Tag Archives: Unions

Beyond Costa Mesa: The pension fight has legs, walks upright

Even as local union leaders tell you there’s no pension crisis in Costa Mesa, evidence mounts that it’s real (the pension crisis is)—and that Costa Mesa is merely a microcosm of a much larger, global problem.

You could go to Europe, where similar financial disasters have jeopardized national governments. Or consider wee Rhode Island: In a meeting there last week, “the mayors of nearly every city and town” in the state asked Gov. Lincoln Chafee “for greater authority to suspend automatic pension increases and make other changes to reduce rising pension costs.” A few days later, the Associated Press reports, the governor met with public employee union leaders who threatened a lawsuit if Chafee moves unilaterally to reform the pension system.

Like California, Rhode Island has problems. Last summer, Central Falls, RI, was placed in receivership. Local officials throughout the state, facing a massive $2 billion in unfunded pension liability, worry that they’re next.

Rhode Island’s AFL-CIO president has a solution: he recommends raising taxes on Rhode Island’s rich.

But that suggestion doesn’t take into account new technology that would allow high-income individuals to avoid that tax: legs.

Legs first became popular some 3.2 million years ago. Today, they’re developed in utero, and almost everybody has a pair. Indeed, the typical human baby is “able to stand holding on to something when he’s between six and 10 months,” the capital liquidity site babycentre.co.uk reports. ”From then on it’s a matter of gaining confidence and balance.”

Confidence, balance and a motive: Now widely available, legs allow anyone—even the rich—to avoid situations they find unpleasant.

Chafee may have had legs in mind when he observed that it might be easy to assess but difficult to collect higher taxes. The governor, “who has said he is open to considering tax increases this year, said an income tax hike could backfire if high earners leave the state,” the Associated Press reported.

“I’m open to all suggestions,” Chafee said, “but that’s a huge fear I have.”

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Math Murderers: In Costa Mesa pension war, union leaders fail basic finance quiz

When Costa Mesa officials announced a few days ago that the city would finish 2011 in the black, city spokesman Bill Lobdell called it “pretty good news.”

Why only “pretty good”? And why did local union leaders react by completely losing their feces—declaring the surplus proof-positive of political corruption at City Hall?

To answer both questions, let’s begin with the December 22 Los Angeles Times story reporting the surplus. In “Far from a deficit, Costa Mesa is $3.8 million ahead,” writer Joseph Serna seems to imply that a city with a $3.8 million operating surplus can’t have financial problems. It’s ironic, he suggests, writing in his lede, “The Orange County city that received national attention when it moved toward laying off up to half its workforce and outsourcing municipal services to private contractors in order to trim its future pension cost is finishing the year $3.8 million in the black.”

Leaders of the Orange County Employees Association, the union representing many city employees, were seized by precisely the same confusion—hence the bowel-voiding, finger-pointing and just biblical clothes-rending. They quickly responded that the surplus shows Costa Mesa hasn’t got a money problem at all, and that (ergo) any effort to trim city expenses—particularly the cost of public-employee pensions—is a scam run by Republican ideologues who’ve fabricated a phony financial crisis in order to destroy the American working class.

“This demonstrates that this council can’t be trusted and that this [cost-cutting] has been politically motivated the whole time,” OCEA spokeswoman Jennifer Muir told the Times. It’s proof, union official Chris Prevatt wrote me, that “the goal of people like [City] Councilmembers [Jim] Righeimer, [Steve] Messinger, [Eric] Bever, and [Mayor Gary] Monahan, along with their brethren in the [state] legislature, is to starve government until it no longer exists.”

Yes, of course: Conservatives in the Republican Party—the party that wants to listen in on your phone calls and watch you have sex; whose members want to check your prostrate on your way through John Wayne Airport; the people who celebrate TV hero Jack Bauer as a model for American diplomacy but who call for limits on Hollywood entertainment; who bailed out Wall Street in 2008; who launched senseless foreign wars and squandered $4 trillion and thousands of lives to fight them; who envision a 700-mile fence along the Mexican border and who doubled the number of patrol officers to stop itinerant farmworkers from, um, itinerating; who are practically hallucinating on religion/self-righteousness/hatred but don’t want anyone to get high; who applauded Texas Gov. Rick Perry for rubber-stamping the executions of 234 people, even as they claim (the conservative Republicans) that they follow a Jew who said “offer the wicked man no resistance”; and who will allow religious diversity so long as the menorah you spark up in the town square features seven perfect wax re-creations of the baby Jesus—yes, yes: that party is trying to turn America into a lawless frontier town.

But maybe union leaders understand numbers better than they understand political motives.

“It’s important to look back at the past year and remember that when this whole layoff scheme started, the city council said we’re on the brink of insolvency and have no money,” Muir told the Times. Now, she said, as the city closes the books on 2011, there’s this huge operating surplus—a surplus that means Costa Mesa should end its effort to trim the budget and should continue funding its unwieldy/apocalyptic/unsustainable municipal pension system. Speaking to the union-backed Voice of OC, Muir said, “The fact of the matter is, there’s plenty of money in the budget, and they’re admitting that there’s plenty of money in the budget.”

