Six Sided Partnership Meeting
Special Topic: Employee Wage and Benefit Review
CM Conference Room
January 30, 2012, 12:30 p.m.
Attendees:
Lena Beecher, Confidential Employees
Rich Woerth, Fire
Jon O’Connor, Senior Management
Jeff Millen, TOA
Keith Burke, TSA
Wendy Springborn, TSA
Nathan Porter, UAEA
Jackie Awosika, UAEA
Charlie Meyer, City Manager
Renie Broderick, Human Resources Director
Guests
Ken Jones, Finance & Technology Director
Tom Mikesell, Lead Budget Analyst
Lynna Soller, Employee Benefits Manager
Lawrence LaVictoire, Employment Services Manager
1. Welcome and Introductions as Needed – Wendy Springborn was introduced as the new Vice‐President
for TSA; she will be added as an attendee at the Six‐Sided Partnership meetings.
2. Review Notes from December 15, 2011 Meeting – Copies of the December 15, 2011 meeting notes were distributed. No corrections were noted; if any revisions are need after further review, email Sue Buck in HR.
Future notes will have action items bolded for ease of reference.
3. Review PSPRS Projections – This item is in response to previous questions asked about the PSPRS contribution percentages and dollar amounts.
In looking at the percentages and estimating the contributions to PSPRS compared to last year’s increase, the dollar amounts looked off. In reviewing the numbers, the percentage increase from last year to the current year is larger due to removal of 5% furlough, etc.; also, the total recovery was added in salary/wages, so the dollar amount was a little overstated, but the percentages were consistent. Tom Mikesell has since adjusted the dollar amount.
The long range forecast goes to Council on Thursday and the numbers have been adjusted, which means they will be different than what was in the handout previously given to the group.
4. City’s Current Debt – Ken Jones noted than in the context of cost‐cutting, someone asked about debt & debt service payments. Debt is issued via bonds and is paid out of secondary property tax which can only be used for capital projects. It may not be worthwhile to talk about that kind of debt in terms of cutting costs in operation. Sometimes cities can issue debt for really long term debt. There is a change in how money allocated for CIP projects is being handled. The departments didn’t use to come back to Council and explain how the money was spent. Starting this year, they will need to come to Council and re‐appropriate the funds. As a result, Finance has identified holding accounts and has swept money back, identifying over $1,000,000. This is a big change; there are no more carry over projects that you stock pile cash. This allows the City to increase the capacity that we have to do projects this
year by a like amount. The total capacity to issue debt in a 5 year CIP cycle is about $60‐70 million over a 5 year period. The City appropriated $11 million last year and a similar amount this year; that has increased slightly by sweeping the accounts. It is important to note that personnel costs and CIP costs are completely separate funds. We are also budgeting for grants now; we didn’t use to budget for grants like RICO, etc. If it is mid‐year and you get a grant, unless you budgeted for it, you can’t spend it that year. There was general discussion of grant funded employees, past practice and the process to transition from grant funded to regular employee status.
5. Model of Projected Personnel Costs ‐ Ken distributed a handout (attached at end of notes) and noted this item was not on the agenda. The handout depicts a model of the long range forecast for total compensation costs from FY 11/12 through FY 13/14. The “% change of total” column is the percentage change divided by total compensation. If you add up that column, you get the 12.41% total projected change. In FY 13/14, Finance is proposing limits; the forecast projects that personnel costs will go up by 5.07%; the ECI (employee cost index) projection is that all employee costs in the U.S. will. go up by 2.2%. Finance suggested a 3.5% sample employee costs increase. This is just a high level summary of what was discussed at the last meeting; if we have the % number, we can decide how to apply it in each group. Ken is presenting Council on Thursday with projections that include an estimate of 25% unreserved fund balance for next year.
Jackie Awosika referenced the historical average spread sheet previously distributed and asked to havethe # of employees for each group. Ken stated that Finance will provide those numbers.
At the Council meeting on Thursday, Ken will advise Council to stick with 3% operating budget cuts for the next year, in the amount of $5.2 million dollars. We have identified $3.2 million* of that; which leaves $2 million* remaining. (*Note: numbers corrected from those given at verbally at meeting; corrected numbers obtained from Finance 2/2/12 IRS memo to Council). This time of year a lot of info comes in – there is a meeting with the actuary on OPEB, a meeting with PSPRS on contribution rates –all vital to the long range forecast, but we can’t wait to give information to Council. In no way will $3.2 million be too much of a cut; we will have $20‐21 million deficit. We know the temporary sales tax will be generating $12 million when it drops off. Working towards next year, we are really getting tight on budgets.
The group asked questions about the handout, including why Mediflex was singled out as a line item on the handout and what costs are in “other fringe benefits”. Tom Mikesell answered that Mediflex is considered a constant; “other fringe benefits” are a wide range of things. The “employee health insurance” line encompasses dental, commuter, etc. The “contribution to retiree health ins.” is the funding of our unfunded OPEB liability, which had been put back a couple of years.
Wendy Springborn asked the purpose of this meeting. Charlie gave background details on
compensation costs and previous meetings and noted the question is what do we collectively want to do about the costs outpacing revenue. We have the Six‐Sided Partnership for areas of interest to all of us; we have MOUs for each employee group; are there things we want to do collectively to suggest an approach that will allow us to have savings or keep us so compensation doesn’t exceed revenue?
