Deja Vu All Over Again

Today's article talks about a ninth straight unbalanced budget, skyrocketing labor costs and the need to either reduce compensation or the workforce. Sounds like many recent Bulletin articles? Actually it is an article in today's Mercury News discussing the City of San Jose's precarious budget situation.

Here are some excerpts from the story:
...City Manager Figone said she is not seeking to "blame our labor unions" but simply aims "to confront the realities." Those realities, she said, are that in a city facing its ninth straight budget deficit, where personnel costs account for two-thirds of costs to the $880 million general operating fund, the only way to close the shortfall is by shrinking either the number of employees or their individual costs.

Figone said the city would have to cut 763 jobs to cover the projected $90 million deficit without a boost in revenues or concessions from the workforce.

She noted that the city's deficits have soared this decade along with costs for its employees' pay and benefits. While the city's full-time workforce has shrunk from 7,000 to 6,600 since 2000, the average cost for each worker has shot up 64 percent to $120,418. Had pay and benefits merely increased at the rate of inflation as measured by the Consumer Price Index, the average cost would have risen 18 percent to $86,997 today.

The increases have been particularly steep for the city's police officers and firefighters, whose average cost in pay and benefits rose 78 percent this decade. The cost for just their retirement benefits rose 174 percent — more than twice the rate for other city workers — as their maximum pension grew to 90 percent of their final salary with automatic 3-percent annual increases.

But the employees' rights to negotiate any changes in pay, benefits and working conditions narrow the city's ability to shrink costs. And city voters in 1980 granted police and firefighters the right to have outside arbitrators settle contract disputes, which critics say is the reason for their steeper pay and benefit increases.

Among concessions Figone is seeking:
Reduced retirement benefits for new employees. More than half of the projected deficit is due to investment losses in the city's pension funds, which taxpayers are on the hook to offset with added payments. Because retirement benefits can't easily be changed for current employees, Figone wants to negotiate a lower and less costly benefit for new hires.

Reduced health benefits. Figone wants to explore several recommendations from a recent city audit, including having employees pay more for premium costs and co-payments, offering a cheaper plan with a deductible and reducing incentive payments for those who decline coverage.

Reducing automatic "step" raises. Employees typically get five, 5-percent annual raises during their first four years in a new position. Figone has suggested more performance-based raises that would have to be earned over a longer period.

Reducing sick leave cashouts. San Jose's current policy cost taxpayers $7.8 million last year and is more generous than other governments; some police officers and firefighters have collected six-figure sums for unused sick leave upon retiring.

Eliminating "redundant compensation" for injured officers and firefighters who can receive both workers' compensation and disability retirement benefits.
Chavez said city workers earlier this year "tried to give money back" by suggesting unpaid furloughs and other ideas, "and the city made it difficult to do that."

City officials, however, said the workers' proposals did not actually save money or were otherwise unworkable.

Click here for entire article.

As I've noted before, we aren't alone. This isn't just a Manteca issue or a valley issue, or even a California issue. The problem is worldwide and it isn't going to go away until we make fundamental changes in the way we do business.