In July, the Newport Beach announced it might outsource activities such as trash collection, jail administration, and training to reduce costs and pension obligations. In August, the City Manager reported that the City has already cut about 70 full-time positions and expanded efforts to contract out street sweeping, parking meters, street light maintenance, and beach trash collection.
In an era of tight budgets, it’s inevitable that public services come under scrutiny. Still, some of the neighbors seem to think public employees and their unions are the villains in the budget wars. There is an underlying theme that public employees are unmotivated, inefficient, overpaid, and the private sector can do it better. Then there are those fat pensions, which really look suspicious.
So, how ‘bout a good word for our local civil servants? I’ve been here 28 years and never had a complaint about them. Well, actually, I do have a complaint about the trash service. My house is the first pickup on Friday and things must be curbside before 7 a.m. If I’m being honest, there really are mornings I’d prefer to sleep in. But otherwise, they do a great job. Ditto the police, firefighters, water utility guys, park and rec folk, librarians, etc. I am a happy consumer of their services. They put the lie to the claim that government employees don’t care or that they are inherently inefficient and the private sector can run things better.
So, memo to the City: Do not move too fast here. Remember Murphy’s Law. If you play with something long enough, you will surely break it.
Were it not for pensions, this whole discussion would be more restrained. But the image of a retired civil servant sitting on the sand at Pismo Beach, Budweiser in hand, does raise hackles with a frazzled taxpayer stuck on the 405 trying to commute to a stress-filled private-sector job that could get wiped out in the next downturn.
One explanation for this disparity in the social fabric is that public pension fund manager CalPERS used to consistently beat the average rate of return on investments. City negotiators could afford to be overly generous in negotiations if CalPERS came along and saved their butts.
Unfortunately, recent history tells us CalPERS cannot earn those returns every year. In fact, CalPERS’ investment pool peaked in 2007 at $260 billion. Like investors everywhere, they got hurt when the bubble burst, bottoming out at $187 billion in 2009.
Suddenly there wasn’t enough money to meet pensions down the road, and public employees became villains. Here’s the rub. Most figures I’ve seen bandied about on the City’s unfunded future pension liabilities were done using the 2009 figures. So the scary numbers were calculated from the bottom of a very deep hole.
This year, CalPERS’s investments recovered to $239 billion, a nice 28% recovery from the 2009 hole, but not enough to get back to 2007 levels. The other change is that the City negotiated new terms with the unions last December.
So let’s get some new numbers before we jump to any conclusions.
The other canard in this debate is Newport’s “high ratio” of public employees to population. Well, if the City outsources some jobs, the ratio will drop, but the jobs won’t go away. They’ll just be hidden on some private payroll.
Finally, let’s not jettison public employees on a misguided assertion that the private sector always produces better results. We have plenty of examples to the contrary – Enron, Lehman Bros., AIG, British Petroleum, Madoff, TWA, Tyco, Sambo’s, Border’s Books, IndyMac, etc.
Hopefully there’s more middle ground on pensions so the City won’t have to test Murphy’s Law.