She was joined by other union officials. “The evidence is in and the budget for the city of Costa Mesa is not broken,” Prevatt wrote in the Republic of Costa Mesa comments section. “In fact the only thing broken is the theory on impending financial doom that is repeatedly spewed by Righeimer. You need look no further than the budget surplus of more than $3 million in the last fiscal year.”

So, a note to the union leadership: Of course, wealth is relative. But citing the city’s $3.8 million operating surplus as evidence that “there’s plenty of money in the budget” or proof that Costa Mesa’s budget “is not broken” is like declaring yourself rich because—though you just lost your job and you owe $400k on your Visa card—you’ve found $24 in your wallet: You’re not the kind of rich that’s going to get you laid in Newport Beach; you’re rich in more spiritual ways—like a monk who can buy a 40 of Budweiser and a one-month subscription to XXXhoboChix.com.

You’re broke, I’m saying.

To understand this, it helps to know the difference between a P&L and a balance sheet: Costa Mesa’s profit-and-loss statement—the one about which Joe Serna wrote on December 22—does indeed show an operating surplus. But Costa Mesa’s balance sheet shows liabilities of (hold, please) about $170 million in deferred capital projects (e.g., buildings, roads) and $255 million in unfunded employee benefits, including pensions. (It doesn’t include depreciation, which would add millions more in liabilities, but I can see you’re not really that into this.) Total liabilities: about half a billion dollars.

Weigh that nearly half a billion dollars against this year’s $3.8 million surplus, and you can begin to see the problem: either the union leadership can’t understand math or doesn’t want to. But it’s not all bleak: save $3.8 million per year for the next 112 years or so, and you’re all good.

Now, pass that 40-ouncer, please.

The Eighteenth Brumaire of Nick Berardino

The reviving of the dead in those revolutions served the purpose of glorifying the new struggles, not of parodying the old; it served the purpose of exaggerating to the imagination the given task, not to recoil before its practical solution; it served the purpose of rekindling the revolutionary spirit, not to trot out its ghost.

—Karl Marx, The Eighteenth Brumaire of Louis Bonaparte

One goal of politics is to universalize the particular, to make your own minority/fringe/idiosyncratic opinion appear part of some grand movement or tradition. It’s the reason your typical conservative Christian dresses up his attacks on gay marriage not as mere hick prejudice, but really fundamental to a sprawling 3,000-year-old tradition stretching from Moses to the hillbillies. And then that conservative Christian is caught doing meth with a gay hooker.

It’s like that with the union leadership’s war on the residents of Costa Mesa. Take for instance “The 99 percent take back America,” Orange County Employees Association president Robert Gibson’s end-of-year message to the rank and file.

The point of Gibson’s missive is to a link the public-employee union campaign for rising pay and benefits into the broader Occupy Wall Street movement. We’ve already examined the collision of interests between the Occupy movement  and the Orange County Employees  Association, which, like most public-employee unions, depends on Wall Street investments to produce huge returns to fund its pensions. When Wall Street can’t deliver, the governments for whom public employees work, ante up.

But never mind the irony. Gibson puts in considerable effort (regard the sweat trickling from his brow) to link his union members to the  Occupy movement.  “The common theme,” Gibson writes, “is that the 99 percent of us in this country are demanding that the focus be placed back on us, that the 99 percent be given the opportunity to earn a living and support our families. The protests are a statement that the wealthiest 1 percent of the country needs to pay their fair share.”

In reality, of course, the union’s campaign has nothing to do with Occupy Wall Street, nor is it the logical next stage in the historic class antagonism between the ragged, trousered proletariat (on one hand) and (on the other) fat guys in top hats, spats and monocles—or, as Gibson puts it, between workers with “families” and “multinational, multibillion-dollar corporations.” It is, in reality, a conflict generated by the union leadership’s desire to raise pay and benefits for its members, regardless of the political or financial costs to Costa Mesa’s residents, many of them poorer than the union’s members.

And when you come to Gibson’s sign-off—“We, the 99 percent, will prevail”—it’s not “The Internationale” that comes to mind. It’s NWA’s “Straight Outta Compton.”

In his companion piece, OCEA boss Nick Berardino works like an entire roomful of pointy-eared elves, cobbling together a political message that features his members as actors on a world stage. In 2011, he writes, union members “were demonized, ridiculed and subjected to the largest political attacks in our history.” Union members are the thin line between savagery and a “safe and civil” Costa Mesa.

“Without people like you,” St. Nick concludes, “our society would deteriorate to a third world status.”

“Would” deteriorate? There’s some evidence that California is almost there. Underfunded universities, cuts in social services, declining environmental quality, highway overpasses that crumble beneath the weight of antiquity: you can trace some of these dark phenomena to the rising cost of pensions pushed for by the state’s muscular public-employee unions; okayed by union-backed politicians on the left and right; and paid for in part with cuts in the very budget items that even Berardino might concede make California more livable than, say, Juarez, Mexico.

