This past weekend, the Vanguard rated the Council’s 2011 budget as its top achievement. This drew some questions, in part because, while the council indeed hold firm in the face of 150 angry city employees packed into a hot council chambers, the city only realized about one million of the $2.5 million in cuts as actual savings.
However, the rating reflected the fact that, for the first time, the council prioritized putting additional money into fully funding retiree health, shoring up pensions against the expected hit from the reduced earnings forecast, and finally putting general fund money into road maintenance.
At the same time, the 2011 budget set the stage for the 2012 budget, which calls for $4 million in savings to be derived from the next round of MOUs. It is not coincidental that the 2009 MOU process, with its failure to achieve structural savings, represented not only a lost opportunity but the top failure of the previous council.
All of that said, the ratings were merely a snapshot. If the city fails to achieve its goals, the ratings will go down.
The challenges are steep. And the fact of the matter is that the MOUs expired on June 30, we are now approaching September 30 and there is no end in sight.
This weekend the Davis Enterprise reported on the state of the MOUs. Much of what they reported has not changed since we interviewed representatives from DCEA (Davis City Employees Association) back in June, following the layoffs after the June council elections.
Steve Pinkerton still believes that the savings of $4 million are achievable with $1.7 million going to fully fund retiree medical, as the costs rise from 7 percent of payroll to 20 percent. Mr. Pinkerton indicated back in June that those costs will go higher, to nearly a quarter of payroll.
In addition, the city plans to use $2 million of the savings to fund road maintenance, a fund that faces between $15 and $20 million in deferred maintenance costs.
Earlier this month, City Manager Pinkerton told the Vanguard he expects details of the MOUs and negotiations to emerge within a month. The Enterprise reported over the weekend that he still expects movement within the next few weeks.
However, there are some warning signs in the article, as well.
The Enterprise reports: “If the delay in reaching deals with the various labor groups costs the city a portion of those savings, however, Davis could fall short of balancing its budget using the plan Pinkerton presented to the council in June.”
This is not the biggest cause for concern. The budget called for a certain level of savings to be achieved through the MOU process. If the MOUs were signed on June 30, we would have the savings from those MOUs from the entire fiscal year. We have now lost nearly one quarter of the year and therefore we may not be able to backfill that.
However, from our perspective it is most important to get the MOUs right, and if they have to dip into reserves to cover shortfalls for this budget, so be it.
This is the point that both Councilmembers Brett Lee and Lucas Frerichs make to the Enterprise.
“To Lee and Frerichs, it matters less about how much the city saves this year and more about whether the contracts set the city and its employees on a path to long-term fiscal sustainability and to fairly structured employee compensation,” the Enterprise reports.
As Brett Lee notes, in the past, “The city has failed to set aside money to finance the unfunded liabilities it knew it would have to pay someday, and while cutting pay or benefits across the board could save money in the short term, putting contracts in place that don’t address the even larger costs the city will face in the future will only kick the can down the road.”
“We could get $4 million in savings (now), but in the long run we could be worse off than if we get $3 million in savings this year, depending on how the contract is structured,” Councilmember Lee said.
And Brett Lee does not rule out the possibility of reaching the budgetary goals, either.
He told the Enterprise: “I think that $4 million was sort of our goal and we will probably reach some percentage of our goal … (but) the longer we take to reach an agreement – and because we’re expecting that the contracts will be less expensive for the city than they currently are – each week that we don’t have the new contract signed is a week less of savings.”
On the other hand, our old friend Matt Muller told the Enterprise that he believes that Steve Pinkerton overreached with how much he believed the city could save through the bargaining process.
“In all likelihood, Pinkerton’s projections won’t come to their full fruition, which means there will be money left over,” Mr. Muller wrote to the paper. “Where will it go to? I’m fairly certain it won’t be going back into the pockets of the employees it was taken from.”
Indeed, Mr. Muller told the Enterprise that PASEA (Program, Administrative and Support Employees Association) had not met with the city’s negotiators since April and they have no date for the next meeting.
In a way, that is an alarming development. But it might mean very little.
The word that the Vanguard has understood for some time is that DCEA is the bargaining unit most critical to these negotiations. The reason for that is quite simple – they never agreed to a new contract in 2009 like all of the other bargaining units.
The city imposed impasse back in 2010, but a PERB (Public Employment Relations Board) board and an administrative law judge overturned that impasse, and thus they are operating according to the terms of the pre-2009 MOU.
The city has compensated by laying off nine employees, but DCEA needs to agree to a new contract first, and that will set the terms for the other bargaining units.
From the Davis Enterprise article, it seems that the city has not altered its demands since we spoke to DCEA representative Dave Owen back in June.
There is another piece to this puzzle and that is the firefighters. We were told by interim Fire Chief Scott Kenley that the city had asked him to thoroughly evaluate a move from four firefighters per engine down to three. A move that could save the city nearly $2 million per year.
