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Why I’m Voting “No” To 10-Percent Salary Increases

By City Councilmember John Mirisch (Former Mayor of Beverly Hills)

Call me Nostradamus.  On June 17, the City Council will vote 4-1 in favor of giving a large number of City employees a 10-percent salary increase this year.  The increases will apply to a number of groups whose contracts have expired, including the Miscellaneous Employees Association (MEA), our City’s largest bargaining units.

In the olden days (meaning for all past union contract negotiations), the City council would have voted at our May 20 meeting, and the contract would have been approved.  This time, however, thanks to a new procedure we adopted, the council can’t vote upon the salary increases until the next meeting.  The idea is that these new rules will give the newspapers and public a reasonable chance to digest the information and to comment.

The City Council will still vote in favor of the contracts which, over my objections, were negotiated in closed session, and there still may not be a lot of public comment.  People have plenty to deal with in their own lives and many average residents just seem disenchanted with all forms of government.  Many simply can’t bring themselves to get involved.  The frustrations aren’t worth it, and sometimes people just feel that they simply can’t fight City Hall.

Of course, nobody should have to fight City Hall.  And I get the frustration.

In this case, nothing much is really changing.  The system is doing what it does best: protecting and perpetuating itself, all at the cost of the residents and businesses.  Once again, it’s treating us like ATMs.

Make no mistake about it: I am in favor doing right by our hard-working employees and providing fair, competitive salaries and benefits.  But as anyone who has read The Courier’s recent salary survey knows, our employees already have great salaries and excellent benefits, including a very generous amount of time off.  Considering this, a 10-percent raise is simply excessive and unjustifiable.  In fairness, the increase needs to be put in context and that is pension contributions.

Pension contributions are divided into two components: the employee’s share of pension costs and the City’s share.  In other words, both the employee and City have been expected to contribute to the employees’ pension costs  Up until now, the City has not only been paying its share of pension costs for the employees.  The City has also been paying the employee’s share.  In other words, up to now, the employees covered by the proposed contract haven’t paid a dime towards their own pensions.  The recent state law known as PEPRA (Public Employee Pension Reform Act) forbids this practice, and now requires all employees to pay their own share of the pension contributions (with the City, of course, continuing to pay its share).  For the bargaining units in question, the employee share is 8-percent of their salaries, while the City share is 16.7-percent for this fiscal year and 17.6-percent for next fiscal year.  Yes, the City’s share continues to increase.

The 10-percent salary increase means the City will effectively be continuing to pay for the employees’ share of pension costs, with 8-percent being called an “offset.”  This very much would seem to go against the spirit of PEPRA and it feels like we’re exploiting a loophole to circumvent the law’s intent.  Very generously, we are covering the costs the employees now by law would be required to pay.  This can hardly be described as a “compromise,” which would be, for example, splitting the costs.  Yet again, the City and taxpayers are taking care of the whole shebang.  Of course, increased salaries also means increased pensions versus the scenario whereby employees would have paid their portion of their pension costs, as the term “employee share” implies.

And even our current generosity isn’t enough.  Any and all risk regarding pensions is assumed by the City.  Any and all investment shortfalls will have to be made up for by the City, not a dime by the employees.  Our current unfunded liability is almost $200 million, with exponential increases a mathematical fact unless and until we make systemic changes.  Indeed, the pension issue is the single largest threat to the long-term stability of our state and local governments.

The solution to stop the bleeding is fairly simple.  Public employee pensions should be transitioned from a defined benefit model, guaranteeing a percentage of an employee’s salary, to a defined contribution model, which would be similar to the 401k-style pensions that almost everyone in the private sector uses.

As long as we continue to ignore the long-term interests of the residents and continue to take a “happy wife, happy life” attitude in which we bend over backwards to take care of everything for the employees, there is simply no motivation for them to work with us to achieve sustainable and systemic reforms.  Why should they do anything and where is the urgency when we keep ponying up fistfuls of dollars and kicking the can down the road to our children and their children?

You may hear from some proponents of this contract, that “It’s a step in right direction.”  It’s not.  We’re effectively not moving towards the necessary systemic reforms.  While we’ve managed to fix some of the most egregious mistakes from past bargaining agreements, the contract on the table is on balance simply slowing down the pace a bit of our marching in the wrong direction.  While that may be better than speeding up the current pace, a step in the wrong direction is still a step in the wrong direction.

That’s why I’ll be voting “No” to the 10-percent City employee salary increase on June 17.

(P.S. Already agreed upon, our employees are getting an additional 1-percent raise this October.)

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