This post was authored by Peter J. Brown
As 2017 comes to a close, it is a time of reflection for me since I have spent so much time this year in collective bargaining negotiations and in Board and Council meetings to discuss these negotiations. It is an interesting time in our nation with a national economy that is humming along. While California public agencies are benefiting with sources of revenue increasing, they are facing lots of challenges on the expenditure side of the balance sheet. The reaction has been varied as the impacts of rising revenue and expenditures hit agencies differently. Agencies have authorized me to offer substantial increases; I have had an agency implement terms and conditions of employment with considerable cuts; and everything in between. One thing has proven to be consistent – the legislative bodies in the public sector look at the issue of wages and benefits very differently. This is driven by both the financial condition of the agency as well the makeup of the elected officials and their beliefs about how government money should be spent. Here are some thoughts if you are involved in this process as you start 2018.
Many elected officials are focused on rising pension costs as a result of CalPERS’ December 2016 announcement that it is reducing its discount rate (the rate CalPERS projects it will earn from its investments). The impact of CalPERS’ announcement has caused many agencies to see projected rate increases in excess of 20% in the next three to five years. The result is that when many agencies compare their projected revenue and expenditure increases over the same period of time, they are projecting that they will experience significant shortfalls. Several of the legislative bodies at these agencies are wondering how it will be possible to maintain services at current levels when they look at their expenditures (with the inclusion of the projected CalPERS rate increases) projected over the next few years. While most of these same agencies are experiencing healthy revenue increases caused by increases to tax revenues (e.g., property, sales and transient occupancy) as people are spending more money, those projected revenue increases are often significantly outpaced by the projected expenditure increases. This has caused a varied response to labor whose members are seeking cost of living increases and other improvements to their wages and benefits. In many cases, labor is seeking only to keep up with the increase in the cost of living, but even this request can be difficult for agencies to grant as elected officials view even those types of increases as adding to their projected shortfalls. Improvements do not have to be pensionable. There are lots of non-pensionable improvement options. 2017 has seen this strategy become more commonly used. Evaluating opportunities for non-economic improvements to working conditions is a strategy that can close the gap if financial resources aren’t available to meet employee expectations.
Alternatively, there are many agencies who are less focused on the future and the concerns about what might happen and more focused on the present and that their employees feel that their work should be rewarded with the increases that people (regardless of where they work) feel they should receive for their hard work and dedication to their jobs. I have heard the comment “we are doing more with less” hundreds of times at the collective bargaining table. While some of it is just rhetoric, there is some truth to it in the departments of some agencies. Staffing is not as high as it used be for some agencies. In addition, since there are many agencies giving increases, it creates somewhat of a domino effect because public employee compensation is often influenced by what the market pays similar employees. Market comparisons are one of the most significant factors under the fact finding law (Government Code section 3505.4(d)(5)) for a fact finding panel to consider when making recommendations to the agency and employee association following fact finding. The result of this has caused some agencies to provide increases which they do not actually believe they can afford based on projections, but believe they should provide so that they can maintain public services with quality employees. Talk to your boards and councils about these issues so they can decide how to prioritize how they spend the money that they have been entrusted to spend.
One thing has remained constant in 2017, when the negotiations occur at the collective bargaining table, negotiations have been smoother and more successful. Elected council and board members are often approached by the employee unions, especially when the unions are not seeing the kind of movement at the table they want or expect. At those agencies where the elected officials listen but don’t promise anything and understand that negotiating should be done by their negotiators, the negotiations have gone more smoothly. Often members of a city council or board disagree on the position the agency should take at the table. While it would likely help facilitate an agreement if they spoke with one voice at the collective bargaining table, the differing interests shared by individual communications between elected officials and union representatives often creates expectations which cannot be realized since the majority of council or board has not authorized or endorsed those same sentiments. This has happened to me and is part of the process, but as the labor negotiator for the agency, I am limited to the authority provided by the majority of the governing body. Speaking with one voice shows resolve, a commitment to the process, and trust in the negotiations team. But, at those agencies where the elected officials do more than listen, the labor unions understandably see that as an opportunity to make progress towards accomplishing their goals through direct contact as opposed to through collective bargaining. Talking to your elected officials about this issue early and often in the process can help your negotiations to be more successful.
2018 is right around the corner. If you are going to the table start planning now. There is a lot to do. Surveys are important to show your elected officials how the employees’ total compensation compares to the relevant marketplace. Showing your council or board what pension costs are projected to do to your budget will help them make an informed decision about how to approach labor negotiations. Having well written MOUs is critical to avoiding grievances or other claims. There are many new legal issues which you need to consider including the impact of Flores v. City of San Gabriel, AB 119 and DiCarlo v. County of Monterey. Communicating with your elected officials early about what to expect and managing their expectations will go a long way towards overall success at the table. If, along the way you run into hurdles, our experienced negotiators are a phone call away and can help you with any part of the process. Good luck!