COVID-19 Crisis forces Solvang City Layoffs

Op-Ed:

By Council Member Chris Djernaes

The views and opinions expressed herein are strictly my own. I do not speak for the Council or City Management nor for Solvang Journal. All information is derived from City and public sources.

As the COVID19 crisis accelerates, the City has become a virtual ghost town as residents shelter in place and businesses remain closed until further notice. The City’s tourism economy has all but shut down leaving the City budget bleeding over $500,000 per month.

Anticipating the unprecedented economic shock, the Council voted 5-0 at the March 20 Emergency Session to give the City Manager full authority to immediately cut all non-essential staff, services and contracts. Laying off non-essential staff and shutting down the Planning Department and Parks and Recreation could save $2 million, but that is not enough to cover a  projected $4-5 million budget loss over the next 12 months.

Drawing against cash reserves is also not an option as the City must invest $20 million in long-overdue improvements to roads, water, sewer, and wastewater treatment facilities. Until tourism recovers, the City has no choice but to do more with far, far less.

Sadly the City’s laid-off employees are not alone. The Federal Reserve warns that as the crisis deepens, unemployment could skyrocket from 3.5% to 30%, or more than 45 million people. In response, Santa Barbara’s County and Cities are forced to lay-off hundreds of non-essential staff.

Worse, the California public pension provider, CalPERS, admitted last week that it lost nearly $70 billion through mid-March as a result of historic volatility and corrections across all financial markets. It is well known that CalPERS and OPEB pensions were already underfunded before the market losses. Industry experts report that if CalPERS and OPEB technically fall below the funding ratio of 55%, then it is technically insolvent and impossible to recover without massive cash bailouts.

Such bailouts could force many California Counties, Cities, and public union agencies into bankruptcy and force the termination of millions of public union employees. Readers should visit Stanford University’s Hoover Institution for pension more research at www.hoover.org. I’ll write more on the scale of California’s pension crisis and the imminent threat to Solvang.

The CalPERS website shows the City’s combined current unfunded CalPERS and OPEB pension liabilities could explode from $10 million to $12 million – i.e., dwarfing the City’s current budget crisis and forcing the City of Solvang into bankruptcy. The Council is looking for solutions to this economic time-bomb.

Sadly, Solvang’s old guard and allies in local and social media choose to ignore the City’s dire economic reality and prefer to blindly attack the City Council and Staff over the termination of non-essential staff and services. This is simply unproductive, political hackery.

In contrast, the Council and City Staff are working fast to implement emergency services and layered financial aid programs to help the Community survive and recover from the devastating effects of the COVID19 crisis. The Council’s decisive actions exemplify Leadership.

Let’s work together and help each other get through these challenging times. And let’s do the same for our friends and family across the Santa Ynez Valley.