The following table, from the City of Palo Alto bi-annual budget, provides a clear, and
concise, view of the costs of labor for the City Government:
Bargaining Units:
MGMT - Management
IAFF -- Firefighters
FCA -- Firefighter Management
SIEU--Hourly Employees
PAPO--Police
City of Palo Alto Compensation Model
While there seems to be no published compensation model for the City of Palo Alto, it’s
clear from reading the City’s published budget that the following basic model is in use:
• Salaries are linked to other government agencies, not similar jobs in the private
sector.
• Salaries increase yearly, without concern for the intrinsic value of the job.
• Salaries increase based on the number of years the employment.
• There are no caps to salaries.
• Salaries tend to double every 12-15 years, depending on various factors.
• Salaries and Productivity are not linked.
• Pensions are linked to the high year’s salary.
• Employees are not expected to contribute very much to their “benefits’ package.
• Benefits are not capped, as a percentage of salaries.
• Post-retirement benefits are managed by CalPERS using money management for
the bulk of post-retirement funding. PA employees have not been expected to
contribute very much for these lavish post-retirement pensions.
• Pensions for employees making over 100,000 per year will payout $2M-$4M
over a 30-year retirement.
• Post-retirement health care is also provided by the City.
20-Year Salary and Benefit Cost Projections
Using 10-year averages for each of the bargaining units, provided by City of Palo Alto
Human Resources, the table below projects the costs of salary and benefits forward
twenty years:
The following is a graph that might help to visualize the growth of the salaries and
benefit costs of the Palo Alto employees over the next twenty years:
$500,000
$400,000
Salary And
Benefits
$300,000
$200,000 MGMT
$100,000 IAFF
Bargain-
$0 FCA
ing
2011
PAPOA
2015
2019
2023
SEIU
2027
SEIU
2031
MGMT
Projected Timeline
20-Year Salary Projections
The following table projects just the salaries of the main bargaining units, without benefit
costs, over the next twenty years:
Conclusions
The City of Palo Alto’s presumed compensation model for its staff seems to be uncapped,
doubling every so often, with pensions linked to the high year’s salary. The data in the
tables presented in this short paper was derived from the 2010-11 bi-annual budget, and
ten-year average pay increases for each bargaining unit, which was provided by the Palo
Alto Human Resources Department.
The many newspaper articles that now can be found in just about every newspaper
around the country use terms like “unsustainable”, but do not seem to provide hard
details about what “unsustainable” really means. Given that the pension problem is
linked to the uncapped, and rapidly escalating salaries of government officials, and staff,
this issue of “unsustainability” becomes a two-pronged problem—government salaries
and government pensions.
Many local governments do not seem to be fully aware of the problem, at least not in
terms of providing this sort of twenty-thirty year projections of salaries and benefit costs
so that taxpayers, business owners and residents would understand just how high the
costs of local/state/federal government have become, and how even more expensive these
costs will become in the coming years.
Solutions are numerous, but doubtless will require outsourcing as much of local
government as possible to the private sector, rescinding these guarantees of lavish
pensions (which become in the $4M-$10M as these salary bases grow ever larger.
If our elected officials can not understand these issues and take the appropriate actions,
the voters will have to take matters in their own hands.
On-the-NET: