Memo to Gov. Jerry Brown:
Governor, you’ve done it again. It couldn’t have been easy getting state engineers and scientists to sign off on new labor deals that would require their members pay a percentage of their wages into a retiree health care fund.
You knew the math. So did they. The state faces nearly $72 billion in future debt for retiree health benefits because it has set virtually nothing aside for them. The pay-as-we-go method is eating up more money each year and the “unfunded liability” – wonkspeak for “we don’t know where we’ll find the cash” – has grown 33 percent since 2007.
The new deals you’ve cut require employees to begin paying into a pension-style retiree-benefits fund. Eventually, the engineers will pay 2 percent. The scientists will pay 2.8 percent. The state (i.e. taxpayers) will match.
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As of Tuesday, you were still bargaining with maintenance workers and correctional officers. Other unions come up next year, including the 95,000-employee SEIU Local 1000.
Even though contracts are bargained independently, these first two sent a clear signal about what you want. And you’re used to getting your way.
You persuaded the unions to swallow furloughs a few years ago to strengthen your political hand for a successful tax initiative. You pushed through pension legislation that mandated local government employees pay into their pension accounts (a first for some) and new hires wait longer to receive less.
These new state deals mandate engineers and scientists hired in 2016 and beyond to put in 25 years of service to earn the maximum retiree medical subsidy for themselves and their dependents, and cuts that subsidy by one-fifth. Right now, the threshold is 20 years of service for 100 percent of the retiree premium, a bit less for dependents.
Governing is about trade-offs, and your agreements with the scientists show how it’s done.
You take with the new employee contributions and give with the employer match. You take by requiring future hires work longer for a lesser benefit, then give the largest pay raises either union has seen in years – a total 7 percent to the engineers and a total 15 percent to the scientists (they would argue they should get more).
The non-partisan Legislative Analyst said in its assessment of the engineers’ contract last week that you and the union “deserve credit” for agreeing to set aside retiree health funds. (You can assume the analyst will say the same this week about the scientists’ deal.)
But then the LAO did its own bit of paddling, noting for example, that every dollar in salary costs the state $1.34 because of wage-connected retiree benefits like Social Security, Medicare and pensions. With these deals, you’ve just added another one.
This retiree health issue is a mess. There’s likely no perfect solution. But, hey, at least you’re trying.