By Shaun Bishop
Daily News Staff Writer
Posted: 06/11/2009 10:43:34 PM PDT
Updated: 06/11/2009 10:43:36 PM PDT
Peninsula cities cannot afford to continue paying their employees rising salary and benefits packages in the midst of an economic crisis, according to a new San Mateo County Civil Grand Jury report.
The grand jury recommends the county's 20 cities take control of personnel costs by cutting benefits for newly hired employees, using contractors for some services to save money and reviewing the way employee salaries are set, among other cost-savings steps.
While local unions criticized the report, several city managers said it raises good questions about a budget issue many Peninsula cities struggle with.
"I couldn't argue at all with any of the recommendations," said Redwood City Manager Peter Ingram. "It's how do we get there that best honors what direction we've received from our council for making the budget smaller and preserving their strategic initiatives and core services."
The report traces the problem to the dot-com boom, when cities hired new employees and increased salaries and benefits in labor contracts to attract qualified workers.
After the bubble burst, the grand jury notes, "the cities found themselves chained to employee obligations they could no longer afford" and now spend roughly 70 percent of their general fund budgets on employee costs.
Among other changes, the grand jury said cities should create a "two-tier" system of hiring in which new employees would have reduced benefits, including less vacation time and larger contributions to health care coverage.
The report also said cities should reconsider how they pay retirement pensions, which currently kick in at age 50 or 55 in most cities and give employees between 2 and 3 percent of their salary, multiplied by the number of years of public service.
The grand jury said employees should contribute more to the retirement funds, and the benefits shouldn't kick in until they turn 60.
It recommends each city convene a citizen task force to review city wage and staffing policies.
Two of the Peninsula's largest unions criticized the report. A representative for the American Federation of State, County and Municipal Employees said the union's 3,100 members in San Mateo County deserve good benefits and contracts are not the only factor in city budget deficits.
"It's a good thing to provide health care benefits to a work force. It's a good thing to ensure people have a retirement," said union business agent Nadia Bledsoe.
The report also says there are "political barriers" to reducing personnel costs because the parties involved in negotiating — city council members, unions, city staff — benefit when compensation packages grow.
Bledsoe said the notion unions have "a total grip on the city council is just really misleading."
The Service Employees International Union found the report "highly hostile to the working men and women who serve the residents throughout San Mateo County," said spokeswoman Khanh Weinberg in an e-mail.
Foreperson Virginia Chang Kiraly said the grand jury's intention was to shed light on how taxpayer dollars are being spent, not to attack labor groups, which she said are simply representing their members.
Several city managers said the report's recommendations are useful but reducing employee costs is not as simple as slashing salaries or benefits unilaterally.
In some cases, cities may be able to reduce or consolidate services to save personnel costs without impacting salaries or benefits, said Glen Rojas, the city manager of Menlo Park.
San Carlos City Manager Mark Weiss said his city has instituted salary freezes, reduced pension benefits and increased employee health care contributions over the past decade to close budget gaps. Now, he said the city's salaries lag behind others on the Peninsula.
"We've done the reductions and cuts and are hopeful that other cities will follow suit," Weiss said. "We can't do it on our own. We're not living on Easter Island. We live in an area where there's 20 cities, and we're all competing."
Each city must respond in writing to the report within 90 days, though the grand jury's recommendations are not binding.
http://www.mercurynews.com/breakingnews/ci_12574908?nclick_check=1
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