California’s minimum wage is set to gradually increase to $15 by 2022, following in the footsteps of minimum wage pioneer city Seattle.
Unfortunately, the unintended consequences of Seattle’s minimum wage experiment are starting to show, both in deteriorating restaurant quality and in decreasing wages for low-income workers.
According to the latest study, Seattle’s 2016 minimum wage hike approved by the Seattle City Council appears to have pushed restaurants to deal with rising labor costs by cutting corners in hygiene. Researchers at Ball State University in Indiana concluded that overall restaurant health code violations increased by 6.4% and less severe violations increased by 15.3% with each dollar increase of the minimum wage.
Bad hygiene is gross, but it isn’t the only serious consequence of Seattle’s minimum wage increases. Researchers from the University of Washington published in June their finding that Seattle’s increase from $11 to $13 coincided with a decrease in actual wages for low income workers – the exact opposite of the policy’s intended result.
According to the study, the 2016 increase to $13 led to a 9% decrease in hours worked at low-income jobs, while hourly wages rose by 3%. This means that on average people in low-wage jobs earned around $125 less per month than they earned before. Instead of helping people in low wage jobs, significantly raising the minimum wage in Seattle has actually hurt their earning ability!
Back in 2013 the City of Irvine had an unfunded pension liability of $91 million and cash reserves of $61 million. The unfunded pension liability was being paid off over 30 years with interest charged on the unpaid balance at a rate of 7.5% per year. Irvine’s cash reserves were conservatively invested and earned interest at an annual rate of around 1%. With that much money in reserve, earning almost no interest, the city council decided use some of that money to pay off their unfunded pension liability.
As reported in Governing magazine, starting in 2013, Irvine increased the amount they would pay CalPERS each year by $5M over the required payment, which at the time was about $7.7M. With 100% of that $5M reducing the principal amount owed on their unfunded liability, they expected to have the unfunded liability reduced to nearly zero within ten years, instead of taking thirty years. Here’s a simplified schedule showing how that would have played out:
CITY OF IRVINE, 2013 – PAY $5.0 MILLION EXTRA PER YEAR
ELIMINATING UNFUNDED PENSION LIABILITY IN TEN YEARS
This plan wasn’t without risk. Taking $5 million out of their reserve fund for ten years would have depleted those reserves by $50 million, leaving only $11 million. But Irvine’s city managers bet on the assumption that incoming revenues over the coming years would include enough surpluses to replenish the fund. In the meantime, after ten years they would no longer have to make any payments on their unfunded pension liability, since it would be virtually eliminated. Referring to the above chart, the total payments over ten years are $127 million, meaning that over ten years, in addition to paying off the $91 million principal, they would pay $36 million in interest. If the City of Irvine had made only their required $7.7 million annual payments for the next thirty years, they would have ended paying up an astonishing $140 million in interest! By doing this, Irvine was going to save over $100 million.
Four years have passed since Irvine took this step. How has it turned out so far?
Not so good.
Irvine was doing everything right. But despite pumping $5M extra per year into CalPERS to pay down the unfunded liability which back in 2013 was $91M (and would have been down to around $64M by the end of 2016 if nothing else had changed), the unfunded liability as of 12/31/2016 is – that’s right – $156 million.
Welcome to pension finance.
The first thing to recognize is that an unfunded pension liability is a fluid balance. Each year the actuarial projections are renewed, taking into account actual mortality and retirement statistics for the participants as well as updated projections regarding future retirements and mortality. Each year as well the financial status of the pension fund is updated, taking into account how well the invested assets in the fund performed, and taking into account any changes to the future earnings expectations.
For example, CalPERS since 2013 has begun phasing in a new, lower rate of return. They are lowering the long-term annual rate of return they project for their invested assets from 7.5% to 7.0%, and may lower it further in the coming years. Whenever a pension system’s rate of return projection is lowered, at least three things happen:
(1) The unfunded liability goes up, because the amount of money in the fund is no longer expected to earn as much as it had previously been expected to earn,
(2) The payments on the unfunded liability – if the amount of that liability were to stay the same – actually go down, since the opportunity cost of not having that money in the fund is not as great if the amount it can earn is assumed to be lower than previously, and,
(3) the so-called “normal contribution,” which is the payment that is still necessary each year even when a fund is 100% funded and has no unfunded liability, goes up, because that money is being invested at lower assumed rates of return than previously.
That third major variable, the “normal contribution,” is the problem.
Because as actuarial projections are renewed – revealing that people are living longer, and as investment returns fail to meet expectations – the “normal contribution” is supposed to increase. For a pension system to remain 100% funded, or just to allow an underfunded system not to get more underfunded, you have to put in enough money each year to eventually pay for the additional pension benefits that active workers earned in that year. That is what’s called the “normal contribution.”
