Al Gore pointed to an inconvenient truth about global warming, but his message never mentioned the damage from an inconvenient recession.
Seattle's city budget deficit is at least $40 million with a strong potential to become more like the $50 million for next year, a figure that Mayor Mike McGinn mentioned in his state of the city speech. Complicating matters, outgoing Mayor Greg Nickels, in his eight-year administration, added nearly 1,000 new city employees.
It's now new Mayor McGinn’s task to provide the leadership to slash the $40 to $50 million from the city budget he will propose later in the year to the city council. He will attempt this without either the experience or the wisdom of Dwight Dively. In a move that has surprised everyone, veteran city budget leader Dively has taken the job of director of finance for King County. The move, a stroke of administrative genius for county Executive Dow Constantine, is a colossal loss for McGinn. Why McGinn failed to appreciate the value of Dively to help the city survive the next few years can only be explained as a rookie misjudgment.
Neither McGinn nor the council can escape the reality of a faltering economy, however. Typically governmental solutions in hard times are to look for ways to raise taxes and to cut critical public services, but never to make fundamental changes in the cost of government. When the private sector faces similar choices it cuts pay, employees, and benefits. If these businesses fail to act, bankruptcy is often the result.
While elected officials cling desperately to the notion that a yellow brick road lies just ahead, the business world cannot. But rescue for the city government isn't going to appear in time for the next budget. Local unemployment hovers around 10 percent. Housing prices haven't yet rebounded to their former level, and vacancy rates in the downtown core are now above 18 percent. A variety of city revenue sources have declined by an average of 35 percent in recent years, according to a city handout given to neighborhood activists two months ago. Sales taxes in all but two categories have declined, some as much as 25 percent.
In a perfect world, the council and the mayor collaborate to reach workable budget solutions. After the mayor gives the council his budget proposals, hundreds of people asking for city funding show up at city council hearings. Not to be overlooked, there are 24 unions representing a variety of public employees from engineers to firefighters to police officers.
The reality is that a very large part of any city workforce is under one or more union contracts or work agreements. When the coffers were flush with money, work agreements and union contracts were negotiated with optimism and amazing generosity. Public officials seeking reelection, and unaccustomed to the realities of profit and loss in the private sector, caved in during labor negotiations. While this practice has been true nationwide, it's especially true in Seattle.
With union contracts and work agreements in place, the ability of a city to reduce spending is severely limited. During Mayor McGinn's campaign, he and his staff gathered information on the city’s spending and McGinn talked about the need to trim some spending from the more highly paid employees. When making campaign speeches, one assumes, he reasoned that the employees who provide more direct services to the public should stay, but that there was fat that could be trimmed without eliminating services. In practice, he might have meant that the person who dumps the garbage can in your park should be retained, while some very expensive policy analyst should look for other employment.
McGinn first pointed to the nearly 684 city employees who make more than $100,000 per year. After his election, he said he would look at all the top jobs and make an effort to find 200 people who should make less or look for other work.
It didn't take long to hear cries of anguish from the ranks of city employees who felt their jobs were at stake. As a result of the threat of losing their jobs or having pay cut, some Seattle city employees have formed an organization called Working Seattle. They claim they have been unfairly targeted to lose their jobs.
Local public employee union newsletters reacted strongly at a time when the leaders of large, private-sector unions like the UAW have been warning their locals they may need to renegotiate some of their contracts or facing losing jobs altogether.
While private sector unions have lost some of their power and influence, public sector unions are growing in size, pay and benefits. In 2009, public employees accounted for over half of America's unionized employees.
Politicians so far have been reluctant to deal with the inconvenient truth that overgenerous contracts have collided with the reality of cities and states in recession. Unions can poison a reelection campaign. As a rule, politicians find it easier to reduce public services or raise taxes or fees, rather than reduce pay or benefits,
But the pay and benefit questions are too big to ignore entirely in this recession. So, typically, politicians have resorted to non-decisions. The norms nowadays are hiring freezes, staff reductions through attrition, requiring employees to take furloughs, and leaves and vacations without pay.
Seattle as of late 2008 had 11,201 employees with a payroll of $743 million, and the 2009 figures were likely larger. The top 100 highest paid public employees all make above $134,625. By far the largest chunk of payroll money goes out to employees earning roughly $65,000 to $125,000. These figures don't represent the cost to the city of health insurance, retirement, or death benefits included in some union contracts.
In all, Seattle lists contracts with 24 unions, each different. The firefighters union and the police guild have some of the most inclusive and complex agreements which cover not only pay, but a significant number of other work conditions or agreements that cover off duty work, sick leave etc.
For example, in the firefighters contract includes a health care provision that states the city shall pay "$943.11 ... per member per month for 2010." This amount is paid directly to the firefighters union. The union itself manages and contracts for their own health care plan. The city pays but has no role in how the plan is administered by the union. The plan also includes automatic increases in the city’s contribution if national health care costs rise. (Copies of all city union contracts are available online.)
According to the City of Seattle’s web site, the median salary for a Seattle household is $45,763. While these numbers are based on census numbers from year 2000 and adjusted for time, they are incredibly lower than the average pay for a Seattle city employee, which in 2008 was $66,350. If around 10 percent of our citizens are out of work, it becomes even more of a challenge for that 10 percent to pay the fees and taxes to keep the city payroll at its current level. Something will have to give.
It is no surprise that there are city departments and services with very vocal representation which fare far better when budget reductions are considered. It will take a courageous politician to do what must be done.
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