BHEA’s Salary Formula: Fiscally Imprudent & Unsustainable

The BHEA, the teachers’ union in Beverly Hills, accuses me of “uncivility” because I suggested their position that defends linking teacher salaries to Beverly Hills property values is “intellectually dishonest.”

(They also accuse me of being misleading and factually inaccurate in my takedown of their bogus arguments. More on that later).

As an elected leader, I look at it as my job to defend our residents and our City against attempts to insult our collective intelligence and I make no apologies for it. What is uncivil, in my opinion, is the attempt to spin and deceive our Community about a salary formula which could vie fairly to be the textbook definition of the concept of “fiscal imprudence.” I look at it as my duty – and a mitzvah – to take a strong position against any attempts to insult our collective intelligence, whether the matter has to do with land use, fiscal responsibility or anything else.

As I mentioned in my 2015 letter, from an intellectual standpoint, it would make sense (and not be intellectually dishonest) to suggest linking teacher salaries to performance metrics, such as test scores and/or college admissions – or even school and District rankings. Personally, I don’t believe that this would be good policy, but at least a reasonable argument could be made as to why performance and salaries should be linked.

But what in the name of heaven do Beverly Hills teacher salaries have to do with Beverly Hills property values? We all understand that Beverly Hills property values tend to appreciate well and above the CPI. How does it make any fiscal sense – or logical sense, for that matter – to link teacher salaries to something as extraneous and irrelevant as Beverly Hills property values?

On the other hand, Beverly Hills property values have absolutely nothing to do with the performance of BH teachers and no reasonable argument can be made that linking teacher salaries to Beverly Hills property values is good for the Community at large. It is disingenuous to make that argument. One might as well link salaries to the weather in Ulan Bator, to Cody Bellinger’s OBP or to how often Rahm Emmanuel gets indigestion after eating spicy food. Fiscal responsibility 101 suggests that any policies which tie the hands of the organization responsible for expenditures is simply bad fiscal planning.

As I stated in 2015, teachers have a right to fair and sustainable salaries, but these should be negotiated in collective bargaining with no linkage to extraneous factors. As I pointed out, condoning such a ridiculous link would quite naturally encourage City employees to push for a similar link between their own salaries and Beverly Hills property values.

The JPA is a lease agreement which is supposed to provide in-kind value to the City at the level we are paying for. The City is in no way obligated to simply give the money to the schools, and while I have been a strong supporter of the JPA in the past, I simply cannot overlook a fiscally absurd policy which will damage our schools and could damage the City. It’s just not worth it.

We have a choice when it comes to leasing facilities and under such circumstances and I certainly wouldn’t choose to rent from a landlord who thinks it’s OK to insult the collective intelligence of the people of Beverly Hills.

As for the BHEA’s contention that I state “inaccurate and misleading information,” their response does not point out any single piece of “inaccurate and misleading information.”

What the BHEA does do is attempt to counter my suggestion that they split future pension cost increases with the School District. Now, a lot of public employee pension information may seem like inside baseball. And BHEA likes to talk about what’s ‘fair.’ But is it fair for the district’s pension share to increase from 12.58% to 19.1% within the next three years? Is it fair for the taxpayers to be on the hook for an increasing share of pension costs even as the overall pension obligation continues to grow with property tax receipts as under the current contract formula? While taxpayers pay, the teachers’ share is capped at only 10.5%.

For the BHEA to suggest that the Public Employee Pension Reform Act of 2014 (PEPRA) is “dealing” with the “fiscal threat” of ballooning pension costs that I referred to – and which the teachers’ themselves suggest is the main cause of the School District’s fiscal woes — is both self-contradictory and a half-truth at best.

Pension costs are not the main cause of the District’s fiscal problems. And even they were, evidently PEPRA is not “dealing with the fiscal threat” in any meaningful way. In point of fact, PEPRA is window dressing which only addresses some 12% of the state’s public employee pension problems. PEPRA is simply not addressing the pension crisis in any meaningful way. (The ultimate solution, moving public employees to 401k-style pensions or hybrid plans, is both simple and impossible in the current political climate because of the power of public sector unions in California).

On the other hand, the BHEA’s interpretation of PEPRA’s intent is also wrong. There is nothing in PEPRA which precludes the District from asking the teachers for additional concessions in the event that the District’s share of future pension costs continues to increase due to the poor rate of return of the pension fund. (Another irony is that union representatives control the pension fund, yet the taxpayers assume all the risk of their bad investments.) Indeed, PEPRA allows for this kind of cost sharing through collective bargaining.

The employees of the city of Costa Mesa, for example, have agreed to cost sharing in the event of future employer pension rate increases. In the BHEA’s case, that would mean teachers and the District split the difference between the District’s current 12.58% employer share and the projected 19.1%. (In Costa Mesa the employees actually pay for 60% of any increases).

The BHEA takes issue with my use of the word “unsustainable” to describe the current salary formula. But linking teacher salaries to Beverly Hills property values ties the hands of District Boardmembers and does nothing to alleviate the pension crisis. Furthermore, at the same time as base salary and ‘statutory benefits’ (including pensions) increase with a tax rise, the District’s overall obligation will increase at a compounding rate as it will pay an increasingly-disproportionate share of the total costs. In my book, that is the very definition of “not sustainable.”

But beyond that, linking teacher salaries to Beverly Hills property values is just plain wrong. While it should be clear to most that the salary formula is paydirt for the union, it is the brazen attempt to convince us that such a linkage is also actually great for our Community which is both disingenuous and insulting to our collective intelligence.

While I believe the BHEA’s heels-in-the-ground position is only representative of a few individuals prone to casuistry, their unfortunate attempt to sell us a bill of goods gives rise in my mind to something I never thought could happen: the thought that maybe the time has come in Beverly Hills for charter schools.