Whistling in the dark: Berkeley budget woes

DCalWhistleFin
Jaime Chong/Staff

A couple years ago, the City of Vallejo went bankrupt, blaming unsustainable costs of wage and benefit packages negotiated with employee unions. Two months ago, Pleasant Hill, despairing of a negotiated settlement with the unions, imposed a salary freeze on its workers and dramatically reduced pension benefits for future hires.

Then, on Nov. 8, San Francisco voters approved an initiative requiring city workers to contribute 7.5 percent or more of the money needed to fund pension promises made to legions of past employees. This was the progressive solution to a nationwide dilemma. In Wisconsin the result was reactionary: Employee unions lost their right to collectively bargain on nearly all meaningful issues.

What’s happening? All across the nation, the costs of salary and benefit packages far exceed available revenues.

What of Berkeley, where our mayor brags about the city’s high credit ratings? Unhappily, His Honor is whistling in the dark. The numbers in fact reveal structural problems that began long before the current recession. If it continues on its present course, Berkeley will be bankrupt in a few years, and its workforce will be on the streets.

Over the last twenty years, wages and benefits have gone up by nearly twice the rate of inflation.

Clearly, wage and benefit costs have eaten up money that used to go to maintaining critical infrastructure. There is an obvious reason why there are holes in our streets, clogged storm drains in low-lying areas and failing sewer lines nearly everywhere. There is also a reason why the city’s expenditures on social safety net programs for youth, seniors and the disadvantaged have declined by more than one third over the past few years.

Phil Kamlarz is Berkeley’s long-time city manager and nobody’s fool. He is now retiring with an annual pension some estimate at close to $300,000. After years of reassuring us that all was well with the city budget, Kamlarz recently reported that “years of limited funding and deferred maintenance have resulted in an aging city infrastructure that needs repair and improvement. We have been taking away from capital improvements in a way which is not sustainable.”

When compared to the regional average elsewhere, Berkeley has more employees, pays higher salaries and gives more benefits to its employees.

On Nov. 16, 2010, the city auditor reported that most of the city’s pension obligations were unfunded and that drastic salary/benefit reductions are in the works.

“In FY 2010 a City Employee earned an average $.54 in benefits per every $1 in salary,” said City Auditor Anne Marie Hogan in her Nov. 16 report. “To offset [these] costs the City will need to make significant compensation reductions to future and/or current employees. With such high pension rates, in fiscal 2016, salary reductions would have to range from 9% for police and 11.5% for fire to 7% for all other employees just to absorb the CALPERS increases.”

We are on a collision course. Unlike other jurisdictions, Berkeley continues to yield to its unions, for example by funding 100 percent of the cost of some plush pension and health care packages. For this, we cannot blame the unions: Their job, after all, is to get whatever they can for their current members. We can only blame the politicians. Their job is to bargain seriously to get the best deal for the voters. Their job is also to tell us the truth, even when it is hard to digest.

To date, they have failed miserably.

David Wilson is a Berkeley resident and a member of Berkeley Budget SOS.

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  • Glad to see there’s at least one Berkeley resident with a clue.

  • Frustrated Taxpayer

    Hey Tom Bates!  Cut the damn budget and hire more auditors to investigate waste and corruption.  

  • Contempt Costanza

    Berkeley is the most dysfunctional city I have ever had the distinct displeasure of living in.

    They drive away big business in favor of empty storefronts and streets lined with homeless punks and trash.

    It’s a wonder all business in Berkeley hasn’t completely collapsed. If it wasn’t for the captive audience of Cal students, nobody would ever go to downtown Berkeley.

