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

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.

3 responses to “Math Murderers: In Costa Mesa pension war, union leaders fail basic finance quiz

  1. Hey Will, at about Two Hundred Grand a year each, C.M. could hire another 19 cops and/or firemen/women/persons/other and burn through that audacious, unpardonable, unforgivable profit margin of $3.8 millll mach schnell…

  2. Or they could pave my street… Thanks for ending the year with some healthy rational writing…

  3. Why should anyone be surprised that a Public Sector Union would seize upon any opportunity to stop/stall the much need pension reform …. no matter how spacious the argument.

    At a MINIMUM, future service pension accruals need to be 50% of current formulas . Better yet, the Plans should be frozen and replaced by DC Plans (with a modest match) for CURRENT (not just new) workers.

    Or …. let’s just outsource everyone … and be done with it !

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