News Alert: Sky Does Not Fall

Maywoood, California outsourced all city services including police and fire. The unions predicted dire consequences. Well, not only did the sky not fall, but services have improved.

Please consider A City Outsources Everything. Sky Doesn�t Fall.

While many communities are fearfully contemplating extensive cuts, Maywood says it is the first city in the nation in the current downturn to take an ax to everyone.

The school crossing guards were let go. Parking enforcement was contracted out, City Hall workers dismissed, street maintenance workers made redundant. The public safety duties of the Police Department were handed over to the Los Angeles County Sheriff�s Department.

At first, people in this poor, long-troubled and heavily Hispanic city southeast of Los Angeles braced for anarchy.

Senior citizens were afraid they would be assaulted as they walked down the street. Parents worried the parks would be shut and their children would have nowhere to safely play. Landlords said their tenants had begun suggesting that without city-run services they would no longer feel obliged to pay rent.

The apocalypse never arrived. In fact, it seems this city was so bad at being a city that outsourcing � so far, at least � is being viewed as an act of municipal genius.

�We don�t want to be the model for other cities to lay off their employees,� said Magdalena Prado, a spokeswoman for the city who works on contract. �But our residents have been somewhat pleased.�

That includes Mayor Ana Rosa Rizo, who was gratified to see her husband get a parking ticket on July 1, hours after the Police Department had been disbanded. The ticket was issued by enforcement clerks for the neighboring city of Bell, which is being paid about $50,000 a month by Maywood to perform various services.

Maywood�s biggest problem by far has been its police department. A report by the state attorney general last year concluded the culture of the department �is one permeated with sexual innuendo, harassment, vulgarity, discourtesy to members of the public as well as among officers, and a lack of cultural, racial and ethnic sensitivity and respect.�

There are $19 million in claims pending against the police, which made it effectively impossible for the city to get insurance for any of its employees. If Maywood did not dismiss the municipal work force, officials said, bankruptcy would have been the only option.

The budget for the Police Department last year was nearly $8 million, more than half of Maywood�s revenues. The contract with the Los Angeles County Sheriff�s Department will cost about half of that. Insurance premiums for the city have fallen to $200,000 from $1 million.

The deputies have already engendered good will, Councilman Aguirre said, by cracking down on a local hotel that was a haven for prostitution.

And others said they have seen an increased police presence in the last few weeks. �The deputies are there right away,� said Maria Mendez, who has lived in Maywood for most of her 73 years. �Before you used to wait and wait for the police.�

As I have said on many occasions, getting rid of public unions is the only long-term cure for states' budget messes. The added bonus is non-union replacements actually seem glad to have a job and try to perform it.

San Jose councilman calls for pension reform

Mercury News reports San Jose councilman calls for pension reform.

With dozens of California cities and counties seeking to reform soaring employee retirement costs, San Jose Councilman Pierluigi Oliverio on Monday called for voters to decide whether they want to continue paying millions into the city's pension system.

Oliverio wants to change the city charter � which requires a public vote � to remove language that spells out at what age employees can retire and how much the city must pay into their pensions. Instead, he wants the council to have the flexibility to determine those numbers.

While union officials assailed the proposal, Oliverio called the city's pension costs "out of control." Even as it lays off workers, the cash-strapped city will pay nearly $200 million this year to cover its pension obligations; next year, that's projected to swell as high as $250 million.

"If you're a resident and if you've ever said, 'Why is my street not paved? Why is my library not open? Why aren't there enough police officers?', it's because the pension system has grown to such a large proportion," said Oliverio.

In San Jose, officials say employee costs have risen three times faster than revenues in the last decade, driving a nine-year run of red ink that's projected to continue.

Pension costs alone have soared 131 percent during that time. And to make up losses from the recent stock market crash, the city will have to boost its $138 million annual contribution to its pension funds by more than $60 million this year.

Taxpayers are on the hook to make up the difference if the funds do not hit their projected return rates, which are set by two independent pension boards.

Most San Jose city employees can retire at 50 percent salary at age 55 if they have 20 years of service. The average retiree receives $38,666 a year, as well as free health care and other benefits.

Public safety officers do considerably better: they can retire at 90 percent salary at age 50 if they have 25 years of service. Those retirees receive an average pension of $85,000 a year.

As always, the union response is to bitch and moan like they always do. In fact, unions spend more time bitching and whining and collecting benefits than they do working. Police can retire at age 50 after 25 years, and if they live to age 75 or longer, they collect more in unemployment than they did working.

