A tale of two counties (The Washington Post) (Collective Bargaining story)

MONTGOMERY COUNTY has just completed a nightmarish budget year. Stressed, squabbling and besieged elected officials savaged services and programs and jacked up taxes to eliminate an eye-popping deficit of almost $1 billion in a $4.3 billion spending plan. Meanwhile, across the Potomac River in Fairfax County, all was sweetness and light by comparison. With a budget roughly equal to Montgomery’s, Fairfax officials erased a deficit a quarter as large with relative ease and far less drama.

The picture isn’t likely to change anytime soon. Montgomery, having already pruned the low-, medium- and some high-hanging budgetary fruit, is facing annual deficits in the hundreds of millions of dollars as far as the eye can see. Fairfax, though facing tough choices and further cuts in an economy clouded by recession, has a brighter future.

The region’s two largest jurisdictions — demographic cousins with populations around 1 million, school systems among the nation’s biggest and best, and public spending equal to that of small countries — have parted ways. To put it bluntly, Montgomery is lurching under the weight of irresponsible governance, unsustainable commitments and political spinelessness — particularly in the face of politically powerful public employees unions.

Over the past few months, some readers have asked why we lately have devoted attention to those unions. The diverging paths of Montgomery and Fairfax provide one explanation. We respect the public employees in both counties and their dedication to public service. Clean parks, cheerful classrooms, safe streets, bustling libraries — the work of these employees helps keep these counties such attractive places to live. But when 80 percent of all outlays are related to personnel, labor contracts that get out of whack can endanger the public welfare.

Take a snapshot of one year, 2006, when times were flush. In Fairfax, the county executive, an unelected technocrat, proposed a budget with a relatively robust spending increase of about 6 percent. In Montgomery, County Executive Douglas M. Duncan, a career politician then running in the Democratic primary for governor, pitched a gold-plated, pork-laden grab bag of political largess that drove county spending up by 11 percent.

Mr. Duncan’s budget that year capped a three-year spree in which county spending rose by almost 30 percent. It reflected major multiyear increases in pay and benefits that he had negotiated for police, firefighters and other county workers. At the same time, Jerry D. Weast, Montgomery’s schools superintendent, negotiated a contract that promised pay increases for most teachers of 26 to 29 percent over three years — about twice the raise Fairfax teachers got — plus health benefits virtually unmatched in the region. Montgomery County Council members, most of whom were hoping for union endorsements in the fall elections, rubber-stamped Mr. Duncan’s contracts. The Board of Education, equally beholden to the teachers union, did the same for Mr. Weast.

The primary culprits here, as this account should make clear, are not the unions, which are supposed to represent their workers energetically, but county leaders. These include an inexperienced and now all-Democratic County Council, whose current members’ average tenure, less than six years, is half that of the members of the Fairfax County Board of Supervisors; a politically agile schools superintendent who has rallied support by striking generous deals with the teachers union; and successive county executives who signed their own unaffordable contracts with police, firefighters and other public employees unions.

The results have been striking — and strikingly unaffordable — in a county where more than half of all spending goes to public schools. The average teacher salary in Montgomery today is $76,483, the highest in the region. Average pay for teachers is now almost 20 percent higher in Montgomery than in Fairfax and has increased much faster than in most local suburban school systems. Since 2000, salaries for Montgomery teachers, as for many other county employees, have nearly doubled, rising at almost triple the rate of inflation.

Teachers are pillars of any community, and Montgomery’s are highly rated. But their compensation has outstripped the marketplace. Today, Montgomery schools spend about 20 percent more per pupil than Fairfax schools; they consume a greater share of the public spending than in any other locality in the region. The spending gap is not about classroom quality and student achievement; in those terms the two school systems are comparable. Rather, the difference is compensation, which accounts for 90 percent of Montgomery’s education spending.

