Davis Budget Forecast: Cloudy with a Slight Chance of Sunshine on the Horizon

We must first acknowledge that the budget picture is not a uniformly negative one.  After years of a council and staff in denial, it is clear that at least the council and the upper levels of city government proverbially understand the nature of the problem.

At the same time, what the time that has elapsed since the June budget was passed by a 3-2 vote, with the lack of clear progress made toward those directives in the nearly nine months since, illustrates is that one cannot simply wave a wand and make the budget problems go away.  No matter how well-intentioned those in charge now may be, it is simply too deep a mess.

That said, it is a profound disappointment not only that we will not achieve those modest goals this year, but also to see the ease with which the council has almost conceded the point.

To my mind, those, who want to argue that the appropriate time to have issued the $2.5 million in personnel cuts was this next fiscal year, miss the point.

Good questions, I think, were raised with regard to my comment in yesterday’s article that we are putting all our eggs in one basket if we are relying on the MOUs to achieve all of the savings.

The first point is that $2.5 million is only an interim goal.  By my calculations from last spring, the ultimate number is far higher – upwards of $7 million by 2015.

If anything, despite very very modest increases in sales tax revenues, that number is likely higher now.  We have had multiple setbacks, including the quarter percent decrease in the PERS forecast earnings, the impasse that was nullified and the fire merger that has collapsed, among other things.

Adding to that is the expectation that these MOUs, just like the last ones that took effect in 2009, will likely either fall short of the goals, or we will have protracted hold-outs and impasse.

Despite what some have argued, impasse is not a long-term viable bargaining scenario.

A poster yesterday noted, “I don’t think they believe they will achieve the entire 2.5 million in savings from the MOUs. Rather, I think that by waiting to achieve just how much savings they achieve will help them make better decisions as far as program/staff reductions.”

They add, “I have to believe that if they’d implemented the 2.5 million in reductions before the conclusion of the negotiations, the bargaining units across the board would be much more resistant to making any concessions. So by waiting, they’re actually going to be able to reduce the number of layoffs which is a good thing.”

This is what makes this situation so complicated.  If the number were truly $2.5 million that we needed, it would be far simpler.  It is not.  The number in my estimation is at least three times that.

My hope was to achieve that first $2.5 million by capturing low-hanging fruit.  The truth is, the fruit never hangs as low as you hope.

The poster commented as well: “David, you’ve always claimed to defend the rank and file. Well, it looks like rank and file positions will probably be saved by delaying this until after the MOUs are finalized. Unless you were in favor of the layoffs? I mean how else do you propose they achieve the savings?”

It is a difficult scenario.  My  original hope was that the council could achieve the $2.5 million with relative ease.  That was linked at least in my mind primarily to two actions.  First, a reduction in fire staffing from four to three.  Second, a cut to the top salaries in the city by a specified amount.

That goal would have achieved both the immediate savings we need to divert in infrastructure and road maintenance, as well shoring up unfunded health care and pension liabilities.

However, nothing is that easy.  The report to recommend the fire staffing reduction was supposed to come out last summer.  It has not come out.  Vice Chancellor John Meyer, however, alluded to it in his letter to the city that suspended the fire merger – something that will ultimately make it more difficult to achieve savings.

The Vanguard has requested the document.  We eagerly await the city’s response.

So that is where we are.  I am thoroughly disappointed in a number of things this year, but primarily that we did not push these reforms through more aggressively, which I believe would have set us up far better going into the next round of bargaining.

The future is now with the MOUs – like it or not.

That really becomes Steve Pinkerton’s first major test.  The water issue was dumped on his lap.  I don’t think that is a fair test.

This one is him.  The council believes they have this set up as well as can be with an outside negotiator that people like Sue Greenwald have argued for, for years.  She finally has a council that is really willing to listen.

But on the other hand, I think a lot of this hinges on what fire does.  The problem there is that Davis’ union President Bobby Weist is also in the leadership for the state wide union and there is a general belief that he has to stay strong and not take concessions, by way of setting example for his cohorts around the state.

Nevertheless, Steve Pinkerton believes in his track record of success in this area.

On Monday, an article appeared in the Manteca paper that indicated the the pension cost rise meant no city raises in 2013-14.

What is important to note is this from the Manteca paper: “New contracts with the city’s bargaining groups direct increased revenue in property and sales taxes to go first to cover any additional retirement costs for city employees enrolled in the California Public Employees’ Retirement System (PERS).”

“Contract language calls for half of any net annual increase after that of over one percent in combined property and sales taxes to be split among the employee bargaining groups to determine how they’d like it applied to compensation – salary or benefits – within their units.”

More importantly, “The contract language was aimed at stabilizing the general fund to eliminate the city’s structured deficit. At the same time it increased job stability for city workers by helping to partially [e]nsure the city can handle retirement cost increases as they occur. Pension payments are a major part of the municipal budget. Getting retirement and health costs under control is an essential key to keeping Manteca’s municipal budget on even keel.”

The bottom line, though, is that Steve Pinkerton at least oversaw that contract language that is now protecting Manteca.

I happen to believe that Davis is a different sort of beast and we will see if what worked in Manteca can work here.

But it is at least a hopeful sign.  Perhaps the first such hopeful sign since the budget deal imploded in late September.

—David M. Greenwald reporting

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