Of all the cities in Orange County, Irvine’s economic situation is by far the best. It’s consistently one of the nation’s best managed cities, it has a high ratio of jobs-per-resident, safest city in America, and its budget will run a nearly $11 million surplus this year. Add to this rebates from the County’s Fire Authority (Irvine actually subsidizes the fire protection services for several OC cities) worth about another $18.4 million this year (and similar amounts for years to come), Irvine’s $30 million in reserves plus about $100 million in the bank, the warnings issued by Councilman Jeff Lalloway in a statement for this past week’s City Council meeting make the councilman look like Chicken Little. The sky isn’t falling with the latest employee contract deal the council voted on Monday.
Even during the worst economy in recent memory, Irvine used its reserve fund (which is what a reserve is for) to pay the bills, with no layoffs at city hall (while workers got no raises or bonuses in the midst of a hiring freeze), but for Irvine residents — no cuts in services. As the economy continues to bounce back, Irvine’s reserves are fully restored and the budget surpluses are the envy of every city in the county if not the nation. Costs were kept down due to frozen salaries, frozen bonuses and attrition.
But these facts on Irvine’s solid financial picture ruin Lalloway’s position. So he used “if’s and but’s” to make a case that the sky is falling. Lalloway was unable to attend last Monday’s meeting due to a business commitment but he issued this statement to the council which had to waive the confidentiality of its closed session meeting so the statement could be entered into the record. Issuing the statement was a way for Lalloway to state his position without actually having to say the words aloud for city employees to hear and he didn’t vote on the contract giving him “deniability” when he’s up for re-election next year (“I didn’t vote against the new contract for employees” would be factually true but not accurate). And the script must have been stolen from Costa Mesa Mayor Jim Righeimer who regards his city workers in much the same way Lalloway does in Irvine–in a word: poorly.
In his statement to the Council Mr. Lalloway says:
“Let me first make it very clear that I have nothing but the utmost respect and regard for all of those who work for this city. Whether it is the planning engineer reviewing a request for new development, the lifeguard on duty at the Woollett Aquatic Center, a receptionist here at City Hall, or the police officer who patrols our streets in the dead of night – the greatest strength of our city government is our people.
I want to emphasize this point because it could be easily misconstrued that because I oppose these contracts that I am not supportive of our employees and the work that they do, and nothing could be further from the truth.”
There’s nothing to misconstrue. I’d argue by opposing the contracts, Lalloway doesn’t support city workers. And if he does support them, he just doesn’t want to pay them what they are worth and he certainly doesn’t want to pay them a pension. Saying he is supportive of them is akin to “of course I’ll respect you in the morning.”
Lalloway goes on to complain; “…over time public sector wages have more or less reach parity with the private sector, and paired with extremely generous defined benefit retirement plans, it has created a truly unsustainable financial burden.”
Maybe for senior managers, wages are matching private sector but not for the rank and file. And the statement “truly unsustainable?” How? His concern expressed in the statement doesn’t match the reality of Irvine’s recent decision to take a portion of surplus funds projected for future city budgets to shorten the time period necessary to recover the projected unfunded pension liabilities resulting from the 2008 financial collapse. Irvine’s unfunded pension liabilities will be nearly fully covered except for a few percentage points. There’s no smoke because there’s no fire.
Lalloway states; “But even our modest actions in Irvine will not be enough. To our city employees I would tell you that I am not another politician who will simply vote for more increases in pension benefits, and then tell you that everything will be there for you when you retire. I actually am very concerned that the funds you anticipate being on hand to support your promised benefits will, in fact, not be there for you.”
“…The residents and business owners of Irvine in the future should not be saddled paying for city spending of today – certainly not when it comes to the compensation of our employees. By the time my two little daughters are grown up, and are in the work force, paying taxes, a great many of our current employees will have retired. The burden of paying the benefits of these retirees should not fall onto the future generation.
When I step back and look at the evolution of total compensation for public sector employees, as compared to private sector workers, it is startling, and unsustainable. Defined benefit pensions in the private sector have all but disappeared. In the public sector, they were instituted with the premise that government workers made a very modest salary, and retiring with a generous percentage of that salary for life was sustainable. But over time public sector wages have more or less reach parity with the private sector, and paired with extremely generous defined benefit retirement plans, it has created a truly unsustainable financial burden.”