Virginia law denies public employees collective bargaining rights; that’s helped Fairfax resist budget-busting wage and benefit demands. As revenue dipped two years ago, Fairfax officials froze all salaries for county government and school employees with little ado. By contrast, Montgomery leaders were badly equipped to cope with recession. County Executive Isiah Leggett took office proposing fat budgets and negotiating openhanded union deals after he succeeded Mr. Duncan. Then, as economic storm clouds gathered, he shifted gears and cut spending — while still trying to appease the unions.

Notoriously, one such deal guaranteed almost $300 million in pension benefits over 40 years to thousands of employees based on salary increases they never received. The giveaway became known as “Phantom COLAs,” for the cost-of-living raises that were never paid. And even when Montgomery’s teachers agreed to give up cost-of-living raises last year, about two-thirds of them continued to receive step increases of up to 4 percent.

The cozy ties between elected officials and public employees unions in Montgomery have formed the backdrop for a drumbeat of reports about county employees’ bountiful benefits, perks and abuses. In the past few years we’ve learned about county police officers who helped themselves to hundreds of thousands of taxpayers’ dollars to secure cut-rate weapons for personal use. More than half the officers who retired recently from the police force left claiming “severe disabilities,” some of them dubious, entitling them to huge taxpayer-funded benefits for life. Veteran firefighters may retire at age 46 and continue working for three years while simultaneously accruing pension payments that increase at a taxpayer-guaranteed rate of 8.25 percent annually, regardless of market performance. Meanwhile, Montgomery’s teachers union has wielded such outsized electoral clout that politicians who received the teachers’ endorsement in the most recent elections reached into their pockets and wrote checks to the union. As far as we know, this occurs nowhere else in America.

Some of Montgomery’s problem is also structural. It has relied for more than a quarter of its revenue on a local income tax, an option available to localities in Maryland but not in Virginia. The income tax is volatile: In good times it yielded windfalls for Montgomery — and no-holds-barred spending sprees — but in the current downturn it has meant a cruel collapse in revenue. Over the past two years, Montgomery’s take from the income tax has plummeted by $400 million — by itself the equivalent of 10 percent of all county revenue.

The recession has had a bracing effect on Montgomery’s elected officials, some of whom now express contrition about their spendthrift ways and deference to unions. This year council members, along with Mr. Leggett, by necessity turned into cost-cutters. A year ago, just one council member, Phil Andrews (D-Gaithersburg-Rockville), voted against the phantom COLAs; this month Mr. Andrews was able to muster a unanimous vote on the council to overturn them. Even Mr. Leggett, who negotiated the phantom COLAs, endorsed the council’s action to scrap them — a rare instance of government repealing an entitlement.

Contrition is fine as long as it’s accompanied by concrete steps to reform. The county has just about run out of revenue-raising options, having boosted nearly its entire menu of taxes to the legal or practical limit. Montgomery’s higher taxes already put it at a competitive disadvantage with Fairfax, which has a wide lead in attracting business and creating high-wage jobs; now Montgomery risks a downward spiral. To avoid that, a cultural shift must take place. Some helpful measures would include:

— Candidates for council and school board in Montgomery should foreswear all donations to or from public employees unions. This is a minimum necessary step to sever the cozy ties that have indebted officeholders to the employees they are supposed to oversee and whose compensation forms a critical aspect of the county’s fiscal integrity.

— Candidates for public office, who are routinely asked to fill out questionnaires from public employees unions and other special interests in election years, should refuse to answer any question that would commit them to undefined future spending.

— The county should beef up its rainy-day reserve funds as a means to protect against future downturns, provide an incentive to fiscal restraint and safeguard the county’s shaky AAA bond rating.

Nancy Floreen (D-At Large), president of the County Council, has asked the county staff to prepare options for shrinking future deficits. County officials will encounter inevitable pushback from unions and other interests warning that more cost-cutting will have dire consequences. They may find that their best counter-arguments are close at hand, just across the river.

Sunday, May 30, 2010; A16