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CALIFORNIA CITIES ADMIT PRIVATE SECTOR DOES IT BETTER
Laer Pearce
May 26, 2011
[Publisher's Note: We are pleased to present this original commentary from Laer Pearce who is a veteran of three decades of California public affairs.
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In June of 2010, the tiny Los Angeles County city of Maywood admitted what many of us have known for some time – city employees are just too expensive. Maywood’s admission came in the form of laying off every single one of its employees.The city, a neighbor of the infamous city of Bell, had already outsourced its parks department, landscaping and street sweeping to private contractors and was happy with the results. City officials said, in what CNN called “an odd twist,” that the outsourcing the rest would allow Maywood to provide its residents with better service for less. There’s nothing at all odd about that, unless one has a CNN-style belief system.
The New York Times later found the city council’s prediction that Maywood’s residents wouldn’t notice a difference in service to be true, writing, “The [expected] apocalypse never arrived. In fact, it seems this city was so bad at being a city that outsourcing – so far, at least – is being viewed as an act of municipal genius.”
Cities don’t have to be bad to benefit from outsourcing, and many municipalities across the state are following Maywood’s lead. The most famous is Costa Mesa, which made national news earlier this year when it sent layoff notices to half of its workforce in preparation for a major commitment to outsourcing. The city council saw no option because it had to get control of its out-of-control payroll, pension and benefit costs. How out of control? The city reports an unfunded pension liability of over $220 million and its employee’s compensation is $140,000 a year, versus a city median income of $60,000.
In Sonoma County and in the Orange County cities of Fullerton and Brea, fire departments are on their way to being merged to cut costs, and throughout the state costly police helicopter services are being merged or jobbed out to county sheriffs. In San Jose, janitorial services were outsourced as the city’s living wage ordinance drove city janitors’ salaries to $40.41 an hour, and the same economics are forcing many cities to merge their staffs with neighboring cities. Could demands for municipal mergers be far behind?
While pension costs are the driving force of much of this, compensation levels are just as big a problem. You have to wonder how out-of-control city employee compensation has become when Newport Beach reported that it will save $500,000 a year by outsourcing street-sweeping. Were the beach city’s street-sweepers pulling down over $100,000 a year like many of its lifeguards?
Newport Beach city manager David Kiff as much as admitted to gross overpayment when he told the Orange County Register that employees who have been forced to transition to the private sector due to outsourcing don’t like it because “the salary and benefit structure is different in the private sector.” Different as in not nearly as rich and cushy, and that’s the rub that explains why there are two big hits coming to public employees and the people who hire them.
The first, of course, is the financial hit. It has been well-covered and is obvious, with the warning bells emanating from the state’s $500 billion retirement benefits shortfall echoing in counties and cities up and down the state. The numbers are so frightening that in public opinion polls pension costs are crowding out crime and education as respondents’ number one concern.
The second hit is political, and every elected in the state sees coming, which explains the outsourcing tsunami and newfound toughness at the negotiating table we see electeds suddenly taking after years of acquiescing to politically powerful – as in, “able to spend a lot on campaign contributions” – public employee unions. Costa Mesa’s city council showed the way when its members looked out on a council chamber packed with public employees and the union bosses who fund campaigns and still voted 4-1 to issue the layoff notices. They understood the voters outnumber the workers.
Most elected officials in the state weren’t up for reelection in 2010, and many of those who were dodged the pension crisis because the pot wasn’t quite at full boil yet. No more. Just last week, more than 50 Marin County residents trudged out in a windy rainstorm to sound a call to arms at a city-sponsored forum on pension reform. There were public employees and their union representatives in the audience but not one of them stood to speak. Marin County’s $700 million unfunded liability doesn’t sit well even in one of the state’s most liberal counties – a sign that pension reform is an issue that is going to impact every candidate and every party in the next round of local elections. Pity the otherwise worthy candidate who earlier voted in favor of a generous public employee pension deal.
Of course, some municipalities still aren’t very good at reading the writing on the wall. For example, take Los Angeles and its seemingly insurmountable $50 billion unfunded pension liability. It just ended a 35-year practice of outsourcing golf cart operations at its five municipal golf courses, cancelling a new bidding process for the golf cart franchise that was underway, and replacing private sector workers with unionized city employees. That’s the new reason why it’s called “La La Land.”
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Laer Pearce, a veteran of three decades of California public affairs, is currently working on a book that shows how everything wrong with America comes from California..
