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December 15, 2007
A Round In The Chamber
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| Photo: The loaded Chamber before taking aim at the budget
problem. Some of you may have noticed that I've laid off the budget issue for a while. With Christmas around the corner, and with so many irons in the fire, I needed a break from the research as well as attending public meetings. Could any of you tell I've been on blog vacation? But yesterday I found myself releasing a giant exhale of relief. Mark Sorensen sent me a copy of the Chico Chamber of Commerce's analysis of Chico's budget problem (here is the document they released). They spent a long time doing the research. By the time I got home Friday night Jim Goodwin (Chamber CEO) at was on TV, and the ER had posted that they would do an in-depth story today (see story here). I'm not a member of the Chamber, and certainly not associated with the task force they put together to study this issue. I had heard that they were evaluating the idea of supporting a sales tax increase. This document states that they are not supporting discussion of a tax increase until the city cuts expenses. The reason I exhaled in relief is that people like me, who think paying a Fire Captain $200,000+ is an indication of a system off track, can see the Chamber's position as supportive. When the press publishes stories with city officials commenting on budget issues they can now contact the Chamber for a distinctly different point of view. This allows for an actual debate to occur in the public square. Here are some high points from the Chamber's budget analysis. Each finding is numbered, and I'm not displaying them all, or in numeric order. They are also broken down in the document by revenue and expenses. 31. The use of comparable cities as a contributing factor in setting pay ranges can lead to unjustifiable results. Comparable cities become important only if the city of Chico is actually competing with those cities for employees. There is reason to believe that public agencies have leveraged other public agencies as “comparables” in a never-ending escalation to be “ above average” in rates of employee compensation. 28. The applicant pool for filling vacancies, including in public safety positions, has been strong. While some specialized positions may have as few as three candidates, others have had double digit responses. The Task Force believes that compensation rates do not need to continue their acceleration in order to support strong application activity. The experience of the city in creating an eligibility list is that for most positions, the city gets more than 15 applicants for each filled position. While engineering positions may draw fewer applicants (as few as three), the more common experience is that applicants outnumber placements by a ratio of at least 15 to one. In the case of firefighters, the reports given to the Task Force indicate that the city had 188 applicants for four placements. The Task Force was unable to determine from the data how many applicants are rejected outright for failing to meet minimum qualifications. 11. Growth in salaries and benefits for all city employees have substantially exceeded the growth in the CPI and population, and have substantially exceeded the growth in city revenues. Since 1997 a. the CPI has increased by 34% b. the population of the city has increased by 43.5% c. the compound rate of growth in CPI and population is 92% d. General Fund revenues have increased by 112% e. salaries and benefits for all General Fund employees have increased by 161% There is nothing about the Consumer Price Index that makes it the correct index to use for pay increases. However, over time, it provides a useful yardstick for comparing increases in pay and benefits to the purchasing power of employees. Salaries and benefits for all General Fund employees cost $14,552,031 in 1997-98. If this figure were increased by the compounded rate of growth in CPI and growth in population since 1997 (92%) rather than the actual rates, in 2007-08 the city would be spending $ 27,939,900, $10,093,8523 less than the 2007-08 budget allows, for the same workforce (calculations completed by Task Force). While salaries and wages account for the majority of personnel costs, other compensation changes have included upgrading to more generous PERS retirement plans for all employees, the city paying all or a portion of the “employees share” of the premium paid to PERS for the retirement plan, increased costs of the health insurance plan and the city paying into a fund to support health insurance premiums for post-retirement years for safety employees. The Task Force finds that the growth in compensation is not associated with any apparent growth factors affecting city operations. Those are a few of the points made in the report. There are specific discussions regarding growth in public safety (police and fire) as well as non public safety (pay/benefits/employees). The report is very easy to read, and makes some very good points. For example, it states that the $56,000,000 ten-year structural deficit is based on 3% annual increases in employee pay. The city recently approved 5% and 4% increases for the fire fighters. That means that the budget deficit forecast is too low. It also says 10 year forecasts are pretty much worthless and 5 year forecasts should be the standard used. Another salient point made early in the document is that it is illegal for the city to operate with a deficit. Transfers between funds (using gas tax to pay employees instead of fix roads) cannot continue to accommodate the growing deficit. The city must address this deficit within the next year or two to remain solvent and avoid possible lawsuits. Therefore, we can never actually have a huge 10-year deficit. This council must address this problem during their term. There is a Chamber recommendation that the city hire a consultant to help with the budget analysis. I don't think this is a good idea. We need leadership from city staff and our councilors to make tough fiscally sound decisions. Or we need to replace them. The Chamber makes a number of recommendations at the end of the document. Here is the one regarding tax increases. In the blurb there is a reference to "steps described above", these relate to a number of expenditure decreases including looking at privatization of some city services. 2. The Task Force recommends the city not ask for a tax increase at this time. The Task Force feels that the city has made some judgments regarding salaries and benefits that will lead to a negative reaction among a majority of the city’s voters when they consider whether to tax themselves more. The Task Force is concerned that the city must have the resources it needs to deliver necessary services within the city. The Task Force believes that if the city takes the steps described above, in the future the situation may be more conducive to serious discussions regarding increasing revenues. |
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CI Challenge: Can you guess what it is? Winner: Anon, see comments below for the answer. |
Posted by Lon at December 15, 2007 07:31 AM
Comments
CI Challenge answer is the tip of the CalPers logo.
