By nature I am an optimist. My heart tells me to expect the best. Unfortunately, my experience has taught me to fear the worst. To throw out one more overused cultural statement before diving into this topic I will suggest that the Who was onto something when they sang, “Meet the new boss, same as the old boss.”
I just do not get the purpose of giving the council the budget right before the meeting. There is nothing more useless than that, and yet that is a holdover from the last council that would bat nary an eye at such a thing.
There is a new 40-page document available on the city website. If you are suffering from sleep problems I would highly recommend reading it.
In it is offered Consideration for Potential Budget Amendments. This is the exact wrong approach, in my view. The budget presented in May doesn’t need to be amended. It does not need to be revised. It does not need to be tweaked.
IT NEEDS TO BE TORN UP AND THROWN AWAY IN THE GARBAGE. Someone then needs to take some lighter fluid, douse it with lighter fluid, and someone else needs to light a match and throw it in.
You have that image thoroughly in your mind? Good.
Councilmember Sue Greenwald argued two weeks ago that we cannot nickel and dime our way out of this. We need structural changes.
She is absolutely correct here. We cannot nickel and time our way out of this.
Perhaps the most frustrating thing about all of this is that everyone involved inherently understand this to be correct.
In the budget discussion they list three critical goals: address structural budget deficit, address priority unfunded needs and address renewal of voter-approved tax measures.
Paul Navazio argues: “A case can be made that the City has successfully managed two of these three elements, with perhaps only marginal progress on the third.”
He adds, “The City has made significant budget reductions over the past three years in order to maintain a balanced-budget, without reliance on one-time savings measures, and without depleting its reserves. This has been no small challenge in the current economic climate.”
Except that we have not done this. Not at all. We have, at best, done what the state has done – balanced the budget on paper. But what we have seen every single year is the need to cut into our reserves and cut mid-year or later.
The problem is that we have balanced the budget in two ways. First, on paper using overly-rosy projections. Councilmember Rochelle Swanson hit the nail on the head when she argued that we need to adopt the most pessimistic view as the actual view.
If one adopts that approach, one ends up, at the very worst, with more money than projected which can then either go into savings or be used next year.
Instead, we still have a budget that is overly-rosy. We are still projecting revenue that could be seen as overly-optimistic. In the meantime we are underestimating labor costs down the road and assuming that CalPERS does not raise rates or lower projections.
These assumptions basically mean we could be off by millions of dollars.
The second way in which we have balanced our budget is even more insidious. For years now we have put our deficits into unmet needs categories.
Writes Mr. Navazio, “The area that remains most challenging is identifying funding sources to address priority unmet needs, ranging from city infrastructure, enhanced public safety services, unfunded liabilities and several City Council goals, including aggressive implementation of the City’s Climate Action Plan. Some progress has, however, been made over the past few years to provide additional funding of the City’s OPEB [Other Post Employment Benefits] Unfunded Liability as well as priority needs within the City’s water and wastewater utilities.”
We all know by now that the city is facing tens of millions of dollars in unfunded liabilities. We do not count that budget in our current deficit, in part because the bill is not due yet. But it will manifest in the coming years and it will cost us millions per year.
The deferred maintenance for infrastructure and road repair is particularly insidious because not spending $1 now means spending a lot more than that in the future. We are talking about a $13 million deficit on road repair alone and declining road conditions.
We need about $800,000 just to keep funding at a normal rate and that is not even sufficient, and yet this year we will be at may one-third of that.
At some point those bills will come due, but we have managed until then to create the illusion that we have a balanced budget. Moreover those costs have not been factored into future budgets, that deceptively show budget surpluses even though they are really millions in the red.
This budget does not give any realistic solution to any of these problems, which is why the council, if they are telling me the truth, needs to throw it out and take a stand now. I see tweaks, but I do not see anything radical happening.
What this budget does is preserve the status quo. Changes are made on the margins, the structure remains.
My suggestion is far more radical. As we presented last week, the Department Heads and Managers have not taken a real pay cut in this process. A ten percent across the board pay cut for Department Heads and managers could produce over half a million in savings.
It would also send a message to the bargaining group that the city is serious about fixing its fiscal needs and they would not be able to argue that we are not in fiscal crisis.
I want to see council put that proposal on the table and see where it goes.
