Let’s break out the crystal ball and peer into the future for Gov. Jerry Brown’s plan to bargain state-employee and retiree health benefits with unions.
Background: California spends about $3 billion on medical benefits for state workers, plus $2 billion for retirees. Unfunded obligations to retirees over the next 30 years approach $72 billion.
If nothing changes, experts have said, that long-term unfunded liability will more than quadruple by midcentury because the state sets aside nothing for those promised benefits. Brown wants to prefund them with trust money seeded with 50-50 contributions from government employers and employees.
Taxpayers would pay $600 million more annually for the employers’ share, the administration says, but save billions long term. Employees would pay more, but their benefits would be more financially secure.
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▪ Unions will argue over whether their members should pay a percentage of salary or a flat contribution. Unlike pensions paid in part based on an employee’s income, medical benefits are the same for everybody. Should a state physician earning six figures pay five times more for retiree health than an office technician?
▪ Look for the 30,000-member California Correctional Peace Officers Association to cut the first contract deal. Its health care provisions will set the template for everyone else. In theory, the state’s 11 employee unions independently bargain, but history shows that the first agreement sets the template for those that follow.
Brown’s M.O. picks off a big union first – last time it was the 95,000-member SEIU Local 1000 – which sends a strong signal to the smaller groups.
Scientists, engineers and heavy-equipment operators also have expiring contracts this summer. All held out for more money last time (it didn’t work), so there’s little reason to think they’ll do differently now that Brown wants their members to cough up more for benefits.
▪ Once employees prefund their retiree medical insurance, the benefit will get a new layer of legal protection. Why? Because workers will have reason to claim that the benefit can’t be taken away – at least what they paid into it.
This week, the U.S. Supreme Court ruled there’s no presumption that retiree-health benefits are guaranteed.
But when employees pay in, the benefit “could become like a pension system, with vested rights,” said Sacramento-based labor attorney Tim Yeung.
▪ The governor will get most of what he wants. He’s more popular than public unions. State-style benefits rarely exist in the private sector. Like his Republican predecessor, Arnold Schwarzenegger, Brown has shown little generosity to state labor. Some union negotiators privately grouse that collective bargaining has become collective begging.
Brown has the whip hand. He’ll use it.