By now, nearly everyone’s eyes glaze over, which is really too bad, because here’s where it gets interesting.
The reason the normal contribution has been kept artificially low is because the normal contribution is the only payment to CalPERS that public employees have to help fund themselves via payroll withholding. The taxpayers are responsible for 100% of the “unfunded contribution.” CalPERS has a conflict of interest here, because their board of directors is heavily influenced, if not completely controlled, by public employee unions. They want to make sure their members pay as little as possible for these pensions, so they have scant incentive to increase these normal contributions.
When the normal contribution is too low – and it has remained ridiculously low, in Irvine and everywhere else – the unfunded liability goes up. Way up. And the taxpayer pays for all of it.
Returning to Irvine, where the city council has recently decided to increase their extra payment on their unfunded pension liability from $5 million to $7 million per year, depicted on the chart below is their new ten year outlook. As can be seen (col. 4), just the 2017 interest charge on this new $156 million unfunded pension liability is nearly $12 million. And by paying $7 million extra, that is, by paying $20.2 million per year, ten years from now they will still be carrying over $35 million in unfunded pension debt.
CITY OF IRVINE, 2017 – PAY $7.0 MILLION EXTRA PER YEAR
REDUCTION OF UNFUNDED PENSION LIABILITY IN TEN YEARS
This debacle isn’t restricted to Irvine. It’s everywhere. It’s happening in every agency that participates in CalPERS, and it’s happening in nearly every other public employee pension system in California. The normal cost of funding pensions, which employees have to help pay for, is understated so these employees do not actually have to pay a fair portion of the true cost of these pensions. If this isn’t fraud, I don’t know what is.
It gets worse. Think about what happened between 2013 and 2017 in the stock market. The Wall Street recovery was in full swing by 2013 and by 2016 was entering so-called bubble territory. As the chart below shows, on 1/01/2013 the value of the Dow Jones stock index was 13,190. Four years later, on 12/31/2017, the value of the Dow Jones stock index was up 51%, to 19,963.
Yet over those same four years, while the Dow climbed by 51%, the City of Irvine’s unfunded pension liability grew by 71%. And this happened even though the City of Irvine paid $12.7 million each year against that unfunded liability instead of the CalPERS’s specified $7.7 million per year. Does that scare you? It should. Sooner or later the market will correct.
DOW JONES INDUSTRIAL AVERAGE
PERFORMANCE FOR THE PAST FIVE YEARS, 2013-2017
While the stock market roared, and while Irvine massively overpaid on their unfunded liability, that unfunded liability still managed to increase by 51%. Perhaps that normal contribution was a bit lower than it should have been?
Irvine did the right thing back in 2013. CalPERS let them down. Because CalPERS was, and is, understating the normal contribution in order to shield public sector workers from the true cost of their pensions. The taxpayer is the victim, as always when we let labor unions control our governments and the agencies that serve them.
CalPensions Article discussing CalPERS recent polices regarding pension debt repayments:
Irvine 2017-18 Budget – discussion of faster paydown plan on UAAL
Irvine Consolidated Annual Financial Report FYE 6/30/2016
Irvine – links to all Consolidated Annual Financial Reports
CalPERS search page to find all participating agency Actuarial Valuation Reports
CalPERS Actuarial Valuation Report – Irvine, Miscellaneous
CalPERS Actuarial Valuation Report – Irvine, Safety
Governing Magazine report on Irvine
“We’re not anti-cop. We’re anti bad cop. Bad cops have to be fired, just like bad politicians”
– Leader of Black Lives Matter counter-protest, who was spontaneously invited to speak at a pro-Trump rally (watch video).
There aren’t too many things that are easier to agree on than this sentiment. Even those of us who offer nearly unequivocal support for law enforcement can agree that bad cops have to be fired. But progress in the form of better training and more accountability will be incremental, despite the fact that social media now makes every tragic incident – no matter how statistically insignificant – visceral and immediate.
Last year the City of Sacramento enacted incremental improvements to their local ordinances governing police department officer training and police accountability. The impetus for this came after a homeless, mentally ill man was shot 14 times by police for walking around with a knife in North Sacramento. As the Sacramento Bee editorialized, the incident “cried out for a new approach to police abuse, one that would set a statewide or even a national standard. Instead, hamstrung by local and state laws that over the years have made police accountability much too hard in California, the City Council had to settle for doing what it could around the margins, revamping civilian review, pushing for better training and slightly improving transparency in officer-involved killings.”
