REVOLT!

In a moment that defined their political careers, Montgomery County Council Members Duchy Trachtenberg, Phil Andrews and Valerie Ervin put the fate of the public employees’ cost of living adjustments on the table last Friday. Present to greet them were over 300 chanting, stomping, clapping and occasionally yelling union members.


Council Members Trachtenberg, Andrews and Ervin are members of the council’s Management and Fiscal Policy (MFP) Committee. The committee’s charge on Friday was to discuss the extent to which savings on the county’s labor costs should be applied to fix its $297 million budget deficit. “Labor savings” ultimately means funding less for personnel costs than is called for in the county’s collective bargaining agreements: a practice derisively labeled by the unions as “contract busting.”

A word about the union members in the pictures. Assembled by pugnacious MCGEO President Gino Renne in the nearby County Executive Office Building, they were in no mood for “contract busting” and marched across a rain-soaked street to confront their council overseers. Their radioactive yellow battle color is not intended to please the eye and it certainly does not. It is designed to attract attention. They certainly received plenty of it on Friday.

Council Member Trachtenberg, chairwoman of the MFP Committee, opened the meeting with new transfer and recordation tax receipt numbers for April. Transfer and recordation taxes depend on property sales and they have been devastated by the recent collapse in the county’s real estate and construction market. According to Ms. Trachtenberg, the county received $13 million in transfer and recordation taxes in April 2008, down from $18 million in April 2007. For the year to date, transfer and recordation taxes totaled $138 million, down from $180 million the year prior. “Taxpayers are reaching a breaking point,” declared Ms. Trachtenberg and that justified a 2% reduction in the unions’ negotiated COLAs.


Council Member Andrews agreed. Citing the fact that personnel costs accounted for 80% of the county’s budget, he told the ornery union members, “What’s fair is to ask everyone to help.” As he has for months, he criticized the unions’ agreements as “unaffordable” and stated flatly, “I would not have negotiated the contracts that came over to us.” Supporting Ms. Trachtenberg, he said, “I believe that the 2% COLA reduction is a fair way to go.”

Pictures cannot do justice to the unholy din created by the roaring public employees. Hundreds of police officers, bus drivers, librarians, deputy sheriffs, correctional officers and park and planning workers rose to their feet to challenge Council Members Trachtenberg and Andrews. “What are you giving back?” one cried. “We are the taxpayers!” another yelled. “You’re hitting us twice!” pointed out one employee who was also a county resident. Worker after worker decried simultaneous increases in fuel and food costs, cuts in county services and proposed cuts in COLAs as a squeeze on their standard of living from multiple sides.

And then Ms. Ervin took the mike. She is a 25-year veteran organizer and trainer in the labor movement and everyone knew what she would say. “I was a proud member of the UFCW union,” she announced to the crowd. “We do not have to balance this budget on the backs of working people.” She recounted a bookful of statistics on poverty and income inequality to the groans of the audience (some of which we will examine on this blog) and concluded with, “Montgomery County is affluent for only some people.” “I believe that cutting salaries will hurt our local economy,” she said, “and I will not support a 2% COLA reduction.” We present the crowd’s reaction below.


In the end, the MFP Committee did not recommend a 2% COLA reduction. Instead, Ms. Trachtenberg introduced a motion calling for $40 million in “labor savings” with the exact mechanism to be decided later by the rest of the County Council. Mr. Andrews concurred and Ms. Ervin ferociously dissented. Neither the council members nor the staff justified this particular number against a lesser or greater amount. No mention was made by anyone of the unions’ identification of $67 million in additional revenues and savings as reported on this blog. The Post and the Gazette also omitted that fact from their coverage.

So what will become of the committee’s proposal for “labor savings,” a euphemism for underfunding the contracts? There do not appear to be any other votes on the council for the MFP Committee’s proposal, especially considering the fact that the union contracts are affordable in the next fiscal year. Instead, a rough consensus is forming in favor of a slightly lower property tax increase than that proposed by the County Executive along with a carbon tax proposed by Council Member Nancy Floreen.


But even that plan involves breaking the county’s charter limit on property tax increases, which generally holds tax receipt gains to a level equaling the increase in the consumer price index. Seven of the eight County Council Members must vote to exceed that limit. Both Council Members Trachtenberg and Andrews oppose breaking the charter limit, enough to kill any property tax hike. Will either of them budge on that position, thus enabling the union contracts to be preserved? That is the big question. We will have an answer by Thursday.

Labor Between the Hammer and the Anvil

As Montgomery County's budget battle draws to a clamorous climax, a new bomb has been dropped.

