State employees: New budget plan more difficult than the last

For some state employees, Gov. Schwarzenegger’s revised budget contains cuts that are even deeper than those in earlier budgets that sparked lawsuits from public employee unions.

The three unpaid furlough days per month are  scheduled to end at the end of June, per the provisions of Gov. Schwarzenegger’s executive order. The furloughs were among the workforce items intended to save the state about  $2 billion, according to the administration, and represent the equivalent of about a 15 percent pay cut. The administration believes a similar level of savings will be realized through new cuts in the governor’s revised, 2010-11 budget, although budget experts in both the Capitol and the Legislative Analyst’s Office (LAO) say that $2 billion figure is optimistic by hundreds of millions of dollars.

The governor’s latest proposal, offered in the teeth of a daunting $20 billion budget shortage and a weak economy, also includes roughly 15 percent in paycheck hits – a 5 percent pay cut, a 5 percent increase in an employee contribution to the state pension fund and the equivalent of a 4.65 percent pay cut stemming from one unpaid day off per month. In addition, the administration has also ordered state departments to reduce their budgets by 5 percent, a cut that may be met in part by natural attrition and not layoffs. Of the four components, three were included in the governor’s original budget proposal in January. The fourth, relating to the personal leave day, is new.  

Overall, then, the governor hopes to reduce workforce costs by about 20 percent.  

But the proposed cuts, like many of the administration’s earlier budget proposals during the past two years, are likely to face legal challenges. For example, the plan to boost workers’ contributions to CalPERS faces legal hurdles.

“When you start your employment with the state, the state can’t just change the terms of retirement. Basically, it’s like a contract: The state cannot unilaterally change the contributions because that would violate the law. Even if it was approved by the Legislature, it probably wouldn’t be allowed to stand,” said Diego Martin, who specializes in public employment issues at the Legislative Analyst’s Office.

In addition to the general reductions, there are other proposed cuts targeting specific employees.

One set of reductions includes cutting the equivalent of some 750 positions at Caltrans,  including engineers and related staff in the Capitol Outlay Support Program, while increasing the number of contract workers.

The cuts will not result in delayed projects but were ordered to better match the staffing with the workload, the administration said.

The numbers of the proposed cuts, coupled with an apparent increase in outsourcing engineering jobs, drew fire from unions representing the state’s engineers. They have scheduled meetings this week with the administration to discuss the issue, which thus far has received little attention in the Capitol.

“This looks like something he’s trying to accomplish on his way out the door,” said Bruce Blanning of the Professional Engineers in California Government. “Cutting staff while increasing contracting output is illegal, in our view. Historically, there has been 90 percent staff and 10 percent outsourcing, and this (the May Revision) would throw that way out of whack.”

The state believes it could save money by outsourcing some projects, a common practice in the private sector, rather than maintaining a permanent staff. The administration also favors the “design-build” model in major projects which design and construction are handled by one entity,  streamlining the bidding process.

The largest single question facing state employees is whether – and for how long – the forced furloughs will continue.

The LAO says it is difficult to estimate the real savings associated with the furloughs, in part because vacant positions were included in the furlough tally, some revenue-collecting employees were furloughed – which caused the state to lose money – and because of overtime, back-pay and leave issues. Original estimates from the administration of $1.3 billion in savings were too high, the analyst said, and the $2 billion estimate may be overstated, too.

The three days per month of furloughs are scheduled to end by June 30, according to his executive order. But if the new budget isn’t in place on July 1 – a likely prospect, given the severity of the state’s fiscal condition and the history of past negotiations – the furloughs could continue, although the governor has not made a final decision.

 “If his May Revision is enacted, we have other state-employee comp savings to replace the furloughs,” the governor’s spokesman, Aaron McLear, noted in an email. “If not, the governor maintains his authority to furlough employees in an economic crisis if he needs to.”