Four Unions Strike Tentative Deals With California

ALAMEDA, Calif. — Four unions representing California state employees agreed to contracts that require workers to contribute more to their pensions and provide less generous benefits to future hires, Gov. Arnold Schwarzenegger announced Wednesday afternoon.

The tentative agreements could help smooth the way toward adoption of a budget, particularly if other unions representing a larger share of the state workforce follow suit.

Schwarzenegger has said repeatedly that he will not pass a budget without the adoption of pension reforms that lower the cost of public employee retirement plans.

Wednesday’s agreements cover 23,000 employees. The administration is still negotiating with eight unions that represent 170,000 workers.

“We’re very hopeful other unions will see this as reasonable pension reform and a reasonable approach to our budget problems,” Debbie Endsley, director of the Department of Personnel Administration, told reporters Wednesday.

Even if the larger unions agree with the template set by this week’s agreements, the Republican governor insists that lawmakers have to adopt legislation to codify the pension reform goals in statute.

The Legislature’s majority Democrats, who typically count on sizable campaign support from public employee unions, have been reluctant to support changes that reduce benefits for those members. But they could be more willing to accept changes bargained by the unions themselves.

The key change is a rollback — for future hires — of increased pension levels that were approved by lawmakers and then-Gov. Gray Davis in 1999. New employees will have to work more years to get a full pension, which will be lower.

For future hires, pensions will be calculated by averaging their three highest-paid years, instead of just their last year, to reduce “pension spiking” from final-year compensation boosts. Employees will have to contribute a larger share of their salaries to the retirement fund.

Schwarzenegger insists that pension reform is a quid pro quo for his signature on a budget.

“He’s quite serious about it,” said Barbara O’Connor, director of the Institute for the Study of Politics and Media at California State University, Sacramento.

“If you look at the elections we just had, the union clout is not nearly as strong. Public employees are coming to grips with having to be part of the solution,” she said.

“I will hold up the budget,” Schwarzenegger told Politico this month. “It doesn’t matter how long it drags — into the summer or fall or into November or after my administration — and I think people will support that.”

With the new fiscal year just two weeks away, there has been little public movement over how to solve the state’s $17.9 billion general fund budget gap, which includes a $7.7 billion deficit carried over from the current fiscal year.

Schwarzenegger proposed an all-cuts budget that includes the complete termination of the state’s welfare program and other social programs.

Legislative Democrats want to preserve those programs, and have proposed tax increases and more than $8 billion of borrowing against the state’s bottle deposit fund. The state attorney general’s office this week said it would not provide a legal opinion necessary for such a borrowing.

Republicans are in the minority, but some of their votes will be needed to achieve the two-thirds threshold required to adopt a budget.

They say they are perfectly happy with the governor’s budget proposal.

“Republicans have made it clear that we will not support a budget that raises taxes or further burdens California businesses,” Bob Dutton, the ranking Republican on the Senate Budget Committee, said ­Tuesday.

Controller John Chiang in a letter on Tuesday told lawmakers not to dally over the budget, warning that adverse effects would become visible soon after the fiscal year begins. California has a zero balance in its general fund, and will exhaust the $20 billion it can borrow from its special funds before the end of July.

That means payments to schools and local governments will be deferred, as well as payments to vendors for services rendered after July 1, and payroll for elected officials and political appointees, Chiang wrote. The deferrals would protect creditors with higher legal status, including bondholders.

“At a time when the economy is showing signs of recovery, we can ill-afford the 'business as usual’ approach of requiring the state to be driven to the brink of a fiscal meltdown before compromise is achieved,” Chiang wrote.

Schwarzenegger has threatened to cut all state employees to the minimum wage in the absence of a budget, an action that would lead to legal challenges if implemented.

If the deals are ratified, members of the four unions that made agreements this week with the administration would be exempt from that threat, and also be exempt from any mandatory furlough days beyond those in the agreements.

“We are not blind or deaf to the unique times in California. We want to get the necessary discussion of pension reform behind us,” Jon Hamm of the California Association of Highway Patrolmen said in a statement.

The other unions reaching agreements were the California Department of Forestry Firefighters, the California Association of Psychiatric Technicians, and the American Federation of State, County, and Municipal Employees.

“The unions are basically getting the security of the known,” Endsley told reporters Wednesday.

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