Monday, March 23, 2009 | The other day, Rich Toscano did an analysis and came up with a rather startling conclusion.

Unemployment in San Diego has reached 8.8 percent. This, in itself, is not a big surprise. The bad economy is like the tide: It’s getting closer and closer to all the little sand monuments we’ve built on the beach.

What is startling is its velocity. Toscano noted that we’ve now blown past the highest unemployment rate San Diego ever reached during the downturn in the 1990s. The recession that began in the summer of 1990 pushed unemployment to 8.6 — but that took three years. In three years, at this rate, we’d be approaching Gaza Strip-type unemployment.

At the heart of a recession is a decision business leaders make to stop investing in their employees and their ideas.

So, to get out of a recession, we’ll need businesses to decide to invest again in their employees, in their communities and in their ideas. So while we — as in “we the people,” who are in charge of our local government — can’t directly give businesses money, and we can’t artificially generate demand for their products and services, we can do our best to eliminate uncertainty and fear. We can build good infrastructure and maintain it. We can maintain safe neighborhoods, which helps people feel confident and helps them decide to invest in the things they care about.

Only a few San Diegans are part of the elite group trying to decide what to do about the world economy. But we’re all part — or we all should be part — of the discussion about what we can do about the San Diego economy.

We can sit here and hope that everything is going to be OK. We can continue to look out for ourselves and be fearful. We can feel helpless. It’s justified, after all, this is an international crisis. What can little old San Diego do about it?

Or we can try to control the few things we have influence over. We can ensure our city is doing its best to make residents and business feel comfortable enough to invest in their community.

If we choose the first option and let everything go to hell.

This won’t be hard because things are headed there fast.

Last week, the state of California realized it will collect even less money than it thought in the coming year — $8 billion less. The chewing gum they shoved into the massive leak in this dam is already overwhelmed.

There’s nothing particularly significant about the $8 billion. But what it shows is just how fast the economy is collapsing and how even the worst of budget deficits are probably measured with too much optimism. We should know, by now, that we should be forecasting for the worst-case scenario and then dialing it down even 10 percent more.

When people don’t work, they don’t spend money. And local governments, like San Diego, don’t bring in as much money.

Now, the other piece of news: The City Attorney’s Office, months ago, pegged the city’s pension deficit at well above $2 billion. But the former city attorney’s loud warnings, we know, didn’t always carry the weight they might have or should have. The Mayor’s Office, however, has now confirmed that the shortfall between the amount of money the city owes its current and future retirees and the amount it has saved up has reached $2.25 billion.

This means that next year, the city will undoubtedly have to dramatically increase its contribution to the employee pension fund.

That may sound like something to shrug your shoulders to, but think what it means. The city is already facing one of the most difficult budgets in anyone’s memory. The City Council will have to find up to $54 million this year just to continue operating — if not more. And there’s no way to make up a $54 million annual deficit without very painful actions.

So, if next year, we have a similar shortfall just to make ends meet, what if we have to take an additional $50 million to $100 million out to put in the pension system?

We’re talking about a catastrophic fiscal problem — not a routine deficit.

We’re getting hammered from both sides. Our liabilities are skyrocketing at the same time that our revenues are plummeting. And all of it is happening when we need to be our best and our strongest.

Yet, with dramatically lower revenues and rapidly increasing liabilities, we will face a financial disaster unlike any we can imagine. It’s the kind of shortfall that could completely redefine the expectations of service we have from our local government.

If our infrastructure or public safety is threatened right when we need it to be the most secure, it will be like the furnace breaking down right before a historic winter blizzard.

Right now, the mayor and the city’s employee unions are meeting regularly to forge some kind of compromise that might allow us to get through the year.

But they are not thinking beyond that. They are not thinking about the kind of bleak future we face just around the corner.

This is not tea-leaf reading. I’m not looking at the smoke dancing from a standing cigarette and uttering some broad random proclamation about what’s going to happen. The signs in the economy could not be clearer.

City officials and union reps heard that a storm is coming but it’s not all that big of a deal to them. They all — the mayor and his staff; the elected leaders of the employee groups — are perfectly comfortable putting another layer of duct tape on the furnace. The employees want promises that any concessions they make will only be temporary. The mayor refuses to say what needs to happen to make him willing to ask taxpayers to help steel the city for the coming troubles.

This is unsustainable unless their goal is to have us live in a city with ever-decreasing services, constant layoffs, and an increasingly frustrated populace. This is unsustainable unless they want to be as ill-prepared to weather this recession as possible.

Both the employees’ leaders and the mayor are suffering from a paralyzing fear of the people who put them in charge. The mayor and his staff worry that any mention of a tax or fee increase will signal weakness to the groups who have helped him reach his office. The employee representatives fear that their rank and file will scream bloody murder and hire better leaders if they even hint at concessions to the city.

If both sides stick to this status quo, they aren’t leading their respective constituents. They are pandering to them. What they miss is the power of this reality. If employees had a true understanding of the state of the economy and if they appreciated the consequences of the city’s precarious financial position, they might choose reasonable concessions over mass layoffs. The city’s political leaders don’t realize that angry taxpayers are willing to deal with certain fee increases if they see the employees come to the table sincerely and if they know the consequences to infrastructure and public safety if they don’t act and act now.

They need to start realizing it quickly.

The bottom line is this: Our ability to emerge from this economic crisis depends on our businesses’ ability to innovate and invest in their community. This means we have to have a strong, attractive and well-run city.

Taxpayers, city employees and business people are all reasonable people and they all have something to offer — mild sacrifices that can help us know we’ve done all we can, we’ve controlled everything we’re able to control, to ensure we don’t have to make major, unthinkable sacrifices in the future.

We all take for granted that we can continue to act in our own selfish interests and that miraculously, the city will provide.

We all want to live in a nice, clean city.

We just need to understand that we are not going to if we continue on this route.

And our leaders need to put us on a different one.

Protect employees with a reasonable pension but get rid of the DROP program. Raise the retirement age to 55 for all employees (we don’t need to bribe people to work until 55). Agree to some minor decreases in employee salaries or accept furloughs but also agree to some kind of formula that will remove them when the economy improves and revenue streams increase.

Strip city managers of excess flexible benefits such as outsized health-care plans.

With these concessions, business and taxpayer advocates and the entire political establishment would be emboldened to persuade residents to support revenue increases such as a fee on trash collection and a reimbursement of the city’s cost for dealing with storm water.

Everyone must give up something. But with all the sacrifices piled together, we can catch a glimpse — for the first time — of a truly balanced budget where employees are still compensated well during a time when thousands of their neighbors are losing our jobs. It’s a budget that will keep the city’s services at a time when the city most needs them.

It will keep us as warm as possible during the coldest spell we can imagine settles over us.

Please contact Scott Lewis (scott.lewis@voiceofsandiego.org) directly with your thoughts, ideas, personal stories or tips. Or send a letter to the editor.

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