The Vanguard’s analysis of the budget suggests that while Interim City Manager Paul Navazio has attempted to tweak the budget, what is really needed is for the council to throw out the budget, stop the attempts to balance a current year budget with rosy assumptions and nickel and diming tiered approaches, and work on critical structural change.
Our examination suggests that are six critical flaws in the current budget, perhaps a seventh. We made seven short-term suggestions for immediate savings and five suggestions for savings down the line.
The result is that we continue to talk about reducing the budget of the Police Ombudsman that at most would save the city $20,000, while ignoring the fact that a new police chief and the ombudsman have produced an ongoing savings by reducing the number of complaints and claims against the city. Why is a position that has been shown to help the police consistently being targeted for minor cuts?
This is emblematic of the problem in this approach. We need to cut hundreds of thousands if not millions, but we have instead targeted program cuts in the tens of thousands.
The result of this approach is insufficient funds for unmet needs. The budget calls for $485,000 in cuts in tier II that would go toward roads and infrastructure. But only $250,000 of that goes to road maintenance. The result is a massive cut from the current $800,000 in annual spending on road maintenance that itself is insufficient.
The city is going to be looking at $15 to $20 million in deferred maintenance on roads, which means the actual costs down the line could be 1.5 to up to 3 times greater than what is currently projected.
Moreover, the city manager shows a budget that produces a surplus in the out years – but this budget is based on such faulty assumptions that it is virtually useless even as a guide.
For one thing it projects a balanced budget, assuming the current level of unmet needs remains in place. That means that we are only spending $250,000 on roads, and even Paul Navazio admitted that the city would have to spend more to maintain its roadways and that this would influence the bottom line.
It also assumes a flat payroll. More realistically, you would expect at least a 3% increase in payroll over the next five years, and that could mean up to $3 million in additional costs.
Moreover, the budget assumes that we will pay the same Public Employees Retirement System rate in five years that we are now. More than likely, that number will rise, although the city is probably going to take steps to mitigate that cost.
Where the city has not taken steps to mitigate costs is if the assumed rate of return would drop from 7.75% to 7.5%. Each quarter percent drop in the ARR means an addition $1 million in costs to the city.
Right now, the city is operating with an interim city manager but not a separate finance director. Should the city hire someone other than Paul Navazio, it is unclear if that cost is included in next year’s budget. It is also unclear how much if anything the city has carved out for those expenditures.
The Vanguard has a number recommendations in the short term to reduce costs.
First, as we have pushed, a voluntary across the board cut to department heads and management. The fact is, given where the Memorandums of Understanding (MOUs) have to go, everyone will have to take a hit sooner or later. The sooner that it occurs at the top, the sooner the city can recognize up to half a million in savings and the more it sends the message to the bargaining units where they will have to go.
Ten percent is on par with what state workers and UC employees have had to take in pay cuts.
Next, the one proposal we do like is closing Community Pool. We would add to that by considering the closure of one major park.
Furthermore we recommend that the city lay off a Deputy City Manager or an Assistant City Manager.
Furthermore we recommend laying off at least two planners.
Finally and not without a huge fight, but we believe the city can save at least one million annually by moving from 4 firefighters to 3. Given the few structure fires, given the close proximity of other fire stations, given the mutual aid with UC Fire, and given costs, we believe this is feasible with a minimal reduction in service.
We have been led to believe that this will come out in the next round of recommendations from “CityGate.”
These are all short-term savings. Down the line we recommend that the city increase its fees on continued planning for all new developments. We should at least be on par with other communities.
Next and more radically, we need to prioritize services and cut back non-priority services in order to create an ongoing $1 million in savings that can be shifted to road repair.
Third, we need to figure out ways to incentivize the passage of early revisions to the MOUs to realize savings and reforms much sooner.
Fourth, another radical suggestion is direct the new city manager to work on a transition plan that moves the city’s recreational programs from city run programs to privatized programs, with the idea of getting non-profits and private businesses to partner with the city and pick up the costs.
Fifth, we need to work toward multiyear budgets and, instead of doing all of this work under the deadline of the end of the fiscal year, we need to plan to pass new budgets in December, which would give us more time to tweak and look at new programs.
There is no doubt that many of these will be difficult cuts, but we believe in the long run these will preserve core services and put the city back on the right track. The bottom line is that the days of tweaking the budget need to be over. We need radical changes.
—David M. Greenwald reporting
“Next, the one proposal we do like is closing Community Pool. We would add to that by considering the closure of one major park.”
Political suicide!
Toad: You don’t have any good choices and the pool is already tabbed for closure. Is it less political suicide to cut police services?
I agree that we are just “nibbling around the edges” with this budget, and not getting at the heart of the problem. We need structural change that truly reduces cost –
1) Encourage bargaining groups to consider taking more salary cuts than they already have – it is either that or massive layoffs, which is counter productive.
