Public Enemy Number One:San Diego’s Carl DeMaio puts pension reform center stage- and himself in union crosshairs.
In 1978, Howard Jarvis launched the U.S. anti-tax movement in California with Proposition 13, which capped annual increases in property taxes and kept people from being forced from their homes during real-estate bubbles. A generation later, the Golden State could be on the brink of launching another populist movement, one driven by anger over government compensation practices. A key battleground is San Diego. In June, voters will decide on Proposition B, the Comprehensive Pension Reform Initiative. It would end defined-benefit pensions for all new city hires except for police officers, instead providing pensions similar to 401(k)s. It would prevent pay sweeteners from being added to base salary when calculating pensions, and it would require city workers to pay a bigger share of their pension costs. Finally, Prop. B would mandate a five-year salary freeze.
Prop. B’s chief author is San Diego city councilman Carl DeMaio, a Republican former management consultant and leading candidate for mayor. DeMaio, 37, doesn’t just want to end costly defined-benefit pensions for public employees, a position he shares with former Republican and newly Independent Nathan Fletcher, one of his rivals in the race. He’s also a vigorous advocate of “managed competition,” in which public-employee groups bid against private providers on the provision of government services. San Diego’s version of managed competition—which DeMaio would like to expand upon—so far has driven down the cost of municipal fleet maintenance, street sweeping, and printing. “Managed comp” carries the promise of extending to government—at last—the productivity revolution that has transformed the private sector over the past 30 years. Even with total U.S. employment at historically low levels, the gross domestic product has never been higher. It’s been nearly a decade since the McKinsey consulting group reported that “the opportunity to improve government productivity is huge … [with] three classic management tools … organizational redesign, strategic procurement and operational redesign.”
Nor does DeMaio’s reform agenda stop there. Politicians often talk of tying government pay more closely to performance, starting with teachers. DeMaio, a Georgetown University graduate, wants to take the performance emphasis further and end the standard government pay practice in which most public employees receive automatic, annual “step” wage increases solely for accumulating years on the job. Many California school districts, including San Diego’s, now spend more than 90 percent of their operating budgets on compensation. Automatic raises also are a driving force behind the maddening practice of government “baseline budgeting,” in which taxpayers are told that every agency’s budget must go up by 6 percent or 8 percent each year, or else the agency’s budget is being “cut.” “Instead of automatic salary increases based on ‘time served,’ we should have targeted increases based on ‘performance achieved,’” DeMaio says.