That report is due out in October and will go a long way toward determining what is possible with regard to fire staffing. In addition to the $4 million in personnel savings, the city is looking to cut nearly as much through reorganization, and changing fire staffing could be a huge piece of that puzzle.
—David M. Greenwald reporting
[quote]Matt Muller told the Enterprise that he believes that Steve Pinkerton overreached with how much he believed the city could save through the bargaining process.[/quote]
Actually David, Tom didn’t get that point entirely correct. I believe Pinkerton overreached with how much he believed the city “needed to” save through the bargaining process. Here is what I sent the Enterprise back in June.
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[i][b]Earlier this week Steve Pinkerton laid out his budget proposal for the FY12-13 and in it he included somewhere around $4 million in employee concessions, or about 29 full time employee layoffs across the city.[/b][/i]
[i][b]What’s your reaction to that budget proposal?[/b][/i]
My concern is that budget proposal presented is an absolute worst case scenario. While I understand the city’s need to err on the side of caution, statistically speaking, worst case scenarios rarely play out for any given event just like best case scenarios rarely do. Reality ends up being somewhere in between. So in all likelihood Pinkerton’s projections won’t come to their full fruition which means there will be money left over. Where will it go to? I’m fairly certain it won’t be going back into the pockets of the employees it was taken from. PASEA’s concern is it will be going to fund projects that wouldn’t be considered an absolute “need”. My group is not highly compensated by any means so we’re talking about concessions on such a scale that it possibly means taking roofs from over their heads, food from their tables, and clothes off their backs. With regards to PASEA you’re talking about a group of people whose members make a salary of about $30,000 to $36,000 at the low end and the mean salary of the entire membership is around $53,000.
[i][b]Can your departments handle lay offs and still sustain current service levels?[/b][/i]
Our departments have already experienced layoffs to such an extent (many through the elimination of vacant positions in addition to the active positions that have been eliminated) that I am convinced there is absolutely no way that the city can layoff more staff without adversely affecting service levels. Additional layoffs are definitely going to have a negative impact on the citizens of Davis.
[b][i]Do you accept that layoffs, at least some, may have to occur? Or what else should the city do?[/i][/b]
We’ve already taken layoffs, so many already have occurred. PASEA has always cooperated with the city. In 2009 we agreed to concessions and were still subjected to layoffs. We have never been unwilling to make concessions. Our issue is with the level of concessions and the justification for them. The City’s own compensation survey showed that it was below market for almost every single position, some to the tune of 8% or more. In terms of salary they ranked in the bottom 2 or 3 for many positions. The benefits are the only thing making them competitive and with the level of concessions they’re proposing in the budget it’s going to drive Davis down to the bottom of the barrel in terms of the total compensation they offer their employees.
[b][i]How much has PASEA been cut over the last year? How have service levels been affected?[/i][/b]
A little over a year ago we were at about 127 members. Now we are at around 100. Much of the workload that was left as a result of the layoffs was disbursed to other positions – many without due compensation increases. As individuals take on the additional workload and responsibilities of these eliminated positions, it is unrealistic to expect that they will be able to maintain the same level of detail and creativity in their position. This in turn makes adversely impacting the overall customer service level and the city’s ability to maintain its progressive community, and environmental planning efforts, an inevitability.
[b][i]How are current negotiations going so far?[/i][/b]
While I’m sure everyone would like to have had an agreement in place by now, the reality is that negotiations started much later than they should have, and it has taken longer than expected to get the information we need to hold a meaningful discussion. It is far better to take the time to work through the issues to reach an agreement that meets the needs of everyone than it is to try to rush to meet an arbitrary deadline without the information you need to make a good decision. At the same time, I also cannot dismiss my concerns regarding the possibility that these delays might be interpreted by those paying attention to the negotiations but not involved in them as PASEA being uncooperative, which couldn’t be further from the truth.
Matt: Appreciate the clarification.
DG said “The word that the Vanguard has understood for some time is that DCEA is the bargaining unit most critical to these negotiations. The reason for that is quite simple – they never agreed to a new contract in 2009 like all of the other bargaining units.”
It’s my understanding that DCEA was more than willing to accept concessions in 2009. The only issue that prevented those concessions was DCEA request for fact finding. The city refused to comply with this mandatory requirement and unilateral imposed their last best final offer. The city has no one to blame but themselves (and their attorney) for this debacle. I don’t’ blame the employees for insisting the city follow their own rules. The city has been embarrassed by their blue collar work force and appears to be trying to make an example out of them. The city has not met with any other employee group sense April? The city expects to realize a 4 million dollar savings by employee concessions, yet they haven’t met with any other bargaining group in five months? If the city were to come to an agreement with the Management group first it would go a long way toward convincing the rank and file to follow suit, IMHO.