Yesterday, Council Member Trachtenberg sent the following letter calling for a 2 percent cost of living reduction to each of the county's public sector unions:



The unions countered in two ways.

1. In a letter to Ms. Trachtenberg sent today, MCEA, SEIU Local 500 and the school supervisors listed $67 million in new revenues available to the council next year. Those revenues include:

$14 Million
Adjustments in OPEB [contributions to future retiree healthcare liabilities]; would allow for 8 year payout, but does not assume the same level of increase; $11 million in savings from MCPS and $3 million from other agencies.

$9 Million
Net gain from increases in energy tax [as proposed by Council Member Floreen].

$10 Million
Could be taken from PAYGO.

$19 Million
Reduction of .5% into the reserve [maintained by the county to protect its AAA credit rating].

$15 Million
Potential carry-over carry over funds that were set aside in the FY 08 budget for emergencies, such as snow removal that were not needed.

2. In their letter to Ms. Trachtenberg, the unions state, "An additional source of revenue is to take into account any revenues in excess of projections in the current budget. We have no knowledge of what that figure is since it has not been shared by the County Executive’s office." Indeed, rumors are flying that the county's income tax receipts may be higher than first thought. The unions have sent a Freedom of Information (FOIA) request to the County Executive's office seeking a monthly tabulation of new income tax revenues received from the state. They hope to discover evidence that income tax receipts are higher than projected, thus relieving the pressure on their contracts.

One of the sad aspects of this showdown is that it may not be necessary. A week ago, we demonstrated to our readers that the County Executive's budget projects $301 million in new revenues for FY09 against $154 million in added union labor costs. At least for next year, labor's cost of living adjustment is easily affordable. Nevertheless, the hammer is falling.

In the private sector, an employer could not do what the county is considering. If a private company attempted to unilaterally change a labor agreement, the union could strike, file unfair labor practice charges, get enforcement orders from the National Labor Relations Board and the courts and file suit to collect benefit contributions. Only employers under bankruptcy protection could unilaterally alter wage levels. Montgomery County may be in a recession, but it is not under the supervision of a bankruptcy judge!

The fate of the unions' COLAs is far from certain. Council Members Trachtenberg and Phil Andrews can block the County Executive's proposed property tax increase, which requires seven of the eight sitting council members to pass. But altering the union contracts would require five votes. It may be difficult for Ms. Trachtenberg and Mr. Andrews to find three more council members willing to cut the COLAs when there are less electorally-threatening alternatives available.

And if the council simultaneously rejects the property tax hike and rejects COLA reductions, what then? No one knows. But the choice must be made in less than a week.

Challenge to the Unions, Part Two

In Part One, we reported on County Council Member and Management and Fiscal Policy Chairwoman Duchy Trachtenberg’s letter to public employee union MCGEO offering a choice between layoffs and COLA reductions. Today we examine whether those measures are justified by the county’s dire budget situation.

Concerned over the county’s long-run finances, Council Member Trachtenberg asked council staff for an estimate of the future obligations to the county imposed by its public employee union contracts. Two weeks later, the County Council’s merit staff director responded with a 129-page memo outlining those costs. Page 2 of the memo contained this statement:

Councilmember Trachtenberg has requested information on agency compensation costs over time. One measure of these costs is the cumulative fiscal impact of the current or pending three-year negotiated agreements with the six County and MCPS unions, starting with the base year. See the fiscal impact statements on pages 37-39 and 111-113. The cumulative fiscal impacts are $117.9 million for MCGEO [government employees], $45.4 million for the FOP [police], $37.2 million for the IAFF [fire fighters], $61.9 million for non-represented employees in County Government, and $577.7 million for MCPS.

The total of these amounts, $840.1 million, does not include higher ongoing costs for health benefits for active and retired employees, nor does it include the $1.2 billion cost of the proposed eight-year pre-funding schedule for future retiree health benefits.

Are these marginal costs really accurate? We looked up the supporting data on pages 37-39 and 111-113, which correspond to pages 53-55 and 127-129 in the pdf document. Following is our tabulation of all marginal costs reported.

The marginal costs for each of the employee categories amount to $134 million in FY08, $176 million in FY09, $225 million in FY10 and $21 million in FY11 for a total of $557 million over the four years. (The estimate is low for FY11 because only the fire fighters’ agreements cover that year.) This total is much lower than the $840 million reported on the second page of the staff report, even though that summary refers to the pages tabulated above. There is simply no data in those pages to justify the $840 million estimate.

Furthermore, marginal cost data for FY08 should not be construed as a future obligation faced by the county. FY08, the current fiscal year, expires on 6/30/08. Those costs have mostly been paid already.