2) Three man fire teams is no longer an “if” but a “when”. The city just cannot afford four man fire teams.
3) Community pool is underutilized, and needs to be closed temporarily, until such time as the city’s fiscal position improves enough to make it feasible to reopen this pool. Or citizens can raise private funding to keep it open.
4) Direct city staff to find ways to significantly economize – let them get creative – they know their jobs are at stake here.
It is important at this time to:
a) Not bash city staff – very tough times are head for many of them;
b) Keep as many employed as is economically feasible, bc unemployed people cannot contribute to the tax revenue stream – and will contribute to the downward spiral of the economy.
David: I agree with all of your recommendations. Have you become a fiscal conservative, or have you just given up on tax increases as a remedy?
Elaine:[i]”It is important at this time to:
a) Not bash city staff – very tough times are head for many of them;
b) Keep as many employed as is economically feasible”[/i]
Although I agree in principle to not bash… city employees can too quickly pull the victim card and claim they are being bashed when people are only challenging the status quo. Related to this, I do NOT agree that keeping as many people employed as is economically feasible should be a goal. Instead, we need to adopt “lean operations” principles at all levels of government. Lean is defined as:
[quote]the elimination of waste and things that don’t add value as defined by the customer[/quote]
I think I am as concerned as anyone about the prospects of my neighbor losing his/her job from cuts, however, saying that we should keep as many employed as possible sends the wrong message. Government is not a jobs program, it is a collection of services.
First we determine what services we must have. Then we decide what service-levels are necessary. Then we do the same for the nice-to-have services that we can afford. Next we determine what resources are necessary. We retain these, and lose the rest. The last step is an ongoing management process to constantly strive to do more with less. If city management had taken this approach all along, we would not be in the budget mess we are in today.
JB
“when people are only challenging the status quo”
I am completely with Elaine on this one. It should be a priority to maintain as many of our public sector jobs as possible.
The use of the word “only” here certainly provides a nice, benign connotation here, but I am quite sure none of us would see this as so benign if it were our job on the line. I do not believe that you are as concerned as some others about your neighbor losing his job, because you seem to feel that, that only valuable jobs are those in the private sector. Many services provided by our public employees are at least as valuable to our community as private sector workers and yet you would advocate for their elimination. You define waste as that of which is does not add value as defined by the customer. well, the customer in this case is the taxpayer/voter and we decide as a group what is or is not of value to us. Whether one sees any given service as Cadillac or necessary depends on our individual values. No one has a lock on right or wrong on this just as Elaine pointed out with her comments about Measure A earlier this year.
Jeff, Elaine, & others make interesting, if sometimes contradictory points… if a work group has a long term reduction of 15% of “work”, what is best? Reducing all worker’s compensation by 15%, or maintaining 100% compensation, and laying off 15%? With the former, ALL employees may be unable to make mortgage payments. With the latter, some employees including the most recent hires (an unfortunate result of the general civil service system), will be out of work. The most talented can probably find other employment, even in this economy, but the average or marginal may not. With either choice the total # of discretionary dollars reduced to ‘fuel the economy’ will be about the same, in my opinion. I’d lean toward Jeff’s approach to see what services are “mission-critical”, and make sure compensation levels retain the most competent (to the extent that most public service is tenure-based rather than competency).
Medwoman: [i]” I am completely with Elaine on this one”[/i]
Why am I not surprised?…=/
[i]”It should be a priority to maintain as many of our public sector jobs as possible”[/i]
That sounds like the same mindset of soviet Russia.
Seriously though… why should public sector workers have greater job security than private sector workers? When expenses exceed revenue, a private-sector business has to reduce expenses to keep from becoming insolvent. Typically the greatest expense is labor, so labor is usually cut. Some companies experiencing temporary financial difficulty will reduce worker hours and pay to maintain their workforce. However, when the financial problems are structural and long-term, the solutions must be structural and long-term.
Note too, that if you reduce the pay of an employee for no reason other than you cannot afford to pay them, then you in effect discount them and they will tend to respond with a discounted effort. However, if you retain the top employees and lay off the lower performers, those retaining their jobs will tend to increase their efforts in recognition of the situation.
[i]” because you seem to feel that, that only valuable jobs are those in the private sector.”[/i]
I never wrote that. I certainly do not believe that. I just believe that, all things being equal, a private-sector employee will out-perform his government employee peers. Some jobs like policing do not have private-sector equals.
