Ask Nancy: Budget and Pension Reform
Dear Nancy:
Can you summarize the governor's budget and pension "reform" proposals and the Legislature's response to the governor's proposals?
- Jane, Sacramento, CA
Can you summarize the governor's budget and pension "reform" proposals and the Legislature's response to the governor's proposals?
- Jane, Sacramento, CA
Dear Jane in Sacramento:
First, I want to thank everybody who sent questions this week. I've received dozens of question that mainly revolve around two issues: the budget and pensions. In this week's edition of Ask Nancy, I will address both and how they are related. Let's start with a brief overview of the Governor's proposals for state employees and end with the Assembly and Senate's response to those proposals.
Budget Summary
As many of you well know, the governor released his revision of January's budget on May 14. In the May Revise, the governor asked the Legislature to approve his original employee compensation proposal from January - "5/5/5" program (reducing state employee salaries by 5 percent, increasing state employee pension contributions by 5%, and requiring departments to reduce personnel costs by 5 percent (workforce cap). In January, the governor proposed an additional 5 percent reduction in state employee salaries if the state did not receive an additional $6.9 billion in federal stimulus, essentially a 15 percent pay cut for state employees.
In the May Revise, the governor proposed a "mandatory personal leave program" (PLP) that will include one unpaid eight hours of pay each month in exchange for eight hours of personal leave in lieu of the 5 percent pay cut, but still including the 5 percent increase to PERS contributions and the 5 percent across the board cut to departments and agencies. In the end, if the governor's proposals were approved by the Legislature, the total amount of reductions to state employees would be approximately 15 percent, which is equivalent to the current 15 percent reduction as a result of the governor's furlough program. On top of 5/5/5 and the PLP proposal, the governor explicitly stated that he will not sign this year's budget unless it includes his pension "reform". (Side note: gubernatorial candidate Meg Whitman has called for similar pension "reform" proposals.)
Pension Summary
What constitutes pension reform in the governor's mind? The governor has endorsed and is pushing Senate Bill 919, authored by Senator Dennis Hollingsworth, which would reduce retirement formulas, cut retirement benefits, and increase pension contributions for new public employees. In addition, this bill will cut health care benefits and shift cost to employees by requiring employees to contribute more to their HMO, allows health care providers to negotiate two-tier systems for new employees, and allows the state to cut health care benefits by purchasing health care plans from providers other than CalPERS.
What did the Assembly and Senate propose? The Assembly approved the governor's 5 percent "workforce cap" and rejected the 5 percent increase in pension contributions, the one PLP day and the 5 percent salary cut. The Senate followed the Assembly by approving the 5 percent "workforce cap" and rejecting the rest. So, what happens now?
What's Next?
Members from the Assembly and Senate budget committees will meet in conference to reconcile the differences in each house's budget proposals. A Conference Committee on the Budget is assembled with members from the Assembly and Senate that are appointed by the Assembly Speaker and the Senate pro Tem to create a final budget to be proposed to the governor. As the conference committee works towards creating a final budget, the "Big 5" comprised of the governor, Senate pro Tem, Assembly Speaker, and the minority leaders from both houses, may meet to work out differences between the Legislature's final budget proposals and the governor's. However, Assembly Speaker John A. Perez has publicly stated that the "Big 5" will not meet in secrecy and the Legislature's final budget will be created in the open.
Once the conference committee has settled their differences, the committee produces a report to be voted on by both houses. The conference report contains the Legislature's budget proposal. If the conference report is approved by the Assembly and Senate, it is sent to the governor for his signature or disapproval.
SEIU Local 1000 has spent six months attending hundreds of budget and policy committee hearings. We will continue to follow the conference committee's progress to ensure California's state budget is not balanced on the back of state workers.
- Nancy Farias
SEIU Local 1000 Legislative Director
First, I want to thank everybody who sent questions this week. I've received dozens of question that mainly revolve around two issues: the budget and pensions. In this week's edition of Ask Nancy, I will address both and how they are related. Let's start with a brief overview of the Governor's proposals for state employees and end with the Assembly and Senate's response to those proposals.
Budget Summary
As many of you well know, the governor released his revision of January's budget on May 14. In the May Revise, the governor asked the Legislature to approve his original employee compensation proposal from January - "5/5/5" program (reducing state employee salaries by 5 percent, increasing state employee pension contributions by 5%, and requiring departments to reduce personnel costs by 5 percent (workforce cap). In January, the governor proposed an additional 5 percent reduction in state employee salaries if the state did not receive an additional $6.9 billion in federal stimulus, essentially a 15 percent pay cut for state employees.
In the May Revise, the governor proposed a "mandatory personal leave program" (PLP) that will include one unpaid eight hours of pay each month in exchange for eight hours of personal leave in lieu of the 5 percent pay cut, but still including the 5 percent increase to PERS contributions and the 5 percent across the board cut to departments and agencies. In the end, if the governor's proposals were approved by the Legislature, the total amount of reductions to state employees would be approximately 15 percent, which is equivalent to the current 15 percent reduction as a result of the governor's furlough program. On top of 5/5/5 and the PLP proposal, the governor explicitly stated that he will not sign this year's budget unless it includes his pension "reform". (Side note: gubernatorial candidate Meg Whitman has called for similar pension "reform" proposals.)
Pension Summary
What constitutes pension reform in the governor's mind? The governor has endorsed and is pushing Senate Bill 919, authored by Senator Dennis Hollingsworth, which would reduce retirement formulas, cut retirement benefits, and increase pension contributions for new public employees. In addition, this bill will cut health care benefits and shift cost to employees by requiring employees to contribute more to their HMO, allows health care providers to negotiate two-tier systems for new employees, and allows the state to cut health care benefits by purchasing health care plans from providers other than CalPERS.
What did the Assembly and Senate propose? The Assembly approved the governor's 5 percent "workforce cap" and rejected the 5 percent increase in pension contributions, the one PLP day and the 5 percent salary cut. The Senate followed the Assembly by approving the 5 percent "workforce cap" and rejecting the rest. So, what happens now?
What's Next?
Members from the Assembly and Senate budget committees will meet in conference to reconcile the differences in each house's budget proposals. A Conference Committee on the Budget is assembled with members from the Assembly and Senate that are appointed by the Assembly Speaker and the Senate pro Tem to create a final budget to be proposed to the governor. As the conference committee works towards creating a final budget, the "Big 5" comprised of the governor, Senate pro Tem, Assembly Speaker, and the minority leaders from both houses, may meet to work out differences between the Legislature's final budget proposals and the governor's. However, Assembly Speaker John A. Perez has publicly stated that the "Big 5" will not meet in secrecy and the Legislature's final budget will be created in the open.
Once the conference committee has settled their differences, the committee produces a report to be voted on by both houses. The conference report contains the Legislature's budget proposal. If the conference report is approved by the Assembly and Senate, it is sent to the governor for his signature or disapproval.
SEIU Local 1000 has spent six months attending hundreds of budget and policy committee hearings. We will continue to follow the conference committee's progress to ensure California's state budget is not balanced on the back of state workers.
- Nancy Farias
SEIU Local 1000 Legislative Director