Last November 16, 2010, almost 11 months ago, City Auditor Ann-Marie Hogan issued a report “Employee Benefits: Tough Decisions Ahead” that concluded it was critical that Berkeley manage its liabilities to ensure long-term fiscal stability. As part of the report, Hogan requested that the City Manager report back on or before September 27, 2011 on the adoption status of her recommendations and no later than September 2012 on full implementation status of her recommendations.
Hogan’s report addressed the City’s employee benefit costs and resultant unfunded liabilities, and her most crucial recommendation was that the City ”Reduce today’s expenses and tomorrow’s liabilities.” She also recommended that the City increase transparency on financial matters, and that it “Clearly communicate costs and liabilities to Council and the public.”
Hogan’s report provided an apt view of the City’s current financial problem. Specifically, it presented the unfunded employee benefit liability at more than $250 million. It also made plain that in 2016, just five years from now, the City will be required to pay CalPERS close to $41 million as its share of payments to Berkeley retirees. Every day that these excesses and liabilities are not resolved, our City’s financial situation becomes more perilous.
Hogan’s report also described a few overly generous personnel policies, such as the accumulation of sick leave benefits and payment to employees at the end of their tenure for a portion of their sick leave benefits. The financial consequences of these policies are significant. In 2009, the City paid out $1.47 million to employees leaving the City for sick leave, vacation and other benefits.
In light of our city’s serious financial situation, it was shocking to learn recently that the response to the City Auditor’s Report will be delayed until at least January 2012 – about 14 months after the publication of the City Auditor’s report. This delay is particularly disturbing considering that five out of the six union contracts are now under negotiation since they are due to expire in June 2012. And it means that Berkeley citizens cannot vet the response to the City Auditor’s report in time to have bearing on the contract negotiations – which is unacceptable.
Rather than increasing transparency on the issue of its unfunded liabilities, the City Manager’s office is becoming a black hole of non-response. All this from a City Manager who received a hefty raise from City Council just two years ago; the Council agreed to the raise not long before Hogan’s report revealed the extent of the City’s financial crisis.
Already, other cities in the Bay Area are grappling with similar issues related to escalating personnel costs: San Francisco, Oakland, and San Jose to list a few. By watching other cities address these matters, we can learn that the solution will not be an easy one. In fact, in November, the citizens of San Francisco will be going to the polls to vote on competing ballot propositions. It may be messy, but at least citizens are being involved in the decision making process.
Yes, here in Berkeley, a series of workshops have been scheduled by the Council to address a variety of topics. But a closer inspection of the agenda reveals that the issues raised by Hogan’s report won’t be discussed, at least in part, until the December workshops – again too late.
The purpose of the Opinion is to encourage all Berkeley citizens to oppose this high-handed conduct by the City Manager’s office, and to encourage the City to embrace the reality of its current financial situation.
(Jim Fousekis is a 40-year resident of Berkeley, a retired attorney and motivated citizen. He is a supporter of a number of Berkeley institutions, including the Center for Independent Living and the Berkeley Public Education Foundation and an active Democrat, and recently became involved with Berkeley Budget SOS – a community group committed to transparency in financial matters. He can be reached at firstname.lastname@example.org.)