Commentary: Council Faces a Quiet Crisis of Confidence on Labor Front – Last week’s employee contract that was approved by the council by a 5-0 vote was a reminder that while the city has been focused – and rightly so – on getting the water project squared away, there is another critical battle underway and that is the approval of the employee contracts.
The last contracts expired on June 30. It is now approaching November 30 (particularly when you realize that city offices are closed until November 26) and contracts remain unsigned.
In September, City Manager Steve Pinkerton felt there would be some progress within thirty days, but that timeline has come and gone and now we might be looking at another 30 days.
The city made some headway with the Police Management Contract. As we noted late last week, the city made clear progress on the cafeteria cash out – a sore spot for employees who have come to rely on the additional $1500 in take-home income, but a symbol to many of the extravagant and unnecessary perks bestowed by previous councils.
As several councilmembers have noted, this is a benefit that you just cannot find anywhere else. The city is reducing theirs from $1500 per month to $500, which would put them into the median category for benefits. It is enough to induce people to take the cash out, but a clear savings to the city over the full compensation in lieu of health insurance that it once provided.
The city continues to work on ways to reduce retiree health care which is currently about 20 percent of payrolls and, if left unchecked, would consume one-quarter of the city’s payroll. The proposal to the police management group would bring retiree health benefits down to about 16 percent of pay.
A movement toward a second tier for retirement benefits would allow for later retirement and lower pension formulas for new employees. And for current employees they would be asked to pick up a greater percentage of their pensions, saving the city money over time.
These would all seem to be common sense approaches – approaches, it seems, for which there is a broad consensus across the board and by the council.
Nevertheless, there is considerable resistance by the bargaining units to these changes. In fact, despite the fact that the contract signed by the city this past week with the police managers’ bargaining unit represents a considerable accomplishment, it also leaves the city well short of where it had hoped to go.
The city figures the first year total compensation reduction of this contract is approximately 3.5%.
According to the city manager, if all the groups take the proposal that police management took, it would amount to about $3.3 million in all funds savings by the end of the contract.
Year 1 assumes an effective date of December 1 for the new labor agreements, he told the Vanguard. And the total savings for this year would be about $1.9 million, but the budget projected about $4 million in savings total this year.
By the end of the contract, year 4, it would create about a $3.3 million savings in all funds, but again that falls short of the $4 million in general fund savings the city was projecting in June.
And that savings assumes that fire stays at 36 staffers rather than hiring back up to 42. It also assumes inflators for PERS (Public Employees’ Retirement System) retirement increases and medical premium increases.
Bottom line, while this contract moves the city forward, it gets them less than half way to where they wanted to be when they passed the budget in June.
Privately, officials seem to be acknowledging that headway has been slower and more difficult than perhaps they previously believed. The unions, led by the firefighters, have fought these reasonable proposals tooth and nail.
It is, of course, difficult for a man who makes $210,000 in total compensation each year to cry poverty, but other city groups engender a bit more empathy from both the council and the community.
The bottom line is that the city needs to get these long-term structural issues fixed now, while we have solid backing by council and the community.
If these bargaining units continue to hold out, we are going to see imposition of impasse where the last, best and final contract is imposed upon employees. It is a risky strategy, as we learned last time, but the laws are a bit more lenient in this regard than they once were.
If that does not work, we will see more layoffs like we saw with Davis City Employees Association. The city took a big publicity hit when it laid off a number of parks maintenance workers and tree trimmers, following the June election. But they were forced to do so when PERB (Public Employment Relations Board) reversed their impasse and DCEA refused to agree to concessions to save jobs.
The Vanguard remains firmly behind the concept of structural reform and opposes efforts by the city to save money through privatization and outsourcing of contract positions. We do not believe this is the best way in which the city can save money. But in order to avoid layoffs and outsourcing in the future, the bargaining units have to agree to what every employee at the state, county and municipal level has done across the state – take a reduction in retirement benefits.
