Paradise Plundered – unmasking what has led San Diego to the brink

Editor: This was originally published on Sept 19, 2011, so the intro is somewhat dated. But I’ve picked this tomb up in the last few days to reread it – and it is definitely worth a second look.

Last week on KUSI’s Republican campaign infomercial, Carl DeMaio, Jerry Sanders, Kevin Faulconer, and all the usual suspects lined up to pound home the point that the pension scandal is the root of all things evil in San Diego.

If only we can bust city employees’ pensions, the future will be golden for San Diego’s taxpayers.  It is time, they said, as the KUSI lapdogs nodded along, to save the city from the horrors brought them by the public employee unions.  Other than the show trial-like atmosphere, this exercise in right-wing demagoguery was nothing new.  And it explains little.  Back in 2005 in the afterward to the paperback edition of Under the Perfect Sun, I addressed the emerging scandal by putting it in its larger context:

San Diego’s looming pension scandal has earned it the moniker of “Enron by the Sea” in the New York Times and further soiled its America’s Finest City image. . . . While local news reports made it seem as if the city’s pension scandal hit out of nowhere, the truth of the matter is that its roots lie decades in the past.  Mayor Dick Murphy’s chief of staff, John Kern, while asserting that “we are not on the verge of bankruptcy” informed the New York Times that the problem began in 1996 when the city made the “mistake” of borrowing millions from its pension plan in order to fund the Republican National Convention and numerous other projects.  Later, a report commissioned by the mayor concluded that the practice of defining above average returns earned by the pension fund in good times as “surplus earnings” began in 1980 when the tax phobic city government used this hypothetical money in order to cover a cost-of-living increase for the city’s retirees.  As the Times notes:

San Diego authorities continued to rely on the pension fund’s “surplus earnings” until 1996.  The routine was thrown off that year by a number of increases in promised employee benefits.  The city and its labor unions reached a temporary agreement that the pension fund could make do with smaller contributions for a time.  That gravely weakened the pension fund, but a roaring stock market concealed the problem.  The temporary underfunding became permanent.

San Diego was particularly vulnerable to such a dangerous scheme because of its long history as a center of anti-tax, anti-government ideology.  When California’s Proposition 13 limited property tax revenues and imposed a supermajority requirement (2/3 of voters) in order to raise taxes, cities were forced to find new ways to fund urban needs and pension funds became attractive targets.  Unlike other California cities, San Diego lacked a utility tax, had fewer city fees, and imposed much lower taxes on its citizens.  This led to problems funding city infrastructure, meeting neighborhood needs, and paying competitive wages to city employees.

In that same afterward I argue that the Cedar Fire exposed how woefully undermanned and poorly funded our fire services were because of, “the fact that San Diego’s anti-government, low tax ethos had led to a situation where it had 35% fewer fire personnel than areas of comparable population and no helicopters.”

In their new book, Paradise Plundered: Fiscal Crisis and Governance Failure in San Diego (Stanford University Press 2011), Steve Erie, Vladimir Kogan, and Scott MacKenzie cite Under the Perfect Sun numerous times and note that it “tells the sordid history of elite ‘private governments’ and of labor resistance and community activism from below” but then make the mistake of adding, “But their story ends in 2000 before the city’s pension scandal and fiscal crisis fully unfolded.”  That minor oversight aside, Paradise Plundered does an excellent job of far more thoroughly outlining and updating the complex mixture of factors that led to the pension scandal and San Diego’s fiscal nightmare.  As I wrote last week, the authors show how San Diego’s financial mess is just as much a result of our city’s decade’s long aversion to any taxes and our reliance on “public-private partnerships” which enrich the affluent while delivering little to the majority of San Diegans. Specifically, they document that, “Across nearly all city departments, San Diego has consistently hired fewer public employees and spent less on their wage compensation than other large California cities.”  And we have paid for their pensions with bogus “surplus revenue” schemes that allowed politicians to offer voters services without asking them to pay for them.