What the City of Sacramento did was not necessarily enough, but it is a good place to start. It represents a savvy mix of steps that accomplish as much as can be hoped for in the face of existing laws, most of them enacted by California’s legislature.
Here are key features of the City of Sacramento’s reform:
1 – De-escalation: Greater police training to emphasize de-escalation and other nonlethal tactics when confronting suspects.
2 – Body Cameras: Police also will have to wear body cams, which tend to make interactions between officers and the public more transparent and civil.
3 – Transparency: Dashcam video of police shootings will be made public after 30 days unless the department can prove it will compromise an investigation, and victims’ families will get a first look, which will shine a light on cases that too often get complicated by emotion and hearsay.
4 – Accountable to City Council: The Office of Public Safety Accountability will at last get some money and staffing, and will report to the City Council, not the city manager, who also oversees the Police Department.
5 – Civilian Oversight: A new oversight commission, made up entirely of civilians, will get broader powers to review complaints filed with the accountability office. This will include the ability to subpoena information when needed.
SAMPLE LANGUAGE – “OFFICER NEXT DOOR” FRAMEWORK
RESOLUTION NO. 2016-Adopted by the Sacramento City Council
ADOPTING THE OFFICER NEXT DOOR FRAMEWORK
A. During the State of the City address on January 30, 2015, Mayor Kevin Johnson announced the Officer Next Door Program (OND).
B. The vision of the OND is that Sacramento will become the safest big city in California and a model of community policing practices.
C. The goals of implementing the OND program are a measurable decrease in crime and a measurable increase in community trust and engagement.
D. The OND framework consists of four pillars: Training, Diversity, Engagement, and Accountability. Implementation of these four pillars is in the best interest of the City of Sacramento to achieve the OND vision and goals:
1. Training: The police officers of the City of Sacramento will receive training that is nationally recognized as the best practices in community policing.
2. Diversity: The City’s police department (at all levels) will reflect the diversity of our City’s residents.
3. Engagement: The OND police force is actively engaged in the community that he or she is sworn to protect.
4. Accountability: Our police department is held accountable to the highest professional standards and embraces transparency.
BASED ON THE FACTS SET FORTH IN THE BACKGROUND, THE CITY COUNCIL RESOLVES AS FOLLOWS:
Section 1. The Officer Next Door Framework attached as Exhibit A is hereby approved.
Section 2. The City Manager or the City Manager’s designee is hereby authorized to take administrative actions and develop procedures to implement the OND Framework.
Exhibit A – Officer Next Door Framework
VISION & GOALS
To make Sacramento the safest big city in California and a model of community policing demonstrated by a measurable decrease in crime and a measurable increase in community trust and engagement
– Training: The police officers of the City of Sacramento receive training that is nationally recognized as the best practices in community policing strategies.
– Diversity: The City’s police department (at all levels) will reflect the diversity of our city’s residents.
– Engagement: The Officer Next Door police force is actively engaged in the community he or she is sworn to protect.
– Accountability: Our police department is held accountable to the highest professional standards and embraces transparency.
Our Officers Receive Training That Is Nationally Recognized As The Best Practices In Community Policing Strategies
We want our police officers to receive consistent, high-quality training to ensure that they are well equipped to address challenging situations that may arise as they are doing their important work in the community. Over the last decade, a myriad of training programs have been developed for public safety officials which can make them more effective when faced with difficult issues. Our police department must have the necessary resources to provide access to this type of training.
We will continue to ensure that our officers are trained in the following:
– Cultural sensitivity
– Implicit bias and discrimination recognition
– Peaceful conflict resolution and de-escalation techniques to include less lethal options.
– Chronic and mental illness recognition training including peaceful conflict resolution and deescalation techniques.
– Problem-oriented policing
Our Police Department (At All Levels) Reflects The Diversity Of Our City’s Residents
Sacramento is one of the most diverse cities in America. As such, it is critical that we put proactive and deliberate strategies in place to ensure that our police force becomes more diverse. We strongly believe that this diversity will result in stronger community relations and robust engagement with our residents.
We will work to implement the following:
– Targeted recruitment strategies focused on increasing diversity (of race, gender, sexual orientation, etc.).
– Mentoring and professional development geared toward increasing diversity in police leadership and command structure.
– Incentive programs to encourage police officers to live in the City and hiring more officers who currently live in the city.
– Exploring the development of a public safety charter school.
Our Officers Are Actively Engaged In The Communities They Are Sworn To Protect
Our police force is most effective when they have meaningful and trusting relationships in the communities they serve. We must work toward creating true collaboration and understanding between officers and residents, so that our work can be proactive and preventative.
