County supervisors have placed a new tax measure on the November ballot to benefit the Contra Costa County Fire Protection District. Measure Q is a parcel tax intended to boost District finances now plagued by reduced property tax income and rising labor costs. In truth, though, this tax does not address the root cause of the District’s money troubles. This is one reason County Supervisor Candace Andersen opposed the tax measure, which was approved on a 4-1 vote.
The District expects the proposed 7-year parcel tax to raise about $17 million annually through a yearly flat $75 tax for homeowners; a half-rate for apartment units and vacant parcels; and $75 per-quarter-acre for commercial/industrial land. District polls predict the measure could pass with the required two-thirds support from voters, but only if there is no opposition campaign. Since the measure doesn’t solve the problem, opposition is strong.
Without this tax, the District projects a budget deficit next year of $13 million. With the tax – and using the District’s unrealistically rosy revenue and expense projections – the District projects a $2 million budget deficit in budget year 2015/16.
A Band-Aid — Not a Cure
While the tax would provide the Fire District short-term budget relief, it does nothing to address chronic fiscal mismanagement and resistance to change. Consider:
- Labor costs consume nearly all of the District’s income. In 2003/04 labor costs (i.e., salaries, benefits, pension bond payments) represented 84% of all District revenues. In 2013/14 this figure jumps to 103%. Living beyond one’s means is a formula for failure.
- The District allocates insufficient funds for vehicle replacement and fire station maintenance. While one fully-equipped fire rig can cost up to $1 million, the District no longer maintains an adequate vehicle replacement fund. As a result there is a chronic shortage of funds available to meet the District’s capital maintenance and replacement needs.
- More economical service delivery methods should be explored. A recent Contra Costa Times editorial states, “There has been no serious evaluation of alternatives. Instead, voters are told to either pay more or watch homes burn.” The District’s stubborn resistance to change was on display recently during discussion among county supervisors regarding a draft response to a grand jury report. Chief Daryl Louder defensively insisted that the District’s current system “is not flawed,” while Supervisors John Gioia and Candace Andersen disagreed with Louder’s assessment.
The Fire District acknowledges the impact of rising labor costs, which restrict funds available for other purposes. Since pension costs, in particular, consume a progressively larger share of the annual budget, county supervisors urge adoption of a lower pension benefit for new hires. Firefighters say they’re willing to discuss this change, which county employees have already accepted.
But adding a lower pension benefit does not address the Fire District’s current fiscal woes. Since it only affects new hires, whatever savings this change can yield won’t come for decades. And the state’s new pension reform legislation, recently signed by Governor Brown, amounts to nothing more than tinkering at the edges, offering no significant short-term fiscal relief.
Something’s Gotta Give
Because pensions take more than their fair share of the Fire District budget, little is left for anything else. And as pension costs escalate, each year this problem gets worse. The only way to solve the current problem is to adopt lower pension benefits for all current and future employees. Yet county supervisors and employee unions reject this solution, citing legal uncertainty.
California courts have long held that unearned, future pension benefits are contractually protected, thus cannot be reduced. However, the Little Hoover Commission watchdog group and legal scholars maintain that pension benefits can be reduced prospectively for current employees.
Ultimately bankruptcy may be the only alternative when fiscal insolvency strikes and taxpayers refuse to pay more. Sacramento Bee columnist Dan Walters reports that, while California’s state constitution protects pensions as contracts, federal bankruptcy law may trump the state constitution’s contract impairment provision. In an August 2012 federal bankruptcy court ruling related to City of Stockton retiree health benefits, the judge stated: “While a state cannot make a law impairing the obligation of contract, Congress can do so. The goal of the Bankruptcy Code is adjusting the debtor-creditor relationship.”
As more California government agencies declare bankruptcy these legal issues may evolve to provide elected officials new mechanisms to reduce benefits in order to achieve long-term fiscal solvency. This would be an important development for agencies at the financial brink, such as the Fire District.
Ballot Box Success a Long Shot
The Fire District needs to agree on a plan to deliver needed services at an affordable cost. Likewise, the District must assure employees that its pension system is financially sound. Because residents demand value for tax dollars already given, they expect government to manage money responsibly and live within its means. Given the lackluster economy and public skepticism of government spending, voters are unlikely to support this new tax.
Public confidence about personal finances has declined. In recent years, families used savings to survive unemployment and other impacts of economic downturn. Today most residents and business owners don’t have extra income to pay higher taxes. Further, placing additional tax burdens on commercial property owners hurts the local economy and jeopardizes jobs. As taxpayers see it, this is reality, and county supervisors remain oblivious.
With this measure the Fire District offers voters an ultimatum: pay more taxes or accept reduced services. By opposing the measure, taxpayers present a counteroffer: Spend public money responsibly and live within your means. Only then will taxpayers be receptive to plans for new taxes.