Don’t Blame Public Sector Workers for State Budget Mess

California workers have been hit hard as the national economic crisis has resulted in layoffs, home foreclosures, bankruptcies, and declining revenues for the state and local governments. The recent state budget deal cuts billions of dollars from education and state programs that provide vital services to Californians. Line-item vetoes by the governor will reduce those essential services even further. And as the state’s unemployment rate approached 12 percent and state workers are ordered to take unpaid furlough days, California families have less money to spend, with the resulting ripple effect of more businesses closing, and further declining tax revenues for the state.

Counties and cities will bear the brunt as part of the budget deal calls for taking or borrowing funds from local government to balance the state’s budget. San Mateo County Central Labor Council President Linda Gregory noted that, “counties are being squeezed to death. They have become collection agencies for the state but are still supposed to provide all the services that have devolved to the local level.”

Public sector union leaders point out that funding for the vital services provided at the local level is being reduced or eliminated just as the need for them has reached a crisis level. For seniors and the disabled who rely on In-Home Support Services or for patients needing assistance to purchase drugs to treat HIV and AIDS, elimination of funding and reductions in staffing are a matter of life and death. Reductions in staffing for public safety could result in fire stations closing and longer response times to deal with emergencies. Under the threat of declining revenues, city, state and county departments of public works will not be able to keep up with road repairs or maintenance of water delivery systems, sewer pipes, parks and utilities. And many students will be forced to attend overcrowded classrooms in schools where art and music classes, nurses and counselors have been eliminated and will not receive the quality of education the state was once famous for providing. Dedicated teachers will do their best with the resources available, but in the long run education will suffer as the profession becomes less attractive as budgets continue to be cut.

As in any crisis, there are those who will look to find a convenient scapegoat to blame. For some opportunistic politicians and others who philosophically oppose unions and workers’ rights, public sector workers are to blame. Some see the economic crisis as a chance to rip up union contracts and take away the health care benefits, pensions, and living wages public sector workers have earned and fought to maintain.

In San Mateo County a Civil Grand Jury report released in June suggested that cities and towns in the County should rein in employee costs through a two-tiered benefit system, reductions in staffing, and renegotiated union contracts. The report also suggests that voters should decide through ballot measures whether they want two-tier systems of wages and benefits. In a climate where many voters are already swayed by negative reports in the media blaming workers and their “powerful unions” for the budget mess, a ballot measure could further erode the wages and benefits of public sector workers.

Pensions Under Attack

Gov. Schwarzenegger has indicated support for similar measures at the state level, proposing to lower pension benefits for new employees. While some Republican legislators have embraced the idea, Democratic Assemblymember Mike Eng from southern California pointed out that pension benefits should be decided in negotiations with the state’s employees unions. “That’s one of the things you have collective bargaining agreements for,” Eng told the Associated Press. He said Democrats in the state legislature had brought the governor two alternatives to cutting pensions to help balance the state budget—a tobacco tax and a levy on oil drilling, which were supported by labor. “I think it’s rather disingenuous of the governor to take something like pensions and ask us to embrace that when we gave him a couple of solutions that he rejected,” Eng said.

Along with a tax on oil extracted from the state by big oil companies that could bring the state as much as $1 billion annually, public sector unions also proposed a number of revenue generating measures including closing corporate tax loopholes. Those were rejected by the Republican minority in the legislature and the governor. And instead of taxing the wealthiest Californians at the same rate they were taxed during the business-friendly regimes of Governors Wilson and Reagan, workers at the lower end of the pay scale will see salaries and benefits cut, more unpaid furlough days, and the prospect of having to pay to use public facilities like parks—if there are still any remaining open.

Nadia Bledsoe of the American Federation of State County and Municipal Employees Local 829 pointed out that many people who seek jobs in the public sector do so knowing they will make a lower wage or salary than their private sector counterparts because they expect to have good retirement benefits, set by their union contract. She said the average pension for retirees is less than $2,000 a month, which is not a lot of money given the cost of living in the county and the Bay Area in general. Often left out of press reports on the issue of pensions that only tell the management side of the story is the fact that the workers themselves contribute to their pension fund through payroll deductions. And of course those workers also pay taxes, which support the state and local economies.

The California Public Employee Retirement System produced a report in 2005 (at the time Schwarzenegger was proposing cutting pension benefits and retiree health care of firefighters) that showed that the existing CalPERS Defined Benefit Plan was working very well, better than a proposed Defined Contribution (DC) plan would do. The report stated that, “CalPERS has been a proven great investor for the taxpayers of California. Over the last 10 years ended June 30, 2004, CalPERS returns averaged 9.7 percent even with two years of negative returns. It has generated positive investment returns 18 of the last 20 years, and costs less than a DC plan.” Many of those investments, funded by employer and employee contributions, are for projects that create jobs. A 2007 report found that “CalPERS dollars injected into businesses generated approximately 124,377 jobs in 2006, topping the heavy construction, civil engineering, and motion picture and video production industries.” The California State Teachers Retirement System (CalSTRS) similarly contributes to the state economy—using funds contributed by school districts and teachers to create private sector jobs. Cutting the public sector workforce would then result in less investment by the retirement systems in job-creating projects.