COSTA MESA’S UNFUNDED pension liability is a quarter of a billion dollars—about two and a half times its annual budget. In order to pay down even some of that obligation, the city has gone for years without essential street improvements, equipment purchases, and building renovations while cutting public services—all to pay off rising pay and benefits that Berardino & Co. have worked single-mindedly (and successfully) to win. You can see the misplaced priorities while driving the potholed streets of westside Costa Mesa—like strapping yourself into one of those Imperial Vibrating Belt Massagers from the Eisenhower-era. Take a look around City Hall, where such basic renovations as air-conditioning and heating are delayed year after year, blasted by the union’s high-priced PR team as “luxuries” or mere “cosmetic upgrades.” Or walk the athletic fields at Estancia High School. It’s no verdant glen; it’s Tom Joad’s Oklahoma. There are, as one local put it, “simply too many feet.” Why? Because the kids have got no place else to go, because—after paying for salaries and pensions—the city has no cash left for new parks, and little money to support existing parks.

But Berardino and Gibson can’t sell that Dickensian reality. So they argue instead that the union leadership is fighting a world-historical battle against the forces of evil, against “multinational, multibillion-dollar corporations.” Because that sounds better than the truth—which is that what the union really wants is to force Costa Mesa to raise taxes on its younger residents so that retired union members can achieve longer, firmer erections well into their 80s.

THE NEW YORKER MAGAZINE described Berardino as “a hot-tempered man with a placatory gray mustache.” An inch or so beneath that kindly cookie-duster, Berardino’s lips told the Los Angeles Times he’d consider reductions in his members’ pay and benefits if that would help the city, but that he would not negotiate “with a gun to our heads.”

Message to union members: That’s no gun next to Nick’s head. Nick is a comic book figure. That thing next to his noggin is an empty thought bubble.

Or maybe not empty: St. Nick ends his yuletide message with a weird, unseasonal threat: “P.S. For those who plan to attack us in the coming year, get ready because we will continue to fight!!!”

Merry Christmas!!!

How the revolutionary California labor movement became Wall Street’s biggest gambler

Like most social media profiles, the union’s “Repair Costa Mesa” page lists things the union leadership likes. On one recent night, the Top 3 likes were Occupy Irvine, Occupy Costa Mesa, and Occupy Orange County.

I’m a huge fan of the Occupy Wall Street movement and its myriad spinoffs, in part because, like a lot of Americans, I can see the Bush Administration’s bank bailout—and the banking industry’s subsequent crackdown on the very taxpayers who supplied the cash that saved the banks—only through the prism of something like Jesus’ parable of the Unforgiving Servant.

You don’t have to be a Christian to appreciate the Kafkaesque irony of Matthew 18:21-35: a king who had loaned one of his best servants $10,000 (or its Roman-era equivalent) one day told that servant it was time to pay up. The servant begged the king for more time. “Sure,” the king said. Relieved, the servant went out into the public square—and ran straight into a ragged, fellow servant who owed the servant (let’s say) $10. “Pay up,” the first servant said to the second. The rest of the story is worth quoting:

So his fellow servant fell down at his feet and begged him, saying, “Have patience with me, and I will repay you!” He would not, but went and cast him into prison, until he should pay back that which was due. So when his fellow servants saw what was done, they were exceedingly sorry, and came and told to their lord all that was done. Then his lord called him in, and said to him, “You wicked servant! I forgave you all that debt, because you begged me. Shouldn’t you also have had mercy on your fellow servant, even as I had mercy on you?” His lord was angry, and delivered him to the tormentors, until he should pay all that was due to him. So my heavenly Father will also do to you, if you don’t each forgive your brother from your hearts for his misdeeds.

Like I say, we don’t have to be Christians—don’t have to be religious at all—to see that this story is about unfairness/hypocrisy/double standards. When we consider that Wall Street was saved from ruination by just massive amounts of government money, and that Wall Street returned the favor by driving Americans from their homes, well, it just makes you want to eat tofu cooked on a grill powered by a dreadlocked guy peddling a bike hooked up to a generator in Zucotti Park.

And so I understand why almost every American would feel some sympathy for the Occupy Wall Street movement—almost every American but those in Costa Mesa’s public employee unions. The members of the city’s unions must feel unsettling ambiguity, some sense of weird kinship with Jesus’ Unforgiving Servant, because their pensions, like the pensions of most public employees in California, are invested in Wall Street, via one of the nation’s maddest gambling institutions, the California Public Employees Retirement System, or CalPERS.

CalPERS is to Wall Street what a whale is to a Vegas Casino. A high roller. A player. The biggest swinging male appendage in the room. With $235.8 billion in assets, it is the nation’s largest pension fund, and among the biggest investors in the world. And it’s largely on the expected gains in its Wall Street investments that CalPERS has been able to persuade officials in many California cities and counties that they could pay rising pension benefits to their public employees.

It wasn’t always this way. For decades after its 1931 founding as a pension program for state workers, CalPERS—then called the State Employees Retirement System (SERS)—made stodgy, sure-thing bond investments. That changed in 1953 when the legislature allowed SERS to invest in real estate. Thirteen years later, there was another loosening of the restraints on the agency’s investments when state voters passed a union-backed proposition allowing CalPERS to invest a quarter of its portfolio in stocks. In 1984, high on the fumes of the Reagan Revolution, labor pushed Prop. 21, allowing CalPERS to invest anything/everything in Wall Street. CalPERS had become a whale.