While the city of Davis has avoided the worst problems faced by municipalities across the state, we are far from out of the woods. The city manager needs the budget flexibility of cutting roughly 20% of the general fund in order to ensure the long-term sustainability of this community.
In order to do that, the people of this community must give the council the strength to stand by these principals, despite great pressure internally from the city bargaining units and their allies, both within this community and outside.
The election scenario reemerging in the coming weeks, of outside labor interests pressuring our council, is quite real. The stakes are too high here and the public needs to continue its commitment to fiscal sustainability.
—David M. Greenwald reporting
“The Vanguard remains firmly behind the concept of structural reform and opposes efforts by city to save money through privatization and outsourcing of contract positions. We do not believe this is the best way in which the city can save money – but in order to avoid layoffs and outsourcing in the future, the bargaining units have to agree to what every employee at the state, county, and municipal level has done across the state – take a reduction in retirement benefits.”
I suppose you thought everyone would get together and sing Kubaya hold hands and make a deal to give up wages and benefits. After arguing for years that compensation is too high and unsustainable you seem not to have the stomach for the fight you have championed.
“I suppose you thought everyone would get together and sing Kubaya hold hands and make a deal to give up wages and benefits.”
You insult me?
“After arguing for years that compensation is too high and unsustainable you seem not to have the stomach for the fight you have championed. “
What makes you say this?
Tend to be against “cherry-picking”, but this article is ‘over-ripe’.
[quote]The Vanguard remains… opposed to efforts by city to save money through privatization and outsourcing of contract positions. We do not believe this is the best way in which the city can save money – but in order to avoid layoffs and outsourcing in the future, the [b]bargaining units have to agree to what every employee at the state, county, and municipal level has done across the state[/b] – take a reduction in retirement benefits.[/quote]
Ok… DG agrees with Jeff Boone that we essentially need to pursue a ‘race to the bottom’, to strive for public and private compensation (total, salary and benefits) to ensure minimum costs, while not creating too much turnover. The difference is Jeff Boone would take a portion of those savings to compensate ‘high-performers’. David does not appear to agree that high-performers should be compensated more. Seems that DG believes a first-year tree-trimmer should be compensated the same as a 25-year professional planner/engineer. Very egalitarian. Perhaps, noble.
[quote] the people of this community must give the council the strength to stand by these principals[/quote]OK, surprisingly, David wants to make top school administrators to “pay” too [sorry, just too easy].
[quote] (particularly when you realize that city offices are closed until November 26) and contracts remain unsigned.[/quote]Interesting comment, as I understand the City, outside of meet and confer, just told employees that they had to take 3 days of accumulated vacation leave to close city hall. Or, perhaps they could have taken “leave w/o pay” and have to pay for their other benefits during what amounts to a ‘furlough’. Punish employees and decrease city services to the public… a “two-fer”. Nice.
[quote]The city continues to work on ways to reduce retiree health care which is currently about 20 percent of payrolls and if left unchecked would consume one-quarter of the city’s payroll.[/quote]Ironic. How much of that is due to the fact that the City was pursuing a “pay-as-you-go model, and the GASB said you can’t do that, and so now the City is playing “catch-up”, in a very similar manner as they will have to do on water rate charges, WITH OR WITHOUT the water project. Again, nice use of numbers.
[quote]As several councilmembers have noted, this [cafeteria cashout] is a benefit that you just cannot find anywhere else. [/quote]Agreed. The ‘cashout’ should never have existed, but once it did, it was part of many employee’s ‘calculus’ and budget. I get the employees’ push-back on that, unless it is phased.
[quote]in the future, the bargaining units have to agree to what every employee at the state, county, and municipal level has done across the state – take a reduction in retirement benefits.[/quote]Yet, teachers and other school district employees should be immune to such changes, based on their omission in DG’s reality. The same can be argued for reductions in SS & Medicare, BTW.
