In December 2013, the Davis City Council unanimously voted to impose the last, best and final offer on the Davis firefighters. That ended about a year and a half of turmoil in the city, but the imposed contract was only a one-year deal and, as of now, the Davis firefighters are technically speaking back, on the clock – except for one big change, now the status quo is the imposed contract rather than the more lucrative 2009 MOU.
We have heard a lot of talk about the low morale of the department, but we also need to remember that this is the best compensated bargaining unit in the city from top to bottom. The typical firefighter, when overtime is counted in, receives over six figures in salary, and upwards of $150,000 in total compensation.
An editorial in this morning’s Sacramento Bee, “Is This Fire Contract the Best City Can Do?” is a reminder that the city of Davis is not alone in having to deal with these issues.
As the Bee rightly notes, “Absolutely, firefighters in Sacramento and elsewhere do dangerous work. Just Monday morning, three were injured in a blaze in South Sacramento. Still, their pay – like salaries for other city workers – has to be viewed in terms of what taxpayers can afford.”
Whenever labor or contractual issues come up, firefighters and their union emphasize the importance of their work. No one disputes that – no one disputes that firefighters, like police officers, often put their lives on the line and that, while the firefighters in particular are well-compensated for their jobs, there really is no amount of money that mitigates that risk.
Still there are some telling things in the Bee editorial that we need to highlight as we look ahead here in Davis.
Sacramento City Manager John Shirey “won’t dare call the new contract with Sacramento firefighters a ‘good deal.’ Instead, he says the pact up for City Council approval Tuesday night could be a ‘fair deal’ – if the firefighters union helps find savings to offset some of the contract’s cost, mostly a cumulative 12 percent pay hike by December 2016. “
Moreover, the Bee notes, it is “even more revealing” that the city manager “let on that council members spent more time on this contract – all behind closed doors – than any other during his three-plus years on the job.”
Writes the Bee, “That’s no coincidence: The firefighters union is a powerful and generous player in city politics.
“Of the eight council members, three newly elected ones weren’t involved in the negotiations. It would show some political courage if they at least ask: Is this the best deal the city can get?” the Bee argues.
However, there are offsets to the contract.
For instance, “If the contract is approved, firefighters, who now pay 9 percent of their salary into their pensions, will pay the full 12 percent share starting in December 2015. That will save the city $4.7 million during the term of the contract, which will run until June 2018, and trim future pension costs.”
The city was also able to get the union to exclude sick leave in calculating overtime and new employees will no longer be able to cash out unused sick time.
However, “Those savings will be far outweighed by salary increases – 5 percent retroactive to Dec. 27, 4 percent in December 2015 and 3 percent in December 2016. Higher ranks would get slightly less. The pay hikes, on top of a 5 percent raise in December 2012, will cost the city nearly $25 million over the four-year contract.”
Ouch.
The Bee notes that Sacramento firefighters receive nearly 25% more than Davis firefighters even before this contract. “In 2013, city firefighters received an average of roughly $98,300 in base pay, overtime and retirement cash-outs, according to a Sacramento Bee review of data from the State Controller’s Office. The average payout was about $91,200 for city police officers, who, in their contract approved last June, get a 9 percent pay hike over three years.”
The Bee adds, “Unlike all other new city employees, new firefighters will receive retiree health benefits under the proposal. A 50-50 split to fund them in advance will cost the city about $315,000 a year.”
The contract will cost the city $22 million over four years, then $8.4 million a year after that.
The Bee editorial board writes, “While it may not be the ‘fiscal suicide pact’ described by Eye on Sacramento, a local watchdog group, this contract will worsen the ‘fiscal cliff’ when Measure U – the half-cent voter-approved sales tax that generates more than $30 million a year – ends in March 2019. With this contract, the city would face a projected general fund deficit approaching $50 million by 2019-20.”