But even then, you could see the specter that would come to haunt California’s cities, a kind of proto, financial Paranormal Activity. Prop. 21 “would have no direct fiscal effect on the state or local governments,” the state’s Legislative Analyst’s Office told voters before the 1984 election. But then it warned obliquely of an “indirect fiscal effect,” one that “would depend on the extent to which the rate of return on the investments of public retirement funds is higher or lower than what it would have been in the absence of the additional flexibility authorized by this measure.” If the rate of return rose? Everybody’s a winner! If it fell, the fine print read, taxpayers—not CalPERS, not public employees—would make up the difference in the pension fund.

For a long time, CalPERS’ rate of return was higher than it would have been without Wall Street. Following 1984 passage of Prop. 21, “The stock lid came off as the market began a long boom, allowing funds such as the University of California’s to go two decades without contributions from employers or employees,” reports the blog Calpensions. “Years of double-digit investment earnings led to the belief that generous pension benefits . . . could be paid for by investments with little or no need for increased contributions from employers or employees.”

Alongside this ballooning confidence in the power and logic of Wall Street was a parallel optimism about what retirement ought to look like—a sense evolving over decades that California’s public employees could retire younger and younger, and rely on bigger and bigger pensions whilst buying second homes in Coeur d’Alene and sunning like gators on boats on the Snake River. In 1932, when SERS was still a mewling Depression-era babe, the pension promised to pay according to this simple formula: beginning at age 65, a retired state worker would receive 1/70 of salary times years of service; keep in mind that we died younger in those days—about age 60 versus nearly 80 today. As lives lengthened, the retirement-age paradoxically dropped for many state workers—to 60 in 1945 (thanks, Gov. Earl Warren!), and down to age 50 in 1970.

You can begin to see the confluence of forces that would generate a pension problem when you also consider that, with life-expectancy rising and retirement-age falling, California offered public workers more generous pension benefits. In 1932, that benefit was 1.4 percent per year of service; the percentage increased to 1.6 percent under Gov. Warren, and to 2 percent when Gov. Ronald Reagan took over the Governor’s Mansion in Sacramento. It’s between 2 percent and 3 percent today.

Now? “Now,” Calpensions summarizes, “a historic market crash has punched a big hole in pension funds. Government agencies face years of increased pension contributions to make up for the losses, threatening funding for other programs.”

AND SO THE UNION FINDS ITSELF split, its progressive heart inclined to the 99 percent of America that resents Wall Street’s influence in Washington, its pensions simultaneously dependent on an engorged and rampant Wall Street. That produces some weird bipolarity/split-personality disorders in organized labor and its supporters. The problem isn’t a pension system built on casino-style gaming, they say; the problem and its solution are in that gaming. They are gambling junkies.

“Let’s be clear,” wrote president of the American Federation of State, County and Municipal Employees Gerald W. McEntee, a man who is anything but clear:

Underfunded pension systems resulted from unprecedented losses of asset values caused by reckless behavior on Wall Street and the refusal of some politicians to make their required payments. As recently as 2007, pension funds had, collectively, 96 percent of the assets required to meet future expenditures. But Wall Street drove America’s economy and retirement security into a ditch. And now both pension and 401(k) accounts alike must be rebuilt.

Similarly, a pro-union reader on the liberal Orange Juice blog asserted that the Costa Mesa council majority’s goal in outsourcing city jobs isn’t a response to a real financial crisis. Its goal is to destroy the American working class and “to steer pension monies to Wall Street.”

Except, of course, that’s where those “pension monies” already are. And if you listen to other union backers, it’s where that money ought to stay.

THERE’S NO BIGGER BELIEVER in Wall Street miracles than the guy whose pension is invested in highly speculative stocks. Writing on the same Orange Juice blog, “Mayor Quimby” handed out stock advice to Costa Mesans, sounding more like Mad Money’s apoplectic host Jim Cramer than an advocate of Occupy Wall Street: Keep your money in stocks, the Mayor admonished Costa Mesa: “you might find out that outsourcing will create a fiscal crisis for the city, by locking the city into losses that were incurred during the Great Recession, and missing the gains from the recovery.” That pitch—don’t leave before the miracle happens!—is how Wall Street locks in the losers.

Orange County Employees Association spokesperson Jennifer Muir was equally bullish on the markets: The Orange County Employees Retirement System “just reported a 19 percent rate of return for this year,” Muir reported breathlessly last summer. “CALPERS and CALSTRS are even higher at close to 25 percent.” Bottom line: diversify—always diversify—but keep your retirement in high-performing stocks.

CalPERS has a reputation as an activist investor. The organization has insisted on quid pro quos: in exchange for investment cash, it has pushed for caps on executive pay and transparency; has led the way for human rights, environmental and labor standards in emerging markets; and participated in class-action lawsuits against major health insurance companies, including UnitedHealth Group.

Leveraging that tradition, the city’s workers could reform their union and its bloated pensions. They could start by demanding that CalPERS invest their pensions in solid/stolid/boring U.S. bonds rather than in the speculative junk that fueled Wall Street’s rapid, unprecedented rise through the 1990s and its post-scriptural crash in 2008. That might—might—mean more modest retirements, of course, but it would certainly end union members’ hypocritical reliance on Wall Street—their affection for gambling when Wall Street inflates their pensions, their hatred of the market when it shapes the contours of their daily work.

