As California Governor Jerry Brown seeks a temporary 5 percent pay cut from public employees to fill the largest state deficit in the U.S., many of those same workers are poised for raises next year.
Labor contracts covering 140,000 workers grant increases of about 3 percent to top earners beginning in July 2013, according to the Personnel Administration Department. About 34,000 employees became eligible this year as the raises began to be incorporated.
Brown, facing a $15.7 billion deficit through June 2013, is seeking savings in a state where unionized public employees are paid more than government workers in other states, and civil- service protections hamper dismissals. The 74-year-old Democrat wants to save $400 million by shortening the work week by two hours. That will require approval from unions representing 182,000 of the state’s 214,000 workers.
“This just highlights the fact that government works really well for public-employee unions, but really does not work for anybody else,” said Aaron McLear, the former spokesman for Brown’s predecessor, Republican Arnold Schwarzenegger, who clashed with labor leaders over costs. “I get that they are under contract, but the idea that labor unions get to negotiate their cuts is stunning.”
During collective bargaining in 2010, Schwarzenegger agreed to raises of 2 percent to 5 percent for workers at the top of the pay scale. In return, union members contributed more toward their pension and retirement benefits, and gave up some paid holidays.
The agreement came after Schwarzenegger and lawmakers had forced workers to take unpaid days off each month for two years, cutting pay by about 14 percent.
The contracts cover all unionized workers, from janitors to highway patrol officers. While Schwarzenegger signed many of the deals, Brown came to the same terms with prison guards in 2011.
Not every state worker can get the July pay increase, only those at the top of the pay scale for at least 12 months, with satisfactory evaluations. While there’s no estimate of how many that will be, it typically takes five years to reach top scale, according to Lynelle Jolley, a spokeswoman for the Personnel Administration.
Leaders of Service Employees International Union Local 1000, which represents the largest number of state employees at 95,000, are willing to talk about pay cuts or an alternative, according to a letter addressed to members earlier this month.
“We could have said ‘no,’ and demanded that the governor honor our contract,” said the letter, signed by nine bargaining unit leaders. “By staying engaged, we minimize the potential for a huge number of layoffs and even deeper cuts in vital services.”
California, with the world’s ninth-biggest economy, lost more than 1 million jobs in the recession that started in 2007, reducing the most populous U.S. state’s revenue by 24 percent. Even with savings from program reductions, that left a deficit of $9.2 billion, the governor said in January.
Brown is pushing a ballot measure asking voters to temporarily raise the statewide sales tax to 7.5 percent from 7.25 percent, and boost rates on income taxes starting at $250,000.
Brown’s proposed budget includes a mechanism that would automatically trigger more than $6 billion in additional reductions, mostly from schools, if voters reject the tax increase.
Even if those cuts occur, state workers would still get their pay increase.
On May 14, the governor was forced to propose a new round of spending rollbacks after acknowledging the revenue projection he built into his January budget was off by more than $4 billion. To fill the gap, he wants to cut more than $3 billion from medical care for the poor, welfare, in-home services for the disabled, and childcare subsidies.
The governor also said he’d seek to reduce employee costs 5 percent by having them work 9.5 hours on four days instead of 8 hours in five days. His proposal would cut $840 million from payroll costs, with $400 million of that coming in the deficit- ridden general fund.
The average Golden State worker receives about $1 more for every $4 earned by a Texas employee, according to U.S. Commerce Department data. Per-capita income for all employees in California, public and private, was $42,578 last year, the department said. State workers, on average, made $58,340 in total pay, according to data from the controller’s office.
Brown’s options are limited. If unions balk at his proposal, he could fire state workers, though civil-service rules would require a dozen months or more to see any savings.
He could furlough workers as Schwarzenegger did, but that could end up costing more in future years, as workers in agencies that can’t shut down, such as prisons and the highway patrol, accumulate vacation and unpaid leave.
“The state employees particularly have come forward with some very imaginative ideas,” the governor told reporters in Sacramento when he unveiled his revised budget. “They’ve been willing to step up to the plate.”
© Copyright 2015 Bloomberg News. All rights reserved.