Relax Mr Toad. David would spare the school district, and focus on City employees.
hpierce:
“David does not appear to agree that high-performers should be compensated more. Seems that DG believes a first-year tree-trimmer should be compensated the same as a 25-year professional planner/engineer. Very egalitarian. Perhaps, noble. “
I don’t believe I weighed in on that issue and I certainly don’t see your latter statement as indicative of anything I have written.
“OK, surprisingly, David wants to make top school administrators to “pay” too [sorry, just too easy].”
What?
“Ironic. How much of that is due to the fact that the City was pursuing a “pay-as-you-go model, and the GASB said you can’t do that, and so now the City is playing “catch-up”, in a very similar manner as they will have to do on water rate charges, WITH OR WITHOUT the water project. Again, nice use of numbers.”
I think you have a few problems in this statement. First, GASB never said that the city cannot pay as they go with retirement. In fact, GASB is an accounting mechanism. The city using GASB’s became aware that it would cost them a lot more to maintain this model long term and have begun transitioning. That reflects a truer cost for current services and will save a lot of money in the long term. However, irrespective of this, health costs are rising. 20 to 25 percent of payrolls represents a far truer representation of these costs than we were paying previously.
“Agreed. The ‘cashout’ should never have existed, but once it did, it was part of many employee’s ‘calculus’ and budget. I get the employees’ push-back on that, unless it is phased. “
I’m in agreement on this point.
“Yet, teachers and other school district employees should be immune to such changes, based on their omission in DG’s reality. The same can be argued for reductions in SS & Medicare, BTW. “
That’ s a strange statement – have you just completely ignored the columns calling for teaching concessions?
[quote]”Yet, teachers and other school district employees should be immune to such changes, based on their omission in DG’s reality.”
That’ s a strange statement – have you just completely ignored the columns calling for teaching concessions? [/quote]
You have called for minor concessions on ‘current year pay’. You have not called for concessions on pensions or other retiree benefits for teachers, as you have for City employees. I’d address other points, but need to run some errands. I stand by my statements.
Aren’t teachers getting 2% at 60 on about $55 or $60K?
[i]A movement toward a second tier for retirement benefits would allow for later retirement and lower pension formulas for new employees. And for current employees they would be asked to pick up a greater percentage of their pensions, saving the city money over time.[/i]
What a fine mess we built for ourselves.
In all my private-sector employee and management experience, try as I may, I cannot wrap my head around the dynamics of this debate and how it meshes with politics. I have been impressed with the Vanguard for taking an ideologically and fiscally-rational position on public-sector pay and benefits at this time of profound budget difficulty. Conversely, I have had a hard time assigning a commensurate level of respect for those that argue to anything approaching status quo.
How can any adult city employee support a “keep mine, screw the kids” approach and still wrap themselves in pride for being a dedicated soldier of the political left… the side of politics that is supposed to be giving and egalitarian.
Similarly, for teachers, how can senior educators sleep well at night knowing they rejected wage and benefit concessions when the obvious consequences is that young teachers lose their jobs? (In fairness, the Davis teachers have accepted concessions at times.)
I have never worked anywhere where senior employees would be so willing to throw young employees under the bus. In my long management career, I have no experience working on any cost cutting plan that did not focus on the welfare of ALL employees, and seek nuanced solutions that spread the pain and benefits among the largest group possible.
If I remove the unions and labor contracts as impediments to doing the right thing, the obvious solution for be would be for all employees to take a pay cut, and begin paying more for their retirement and healthcare while increasing the retirement age. I would implement a graduated schedule for those close to retirement age, but otherwise keep the pay and benefits the same for all. I don’t have any emotional response to requiring employees to work more years before they retire… especially when compared to consequence of screwing the kids. Early retirement has become an entitlement for public-sector employees at a time when larger and larger numbers of private-sector employees have to return to the time when the Social Security age was set to equal male life expectancy.
