Writing Shotgun

BAD NEWS FROM SACRAMENTO

Theo DouglasTue. July 21
 

Facing a structural budget deficit and belt-tightening in the state house, city declares fiscal emergency

At Tuesday night’s Long Beach City Council meeting, the council did something highly unusual: it passed a resolution declaring a fiscal emergency, acknowledging a financial hardship whose effects we may just be coming to know, thanks to our looming state budget–hammered out with much harrumphing from Sacramento.

The budget hasn’t even been passed yet; its language is still being parsed by state cryptologists, and its numbers aren’t yet final.

But in a chilling exchange Tuesday, the city’s Manager of Government Affairs Tom Modica confirmed to the audience in Council Chambers that Sacramento has balanced its budget on the backs of California cities–dealing a low blow to municipalities like Long Beach, which have struggled with structural budget deficits to keep their own books in the black.

“Obviously, this says a lot of what we’re going to be facing over the next few years,” said Eighth District Councilwoman Rae Gabelich, warming up the crowd for Modica as she asked him what to expect from the state capital.

“Late yesterday, the government and state legislature announced a tentative state budget deal. It has not been adopted yet,” said Modica.

“We really don’t have an exact number on what those impacts will be to Long Beach until we see those numbers. However, it does look like local government funds are part of the solution.”

Highlights (or lowlights) include a $16.3 million impact on the city’s General Fund–caused by the state taking back $8 million in gasoline tax funds ($6.3 million of which will come from the General Fund); and taking back $10 million in Proposition 1A property tax funds.

Then, Modica said, there’s the distinct possibility the state will take back an estimated $23.5 million in redevelopment funds.

“This is the section that is still under debate about exactly how it would be implemented,” Modica said, noting that the successful outcome of a lawsuit brought over redevelopment monies could make it more difficult for the state to hold onto that money.

But the manager of of government affairs seemed confident–if that’s the right word–that Sacramento would find a way to do just that.

“The language the state legislature is proposing to use is to make changes to the language, based on the lawsuit, to get around some of those concerns raised by the lawsuit last year,” Modica said.

The tale of our gas tax money is, if possible, even sadder, he said.

“To my knowledge, gas tax funds have not been raided in this way in at least 10 to 15 years, so this would be a new court case that would have to go to the courts,” Modica said.

“City budgets are definitely where the rubber hits the road. We are on the frontline of services to the public,” said Second District Councilwoman Suja Lowenthal, before the council voted 7-0 to pass the resolution.

“I hope that all the sacrifices at the local level will bring sustainable, thoughtful budgets at the state level.”

Maybe not this year. Already, it sounds like the opposite of Christmas.

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  • Gschipske
    Foster didn't open the POA contract. The POA agreed to open it. Without agreement from both parties the contract cannot be opened nor changed. The reason both sides agreed to re-open two years ago was to stem the tide of police leaving the city for higher paying cities. The economy has changed the situation. No, not everything can be negotiated. Labor contracts and labor law are quite clear -- the employer cannot unilaterally change the terms and conditions.
  • JuanPardell
    Gerrie - You said, "No, not everything can be negotiated. Labor contracts and labor law are quite clear -- the employer cannot unilaterally change the terms and conditions."

    Perhaps. But a bankruptcy court can.
  • The Toad
    Gerrie--Is there any valid reason that the Council has not asked for a study of a municipal bankruptcy? I know that the Mayor gets squirmy as hell at the mere mention of the word, but ought we not begin looking at the pro's and con's of such a move? I can all but guarantee that a year from now the City and the State are going to be even worse off than they are now. I am eager to listen any other suggestions you wish to promulgate. THANKS!
  • JuanPardell
    The Toad - I suppose the only reason no one has requested a study, of possible filing a municipal bankruptcy, is because it would be considered an embarrassment for the mayor & city council. Its quite appearant, they'd rather save political face, as opposed to dealing with the hard realities of operating your city's government. Mayor Bob Foster, seem to have forgotten his private sector/small business roots. When an entity is losing money, and unable to raise revenues, it has to cut expenses. Its that simple. There's just too many sacred cows in Long Beach city government.
  • Dave in Alamitos Beach
    My gut feeling is that Long Beach would do it, but they don't want to be first among major cities (Vallejo doesn't count ;-). If the likes of Fresno or Sacramento go first, then maybe LB will follow.

    Also, they must just be waiting because things probably WILL be worse next year. The only thing more embarrasing than declaring bankruptcy is having to declare it twice!
  • Juan Pardell
    Dave said, "The only thing more embarrasing than declaring bankruptcy is having to declare it twice!"