Posted by: anon at December 15, 2007 08:48 AM
The figures in number 11 are pretty shocking. Even if the Chamber had come down on the side of a tax increase, I'm not sure it could pass. City staff and council have got us into this mess, they need to get us out.
Posted by: Sean at December 15, 2007 12:22 PM
Glad that I was able to wake you up from your Blog vacation :- )
>“There is a Chamber recommendation that the city hire a consultant to help with the budget analysis. I don't think this is a good idea. We need leadership from city staff and our councilors to make tough fiscally sound decisions. Or we need to replace them.”
True.
However, the reference to a professional management firm was not for budget analysis, at least not directly. It was for a review of the various City operations.
I loved Jennifer Hennessey’s quote:
http://www.chicobeat.com/?q=city_headed_to_poor_house
“…If this were a private-sector problem, it would be solved in two weeks."
I believe that all of us had experience with large organizations that had been through paradigm shifts, as well as the kaizen process of never ending incremental changes. But, in the private sector the pressure to produce those changes is frequently economics, survival and/or competition from others who will eat your lunch if you don’t get the product or service delivered in a better and/or more efficient manner relative to others. Those pressures are different and in many cases absent in the public sector.
I recently heard one city employee who was incensed (really, really PO’d) by the suggestion that there was more that could be done to focus the organization on core missions, and to identify better and more efficient ways to get certain tasks accomplished.
Yet, my own experience suggests those are indisputably, never ending tasks. Day after day, month after month, year after year: knowledge, techniques, tools and technology offer better, safer and more efficient ways to get certain jobs accomplished.
There are companies that specialize in working with an organization such as the City through an independent ‘thinking outside of the box’ top to bottom review.
We came away with the belief that the City, and we the taxpayers, could significantly benefit from a thorough and impartial review of city operations, piece by piece.
This is not a criticism of existing management or employees, but rather the notion of borrowing a common, legitimate and useful tool and practice from the private sector. Bring in a fresh set of eyes, folks who are knowledgeable in specialized areas for fresh perspectives, experiences and ideas.
Does that mean to suggest that the private sector methods and outcomes are always right? No. I could write a book on the bone-head, myopic, short-term solutions to long-term problems that I’ve seen in the corporate world…. But, there are some good and useful practices to be found, and there is a balance to be found.
The reasons that private sectors go through the exercise are valid for the public sector, actually more so. Mainly to give decision makers support, on many levels. But, this is a huge subject all its own.
The bad news is that it would be exceedingly difficult to properly pull it off. Particularly in the environment that exists here. It would require a long-term commitment to change on the part of all involved.
Otherwise that exercise would be yet another waste of time and money.
Posted by: Mark Sorensen at December 15, 2007 12:33 PM
Sean,
I agree. But the Chamber has the ability to organize resistance or support of a tax increase. My preference is that it be resisted until some substantial cuts in spending occur.
The spending cuts on the table, $2.1million, that keep getting mentioned are not substantial. Many of the cuts require renegotiations with the unions. Some are efficiency improvements that do not cut expenses but instead re-target employees to accomplish more (we actually need to spend less). And some of the cuts are not applicable to the General Fund where the structural deficit discussion is directed. For example, the Merit Pay freeze of $200,000 or more cuts $89,000 out of the General Fund. Yet the $200K figure is used in the $2.1million calculation.
I'm very happy the Chamber produced this. It seems balanced and well researched.
Lon
Posted by: Lon at December 15, 2007 05:05 PM
Mark S.,
That Chico Beat article was actually pretty good as far as the number of people interviewed and the depth of the topic it covered. It was funny that they took the same stance as did our current Mayor before the last election, that it's not that big of a problem. I actually liked Jennifer H's quote that the sky wasn't falling but it was starting to come down. That's an apt description. We now need to be concerned about the degree to which the sky is falling.
I'm glad my campaign manager, Tom Gasgoyne, gave me a good plug. I am concerned I wasn't referenced as local business man, blogger, member of the Hooker Oak Alliance, disc golfer, possible candidate for City Council, likes peanut M&M's when they're cold, and really enjoys a good Celebration Ale when in the hot tub. Because that's how I want to be known.
I guess I might as well be the one to throw this out, but if we pay to have the best employees, why do we need consultants?
Honestly, I've seen enough consultant's work in this town to know exactly what will happen. Any hard decisions the consultant recommends will not be supported by staff or elected officials. Everyone will run from them. It doesn't matter if the consultant is hired to review city operations or provide budget recommendations.
I don't think the Chamber's recommendation is off-base, but I'm convinced the result will not be third party information that is respected by all.
Lon
Posted by: Lon at December 15, 2007 05:23 PM
Anon,
Yes that is CalPERS' logo. I have this feeling that I may have used that before on a challenge. I'm up to 124 and don't track what I use, so maybe I did. Anyway, good guess.
Lon
Posted by: Lon at December 17, 2007 07:32 AM