We will implement the following to increase engagement levels:
– Community activities such as youth listening sessions and education events.
– Youth development and crime prevention strategies like Summer Night Lights and the Mayor’s Gang Prevention Taskforce.
– Restoring police staffing levels to support community policing.
– Addressing underlying, systemic issues such as education and unemployment.
Our Police Department Is Held Accountable To The Highest Professional Standards And Embraces Transparency
As a community, we need to have faith that our law enforcement officers are always operating in the best interests of our residents and community. We should consistently be sharing and discussing public safety data to ensure that we’re identifying where potential issues may exist and working to correct them. Equally important is the responsibility the public has to support our police department with the resources they need.
We will implement the following to increase transparency and accountability
Increase transparency and availability of data to the public
– Release all video associated with an officer involved shooting, in-custody death, or complaint reported to OPSA within 30 days, where said video does not hamper, impede, or taint an ongoing investigation or endanger involved parties. The family of the decedent shall be offered the opportunity to review the video prior to public release. All faces will be blurred to protect the identity of those present and a warning will also be included to advise of the graphic content of the video. If the video cannot be made public by the 30th day, the Police Chief will provide the reasons and obtain a waiver from the Council.
– Work in coordination with the Coroner’s Office to notify the impacted family as soon as possible, an assign staff to the family to act as a liaison through the process.
– Adopt a use of force policy that encourages transparency and accountability.
– Respond to public records requests and other information requests in a reasonable and timely manner consistent with law.
Implement a body camera program
– Adopt a body camera video policy consistent with council policy and law.
– Ensure the program enhances transparency and availability of data to the public.
Changes to the Office of Public Safety Accountability (OPSA)
– Have OPSA Director report directly to the Council.
– Have OPSA be responsible for staffing the Sacramento Community Police Review Commission.
Changes to the Sacramento Community Police Review Commission (SCPRC)
– The Commission should be 100% civilian led.
– SCPRC to make policy recommendations to the City Council.
– SCPRC’s governance structure to be 11 members with one from each councilmember and three from the Mayor.
– The commission shall review quarterly reports prepared by the office of public safety accountability consistent with California Penal Code section 832.7(c), relating to the number, kind, and status of all citizen complaints filed against police department personnel, to determine whether there are patterns of misconduct that necessitate revisions to any police policy, practice, or procedure.
Monitor the national movement towards independent investigations
Monitoring and follow-up
– Bi-annual presentation and quarterly reports to the City Council and SCPRC on implementation of the OND Framework.
– Annual review of OND Framework implementation including activities of OPSA and SCPRC by the City Auditor.
SAMPLE LANGUAGE – ADOPTING A USE OF FORCE POLICY
RESOLUTION NO. 2016-Adopted by the Sacramento City Council
ADOPTING A USE OF FORCE POLICY
The sanctity of life is inviolable and every person is precious. Developing and maintaining a professional and highly trained police force is imperative. In an effort to guarantee that all lives are protected and valued in the City of Sacramento, Council is adopting the following policy that requires the City Manager to ensure the police:
A. Are authorized to use deadly force only when an officer reasonably believes that a suspect poses a threat of death or serious bodily injury to the officer or others.
B. Issue a clear and comprehensible verbal warning, when possible, before using deadly force.
C. Use the minimum amount of force necessary, under the circumstances presented to the officer, to apprehend a subject.
D. Develop and issue specific guidelines for the type of force and tools authorized for a given level of resistance.
E. Are issued and carry less-lethal weapons consistent with current best practice.
F. Do not move in front of moving vehicles.
G. Do not shoot at moving vehicles unless the person poses a threat with a weapon other than the vehicle OR has exhibited a specific intent to use the vehicle as a weapon.
H. Intervene when an officer observes another officer using force that is clearly beyond that which is objectively reasonable under the circumstances, and when in a position to do so, to prevent the use of unreasonable force and report the incident to their immediate supervisor as soon as reasonably possible.
Monitoring Method: Council Report
Frequency: Semi-Annual (March & September)
I. Receive training in de-escalating encounters with the public, to include mentally ill individuals.
J. Are trained in basic first aid and render such aid (as soon as it is safe to do so) after a deadly force incident.
K. Make death notifications to family members of a subject that has died as a result of an officer involved shooting or while in police custody.