The Bee adds, “Brian Rice, president of the city firefighters union, says that it didn’t get everything it wanted and that the contract is fair for both sides. He also says that the union is a ‘complete team player,’ pointing out that it bankrolled the Measure U campaign. “
The Bee concludes, “Now its contract makes it more likely that the council will ask voters to renew it, or even make it permanent, to avoid painful layoffs or service cuts. That’s very telling, too.”
Davis residents should pay close attention to what just happened in Sacramento. The city is not suddenly flush in money. They just passed a half-cent voter approved sales tax, they have a projected general fund deficit, and the Sacramento City Council bowed down to the public safety unions.
The handwriting is on the wall. We will see if our council can do better than Sacramento’s.
—David M. Greenwald reporting
This is looking at the matter backward. What the taxpayers can afford is irrelevant; if the taxpayers decide they can only afford to pay $2 an hour, no one will apply for the jobs. What the service is worth is what matters, and when you have hundreds of qualified people lined up to apply for a handful of job openings, that’s a good indication that you’re paying too much for the service.
Jim Frame, I was about to post the same thing, you got it exactly right. Davis firefighter jobs won’t be hard to fill if our current firefighters want to go elsewhere for more pay.
A few years ago I read over a thousand people lined up for a handful of open slots, a clear indication the positions are being vastly overpaid.
Fire fighting is dangerous work, but so is working at a liquor store at midnight or 4 AM. So is roofing or being an electrician. These “civil servants” often retire at 50, some even take second jobs while they are an active fire fighter! Don’t forget pension spiking.
I had a State worker recently bend my ear about the high percentage of sheriffs who go out on disability right before they retire. There has to be an added benefit there, and I wonder if the same thing happens with fire fighters?
https://davisvanguard.org/commentary-hundreds-would-happily-take-fire-contract/
It is also an indication that the supply of those qualified people is robust, so even if you scare some away with lower wages, there will still be a sufficient supply of qualified applicants.
For those concerned about maintaining adequate funding for future employee pension benefits – which presumably includes everyone – it would be helpful to know if the projected $8.4MM increase in annual operating budget is inclusive of the additional, net contributions required to keep prefunded pension assets in balance with the increased basis of future liabilities.
Secondly, if these increased contributions are included in the projected future operating budget, how many years are being allowed for full “rebuilding” of associated, additional pension assets? These should be important questions for plan beneficiaries, administrators, elected leaders, current and future taxpayers alike, for it determines how much of required additional contribution is to be paid by today’s taxpayers versus future generations.
As we find so often in these types of editorials, the potential for such actions to negatively impact future, unfunded liabilities is not explicitly addressed. And, without clarity on this point, your readers, the Sacramento Bee, and perhaps the Sacramento City Council are simply left to wonder about the cumulative effect of a baseline departmental compensation increase of 17% in just four years, on the actuarial balance of the city’s unfunded pension liability.
If the Government Accounting Standards Board has its way, beginning in 2015 we should see progress on recommended policies requiring all public agency reporting to reflect a short window, perhaps as little as seven years, to formally absorb any additional prefunding necessitated by factors affecting the actuarial liability (including raises and changes in employee contribution levels) in order to rebalance the future pension liability. If such requirements are already in effect here in California, it would be interesting to know.
Perhaps Mr. Carson or some of your other readers would know the answer to these questions?
the big problem here is public safety employees being able to pressure public officials to give them raises when in fact the city cannot afford pay increases. the union/ council tried to argue the salaries offset but the bee clearly shows that is false. the same thing is going to happen here – wolk is lining things up to make the case, frerichs will follow and swanson will do it for the sake of labor peace and it’s game over – 2008 redux except next time, things will be far worse and we might actually go to bankruptcy.
When and if it happens and the voters turn down more taxes because they feel they were tricked then like you say bankruptcy might be in the cards.
DP wrote:
> the big problem here is public safety employees being able to pressure public
> officials to give them raises when in fact the city cannot afford pay increases.
