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Chronicling civil-service life for California state workers

California state government’s leave cash-out program is up and running at the Department of Social Services, where employees last week received query forms that asked if they wanted to trade up to 20 hours of leave time for money.

Social Services workers covered by the California Statewide Law Enforcement Association and International Union of Operating Engineers (Bargaining Unit 12) are eligible under terms of contracts bargained last year. The state’s civil service engineers’ union, a group mostly found in Caltrans, also bargained a leave cash-out clause. And the Brown administration added excluded employees to the program – managers, supervisors and the like – even if they manage unionized workers who aren’t eligible.

About 62,000 of the state’s 218,000 government workforce falls into one of the four groups.

Departments have discretion whether to offer the program, since they have to cash out the leave credits with money pulled from existing resources. Disbursements must be made by the end of June. Here’s how Social Services asking its unionized workers and its excluded staff about participating.

Our State Worker column this week highlights a new report that concludes public employees brought in under last year’s cheaper pension formulas must work up to five years longer or save thousands of dollars each year to have the same retirement income as workers under older, more generous pension plans.

Here’s the CalPERS report that underpinned the column and a companion report that concludes lower pension benefits for new hires will pressure employers to offer better pay to recruit future workers.

The Emerging Role of Defined Contribution Plans for California Public Employees

California Public Employee Retirement Benefits— Assessing Compensation Changes

California became a dual-class public employee state last year when a sweeping law lowered pension benefits for state and local government workers hired in 2013 and later.

What that means for the state, for taxpayers, for employers, has been known for a while. But now a new CalPERS report uses a few examples to illustrate the law’s impact on individuals. It concludes that new members must set aside hundreds of dollars per month or extend their careers for years to achieve the same retirement income as counterparts under older, more generous formulas.

Let’s take a miscellaneous employee, a common classification that covers everyone from DMV office staff to local school custodians. Say the employee retires at age 55 after 20 years of service with a final salary of $92,200.

That worker, if hired before Brown’s law changed retirement benefits formulas, CalPERS estimates, would receive a $3,020-per-month pension (plus Social Security). CalPERS refers to employees under that old, 2 percent-of-pay at 55 plan as “classic members.”

Since our report on the state’s employee leave cash out program for three bargaining units and all excluded employees (if departments can afford it), we’ve fielded calls and emails from state workers whose responses range from praise to disdain.

One employee said the extra cash would help offset a hefty tax bill he has to pay this month. Another state worker said the program is too narrowly defined and too cheap; she thought it should apply to all employees and should cash out up to 40 hours of leave. Another suggested only employees above the state’s 640-hour cap on leave should be able to buy down hours.

Another state employee said he’s not in one of the groups eligible for the program, but if offered the chance, he wouldn’t cash out his leave. He has small kids and needs the hours more to stay home when they’re sick. If you had the chance to cash out 20 hours of leave, would you? Take our poll. In a few months, we’ll match the results against how many state workers are offered a leave cash out opportunity versus how many take it.

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Sacramento Bee file
The CalPERS headquarters building in Sacramento.

Editor's note, 3:50 p.m.: This post has been amended to include information about the law firms spearheading the long-term care lawsuit against CalPERS.

CalPERS has asked a judge to throw out a lawsuit alleging that the fund and individual board members, among other things, failed to watch out for members’ best interests when the fund increased rates on long-term care insurance plans.

The fund’s attorneys said in a recent Los Angeles court filing that CalPERS has a “clear contractual right to impose the complained-of increases,” that CalPERS’ actions reflect trends in the long-term care industry and that, even if the plaintiffs’ allegations are correct, CalPERS and its board members are immune from liability.

The plaintiffs’ complaint was triggered by CalPERS’ decision to increase the rates of its most expensive long-term care policies by 85 percent in 2015 and 2016. The fund under-priced the policies when it launched the program nearly 20 years ago, the lawsuit contends, and sold them with a lie: that rates “would be fixed and would never rise based on the consumer’s age or health.” After CalPERS mismanaged its investments, the lawsuit says, it wrongly forced policyholders to make up the losses by jacking up long-term care rates.

Tens of thousands of state workers stand to get extra money in the next couple months by cashing out some of their unused leave time – assuming the state can find money to cover it.

Under the terms of contracts bargained last year, about 30,000 unionized civil engineers, investigators and heavy mechanical equipment operators could qualify to convert up to 20 hours of leave time into dollars. Last week the state made the same offer to about 32,000 managers and supervisors across state government.

The payments, which could reach about one-sixth of the rank-and-file workforce, must be made from departments’ current funds by the end of June and will likely cost millions of dollars. Such a program would have been unthinkable just a few years ago when Gov. Jerry Brown froze hiring, slashed everything from departments’ cellphones to office space and furloughed employees in response to California’s serial budget crises.

While the program will likely cost some departments big money up front, it saves even bigger costs down the line by reducing hours that their employees would cash out later at a higher pay rate when they quit or retire.

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Hector Amezcua/ The Sacramento Bee
A state employee works near a printer running state paychecks.

Thousands of California state civil engineers, investigators and heavy mechanical equipment operators each stand to cash out up to 20 hours of leave time – if their departments can afford it.