    • Anonymous

      But, but, it’s sooooooo progressive. LOL

  • Anonymous

    “Capitalism is using its money; we socialists throw it away.”
    – Fidel Castro

  • Guest

    California’s budget woes with regard to state and local worker salaries stem from dramatic increases in salaries during the Dot Com Boom that were funded by tax revenue  generated by the  Alternative Minimum Tax that was imposed on income from employee stock options. This income stream was projected into the future when it should have been crystal clear that it would be short lived.  K-12 Education takes around 43% of the state budget. Teacher salaries increased significantly and so did Police , Fire and Prison Guards. The salaries for Police, Fire and Prison Guards is completely out of line with the pay for similar positions in the federal civil service and military. In Berkeley,  a cop in training  status makes around $75,000 per year and this increase to near $100,000 within a  year.  In the military,  these are enlisted positions, no college degree required,  and this level of salary is not seen until an enlisted  service member  has served around twenty years.  Even for military officers, who must have a bachelor’s degree at a minimum,  this level of salary is not reached  until around five years of service.
    http://militarypay.defense.gov/mpcalcs/Calculators/RMC.aspx
    E-X =Enlisted, O-X= Officer It takes roughly 20 years to make E-9 or O-6 and only a very small percentage ever reach these levels in the respective enlisted and officer corps.
    It is an odd  state of affairs when cops in training make more than newly hired City Attorneys, and after one year make as much as an Army Captain(O-3) with  a degree in Civil Engineering and  branched Army Corps of Engineers and who only arrived at a similar  salary level after five years on the job. At the present time, it is almost impossible to commission as an Air Force or Navy Officer unless majoring in Engineering, Math or a Physical Science.  Not only did California K-12 teacher salaries increase but the number of students per teacher decreased  and the multitude of new schools that were constructed were based on a smaller class size, which makes it difficult to increase class sizes. The number of students in k-12 is dramatically higher than it should be due to the  large number of illegals and anchors.  This increased cost alone accounts for the majority of California’s twenty billion dollar deficit.

    • Anonymous

      Don’t military personnel get on-base housing? It is the cost-of-living in Berkeley that probably is driving the salaries paid to city employees. The cost-of-living is driven by the desirability of the city.

      For most of the country, there is a nice feedback loop that keeps these things aligned: the property tax revenue goes up as the city gets more desirable, and this in turn allows the payroll to be met. The rising taxes eventually make some people decide to move out, and this keeps everything in check.  People who like good city amenities live in cities and pay their taxes, while those who could care less move away.  It’s a virtuous cycle for free people — people get to vote with their feet, their pocketbooks, and at the ballot.

      In California, we have a dysfunctional system that breaks this loop. The city can get more desirable, causing prices and rents to rise. People need to be paid more in order to afford it. But the local property tax revenue does not keep pace (thanks to Prop 13). The only thing that cities can do is cut services or degrade them in some way. This at some point stops the city from being more desirable and the prices reach equilibrium. But notice that people are less free. Those who like good city amenities can’t really vote to support them because even if a majority of the locals want to raise the local property taxes, they can’t. The whole system is so dysfunctional that money ends up flowing down from the state-level to support essentially local functions, because there just isn’t enough money at the local level. This gives control to distant politicians and bureaucrats instead of locals. To make matters worse, we have term limits at the state level so our reps there are always looking to set up their next gig rather than learning what is necessary for their districts, cultivating deep local relationships, and thinking about the long term. It’s like someone didn’t want government to work well and provide people with what they want/need — oh wait. It is exactly that. That is what the authors of Prop. 13. and term limits actually wanted.

      • YourMONEYtree

        So your saying that to pay for lavish benefits these public employees get we should tax property owners MORE? Why not tax all these outspoken renting UC students. Shouldn’t they pay for the services they demand?

        • Anonymous

          Make sure you tax old people on fixed incomes so they have to sell their homes.

      • Anonymous

         The original Guest made a statement about ridiculous salary and benefit increases for public employees during boom years.  At that time government negotiators already knew about Prop 13 but decided to give away raises anyways because they pretended surpluses from dot com taxes would continue indefinitely.  Now that the dot com AMT revenue stream has dried, the answer is not to go back to blaming insufficient taxes (Prop 13), but to force government to live within its means and claw back some of the giveaways to unions.