[i]” the customer in this case is the taxpayer/voter and we decide as a group what is or is not of value to us.”[/i]
Exactly. Our elected officials represent our interests and they need to make the tough choices. I’m sure you recognize that it is impossible to make everyone happy.
hpierce: [i]”to the extent that most public service is tenure-based rather than competency”[/i]
I think that is more often the case with public-sector employees. Ideally length of service (seniority) is only one of many criteria used to estimate the ongoing value of an employee. The first step is for the organization to determine its go-forward mission, its services and its service-levels. If cutting 15% of the pay of the existing workforce (without any layoffs) would provide the best result, then I would support it. However, it generally will not. It will more often create bigger problems down the road resulting from a decline in moral and poor worker commitment to the mission of the organization.
[quote]saying that we should keep as many employed as possible sends the wrong message.[/quote]
Notice my actual quote, which was carefully worded:
[quote]Keep as many employed as is economically feasible[/quote]
Note the words “as is economically feasible”. That takes into account that some workers may have to be laid off, but it should be carefully considered, bc unemployed workers contribute to the downward economic spiral, do they not? At some point, laying off too many people can be counterproductive. It may make better sense to encourage workers to take pay cuts as opposed to massive layoffs.
hpierce makes the solid point:
[quote]if a work group has a long term reduction of 15% of “work”, what is best? Reducing all worker’s compensation by 15%, or maintaining 100% compensation, and laying off 15%? With the former, ALL employees may be unable to make mortgage payments. With the latter, some employees including the most recent hires (an unfortunate result of the general civil service system), will be out of work. The most talented can probably find other employment, even in this economy, but the average or marginal may not. With either choice the total # of discretionary dollars reduced to ‘fuel the economy’ will be about the same, in my opinion. I’d lean toward Jeff’s approach to see what services are “mission-critical”, and make sure compensation levels retain the most competent (to the extent that most public service is tenure-based rather than competency).[/quote]
[quote]I just believe that, all things being equal, a private-sector employee will out-perform his government employee peers. [/quote]
I have no idea why you would assume this. Any specific data to back it up? My dad was a federal gov’t worker and was extremely capable and worked very, very hard. I have worked in the private sector, and have seen some pretty lazy employees. I don’t think such a sweeping generalization can be made…
Elaine: It was a generalization. There are certainly exceptions. I worked in both. My experience backs my opinion. Today I work in a private business that directly interfaces with Federal employees. Many of these employees are very hard working and competent. However, the agency modified the program 25 years ago to delegate work to private companies precisely because they could not perform well enough.
Here is a good resource backing up my claims: [url]http://reason.org/news/show/public-sector-private-sector-salary[/url]
Here is quote from this article that, I think, covers the general concept of lower public-sector work productivity:
[quote]Even on an hour-for-hour basis, one would expect private sector workers to be more productive due to the lack of competitive forces in government. Private sector businesses face constant pressures of competition to innovate and improve their goods and services, lest they lose business to their competitors. Government agencies, by contrast, are typically monopolies protected by law, and thus are not subject to such competitive incentives and pressures. (There is a reason for all those jokes and complaints about the efficiency of post office and DMV workers.)[/quote]
In the art and science of performance management there is something called “competitive tension” that we strive to maintain. Go too far and it causes too much stress and anxiety that leads to lower worker productivity. However, without enough competitive tension, workers become complacent and uncreative. They become resistors of change. They may continue to work hard, but they will produce less than their private-sector peers.
Comparing the post office to private companies:
[url]http://www.tnr.com/blog/jonathan-cohn/76191/should-businesses-be-run-the-post-office[/url]
Don:
That is an interesting positive spin on the USPS.
Here is another view: [url]http://www.theepochtimes.com/n2/content/view/20892/[/url]
[quote]Even on an hour-for-hour basis, one would expect private sector workers to be more productive due to the lack of competitive forces in government. Private sector businesses face constant pressures of competition to innovate and improve their goods and services, lest they lose business to their competitors. Government agencies, by contrast, are typically monopolies protected by law, and thus are not subject to such competitive incentives and pressures. (There is a reason for all those jokes and complaints about the efficiency of post office and DMV workers.)[/quote]
Hmmmmmmmmm… interesting point. However, the US Postal Service is having to work like a dog to keep up with the likes of FedEx, etc. So there is actually a lot of competition out there that the US Postal Service is up against.
Also, look at our military or law enforcement. Both are run by the gov’t, and do a much better job than private companies, I would say. Look at the mess private security companies made in Iraq. I’ll put up the prowess of our Special Forces and other military services against any private run military force. Take a look at NASA – bc of them we have the internet, iphones and the like. And private companies often work hand in hand with gov’t to produce. I’m just not sure such a sweeping generalization about gov’t workers as being less productive than private workers is justified. Just my opinion 🙂
Another small example. I have worked as a general medical officer in a non arms bearing branch of the military, and in private sector medicine for many years. I do not think that the government medical and support personnel weed any less dedicated and hardworking than those in the private sector. I agree with Elaine that this is just to broad a generalization.