Cities, counties shouldn’t ignore Vallejo
By Thomas Elias
The late spring headlines about labor negotiations in the San Bernardino County city of Rialto were absolutely stunning, considering the context. “Rialto pension plan OK increases city obligations,” blared one local newspaper.
The details were even more remarkable in this time of strapped municipal and county budgets. For Rialto city council members voted 3-2 to give the local police officers’ union a “3 at 50” pension plan, which will let any officer retiring at age 50 or above collect three percent of his or her highest annual salary each year, multiplied by the number of years served. Firefighters were expected to get the same plan.
So 20-year police veterans can retire at 50 with 60 percent of their annual salaries, while 30-year veterans get 90 percent. Stay 40 years and you can get paid 20 percent more in retirement than for working. For police officers, the plan represents a 50 percent increase over their current 2-at-50 system.
This stunningly generous pension plan, combined with a somewhat lesser one proposed for non-public safety employees, would start off costing the city of 101,000 about $3.3 million per year, more than 5 percent of its $57 million annual budget. Immediately there were fears around City Hall that this agreement could lead to layoffs.
Also, Rialto’s action quickly raised the worry that other San Bernardino County cities would soon be coerced to follow suit, thus imperiling their own budgets. And if cities there adopt this plan, it might soon become a bargaining template for public employee unions all over California.
That’s exactly what cities and counties don’t need just now. About the only good thing in Rialto’s bargaining process is that it has involved some openness: Citizens know how much their public safety employees will be getting and they know who voted to give it to them. So they can vote out those officials if they like.
But it’s hard to understand what were in the minds of both union officials and City Council members during this bargaining process. They knew about the fiscal catastrophe in the slightly larger city of Vallejo, just northeast of San Francisco, which declared bankruptcy in May because it can’t meet pension and salary obligations to police and firefighters.
Vallejo is just the second California city ever to declare bankruptcy, following the 2001 case of Desert Hot Springs in Riverside County, which emerged from bankruptcy about a year later with more manageable contracts. Orange County also famously went bankrupt in 1994, but that was caused by more than $1.5 billion in investment losses, not labor costs.
Realizing this might be even worse his them than a lesser labor agreement - bankruptcy has the potential to cause suspension of all union agreements with the city - Vallejo union bosses at the last moment before the official filing offered to take $10.6 million per year worth of pay cuts for two years, with police and firefighters offering a 6.5 percent giveback of pay and benefits and other employees proposing a 3 percent reduction, plus foregoing two years worth of 10 percent raises.
Of course, the entire Vallejo crisis would never have happened if the public employee unions had not been so aggressive in their negotiating over the previous few years.
Some public employee unions have actually learned from all this, even if Rialto’s did not. In San Diego, the Municipal Employees Association offered a plan for cutting its own pension benefits by $25.4 million per year, seeking to avert a tougher plan proposed by Mayor Jerry Sanders.
But other unions and retiree groups have learned nothing. Retired employees of the Fresno Unified school district, for one, are suing their ex-employer for partially reneging on a 30-year-old pledge to provide health benefits for life. Since 2005, the district has forced retirees to pay for some of their benefits.
Feeling betrayed, retirees who years ago were recruited to the district in part with the pledge of perpetual free benefits, sued and the outcome is not yet determined.
That lawsuit and the Rialto agreement fly in the face of today’s reality. With home foreclosures causing reductions in real estate values and property taxes, plus a nascent recession spurring drops in sales tax revenues, cities, counties and school districts don’t have as much money as they once did.
Unions that don’t face this reality risk municipal bankruptcies and loss of many of their hard-fought gains.
All of which means it is high time for public employee unions to accept, as San Diego’s plainly have, the truth of the old saying that half a loaf is better than none.