Up to now the meetings have been in an information gathering stage. Expenditures can’t exceed
revenues; we are not talking about triggers, rather long term, over time, it must balance out. If we don’t have this discussion then ultimately we could have a circumstance in which the City Council says we will do “x” – for example, furloughs. If we had this kind of meeting and said in lieu of furloughs, the employee groups suggest “y”……that didn’t occur. We are not necessarily talking about cutting – we are talking about how to manage growth in total compensation. If everyone has a stake in those projections, how do we keep the costs in line; this handout is just a hypothetical number – what would we do if we had perfect foresight in order to stay within those limitations? For FY 12/13 we balance the budget without this conversation; in FY 13/14 all MOUs are due to be renewed. As we go into those discussions are there steps we take now to make sure they are informed discussions about what we have to spend. There are some costs that are not part of the MOUs; we can talk about those things or about approaches, but we don’t agree to anything at this table that would alter an MOU.
There was general discussion about retirement system numbers and forecasts as per the assumptions page handed out in September 2011. The number is the actual number projected for total retirement system contributions – it is not equal for each employee group.
There were concerns noted about the projection numbers. Rich Woerth noted that Fire was not willing to make any cuts; they will just go through the negotiation process and are not willing to continue further in these meetings. There was a request for a list of things that would be non‐MOU, generic, city‐wide issues or policies that could be discussed by the group. There was general discussion whether/how best to proceed with meetings on this topic. If one of the employee groups wants to pull out of the discussion and the others wish to continue, it is up to the group to decide whether to do that.
There were concerns stated about other policies or practices that could be evaluated for better
control, such as overtime. Mandatory overtime is considered in salary/wages as a personnel cost, but there doesn’t seem to be adequate control, specifically pertaining to special events and recouping costs.
That is a great example of an item to talk about as a group and determine what makes sense
going forward. If the City adds 50 special events and we covered the costs 100% ‐ that would cover revenue/expenses so they are in balance. There was discussion of various special events, billing, overtime and current negotiations in progress with the Fiesta Bowl Association. There are 3 events where the City is not billing ‐ 4th of July, the block party and the Rock n’ Roll Marathon. Overtime does not mean the same thing to all groups, work areas – some areas have been on mandatory overtime for years and do not want it.
Is it fair to show/breakout overtime from compensation so we can really see it? What about temps, the non‐benefitted employees? Temp wages are in this model, but contracted services are not.
Charlie noted that we don’t want to have more meetings breaking things out of line items if we don’t want to have a conversation; if we do want to have a conversation, then we can spend one meeting on an overtime conversation, etc. Jeff Millen noted that TOA is not interested in making cuts to existing benefits/wages, but they are interested in where else the City can make cuts to cut costs to the City.
Rick Woerth noted that Fire is not interested if it is a pay cut.
If ASRS is going up ½% per year on PSPRS 5.5% per year – how does that equate on what is brought to
the table on growth – how do we limit PSPRS growth? That is the whole point – we have policies that say we will pay ASRS, PSPRS, etc – the question is do we stay with those policies and go bankrupt or do
we put limits on any given year in total compensation via changes to policies, etc? There was general discussion of numbers used in the past and current projections. Keith Burke noted that nobody wants cuts, but if you look at the numbers for each of the groups, some are already making adjustments or taking a hit for that other group. There was general discussion regarding Finance’s projections and tuition reimbursements.
The hope was that through these discussions, the group would come up with an approach and we would have an employee voice carrying over to City Council about how we enter into meet & confer for the next process. The radical personnel cuts in various California cities were discussed. Jackie
Awosika noted that in the worst case scenario, the employee groups have been informed and have some info/numbers, whether they are in agreement with them or not. Charlie stated that we can all agree that the numbers will change and we will have an open process.
If there is a next step, it is to create the list that was mentioned earlier – topics/policies that incur a personnel cost – for example, service awards, a summary of tuition reimbursement by
group/employee, overtime, etc. There was additional discussion regarding overtime, cost of level of service, contractual changes, etc. If we can’t sustain costs, we can’t afford it and can’t continue to do it; the point isn’t if it is good or bad or needs to be negotiated, the point is we can’t afford it. There are things we can do to increase revenue for the future – for example, we can get reimbursed from special events. We have to keep feeding the revenue side, negotiate with partners and build our base.
Keith Burke asked in the good times when revenues go up, are there ways to share equally so the employee groups are not pitted against each other? If the City does better, do we get to share? Jackie Awosika noted that it is like you are asking us not compete against each other, when that is what we do. Council sets priorities and decides where the budget goes; we are not entering into a conversation with them asking them to even things up – they tell us what is important, we just tell them what we can afford to pay.
We will continue to have Six‐Sided Partnership regular monthly meetings; we separated these
meetings out just to talk about budget issues. Are we willing to put together a list of things we can discuss with all 6 sides at the table? All indicated agreement/interest to look at any information provided. The official MOU negotiation process starts in the Fall; we need to provide information to Council in order for them to have time to make decisions and give Charlie direction previous to negotiations. The budget year under discussion is 2 fiscal years from now, but we are only 8 months from when we start negotiations. We could put together a list of items that cost money and represent some level of policy decision the City has made in the past, send it out before the next meeting, and discuss it at the next meeting – work our way through the list. In doing that exercise maybe we get some sense if we are asking the employee groups to act against own best interest or if it is a productive exercise.
For example, on health insurance, there might be up to a dozen components of health
insurance – eligibility, deductibles, etc.; we could dedicate a day to health insurance. The list should be components of pay/compensation that we have control over. We can pick things off the list to talk about at separate meeting and bring facts, history, to that meeting. HR will compile the list and send it out to the group previous to the next meeting.
6. Next Steps/Meeting? Another meeting will be scheduled and an Outlook notice will be sent out to everyone.
Meeting adjourned.