Finally, the analysis includes marginal costs due to fire and rescue management and non-represented employees. Why should the unions be held responsible for additional spending on employees they do not represent?

Subtracting out costs for the almost-expired FY08, the fire and rescue management and the non-represented employees, the remaining future obligations faced by the county total $154 million in FY09, $193 million in FY10 and $20 million in FY11, or a combined $368 million. This is a far cry from the $840 million cited at the beginning of the staff report.


Are added salary costs of $150-200 million per year sustainable? The answer depends on the county’s economic performance and the county government’s revenue collections. According to revenue statistics released by the County Executive, revenues collected by the county are projected to rise by $109 million in the current fiscal year (between 7/1/07 and 6/30/08). That overall rise in receipts occurred despite the facts that a) county receipts from the real property transfer tax dropped from $107 million to $80 million (down 25%), b) receipts from the recordation tax dropped from $73 million to $53 million (down 27%) and c) the county may have entered a recession. The above means that even in a really bad year, the county’s revenues continued to rise.

The County Executive’s proposal projects a further rise in receipts in FY09 of $301 million, partially due to his property tax increase. This would be more than enough to pay the $154 million in extra costs associated with the union contracts. At least for next year, the county should be able to meet its labor obligations if it adopts a budget similar to the County Executive’s recommendation.

As for the future, the most volatile components of the county’s revenues are the two tied to real estate sales: the real property transfer tax and the recordation tax. According to the county’s Department of Finance, residential real estate sales volume averaged over $500 million per month from 2006 through the first eight months of 2007. Since then, residential real estate sales volume has averaged between $200 and $300 million per month. It is this collapse in residential real estate transactions that has caused many of the county’s current budget problems. All policymakers – both inside the government and inside the unions – should watch this figure in the Finance Department’s monthly economic updates. If it rises back up to $400 million per month or more, the county’s real property transfer and recordation taxes will begin to recover. If it falls further, tougher times are ahead.

Challenge to the Unions, Part One

In a story first reported by the Washington Post’s Ann Marimow, Montgomery County Council Member and Management and Fiscal Policy Committee Chairwoman Duchy Trachtenberg has written to UFCW Local 1994 (MCGEO), one of the county’s public employee unions, offering a choice between layoffs or smaller pay increases. We reproduce the letter and discuss its importance below.

April 29, 2008

Gino Renne, President
UFCW Local 1994 MCGEO
600 S. Frederick Ave., Ste. 200
Gaithersburg, MD 20877

Dear Mr. Renne:

In light of the difficult decisions County Council faces for the upcoming budget, I am turning to elected union leadership for counsel during this process.

The strong advantage of having union represented county employees is that the union structure, through its elected leadership, is an excellent conduit to reach out to the rank and file. It is important to each councilmember to hear and respect what options county and school employees would prefer as the Council balances the interests of residents across Montgomery County while making our final budget decisions. Without unions in place, this process would be much more difficult.

With the uncertainty of the County Council’s willingness to break the charter limits and concerns over jeopardizing our AAA credit rating, we may well not have the revenue needed to execute the current CBAs [collective bargaining agreements] without invoking their provisions for Reductions in Force. In an abundance of caution, I want to begin a conversation about all available options that might come forward to avoid force reductions as we face the budget deficit.

I am reaching out for an honest and open discussion of options to address our budget deficit. This invitation is extended to MCGEO, SEIU 500, FOP [police], IAFF [fire fighters] and MCEA [teachers]. To facilitate our discussion, below is a list of ideas that have come to my attention that warrant a response from organized labor. You are all invited to submit a memo outlining your concerns and options you feel will be acceptable to the county and school system employees you all represent.

1. If your members were given a choice between a reduction in COLA [cost of living adjustment] or involuntary layoffs through each contract’s provisions for Reduction in Force, which option do you think your rank and file would find most acceptable?

2. The County Executive projects only 58 employees will take an early retirement buyout option. Do you concur with this position, or do you believe there is more demand for this option? What are the best ways to structure these offers to make them more appealing to your members?

3. Would you have members interested and able to participate in a voluntary layoff program that would protect their seniority and health insurance while they drew unemployment for six months? Would there be more interest if this option could be used as a way to bridge a member to retirement?

4. During the District 4 Special Democratic Primary, Don Praisner proposed an extensive labor management cooperation program to help identify savings, much in the same manner as MCGEO’s letter to council. Would your members be interested in such a program?

These questions by no means limit our conversation. For further clarification of this request and any other questions you may have, please contact Eric Hensal through my office. Eric is a former union organizer with a depth of experience in labor issues and a Masters of Public Administration earned through the National Labor College. I am sure you will find Eric an excellent resource as we all chart a course through the current budget crisis.