For me, retirement is the key to getting back to a level of fiscal sustainability and sanity. The way I see it, the retirement age should be five and maybe ten years before life expectancy. I would support a reduced pension for those that retire early… requiring them to save their own money to fund any earlier retirement like the rest of us. Ideally, I would convert all defined benefit pensions to defined contribution plans that allow employees to make their own decision for retirement.
[i]the people of this community must give the council the strength to stand by these principals
OK, surprisingly, David wants to make top school administrators to “pay” too [sorry, just too easy]. [/i]
Ok, I got the pun. Vagaries of spell-check…
I missed the pun obviously. Homonyms are the toughest for me to spot – they are not caught by spellchecks and often not by grammar checks either and they don’t catch the eye reading over them. Highbeam normally catches them and then makes fun of me.
I hope hpierce gets back on some of the other issues he posted on because I was not clear where he was going.
I will add that while I don’t completely agree with Jeff Boone, I think it’s understandable where he’s coming from. I remain a firm supporter of unions even in the public sector because I have witnessed, particularly through my wife’s work, a good deal of abuse of employees from their supervisors that would be extremely difficult to deal with, without work place representation.
The collective bargaining process is a good one, but there is always a danger when the level gets pushed too hard in one direction or the other.
Growth nailed it on teachers, they get 2% at 60 upon retirement that’s where I want to see city pensions go, so why would I be speaking out against? Hpierce, you act like everything is in equivalence here and it’s not. City employees get far more in benefits and pensions and most get paid a lot more than teachers as well – you can cut it down to days of work, but how do you then defend firefighter salaries?
DG: [i]”… the city made clear progress on the cafeteria cash out – a sore spot for employees who have come to rely on [b]the additional $1500[/b] in take-home income.”[/i]
For the sake of clarity, the “additional” income of $1,500 per month is only for those employees who get no medical benefit through the City. For most City workers, the cash-out ranges from $0 to $1,000 per month. Under the proposed change (adopted in the police lieutenants’ contract), the cash-out for employees who get a medical benefit from the City now would fall to $0. The loss for them would be up to $12,000 per year. Those who get no medical coverage from the City are presently taking an annual cash-out of roughly $18,000 per year. That will fall to $6,000 per year with the adopted changes.
One thing to consider is that the police lietenants and other top city managers make a substantial salary, so a loss of the cash-out represents less of a percentage loss for them in salary than it does for a lot of junior employees. Secondly, I would guess that most of these senior employees currently get less of a cash-out than most junior employees, since the senior ones are more likely to have families and thus are using the City’s benefit to cover themselves, their spouses and their children’s medical insurance.
I am not saying, however, that this change in cafeteria cash-outs is not the right thing to do. It is. We are very much on the road to bankruptcy and have to try to stop the fiscal bleeding. But I do understand that there will be problems of equity in making this change.
Rich: I agree.
[i]Growth nailed it on teachers, they get 2% at 60 upon retirement that’s where I want to see city pensions go[/i]
1.75% at 65 works fine for me. If you figure a 40-year career, that is 70%. A 35-year career – that is 61.25%. That should be more than enough for someone 65 years of age assuming their healthcare is also mostly covered and they lived responsibly preparing for their retirement.
[i]The collective bargaining process is a good one, but there is always a danger when the level gets pushed too hard in one direction or the other.[/i]
I don’t support collective bargaining, especially in the public-sector. The “abuse” excuse is no longer worthy given the historical comparison of the types of abuses that launched the workers-rights movement in this country, and given that copious laws and regulations have since been enacted to protect employess.
What I do support and respect realtive to employee rights to collectively bargain for compensation are ESOPs. If employees want a say in what their compensation should be, then they should put much more of their compensation at risk in company ownership and accept a role in making the management decisions that determine the success or failure of the company. But to sit on the sidelines a wage war with the owners who are taking all the risk is unworthy of any respect in my book. Unions demand all the upside they can get without sharing any responsibility for the downside. In this, collective bargaining by unions is nothing less than legalized wage extortion.
