As retirement costs grow, traditional labor disputes over wages and health coverage have a newcomer. Pensions are one of the issues in recent strikes by UC hospital workers and San Francisco Bay Area transit workers.
The dispute is not over the amount of pensions promised current workers, widely believed to be protected by court rulings. The sticking point is how the cost of the pensions is split between employers and employees.
UC patient care workers balked at increasing their pension contributions from 5 percent of pay to 6.5 percent. Bay Area Rapid Transit workers make no pension contribution because the employer pays their CalPERS share, 7 percent of pay.
After heavy investment losses in a deep recession, the trend among public pensions is to get employees to share costs and risks. Gov. Brown’s pension reform last year calls for employers and employees to pay a 50-50 split of normal costs.
Last week a BART attorney, Vicki Neutzel, told a fact-finding panel appointed by the governor that the rail system wants to “sustain” its package of medical and pension benefits, but cannot unless employees share the risk and increased costs.
“BART believes and continues to believe it is essential that its employees share in the risk of this benefit, so that the benefit can continue,” Neutzel said, while outlining the pension proposal.
The panel was told the annual BART payment to the California Public Employees Retirement System increased from $3.1 million in 2002 to $50 million this year and is expected to grow at the rate of 7 percent a year for the next four years.
“While labor talks always seem to focus on wage proposals, the cost of maintaining the existing benefit package cannot be ignored,” said Carter Mau, the BART budget manager.
Many unions throughout the state have agreed to a standard post-recession pension cost control: higher employee contributions and lower pensions for new hires. But some have not agreed, and UC is an example of the split.
After a remarkable two-decade “holiday,” when neither employers nor employees made contributions, UC Retirement began to phase in contribution increases for management and labor three years ago.
Most of the UC unions agreed to another step in the contributions on July 1, when the employee share increased from 5 percent of pay to 6.5 percent. But as part of a larger pay and benefits dispute, three unions balked at the higher pension payments.
A union representing a wide range of 13,000 patient care workers held its first strike in May, a two-day action that UC estimated would cost $20 million. Then as allowed under state law when there is no agreement, UC imposed its contract proposal late last month.
The president of AFSCME 3299, Kathryn Lybarger, said in a news release that UC, with “exorbitant” executive pay and pensions, should be subject to the pension cap in the pension reform pushed through the Legislature last year by Gov. Brown.
AB 340 links a cap on new-hire pensions to the amount of pay taxed for Social Security ($113,700 this year). The reform covers CalPERS, the California State Teachers Retirement System and 1937 Act county systems, but not UC and big-city systems.
“While AFSCME 3299 has negotiated in good faith and offered meaningful compromise, UC has chosen to hold the health and aspirations of millions of Californians hostage over its insistence on $300,000/year public pensions for its highest paid employees,” Lybarger said in the news release.
BART unions have been in a kind of sweet spot for labor action. Its workers are not barred from strikes, like some government workers providing vital services, and a rail strike causes immediate public disruption, unlike a walkout by most office workers.
A business group, the Bay Area Council, estimated that a 4 ½-day strike by the two largest BART unions earlier this month cost an estimated $73 million a day in lost productivity.
A 60-day cooling off period sought by the governor was approved yesterday by a judge, avoiding another strike today. It was the sixth BART cooling-off period ordered since 1988.
All of the previous cooling-off periods avoided a strike, except in 1997 when the two-month period was followed by a six-day walkout, the San Jose Mercury-News reported.
Employer payment of the employee share of pension contributions has been a widespread practice. For new hires, the reform legislation last year prohibits what is formally known as the “employer paid member contribution.”
At least 117 public agencies in the San Francisco Bay Area pay part of the employee pension contribution, an analysis by the Bay Area News Group found. The BART “pension pickup” of the employee share was $17 million last year.
An attorney for the biggest BART union, SEIU 1021, told the panel last week that the “pension pickup” became a part of labor contracts after Proposition 13 in 1978 cut property taxes and reduced revenue.
Instead of a pay raise, said Vincent Harrington, BART began picking up the employee pension contribution. He said employees received more take-home pay, and BART in effect was able to give employees a raise without paying the usual taxes.
“Thirty years ago we gave up the wages reflected in this swap, and we have never had them since,” Harrington said.
The BART general manager, Grace Grunican, said salaries average $79,500 and benefits an additional $50,800. With no pension contribution and health coverage for $92 a month, she said, employees have “one of the richest” benefit packages in the industry.
To avoid system deterioration as federal funds decline, Grunican said, heavy local spending is needed to replace the oldest fleet of rail cars in the nation, replace a 40-year-old control system and expand maintenance as the line is extended to San Jose.
BART wants employees to begin making a 2 percent of pay pension contribution, reaching 5 percent after four years. Unions are offering to make a 7 percent of pay pension contribution, if it’s offset by a 6.5 percent salary increase.
The employer share of the BART miscellaneous CalPERS payment is 12 percent of pay. Unlike state workers and many other local government employees, BART workers do not receive Social Security in addition to pensions.
On all issues, BART said, there is a four-year $100 million gap between its proposals and the unions, $150 million if as customary the union agreement is extended to the full workforce. Disagreeing, unions said the three-year gap is $56 million.
In the past BART union actions have had some public support or tolerance in the politically liberal San Francisco Bay Area. But a KPIX Channel 5 poll released Aug. 1 found 44 percent think BART management has made a better case, the unions 19 percent.
News reports said a Bay Area legislator, Sen. Mark DeSaulnier, D-Concord, is considering legislation that would prevent BART strikes.
“While I am looking into legislation that could prevent future strikes,” DeSaulnier said in a written statement on Aug. 2, “it should not distract from the need for BART and labor to remain engaged in negotiations now.”
“I have been, and will continue to be, a strong supporter of organized labor. The intent of any legislation will not be to simply stop strikes, but to ensure we produce equitable outcomes for workers and commuters during future negotiations,” he said.
Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune.
Crossposted on Calpensions