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Monday, February 22, 2010

Time To End Public Employee Furloughs

Last week, under the push of Mayor Antonio Villaraigosa and his staff, the Los Angeles City Council put financial prudence ahead of political alliances. Looking at the continuing downward spiral of budget deficits beyond their own terms the elected officials stunningly voted 9-3 to eliminate four thousand jobs in the City of Los Angeles. Previously there was considerable consternation over a Villaraigosa proposal to eliminate one thousand jobs at the city, to vote weeks later to work towards not only agreeing to the Mayor's request for one thousand jobs to go but to add another three thousand was quite a shock.

With their vote and intended action, the Mayor and City Council of Los Angeles are doing something that other public officials and elected leaders are denying: payrolls and accompanying benefits are too large and are crashing budgets.

Last week I took some heat in a few emails for the statement in my post (Agenda 2010 = Jobs or More Pandering) that if the State Franchise Tax Board is losing $21 million per month in collections because of the current state furlough program they should be laying off people instead of furloughing them. I stand by that statement and wish to expand upon it. The State of California should end all of their employee furlough programs. The furloughs are supposed to be saving the State approximately 15% of the payroll costs to the budget. The furloughs have been in effect for long enough now for all departments and consumers to adapt to closings of offices and departments one day a month. Evidently the jobs can be done with 15% less in payroll expenses. So time to elimate the expenses permanently, end the furloughs and instead lay off or eliminate 15% of the jobs paid for by the State of California.

When Governor Arnold Schwarzenegger announced furloughs he was immediately attacked by his political opponents and the unions went to court to protect their salaries and benefits. So far the furloughs have held up and the state has been able to save millions of dollars to add a few drops back to a bucket that is leaking billions. But furloughs are not enough for the state to get back to level on the balancing of revenues and expenses, as we can see by the state once again running out of cash sometime this month or next.

Democrats in control of the Legislature with majorities in both houses short just a vote or two enacting any budget want to raise taxes and fees even more than last year's budget, which was the largest increase in taxes and fees in history. Still ignorant to the basic economic fact that the biggest problem in California is not revenue but spending, the Democrats want to further decrease revenues by choking off jobs and increasing taxes and fees across the state.

Why do Democrats wish to increase fees and taxes on all Californians? To prevent layoffs and furloughs of the public employees who pour millions into campaign donations up and down the state to Democrats running for city, county, state and federal offices. The political alliances between the public employees across the state and elected officials who happen to be registered Democrats has become a choke hold on budgets up and down the state.

Looking to the future the State economic situation is not improving and revenues are not going to increase to provide for the salaries and benefits of all those on public payrolls in the near future. Schwarzenegger and Sacramento pols can beg for more money from Washington but we are politically useless to the Obama Administration and Congress by virtue of the State's guaranteed delivery of votes and Representatives for Democratic majorities. With the state out of play politically it is out of play fiscally as well. Even with federal funds the problem is not solved, as can be seen with one-time funds from the American Recovory and Reinvestment Act (aka Stimulus I) which may have protected some public sector jobs for one year, and added an additional year of long term benefits to the balance sheets.

For the rest of this fiscal year, next year, the year after and the year after that and beyond there is not magic pot of gold that will bring billions of dollars in revenue to the State. As much as the Legislature wants to squeeze more and more money out of us for taxes on income, savings, health insurance, transportation, goods and services, technology, very soon they will see there is nothing left to squeeze. Only then will they see that it is time to cut expenses and the number one expense in every organization are employee salaries and benefits.

With term limits in place it is easy for current politicians to push the expense cutting to the next term and the next elected official. In the meantime by listening to their campaign donors instead of their consituents, who are losing jobs at a rate of 15%, they are digging a deeper and deeper financial hole. And will take more and more money from local governments and citizens.

Which leads me to Long Beach, and other cities in the state facing severe budget deficits. Mayor Bob Foster needs to show the City Council the future, and it looks a lot like the City of Los Angeles. With Sacramento making no changes to its mentality to protect spending and trying to increase revenues in a down economy with a state unemployment rate realistically running at over 15%, the economic future for Long Beach is pretty bleak. The State will raid more funds in each successive budget draining millions and millions from City and County budgets. Today's $20 million budget deficit is tomorrows $30 million gap, or bankruptcy.

Furloughs are a difficult short term solution to a short term problem. Most private sector firms that use furloughs do so with a plan and eye to increase revenues and business to be able to eliminate furloughs within months, a year at most. Any plan that does not foresee being able to bring back employees to full time within twelve months is a plan where furloughs are not a solution.

Furloughs may save some money in the short term, but as a long term solution they are detrimental because of the accrual of benefits, especially retirement benefits. Keeping the positions on the payrolls adds more years to pensions that future taxes and fees will have to support. By foregoing layoffs and elimination of jobs through furloughs for a prolonged period of time the City, or State, is saving some money in the short term but continuing to add expenses to future budgets at an exponential rate.

Looking at the economic landscape and future for public revenues it is time for our elected officials to do what is best for the long term benefit of their constituents and future generations and quick the furloughs of public workers. As we have seen a reduction of 15% of service through furloughs have had a minor impact on the overwhelming majority of residents, ergo we can cut services and payrolls permanently by up to 15%.

Our elected officials need to end the furloughs, cut the jobs to balance budgets and reduce government spending and growth. It is time to look at the economic reality and not the political alliances.
DCS 02222010


Bob S said...

A couple of thoughts...

First, the City doesn't have much choice. Revenues have fallen so far that nothing short of staff reductions or salary cuts will balance the budget. That's not cause for rejoicing. It's just a hard fact. And it looks like we agree with the Mayor -- reducing work hours, which is what the State has done, won't work. The City, sadly, needs to lay people off.

Second, this is actually a labor negotiation. The Mayor has proposed a 15% cut in the salaries of city workers across the board. He would, I think, prefer that, but if the unions don't agree -- and their internal politics make it hard -- then both union members and the public will suffer.

You rightly point out that municipal and state employee unions are powerful and not always a force for good government. At heart, I think the problem is our conviction that free speech and the payment of money to legislators under one guise or another are the same thing.

The unions, who take lots of justified criticism for their influence in the State Legislature, are pikers compared to the private money that floods the both the State Legislature and the Congress. Party affiliation is not an issue here. These people give money to everyone. A long time ago -- 45 years, to be exact -- a grizzled old City Councilman (they were almost all men in those days) described American democracy to me as "...a process of competitive bribery." He was right then, he's right now, and I fear for our beloved country because of it.

Charles S said...

Regarding Bob S comment on public employee unions being "pikers" compared to private contributors, I would have to disagree. Not only do public employee unions provide money but also provide votes and in local elections, that can make a difference. So influence peddling involves more than just money.