L. Release all video associated with an officer involved shooting, in-custody death, or complaint reported to OPSA within 30 days, where said video does not hamper, impede, or taint an ongoing investigation or endanger involved parties. The family of the decedent shall be offered the opportunity to review the video prior to public release. All faces will be blurred to protect the identity of those present and a warning will also be included to advise of the graphic content of the video. If the video cannot be made public by the 30th day, the Police Chief will provide the reasons and obtain a waiver from the Council
City of Sacramento City Council Report, November 29, 2016
City of Sacramento City Council, Archived Meetings
Sacramento’s new rules are just a first step toward police reform, Sacramento Bee, December 1, 2016
Heavyweight Los Angeles law firm to challenge Sacramento on police practices, Sacramento Bee, November 27, 2016
A lost opportunity on police reform, Sacramento Bee Editorial, June 6. 2015
The City of San Jose was a pioneer in reforming their rules governing binding arbitration, rules that may seem obscure and complex to the uninitiated, but which have profound consequences. Until the San Jose city council put arbitration reform on the ballot in 2010, unelected arbitrators could end labor negotiations with decisions that were devastating the city’s finances.
In 2007, an outside arbitrator granted a pension increase to firefighters, extending a process of granting financially reckless concessions. Between 2000 and 2010, the city’s payments for retirement benefits tripled, while at the same time budget cuts forced a 20% reduction in overall city employees.
A 2009-2010 Santa Clara County Grand Jury report entitled “Cities Must Rein In Unsustainable Employee Costs,” concluded the arbitration process in San Jose “has resulted in wage and benefit decisions that have been greater than the growth in basic revenues sources.
For these reasons, in 2010 the San Jose City Council placed a measure onto the November ballot designed to reform the arbitration process. The measure, which voters approved by a margin of 66% to 34%, among other things, placed important limitations on what an arbitrator could do. Crucially, by reforming the arbitration process, it was no longer possible during negotiations for the unions representing city employees to coerce the city into accepting a bad deal because the arbitration process would likely result in an even worse deal. Here are highlights:
1 – If the two sides cannot agree on the neutral arbitrator, then either party may request the Santa Clara County Superior Court to appoint a retired Superior Court judge as the neutral arbitrator. Previously the third appointed arbitrator, the tie-breaker, would come from a from a list provided by the State of California Conciliation and Mediation Service.
2 – Arbitration hearings would be open to the public and documents submitted would be public records, unless provided otherwise by law.
3 – The city’s “ability to pay for employee compensation from on-going revenues without reducing City services” would become the primary factor that the Arbitration Board must consider when making a decision.
4 – Specific criteria was added to give weight to the obligation of an arbitration board to consider how their decision would impact the financial condition of the city. For example, the arbitration board could not approve a new deal that would:
- increase the projected cost of compensation at a rate that is more than the 5-year average increase for sales tax, property tax, utility tax, and telephone tax,
- retroactively increase or decrease compensation (other than base wages) for service already rendered,
- create a new unfunded liability for the City, or,
- interfere with the discretion of the Police or Fire chiefs to make operational or staffing decisions.
Critical to the success of San Jose’s arbitration reform was the support from a bipartisan coalition of city council members, lead by Mayor Chuck Reed, along with influential members of the community including the president of the San Jose Silicon Valley Chamber of Commerce, a local School District Superintendent, the president of the Santa Clara County Taxpayers Association, and small business owners.
ARBITRATION REFORM – SAMPLE LANGUAGE
EXHIBIT A TO RESOLUTION NO. ____
OF THE CITY OF SAN JOSE
That Section 1111 of the City Charter be amended to read as follows:
SECTION 1111. Compulsory Arbitration for Fire and Police Department Employee Disputes.
(a) It is hereby declared to be the policy of the City of San Jose that strikes by firefighting and peace officers are unlawful in the state of California and not in the public interest and should be prohibited, and that a method should be adopted for peacefully and equitably resolving disputes that might otherwise lead to such strikes.
If any firefighter or peace officer employed by the City of San Jose willfully engages in a strike against the City, said employee shall be dismissed from his or her employment and may not be reinstated or returned to City employment except as a new employee. No officer, board, council or commission shall have the power to grant amnesty to any employee charged with engaging in a strike against the City.
(b) The City, through its duly authorized representatives, shall negotiate in good faith with the recognized fire and police department employee organizations on all matters relating to the wages, hours, and other terms and conditions of City employment, including the establishment of procedures for the resolution of grievances submitted by either employee organization over the interpretation or application of any negotiated agreement including a provision for binding arbitration of those grievances. Unless and until agreement is reached through negotiations between the City and the recognized employee organization for the fire or police department or a determination is made through the arbitration procedure hereinafter provided, no existing benefit or condition of employment for the members of the fire department or police department bargaining unit shall be eliminated or changed.