The solution is not to increase union contribution levels but to eliminate public contribution and responsibility totally. Taxpayers should not be on the hook for inane pension plan assumptions of 8.5% a year or so.

The best way to go about this is to outsource the whole thing just as Maywood did. San Jose could then lower property taxes, putting much needed money in taxpayer pockets.

Montreal port lockout jams up Seaway

Global News reports Montreal port lockout jams up Seaway

The St. Lawrence River is supposed to be Eastern Canada�s busiest shipping route, a quick way for overseas companies to get their liquor and clothes to Chicago and Detroit as well as Quebec and Ontario. But events over the past seven days have jammed the river with ships lined up stem to stern and new arrivals are being turned away to U.S. East Coast ports.

�The port is shut down. There are no ships and no trains coming in or out,� Port of Montreal spokesman Jean-Pierre Lejeune said Monday. Four or five commercial vessels are in the river outside port waters and they�re not moving, he said.

Some of the largest shipping lines that normally dock at Montreal are diverting to the U.S. ports of New York and Norfolk, Va., said Gilles Corriveau, spokesman for the Maritime Employers Association, the main industry group representing shipping lines and other employers in the port.

The Employers Association said it locked out some 850 dock workers as of Monday in a disagreement over pay. The two sides had been in negotiations for a new labour contract that expired in December 2008.

The dispute centres on terms of the expired collective agreement related to pay and job security. Under the agreement�s decades-old job security plan, Montreal�s longshoremen are guaranteed between 1,280 and 1,600 work hours over a 40-week period each year and receive full pay even when they are not working.

Read that last paragraph again. The union demands to be paid 32-40 weeks whether there enough work or not. Clearly this is insane.

The union whines this will assure a "guaranteed pool of workers available for work 24 hours a day every day."

On the other hand, I assure you that if they killed this union, there would be a line 5 miles long of people wanting those jobs. That is the "seen".

The unseen benefit is lower transportation costs means lower costs across the board to consumers. It would be a win-win situation to get rid of the union.

Ontario to appeal for public-sector wage freezes

As in many cities and states in the US, public union wage and benefit discussions are taking place in Canada. Please consider Ontario to appeal for public-sector wage freezes.

Ontario Finance Minister Dwight Duncan will meet public-sector employers and labour leaders on Tuesday, where he will appeal directly to them to impose wage freezes.

Mr. Duncan put teachers, nurses and other unionized workers on notice in the provincial budget in March that there will be no money for wage hikes when their collective bargaining contracts expire. But Tuesday will be the first time he delivers that message face-to-face to about 60 public-sector executives and union leaders.

Canadian Union of Public Employees Ontario president Fred Hahn said he plans to tell Mr. Duncan that wage restraints don't work, especially at a time when the economy is showing signs of recovery.

�It's a punitive, panic-driven measure that we think will hurt the economy,� Mr. Hahn said in an interview on Sunday.

Fred Hahn proves that public union bitching, whining, and moaning is not just a US phenomenon.

The problem is wages do not need to be frozen, they need to be rolled back, as do pension promises.

Once again, the best way to address this is to simply get rid of the union workers, as Maywood did.

I assure my Ontario and California readers the sky will not fall if these actions are taken. Better yet, getting rid of unions will put money back in taxpayer pockets where it belongs.

Addendum:
San Jose can no longer afford Janitors

Here is an article about San Jose that was just brought to my attention: Cities Rent Police, Janitors to Save Cash

Faced with a $118 million budget deficit, the city of San Jose, Calif., recently decided it could no longer afford its own janitors. So the city's budget called for dropping its custodial staff and hiring outside contractors to clean its city hall and airport, saving about $4 million.

To keep all its swimming pools open and staffed, the city is replacing some city workers with contractors.

"These are cases where the question is being asked, 'Is this a core service at the city level?' " said Michelle McGurk, senior policy adviser to the San Jose mayor.

After years of whittling staff and cutting back on services, towns and cities are now outsourcing some of the most basic functions of local government, from policing to trash collection. Services that cities can no longer afford to provide are being contracted to private vendors, counties or even neighboring towns.

Cities say they have little choice. Municipalities across the U.S. will face a projected shortfall of $56 to $86 billion between 2010 and 2012, according to a report from the National League of Cities.

"You can do across-the-board cuts for only so long," said Andrew Belknap, Western Regional Vice President for Management Partners, a government consulting group. "It's gone from the tactical cost cutting to get through a recession, to in some cases saying we have to exit that business or service altogether."

San Jose will quickly discover the sky will not fall. Hopefully that will provide the impetus to do what really needs to be done: outsource the police and fire departments.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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