As one of my (now retired at 50 with a $150K+ pension) friends learned early in his firefighting career that if a politician does not give you what you want it is easy to get rid of them by getting friendly good looking clean cut firefighters in uniform to hang out in front of grocery stores in town and give kids stick on badges while telling their parents that if council member ________ is re-elected the cuts he or she wants will not allow them to buy a new hook and ladder and little “Johnny” (who is smiling with his junior firefighter sticker badge) will end up dead in his second floor bedroom…
Democrats control the state and yet they apparently cannot do anything about the absurd escalation of compensation to these public sector union members.
We hear how Democrats want to cap CEO pay and overturn Citizens United, yet it is the public sector unions that are bankrupting the nation, the states and cities.
Why isn’t the governor working with the state legislature to stop this madness in cities across the state?
Sacramento fails to hold the line, and so Davis firefighters get to point over to their peers and demand they too get a raise.
It is really quite disgusting and a clear sign that Democrats are really not fit to govern unless financial insolvency is the goal.
Will the city of Davis do the right thing, or cave in again to the absurdity around us? Will we lead or follow?
the real question is why did mayor kevin johnson sign off on this. not all democrats are the same on union issues and kevin johnson is largely disliked by the unions. but he bows down here.
DP wrote:
> the real question is why did mayor kevin johnson sign off on this.
I’ve heard that Johnson wants to run against Newsom for Governor and we all know you can’t run for Governor as a Democrat without union money (and being married to Rhee will make “teachers” union money hard to get)…
This is my thinking too.
Although big private money may be more influential in national politics, it is more than clear that union money calls the shots in local politics, and the elections of states that are significantly left of center.
Wisconsin leads the way for the vision of left-leaning states getting their fiscal act together. The first step is to turn-back the clock on all the protections that prevent a right-to-work approach to public sector labor.
The alternative is a private non-profit that pulls as much weight in helping to fund political campaigns. But what is generally missed in this “power of the unions” assessment is their organization. Unions have devolved into being more a professional lobbying and campaigning operation that focusing their operations on employee advocacy. When you consider the Davis FF union… it is really quite a small group. So why then does it carry so much influence? It does because there are about 200-300 related “friends” that can be easily mobilized to raise hell and push an agenda. The FF unions is a “locked-and-loaded” campaign engine before every election where they have a money stake. Same with the teachers union.
And then we have this irrational left attack of private money funding politics… including the IRS going after those non-profits and not any that are friends of Democrats.
So the unions get the path cleared to do their dirty deeds.
And then Democrats cry that there is no money for their beloved social causes, and they point to successful people and demand more taxes from them. And then the unions see the money and demand a raise. And the absurd cycle continues until Democrats run out of other people’s money… which they eventually always do.
And certainly not ALL Democrats agree with this absurdity, but since they continue to vote for those that do… they are the same.
BTW… I certainly realize how I am being very partisan here… but in CA, Republicans cannot do a thing about this problem. It is frustrating to be out of the power and influence and see the absolute ineffectiveness of the party in power. What choice is there but to criticize the party in power? Some would prefer that the debate just stay on the facts and numbers, but the root of the problem is purely political. Those that want a long-term political career in the Democrat party have to play the same game that is basically one that kicks the fiscal can down the road to insolvency.
Note to all… we will have another recession. We always will.
at the same time, by being partisan you end up alienating people who might agree with you but grow tired of the partisan crap. for example – me.
D.P., and you’re not partisan?…..LOL
BP, I don’t see DP as partisan, nor do I think of myself as partisan. Further, Party registration (mine is Democrat) isn’t a very consistent indicator. Many people register for a party affiliation when they vote for the first time, and then never change that affiliation, even though their views were very different at that time than they are now.
i’m not registered to a party and i rarely vote for democrats, so no, not partisan.