Who manufactured the ‘manufactured budget crisis’?

Can we all just stipulate to one fact—that the financial challenges facing Costa Mesa are not manufactured (i.e., faked) and they’re not unique to Costa Mesa?

That’s one of the central claims of the union leadership and its allies, and it’s so patently absurd that it hardly seems worth correcting. But it’s everywhere, as common—and bothersome—as methane. And it’s hard to deal with the reality of the problem of rising pensions and benefits when one is constantly waving one’s hand in front of one’s face.

Geoff West repeats the claim so routinely in his blog it’s likely he now actually believes it’s real. (Speaking of Councilmember Jim Righeimer recently, Geoff writes, “So, he fabricates a fiscal crisis and cooks up the ‘outsourcing’ fiasco.”). Over at Orange County Employee Association HQ in Santa Ana, spokesperson Jennifer Muir continues to claim that “the Costa Mesa City Council majority has been hiding money to create a manufactured budget crisis”—despite the fact that her organization’s handpicked auditor looked over the city’s book and denies the claim. “Jackson” echoes that assertion—while dismissing me as a women’s feminine hygiene product in his comment on my most recent post: “Put Jim Righeimer and Steve Mensinger on a lie detector and ask them if they tried to manufacture a budget crisis to get out of contracts.”

I don’t own a lie detector. But I own a laptop, and it’s connected to the intertubes, where I discovered months ago that, in fact, rising pensions are a problem throughout the country. That makes it seem unlikely that Costa Mesa’s pension troubles are fabricated–unlikely but not impossible, Geoff West will observe, and we’ll agree: but if fabricated, Costa Mesa is part of a conspiracy of similar fakes so vast and so non-partisan (involving as it does Democrats and Republicans, liberals and conservatives, etc.) that it would require the firm guidance of an expert in Chaos theory.

Search for the key words “city budget pension union ” as I did, and see what you find. In 15 minutes, I got the following from just the last few days’ headlines:

Central Falls, Rhode Island’s poorest city, sought Chapter 9 bankruptcy protection as it struggles to meet pension obligations.” “The City Council will vote today on the Memphis City Schools’ budget, and also will discuss city layoffs, salary reductions and possible revisions to the city’s retirement system.” “In confining his remarks to the shortfall in the [Chicago’s] main checking account, [Mayor Rahm] Emanuel also didn’t address another looming budget problem in a different fund — the one used to cover rising pension obligations as well as mounting interest and principal.” “[Hollywood, FL] voters would go to the polls Sept. 13 to answer one question: Should public employee benefits be cut as a way to help close the city’s $38 million financial gap?” “‘We are cutting much-needed street paving despite this year’s record numbers of potholes,’ Mayor R.T. Rybak said in a press release. ‘We are slowing our debt repayment despite the fact that doing so has helped restore Minneapolis’ AAA bond rating and save taxpayers money. And we are cutting positions from Police and Fire despite achieving record-low levels of crime this year.’” “The budget forecasts increased pension costs of more than $730,000. Again, Lafayette [LA] isn’t alone. Local governments across the country are trying to come to grips with the growing cost of pension plans, which have been hurt by uncertainty in investment markets over the last decade. Louisiana’s state employee retirement systems face billions in unfunded liabilities.” “How is it possible that [San Francisco] city officials made deep cuts to a general fund that swelled by nearly $300 million? ‘Our expenditures are growing faster than our revenues,’ said Greg Wagner, the mayor’s budget director. ‘We project that even once the economy has recovered and revenues have resumed previous rates of growth, we will still face significant deficits unless we take actions to control growth in costs.’ City officials point to the cost of operating a government is ever-increasing, driven by the escalating cost of workers’ pension and health benefits.” “City seeks budget savings ideas.” “The first order of business with the [Rockford, IL] 2012 budget will be making a decision on public safety pension contributions and whether to pay into the funds as recommended or spend the money elsewhere. 
’Council members know that it will be a difficult year,’ said Central Services Manager Carrie Eklund.” “[New York’s MTA officials] also want the unions to commit to pension reform. By 2015, he estimated that pension spending will balloon to $1.4 billion dollars, while health care costs for employees and retirees will soar to around $1.7 billion. MTA Board member Andrew Saul — chair of the agency’s finance committee — called the agency’s mounting debt problems a ‘ticking time bomb.’”

Letters from my friends on the Left!

Progressives/lefties/liberals are supposed to react like subjects chosen at random from a Vegas audience who are, on a spotlit stage, subsequently entranced by a tuxedoed entertainer with a vaguely medical- and/or professorial-sounding name and a pocket watch on a chain. We’re supposed to hear the word “union,” that is, and lose our minds–the logic and math centers of the brain suddenly flooded with images and sounds of the Triangle Shirtwaist Fire, child coal miners, black workers facing off against their non-unionized white brothers in Chicago’s meatpacking plants, Sacco and VanzettiSaul Alinsky, that TV commercial from my childhood in which honesthardworkingsouthernladies tell us (in song, no less) what it means to us and to them when we buy our products from such hellholes as Bangladesh and China. So I’m never surprised when my friends express their reservations about the Costa Mesa situation, where the Orange County Employee Association has launched an American Express Centurion-level media campaign to hypnotize us–not with a swinging watch but with code words (“union,” “workers,” “families,” “right-wing”) that assume that the workers and families who live as mere residents in Costa Mesa can survive alongside the pension system sucking dry their city’s wealth. I understand it–the mesmerization–because I’m subject to it too, and I take my friends’ questions seriously. Consider this one, for example, which arrived this morning:

Will: Liked your post on “parks and pensions.” Provocative—hit the sweet spot where informative becomes entertaining. I’m even coming round to your point of view on this. A while ago I actually heard a story on NPR about the Costa Mesa budget battles, and [Councilmember] Jim Righeimer sounded absolutely honest and forthright in his comments, while the union guy—can’t remember his name—sounded squirrelly. I guess what continues to bother me is the mass pink-slipping that started all this. That scared the [deleted] out of a lot of employees—at a time when there are few jobs out there for them to snap up in case the firings do go through. That looked like grandstanding on the part of the council. Otherwise…. I think you’re right about this mess. Coffee after the Fourth?

Pal: Coffee? Yes, please! The mass pink-slipping is weirdly/tragically/ironically a feature of union life, the result of a perk demanded by the union itself. Some (maybe not even many) of those pink-slipped won’t be let go, but in order for the city to get moving on any plan to cut costs by outsourcing services (about which more in a minute), city officials have to honor the six-month notification requirement in all union contracts. Me? My colleagues in the private sector? We rarely get notice. If my company begins gushing blood and the boss determines he needs to cut staff to save the company, we scavenge a cardboard box near the all-in-one copier/printer/fax, pack our [deleted], and we’re gone.* A couple of weeks would be nice to get our feces consolidated, maybe even a month. But that’s not always possible: If private-sector companies had to offer six months’ notice, they might not survive the short-term blood gushing. The entire place would go down, taking all 70 jobs with it for the failure to act quickly. It’s very Hamlet.

So, in the six-month window the city gave itself by pink slipping (beginning March 17–so, what, ending around September 17?), it has sent out RFPs (bizlang for “requests for proposal,” basically invitations asking outside organizations to propose satisfying a city need) for outsourcing such departments as fire. It has made a condition of any outsource that current city employees be given first right of refusal for employment. Those employees would transfer into the new organization without the rock ‘n’ roll benefits they may presently enjoy (four-day workweek, early retirement, something approaching full pay and health till death)–unless that’s what the new employer offers (as in the case of fire, where one possible outsource partner is the OC Fire Authority).

Now, let’s go back to March 17 for a moment and consider the possibility that, instead of pink-slipping people, city officials had simply underscored their already-announced intention to weigh outsourcing city functions. Costa Mesa would now have two problems: (1) employees would begin wigging out about job security–which is likely precisely what they did when someone (their supervisor or HR director, I imagine) handed them a manila envelope with a non-pink notification (further research on color required here) that they might not have a job in six months; (2) the city would begin the months-long RFP process, during which they would daily confront de-wigged employees and declining city finances, at the end of which process (the RFP) they’d still have to offer the now completely bald city employees six months’ notice—another half-year of hair loss and general fiscal degeneration. Please, at this point, recall Hamlet, above, who, I don’t need to remind you, loses an entire kingdom in a bloody every-man-and-woman-for-him/herself brawl involving swords/daggers/poison because he (Hamlet) refuses to dispatch Uncle Claudius when ordered to do so by his dead dad’s ghost and had the chance to satisfy his dad’s ghost’s demand in a very early act.

So, to sum: the mass pink-slipping, while apparently brutal and shocking, is in fact perhaps the happiest of all possible unhappy outcomes here—short of the city discovering that it has an oil deposit the size of Saudi Arabia’s beneath the empty plot of land known as Goat Hill–at which point the midget-railroad guys (not midget railroad-guys) with a dollar-a-year lease on that piece of sun-blasted heath would hire Jennifer Muir, the megaphonic but wildly attractive spokesperson of the Orange County Employee Association, to attack the city council as child-murderers and model-train-haters.

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* In a May 18 post, I noted, “In other parts of the world, especially at the management level where union protection is rare, a different policy prevails–the policy of being handed a lightweight cardboard box that might once have held HammerMill® Copy Plus Copy Paper and being told you have 15 minutes to clear out your office while an uncomfortably silent and awkward corporate security officer or HR director watches to make sure that you don’t use that moment to dash off a hasty, poorly conceived and angry email for general distribution or make off with the team playbook.” And then, on June 20, as if to prove my point, former Costa Mesa Police Chief Steve Staveley was given the free use of his office after resigning–an interregnum Staveley used to dash off a letter that made him look anything but courageous.

When titans clash! Auditors disagree mildly over Costa Mesa finances

The union’s auditor came to town last week,* and all the union got was a bill for some $17,000** and a clearer sense that its war against the residents of Costa Mesa is purely philosophical.

The Orange County Employees Association had hoped the auditor would land the lethal blow. Instead, granted full access to Costa Mesa’s books, auditor Steve Foti concluded—just in time for the dramatic June 21 budget vote—that the city might be saving too much money for such eventualities as capital expenses, employee absences, and self-insurance.

