In La-La Land, America’s Silliest Election

May 10 (Bloomberg) -- Move over, Mark Sanford: Los Angeles’s mayoral race may be America’s dumbest political campaign this year.

The race, between Wendy Greuel and Eric Garcetti, pits two liberal Democrats with few apparent policy differences against each other. Neither has offered a serious proposal for addressing the city’s troubling fiscal problems.

In happy economic times, low-content campaigns can be a sign of flush municipal coffers and, consequently, relatively few pivotal policy choices for candidates to debate. If that were the case, a mayor’s race like this would be just fine.

But Los Angeles isn’t living in an era of economic happiness. It faces severe fiscal stresses that led it to cut its municipal workforce by more than 10 percent from 2009 to 2012. Pension costs have risen 25 percent a year for a decade; now, for every dollar the city spends on wages, it pays 32 cents into pension funds and its employees pay an additional 9 cents on top of that. Pensions are eating the city budget, forcing deterioration in everything from fire-response times to tree pruning.

So this is hardly the time for Los Angeles to be having a content-free race for mayor. Yet, here we are. These headlines are representative: “Garcetti, Greuel Agree They Are Not So Different.” “Greuel, Garcetti Find Different Ways to Balance Campaigns, Kids.” “Garcetti, Greuel Focus on Independent Leadership.” “Garcetti, Greuel Discuss Tunnel and Hollywood Jobs in Mayoral Forum.”

Tunnel Money

That last one refers to a public forum in which both candidates said they favored a rail tunnel from the San Fernando Valley to West Los Angeles -- a nice thought, but the city doesn’t have any money to pay for it. In the same forum, Garcetti and Greuel both said they wanted more tax credits to support film jobs -- paid for by the state legislature, for which they’re not running.

It’s a campaign that doesn’t really matter very much. I’m not alone in thinking this way. Just 21 percent of registered voters in Los Angeles turned out for the primary, down from 34 percent the last time there was a primary with no incumbent, in 2001. Presumably, the turnout for the mayoral election on Tuesday, May 21, will reflect that same indifference.

The saddest part of the mayoral race is probably a text-message fight over securing the well-wishes of Kevin James, a buffoonish former talk-radio host and Republican who finished third in the primary.

Los Angeles is a liberal city, but it’s not that liberal, and Republican endorsements can be particularly valuable in the suburban San Fernando Valley. So Garcetti, who until recently was president of the City Council, fought for, and got, James’s endorsement. Punching back, Greuel, the city controller, sent out a mailer attacking her opponent for securing the endorsement of an “Obama-hater” who “compared Obama to a Nazi sympathizer on national TV.”

That last part is almost true. In 2008, James gained brief national notoriety for shouting over and over again on MSNBC’s “Hardball” that then Senator Barack Obama was, like Neville Chamberlain, an “appeaser.” Pressed by Chris Matthews to explain what Chamberlain had done wrong, James made clear that he didn’t know.

James got his revenge on Greuel last week, releasing a string of text messages that she sent him in March, when she also courted his endorsement. According to the Los Angeles Times, Greuel sent James flattering messages including “I am stalking you :)” and “You are beloved -- I hear it a lot!” A pro-Garcetti political action committee has been running a Web ad highlighting the text messages.

This is how Los Angeles is choosing its next mayor.

Pension Weakness

Austin Beutner is a particularly distraught observer of this vacuous mayoral race. Beutner had a successful career in private equity and then served as first deputy mayor to current Mayor Antonio Villaraigosa before making his own, aborted mayoral bid. He doesn’t think much of the field he left behind.

“It’s staggering to me that the media, it’s staggering to me the community, would find acceptable those two choices,” Beutner told me. “The candidates are promising the sun, the moon and the stars without any idea how to pay for it.”

Elsewhere in California, finding ways to control pension costs has been the dominant theme of municipal political discussions since 2011.

In San Diego and San Jose, voters recently approved ballot measures that impose cost-saving pension reforms on public workers; in San Francisco, the threat of a similar ballot measure helped the city reach a consensual (though less far-reaching) deal with its unions. These reforms are helping to bring California into line with national practices.