I think the limited number of circumstances where the employees organized to buy the company they work for is evidence that they don’t really have a clue and under-value what it takes to start and run a successful company. Hostess is a great example of this. If the employees were so unhappy, and management was so wrotten… why didn’t the union labor organize to purchase the company?
I have mixed feeling about ending the cash out. Do we know… in taking away the cash-out benefit, will more employees elect coverage?
It seems that there would be some equilibrium here where some amount of cash out would dissuade employees from jumping from a spouse’s policy to increase city health care costs, without the city paying more than it needed to for dissuading the employees from doing this.
In my case, the premiums for a single person are significantly lower than for a couple or a family. Let’s use an example where a city employee that is currently on a spouse’s healthcare plan is paying another $500 per month on that plan, and getting $1500 per month in cash out from the city. If the cash out is take away, why wouldn’t that city employee just cancel her $500 rider on her spouse’s insurance and demand the city cover her health care costs at $1500 per month? In this case, the optimum cash out would be something like $600 per month. The employee would net another $100 per month staying on her spouse’s insurance. The city would save $900 per month.
Oops… I just thought of another bit of criteria that can dissuade a city employee from from jumping off a spouse’s policy and demaning city health care. This assumes there is some deductable and/or out of pocket maximums for each policy. The family expense of having two sets of deducibles and out of pocket maximums would tend to dissuade the demand for city-paid health insurance. But again, this would be offset against the motivation to lower the extra premium costs of the spouse plan.
“Do we know… in taking away the cash-out benefit, will more employees elect coverage?”
That’s a good question. The hope of course is that the $500 per month ($6000) would provide savings to the city while still producing enough incentive to cause workers to take the cash rather than a redundant benefit.
Here’s my analysis ([url]https://davisvanguard.org/index.php?option=com_content&view=article&id=5486:vanguard-analysis-cafeteria-cash-out-benefits&Itemid=79[/url])
definitely a small number of employees account for most of the project savings.
JB: [i]”I have mixed feeling about ending the cash out. Do we know… in taking away the cash-out benefit, will more employees elect coverage?”[/i]
Even if more do, the taxpayers will come out far ahead in almost every case.
Consider Employee A, who gets his medical coverage* through his wife’s work. His cafeteria benefit is $20,000. His cash-out is 90% of that or $18,000. After the City adopts the cash-out reform, Employee A decides he would be better off leaving his wife’s plan and accepting the City’s plan. The City’s coverage costs about $6,500 for him. Thus in the case of Employee A, the taxpayers will be better off by $11,500 (or $18,000 – $6,500).
Consider Employee B, who gets her medical coverage through her domestic partner’s work. Her cafeteria benefit is $20,000. Her cash-out is 90% of that or $18,000. After the City adopts the cash-out reform, Employee B decides she and her partner would be better off leaving her partner’s plan and accepting the City’s plan. The City’s coverage costs about $13,000 for the two of them. Thus in the case of Employee B, the taxpayers will be better off by $5,000 (or $18,000 – $13,000).
Consider Employee C, who gets his medical coverage through his other job. His cafeteria benefit is $20,000. His cash-out is 90% of that or $18,000. After the City adopts the cash-out reform, Employee C decides he would be better off accepting the City’s plan. The City’s coverage costs about $19,500 for him, his wife and their kid. Only in the case of Employee C, the taxpayers will be worse off–by $1,500 (or $18,000 – $19,500).
Most City employees now get their healthcare from the City. And most of those plans cost less than $18,000 per year. Thus most City employees are now getting a cash-out, and they will lose that under this reform.
