Statement On Council Agenda Item: Approval Of Contracts For City Employees

Because I am unable to attend this evening’s City Council meeting due to a work conflict, I sent in the following statement addressing the scheduled review and adoption of resolutions containing terms and conditions for employment for city employees…

MEMORANDUM

Date:   August 12, 2013
To:  City Council
From:  Mayor Pro Tem Jeff Lalloway

RE:  Statement Regarding Agenda Item 1.12Resolutions Containing Terms and Conditions of Employment for Represented and Non-Represented Employees

Today as the Irvine City Council votes to ratify new contracts with sworn and professional staff members, it is incumbent upon me, as an elected official, to explain why it is that I oppose these agreements, and why I urge my council colleagues to join with me in rejecting them.

Let me first make it very clear that I have nothing but the utmost respect and regard for all of those who work for this city. Whether it is the planning engineer reviewing a request for new development, the lifeguard on duty at the Woollett Aquatic Center, a receptionist here at City Hall, or the police officer who patrols our streets in the dead of night – the greatest strength of our city government is our people.

I want to emphasize this point because it could be easily misconstrued that because I oppose these contracts that I am not supportive of our employees and the work that they do, and nothing could be further from the truth.

When I made the decision to run for City Council back in 2010, there were a lot of factors and issues that motivated me to do this.  But the single greatest factor was my desire to be a steward to make sure that all of the things we love about our great city, are enhanced and around for our children, and grandchildren to enjoy.

One of the greatest challenges that the next generation will face, and this is not specific to Irvine by the way, is a legacy of debt and unfunded liabilities left behind by politicians who have abandoned the simplest of budgeting principles – pay as you go.  The residents and business owners of Irvine in the future should not be saddled paying for city spending of today – certainly not when it comes to the compensation of our employees.   By the time my two little daughters are grown up, and are in the work force, paying taxes, a great many of our current employees will have retired.  The burden of paying the benefits of these retirees should not fall onto the future generation.

When I step back and look at the evolution of total compensation for public sector employees, as compared to private sector workers, it is startling, and unsustainable.  Defined benefit pensions in the private sector have all but disappeared.  In the public sector, they were instituted with the premise that government workers made a very modest salary, and retiring with a generous percentage of that salary for life was sustainable.  But over time public sector wages have more or less reach parity with the private sector, and paired with extremely generous defined benefit retirement plans, it has created a truly unsustainable financial burden.

Some cities that do not see the economic prosperity that we have here in Irvine are already having to make devastating cuts in city services and programs in order to “make good” on some of their employee pension liabilities.  In fact, we have already seen some local governments file for bankruptcy protection, and look for great numbers of cities to follow suit.

Here in Irvine we have agreed, as a council, to more aggressively step up to address just some of our unfunded pension liabilities – but at its most basic level, our “plan” simply is shifting more of our city’s current and future revenues into funding employee retirement benefits – when those tax dollars could otherwise be going into programs and services, or into providing relief to city taxpayers.

But even our modest actions in Irvine will not be enough.  To our city employees I would tell you that I am not another politician who will simply vote for more increases in pension benefits, and then tell you that everything will be there for you when you retire.  I actually am very concerned that the funds you anticipate being on hand to support your promised benefits will, in fact, not be there for you.

The vast majority city employees will be able to retire at the age of 55 with as much as 80% of their salary, for life, with cost of living adjustments built in.  In order for someone who does not have a pension to enjoy that standard of living, they would have to have around $4 million in savings.  So the city has to “put away” millions of dollars for most employees, to sustain their lifetime benefits.

We, as a City Council, should be part of a solution to getting employee costs under control and making sure that total compensation for our employees is fair and reasonable – but yet is justifiable and sustainable.

In some regards, there is an “arms race” of sorts taking place where public employee compensation is basic more on comparisons to what other government employees are making, as opposed to based on more sound criteria.  How often do we hear the refrain, “If we can’t offer salary and benefits that are a little bit better than our neighboring cities, how can we hope to attract and retain the best employees?”

It is also a practical reality that, unlike in the private sector, public sector employee compensation never seems to see reductions in total compensation.   During this latest recession, which by some measures is now in its seventh year, we have seen a contraction of the economy, and with it we saw employee compensation in the private sector drop, as employers are faced with either laying off employees or paying them less.  There have been no such corresponding reductions of public sector employee compensation – at least not that I have seen written about anywhere, and not here in Irvine.

While brings us to the employee contracts before us today.  It was my strong belief that the City Council, after reviewing details on total compensation for our employees, should have negotiated with our employees so that they would increase their contributions to their retirement benefits while maintaining their existing total compensation.  Or if our employees desired increases in their current wages, they could have done this by voluntarily taking lower retirement benefits so that their total compensation was not being increased.

But that is not the prevailing philosophy of my council colleagues, who offer significant increases to employee total compensation, including a “smoke and mirrors” type arrangement where city employees will increase their payments to their retirement benefits, but are given pay raises to cover the cost.  In this arrangement, to be clear, it is functionally equivalent to the taxpayers still covering the same amount of a city worker’s retirement benefits.  In fact, that arrangement “deepens the hole” as their retirement benefits are then calculated based on the new raises.

As a consequence, at a time when we should be focusing on how to “pay as we go” for our employee costs, and figuring out how to bring the total compensation of city workers into line with the realities that face private sector employees – we are instead “fanning the flames” of ever-inflating government worker costs.

I simply cannot vote to ratify these new employee contracts, and would counsel my colleagues to oppose them as well.  For me, voting for them would break faith with the commitment that I made to the voters when I campaigned for this office – to be a responsible steward of our city government and its resources.  And that I would seek public policy goals aimed at reducing, not increasing, the burden of tomorrow’s generation based on the spending decisions we make today.

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