Well if you are not a registered Democrat DP, then why would you be so sensitive about criticism of the Democrat Party? Or are you just registered independent to claim you are independent but are a closet Democrat?
one of the reasons i’m not registered to a party is i grew tired of politics in the most base sense of the word. politics isn’t about policy, it’s about brinksmanship. your constant berating of liberals and democrats, even if i’m not a democrat, strikes at the very core of my disdain for the whole process. in the process you draw barriers where you could have allies.
Ironic. I grew partisan after coming to the conclusion that there was not enough political introspection in this state, and that the main media had become corrupt and/or complicit and primarily left biased. It became clear that one side, the Democrats, controlled the agenda and the narrative and they had grown fat, dumb and lazy in thinking that they were righteous and everyone else is an idiot and should just go away. And they could just say and do things without any political consequences. And so the criticism. I think we need more of it not less of it. It is only politics, why the hypersensitivity?
I don’t accept your explanation. If you are truly independent you would not respond so strongly to criticism of the Democrat party or liberals. You certainly don’t do the same over criticism of the Republican party or conservatives.
Your response is at least as partisan as is my criticism.
When the problem is political is calls for criticism of politics. And like it or not, the political world is still controlled by Democrats or Republicans. Maybe one day that will change but until it does we need to call out the destructive antics and screwed up ideals of both parties. And it isn’t personal unless you take it personal.. and that would be your choice.
Frankly, if it looks like a duck……….
i’m not truly independent as in middle of the road. however, you’ve completely missed my point. i’m not interested in common cause with partisans. it’s not a matter of like it or not – i don’t like it but for the most part, i don’t see people on the left on this site nearly as likely to make partisan/ party/ or even ideological comments as people on the right here.
… and the Davis city council doesn’t even have a majority of registered Democrats, so Frankly’s partisan detour was particularly unwarranted. The key vote on any budget issue in this regard in Davis will be Rochelle Swanson. Last I heard, she wasn’t a registered Democrat, nor is she beholden to any public employee unions.
I would agree with you, and I had a little hope when Governor Brown supposedly reigned in cell phones and state cars being used for private purpose.
Governor Brown hasn’t gone to work on pensions, but has pushed for a $68-Billion bullet train which already won’t meet it’s original goals. The Bay Bridge came in at about 6x the original estimate, so that gives you an idea of what we are facing at the upper end. Lots of union jobs.
I have it from a state worker that when the budget cuts came through a few years ago, the word came down from the governor’s office – protect union jobs. More productive, younger, tech-savvy workers were let go in favor of dramatically slower union workers.
“Governor Brown hasn’t gone to work on pensions”
that’s not true.
https://davisvanguard.org/governor-announces-compromise-deal-on-public-pension-reform/
now you can criticize what he’s done, but he probably went about as far as he could.
I read what you linked to and will comment, but SOD and Frankly are probably more informed on this topic than I.
It looks as if the biggest reforms were made for new hires, not existing employees, which is a huge mathematical problem. It also looks as if the same basic structure is in place – i.e. a defined benefit, not a 401K type of plan – which will just cause more problems down the road.
My guess is that the system is still unsustainable, and we just kicked the can down the road a couple of years, which doesn’t really solve the problem.
I’d like to read some feedback from an independent financial analyst who is not tied to the unions or the Democratic Party.
The problem that you have with reforming existing employees are court decisions have ruled that those pensions are vested rights and therefore you can’t change them. That’s why, the Stockton bankruptcy ruling was so fascinating because for the first time a judge ruled that a city in bankruptcy could reduce their pension obligations – and even then, Stockton settled with the unions rather than touching pensions.
TBD wrote:
> SOD and Frankly are probably more informed
> on this topic than I.
I’m not any kind of expert on this topic, other than (extended) family members that are Bay Area firefighters and my best friend since childhood is close to 30 years as a firefighter and many of the guys from his academy class are now retiring.
> My guess is that the system is still unsustainable,
Anyone who knows even basic math knows that the system is “still unsustainable” (unless we have another real estate bubble that does not pop, another dot com bubble that does not pop and discover that there is more oil under the Salton Sea than in Saudi Arabia).
