The Next Bubble to burst - CA municipal employe salaries

alan_IHB

alan_IHB

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As this is a bubble blog, I thought I would start a discussion on the next bubble to burst, that being CA municipal employee pay scales. As readers here know, the first bubble was the tech bubble, the bursting of which lead Greenspan to lower interest rates which lead to the start of the real estate buble which popping.



Along with the astounding growth in RE prices, CA cities followed the good times with astounding pay packages for municipal employees. The manager of Villejo pulls in $350K/yr and Villejo pays starting firemen $80K/yr (no wonder Villejo nearly filed for bankrupcy, and they are not out of the woods yet). SF, facing a $400 Million deficit pays a nurse $350K; turns out he's a prision nurse pulling in $110 base and the rest in overtime. Even without the overtime, $110k/year sounds absurd for a prision nurse.



http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/03/29/MN7OVQOPK.DTL



CA cities are just starting to hit revenue shortfalls, closing a deficit this year will be followed by closing a larger deficit next year. Getting these salaries back to earth with be a bitch because of service employee union contracts. I think mutiple municipal bankrupcies could occur.



Any thoughts?
 
When I was a state employee (CT) in the early 90's, I took a 10% pay cut due to the state's fiscal woes. That sucked, and it CAN happen.
 
I know that during the OC bankruptcy salaries were frozen. There might have been some cuts, too. Although I think that was wholesale jobs, and not salary cuts to the people who remained.
 
i'm sure that the 110k base for the nurse is what it takes to attract someone to the job. say you are a PA or OR nurse, and can earn 80k in a nice hospital (market). what supplement would you want to work in a prison? and what if, like the firefighters, they want you to work double shifts because they can't get anyone else at 110k (or want to save on bennies by not hiring another)?





if there were people clamoring for prison nurse jobs at 50k, i'm sure they would hire them.





that said, how do you get cops for irvine, or nurses for jails, in a high cost area without paying them the prevailing wage?





one way is by good bennies, but look at what that has (and will in the near future) cost the cities and counties of CA (hello...San Diego!)
 
FreedomCM.... whatever that means....



I suppose you think you are right that oh, cities have to pay more...



But CA cities don't control their revenue. (Think prop 13) Remember when a private company hires employees, they know what their revenue is, factor in a profit margin then figure how much they can afford to pay their staff. If the Employee's cost too much or they can't negotiate a fair pay level, like Eastern Airlines.. remember the good old pilots union, they close up shop. Cities have been promising more money then they take in for years, now somethings gotta give.



It used to be public employees made less but were rewarded with stability and benefits. Now they get more and stability and benefits...
 
Planning departments are going to have severe pay cuts, developer fee's paid for much of their salaries and if i'm not mistaken. Developer's stopped developing.
 
My wife and I are not employeed by a government agency. My wife makes $110k as an RN with 10 years of experience. This is not uncommon. In fact, some nurse specialists make even more. Why would any RN want to work in a prison treating felons for anything less than $100k? Get real.



Most public employees make less than their counterparts on the outside. Yes, some are overpaid, but the vast majority are not. In fact, most public employees in high demand professions make considerably less - lawyers, engineers, doctors, etc. I use to work as an engineer for a City. I nearly doubled my salary after I left for the private sector. I get benefits that are just as good as any government agency. Government jobs aren't as stable as they once were.



For example, the CEO of Orange County makes less than $300k/yr. He is in charge of over 12,000 employees and an annual budget of $6 billion. You tell me if this guy is over paid in relation to his counterpart on the outside?
 
I think bugmenot hit it square.



I don't know if anybody noticed, but there is a shortage of nurses. His comment about city engineers/private engineers is also correct.



The biggest overfunded and bloated department is FD. The OCFA is a monument to municipal waste, yet they come up with one study after another about how underfunded they are. What a joke.
 
What effect will the expected reassessments have on city and county budgets though?





It seems to me that older cities should fare better, since less of their housing stock turned over 2004-2007, while areas with active building during that period (Irvine) could see a larger drop in revenue.





What will be cut? How will it affect the quality of life?
 
Yes skek, the city of LA is already grumbling about out 5% contractual raise that hits on 7/1. We'll see what happens.... plenty of other PD's pay more than my department. We might see some seasoned officers move on to other agencies if they don't honor the contract.





Oh, and I was a police officer in the early 90's when I took the 10% paycut.... so I don't think Public Safety jobs are immune.





I have to agree that the 110K paid to the prison nurse is on par. Who the heck would want to be locked up with criminals, many with communicable diseases....no one wants this job, so you have to pay. Kind of like the garbage man, they make big bucks.
 
Without discussing merits of compensation for employees, I think this is quite relevant discussion. When affordability is a factor and salaries get cut, the housing market will feel it. I think the cost of benefits will also have a doubling effect on salary reduction.



As a side note, I was very frustrated last fall when Florida municpalities and pension plans were prevented by the state from liquidating their holdings in banks who were obviosly going to writing off large amounts of bad mortgage investments.
 
<p><em>>>they do a heck of a job negotiating higher pay and benefits that are unmatched in the private sector.</em></p>

<p>So the OC CEO has a golden parachute like Mozillo?</p>

<p> </p>
 
<p><em>>>We'll see how much they give back when tax revenue tanks. </em></p>

<p><a href="http://www.ocregister.com/ocregister/homepage/abox/article_1272987.php">Who has to wait for revenues to tank?</a></p>
 
There are still large public companies that offer pensions (and some not so large companies). I used to work for a big 4 accounting firm and they all have pensions. Pensions are no where near as common as they used to be, but they are still out there.
 
<p>You may want to scroll down to my 10/25/07 comment <a href="http://forums.irvinehousingblog.com/discussion/547/">here</a>.</p>

<p>Ah, "pension plan." There are at least two types: (1) defined benefit plans, and (2) defined contribution plans. A 401(k) is a defined contribution plan because you are limited to how much you can contribute. A defined benefit plan, on the other hand, is one where the beneficiary contributes money, but the plan guarantees a certain benefit (e.g., 60% of pay rate at retirement for X years). So, yes. There are pension plans in the private sector, most of which are defined contribution plans. (FWIW, the entire time I was in private practice no firm I worked for provided a 401(k) match. Every company my non-lawyer spouse worked for has always matched at least a certain percentage. Go figure.) But yes, let's root for the lowest common denominator rather than inspiring the private sector to treat their employees better.</p>

<p>Is it really the fault of the public employees in jurisdictions that choose to current fund retirement plans **cough** Orange County **cough** that the public entity is no longer interested in funding the benefits promised to those employees?</p>

<p>And who is it really unfair to? When a job offer is made, most people look at all the factors involved. So a person chooses to stay in a lower paying public position, rather than going to the private sector, thinking that although they miss out on the higher current salary they can have more security at retirement. And now that person is in for a rude awakening. Further, most of the benefits being complained about now are for people who put in their time over the last 20 to 30 years and only recently retired. Someone employed now can change jobs if the terms change, but what about the people who already gave their time to the public entity and have retired. Is it fair to change the deal on them? They can't retroactively go back and only work four days a week.</p>

<p>So much for the sanctity of contract and promises. I'm surprised that none of the lawyers are discussing the contracts clause.</p>
 
Skek - i started in 1999 and left in 2006, as of the time I left the firm, new hires were still eligible for pensions (both 401K and defined benefit). Ill get a pretty good benefit when i retire, hopefully ill remember to claim it. I dont know if pensions were still being offered for new hires in 2007 and 2008. The big 4 firms are very profitable so they are not your typical private sector company.
 
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