It was a very serious mistake for the City Council to approve the “contract extension” with SEIU Local 1021 (Council item 48a on the June 28 Agenda). This agreement effectively freezes and extends for three years a labor contract that pre-empts serious pension and fiscal reform in a time when local and national economic conditions are worsening. There was no need for precipitous action now before all pertinent factors were carefully considered — precipitous action that will likely have disastrous consequences.
This new contract freezes wages for the next four years if city revenues continue in their sorry state. It allows, by mutual agreement only and not starting until 2014, employee pension contributions of up to 3 percent, the exact percentage dependent on CalPERS rates. It implements a two-tier pension system for Local 1021 employees hired after January 1, 2012. It delays planned layoffs until 2013 and eliminates no more than seven positions in the Solid Waste Division in that year. It maintains current salary levels for those employees demoted or recycled as part of labor force reconfiguration. It will result in about $400,000 in annual savings plus future unstated additional amounts from “reduced” city CalPERS liability.
What is wrong with this picture?
All over California and the nation, public employees are taking substantial wage cuts and commencing substantial contributions for their many valuable benefits. This contract is not an example of such serious reform.
The city of Berkeley has hundreds of millions of dollars in unfunded and underfunded liabilities for pension obligations and decaying physical infrastructure. A full accounting of these liabilities has only just begun. How can a responsible local government allocate resources effectively until the full liability is known?
While city employee compensation has increased by about 5 percent per year on average since 2000, many Berkeley taxpayers have experienced substantial income decline since 2000. Additionally, taxpayer pension assets have shrunk by about 20 percent, and home values are down to 2003 levels and still falling.
Berkeley is way out of line when compared to regional norms with respect to its employees. Berkeley has about one employee per 73 residents, tied for first place out of 12 comparably sized cities.
The 12-city average is one employee per 113.50 residents, a 55 percent difference. Berkeley city employee fringe benefit costs are enormous: for police, 66.44 percent of salary, and actually 74.42 percent when workers comp is included; for fire, 53.99 percent and 64.81 percent respectively; and for miscellaneous, 58.49 percent and 60.56 to 76.67 percent.
Despite excellent salary and benefits with no employee contribution required, city workers also receive overtime and other above-salary cash payments that are hugely above the 12-city average — 138 percent higher than average for fire, 218 percent higher for police and 314 percent higher for public works.
The city is facing at least $12 million in annual operating deficits in addition to its unfunded longterm liabilities. In this light, and in light of the forgoing facts about the city workforce, the $400,000 in annual savings to be garnered by the SEIU Local 1021 contract extension seems rather paltry.
Any savings from the implementation of a two-tier benefit system for new employees are imaginary — given economic realities, there will certainly be no new employees for the foreseeable future while the deficit from the current 1,500 city employees continues long into the future.
To present this contract to the public as a major cost-saving and belt-tightening effort is insulting. The worst part of this contract is that it pre-empts real and necessary fiscal reform, reduces government flexibility in hard times and sets a terrible example for the other labor contracts coming up.
Berkeley Budget SOS urged City Council to reject this contract, carefully consider all of the issues and proceed thoughtfully and methodically toward fiscal soundness. Unfortunately, it was summarily adopted with little to no public council discussion.
Barbara Gilbert is a resident of Berkeley.