Garcetti and Greuel both have long histories of ties to public-employee unions, and they’re both walking a fine line: expressing concern about exploding pension costs without endorsing solutions that would alienate their public-labor constituencies.

Both say they plan to work within collective-bargaining guidelines to reform pensions, unlike in San Diego and San Jose, where reformers determined that collective bargaining was unworkable. Greuel’s and Garcetti’s campaigns expressed to me that they hoped to avoid the sort of litigation that those cities are facing.

Each candidate makes a weak case for how he or she would be better at fixing pension costs. Garcetti spokesman Jeff Millman boasted that his candidate already won pension reforms that save the city $308 million, while serving as president of the City Council. This number has also shown up in the Los Angeles Daily News and Garcetti touted it at a forum last month. Unfortunately, it’s a bogus figure.

Bogus Numbers

Millman pointed me to reports of the City Administrative Officer of Los Angeles, showing that the city’s projected contributions to pension funds for the 2013-14 fiscal year are $308 million less than had been expected in 2010. That’s true, but most of those savings were not because of Garcetti’s reforms.

I spoke with Maritta Aspen, acting chief administrative analyst for employee relations at the office of the CAO, and she walked me through the numbers. About $125 million of “savings” came from a series of accounting gimmicks that cut the city’s payments now and will force it to pay more in the future; about $83 million more came from better-than-expected investment performance since 2010.

That leaves about $100 million in annual pension savings that actually are a result of a deal that Garcetti struck in mid-2011, in which city workers agreed to make larger pension contributions in exchange for an end to unpaid furlough days. That’s a meaningful savings: roughly a 9 percent reduction in the city’s annual contributions to its pension funds. But it doesn’t add up to $308 million in savings to date, and it still leaves Los Angeles paying more than twice as much in pension contributions as it did from 2005 to 2006.

That 2011 reform has been much less discussed in the campaign than a 2012 reform the City Council imposed outside of collective-bargaining negotiations and over strenuous union objections. The 2012 reform made pensions less generous for employees hired by the city in the future; since it doesn’t affect current workers, the city contends that collective bargaining isn’t required.

Because it doesn’t affect current workers, near-term savings are slight -- $70 million over the first five years, or about 0.7 percent of the city’s unfunded pension liability. (Villaraigosa’s proposed fiscal year 2014 budget totals $7.7 billion.)

Both candidates have wavered in their support for the 2012 reform. Garcetti voted with a unanimous City Council to impose the changes last year. Then, when the unions yelped, he voted to sit down with the unions and try to work something out. Those talks failed. In March, Greuel called for reopening the 2012 reform as part of a collective-bargaining process. Then, when the Chamber of Commerce yelped, Greuel walked that back, telling the Los Angeles Times: “I believe in those pension reforms and I do not want to roll them back.”

Union Backing

Despite these mixed signals, public-worker unions have clearly decided that Greuel is their best choice. Working Californians, a pro-Greuel political action committee, has collected $2.7 million to spend supporting her election. Three-quarters of that money came from city unions, chiefly the one representing employees at the city’s Department of Water and Power. That’s the same DWP whose workers are paid salaries 20 percent higher than at similar utilities, according to Fred Pickel, the city’s ratepayer advocate.

Garcetti has attacked Greuel for being in the unions’ pocket. His latest ad calls her “the DWP’s mayor.” Republicans, and others opposed to public-employee unions, have tended to line up with Garcetti. Jeff Corless, one of Kevin James’s campaign consultants, explained that James endorsed Garcetti because “the DWP union and many others are spending millions against him because Wendy has promised she’ll do whatever they want.” Steve Soboroff, a Republican businessman who ran third in the 2001 mayor’s race, is also backing Garcetti.

Rank-and-file Republicans are going along: The most recent Los Angeles Times poll has Garcetti leading by 10 points overall but by 18 points among Republicans. Gabriel Rossman, an assistant professor of sociology at the University of California-Los Angeles and contributor to the conservative blog the American Scene, put it to me this way: “I rely on balance theory and assume that there is meaningful information in the public safety union and SEIU endorsements for Greuel.” (The Service Employees International Union represents 10,000 Los Angeles municipal workers.)

