While this week’s municipal bankruptcy news focuses on Detroit, where a judge has just ruled the city can proceed with its bankruptcy filing, tonight a small California city holds a council meeting to try to avoid the same fate.
Desert Hot Springs isn’t on the national radar, but its situation is hardly unique. With only 27,000 residents and only 55 full-time city employees, Desert Hot Springs lacks the financial heft that allows larger cities – think Los Angeles – to put off their day of reckoning.
If you review the city council’s meeting agenda for December 3rd, 2013, you will see item 5, “Budget and Financial Update – Fiscal Year 2013/14.” Clicking on that link will open a window containing links to five exhibits that constitute the most recent financial projections for the city for their current fiscal year ending 6-30-2014. And as can be seen from the one-page summary document, Exhibit 2, “FY 2013-14 Budget with Revenue & Expenditure Adjustments,” at this point Desert Hot Springs is expecting to collect $13.9 million and expecting to spend $18.1 million.
Put another way, as reported in the local newspaper Desert Sun on December 2 in an article entitled “Desert Hot Springs City Council to consider spending cuts,” after closing down a public swimming pool, laying off school crossing guards, and discontinuing any watering of the city’s parks, Desert Hot Springs still expects to spend 30% more than it makes, a deficit of $4.2 million.
The subtitle of the Desert Sun article reads “Parks, pool listed, but councilmen also eye pay, benefits” (italics added).
That’s a good idea. We took a look at pay and benefits for Desert Hot Springs city employees, using 2011 Desert Hot Springs payroll data from the California State Controller’s “transparency” website, corroborating them with totals as disclosed on the city’s 2013/14 financials Exhibit 5, ”Consolidated Genl Fund Expend Budget, by Line Item.”
Journalists and watchdogs, take note: State and local government payroll numbers as summarized by the State Controller, using payroll data submitted by cities, counties and agencies throughout California, are misleadingly low. Their webpage summary data for Desert Hot Springs lists the average direct pay plus employer paid benefits of a Desert Hot Springs employee as $99,633. Does that sounds like a lot? Well wait, because it’s not even close to accurate.
If you go to the State Controller’s “Raw Export” page and click on the “2011 City Data,” you can download a 6 MB compressed file, which, if you use Excel, will convert into a 29 MB spreadsheet. This will have all payroll records by employee for all cities in California. Scroll down to “Desert Hot Springs” and copy those records into a separate spreadsheet for analysis. Or better yet, just download the analysis here, 2011_Payroll_Desert-Hot-Springs.xlsx (434 KB), since that’s what we did.
The raw payroll data provided by the California State Controller includes a column showing the maximum salary permitted by job title, making it very easy to eliminate employees who worked a partial-year or were part-time workers. Other clues are whether or not an employee was eligible for pension benefits, which is also clear on this spreadsheet.
Once you eliminate the part-time workers, you get representative averages.
The average full-time employee working for the city of Desert Hot Springs earned direct pay plus employer paid benefits during 2011 of $144,329. The average public safety employee working for Desert Hot Springs earned direct pay plus employer paid benefits during 2011 of $164,621.
This is in a city where the median household income is $31,356 and the median home selling price is $133,500.
Public sector union spokespersons often complain that “politicians are trying to balance the budget on the backs of working people.” Set aside for a moment the fact that “working people” means “unionized government employees” who, in the case of Desert Hot Springs, are making more per year than the average home costs in that city. Can Desert Hot Springs balance their budget if their “councilmen also eye pay, benefits,” and could actually do anything about it?
The State Controller’s 2011 data shows full-time and part-time payroll totaling $8.7 million; just full-time payroll totals $7.9 million. The City of Desert Hot Springs 2013/14 Budget Review – Consolidated Genl Fund Expend Budget, by Line Item shows full-time and part-time payroll also totaling $8.7 million, virtually the same amount two years later. But that’s not all. A careful review of the budget also shows “Contract Services,” not associated with payroll, totaling another $6.6 million.
Desert Hot Springs uses outside contractors for their entire Fire Dept. services, as well as Animal Control and Code Enforcement. Outside contractors also fulfill significant portions of the workload for nearly every other department in the city. These contracted services primarily represent costs for personnel, often coming from other local government agencies. Desert Hot Springs is spending $15.3 million, or 84% of their $18.1 million budget, on either city employees or contractors.
If it weren’t for public sector unions, the solution would be obvious, swift and effective. Implement an across the board 27% reduction in pay and benefits to all employees and contractors working for Desert Hot Springs. This would reduce the average pay plus employer paid benefits for a full time employee of Desert Hot Springs from $144,329 per year to $105,360 per year.
There are a lot of good and qualified workers who would be thrilled to water the lawns, maintain the swimming pools, and even patrol the streets of Desert Hot Springs for an annual pay and benefits package north of six figures. And if pay and benefits were lowered, more city employees could be hired, improving services and making the city safer for everyone.
What public servants may wish to consider are comparisons to the people they serve, instead of to their unionized counterparts in other cities and counties, or those convenient boogymen, the “CEOs and billionaires” who, apparently, are the reason we ought to ignore the crippling cost of their own inflated pay.
Public servants may also wish to consider that the consequences of inflated public sector pay are precisely the same as the consequences of inflated bonus packages for Wall Street billionaires and inflated prices charged by corporate monopolies – they raise the cost of living for everyone else. Using their formidable political clout to attack all anti-competitive monopolies who make life in California unaffordable except to the privileged classes – the super rich and the unionized elites – would be a noble undertaking.
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Ed Ring is the executive director of the California Public Policy Center.