(c) All disputes or controversies pertaining to wages, hours, or terms and conditions of employment which remain unresolved after good faith negotiations between the City and either the fire or police department employee organization shall be submitted to a three-member Board of Arbitrators upon the declaration of an impasse by the City or by the recognized employee organization involved in the dispute. All issues concerning the scope of the Arbitration Board’s authority, jurisdiction or powers shall, upon the request of either party, be resolved by petition to the Superior Court.
(d) Representatives designated by the City and representatives of the recognized employee organization involved in the dispute, controversy or grievance shall each select one arbitrator to the Board of Arbitrators within three (3) days after either party has notified the other, in writing, that it desires to proceed to arbitration. The third member of the Arbitration Board shall be selected by agreement between the two arbitrators selected by the City and the employee organization, and shall serve as the neutral arbitrator and Chairman of the Board. In the event that the arbitrators selected by the City and the employee organization cannot agree upon the selection of the third arbitrator within ten (10) days from the date that either party has notified the other that it has declared an impasse, then either party may request the Superior Court of the County of Santa Clara to appoint an arbitrator who shall be a retired judge of the Superior Court.
Any arbitration convened pursuant to this section shall be conducted in conformance with, subject to, and governed by Title 9 of Part 3 of the California Code of Civil Procedure to the extent that such procedures do not conflict with this Charter Section. Unless otherwise mandated by state or federal law, all arbitration hearings shall be open to the public and all documents submitted in arbitration shall be public records. Notwithstanding any other provision of this Charter to the contrary, the authority, jurisdiction and powers of the Board of Arbitrators are limited by the provisions of this Section.
(e) At the conclusion of the arbitration hearings, the Arbitration Board shall direct each of the parties to submit, within such time limit as the Board may establish, a last offer of settlement on each of the issues in dispute. The Arbitration Board shall decide each issue by majority vote by selecting whichever last offer of settlement on that issue it finds by the preponderance of the evidence submitted to the Arbitration Board satisfies section (f) below, is in the best interest and promotes the welfare of the public, and most nearly conforms with those factors traditionally taken into consideration in the determination of wages, hours, and other terms and conditions of public and private employment, including, but not limited to, changes in the average consumer price index for goods and services, the wages, hours, and other terms and conditions of employment of other employees performing similar services, and the financial condition of the City and its ability to meet the cost of the award.
(f) In all arbitration proceedings conducted pursuant to this section, the primary factors in decisions regarding compensation shall be the City’s financial condition and, in addition, its ability to pay for employee compensation from on-going revenues without reducing City services. No arbitration award may be issued unless a majority of the Arbitration Board determines, based upon a fair and thorough review of the City’s financial condition and a cost analysis of the parties’ last offers, that the City can meet the cost of the award from on-going revenues without reducing City services. The arbitrators shall also consider and give substantial weight to the rate of increase or decrease of compensation approved by the City Council for other bargaining units.
“Compensation” shall mean all costs to the City, whether new or ongoing, for salary paid and benefits provided to employees, including but not limited to wages, special pay, premium pay, incentive pay, pension, retiree medical coverage, employee medical and dental coverage, other insurance provided by the City, vacation, holidays, and other paid time off.
(g) Additionally, the Board of Arbitrators shall not render a decision, or issue an award, that:
1. increases the projected cost of compensation for the bargaining units at a rate that exceeds the rate of increase in revenues from the sales tax, property tax, utility tax and telephone tax averaged over the prior five fiscal years; or
2. retroactively increases or decreases compensation, including, but not limited to, enhancements to pension and retiree health benefit for service already rendered, but excluding base wages; or
3. creates a new or additional unfunded liability for which the City would be obligated to pay; or
4. deprives or interferes with the discretion of the Police Chief or Fire Chief to make managerial, operational or staffing decisions, rules, orders and policies in the interest of the effective and efficient provision of police and fire services to the public.
(h) Compliance with the provisions of this Section shall be mandatory and enforceable pursuant to section 1085 of the Code of Civil Procedure; failure to comply with these provisions shall also constitute an act in excess of jurisdiction.
(i) After reaching a decision, the Arbitration Board shall mail or otherwise deliver a true copy of its decision to the parties. The decision of the Arbitration Board shall not be publicly disclosed and shall not be binding until ten (10) days after it is delivered to the parties. During that ten-day period the parties may meet privately, attempt to resolve their differences, and by mutual agreement amend or modify any of the decisions of the Arbitration Board. At the conclusion of the ten-day period, which may be extended by mutual agreement between the parties, the decision of the Arbitration Board together with any amendments or modifications agreed to by the parties shall be publicly disclosed and shall be binding upon the parties. The City and the recognized employee organization shall take whatever action is necessary to carry out and effectuate the award.