At the very least, I want to see real changes to the way we do business. If that doesn’t happen, then we can acknowledge that the new boss, despite all rhetoric to the contrary, really is the same as the old boss.
—David M. Greenwald reporting
[quote]As we presented last week, the… Managers have not taken a real pay cut in this process[/quote]Does this come from “spin”, ignorance, or a deliberate lie? For FY 2009-10, PASEA & Managers took a ~ 4.6% reduction in the form of furloughs. DCEA had the same imposed on them, but it did not occur until the current FY. PASEA & managers accepted a ~ 2.3% reduction in the current FY.
They make more money in base salary than they did in 2007. That’s a fact. The figures I presented last week were payroll numbers.
I’d also point you to our analysis of the contract when it was signed: article ([url]https://davisvanguard.org/index.php?option=com_content&view=article&id=3175:city-and-management-group-agree-to-new-labor-contract&catid=58:budgetfiscal&Itemid=79[/url])
Key point:
[quote]
First, again the city insists on using fake money as an analysis point. They argue that the current baseline annual cost is $8.638 million. With the current contract in place, the costs over a three year period would be $26.414 million from 2009/10 through 2011/12. With this contract it is actually $25.67 million. That they argue is a 2.8% savings over the projected baseline contract or $744,000.
Using these figures, we arrive at the following:
2008/09: $8,638,000.00
baseline: $8,804,666.67
new MOU: $8,556,666.67
That would produce an average savings of $81,333.33 per year or $244,000 in real money over the course of the contract. And again the large savings are in Year 1 and the lowest in Year 3.[/quote]
Also: “The Management Group will receive a 1% cost of living (COLA) salary increase starting July 2010 and a 2% cost of living increase effective July 1, 2011.”
Now how in the world do you get a COLA when the cost of living is declining.
[quote]…when the cost of living is declining. [/quote]Care to quote your source? It is minor for last 4 years (2007, as you like to cite), but NEGATIVE since 2007?
BTW, you’ve answered my question… it’s “spin”.
BTW.. just looked it up from BLS… ~ 10% increase since 2007… but a good reporter doesn’t let facts get in the way of a good story…
Moderator… please remove all my posts on this topic… (including this one)… my attempts on bringing facts to the discussion fly in the face of the purpose of this forum. Just had to have someone I trust point that out to me. I will not engage again in this topic.
hpierce
Just a question. What do you perceive the purpose of this forum to be ?
Wolk and Krovoza are potential candidates in line to get on the political train heading towards the Assembly and we will not see any significant leadership from these two on this issue. The other three Council members, who probably do not have a future Assembly seat in their sights will have to take the lead here. I see Councilperson Steve as the swing vote , literally as he swings back and forth between his desire to be part of old-guard Davis political power and the populist move to challenge it.
hpierce-
I’d rather not remove your posts. They add to the discussion. But I’m willing to do so if you really want me to. You’re welcome to contact me directly if you like: donshor@gmail.com. I won’t reveal your identity under any circumstances.
Don
[quote]The problem is that we have balanced the budget in two ways. First, on paper using overly-rosy projections. Councilmember Rochelle Swanson hit the nail on the head when she argued that we need to adopt the most pessimistic view as the actual view.[/quote]
Councilmember Rochelle Swanson has it exactly right. As Councilmember Sue Greenwald pointed out, we have assumed flat salaries as well, which is hardly realistic.
[quote]The second way in which we have balanced our budget is even more insidious. For years now we have put our deficits into unmet needs categories.[/quote]
This is my biggest pet peeve. To conveniently park deficits into an artificially created “unmet need” category, then pronounce that the budget is somehow “balanced”. I consider that “creative bookkeeping” at its worst, that is highly misleading and downright fraudulent. If it is “normally accepted accounting principles”, it ought to be outlawed…
[quote]At some point those bills will come due, but we have managed until then to create the illusion that we have a balanced budget. Moreover those costs have not been factored into future budgets, that deceptively show budget surpluses even though they are really millions in the red.[/quote]
Nicely said… “create the illusion we have a balanced budget”. This sort of nonsense has got to stop…
If you want to save some time, click on the link David provided and go to page 22 where they summarize the budget. It shows an increase (slight) for the ’12 – ’13 year. Then look at page 23 where it shows a continued deficit through years ’14 – ’15, with the current recommended reductions showing a surplus in the next year. All of that is based on optimistic assumptions about revenues.