…we find little evidence that gross waste and budgetary excess were the primary causes of San Diego’s financial collapse…

On the other hand, San Diego’s political and business elite have done a fantastic job of “using pubic resources to maximize private profit” with little to no oversight from our “shadow governments” and local media who they accuse of “largely representing downtown business interests.”  Importantly, while not sparing the likes of Ron Saathoff, former Firefighters’ union president and pension board member, Paradise Plundered singles out the arguments being made by DeMaio, the Union-Tribune, and others in the San Diego media that we have spent ourselves to ruin by illustrating that “the city’s public finances over the past four decades have been marked by fiscal austerity, not profligacy.”

While their book has none of the partisan passion of Under the Perfect Sun, Paradise Plundered’s straightforward academic investigation of San Diego’s political and fiscal history offers little comfort for our city’s leaders and many aspiring mayoral candidates.  Importantly, the authors point out that “the city granted pension benefit increases in exchange for concessions made by city employees that lowered the city’s immediate wage costs, effectively deferring compensation—and thereby delaying the impact on the city’s budget—until years later, beyond the time horizons of the politicians voting on the increases.”  While some union leaders clearly were “willing partners” in these deals, the other half of the story is that these deals were struck to help avoid asking San Diegans to actually pay for the services that they receive.  It is this free lunch political culture with its hypocritical fiscal populism that the book exposes along with the severe mistakes made by the leaders of the city’s unions, who are usually the sole scapegoats in most of the local media and in much of San Diego’s political discourse.

The authors also point out how the labor contracts that unanimously imposed $30 million worth of compensation and benefit cuts on San Diego’s cops and blue collar workers in 2009 “pushed the brunt of pain” onto current and future employees while leaving those receiving more expensive benefits “untouched.”  With regard to pension reform, they note that, “Even proposals like the elimination of the defined-benefit pension for new city workers and the creation of 401k style plans would do little to significantly lower the pension liability.”  Outsourcing as the savior?  Think again.  On this subject the authors conclude, “Given San Diego’s dearth of effective civic watchdogs, the city’s troubled political history, and the consistent failure of the city’s council to ensure that private-sector redevelopment efforts produce significant public benefits, there is ample reason to be skeptical that the city’s political institutions are currently set up to deliver the oversight necessary to make outsourcing succeed.” A Grim picture indeed.

Perhaps the most useful thing that Paradise Plundered shows is that San Diego’s entire political discourse is dominated by a wrong-headed analysis with regard to the roots of our city’s fiscal crisis.  Despite the constant drumbeat coming from the Union-Tribune editorial page, KUSI, and right-wing AM radio pundits, the facts do not support the argument that San Diego has a spending problem.  Hence the authors argue that:

Contrary to claims made by conservative critics, we find little evidence that gross waste and budgetary excess were the primary causes of San Diego’s financial collapse.  On the contrary, we show that, for decades, funding and service levels for most city services in San Diego have lagged behind other major California municipalities.  Already underfunded before the pension scandal, San Diego’s public services continued to face further cuts as the fiscal crisis narrowed the options available to close the budget deficit.

“The San Diego region has done little to prepare for the major infrastructure challenges of the twenty-first century.”

Thus San Diego’s history of “tight-fisted” voting on tax matters is the real source of its fiscal nightmare.  Public servants, the authors argue, have always been on a “tight leash” in San Diego and that leash got even tighter in 1978 with the passage of Proposition 13.   Then, “San Diego’s fiscal position, never strong to begin with, was weakened by [Mayor Pete] Wilson’s popular property tax cuts.”

Despite this emerging revenue problem, politicians still insisted on putting forth an ambitious redevelopment plan for downtown San Diego:

So local officials developed alternative sources of fiscal slack, setting up a shadow redevelopment corporation in CCDC and treating the municipal pension fund as a cash reserve.  In all these efforts, they could count on support from the Union-Tribune, the city’s conservative leading newspaper, which consistently put a happy face on local events.  And even when the news was bad, editors, politicians, and citizens alike could take comfort in the fact that at least they were not Los Angeles.