(j) The expenses of any arbitration convened pursuant to this section, including the fee for the services of the Chairman of the Arbitration Board, shall be borne equally by the parties. All other expenses which the parties may incur individually are to be borne by the party incurring such expenses.
(k) This Section shall be effective immediately upon passage by the voters, and shall apply to any arbitration in which hearings commence after November 2, 2010.
Council Agenda: 8-3-10
(l) The voters declare that the provisions of this Section are not severable, and none would have been enacted without the others. Should any portion of this Section 1111 be enjoined or declared invalid, all provisions shall be deemed invalid and inoperative and there shall be no compulsory arbitration for fire and police department employee disputes.
You’ve just been elected to the city council. You’re 34 years old and you’ve been attending your city council meetings for almost a decade. You’ve served on some civic improvement commissions. You’ve been a concerned activist for most of your life. But the firefighters union contract is being renegotiated this year, and you’re about to go behind closed doors and negotiate.
On the other side of the table are your respected friends who have protected your town for as long as you can remember. But their union is part of a national organization that wields tremendous financial and political power. And sitting across that table, alongside your friends who run the local fire department, are seasoned professionals who have been involved in labor negotiations for their entire careers. You are outgunned. What do you do?
This scenario has played out across California, especially in the smaller cities and counties and school districts. The elected officials charged with managing these smaller jurisdictions work part-time, for little or no pay. They negotiate with career professionals whose unions often are the largest single source for the campaign contributions that got them elected, or can get them defeated in the next election. The result of this situation is that government unions have a huge advantage in contract negotiations. For all practical purposes, they often run these smaller towns and school districts. What do you do?
Here are a few suggestions that can help make a difference:
1 – Use Outside Negotiators:
They will provide greater expertise in the subject matter, they will already know proven negotiation strategies, they will readily understand the contract language, and they offer a valuable independent, third-party perspective.
Of course it isn’t always necessary to hire an outside negotiator, it depends on the complexity of the negotiations and it depends on the financial impact of the contract. If it affects a large percentage of your budget, it makes more sense to hire an independent negotiator.
If you decide to hire an outside negotiator, you also have to be sure you are in compliance with existing codes and state law. Here is sample language to insert into a resolution to hire an outside negotiator:
OUTSIDE NEGOTIATOR – SAMPLE LANGUAGE
The use of an outside negotiator shall apply to all formal meet and confer processes undertaken pursuant to the Meyers-Milias-Brown Act, where either a recognized employee organization or the city, through their respective representatives propose 1) significant changes to contract terms, 2) extensions, or 3) when the employee association negotiates with third party negotiators or legal counsel.
In an effort to avoid inherent conflicts of interest, if an outside negotiator is deemed necessary, the principal representative negotiating on behalf of the city shall, 1) not be an employee of the city, 2) not be a member of any public pension plan under the city, and 3) have a demonstrated expertise in negotiating labor and employment agreements on behalf of municipalities. The city council shall designate one or more management level employees to be present during negotiations and to assist the principal negotiator as the city council and/or principal negotiator deem appropriate.
2 – Have an Independent Auditor Analyze the Fiscal Impact:
The first step is to get complete factual information in order to perform an economic analysis of the contract. Here are factors to consider:
Get an actuarial analysis: Preparing and providing an economic analysis of the short and long term costs of every term and condition of employment in the contract is the first way to ensure that 1) city council members have the best data available in front of them to negotiate and make a decision, and 2) the public has the appropriate data to vet the contract and the Council’s proceedings. If these negotiations affect pension benefits in any way, the economic analysis should include both the funded and unfunded actuarial liability that would or may ensue from adoption of the contract.
Use an independent auditor: This will allow city council members, staff, and the
public to benefit from the general level of confidence provided by a thorough and
reliable economic analysis by an external professional. Information from outside auditors should be used in conjunction with information from staff whenever practical.
Make sure the economic analysis includes tangible comparisons: The economic analysis of each term and condition of the contract can and should be viewed in the framework of how it will affect the citizens. Also, utilize tangible examples of comparisons with other programs. For instance, if a contract will cost the city X amount of dollars, contextualize it to show that X amount of dollars is equal to a specific city service or program.
Invest in staff training so they can also perform economic analysis: In addition to the use of an independent auditor, city human resources professionals need the proper resources and training to provide and analyze an economic analysis.
Provide for public review of the proposed new contract: The City should consider making the fiscal impacts of the contract available to the public and the City Council at least two (2) City Council meetings prior to consideration by the City Council of an initial meet and confer proposal.
