employer…
[quote]Not only do we need to go back to what is reasonable now that we know the good times were a based on a financial house of cards, we have to learn from our mistakes and make fundamental changes that ensure this does not happen again.[/quote]
Amen!
[quote]Back to my point about the dismal job market… it is the lack of job options that makes it more difficult to consider laying off employees. As companies flee California, and the nation is still stuck in economic doldrums, I have to wonder if this is some political payback for the public-sector employees that overwhelmingly vote Democrat. Tax-payers are tapped out and there are fewer private-sector jobs. With less revenue flowing to government, now public-sector employees are losing their benefits and jobs. A more robust state and national economy would provide them more career options. It seems their politics has painted them into a corner. [/quote]
Excellent observation.
[b]”Toad, that is the way it works with the City of Davis. The “stipend” is essentially the maximum amount. This year that is $21,076. If you only spend $5,500 on your plan, you get to pocket the rest ($15,576), though that money is taxable. “[/b]
What I wrote in my posts above about how the cafeteria benefit works is mostly correct. However, I got it partly wrong and I want to explain that. I received the corrected information moments ago from the HR department:
First, the top amount paid by the City is not $21,076 per year. It is currently $19,769. A handful of employees are enrolled in plans which cost $21,076. They must pay out of pocket the $1,307 yearly difference.
Second, employees whose plans cost less than $19,769 but more than $17,797 do not get any cash-out for cafeteria benefits.
Third, most employees who are covered and have plans which cost less than $17,797 per year get 100% of the difference paid to them in a cash-out.
Take for example an employee on Sacramento Area PERS Choice for 1 person. His plan costs the City $6,288 per year. Here is how he gets cash back:
Basis: $17,797
Minus cost: -$6,288
Cafeteria cash-out: = $11,509
The exception to this is the firefighters. They get 80%, not 100% of the difference in cash.
Fourth, some employees are not covered by the City’s plans, but have other medical coverage (say from a spouse). They all get a cash-out, but it is no longer 100%. For fire it is 80%. The others vary.
Fifth, newly hired employees have a lower basis for cashing out on cafeteria benefits. Where those hired prior to the end of 2009 have a basis on cash-outs at $17,797 per year, newer employees have a basis of just $6,000. What that means is that if they have a plan which costs, say $10,000 per year, the new employee gets no cafeterai cash out. The older employee would get $7,797 in cash out.
From someone with a liberal-progressive-socialist worldview, wouldn’t they want the people lucky enough to have a spouse with healthcare, or the younger and healthier people with lower insurance premiums, to give up their cash-out to fund the premiums of those less luck?
Jeff: I’ve read your answer about three times now, and I’m not sure this issue fits into a simple left-right continuum.
David:
[i]”From each according to his abilities, to each according to his needs”[/i]
This is of course a principle of Marxism and socialism. The left tends to expect the more economically lucky to pay more to fund the needs of the less lucky.
In general I agree with that principle. But I’m not sure that dictates my view on this particular issue.
Why not? Isn’t it the same?
Some employee lucky enough to have a spouse with a good job that pays his healthcare costs can pocket another $17,797. One is able and lucky, the other is not. Shouldn’t the one that is able and lucky help pay for the one that is not? Wouldn’t Marx expect that in his vision of an ideal society?
Please help me understand why a liberal/progressive/Marxist/socialist would not want this, because I don’t. (Note: I am not attempting to be derogatory using these names… I really don’t understand the thinking).
I suppose you could make the case that the guy paying for his healthcare has the freedom to go find and marry a woman with a good job that pays for her family healthcare benefits. However, then you would sound like a conservative free market capitalist saying the poor dude can always strive to make more money on his own and so he should not be supplemented by others having greater luck.
For one thing, a liberal/ progressive/ Marxist/ socialist believes in universal healthcare and therefore despises the entire system of employer-based healthcare
That is a very good point. Still, my question does seem to beg an answer. Why is the lucky wealthier person taxed more, but not the lucky wealthier beneficiary of a cash-out healthcare premium?