The unions are mad at Garcetti for votes on the City Council during the past four years, a period when almost every municipal legislator in California was being forced by budget constraints to vote against unions’ interests. But many of the unions now lining up behind Greuel were also friendly with Villaraigosa -- who once worked as a union organizer -- until he ended up serving as mayor during a fiscal crisis and had no choice but to take actions harmful to their interests.

Collecting Signatures

Greuel had the luxury of serving as controller during this period without being responsible for any contract negotiations, furloughs or pension changes. Before 2009, when she sat on the City Council, she was widely viewed as more conservative than Garcetti. If she had spent the past four years as council president and he had spent them as controller, today’s union support -- and anti-union support -- might well be swapped.

While the pension-reform crowd has tended to gravitate toward Garcetti, Greuel has one key backer with a lot of credibility on pension reform: Richard Riordan, a Republican who served as mayor of Los Angeles from 1993 to 2001 and who has been involved in efforts to put pension reform to a referendum in the city.

Greuel is the third candidate Riordan has endorsed in this year’s race. First, he backed Beutner; when Beutner withdrew, he endorsed James. Now he’s for Greuel, but he doesn’t seem eager to explain his reasoning and didn’t respond to a voice mail or an e-mail seeking comment. I asked the Greuel campaign for assistance in contacting one of their most prominent supporters, and it demurred.

Such reticence may be more easily understood when you see what Riordan says when he does talk to the press about Greuel. The New York Times says Riordan “portrayed the choice as the lesser of two evils” in an interview last month. “I don’t have a choice; they both back the unions,” Riordan told the Times.

Riordan -- and Beutner, who hasn’t endorsed a candidate yet -- may understand better than most reformers that the unions’ choice to line up with Greuel is hardly a clear indicator that Garcetti is any better than she is. So those who hope to control per-employee compensation costs in Los Angeles should perhaps write off this election and look for other channels to achieve change.

Pension Referendum

Riordan, who started collecting signatures too late to make the 2012 ballot, may try for pension reform by referendum again in 2014. Beutner has joined with Mickey Kantor, who was commerce secretary under Bill Clinton, to form a commission called “Los Angeles 2020,” which will make outside recommendations on how best to address job creation, budget deficits and declining municipal services.

Still, the intractability of the city’s fiscal problems may be why the Los Angeles mayoral field has ended up being so underwhelming. In most states, cities address their budget gaps through a combination of tax increases and cost restraint. In California, however, cities face intense legal and political barriers to raising taxes. (On the March primary ballot, Los Angeles voters rejected a 0.5 point sales-tax increase to pay for additional public-safety services.)

On the spending side, all cities in California face many state-level spending mandates that reduce their freedom to cut budgets. Meanwhile, extremely powerful public-employee unions have made it difficult to control costs per employee -- Los Angeles is still handing out pay increases from an employee contract agreed on in 2007 when the economy was stronger. And civilian-worker salaries are set to go up 5.5 percent in January 2014.

Boxed in on all sides, city officials in California are often left with no choice other than to cut costs by reducing employment and therefore degrading services.

Remember this, though: Los Angeles’s fiscal problems aren’t going away, even if they’re being ignored in this campaign. As San Jose and other examples show, ballot measures can be alternatives to legislation for enacting reform. Even so, it helps to have a reform-minded mayor with credibility and a willingness to lead on thorny fiscal issues.

For his part, Beutner remains optimistic that change will come. “My guess is the pressure builds,” he told me, noting that the city’s worsening fiscal problems and eroding services will make reform unavoidable.

In other words, the mess in Los Angeles will have to get worse before it gets better -- and neither Wendy Greuel nor Eric Garcetti has given any indication that they will change that dynamic.

(Josh Barro is lead writer for the Ticker. Follow him on Twitter.)

    Before it's here, it's on the Bloomberg Terminal.