Meanwhile, managers, supervisors and other employees not under negotiated contracts may also be cashing out some of their stacked-up leave under terms of a similar program for excluded workers.

For unionized employees, the arrangement is a provision of contracts covering a total 30,000 workers represented by Professional Engineers in California Government (Bargaining Unit 9), California Statewide Law Enforcement Association (Unit 7) and International Union of Operating Engineers (Unit 12). Beyond those groups, all excluded employees also are eligible to cash out 20 hours of accrued leave time, even if they manage union employees who are not.

Management and other excluded workers comprise the largest of the four eligible groups, accounting for roughly 15 percent of the state workforce, or about 32,000 employees. Their leave will be the most expensive to cash out because they are generally paid more than the rank and file. Employees in that group will also be in the position to influence decisions on whether a department can afford to offer the program to employees.

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Jay Mather/ The Sacramento Bee
A courtyard at CalPERS’ Sacramento headquarters

The economic ripple of benefits paid to CalPERS’ retirees and their family members generated tens of billions of dollars in economic activity in fiscal 2011-12, the fund reported Tuesday, while CalPERS’ investments poured billions more into the state.

Pension spending generated about $30.4 billion of goods and services consumption for the year, CalPERS figures, compared with $2.8 billion that employers contributed to their employees’ pension accounts. That works out to a ratio of $10.85 of economic activity per $1 of taxpayer spending on pensions. (The figure doesn’t factor in what employees contribute to their pensions.)

The money spent from retirement benefits created nearly 114,000 jobs statewide, CalPERS said, with the largest gains seen in the restaurant/bar sector (12,745 jobs), the medical industry (6,722 jobs) and real estate establishments (6,120 jobs).

CalPERS arrived at the estimates by feeding pension data into a widely-used computer model that takes an array of factors into account to determine how retiree spending triggers economic activity in California.

story mug Ortiz
Jon Ortiz

Technically, House Resolution 29 is nothing more than an opinion that Assemblyman Jimmy Gomez wants to put to a vote.

But business interests with a stake in lucrative government contracts and local agencies struggling to control costs say it’s more: A de facto anti-outsourcing pledge.

Resolutions are rarely so contentious, since they don’t carry the force of law. They name highways. Some apologize for wrongs, such as the World War II expulsion of Japanese Americans from state service. A 2011 resolution declared a “West Nile Virus and Mosquito and Vector Control Awareness Week.”

Gomez’s resolution, however, sparked a fight. It asserts that jobbing out government work tears at “the underpinnings of democracy itself” and diminishes taxpayers’ control over public spending. Its opponents say contracting can be cheaper and gives them flexibility that’s lacking with unionized civil-service employees.

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Hector Amezcua/ The Sacramento Bee
Assemblyman Jimmy Gomez, D- Los Angeles, at his Assembly chamber desk in 2012 .

An Assembly resolution against government contracting is drawing fire from local governments and business groups for what they contend is a pledge against giving work to outside interests.

House Resolution 29 by Assemblyman Jimmy Gomez, D-Los Angeles, sets up it’s anti-outsourcing position with a number of findings: The policy undermines “the underpinnings of democracy itself” – transparency, accountability, and shared prosperity and competition. It gives taxpayers less say over government spending. And, the resolution says, contracting government business to private entities fuels what are often substandard wages for contract employees.

“... the Assembly opposes outsourcing of public services and assets, which harms transparency, accountability, shared prosperity, and competition, and supports processes that give public service workers the opportunity to develop their own plan on how to deliver cost-effective, high-quality services,” the resolution says.

The resolution, which doesn’t have the force of law, “urges local officials to become familiar with the provisions of the Taxpayer Empowerment Agenda.”

As we reported last week, the number of California state employees who took their pensions fell dramatically in the first quarter of this year. March also marked the 10th consecutive month that fewer workers retired when compared to the year before. What’s going on here?

Take our poll to express your opinion.

The number of state workers who filed pension papers dropped sharply during the first quarter of this year compared with 2013, according to new CalPERS data, while March extended a record-setting string of months that retirement rates have declined.

The numbers suggest that government work has become more attractive to the kind of long-time employees who just a few years ago were exiting en masse, chased by furloughs, higher pension contribution rates and many years of stagnant pay. In mid-2013, however, furloughs ended at the same time raises kicked in for senior employees. Around that same time, SEIU Local 1000 – which presents half the state’s 180,000 unionized workforce – negotiated a new contract with raises that will likely kick in this summer. Other unions soon followed with their own agreements containing modest raises.

That brightening outlook shows up in the CalPERS data as a record 10-straight-months decline in retirement applications. Another telling sign: January-through-March retirements this year dropped a 18.9 percent, the sharpest quarterly decline recorded by CalPERS since it started tracking the data in 2007.

About The State Worker

Jon Ortiz The Author

Jon Ortiz launched The State Worker blog and a companion column in 2008 to cover state government from the perspective of California government employees. Every day he filters the news through a single question: "What does this mean for state workers?" Join Ortiz for updates and debate on state pay, benefits, pensions, contracts and jobs. Contact him at (916) 321-1043 and at jortiz@sacbee.com.

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Note: The State Worker blog switched blog platforms in October 2013. All posts after the switch are found here. Older posts are available using the list below.


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