Cordially,

Duchy Trachtenberg
Chair, Management and Fiscal Policy Committee

cc: Honorable Ike Leggett, County Executive
Honorable Mike Knapp, Council President
Honorable Phil Andrews, Council Vice-President
Steve Farber, Council Staff Director

The letter is a dramatic development in the county’s budget crisis for several reasons.

1. There are only about two weeks to go before the County Council begins voting on the FY09 budget. This letter to the unions comes late in the game. As recently as April 9, the Gazette reported that Council Member Trachtenberg “said the contracts with county employees should be honored.”

2. When Ms. Trachtenberg refers to “the uncertainty of the County Council’s willingness to break the [property tax] charter limits,” she is referring to a situation over which she has some control. After all, Ms. Trachtenberg told the Gazette, “I do not support going over the charter limit.” Added to Council Member Phil Andrews’ opposition to the property tax increase, the tax hike is in real danger of not passing because it requires seven of the current eight council votes. Ms. Trachtenberg’s opposition to the property tax hike may in fact be creating a need for the sort of choices she is now offering the unions.

3. The reference to Eric Hensal is noteworthy. Hensal lost a special election in Takoma Park to fill Marc Elrich’s vacant city council seat and went on to manage Don Praisner’s District 4 County Council campaign. During the District 4 campaign, the Post reported that Hensal was seen entering the County Council building for lunch appointments with staffers for Marilyn Praisner and Ms. Trachtenberg. Has he now been hired as council staff or as a consultant by Ms. Trachtenberg? If he is a consultant, a reference to him in the letter is very unusual. Why would a sitting council member allow a third-party consultant to speak for her on such a vital matter as employee layoffs or COLA reductions?

But there is more. The public sector unions have not forgotten Don Praisner’s frequent criticism of their contracts during the special election. Nor have they forgotten how the Praisner campaign branded union-backed Nancy Navarro as a “special interest” candidate. Are any of the unions likely to view Mr. Praisner’s campaign manager as a desirable interlocutor for labor relations issues?

4. Ms. Trachtenberg gained a famous fan through her letter: none other than Robin Ficker. On Maryland Moment, Ficker squealed with delight:

Trachtenberg is just the kind of person I like---one tough cookie when she wants to be. Continue asking the tough questions Duchy. Social security recipients get a 2.3% increase in 2008 with NO step increases. I loved Charles Barkley. I would ask him, “Charles I know you want to run for Governor of Alabama, but before I vote for you I want to know your views on the economy, NAFTA and healthcare.” He would reply, “Well, I do have a view on the death penalty----they should use it on you!” Trachtenberg reminds me of Barkley.

All of the above is subject to one awful truth: the county is facing a $297 million budget deficit and the County Council has two weeks to go before the tough votes come. Ms. Trachtenberg did not create this deficit and the problems are real. In Part Two, we will examine whether the county can meet its contractual obligations to the unions in the current budget environment.

Budget Cutbacks at MPW

Recently, we have offered frequent coverage of budget problems at both the state and county levels to our readers. This week, the Gazette reported that MCGEO – the county government employees union – submitted a list of budget savings to the county including limits on toilet paper provided to inmates. In that spirit, we at MPW are announcing a package of budget cutbacks at this blog to deal with our own financial difficulties.

1. MPW owner David Lublin has called his union contract with myself, Kevin Gillogly and Paul Gordon “unsustainable.” Apparently our provisions on catch-up pay to the bloggers on Free State Politics are excessive. So David is cutting our cost-of-living increase to zero, which should save him a lot of money. In return, he is terminating his union-avoidance consultant.

2. We will be introducing a new comment fee for our readers. Anyone posting comments of praise for our opinions, writing skills or superior good looks will be exempted from the fee. Extra charges will be assessed on anyone making more than a million dollars per year, any developers, any members of MCDCC or PGCDCC and any politicians who voted to pass the much-hated blogger tax.

3. We will no longer be employing Itchy and Scratchy as security service providers to this blog. Our readers are aware that we have occasionally criticized certain officials inside the county government. So a couple months ago, we decided to hire a security service for fear of encountering active intimidation by county government employees. But now Itchy and Scratchy will have to return to the state fundraising circuit.

4. Our much-anticipated $65,000 bathroom project with a private shower is indefinitely postponed. The reason is simple: our readers access our content from remote locations. If you are not in our physical presence, what need do we have for hygiene?

5. The saddest casualty of our budget cuts may be David’s hairless chihuahua, Muffitt. He can no longer afford to feed caviar to Muffitt on a daily basis so her fine dining needs will now be covered by donations from the Columbia Country Club.