    The only thing more embarrassing than declaring bankruptcy is having to do so after declaring that would never happen.
  • kathyebryan
    Juan:

    You are right Gerrie's action on behalf of the citizens is great, except when it comes to reforming pensions. The City Council would sooner cut off their right arm then to go up against the unions.

    People will come to realize they are going to pay a high price for keeping people in office that won't face reality. Our fees, costs of tickets, etc. will skyrocket. The dog, bike and parking police are already out looking for ways to penalize the public for additional revenues.

    The city currently pays $80Million Dollars for pension costs, plus another $12Million for Social Security out of a General Fund budget of $412Million. The City recently recieved a bill for $40Million from CalPERS for last years losses, which will come due in 2011. The City will be 'smoothing' that $40Million debt over 30 years, because they don't have the money. The pension costs for each employee at City Hall now averages $16,0000/yr. and it will increase substantially next year. It will take almost $50,000/yr. to fund individual top level managers' pensions.

    There is an outstanding Pension Obligation Bond of around $80Million that the City took out in 2001, which won't be paid off for another 15 years. Our debt for pensions is increasing faster than any one expense.

    Gerrie ignores these facts. If the pension debt increases next year, she will advocate for more 'smoothing' of these losses over another 30 years. Her and her fellow councilmembers refuse to address the pension funding and have the employees pay 1/2 of the pension costs. That would bring in over $30Million a year. That is a substantial amount of money, but the unions have such a stronghold on the Mayor and City Council, it will take the people to stand up against the unions. The City Council does not have the will.

    Pensions will be the issue in the 2010 election, and all those sitting on the sidelines with their heads in the sand will pay a price. No union money will elect them.

    Gerrie should know the power of Mayor Foster. She should do the right thing for the taxpayers and be a hero. The Mayor already has one of his people running in the 7th District, so I am sure he is searching for someone for the 5th. They will certainly be well funded.

    Gerrie could do alot for the people if she would just face reality.
  • Wow, scary--$80 million out out $412million budget is attributed to pensions? That's nearly 1/5th! How come the people in our governemtn that agreed to these kind of contracts couldn't see that at some point the taxpayer can't keep supporting this?

    Bankruptcy may not be a bad idea!
  • Gschipske
    Because of term limits no one who voted for the expenditures is around to be held accountable. That's why I tried to get a charter amendment through council that would require a mandatory reserve whenever council increases benefits. There weren't 4 other council members interested.
  • Mike Ruehle
    Hello Councilwoman Schipske,

    How about proposing Measure J to put negotiated public safety worker pay and pension increases to a public vote before signing the contract. That's what San Francisco does and it seems to be working well for them. That is no different than what the police currently have because the police officers conduct a ratification vote before agreeing to the negotiated contract. Why can't the public have that same right?

    I believe Measure J would modify the negotiating behaviours of both the Union and the city negotiators. They would have less incentive to ask for the sky for fear the negotiated contract would be rejected by voters.
  • Gschipske
    Kathy -- why do you think I called a meeting of the Civil Service and Personnel Committee to discuss the impact of CALPERS when no one on council was interested? Because I am concerned about pension costs and wanted a public discussion about the impact.
    We have to smooth out our current obligations because the city cannot afford the bump up CALPERS is predicting. We can't change what we are obligated to pay -- only regulate it. We can negotiate future pension benefits when the contracts are open because by law we can't just unilaterally change benefits.
    I wasn't supported by police and fire when I ran in 2006 so please stop that red herring. The real issue is that until we can negotiate new contracts the council can't do anything to undo the mess created by those who were here before us.
  • kathyebryan
    Gerrie:

    To start with, I never knew you called a meeting of the Civil Service and
    Personnel Committee to discuss the impact of CalERS.

    The last time I spoke with you was when Tom Stout and I were at your office
    to discuss the pension costs. At that time, you stated that you thought it
    was okay to amortize pension debt 100 years. We discussed the superfunding
    years and the pension obligation bonds that were taken out to fund the costs
    after the 2002 spiking as well.

    I am happy to hear you realize the impact pension costs have on the citizens
    of Long Beach. The City's demographics are not conducive to putting the
    burden on the taxpayers by raising fees and parking tickets to make up for
    the deficit caused by pension costs.

    Gerrie, I appreciate you speaking out on behalf of the citizens of Long
    Beach.

    I do understand that while the contracts are open, you cannot talk about
    certain aspects of the pensions, but I think it is time the Mayor and City
    Council start taking a harder line with the employee unions. The bill from
    CalPERS this year should make everyone aware that the status quo is no
    longer acceptable.

    Kathy Ryan
  • Barf Bag
    long beach can now fulfill the prophecy of becoming the third world city that the residents have always wanted.

    expect this to get worse when the have-nots start wanting.
  • Dave Wielenga
    If you are ever in economic crisis, Barf Bag, I promise to be there for you.
  • The Toad
    Does that include his bail and his attorney's fees?
  • TheCommish
    As long as the legislature gives in to making up the deficit by taking out of the most vulnerable in society (who don't make campaign contributions, opting for food and rent), then the cities pay for it in revenue reversals. Not suffering for the rich or oil industry folks. Nor the a governor who makes comments about how at the end of the day he isn't depressed, he just sits back in his jacuzzi and smokes "a stogie." And, makes what some might say are poor taste and insensitive online videos.
  • lbresident
    I don't object to any of the cuts in the proposed state budget. There actually should be more cuts and pension reform. That would enable us to fix the longer term problem as opposed to including accounting tricks and city/county borrowing as was done in this year's proposal.
  • JuanPardell
    The only surprise, regarding the fiscal emergency declaration, is that anyone would be surprised. The warning signs, were made readily available to those who were willing to listen. However, all constituents kept hearing was city government would fix the problem. Well, its fairly obvious that isn't case. Now, it appears all that's left, is what a few city officials stated would not happen:bankruptcy. Unless, of course, they're willing to detail a fiscal plan that will prevent such an action from occurring.
  • Gschipske
    Juan -- that's exactly why we asked for the resolution. What was not announced last night is the Port's latest info that they will cut in 1/2 the amount they transfer to the City because business has fallen off. I will be agendizing direction to the city manager to seriously restructure his departments -- consolidate, eliminate and reduce. We can't keep doing the same things over and over and expect to balance a budget.
  • JuanPardell
    Gerrie - Although you've addressed this issue, what are your colleagues on the council proposing? It appears, this matter was placed it on the backburner, with the hopes the problem would simply go away.
    Gerrie, if you can recall, nearly two years ago I stated this would likely happen, when Vallejo contemplated its own bankruptcy, and I drew similarities with Long Beach's situation. That city, laid out the foundation for why it had to take action:municipal salaries & benefits were too costly. Unless your city government, chooses to address that very issue, don't expect any significant results from what you've requested of Pat West's office. Throw out all the disclaimers about the economy. The main catalyst, for Long Beach's budget deficit, has been easily defined. Now, is the time for all of you to do something about it.
  • lbresident
    Juan, you are absolutely correct. But Gerrie (and most other council members) are complete slaves to the unions. So don't bet on pension reform.

    Until we as a city start electing officials who are not running for office with the support of union money, we will continue to hear excuses of a bad economy, not of enough tax revenue, prop 13 is the problem, etc.

    It's frustrating with Gerrie in particular. On one hand she can be such a great homeowner/resident advocate but on the most important budget issue (pension reform) she is unwilling to advocate for reform.
  • Gschipske
    That isn't true. First of all, I wasn't supported by police and fire when I ran for council. Secondly, these unions have contracts that need to be negotiated for new hires because by law we can't take back a pension already negotiated. I tried to get a charter amendment two years ago that would require the city to set aside reserves when it gives a pension. Couldn't get support on the council or from the mayor.
  • Dave in Alamitos Beach
    Okay, two tiers is a good approach for the future. I have a question though, even if you can't renegotiate an existing pension, is there a way to regenotiate the employee's contribution to his or her own pension?

    And if LB declares bankruptcy (heaven forbid, but you never know), what happens to the already existing pensions as negotiated?
  • lbresident
    Gerrie, you know that anything can be negotiated. The mayor opened up the contract to give the police a raise a few years ago (which I believe you supported). If he can open it up for that, he can open in up to require employees to split the pension cost. But he and the council need to be prepared to outsource and layoff employees if the unions don't comply otherwise the unions will call your bluff.

    And I support the new tier for new employees. But I don't even see that being talked about seriously. All we hear is it has to come from sacramento so it's state wide or LB won't be competitive. That's crazy. Even gov't employees need work these days.
  • Gschipske
    Until the contracts come up for renegotiating pushing for increased contribution can't be imposed. We have almost a dozen unions each with their own contracts. We need to put them on the same renewal schedule and do all at once. Prop L passed by Long Beach voters prohibits contracting out. Things are not as simple as it appears.
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