Menlo Park's Future

STOP!  We Need To Think This Through

Fellow Residents:

This Tuesday, January 13th, the City Council will be voting on a new contract for our City’s eight police sergeants.  Here are just the highlights:

·         Starting now and continually building until the contract expires in two years, these 8 sergeants will receive between a 22.75% and 35.25% base salary increase.

·         This salary enhancement will mean a $500,000 increase in the General Fund Budget each fiscal year for these eight employees.

·         A sergeant’s salary of $107,086 will become $131,452 in that time.  This is just “base pay”; it does not take into consideration longevity bonuses and/or other many considerations such as working the night shift. 

·         Increased salaries have long-term ramifications in that life-long pensions are based on the “last and highest salary” when retirement age is reached—as early as 50.

Why should we be concerned?

·         Contract negotiations with non-police unions are “Just Around The Corner, “as the latest SEIU newsletter explained to the City’s non-police employees.

·         All other employee unions use the police contracts as a reference point. Increases are traditionally pegged to increases received by police.

Things to note:

·         This contract has been negotiated in private, behind closed doors, with NO public input.

·         The contract and staff report has just been made public.  (Thursday, January 8 for a meeting on January 13).

·         An important appendix is missing from the posted staff report.

·         The coming General Fund Budget is projecting deficit spending by at least a Million dollars, again.

·         Our General Fund Reserves are down by more than one-third from just two years ago.

Let’s wait to get more information and community input:

·         The Mid-year budget projections come out next month.  Let’s see if we can afford this increase.

·         All indications are that our economic projections will be down from what was projected a few months ago.

·         CalPERS (the pension fund we use to pay for our city’s retirees) is down at least 26%.

·         Can we have a “sustainable budget” – a 2009 City Council goal – and keep increasing employee salaries at this rate?

·         Assuming this pay increase is granted, what should be cut from the budget to make room for it.

If you believe this issue is too important to rush through.  If you believe the staff report should include ALL the information before a vote is taken.  If you believe that it is time to stop so we can consider this contract as a piece of the entire budget picture, than email the City Council NOW at [email protected].

As always, I encourage your thoughts and comments at [email protected]

Thanks,

LeeDuboc

I encourage you to take the time to read an excellent letter that was sent to me by a Menlo Park resident, written by another California resident:

 Dateline: Friday, January 9, 2009

A message to CaliforniaState Employees

DearState Employee Friends,

A number of you have asked me to write about a recent decision by Governor Schwarzenegger to impose a two-day/month furlough on state employees.  I know if this furlough goes through on February 1 that it will cause financial strain for many of you.  In these difficult economic times, what amounts to a ten percent pay cut is hard to fathom even under the best of circumstances.  With California facing a $16.5 billion budget shortfall for the fiscal year ending June 2009, these are far from the best of circumstances.

Note that it is not my intention to unduly pick on state employees.  It is my intention however to show how well you are being treated relative to your peers in the private sector.  The dramatic inequity of this situation cries out for fairness.  You may not agree with this letter, and that’s fine.  Look at the numbers, think about it, then start the debate.

In November, California’s unemployment rate climbed to 8.4 percent, its highest level since September 1994.  Numerous private companies including Dell, Motorola, Cisco, Honda had workers that experienced some sort of unpaid furlough over the holidays.  Fed Ex forced 35,000 workers to take a pay cut.

The private sector pain also extends to 401k and retirement accounts.  Dollar Automotive Group, General Motors, Sears, Unisys, Kodak, etc. have all seen their 401k matching programs either suspended or abandoned altogether.  401k or “definded contribution” programs are the only way many private sector employees fund their retirements.  These differ from “defined benefit” plans, which guarantee retirees a fixed monthly income.  According to the U.S. Bureau of Labor Statistics, only 11% of private sector employers still offered defined benefit plans as of 2005, down from 41% in 1978.  This has happened because the private sector has realized that such benefits are economically unstable.  California’s pension system will offer us a profound example of this.

Now that we’ve defined the types of pensions, let’s take a look at the California economy.  The state unemployment rate has shot up 2.7% from November 2007 to November 2008 as 136,000 people lost their jobs.  (California Employment Development Department).  Note that many find workers at CircuitCity and Mervyns now find themselves unemployed.  And what of state employees?  Have any been laid off?  Have any been forced to take a furlough?  No.  In fact, according to Loren Kaye a member of the taxpayer watchdog group ‘Little Hoover Commission’ government across all levels has added 39,000 jobs since July 2007 (+ 1.5 percent) while the private sector has seen a decline of 200,000 jobs (- 1.5 percent) in the same period.

Now that we’ve seen employment inequity between the public and private sector in California, let’s talk pension benefits.  If you are in the private sector, we’ve already seen what could happen to your 401k, if you are lucky enough to even have one.  According to an August 16, 2008 article in U.S. News and World Report, only 16 percent of small businesses in the U.S. with fewer than 50 employees have 401k plans.  The National Federation of Independent Business notes that 98 percent of all businesses in the United States have 50 employees or less.  So, few people have 401k/defined contribution accounts.

Most public sector employees in California receive 2% of their final top salary (or an average of their final three years of employment) multiplied by the number of years they have worked.  Again, this is what’s known as a “defined benefit” plan, which means workers receive a monthly guaranteed benefit in retirement.  Let’s assume a public sector employee retired with a salary of $65,000 having worked for 25 years.  This would leave him/her with a retirement benefit of $32,500 a year every year for the rest of their lives.  That amounts to nearly half of their final salary, which of course doesn’t include Social Security benefits or any money they might have saved.  Thus, receiving a minimum of 60-70 percent of final salary in retirement would not be impossible for the average worker.

Defined benefit plans are funded out of public employee retirement systems like CalPERS for state and some county and city employees.  In good economic times, PERS return on its hundreds of billions worth of assets was enough to hide any fiscal problems.  However, a 36% decline on the broad-based S&P 500 in 2008 spelled trouble for PERS, which has seen its value drop by $54 billion (21 percent) over the last 13 months.

What does this mean for taxpayers?  Currently, the average employer contribution rate for public entities (government) is 13 percent of payroll.  That’s 13 percent of your tax dollars going toward pension benefits.  However, if CalPERS’ assets remain down 20 percent at the end of June 2009, it would trigger an increase in payroll costs (read: increased burden on taxpayers) of two percent to five percent.  It should also be noted that a commission established by the Governor last year to analyze pension benefits found that state and local retirement systems had a combined unfunded pension liability of $100 billion.  So even when the California economy does improve, our pension problem will continue to spiral out of control unless reforms are made.

In closing, imagine yourself as a private sector employee.  Not only have you lost your job and/or seen your 401k account diminish, but now you also have to face the prospect of backfilling the guaranteed pension benefits of hundreds of thousands of government employees.  All of a sudden, a two-day/month furlough doesn’t sound so bad, does it?  It certainly beats being that Mervyn’s employee ….