LA WATCHDOG--Last week, City Council President Herb Wesson and Mayor Eric Garcetti announced that the City had reached a tentative, four year deal with its 20,000 civilian employees. Unfortunately, but par for the course, no financial details were forthcoming from this less than transparent duo.
Based on a variety of guesstimates, this new contract blows a $400 to $500 million hole in the City’s finances over the next four years.
The City Administrative Officer’s four year General Fund Budget Outlook (the “Outlook”) projected that the City would have a budget surplus of $68 million for the year ending June 30, 2020. Under the new contract, the surplus is blown and turns into an annual deficit of almost $100 million.
At the same time, the four year cumulative deficit of $37 million balloons to around $500 million.
The Outlook assumed no increases in wages over the next four years. However, the new contract is expected to include a 2% raise on July 1, 2017, adding $40 Million to the annual deficit and $120 million to the four year cumulative deficit.
The Outlook assumed that civilian employees will contribute 10% of the cost of their Cadillac healthcare plan. That’s not going to happen, adding about $25 million to the annual projected deficit and $100 million to the four year cumulative deficit.
Wesson and Garcetti indicated that the City will “rebuild its workforce” to “restore and improve” City services. They even have the audacity to claim that this will strengthen the City’s budget position!
If the City increases its workforce by 250 people in each of the next four years, or 1,000 in total (a 5% bump), the annual cost would reach almost $90 million and add over $200 million to the four year cumulative deficit.
The thought of hiring additional City workers is frightening given the unflattering audits by Controller Ron Galperin of the Bureau of Street Services, the Department of Transportation, and Recreation and Parks. Furthermore, the City has not made any effort to benchmark the efficiency and cost effectiveness of its poorly managed operations.
There may also be work rule restrictions that limit the City’s ability to hire independent contractors, even if it would result in considerable savings for our cash strapped City.
The new labor agreement also eliminates some of the savings that were associated with the new pension tier for employees hired after July 1, 2013. This will not have a significant impact over the next four years. However, over the next thirty years, the level of savings may decrease by $1 billion or more.
There may be other provisions that will result in higher deficits than those projected in the latest Outlook, whether they relate to the workers’ compensation, non-pensionable signing bonuses, or restrictive work rules.
This new labor agreement is not in the best interests of the City and its four million residents. It will eventually cost Angelenos north of $150 million a year more than we were told during the preparation of the Outlook and the City’s Budget. But this is not surprising given the blatant conflict of interest on the part of Herb Wesson and his cronies on the City Council who are beholden to the campaign funding leaders of the City public employee unions.
The blatant conflict of interest on the part of our Wesson, Garcetti, and the City Council and their lack of transparency are why Angelenos do not trust City Hall, especially when it involves our hard earned money.
No wonder Herb and Eric are trying to hide the truth.
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Note: In the recent Los Angeles Times grading of Mayor Eric Garcetti, he received a C+ on Transparency. However, his grade should be lowered to a D+, a notch above Wesson’s D. This would lower Garcetti’s overall rating to a C-. Wesson, who was received an overall rating of C+ from The Times, is knocked down to a D+ as he is the chief architect behind this shady deal with labor.
(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council. Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at: [email protected])
-cw
CityWatch
Vol 13 Issue 66
Pub: Aug 14, 2015