The city council members are not adept at proposing line-item increases or reductions in budgets. It is impossible to review, item by item, the proposals at a public meeting. The council can set direction and tell staff to return with a new five-year budget based on more realistic assumptions and deeper cuts, or they can try to make specific program changes.
If they aren’t confident in the staff proposing a new budget, I recommend they hire a one-time outside analyst to propose major budget changes, as well as assess the current proposal. Somebody retired from the state Legislative Analyst’s office comes to mind.
If I were giving them guidance, I would recommend that the only parts of the Climate Action Plan that cost no new dollars be implemented, that they phase out support for child care, and that they give negotiators a goal of reduction of payroll costs of 15% overall (with the specifics to be determined in contract negotiations). I would urge that the RDA be phased out over the next five years so that those property tax dollars could be re-assigned to deferred roadway and infrastructure repairs. And I would ask the outside analyst’s recommendations as to how best to fund long-term pension liabilities and what level of reserve is considered prudent.
I don’t see the point in an across-the-board pay cut directed at one particular group of employees. I think that is strictly symbolic, and while I understand the purpose of symbolism I think it singles out one group — suggesting that they are the problem. They aren’t. Total payroll is one of the problems causing budget deficits. You can shrink payroll by reducing staff or cutting pay and benefits, or both. The council needs to give specific direction about how much they want total payroll costs reduced. They need to be specific and substantive, not symbolic.
Don:
I don’t understand your point then. First of all, the money alone generated in savings will be helpful. Second, it helps with the coming MOUs for management to set the standard. Third, it doesn’t just reduce payroll, but also pension obligations.
In short, it doesn’t fix everything wrong with the system because we are too far gone, but it does start the process headed in the correct direction.
hpierce: I laugh, You are accusing me of spin, I cited you three pieces of evidence from the current contract that undermined you initial point, instead you focus completely on my flippant comment that wasn’t based on the contract.
To hpierce: I hope you do not go away from this discussion, as Don Shor has so wisely suggested. (By the way Don, you have been an outstanding moderator of this blog IMHO.) I am very interested in your perspective hpierce. I think you make some interesting points. Trust me when I tell you there have been occasions when I, too, have been quite frustrated with what I have read on this blog. At times I have wanted to just throw up my hands and walk away, as you seem to have decided to do. (I think one commenter said one time “Don’t you just want to shake David?”)
But that defeats the entire purpose of this blog, which is to make sure to get points of view across that may not be well liked or go against the grain of popular misconception. And I say that in all seriousness bc often upon further research, I have frequently found people to be wrong, and said so. Others have done research, and found me wrong a time or two! I have learned an awful lot from this blog.
In my experience there is usually no one way of looking at any issue – there are multiple viewpoints and areas of gray – despite the polarization that often surrounds any particular issue in this community. Some viewpoints I consider just plain cockeyed, others certainly have merit even if I don’t agree with them. But everyone has a right to their opinion and the freedom to express it, which is the strength of this blog. (DMG has done a great service to this community by providing the blog as a forum to bring certain community issues out in the open that probably never would have seen the light of day.) And at times, by being dogged, I have changed people’s mind on an issue. At other times, they have changed my view. But if you don’t hang in there, and join in the discussion, you surely will not educate people nor change their way of thinking.
I, for one, would really like to hear what you have to say about management salaries. My initial instinct is to believe management should take a bigger hit in salary reductions than they already have, as a gesture to make the other bargaining groups more amenable to taking greater salary reductions (perhaps a vain hope to think that will make bargaining groups more pliant in their positions on salary reductions). It is either that, or start laying people off – which is very counter productive. The more people we have out of work, the more the economy spirals downward.
And there are a lot of very good people in city staff who do not deserve to lose their jobs, but will lose them above some on city staff who should have been fired long ago or should have never been promoted in the first place. I feel as if city staff has too many Indian Chiefs (management) and not enough Indians (regular staff that works far below $100,000 a year). But feel free to jump in and correct me if you think I am off base… I am more than willing to listen with an open mind.
