Wednesday, April 27, 2011

Costa Mesa's fiscal house needs some repair

Costa Mesa heard from two ‘experts’ on our pension liability issue. The news, from either of them, is not rosy. They have their own opinions of what our financial liability is, as is the case with any projections, they have likely developed those opinions based on their own selection of assumptions.

The bottom line continues to be that we, as a democracy, in our nation, states, counties and cities have been far too generous in the good times and unwilling to face the facts that our economy is subject to downturns.

Costa Mesa has been working to remain competitive with other agencies when it comes to salaries and benefits. Unfortunately, we have not taken the prudent approach to squirreling away enough money when it was plentiful in anticipation of the day that it would not be; sort of a municipal version of the ant and the grasshopper.

So we all accept that we have this liability. There is still a great division of attitudes when it comes to a solution. What we do know is that regardless of any current actions we may take, that what we have previously committed to is substantial and will take a long time to dig out from under.

Will this problem solve itself over time if we just continue our city austerity program? That is one approach. I am sure the city employees and their association would like this to be the overriding viewpoint. The problem is that we can not be sure this alone will pull us out of a financial burden that is projected to last us decades even with continued economic growth.

There are some in our community that believe continued cutting of infrastructure support is diminishing our quality of life and will raise costs down the road.

Deferred maintenance bit our local school district in the bottom line. Their solution was to go to the voters for permission to float bonds. One of the promises made to gain voter approval is that they would guarantee minimum funding levels for maintenance to avoid getting into the same position again in the future.

The city council majority has floated a plan to outsource some functions in the city. This is certainly worth studying and I believe that a majority of the voters in Costa Mesa support this type of analysis. However, much to the dismay of many, the council decided to move ahead with layoff notices before they had any real evidence that this approach will in any way save any taxpayer dollars.

This is defended by the majority as necessary because of the six month layoff notice requirements that our employment agreements require in the case of outsourcing. The party line is that they needed to get the clock ticking or we would still be six month out when the outsourcing studies were done. Others in the community question the savings a six month lag would have cost us versus the negative reaction engendered by doing this before the facts were in.

The underlying motives of the council majority have been called into question as well. It is well known that the Republican Party, especially here in California, chafes at the control public employee unions have over legislative issue.

This control is a product of the massive political support the unions can bring to bear in the form of finances and boots on the ground. The unions have also done a great job of positioning their organizations favorably with the public. After all, who doesn’t like teacher, firefighters and cops? Who doesn’t want them to be happy and productive? I certainly do! That has translated into phenomenal success at the ballot box for union supported candidates.

So, why wouldn’t the Republican Party support any efforts to weaken the unions? Wouldn’t outsourcing services to companies that are not union organizations help accomplish that? You bet. Unfortunately, the 800 pound gorilla unions are not going away any time soon, even with outsourcing. The teacher and public safety unions will maintain their strength no matter how many janitors and mechanics you outsource out of union membership.

I would suggest that the real issue here is long term reform. Unfortunately, politicians with short sighted political goals never seem to be able to focus that far into the future. Couple that nearsightedness with the single-mindedness of purpose unions maintain that does allow them to strategize decades into the future and we the taxpayers just end up with inadequate defenses against run-away employee benefits.

I believe that the ship has sailed on the issue of past pension obligations. Short of some sort of legislative relief by the state or federal government, we are on the hook for what we have promised. I focus more on moving forward.

Our city needs to establish benefit packages that do not require the city to guarantee investment returns and funding for extended life spans. We need to be realistic with what we are paying. At the end of the year, we should have paid every employee what they have earned and contributed to their pension based on a mutually agreed upon schedule. We should only be on the hook for a finite amount.

How those funds are invested and how long they will meet the financial needs of those employees after retirement should not be the concern of the taxpayers. Let the unions manage those funds if that is what the employees wish. Alternatively, let the employees manage their own investments in 401K style accounts.

The bottom line is that all of these defined benefits programs, including those for public utility employees, and anyone else that reaches into our pockets need to be eliminated on a go forward basis. Yes, we will have to suck it up and deal with our past political leaders largess on our behalf, but at least we head into a future on more sustainable footing.


Kerrykmk said...

I really enjoy reading your posts. You should post more often - I know you are pretty busy so it is pretty tough. It's nice to read a more objectionable point of view. Isn't your wife thinking about starting a blog?

Bruce Krochman said...

Wow, how did I miss picking up this posts? Sorry Kerry!

No, Janet isn't much into the social media thing. No FaceBook, twitter, etc.

She may create a site for her accounting practice. With all of her experience with non-profits, scouting and senior citizens, I think she would have quite the audience. The problem for her, like me, is the investment in time.

Thanks for reading!