Deputies’ pension and pay deals driving ‘contract’ cities to financial brink

Sacramento

More than a decade ago, the Orange County Sheriff’s Department offered a good value to cities that wanted to provide police services without having to operate their own departments. However, years of excessive salary and pension increases have driven up the costs of the contracts and could drive cities toward the brink of bankruptcy.

The 13 Orange County cities that contract with the department agreed earlier this month “on a study to evaluate operational cost and efficiency opportunities in the delivery of police services,” explained a statement from the city of Mission Viejo. The cities will “evaluate opportunities for greater efficiencies, share regional service costs and even consider sharing staff positions.”

A study is a good starting point. But it’s time for the cities – which also include Aliso Viejo, Dana Point, Laguna Hills, Laguna Niguel, Laguna Woods, Lake Forest, Rancho Santa Margarita, San Clemente, San Juan Capistrano, Stanton, Villa Park and Yorba Linda – to also consider forming a joint powers authority that would be jointly run. A JPA could allow these cities to cut their law-enforcement budgets by running their own joint department that offers a 401(k) retirement plan, rather than a defined-benefit pension, and controls the skyrocketing retiree medical costs that are the main causes of budget busting under the sheriff’s department policing contract.

As the Mission Viejo statement explained, the cost of the department’s policing services have increased 33 percent over the last decade, with 26 percent of that increase coming in the last five years. Some cities have faced even greater cost increases. Laguna Woods “city officials fear that the whopping 78 percent jump in public safety costs over the last three years poses a threat to the city’s future solvency,” reports the Orange County Register.

The Register also quoted Aliso Viejo City Manager Dave Doyle, who said that at current rates of cost escalation, the sheriff’s department will consume the entire city’s budget within 25 years. Currently, the sheriff’s budget is consuming more than half of some of these cities’ total general funds, the report explained.

These costs are posing a threat to cities’ long-term solvency and leading to short-term cuts in policing and other services. For instance, Laguna Hills pays far more for police services now than it did a decade ago, even though it slashed three deputy positions, according to a Southern California Public Radio report last week.

The sheriff’s department’s response is marked by bureaucratic indifference to these cities’ plight. The department’s spokesman said that Sheriff Sandra Hutchens welcomes the cost study, but added that the department suspects “they’re going to find out they’re getting a lot for what they’re paying for.” Perhaps, but “getting a lot” doesn’t mean much if the cities have to slash other services or head toward bankruptcy court.

The sheriff’s department refuses to acknowledge the obvious: The massive pay and benefit packages it has negotiated with the county Board of Supervisors, including an 8.8 percent three-year salary hike agreed upon last year, are the main propellant of the unaffordable city contracts. And that comes on top of other increases, including a 50-percent retroactive pension increase passed in the early 2000s at the behest of the department’s unions.

From the cities’ standpoint, a big problem is that is they have no control over these pay and benefit hikes, given that it is the union-friendly Board of Supervisors that negotiates with the Association of Orange County Deputy Sheriffs. The “contract cities” have to live with whatever costs are agreed upon, no matter how outrageous, generous or unaffordable.

California counties would always resist efforts to allow county public-safety contracts to be outsourced to private firms. The OC board squelched a proposal to let cities withdraw from the sheriff’s department without being saddled by unfunded liabilities.

These cost increases have been obvious for some time. In 2015, the Orange County Grand Jury reported on the medical benefits received by deputy sheriffs. The deputies “pay so much less (nothing, in some cases) than their county counterparts,” according to the report. This special subsidy “will certainly result in the county … having to make up the future, increasingly large, shortfall in retiree medical coverage,” the report added.

The grand jury blames the situation on “ambiguous language” in the union agreement, “a lack of initiative on the part of the county to enforce its understanding” of that agreement, and “lack of transparency” in the collective-bargaining process. Perhaps local cities would be better able to hold the line on unnecessary spending.

This is but one example of the kind of costs that are passed on to Orange County cities that contract with the sheriff’s department. Another example can be found on the Transparent California website, which tracks salary and benefit packages for California public employees. The Orange County’s sheriff’s department, for instance, is filled with employees who earn packages (base pay, overtime and benefits) that are more than $300,000 a year.

And these levels aren’t only for top-level managers. I found more than 180 sergeants who earn a total compensation package ranging from $250,000 a year to $389,000 a year. At these pay levels, it’s no wonder cities face such severe fiscal strain. By the way, these compensation packages don’t include the “unfunded” costs of the packages – the portion of the pension and retiree medical benefits that will eventually be borne by taxpayers.

California residents who wonder why state and local governments never have enough money to provide an adequate level of services need only look at how these departments spend the money they already are allotted. Instead of looking to trim costs, officials usually are looking to provide pay and benefit increases to win the approval of public-employee unions.

Police and fire spending tops the list of expenditures, given the importance to public safety and the influence of their unions. But unless something puts the brakes on this gravy train, cities will start experiencing “service insolvency” (the inability to provide adequate services, even if these cities can make their payroll) and perhaps even actual insolvency.

Fortunately, OC cities are starting to look at ways to improve their bang for the buck. But they aren’t going to solve the problem by finding a few efficiencies. They need to put the services out to bid or create their own joint-powers authority – and provide new hires with defined-contribution pensions that don’t bankrupt their cities.

Steven Greenhut is contributing editor for the California Policy Center. He is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

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