That’s it. No demon-possessed Republicans with heads doing high-speed 360s atop roast beef-swollen necks. No Councilmember Jim Righeimer working feverishly under a small cone of light to plan the destruction of “working families.” No Mayor Gary Monahan going so far as to push one city maintenance worker from the roof of City Hall. No “hidden pots of money,” as union spokesperson Jennifer Muir puts it. Just a bespectacled auditor from San Francisco clearing his throat to alert us to the fact that the city might have saved more than is necessary in some areas of the budget.

Muir and her colleagues at Orange County Employees Association HQ in Santa Ana immediately seized on the auditor’s meager finding as evidence of the council’s perfidy—and as a kind of treasure chest that must be tapped in order to fund pensions and benefit packages that (polls suggest) most of us believe are excessive.

We believe that because we’ve watched successive budget deficits suck down the very reserves Foti says are “above average.” Indeed, just a month ago, Moody’s, the international credit rating agency, downgraded Costa Mesa’s credit precisely because the same reserves are too low.***

The philosophical disagreement between Foti and Moody’s isn’t some yawning chasm across which no mere mortal could possibly see the other side. Moody’s said the city is slightly under-reserved; Foti said Costa Mesa’s reserves put it on the high side of normal. It’s only the union that tries to magnify this honest disagreement into an apocalyptic showdown between the unionized forces of Jesus Christ on a white unicorn or man-faced sheep vs. a multi-headed Whore of Babylon operating inside City Hall.

It’s possible we side with Moody’s—and therefore with the city council majority—because we actually hang around Costa Mesa. We can see what Foti probably didn’t: that years of rising pensions and healthcare for city employees has robbed the city of its ability to fund streets, parks and such buildings as City Hall.

You can see the misplaced priorities if you take a walk, as we did this week, across the athletic fields at Estancia High School—the hard-packed dirt and weeds next to the bathrooms that serve the adjacent stadium. In a city notoriously short of parks, schools playgrounds have become the default practice fields of many organized youth sports and adult leagues. For a fee, the Pop Warner and AYSO kids can stomp Estancia’s sod into something like asphalt. And they do. This is no verdant glen, no playing field of Eton; it’s Tom Joad’s Oklahoma. There are, as one local put it, “simply too many feet.” Why? Because the kids have got no place else to go, because—after paying for salaries and pensions—there’s no cash left for new parks, and little money remaining to support existing parks.

The city’s own brief experiment in keeping up athletic fields ended two years ago when, financially strapped, the City of Costa Mesa made a choice: it could continue to weed, water and fertilize its Farm Sports Complex, or it could cut the maintenance expense, let the field return to its natural/fallow weedy state—and push the savings into pension and healthcare for city workers. It chose the latter. That decision is now etched in the landscape, a kind of horticultural “drop dead” from the Orange County Employees Association to Costa Mesa’s kids.

Ditto for the city’s streets—already crappy, and now by some estimates just five years from failure—and for its City Hall, where such renovations as air-conditioning and heating are delayed year after year, and dismissed recently by Muir’s high-priced union PR team as luxuries: “[F]east your eyes on the proposed budget released by the city last week. According to the official budget, millions in new paint and carpet is still planned!” Still planned, still unfunded.

So, we thank Mr. Foti for confirming that the city “is better than average where they’re sitting financially at this point,” though “not in a great financial position.”

We think that means we’re better off than many other cities (hello, Vallejo!), but could be doing much better. If so, we think so, too. We’d like to start by living within our means. That would indicate an end to unfunded—unfundable—pension and benefit programs that force us to sacrifice the streets and parks that make Costa Mesa livable.

Streets? Parks? They may as well be dipped in gold and filled with cash so far as the OCEA is concerned. Instead, the union would have us tap reserve accounts to fund the ongoing costs of employee pensions and benefits. But that’s a one-time solution—the sort of sleight-of-hand business savvy that created the U.S. housing bubble and subsequent economic meltdown; the kind of negligent budgeting that had California add costly programs based on the expectation that the late 1990s run-up in dot-com stocks would last forever. What happens next year when, because Costa Mesa has still failed to cap the city’s obligation vis-à-vis ongoing employee costs, the operating expense has risen again—and this time there are no reserves to tap? When we’re confronted with failing parks, streets and buildings? Faced with declining sales tax revenue?

Moody’s, of course, will go nuts. It’s the one thing their May report warns against. “WHAT COULD MAKE THE RATING GO DOWN?” it asks in admonitory upper-case letters. It answers its own question in upper/lower-case letters that seem like a ghost whispering a laconic warning: “Continued operating deficits. Further tax base decline.”

At that point, one imagines, we’d have neither the sustainable city we want—the leafy, well-paved metropolis we envision—nor the cash to pay for employee pensions and benefits the union says are essential. We’d have the worst of both worlds: potholed streets, closed parks, a City Hall in such disrepair that there will be no roof from which to jump, and no pension funds to mail retirees. On the other hand, we’ll all be miserable together. Which is nice.

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* We’re speaking figuratively here. He spoke with reporters via telephone.

** Steve Foti told Republic of Costa Mesa web editor Janelle Flores that “the Costa Mesa project was bid at $17,500 (about 100 hours) due to the scope of work that was requested.” We’re not clear that that was the final bill.

