Taxpayers Not Even at the Table

Diane Harkey Board of Equalization Member Diane Harkey Leave a Comment


This op-ed originally appeared in the San Diego Union-Tribune 

Mildly optimistic about recent progress in negotiations with the state’s 21 unions, but disappointed in what appears to be the “deal,” we now need some answers.

Roughly three months before California goes to the polls, why would a lame duck governor be able to bring parties that have heretofore been unwilling to negotiate to the table now? With the state bankrupt and unemployment out of control, shouldn’t the next governor and new Legislature have the flexibility to review and approve contracts that impact our solvency and the future of our state?

The six agreements, the subject of Senate Bill 846, are no deal for California taxpayers. To be honest, if any of the remaining 15 organized employee units don’t sign on, they are definitely defying the free-market axiom of working for their own self- interest.

There’s no doubt changes are necessary. Defined benefits for state employee pensions leapt from $140 million in the 1999-2000 fiscal year to $3.8 billion in 2010-11 due to changes made in 1999 with the bipartisan SB 400. While pending new agreements with six unions claim to roll back some of these provisions, the minimal dollars saved in year one are not worth the increasing dollars that will need to be expended almost immediately afterward.

We should be calling the recent progress a first step and a good beginning. But if this is the end of the line, the governor’s memorandums of understanding with the unions should be rejected, as they actually worsen our state’s future liability situation. Below is a brief synopsis:

California benefits by:

-A one-year pay reduction of 4.6 percent.

-Existing and new-hire employee contributions increasing from 5-8 percent to 10 percent.

-Pensions based on the highest three years of compensation instead of the highest year.

-Retirement age increases from 50-55, or 60-63 for new hires, depending on the bargaining unit.

California loses by:

-An increase in top-level pay of up to 5 percent effective January 2012.

-A prohibition on furloughs that ties the governor’s hands.

-Continuous appropriation, which means that employee pay continues with or without legislative approval or a budget. Why should employees worry?

-One additional employee personal-leave day per month.

-Pension contributions to the Public Employees Retirement System temporarily reduced, based on first-year lower pay for employees, increasing the state’s unfunded liabilities or future debt.

-Significant added costs beginning 2011-12 due to the top pay ranges increasing by 2 percent, 4 percent, 5 percent, as well as the use of some types of leave for calculating overtime.

-Contracts can be reopened at any time if pension benefits for a future unit are better. And one agreement actually allows for a matching of a more lucrative compensation package negotiated later by another union!

While there is roughly $68 million of general fund savings in 2010-11, that savings is quickly reversed the very next year and increases to $39 million in extra costs by 2012-13. Other fund account costs also increase in out years. Imagine the net negative cash-flow effect magnified when the remaining bargaining units scoop up the “deal.”

The net result of these six contracts is no bargain for California’s taxpayers, and a worse hand for a new governor to whom we are looking to pull us out of this mess.

A de facto bankrupt state needs all parties sitting at the table willing to negotiate. If these agreements become law – and this is not the beginning but is, in fact, the end of the line – the current and future taxpayers of California will not be sitting at the table. We will be the meal.

Harkey is a Republican member of the state Assembly, representing the 73rd District covering coastal Orange County. She is vice chair of the Assembly Committee on Public Employees Retirement System and Social Security.


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