Recently, the San Luis Obispo City Council voted 3-2 to approve new labor agreements with our management and unrepresented employees. They voluntarily offered to take an 8 percent reduction in compensation starting Jan. 1. That includes our city manager, city attorney, department heads, front-line managers and many professional employees. This exceeds the 6.8 percent reduction in total compensation on which the current city budget is based.
Two council members — Kathy Smith and Dan Carpenter — voted against the new contracts because they believe the concessions offered are not large enough. The three who voted for the contracts — Jan Marx, Andrew Carter and John Ashbaugh — believe the concessions represent a significant step forward and are, in fact, larger than what the council requested. The majority believes the new contracts represent a good deal for city residents and a fair deal for city employees. We’d like to explain the majority view.
The new contracts achieve three important steps on the road toward long-term fiscal sustainability. They are pension reform, suspension of cost-of-living adjustments and employee responsibility for increases in health insurance costs.
1. Pension reform: Management and unrepresented employees have agreed to pay their full member contribution for CalPERS. This reduces take-home pay and reduces the pensions these employees will receive once they retire.
As far as we know, there is no other city employee group on the Central Coast and very few in the state who are paying their full CalPERS contribution truly out of pocket. In San Luis Obispo, our police do pay 9 percent for CalPERS, but when the change was made from city-paid to employee-paid, the city provided a special 9 percent pay increase on top of cost-of-living to fund it.
Management and unrepresented employees have also agreed to the establishment of a second-tier pension plan with lower benefits for new employees.
One could argue that additional public employee pension reform is needed. We agree. In fact, we believe pension reform needs to take place statewide. We also believe, however, it’s not fair to fault an employee group for taking the lead and making a major permanent pension change with significant personal impact when that change goes far beyond what other public employees, locally and statewide, are doing.
2. Cost-of-living adjustments: The new contracts include two additional years with no cost-of-living adjustment (COLA) to management and unrepresented pay. That means four consecutive years without any COLA for these employees.
Again, one could argue these employees should have gone farther, but let’s look at past history and future council goals.
From 2000 through 2010, city police received a COLA of 65 percent on a compounded basis. City firefighters received a COLA of 55 percent. General employees received a COLA of 45 percent. Management and unrepresented employees received a COLA of 38 percent, the least of any group.
In addition, the council established a new employee compensation philosophy earlier this year. It focuses on local labor market conditions in the public and private sector. Within two years, we plan to conduct a comprehensive wage and benefit survey. Working with employees, we plan to use that data to make adjustments on an individual job classification basis, if the data indicate such adjustments are appropriate.
3. Responsibility for health insurance increases: Management and unrepresented employees have agreed to cover completely out of pocket any increase in health insurance costs over the next two years. They’ve also done that over the past two years. This is significant because it shifts the risk of rising health costs from the city to individual employees.
In conclusion, the council is thankful for the leadership our management and unrepresented employees have shown in helping us achieve major budget objectives. We’re confident we can make similar progress with our other employee groups and appreciate their dedication to public service.
Jan Marx is mayor of San Luis Obispo. Andrew Carter is a City Council member.