The results of California’s 2010 midterm elections were tremendously discouraging for voters eager to rein in the influence of the state’s public-employee unions. While other states, like Wisconsin, elected political leaders willing to confront union power aggressively, Californians could only look on in frustration as pro-union politicians prevailed across the Golden State. But there is at least one beacon of hope in California: the Orange County city of Costa Mesa, which has charged ahead to address budget deficits by making massive cuts to its municipal workforce.
In March, Costa Mesa’s city council voted 4–1 to issue layoff notices to nearly half of the city’s workforce—more than 200 workers—and to outsource many city services, including street sweeping, payroll, printing, information technology, animal control, park maintenance, and some fire protection. These are eminently reasonable steps, given the city’s fiscal challenges. Costa Mesa faces a $3.3 million budget deficit in the 2011–12 fiscal year, pared down from a projected $5.1 million, and some of its leaders, including city councilman Jim Righeimer, worry that the budget situation could grow far worse in the future without immediate reforms. Righeimer, who campaigned on pension reform in 2010, says that while it’s unclear exactly how much money outsourcing will save the city, “it will be substantial.”
As Jennifer Medina wrote in the New York Times, Costa Mesa’s efforts, if successful, “will, in one great swoop, reinvent municipal government here, and perhaps lead the way for other cities.” Some have even begun calling Costa Mesa “mini-Madison.” Indeed, Costa Mesa is addressing not only the imminent fiscal threat but also its underlying cause: the size of city government and the scope of its services. City-employee compensation is way out of line with what city residents earn. The median compensation for a city worker is $140,000, including benefits. The median income for a Costa Mesa resident, meanwhile, is around $60,000; if you tack on the usual 25 to 30 percent to include benefits, you’re still left with a compensation level that’s about half what city workers make.
The reforms will also do the essential service of taking some pension benefits off the city’s books. Each year, Costa Mesa has to send a check to the state’s pension fund to cover part of the city’s unfunded pension liability and current commitments—that is, the difference between what it has promised to spend on city employees’ pensions (and related borrowing costs) and what it has actually paid. This year, the check amounted to $18 million, a big fraction of Costa Mesa’s municipal budget of $93 million. But the city’s unfunded pension liability has been rising rapidly and now totals $221.7 million, meaning that without the layoffs and restructuring, the city would soon have to spend not $18 million a year but $25 million. That would crowd out more and more city services.
The pushback against Costa Mesa’s actions started immediately. “The right-wing Republican extremists who are leading the assaults on working people in Wisconsin have hit home locally, attacking working families in Costa Mesa,” the Los Angeles Democratic Party said in a statement. Local unions, led by the Orange County Employees Association, called Costa Mesa’s reforms hasty and heartless. Art Pulaski, executive secretary-treasurer of the California Labor Federation, said that organized labor needed to put out the brushfire in Costa Mesa to prevent it from spreading through Orange County and the rest of the state. Union-funded Internet and TV ads attacking the current city council have begun to appear. And lawyers for the Orange County Employees Association have filed a lawsuit to block the layoff plans; a superior court judge has set a hearing for July. Meanwhile, there is some talk of a recall election for the city council.
Since the announcement of the city council’s reforms, emotions have run high, with the lamentable suicide of a laid-off city employee and the vandalism of a bar owned by Costa Mesa’s mayor. Pain and adversity for the city will undoubtedly continue in the coming weeks and months. But if successful, Costa Mesa’s reforms offer a model for other cities throughout California and perhaps the nation.