The Davis City Council race of 2014 is unique in that there is only one issue that should matter to every voter: our unsustainable labor contracts.
Even if you care a lot about other questions in normal times, forget those this year.
You need to realize Davis is more and more unable to pay for basic services: police and fire protection, parks and road repairs. Even though tax revenues coming into our city’s coffers have been going up at a normal rate, expenses are outstripping them. About the start of 2015, the general fund reserve will be gone.
City staff would have you believe the crisis is due to events beyond our control: the Great Recession, costly water, expensive asphalt, medical benefits inflation and the price of pensions.
The reality is that 75 to 80 percent of the general fund pays the total compensation of current and past employees. That is something we decide.
As I have explained for years, the only viable solution is to get new labor contracts that cap the annual growth of total hourly compensation at the rate the city’s revenues grow.
By email, I asked the City Council candidates two questions to gauge what they think needs to be done. The first is: Is it sustainable to have the total hourly (or unit) cost of labor increase faster than revenues have been growing? The second is: What changes in the labor contracts would each suggest to achieve sustainability?
Some gave long answers and others short. Here is a taste of what each told me:
Daniel Parrella: “Whenever you have costs increasing faster than revenues that is inherently unsustainable. The growing employer’s share of CalPERS in particular is daunting and represents a significant chunk of rising costs.”
Parrella would like to see all city employees pay the full employee share of their pension funding plus at least 3 percent more, as Davis police officers alone now do. He added that he supports eliminating the medical benefit cash-out, which will be capped at $500 per month per employee in 2015.
Sheila Allen: “The growing cost of pensions and health benefits for the staff of the city of Davis and other public agencies is a major and legitimate public concern. However, labor costs are not the only factor that has been growing faster than city revenues in recent years.
“For example, the cost of materials needed to rebuild our potholed city roads have accelerated. And, obviously, water rates will be increasing …” She adds, “In comparing labor costs to revenues, it is important to remember that the country just suffered the greatest recession since the Great Depression, and the recovery has been much slower than past economic recoveries.”
Allen believes, “Future increases in compensation agreed to in future labor negotiations may need to be accompanied by offsetting concessions that require city staff either to contribute more to the cost of their benefits …” or “other changes that enable additional savings.”
Robb Davis: “By my calculations, the total (general fund) costs will be growing at about 3.2 percent per year and revenue at 2.5 percent over the next five years. Given the place of employee compensation in total costs it is clear that we cannot bring the two rates of growth into line without dealing with growing employee compensation.
“Our pension costs are set to double between now and 2020 — going up to over $13 million. Further, and this is where the lack of sustainability is clear, even though we have cut 22 percent of workforce over the past five years, pension costs alone next year will be where they were three years ago. So we are cutting staff but paying more for that staff. Most of that is in pensions, OPEB (other post-employment benefits) and current employee medical care.”
Davis laid out proposals for changes in the next contracts. He thinks we need to consider eliminating the cafeteria cash-out; increase employee contributions to pension funding; freeze salaries or reduce them for those making the most; require staff to work more hours per year; have employees and maybe retirees pay a share of their medical insurance; and consider, where possible, outsourcing some city services.
Rochelle Swanson: The incumbent agrees that “growing costs without matching revenues is not sustainable.”
However, Swanson believes, “As a sitting elected, it is inappropriate for me to give specific answers on specific items on labor contracts — especially when (we) have a couple not formally agreed to, but imposed. I think my record is strong on taking tough votes on getting our budget in better shape.”
John Munn: “… There will be future increases in pension compensation because of staged increases in CalPERS rates and likely growth in health care premiums. So the city’s share of unit labor costs must be brought under control or they will inevitably grow to be larger than the general fund. This is obviously not sustainable. In addition, total employee compensation is still adding to our unfunded liabilities.”
Munn explained how he thinks we need to proceed: “… My approach to balancing the budget is to go through a review process to identify available revenues and then match revenue to spending, including the cost of future unfunded needs such as pensions, health care, and street maintenance and repair. Then the holes between revenue and spending can be seen and a discussion about how or whether to fill them can take place.”
I am not going to tell you whom to vote for. But if you love the city of Davis and you don’t want it to deteriorate, vote for someone who understands what our problem is and what it will take to solve it.
— For a transcript of the candidates’ complete answers, go to http://lexicondaily.blogspot.com
— Rich Rifkin is a Davis resident; his column is published every other week. Reach him at [email protected]