Will San Jose and Other Bay Area Cities Drown in Public Employee Compensation?

ORINDA, Calif. 8/25/2010 - While the U.S. wallows in financial doldrums, California is more like the Titanic, ruptured and slowly sinking in icy seas. While public employee compensation and retirement packages are only the tip of the economic iceberg in the state, it's a large and growing tip. Many jurisdictions are beginning to look closely at this ruptured system, including the City of San Jose, according to the article "San Jose council takes aim at employee salaries, pensions" (San Jose Mercury News, 8/04/2010).

City Manager Deb Figone noted that, over the past ten years, the city's full-time workforce has shrunk from 7,000 to 6,600, while the average cost for each worker has shot up 64 percent to $120,418, with two-thirds of the city's general operating fund going towards personnel costs. Mayor Chuck Reed said the current compensation policy has helped hike police and firefighter costs 99 percent since 2000, contributing to 10 consecutive years of deficits.

Although police and fire department personnel and local labor leaders argued that the issue was about "public safety" rather than economics, city council members evidently recognized that driving the city into bankruptcy would eventually erode public safety more than reducing salary and benefits for those city employees. In June, citizens in the nearby City of Vallejo, where employee costs helped drive the city into bankruptcy, voted to allow outside arbitrators to redo the structure of public employee compensation. Following Vallejo's lead, the San Jose City Council voted 7-4 to put a measure on the ballot that would change a three-decade-old policy giving outside arbitrators the final say in contract disputes with public safety workers, and also voted 7-4 to place a separate measure on the fall ballot that would give the city more leeway in setting pensions.

There is no question that adequate police and fire protection is critical to any jurisdiction, large or small. The growing concern is whether or not the jurisdiction can support these services, and others, without drowning in the sea of red ink they are creating. While we can look at the disaster across the ocean, Greece, to see how a once great country continues to sink to the bottom under the weight of a huge and growing public sector, we should take even greater warning from the City of Vallejo that the same thing can happen right here if we do not get the situation under control.

As a public educator, it is ironic to me that, while city employees face minimal layoffs and few compensation reductions, or even freezes, teachers are being laid off by the thousands across the state. School districts are renegotiating salaries and benefits downwards to save even further layoffs. Is not the good of the public, perhaps even the future of our children and our society, impacted at least as much by this constant deterioration in our public school system as by the possibility of losing a few police officers or fire fighters? In fact, do not statistics clearly show us that poor education leads to higher crime rates and violence? Yet I cannot image a district across the country where the average annual compensation for a teacher is even close to $120,000 per year.

Come the fall elections, the citizens of the City of San Jose will have the opportunity to stem the tide at least a bit. Because bureaucrats protect what they have, allowing outside arbitration and rethinking statutes that allow public employees to determine their own compensation would be a great first step towards regaining fiscal responsibility. The police and fire fighters can live very comfortably on less than $150,000 per year. How long can San Jose, and other cities in the Greater San Francisco Bay Area, survive if they do not erect some sort of barriers against the wave of rising public compensation?