Consider Employee D, who gets her medical coverage through the City. Her cafeteria benefit is $20,000. Her plan costs $6,100. Her cash-out is $11,900. After the City adopts the cash-out reform, Employee D loses her cash-out and her coverage remains the same. Thus in the case of Employee D, the taxpayers will be better off by $11,900 (or $18,000 – $6,100).
Finally, consider Employee E, who gets her medical coverage through the City. Her cafeteria benefit is $20,000. Her plan costs $14,700 for her and her girlfriend. Her cash-out is $3,300. After the City adopts the cash-out reform, Employee E loses her cash-out and her medical plan remains the same. Thus in the case of Employee E, the taxpayers will be better off by $3,300 (or $18,000 – $14,700).
*Keep in mind that no City employees can reject having the City cover their medical unless they have medical coverage from another job or from a spouse or domestic partner or parent, etc.
A final point: there are City employees whose plans cost more than the $20,000 medical benefit. (Note: this cap is higher for firefighters. Surprise!!!) In those cases, they now get no cash-out. And that will still be the case after the reform.
*The firefighter cash-outs are not larger than those for other employees, even though their cap is higher. The reason for that is the cash-out is 80% (not 90%) of the maximum benefit. I have never asked anyone why the firefighters have a higher cap and a slightly lower cash-out percentage. However, it is probably that way in part because a great number of Davis firefighters live far away from Davis. Some live in Santa Clara County, for example. And because of that, they are on Bay Area medical plans, and those plans are more expensive than Sacramento area plans. So it seems likely that Local 3494 requested this higher cap to make sure than Davis firefighters who live far away and have families on their plans would not have to dig into their own pockets to pay for the more expensive medical coverage they get.
[i]”… Local 3494 requested this higher cap to make sure [s]than[/s] [b]that[/b] Davis firefighters who live far away …”[/i]
Fixed.
Rich: [i]Consider Employee B, who gets her medical coverage through her domestic partner’s work. Her cafeteria benefit is $20,000. Her cash-out is 90% of that or $18,000. After the City adopts the cash-out reform, Employee B decides she and her partner would be better off leaving her partner’s plan and accepting the City’s plan. The City’s coverage costs about $13,000 for the two of them. Thus in the case of Employee B, the taxpayers will be better off by $5,000 (or $18,000 – $13,000).
[/i]
If the cash out is $18,000 and would be $0 under the reform the City savings is $18,000. However, if she opts for coverage the savings would be $5,000 as you point out.
Bu my point was that if you allowed some cash out… say 20%… in this case the employee would get a $4000 cash out and that is all the city would have to spend because she would be motivated to stick with her domestic partner’s health insurance.
So, $18,000 – $4,000 = $14,000 in savings. Even though the employee gets $4000, since it motivates her to stick with her existing plan, the city saves an extra $9,000.
That was my point. Some level of cash-out would seem to optimize the amount of savings.
“What makes you say this?”
You seem to want the concessions but don’t like the fight required to get them. Privatization, layoffs, furloughs are some of the tools of the trade for extracting concessions from workers. It seems you don’t like the fight but have been beating the drum for years. Are you really naive enough that you didn’t anticipate what it would take to get those concessions? Did you expect a come and let us reason together attitude would be all that was needed?
I disagree with your premise that I didn’t expect it would take a fight to get the concessions.
[quote]but how do you then defend firefighter salaries? [/quote]I do not… I can not. I’m not “bobby” as Rich used to say I was. I do know that professional engineers could get that type of salary, unless they worked for the City (where they would maybe get 2/3’rd or 3/4 of that).
You have not responded to the fact/assertion that all non-safety City employees, outside of negotiations have to give up 3 days of accumulated vacation this week, or face the equivalent of ‘leave without pay’ and an accompanying loss of pay to cover medical, dental, etc.
But, oh yes, they are over-compensated. Yet, due to your family realities, school district employees are barely compensated enough to deal with your family needs (that all of us pay for).
I’m reminded of Animal Farm: “all animals are equal, but some are more equal than others”