But fear not for Muffitt! We are sending her to work on Senate President Mike Miller’s staff and, in a couple years, she will leave to pursue her fortunes as a high-priced, Miller-connected lobbyist! Muffitt’s burgeoning career in Annapolis will no doubt pay the bills for MPW (as well as David’s mortgage)!

Last Pre-Election County D4 Round-Up

By tomorrow night, this race will be over. Here’s the state of play one day out.

On press, coverage has picked up in the last week. The Post has written its last wrap-up article. Maryland Moment discusses a spat over an email sent by MCEA to its members. Dan Reed at Just Up the Pike has interviews up with almost every candidate. He will post an interview with Don Praisner tomorrow morning. Politicker Maryland has posted interviews with Praisner, Pat Ryan and Nancy Navarro’s campaign manager in the last few days.

On the ground, it appears that Navarro has sent out more literature than the other candidates combined. Some District 4 residents have reported receiving more than a half-dozen mailers from her over the last three weeks. Recently, Navarro lit has been showing up with “Endorsed by the Washington Post” stickers. The signs are more balanced among the Democrats; Praisner probably has a narrow lead with Navarro and Ryan close behind. Republican Mark Fennel may have more signs up than all the Democrats combined, with each accompanied by a “Robin Realty” sign. The three largest MoCo unions - MCEA, SEIU Local 500 and UFCW Local 1994 (MCGEO) - have several thousand members inside the district and are no doubt calling and emailing them on Navarro’s behalf. Don Praisner will be drawing on a list of everyone who has contributed to or supported Marilyn Praisner over the years and his campaign will be asking them to show up one last time for the family.

The great unknowable is who will arrive at the polls tomorrow. In the special election to fill the County Council District 5 seat in Prince George’s County, only 8% of the registered Democrats showed up. If turnout is less than that, Don Praisner will have the advantage. All sides concede that the Praisners have a devoted base inside the district who are sure to vote. But if turnout gets into the mid-teens, Navarro will close the gap.

So now the great call-out begins. Over the last several weeks, each of the candidates has been identifying their voters and earning their loyalties. Now they have to make sure that their people show up. That will determine the course of the election, the holder of the council seat and the political direction of Montgomery County for the next two years.

A Note on Labor Endorsements in CD4

Here's a quick observation from a labor guy on union endorsements in the Wynn-Edwards race.

The labor movement has been unusually divided between the top two contenders in CD 4: Al Wynn, the incumbent and Donna Edwards, the returning challenger. Wynn's biggest labor endorsers are the MSTA/NEA funds (the state teachers), the Washington Metro AFL-CIO, the Maryland-DC AFL-CIO, SEIU Local 400 (Prince George's local schools employees), AFSCME Local 2250 (Prince George's government employees) and the Washington DC Building Trades. Edwards' endorsers include the national SEIU, the national UNITE-HERE, UFCW Local 400 (grocery workers) and Progressive Maryland. She has also earned important non-labor endorsements from NOW, the Sierra Club and Emily's List.

When labor unions endorse, they bring either money, people power or both. In the Wynn-Edwards race, both of the leading candidates have enough money to compete. And both of them already have lots of name recognition in the district. So the labor endorsements that will matter the most will come from unions that 1. have lots of members in the district, 2. can get their members to turn out, and 3. have volunteers that can handle other tasks on behalf of the campaigns, including communication with non-members.

On the Wynn side, the most meaningful endorsements come from the Teachers. Both MCEA and PGCEA use Apple Ballots in their campaigns. But there are real questions as to whether either Apple Ballot will be used for a federal race and whether either affiliate will truly work hard for Wynn. On the Edwards side, the most meaningful endorsements come from UFCW Local 400 (grocery workers), the national SEIU and especially Progressive Maryland. PM has a large email list and engages in plenty of door-to-door work. But it will have to be just as active in Prince George's as it usually is in Montgomery to maximize its impact for Edwards.

So my best guess is that if the Teachers go all-out for Wynn, he'll have the edge. If they don't, PM will give the edge to Donna Edwards. But labor support is only one small dimension in this race. The overriding factors will be the level of satisfaction with Wynn inside the district and the relative skill each side shows in getting turnout. And the minor candidates could drain a few votes from Edwards, though none has yet demonstrated real strength in the district.

Two other interesting facts stand out. First, the 7000-member UFCW Local 1994 (the MoCo government employees) has not endorsed either candidate. Second, it is extremely unusual for a local union (SEIU Local 400) to take an opposite position from its parent. I cannot recall this happening inside my union, where the international and the regional councils closely align. It is probably a sign of the unusual volatility and strong feelings in this particular race.