Then David wrote:
> The problem that you have with reforming existing employees
> are court decisions have ruled that those pensions are vested
> rights and therefore you can’t change them.
As many smaller districts on the East Coast have done all you need to do is get the workers to voter for lower benefits. Not many people will vote to take a 25% pay cut today in order to keep full benefits in 20 years (and the smart people know the benefits will be cut anyway when the reality of math trumps over politics).
The retired 50 year friend I recently mentioned actually retired early because (at least in his department) they made changes (he didn’t vote for) where you now average three years pay to calculate the pension (making it harder to push things in the final year) and they have taken out a lot of what they use to calculate “pay” (in the “good ‘ol days of just a couple years ago) they would count just about everything including cashed out vacation and sick pay (so a firefighter with 30 years who got a $35K vacation cash out would have got an extra $31K in pension EVERY YEAR going forward). This is why my friend retired in his 40’s since he did the math and found that 80% of his pay + extras was going to be more than 90% of his pay without extras…
The site below covers how politicians keep working to hide the pension problem every day:
http://www.pensiontsunami.com/
I’m fairly sure that’s not a possibility in California.
I don’t know what pension-related costs were built into the City of Sacramento numbers published in the Sacramento Bee because I haven’t reviewed them in detail, but I do think the general concerns expressed here are on point. If the city agrees to significant increases in compensation beyond those assumed in the five-year fiscal projections adopted last summer as part of the budget, it will put additional pressure on city finances in two ways — the direct cost of the immediate compensation increases, and the longer term impacts primarily on pension and medical premiums. The projections incorporated into the 2014-15 budget plan assumed 1 percent annual COLAs on average for employee groups in the out-years after the terms of the present MOUs (and imposition of contracts) played out. So going beyond that means we have additional problems to solve in the future.
As the city proceeds with collective bargaining in this next round, I’m hoping the city will take a close look at whether any of the existing work rules that are tied to the contracts could be modified in ways that reduce city costs or at least allow more efficient government. Maybe that will help us work out an agreement the city can afford.
Dan,
Thanks for your comments. Do you know if the budgets for the out years likewise reflect the additional pension contributions that would be mandated for the pension funds as the result of the 1% COLA adjustments? Do you happen to know the city’s policy regarding the number of years being allowed for full absorption of those additional required contributions – i.e. 7 years, 15 years, etc?
I don’t see how our elected officials can be viewed as fully informed or prepared, either from a budgeting standpoint or from the standpoint of contract negotiating if they have not been provided a clear understanding of all projected direct and indirect costs associated with each option.
Doby,
I think the multi-year fiscal impact of any proposed collective bargaining agreement should be “sunshined” and well understood before being adopted . It is an approach that has been adopted in the Capitol. My old office, the LAO, is directed by state law to conduct a fiscal analysis of the numbers put together by the Department of Finance when tentative agreement on an MOU has been achieved. This information is made public and then used to inform legislative action on adopting the MOU in the form of a bill. Sometimes the late timing of agreements on MOUs days before the end of the legislative session frustrates this process, but in the ideal it is a good one and could be adapted for use in the City of Davis.
On your specific questions as to how the pension contributions are incorporated into the five year fiscal projections, I will defer to city staff. As you saw at our commission meeting a couple months ago, we received a valuable briefing from the city’s actuarial consultant about how he estimates the employer contribution rates that the city will pay to CalPERS in future years, but he did not lay out the details as to how the city then actually translates those numbers into budget projections.
My understanding from past discussions though is that the key variables used in the city’s estimates are (1) the year by year actuals or estimates of the contribution rates for the particular employee groups, miscellaneous or safety, and (2) the city’s estimate of PERS-eligible payroll for those groups. That second variable, the size of payroll, could be affected by a number of factors, including planned hiring or layoffs of PERS-eligible staff, staff attrition and retirements, merit raises and COLAs, and whether staffing is skewed toward recent hires or senior staffers.
