The recent scandal involving senior ranking parks officials using state funds for unauthorized vacation buyouts has brought new attention to compensation for state workers.  Recent budgets have included reductions for public employee compensation costs.  This week, California Budget Fact Check examines all employee cost drivers.

The California Budget Fact Check found that:

• The 2012-13 budget assumes one-time General Fund savings of $420 million from employee compensation.  These savings are achieved by adopting a one day a month unpaid Personal Leave Program (PLP) for most state workers, which represents a 4.6% pay reduction.  According to the Legislative Analyst, the savings are one-time in nature and may cost the state more in the long run. 
• State employees will continue to receive salary increases in 2012-13, at a cost of more than $110 million. Since 2008-09, state employees have received salary increases that have cost state taxpayers more than $1.7 billion.  
• In the current budget, the state will pay $350 million more than last year in increased retirement costs.  No provisions to curtail growing retirement costs were adopted as part of the budget. 

Savings One-time in Nature

21 bargaining units have agreed to a one day per month unpaid Personal Leave Program (PLP).  However, the budget still assumes that those remaining bargaining units that have not agreed will have a one day per month unpaid leave program imposed.  This is equivalent to a 4.6 percent pay reduction for 2012-13 only.  This pay reduction does not affect the employee's retirement benefit.  Under the Governor's furlough provisions, employees' retirement benefits will be calculated at their full salaries, as if they did not take a furlough day. 

According to the nonpartisan Legislative Analyst's Office, this provision saves the state money in 2012-13 but will cost the state more in the future.¹  This personal leave can be banked and taken at any time.  Since most state employees will use these unpaid days off in lieu of vacation days, this is essentially an interest bearing loan that will be repaid when the employees cash out vacation days at higher salary levels in the future.

Employee Salary Increases Continue

State Employees Will Continue to Receive Pay Raises: Even though the state continues to face multi-billion deficits, the state will provide salary increases in 2012-13 to most state workers under the "Merit Salary Adjustment" (MSA) system.  While called "Merit Adjustments," the state's system grants merit salary increases automatically and are not related to job performance.  (Government Code Section 19832). 

The average merit increase in 2012-13 is expected to be approximately 2-5% for employees who are not near the top step of their pay ranges.   This year's merit spending increase will cost the state more than $110 million.  According to the Controller, since 2008-09, "merit" raises have increased baseline public employee spending by $1.7 billion.² 

Highest Paid Employees Granted Increases:  Recent contracts ensure that the highest paid workers receive salary increases.  Normally, employees at the top step of the pay ladder are not eligible for merit pay increases.  However, as part of the recently-adopted contracts, employees at the top scale will be eligible for salary increases.  According to the Sacramento Bee, the contract negotiated with SEIU Local 1000 (which covers nine bargaining units) workers at the top-step will receive a 3 percent hike starting July 1, 2013-14. Top-step lawyers will receive a 4 percent pay bump.  Other unions representing highway patrol officers, firefighters, doctors and psych techs will receive between 2 percent and 5 percent top-step increases in January.³

Salary increases are not limited to state workers:  The University of California System granted merit salary increases to rank and file employees in 2011, costing approximately $165 million.⁴  The UC system allocated $140 million to use for non-union employees and faculty pay raises in November, 2011⁵.  According to the UC Chancellor, union employees had been getting pay raises as part of their contract.  UC's total payroll grew by 6 percent last year, from about $10 billion in 2010 to $10.6 billion in 2011, according to salary data the university released in July. ⁶

The California State University system also approved salary increases for 3 incoming presidents in July, 2012.  Two will receive 10% increases and one will receive a 9% increase.⁷  Under the terms of a new contract for more than 23,000 faculty, coaches, counselors and librarians at campuses statewide, there will be no salary increases in the 2010-11 and 2011-12 budget years.  However, negotiated salary increases would be allowed in 2012-13 and 2013-14, if the contract is ratified by September.  The proposed contract is going through the ratification process.

Recent Revelations about Illegal Employee Buyout Leads to Audit Request

Recent revelations about the employees from the Department of Parks and Recreation illegally cashing out vacation time raises larger concerns about employee costs and the lack of fiscal oversight at the state level.  The cash-out cost taxpayers $271,000 and was not approved by supervisors.⁸  Assemblywoman Beth Gaines has requested an audit of the Parks and Recreation's department.  That audit should be completed later this fall.  The audit seeks to find out what systems need to be in place to ensure illegal pay spiking scheme do not continue at Parks and Recreation or any other state department.

Public Employee Retirement Costs Increased By $350 Million

The 2012 Budget includes $2.4 billion for state contributions to the California Public Employees Retirement System (CalPERS) for General Fund programs. This is $350 million more than 2011.  The state's contribution for all funds (General Fund plus Special Funds) cost taxpayers $4.3 billion.  The budget did not include any provisions to reduce current or future retirement costs.  It's clear that taxpayers will not see any real budget savings in public employee compensation until fiscally-responsible pension reforms and rigorous oversight are enacted by the Legislature.

Click here to read past issues of "Budget Fact Check."

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