INDEPENDENT AUDITOR – SAMPLE LANGUAGE
An independent auditor, a certified public accountant, or an actuarial accountant, shall prepare a study and supplemental data upon which the study is based, that identifies the fiscal impacts attributed to each term and condition of employment made available to the members of all recognized employee organizations.
The first analysis shall be of existing contract costs and of each thereafter.
The above report and findings of the independent auditor shall be completed and made available for review by the city council and the public at least two (2) City Council meetings before consideration by the city council of an initial meet and confer process.
The above report shall be regularly updated by the independent auditor to itemize the cost and the funded and unfunded actuarial liability which would or may result from adoption or acceptance of each meet and confer proposal. These measurements shall display the fiscal impacts of the employee association and or/city proposals. The report shall be prepared to include all benefit and pay aspects of each MOU, and shall include written council member acknowledgement that the report has been read and considered by the signing councilmember.
3 – Consider Transparent Discussion of Offers and Counteroffers
California’s current open meeting laws provide that a City Council can meet in closed session to provide its bargaining unit representatives with instructions and parameters for negotiation in the meet and confer process. Closed sessions allow City Councils to speak privately regarding their bargaining parameters without disclosing these parameters to labor representatives.
Additionally, the meet and confer process provides the opportunity for city representatives and labor representatives to bargain in good faith in order to reach an agreement on the proposed labor contract. Here are factors to consider:
Report the Facts: Transparency may result in more realistic counters or counteroffers. Broad dissemination of offers and counteroffers provides a progress report and clearer understanding for both the public and bargaining unit members.
Exercise discretion: Disclosure of offers and counteroffers may result in additional public posturing and increased politicization, which can affect negotiations. All parties involved in negotiations should use caution and clear communication when reporting out of closed session.
TRANSPARENCY – SAMPLE LANGUAGE
The city council shall report out the details of all formal offers that have been rejected at the time of the counteroffer rejecting each proposed term. City council labor negotiators shall have the duty to advise the city council during any closed session of all offers, counteroffers, information, and/or statements of position discussed by the labor negotiators taking place in the meet and confer process since the last such closed session.
4. Require Disclosures of Private Communications
Having city council members disclose communication contacts that were had with any labor representative is another way to bring transparency to the negotiation process and to build faith with the public. A careful value judgment can be made to what type of conversation is appropriate to report to the public. Factors to consider:
Disclose communications: While this principle may be contentious for some city council members, it can be viewed as a disclosure requirement, not a “no-deal” requirement. The communication that is disclosed may simply be that the conversation occurred.
Consider the impact on the process: There is some historical context that private meetings, without the disclosure of names, have been the environment needed to reach an agreement. However, a balance can be found to reconcile transparency with private communications. If a council member is going to meet with the employee group they should remember their closed session obligations and just listen. Council members that talk to employee groups outside of formal negotiations may undermine the negotiation process.
Preserve the ongoing relationship: All parties should approach the process in a respectful and sensitive way that will assist in building long-term working relationships that survive the sometimes difficult negotiation process.
DISCLOSURE – SAMPLE LANGUAGE
Each city council member shall disclose both publicly and during closed sessions, the identity of any and all employee association representatives with whom the city council member has had any verbal, written, electronic or other communication(s) regarding a subject matter of a pending meet and confer process.
5 – Allow Time for Public Comment
Disclosing the MOU and making it subject to more than one (1) city council meeting provides the opportunity for the public to effectively weigh in on the matter. Factors to consider:
MOU negotiations should have time for public comment consistent with other ordinances: 1st and 2nd readings at City Council meetings is standard practice for normal ordinances, and this seeks to put labor negotiations under that standard.
Be sure to get the timing right: Cities must remain in compliance with AB 537 (Chapter 785, Statutes of 2013)3 which requires that if a tentative agreement is reached by the authorized representative of a City and a recognized bargaining unit, the city council must vote to accept or reject that agreement within thirty (30) days of 1st consideration at a noticed public meeting.
PUBLIC COMMENT – SAMPLE LANGUAGE
Any agreed upon memorandum of understanding shall be introduced for first reading at a regular city council meeting and presented for approval at the next regular city council meeting in the same manner as a the first and second reading of an ordinance.
To read Assembly Bill No. 537 (Chapter 785, Statutes of 2013) please click the following link: http://www.leginfo.ca.gov/pub/13-14/bill/asm/ab_0501-0550/ab_537_bill_20131013_chaptered.htm
These suggestions were originally crafted by a committee of experienced local elected officials, city staff and thought leaders through a policy committee at the Association of California Cities -Orange County.