It would be a very serious mistake for the City Council to approve the proposed “contract extension” with SEIU Local 1021 (Council item 48a on the June 28 Agenda). This agreement would effectively freeze and extend for three years a labor contract that pre-empts serious pension and fiscal reform in a time when local and national economic conditions are worsening. There is no need for precipitous action now before all pertinent factors are carefully considered, precipitous action that could have disasterous consequences.
What would this new contract actually do? It would freeze wages for the next four years if City revenues continue in their sorry state. It would allow, by mutual agreement only and not starting until 2014, employee pension contributions of up to 3%, the exact percentage dependent upon CalPERS rates. It would implement a two-tier pension system for Local 1021 employees hired after January 1, 2012. It would delay planned layoffs until 2013 and eliminate no more than seven positions in the Solid Waste Division in that year. It would maintain current salary levels for those employees demoted or recycled as part of labor force reconfiguration. It would result in about $400,000 in annual savings plus future unstated additional amounts from “reduced” City CalPERS liability.
What is wrong with this picture?
All over California and the nation, public employees are taking substantial wage cuts and commencing substantial contributions for their many valuable benefits. This contract is not an example of such serious reform.
The City of Berkeley has hundreds of millions of dollars in unfunded and underfunded liabilities for pension obligations and decaying physical infrastructure. A full accounting of these liabilities has only just begun. How can a responsible local government allocate resources effectively until the full liability is known?
While City employee compensation has increased by about 5% per year on average since 2000, many Berkeley taxpayers have experienced substantial income decline since 2000. Additionally, taxpayer pension assets have shrunk by about 20% and home values are down to 2003 levels and still falling.
Berkeleyis way out of line when compared to regional norms with respect to its employees. Berkeley has about one employee per 73 residents, tied for first place out of twelve comparably-sized cities. The 12 city average is one employee per 113.50 residents, a 55% difference. Berkeley City employee fringe benefit costs are enormous: for Police, 66.44% of salary, and actually 74.42% when Workers Comp is included; for Fire, 53.99% and 64.81% respectively; and for Miscellaneous, 58.49% and 60.56% to 76.67%. Despite excellent salary and benefits with no employee contribution required, City workers also receive overtime and other above-salary cash payments that are hugely above the 12 city average—138% higher than average for Fire, 218% higher for Police, and 314% higher for Public Works. Some specific 2010 examples of total cash payments for the workforce covered by the SEIU Local 1021 contract under discussion: one Solid Waste Loader Operator had a Base Salary of $64,104, but somehow took home $132,625 in additional cash; a Solid Waste Truck Driver had a Base Salary of $67,306 but an additional $109,787 in payments; and a Solid Waste Worker with a $56,971 Base Salary received an extra $138,817.
The City is facing, at least, $12-$15M, in annual operating deficits in addition to the hundreds of millions in unfunded longterm liabilities. In this light, and in light of the forgoing facts about the City workforce, the $400,000 in annual savings to be garnered by the proposed SEIU Local 1021 contract extension seems rather paltry. Any savings from the implementation of a two-tier benefit system for new employees are imaginary—given economic realities there will certainly be no new employees for the foreseeable future while the deficit from the current 1500 City employees continues long into the future. To present this contract to the public as a major cost-saving and belt-tightening effort is insulting. The worst part of this contract would be to pre-empt real and necessary fiscal reform, reduce government flexibility in hard times, and set a terrible example for the other labor contracts coming up.
Berkeley Budget SOS urges City Council to reject this contract, carefully consider all of the issues, and proceed thoughtfully and methodically toward fiscal soundness.
(Berkeley Budget SOS is a civic organization dedicated to fiscal clarity, accountability and sustainability in the City of Berkeley. Its members include attorneys, economists, businesspersons, accountants, and community leaders. email@example.com)