Labor members on the CalPERS board yesterday blocked a Brown administration request for a $50 million increase in CSU employer pension contributions, a delay urged by labor unions who want to bargain new contracts first.
A rare split vote of the CalPERS board divided members elected by active and retired workers from the members who represent the state treasurer and controller or are appointed by the governor and others.
CalPERS president Rob Feckner, elected by non-teaching school employees, usually does not vote. But he voted with the labor bloc to produce a 5-to-5 tie that kept the CSU rate increase from passing. Three of the 13 board members were absent.
The Brown administration requested a separate rate for California State University employers because CSU employees, unlike other state workers, have not agreed to new contracts that increase employee pension contributions.
“We expect that having separate rates will result in state employers having to contribute $50 million less for the remainder of the fiscal year and CSU employers having to pay $50 million more,” actuaries Alan Milligan and David Lamoureux said in a staff report.
During the last fiscal year, state worker unions, who had been contributing 5 to 8 percent of their pay toward pensions, agreed to increase their contributions to 8 to 11 percent of pay, depending on the bargaining unit.
The increased money from workers allowed CalPERS, which had been projecting a state rate of $3.9 billion this fiscal year, to lower its state rate to $3.5 billion, saving the deficit-ridden state about $400 million.
A board member representing the state personnel administration department, which bargains with unions, said unions agreed to increase worker contributions to reduce public pressure to eliminate or cut pensions.
“They felt that if in fact their employees ponied up more money the public pressure would be diminished,” said Howard Schwartz, personnel department chief deputy. “It wouldn’t go away. But it would be diminished.”
“And that was an important goal that they were after in support of their own constituencies,” he said. “If we do not do that (a separate CSU rate), we will deprive their employees of the benefit of their sacrifice.”
Board member George Diehr, a CSU San Marcos business professor elected by state workers, said unions representing the 44,000 workers at the 23 CSU campuses have not refused to increase their pension contributions.
“The various bargaining units are trying to negotiate, and I don’t know what the various reasons are they haven’t settled,” said Diehr. “But I have my bias that CSU is not really bargaining.”
“The units of the CSU have had salary increases and equity adjustments that were taken away, and those are the kind of things that could be on the table with their contribution rate,” he said. “So it isn’t over, and I don’t think that is depriving other state employees of anything.”
Because CSU employer rates are pooled and not separate, when the other unions agreed to worker contribution increases CSU employers got the same rate reduction as other state employers.
The current rate for non-CSU and CSU employers is 18.2 percent of pay for miscellaneous workers and 27.4 percent of pay for peace officers and firefighters.
If the rates were separated as requested by the Brown administration, the miscellaneous rate for non-CSU employers would drop to 17.1 percent and the CSU rate would increase to 21 percent.
The employer rate for peace officers and firefighters for non-CSU employers would drop slightly to 27.3 percent and for CSU employers would increase to 30.5 percent.
The CalPERS chief actuary, Milligan, told the board that a decision on giving CSU a separate rate would not affect the funding of the California Public Employees Retirement System.
The total contribution to CalPERS would remain the same, regardless of whether the current equal amounts were changed to increase CSU employer rates and lower non-CSU employer rates.
“So the main policy reason you would be doing this is greater transparency to the underlying cost structure — the fact that there is a difference in employee contribution rate,” said Milligan, who recommended a separate rate for CSU.
He said CalPERS will, if requested, provide separate rates for police and firefighters in local government, which allows separate pension benefits and can aid negotiations.
At the request of Schwarz, a state finance department staff member told the board that a separate rate would not cut CSU funding this fiscal year. Employer contributions come from a budget source that annually apportions costs and does not have a shortfall.
Board member J.J. Jelincic, elected to represent all CalPERS members, said adopting a separate rate yesterday would pack a year’s worth of state savings into nine months of the fiscal year that began July 1, while delaying until Jan. 1 would do the same in six months.
“So I’m not sure what the great urgency is,” said Jelincic, a CalPERS investment officer who was censured by the board later yesterday after complaints of sexual harassment by coworkers were upheld on appeal.
The CalPERS board, saying it lacked authorization, declined to act in May on a finance department request last December for a separate CSU rate. Finance made another request on Aug. 31 after obtaining authorization in the state budget enacted in June.
Four union officials urged the board to delay action until CSU employees complete bargaining.
Neal Johnson, SEIU Local 1000, said adopting separate rates for two large groups of state miscellaneous workers could lead to fragmentation and conflict. For example, he said, some workers have an 8 percent contribution and others 10 percent.
“The concept of this has been we are all in this together — not ‘I pay this’ and ‘You pay that’ and where do we go fighting each other,” said Johnson.
Meanwhile, CSU miscellaneous workers continue to contribute 5 percent of pay. In addition to increasing their pension contributions, non-CSU miscellaneous state workers in SEIU Local 1000 agreed last year to give new hires lower pensions.
Legislation enacting their new contract also gives new CSU miscellaneous hires lower pensions. But the contribution rates paid by current CSU workers are regarded as a vested right that can only be changed through bargaining.
Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at https://calpensions.com/ Posted 15 Sep 11