North Las Vegas and Henderson plagued by the same problem

Collective bargaining prevents local governments from reigning in outlandish employee compensation

By Victor Joecks, Robert Fellner
  • Wednesday, April 30, 2014

On the surface, North Las Vegas and Henderson appear to be polar opposites.

North Las Vegas has been making headlines for teetering on the verge of insolvency. Henderson keeps showing up on lists of the best places to live and retire.

During their multi-year fight with city officials about pay increases, North Las Vegas union bosses put up billboards stating, “Warning: Due to recent police layoffs, we can no longer guarantee your safety.” Forbes has ranked Henderson as the country’s second-safest city.

North Las Vegas has a reputation for poor financial management, highlighted by its $130 million City Hall that opened during the depths of the recession. Henderson has a reputation as a prudent financial steward.

Underneath the surface, however, both cities are facing — and being overwhelmed by — the same basic problem: The State of Nevada’s collective bargaining mandate for local governments severely restricts their ability to reduce or even limit employee compensation increases. This inability to rein in unsustainable pay and benefit increases surfaced most dramatically in North Las Vegas but is now — despite Henderson’s comparatively prudent governance — causing problems for that city.

Over the last several months, Henderson officials have been maneuvering to orchestrate a hike in property taxes. They commissioned a 21-member panel to produce a report highlighting city service reductions and recommending a tax increase. That panel, however, was instructed by City Manager Jacob Snow to ignore 80 percent of Henderson’s budget — pay and benefits for its employees — because, according to assistant city manager Fred Horvath, a majority of its employees are under collective bargaining agreements.

Reflexively increasing pay and benefits for city employees, however, is exactly what is driving Henderson’s budget problems — just as in North Las Vegas.

While Henderson claims to have made $127 million in citywide cuts, a city spokesman admits many of those “cuts” — rather than actual reductions in expenditures — were simply drawing-board erasures of prospective pay increases.

Henderson’s general fund spending peaked at $221 million in 2008, fell to $203 million in 2011 and is projected to be $219 million in 2014.

Most of its employees’ finances fared much better, according to Henderson payroll information available on TransparentNevada.com. For instance, police captain James Green saw his base pay increase from $138,829.72 in 2008 to $152,032.30 in 2013. His total compensation in 2013 hit $224,617.18. (Henderson didn’t provide TransparentNevada with information on the cost of employee benefits until 2011.) Fire captain Timothy McKeever saw his base pay jump from $99,711.09 in 2008 to $105,316.04 in 2010. Promoted to fire battalion chief in 2011, McKeever then saw his base pay jump from $125,285.95 in 2011 to $137,625.58 in 2013, with his total compensation hitting $208,820.62.

These are hardly isolated incidents. Henderson employees who worked full-time at the city from 2008 to 2013 saw their average base salary increase from $75,204 to $81,220, an 8 percent jump.

Full-time workers employed by the city from 2011 to 2013 saw their total compensation increase from an average of $117,487 to $123,560, a 5.2 percent increase.

This is a far cry from what’s happened to city residents. According to the U.S. Census Bureau, the median household income in Henderson dropped from $67,617 in 2007 to $61,404 in 2012, a decrease of 9.2 percent.

What’s happened in Henderson is very similar to what’s happened in North Las Vegas. Full-time workers employed by North Las Vegas, approximated as those with total compensation exceeding $20,000, from 2010 to 2013 saw their total compensation increase from an average of $136,819 to $141,306, a 3.3 percent increase. That’s even though North Las Vegas withheld raises in 2012.

In 2013, the average compensation of North Las Vegas’ 500 highest earners increased by $5,040.86 per employee compared to 2012, for a total increase of $2.52 million.

What’s driving these increases is the state’s imposition of collective bargaining on local governments. Princeton economist Henry Farber examined states based on the legal environment advantages they bestow on public-sector unions. Farber found that Nevada’s public-sector bargaining statutes, with their compulsory-bargaining and binding-arbitration provisions, arm Nevada’s local-government unions with some of the greatest leverage in the entire nation.

Because of these collective bargaining laws, Henderson officials are now pushing a tax increase on families earning less than $62,000 a year to fund pay increases for employees making over $200,000 a year. How fair is that?

It’s time for city officials to level with citizens and state lawmakers by identifying their true problem and needed solution: Nevada’s collective bargaining law must be repealed or substantially reformed.

Victor Joecks is the executive vice president of the Nevada Policy Research Institute. Robert Fellner is transparency researcher at the Nevada Policy Research Institute. For more, visit http://npri.org.


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