The only way promised retirement benefits won’t be there is if Lalloway and his Republican majority cut or freeze taxes and fees in a manner than dramatically lowers city revenue. Lalloway seems to have forgotten or doesn’t know that 75 cents of every pension dollar comes from investment income. Do you have a mortgage or a car loan? Could you pay it off in full tomorrow? No? You have an unfunded liability. The city isn’t going to have to pay out the entire amount at once. Apply this principle to pensions. The sky isn’t falling.
He frequently mentions his two daughters should not have to help pay the cost of pensions when they are taxpayers further solidifying his GOP-thought process about Republicans being the party of “me” and not the party of “we.” There is a social contract at play here. I have two kids too; one works part-time and will pay taxes and the other is going into high school. The taxpayers have paid for and are paying for their education, as well as their streets/bridges, parks and public safety. And when they enter the workforce, their taxes will pay for someone else’s kids education, roads/bridges, parks and public safety. This is a social contract from generation to generation. I sure hope Mr. Lalloway’s daughters learn that lesson as my kids have.
Lalloway uses a distorted claim that suggests that most of the city’s work force will be retiring at age 55 with 80 percent of their compensation. And while this is theoretically true, it is not a fact. It is rhetoric, designed to instill envy and fear in the minds of the public. Envy, that a public employee has a pension that is part of a negotiated compensation package that levels the playing field between public and private sector employees, and fear that the future liabilities cannot be paid for.
“In some regards, there is an “arms race” of sorts taking place where public employee compensation is basic (sic) more on comparisons to what other government employees are making, as opposed to based on more sound criteria. How often do we hear the refrain, “If we can’t offer salary and benefits that are a little bit better than our neighboring cities, how can we hope to attract and retain the best employees?”
It is also a practical reality that, unlike in the private sector, public sector employee compensation never seems to see reductions in total compensation. During this latest recession, which by some measures is now in its seventh year, we have seen a contraction of the economy, and with it we saw employee compensation in the private sector drop, as employers are faced with either laying off employees or paying them less. There have been no such corresponding reductions of public sector employee compensation – at least not that I have seen written about anywhere, and not here in Irvine.”
Mr. Lalloway seems to have forgotten wages were frozen at City Hall during the worst of the crisis. Bonuses were withheld. When employees left, they weren’t replaced meaning multiple departments in the city did the same work or more work with fewer employees. Being asked to take on an additional 10 percent, 20 percent or 30 percent more work with no additional compensation isn’t a cut in compensation but more responsible with no extra pay..if this happens enough in the public or private sector, good employees leave. This was widely discussed within the city. Heck Irvine Police even picketed Beth Krom’s Congressional fundraisers over this issue. Perhaps Lalloway wasn’t paying attention. I run into a number of Republicans in Irvine who want their kids to get the best teachers in school, but will vote against a parcel tax that might help keep good teachers teaching at IUSD schools. Want great teachers? Pay them. Want great and responsive city employees? Pay them. That’s what the private sector does.
Fortunately, Mr. Lalloway’s colleagues on the Council recognized the extraordinary contributions of the public employees serving the residents of Irvine. They recognize that the City has the opportunity to continue to attract the best of the public sector workforce to join the Irvine family; and they’re willing to commit the dollars to continue that employment dynamic. They voted 4-0 to approve the new contracts. Irvine has great city employees who are nothing but helpful and efficient. If I’m to guess, they aren’t so supportive of Mr. Lalloway’s work as a councilman as his vote against the contracts isn’t really a vote against the contracts because he wasn’t there. Come 2014, City Employees and residents should remember what Lalloway’s position was when he explains he didn’t vote against the contract.
To claim on the one hand that you support your workforce while with the other seeking to needlessly reduce compensation for that workforce is dishonest at best and mean-spirited at worst. How might Mr. Lalloway react if his clients expect him to do more work for a set fee or be paid less than his usual rate? His statements are a disservice to the women and men who work hard every day serving the needs of Irvine, making it one of the most desirable communities to live in the county, the state and the nation.
Mr. Lalloway has taken a stand on a mole-hill, thinking it’s a mountain. That’s not bad actually because when he falls off that hill, he won’t fall too far. Righeimer’s script won’t work in Irvine. Even Mayor Choi and Councilmember Christina Shea understand that and that’s why they voted to approve the contracts.