However, if you really are that fed up, I respect your desire to disengage in the conversation…
[quote]The city council members are not adept at proposing line-item increases or reductions in budgets. It is impossible to review, item by item, the proposals at a public meeting. The council can set direction and tell staff to return with a new five-year budget based on more realistic assumptions and deeper cuts, or they can try to make specific program changes. [/quote]
Truer words were never spoken! So often I become irritated with City Council members, who try and micro-manage from the dais, in areas they know nothing about. One particular exchange comes to mind. A City Council member (can’t remember which one) insisted the developer reduce GHG emissions of his houses by 20%. The developer had apoplexy, and retorted: “You can only put so much insulation into the walls”. It was a perfect example of City Council members trying to tell construction engineers how to do their jobs. It makes far more sense to say in general “we would like GHG emissions reduced – city staff, could you work with developers and come back with a better plan?” Leave it to the experts to implement the broader goals. Let city staff take the direction of City Council, but do the legwork on how to achieve the broader goal. And if you don’t trust city staff to do the job, then 1) bring in outside experts, as we did with the water-sewer project; and more to the point 2) why do you even have on board city staff that you don’t trust?
[quote]Wolk and Krovoza are potential candidates in line to get on the political train heading towards the Assembly and we will not see any significant leadership from these two on this issue. [/quote]
I don’t agree w this statement at all. Let’s give them a chance 🙂 So far, I have found them both to be quite thoughtful, willing to do their homework, and very unlike the previous Gang of Three…
Elaine: Good point. But here is the problem right now. This council has been here for just a few months. They don’t yet have an identity. But what they do have is an interim city manager who himself is working with a staff he did not hire. We all know the problems that the city has with the staff, we have seen council and staff clash markedly in just the last few months, this is a sorting out time. The council will have the opportunity to reshape the staff only when they hire a city manager and that process is dragging. It’s a huge problem. The council and staff are not on the same page on this budget.
[quote]The council and staff are not on the same page on this budget.[/quote]
Then it is up to this City Council to get city staff on the same page on this budget! That will take real leadership for sure, and this CC may very well be up to the task. I don’t know. But I wouldn’t assume they are not… let’s give them a chance…
I like Don Shor’s idea of perhaps hiring an outside consultant. Generally I am against such expenditures, but if city staff keeps bulking at CC requests to get more pessimistic in the budget assumptions, an outside consultant may be necessary. But my sense is city staff will take direction from CC if pushed… As far as contract negotiations, tho, we most definitely need an outside negotiator, no question…
[quote]As far as contract negotiations, tho, we most definitely need an outside negotiator, no question… [/quote]Elaine… what do you have in mind? An “outside” entity I have no problem with, and my personal feelings are that this could benefit all… but the key is what kind of person would this be, and what would be their ‘direction’ be from CC? If they are charged with extracting every single drop of blood from the turnip (“how low can you go…”), that would require that each employee group hire their own professional negotiator, or lie down on the train tracks. Most employee groups have individual members represent their group, not “professional” negotiators. An outside ‘negotiator’ who is a facilitator/moderator/mediator might be very effective. A ‘negotiator’ who is directed to negotiate for the elimination of all future retiree medical benefits (other than Medicare), a 2% @ 70 pension (and no Social Security, for some?), 100% employee contribution to retirement, medical insurance, and a 15% salary reduction (25% for management) would most likely have limited success. The forgoing package would really help city finances. There was at least one CC member who expressed interest in going to “impasse” (where the CC can just impose their ‘last, best offer’) prior to initial discussions with employee groups.
Perhaps there should be a public discussion of the elements of [b]what would be[/b] an equitable compensation system. My concern is that it will trend towards the lowest common denominator.
[quote]Perhaps there should be a public discussion of the elements of what would be an equitable compensation system. My concern is that it will trend towards the lowest common denominator.[/quote]
I think that is a reasonable concern. Personally, I am not advocating for the lowest common denominator. But if something doesn’t give, the city will have to start laying people off. I know some city staff who are very good at what they do, and are very afraid they will be next on the chopping block. I also know there are some on city staff who are making way above what they should be making, based on their job description, educational experience and amount of expertise. And some in city staff are downright incompetent – and making huge salaries to add insult to injury. It is a very mixed bag, and I believe a leftover legacy from our dearly departed former City Manager Bill Emlen, who I was not a particular fan of.
As I see it, we need an outside negotiator, bc the way the city gov’t is configured, there is a built in conflict of interest. The City Manager is the negotiator, for the very people who are working for him. In the past, my belief is the City Manager has improperly used his position to pad the salaries of his employees to the detriment of the city/citizens of Davis. The only way I can see around that built in conflict of interest is to hire an outside negotiator.