*** Unlike some cities, Costa Mesa is unusually dependent on sales tax revenue; Moody’s said the city’s “weakened financial profile” was a result of “above average exposure to volatile sales tax revenue and low reserves given its revenue structure.” Translation: cities that rely on sales taxes from, say, South Coast Plaza are almost naked when the economy goes cold as this one has; such cities would be wise to put on a sweater.

A progressive’s response to the pension crisis

We’re at a crossroads: we can support the services that make cities, counties and states livable, or we can continue to fund pension and healthcare programs demanded by public employee unions–but not both.

In winning the pension and healthcare benefits they have, the union leaders did what they’re supposed to do: they persuaded local leaders–Democrats and Republicans–to give union workers the highest possible incomes. But they also put Costa Mesa on the hook for something that’s simply unsustainable.

Today, the city is running out of cash, and two options are on the table–massive cuts in city services and a reduction in badly needed capital investments, on the one hand, and rising pension and healthcare benefits, on the other. But the leadership of the Orange County Employees Association is playing a game of chicken, betting that its relentless misinformation campaign will undermine the city’s political will to balance the budget. If the union leadership wins–if the city’s elected leaders sign off on unsustainable pension and healthcare programs for city employees–their victory will be short-lived: Costa Mesa will follow other local governments into real financial crisis, and then the union’s members will have neither their jobs nor the sustainable community we know they want to create.

This is not an observation that originated in the high-tech laboratories at RCM World Headquarters. Here’s San Francisco Public Defender Jeff Adachi on the same theme, a year ago:

Adachi was part of a progressive San Francisco coalition that attempted to reform (if only modestly) that city’s pension program, a coalition that included “included Willie Brown, a Democrat who was mayor of San Francisco from 1996 to 2004 and speaker of the California State Assembly from 1981 to 1995, and the Green Party’s Matt Gonzalez, former president of the San Francisco Board of Supervisors and Ralph Nader’s 2008 vice presidential candidate.”

Then, too, there’s this threat from the Right: if progressives can’t see the truth of what’s plain to everybody else, conservatives who come naturally by their hatred of government will use the pension crisis as a wedge issue. They’ll persuade critical swing voters to their side. And they won’t stop with pension reform.

 

 

Boston Globe: ‘Union fight is just beginning’

You don’t have to like Republican dinosaur (and dinosaur-shaped) John E. Sununu, but even a blind pig (or a lystrosaurus) finds an acorn. In this decent overview of the tsunami of pension costs inundating U.S. cities, counties and states, the former U.S. senator from New Hampshire observes that “struggles over collective bargaining and union politics are happening all over the country, suggesting there’s much more here than first meets the eye.” No, Mr. Sununu–if that is your real name–we pretty much saw all of this when it first met our eye. Read the entire story here.

Not Just Conservatives: San Jose will declare state of emergency to cut pension costs

San Jose Mayor Chuck Reed says he’ll declare a state of emergency in order to handle that city’s exploding pension costs. [UPDATE: The New York Times reports, "The City Council is expected to make the declaration official at a meeting on Tuesday (May 24), imposing sort of the government-finance version of martial law.]

“The city’s unions are certain to fight him in court,” the New York Times reported. “And there’s a good deal of case law on their side. ‘No jurisdiction in California has ever, ever succeeded ‘ in stripping away a public employee’s vested rights using a fiscal emergency as justification, said Robert Bezemek, an Oakland labor lawyer.

If you’re a liberal, a lefty or a progressive, you probably grew up singing “Which Side Are You On?” If you didn’t know the song, you knew the sentiment: unions were the thin line between working-class prosperity and a free market in labor that produced widespread poverty.

What’s a progressive to do, then, when confronted with the choice Reed faces–between skyrocketing pension costs associated with public employee unions (on the one hand) and the bankruptcy of our cities and the destruction of the programs that make those cities livable (on the other, much bigger hand)?

“Mr. Reed offered this picture of life in San Jose,” the Times reported: ‘A volunteer fire department, a mostly volunteer police department, and not much else. All libraries except Martin Luther King would be closed. All community centers, most likely closed. You cannot manage the 10th-largest city in the country with 1,600 employees and a volunteer fire department. It is impossible. It cannot happen.’”

We could craft a solution that takes care of workers without BK’ing our cities. Or, like San Jose union president Yolanda Cruz, we could leave the problem-solving at someone else’s doorstep–like a flaming bag of public policy feces. Read Cruz’s comments about San Jose’s crisis, and ask yourself: Which side is she on?

“Taking a page from the Governor Scott Walker playbook, [San Jose Mayor Chuck] Reed has again chosen to blame workers in order to deflect attention away years of mismanaged spending by city leadership,” Cruz said in a statement Friday, referring to Wisconsin’s Republican governor, who sparked outrage earlier this year by stripping public unions of most of their bargaining rights.

Reed is, in fact, a Democrat. And far from attempting “to blame workers,” he says he’s reluctant to make cuts to the city’s pension program–a program that now accounts for half of his city’s deficit, according to Reed. The math doesn’t lie, and public employee unions’ willingness to make symbolic cuts won’t do anything to stop the bleeding in San Jose. Read the San Jose Mercury-News story here.