The multi-term members of the Encinitas Council bring a lot of experience to the table in establishing long-term financial risk in the form of pension liabilities and salary schedules.
Stocks, Houlihan, Guerin and Dalager approved a pay package that would give a staggering 35 percent raise to city workers in the form of a lavish, lifetime boost in their retirement incomes. For good measure, ordinary wages would rise 3.2 percent annually for three years. All this while state government wrestles with billions of dollars in projected deficits, a precarious condition that threatens the fiscal health of local governments.
One year later the city declared it was unable to pay for all its priority projects (library, Hall park, fire stations, & public works yard), and would take out $20 million in loans.
Food for thought: Only the Library and the public works yard have been completed to date. The Hall park phase I is still officially underfunded.
Barth, Stocks, Houlihan, and Bond approved a 15% pay raise over four years right as structural problems in the economy became more difficult to ignore. It had been conventional to approve 3 year contracts. The pay raise resulted in a proportional increase in pension liabilities.
Several citizens asked the council to rethink a four-year agreement because of the housing slump, unemployment and other economic uncertainties. It was too late, the decision had already been deliberated and endorsed behind closed doors.
At the time, “If I were in private business, I would not lock in the kind of increase you’re considering now,” said Gerald Sodomka of Cardiff.
Kevin Cummins suggested a shorter contract or a contract with a clause allowing the terms to be revisited if the economy didn’t hold up. The public comments were blown off. It was already a done deal.
Council Member Bond did point out that the city has a notable stabilization fund that can be tapped if revenues come in short due to a short economic recession. Regrettably, the council doesn’t seem to realize that avoiding a budget squeeze is not the only reason to have gone with a shorter contract.
It was unclear what the labor market was going to look like in 1, 2, 3 or 4 years, but there was good reason to think things were structurally unsound in the economy. The private sector was already pulling back on benefits, salary, and staffing and parts of the public sector would follow.
In hard times it is tougher for the unions to bargain for raises exceeding salary increases found in the private sector. The union probably knew this and they wisely “negotiated” a contract that will got their union members (and, in practice, management) through the rough spot unscathed. That is probably why there were audible, but restrained, cheers from staff when the council gave them 4 years of unconditional raises. It should be sobering to the taxpayer that staff actually cheered the council’s unanimous decision.
No one on the council applied business sense to that decision. The negotiation process did not result in a wise or fair process or result.
This week Jerome Stocks made a sturdy effort to make pension reform part of union contract negotiations.