And so it went, the authors show, with less and less revenue to count on San Diego developed a unique system of “pubic-private partnerships” that has poured millions and millions of dollars into projects which have produced “few high-paying jobs” and further enriched the already affluent.  From Petco Park to Liberty Station to the Navy Broadway Complex the resources kept flowing from the public coffers to private developers for projects that have had very little public benefit.

At what cost?  The authors devastatingly outline how “The San Diego region has done little to prepare for the major infrastructure challenges of the twenty-first century.”  Hence, our fire preparedness, water management, sewer services, port, rail, and more are dangerously inadequate.  This infrastructure deficit goes along with the perennial underfunding of city services like libraries, parks, and public safety.  Not a pretty picture by any stretch of the imagination, but least we can sleep at night knowing that we are keeping Grover Norquist happy.

Paradise Plundered does not just critique San Diego’s fiscal populist ideology and financial irresponsibility, it also takes our governmental structure to task arguing that we have institutionalized conflict between the mayor and the council and consequently done little to ensure proper oversight of fiscal matters across the board.  Their central point is that the council is elected by district, while the mayor’s race is citywide with Democrats doing well in low turnout districts by promising better city services and Republicans dominating citywide by promising a cuts-only approach.  Hence gridlock is a near certainty.  The authors’ focus is on the game of local electoral politics exclusively, however, without much attention to how that game is influenced by larger forces and without doing much questioning of the role of big money and the connections between national, state, and local political and economic players.  The assumption seems to be that that we are all rational actors on a level playing field, not that the game is rigged from the start.

Erie, Kogan, and MacKenzie preface their discussion of San Diego’s political and economic meltdown with a historical overview that focuses nearly exclusively on institutional forces and city elites.  It is not a history of the city from the bottom-up or a study that deals in much depth with the role of race, class, and/or gender as driving factors in San Diego’s political life.  Hence, seminal events like the Free Speech Fight in 1912 are omitted, as is any discussion of various civil rights struggles, or the way the city has been shaped by those events.  Interestingly, in a recent interview in the San Diego Reader Steve Erie observes that, “San Diego didn’t want dirty industry with minorities, Eastern European workers, collateral damage. The leaders thought of the military as clean industry. The Navy was the most Southern of the armed forces, bringing a plantation mentality with them.”  More of this kind of discussion in Paradise Plundered would have been welcome.

The authors also don’t spend any time addressing the history and culture of the union movement in San Diego, something that might have led them to note the difference between narrow business unionism and social movement unionism.  This is important because the mistakes of the labor leaders discussed in their study follow from the limitations of the first variety of union philosophy.   Instead, they bemoan the fact that labor leaders have forsaken their “broader role as watchdogs and governing coalition partners” without much discussion of what that means.

Paradise Plundered’s academic emphasis is on governance from the top down and voters as blocs of interest groups.  Its brief discussion of globalization, for instance, is also from an elite perspective, nothing close to the fine work of writers like David Bacon (Children of NAFTA). These are perhaps more disciplinary biases than anything else and, to be fair, the authors are clear from the beginning that their scope of interest is narrowly focused on governmental and fiscal failure in San Diego.

Still, in sum, Paradise Plundered, is a must read for anyone who wants to understand local politics.  While it offers no solutions, it very usefully blows up the current one-sided narrative on San Diego’s current crisis. The work that Erie, Kogan, and MacKenzie do unmasking how “the new fiscal populism” has led our city to the brink of financial ruin is crucially important and rigorously documented.  If the authors can make it past the San Diego mainstream media filter, their analysis should inform the upcoming mayoral debates and frame the way the local media covers San Diego politics.  It very well may not.  That said, if you care about the future of San Diego, get this book and read it before the you vote or sign a petition.

Read more of Jim Miller’s column, “Under the Perfect Sun”