When the economy and hence tax revenue goes up and down, Nevada’s collective bargaining law allows local government unions to extract massive pay and benefit increases in the good times, while preventing decreases in the down years. It’s a ratchet effect, and the inevitable end game is playing out right now in the City of North Las Vegas.
Nevada’s economic downturn hit North Las Vegas residents especially hard and consequently tax revenues plummeted. Instead of reducing inflated government employee salaries, the union contracts mandated the city give employees raises. In 2012, the city officials tried to declare a state of emergency to prevent giving $25 million in pay increases to its employees. A judge ruled city officials couldn’t do that and now they’re on the hook for $25 million worth of back pay raises.
The nearly insolvent city offered a $7.7 million settlement to workers. The city’s backup plan is to make 10- to 20-percent across-the-board spending cuts, which will mean layoffs.
Union officials aren’t happy with either option. They want pay increases from the near-bankrupt city and, at this point, the option they’re supporting would try and squeeze it out of taxpayers.
The Las Vegas Review-Journal explains:
Plan C — receivership, the state’s broadly untested alternative to municipal bankruptcy. Under receivership, a team of state-appointed financial experts would have the power to increase property taxes and negotiate future, but not existing, union contracts. Faced with a choice between plans A and B, two of the four city union heads said they would just prefer Plan C — receivership, the state’s broadly untested alternative to municipal bankruptcy. Under receivership, a team of state-appointed financial experts would have the power to increase property taxes and negotiate future, but not existing, union contracts.
“If these are the tactics the city’s going to use, I think it’s time for the state to step in,” North Las Vegas Firefighters Association President Jeff Hurley said. “You’ve heard me before, I’ve gone to bat for the mayor, but right now I’m disappointed. … There was just no reason to go this far.”
In 2012, Hurley took home $192,414. What could be disappointing about that?
Well maybe he’s upset that 100 of his colleagues had larger compensation packages in 2012, including police lieutenant Anthony M DiMauro, who received a whopping $408,387.82 in 2012.
Six-digit compensation packages are hardly outliers, and the excessive pay isn’t limited to public safety personnel. A total of 850 employees in North Las Vegas made more than $100,000.
Remember, union bosses, like Hurley, are ready to make North Las Vegas insolvent, not to keep their pay steady, but for pay increases!
Yesterday, Geoffrey Lawrence, NPRI’s deputy policy director laid out the short term solution: a special session to allow municipal bankruptcy.
State receivership basically allows the Department of Taxation to appoint a financial overseer to negotiate contracts on the city’s behalf and implement a debt-reduction plan through both tax increases and spending reductions. Such receivership was last implemented for rural Storey County, but no local government of the size of North Las Vegas has ever undergone the process. Furthermore, the state overseer lacks authority to suspend or modify existing union contracts or debt obligations. As one state tax official told the Committee on Local Government Finance, “It’s no guarantee that structural deficits can be overcome.”
Sometimes, however, it is necessary for governments — just like businesses and individuals — to renegotiate their debt and structure it along different terms. This is why federal law allows municipalities to enter into a bankruptcy protection proceeding. Chapter 9 municipal bankruptcy allows a municipality’s representatives to confront city contractors and creditors and present to court officials their finances so the court can determine what a city can realistically afford to pay and amend the contracts accordingly.
North Las Vegas is about to go under because its unions, not its elected officials, have the most power over its finances.
The long-term solution to that problem is legislation to reform or eliminate Nevada’s local government collective bargaining laws.