I am unaware of any explicit city policy on how required contributions for pensions are absorbed. Our practice has been to budget for the payment of employer contributions based on the most recent rates actually dictated by CalPERS and our estimates, prepared with the help of our actuarial consultant, of what CalPERS will require us to pay in future years. As you certainly are aware, CalPERS has decided to ease into place various rate increases adopted for employers in recent years, such as the one adopted last year to reflect the longer average life of pensioners, to buffer local government and help them absorb the additional costs. But those delays come at a price in terms of higher costs later down the line.
In theory, as I believe we discussed at our commission meeting, if the city had “extra” money available it could pay more in employer contributions than PERS requires and hold down the cost of these future obligations. PERS permits this. But that choice would have to be weighed against other legitimate uses for city resources, such as rebuilding its financial reserves or paving potholes.
Dan,
Thanks for your detailed reply.
So, to simplify, if we assume an across the boards departmental increase of 17%, over four years, what does that do to the agency’s Unfunded Liability for that particular department? Presumably it increases the unfunded component fairly substantially. So, then, if we translate the additional contributions necessary “just to deal with that series of increases”, what does that number look like on an annual basis?
This shouldn’t be rocket science – we are talking about retirement programs.
Knowing what we now know about the pernicious effects of unfunded liabilities (see Treasurer Chiang’s recent commentaries) why would “the next generation of taxpayers” want us to be taking much more than seven years to fully fund any “newly created deficit”?
Why wouldn’t this be standard practice, thereby allowing the sunshine to which you refer in your opening comment?
In the WSJ today:
http://www.wsj.com/articles/steve-malanga-the-pension-sink-is-gulping-billions-in-tax-raises-1421106634?mod=hp_opinion
I am so happy for my 56 year old neighbor that he gets to work on his yard and take long bike rides having been retired from his highly-compensated state job for two years. And I don’t blame him one bit for taking what was given to him. But he and thousands like him represent the cost eating the world. Had he worked for another 10 years and had to contribute more to his retirement benefits, the state and cities across the state would have balanced budgets and our tax rates would be lower and we would have a stronger economy with more people working and able to keep more of what they earn.
http://www.mercurynews.com/education/ci_27290413/school-funding-brown-proposes-7-8-billion-more
Governor proposes $7.8 billion more for schools for 2015 – 16, increase of 7.9%; = $306-per-pupil increase. $2.7 billion more for 2014 due to higher tax revenues.
“…gobbling up much of the new tax money” is a distortion.
Just do the math Don. The rest is the governor giving away the increased revenue from a healthier economy… which will crash again in the next recession.
I did the math, Frankly. Mr. Malanga didn’t. His example is a misrepresentation. Pension reform is a big deal, and I expect the governor to take it on in his second term. But what your essayist presented was a distortion. The governor pushed a time-limited tax increase, promising to restore funding to the schools. He did that. Whether the tax gets extended is an open question, but it has to be renewed. It ends in 2018. The bill he signed re: pensions is “by 2021” so it isn’t directly related to the tax increase or his mid-range budget proposals.
The governor kept his promise. But he, like everyone else, knows that the pension problem has to be resolved. And he’s no great friend of the unions. They have, at best, a wary relationship with Brown.
I have a relative who started working for a city department when she was 18 wit a high school diploma, she retired around 43.
Now that our Governor is termed out, it looks like he may try and stand up to the unions (unlike the City of Sacramento). Here is the latest article from Calpensions.
http://calpensions.com/2015/01/12/brown-plan-to-eliminate-retiree-health-care-debt/
This is encouraging. If he can make it happen, I might turn to be more a fan of the old guy.
When I have worked for places that had a deferred comp plan, like now, I cannot get the money until I retire. It is NOT part of my pension contribution.
Likewise the medical plan that gives you out of pocket money is only accessible for co-pays, and last time I had one of these, you had to “estimate” the deduction from your own pay for this fund. If you did not spend it all, you lost it. What kind of scam is this?