A section of the CalPERS report titled “Excessive Benefits in the Defined Benefit Plan Is a Myth,” noted that, “Average pension is small. No one is getting rich on pensions. Some 25,000 CalPERS members retire each year. The average age at retirement for the largest segment of workers is 60, with 19.5 years of service, and a benefit allowance of $1,673.82 a month,” —less than $21,000 a year. The proposed two-tier pension system at the state and local level would offer lower benefits to new hires—making careers in the public sector less desirable to new workers.

Whose Shared Sacrifice?

Union leaders point out that public employees are often held to a higher standard than those working in the private sector—they are highly trained and experienced and their union contracts set the standard for workplace safety, working conditions and livable wages. Local governments often argue, like managers of corporations, that to attract and retain highly qualified department heads or chief executives, they need to offer lucrative compensation packages with great retirement benefits. While rank and file workers face the prospect of losing benefits or being forced to pay more for health care, managers often are guaranteed pensions way out of proportion to what the average worker gets.

“Every day workers are not getting rich,” said Teamsters Local 856 Business Agent Peter Finn. “It’s not the rank and file union member who is taking the lion’s share of retirement money.”

Firefighters Local 2400 Political Director Tony Slimick said that the public often does not differentiate between the fire chief who gets 90 percent of his annual salary upon retirement and the firefighter who earns much less.

Anti-tax groups lump all public sector employees together and blame them for the state’s devastated economy. But recent news reports laid bare the extreme disparity in salaries between workers in the University of California system and UC executives.

State Senator Leland Yee wrote to his constituents that, “Last month, the University of California Board of Regents yet again approved exorbitant pay raises for more than two dozen. The hikes, which include a 25 percent increase for UC San Francisco’s chief financial officer and pay in excess $500,000 for UCSF’s chief operating officer, were documented in last week’s San Francisco Chronicle.”

“The public is tired of the UC administration acting like AIG,” said Yee. “It is imperative that we stop the UC Regents from turning our public university into a private country club. We can ill-afford an administration that continues to disrespect the taxpayers, students, and their low-wage workers and faculty.”

Yee noted that earlier this year, “the UC handed out 22 percent pay increases for several senior managers and paid exorbitant administrative leave for two former chancellors, receiving over $300,000 and $400,000 a year each. The Regents also approved a $450,000 salary for the new UCSF Chancellor (a 12 percent hike from the previous chancellor) and a $400,000 salary for the new UC Davis Chancellor (a 27 percent hike from her predecessor). UC President Mark Yudof also receives nearly a $1 million in salaries and perks. These actions come at the same time the Regents approved pay cuts, layoffs, and furloughs for lower wage workers.”

“Excessive pay raises and extravagant perks is yet another example of UC executive’s misguided choices and misplaced priorities,” said Lakesha Harrison, President of AFSCME 3299. “Workers are being asked to put less food on their families’ tables while UC executives continue to enrich themselves. Students are asked to pay more but get fewer services. This is outrageous and unacceptable. It is the reason why Californian’s need to reform the UC to make it accountable to taxpayers, not their own self interest.”
But even as their retirement benefits and earnings are threatened, public sector workers have offered to make sacrifices to maintain services and the jobs of their fellow workers. San Mateo city workers recently agreed to forgo scheduled pay raises for the rest of the year or took furloughs. Leaders of the various unions pledged to work with the city to save jobs.

Teamsters Local 856’s Peter Finn said that, “We come up with operational savings all the time but we are ignored.”

In a recent letter to the San Mateo Daily Journal, Rich Del Ben of Redwood City responded to the Civil Grand Jury report. “As a dedicated public service employee, it was alarming to learn about the San Mateo County Civil Grand Jury report about employee costs,” Del Ben wrote. “The grand jury released a scathing report that’s clearly an attack on working families. It makes an outdated case for hacking workers’ earned compensation for providing vital public services. The truth is public employees are already making concessions. At Redwood City, we waived wage increases to help the city get through this tough economic time. Public workers are doing the same in neighboring cities and counties. We understand we all have to do our part these days and we’re taking an active role to maintain quality services and a fair living standard for working families. We would expect our elected leaders to support no less.”

- Paul Burton

[Editor’s note: This is the first in a series of articles San Mateo Labor will feature on the challenges public sector workers face and the jobs they do for the public good. Please contact Paul Burton at smclclabor@netscape.net if you have any comments or would like to contribute to this series.]