Archive for October, 2010

Pension reform holdouts wait for next governor

October 28, 2010

Gov. Arnold Schwarzenegger expects agreements raising worker pension contributions to save the state $800 million this year, but unions with nearly a third of the organized state workforce may wait, hoping to get a better deal from the next governor.

The troubled prison guard union, representing half of the 60,000 state workers without an agreement to cut pension costs, mentions dealing with the next governor under a subhead, “The union is not bankrupt,” on its website this week.

“We have gotten very close to a contract agreement with the current administration, are hopeful we can finalize a deal with the next administration,” the California Correctional Peace Officers Association said in a message to members.

The prison guard union, working without a contract since 2007, personalized its lengthy clash with Schwarzenegger by mounting an aborted recall drive and picketing the Capitol with mobile billboards, one depicting the governor as the devil.

Schwarzenegger used his weekly radio address earlier this month to rip Republican legislators for trying to block his pension reform legislation, suggesting they were influenced by campaign contributions from the prison guard union.

The denial of bankruptcy refers to a federal jury hitting the union with $12 million in damages last week, a verdict in a defamation and breach of contract suit by former officials of Corrections USA, which opposes the privatization of prisons.

The prison guard union also faces a $4 million lawsuit from the state, which says the union has not been making payments owed for the salary and benefits of state employees who spend their time working for the union.

An official of another large union, the Professional Engineers in California Government, said the new contracts agreed to by other unions delay a pay raise until 2013, when the top step goes up 3 percent.

“There is nothing on the table that he is offering that would convince us to come anywhere near agreeing,” said Bruce Blanning, executive director of the 10,000-member engineers union.

The move to cut state costs by giving new hires lower pensions and increasing contributions from current workers began with the Highway Patrol union, which negotiated a trendsetting pension increase a decade ago.

Jon Hamm, a Highway Patrol union executive, suggested early this year that cutting rapidly growing state pension costs might blunt a drive for an initiative to switch new hires to a 401(k)-style individual investment retirement plan.

The Highway Patrol and unions representing five other bargaining units agreed to new contracts. The big move came earlier this month when leaders of the 95,000-member Service Employees International Union Local 1000 agreed to a new contract.

Schwarzenegger vowed not to sign a budget without pension reform. Democratic legislators leaned on the SEIU, getting a tentative agreement that helped end a record budget deadlock that went 100 days into the new fiscal year.

The agreement must be ratified by the nine bargaining units represented by the SEIU. A union official said voting by members is expected to be completed around Nov. 9.

Schwarzenegger outlined his pension reform plan in the Wall Street Journal on Oct. 13, citing the need to curb employee compensation costs that rose nearly three times faster than revenue during the last decade, squeezing funding for other programs.

“Current employees will now be required to contribute more toward their pensions, saving nearly $800 million this year alone,” the governor wrote, listing one of the four parts of his pension reforms.

The six bargaining units that have not agreed to a new contract represent 60,000 of the 193,000 organized state workers. The governor used his executive power to impose the pension reforms on 37,000 supervisors not represented by unions.

Budget legislation will give new hires after Jan. 15 lower pension benefits. A three-year salary average, rather than the final year, will be used to set the pension payment, curbing the manipulation of final pay to “spike” or boost pensions.

So, what’s the incentive to settle for the half dozen bargaining unit holdouts?

Workers without a new contract will continue to have three unpaid “furlough” days per month, the equivalent of a 14 percent pay cut, said Lynelle Jolley, a spokeswoman for the state Department of Personnel Administration.

The new contracts are a pay cut averaging roughly 10 percent, she said, with one unpaid “personal leave” day per month and increased pension contributions ranging from 2 to 5 percent.

She said the new contracts also have a top-step pay raise of 3 percent, beginning in 2012 or 2013, two paid leave days per year for professional development, and overtime for major holidays .

The contracts also protect workers from having their pay cut to the federal minimum wage in budget deadlocks, a move attempted by Schwarzenegger that has not been resolved in the courts.

In addition to the reforms demanded by the governor, a series of scandals drove other pension reform legislation.

Schwarzenegger vetoed legislation, AB 1987, aimed at curbing pension spiking in 20 county retirement systems, including Los Angeles, that operate under a law enacted in 1937.

The legislation was a response to reports in the Contra Costa Times that two fire chiefs retired at ages 50 and 51 with pensions far larger than their salary, the result of boosting final-year pay with unused leave and other maneuvers.

The columnist who revealed the big pensions, Daniel Borenstein, gave the union-written bill “tepid” support as a first step after changes were made. Schwarzenegger said the bill still allowed local pension boards to determine what is counted in final pay.

Schwarzenegger also vetoed two bills responding to the high pay of ousted Bell city manager Robert Rizzo, who some say could get an annual pension of $600,000 or more. He now faces criminal charges.

The governor said AB 827, a ban on automatic salary increases in contracts, should be broadened to include union members and state workers. He said AB 194, limiting final pay to 125 percent of the governor’s salary, is not real pension “reform.”

State Controller John Chiang unveiled a new website this week listing the salaries and pension formulas of city and county employees. The total Bell city manager pay package subject to Medicare reporting in 2009 is listed as $1,171,423.

The California Public Employees Retirement System, which adopted guidelines to alert supervisors when big pay hikes are reported, formed a task force to look at pension-related issues emerging from Bell, with an eye toward future legislation.

Schwarzenegger signed a CalPERS-backed bill, AB 1743, that requires “placement agents,” who help investment managers get money from public pension funds, to register as lobbyists.

The bill was a response to the discovery, after a pension scandal in New York, that a former CalPERS board member, Al Villalobos, received more than $50 million in placement agent fees for helping private equity firms get CalPERS investments.

A state lawsuit alleges that Villalobos bribed CalPERS officials. The placement agent bill was opposed by the financial industry because of a ban on contingency fees based on the amount of the investment.

Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at Posted 28 Oct 10

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