We reviewed the proposed memorandum of understanding (MOU) for Bargaining Unit 10 (Scientists). Bargaining Unit 10 is represented by the California Association of Professional Scientists (CAPS). This review is pursuant to Section 19829.5 of the Government Code.

LAO Contact: Nick Schroeder

MOU
September 9, 2015

MOU Fiscal Analysis: Bargaining Unit 10 (Scientists)

This analysis of the proposed labor agreement between the state and Bargaining Unit 10 (scientists) fulfills our statutory requirement under Section 19829.5 of the Government Code. State Bargaining Unit 10’s current employees are represented by the California Association of Professional Scientists (CAPS). (Administration and CAPS websites include documents discussing the agreement’s major provisions. Our State Workforce webpages include background information on the collective bargaining process, a description of this and other bargaining units, and our analyses of agreements proposed in the past.)

Pay and Related Provisions

The proposed Unit 10 memorandum of understanding (MOU) would be in effect for three years from July 2, 2015 to July 1, 2018. The administration provided fiscal estimates (refer to page 8 of this pdf) of various provisions that would affect Unit 10 employee compensation:

  • 2016-17 Pay Increase for All. Unit 10 employees would receive a 5 percent pay increase on July 1, 2016. The administration estimates that this would increase the state’s annual costs by $14.9 million ($2.6 million General Fund) beginning in 2016-17.
  • 2017-18 Pay Increase for All. Unit 10 employees would receive an additional 5 percent pay increase on July 1, 2017. The administration estimates that this would increase the state’s annual costs by an additional $15.7 million ($2.8 million General Fund) beginning in 2017-18.
  • 2018-19 Pay Increase for All. Unit 10 employees would receive a final 5 percent pay increase on July 1, 2018. The administration estimates that this would increase the state’s annual costs by an additional $16.5 million ($2.9 million General Fund) beginning in 2018-19.
  • Greater Levels of Leave Cash Out. The agreement would increase the number of hours of vacation or annual leave that employees may cash out in 2015-16, 2016-17, and 2017-18 from 20 to 80 hours. The administration estimates that allowing employees to cash out 60 additional hours in each of these years could increase the state’s annual costs by more than $6 million (more than $1 million General Fund). The administration assumes that departments would absorb these costs within existing resources.
  • Additional Pay Increase for Some. Under the current MOU, three employees at the Department of Food and Agriculture can be designated by the department director as “state titled scientists” in a specific scientific discipline or area of specialization. These employees receive extra pay for the duration of their assignment to this role—equivalent to a 5 percent pay increase. Under the proposed agreement, the director would be able to designate nine additional employees as state titled scientists. The administration estimates this would increase annual state costs by as much as $48,500 ($17,600 General Fund) beginning in 2016-17. The administration assumes that the department would absorb these costs within existing resources.
  • Higher Reimbursement Rates for Travel. A greater share of certain travel costs incurred by employees—including lodging in three high-cost counties and the use of private aircraft—would be reimbursable by the state under the agreement. The administration estimates that these provisions would increase the state’s annual costs by about $5,000 ($1,000 from the General Fund) beginning in 2016-17. The administration assumes that departments would absorb these costs within existing resources.

Based on our review, the administration’s estimates for the above provisions seem reasonable. The table below summarizes the administration’s estimated costs of these provisions through 2018-19.

Fiscal Effect of Select Provisions of Proposed Unit 10 Contract

(Dollars in Millions)

2016–17

2017–18

2018–19

General Fund

Total Funds

General Fund

Total Funds

General Fund

Total Funds

2016–17 pay increase

$2.6

$14.9

$2.6

$14.9

$2.6

$14.9

2017–18 pay increase

2.8

15.7

2.8

15.7

2018–19 pay increase

2.9

16.5

Leave cash outa

1.1

6.4

1.2

6.8

State titled scientists

b

b

b

b

b

b

Travel reimburesments

b

b

b

b

b

b

Totals

$3.8

$21.4

$6.6

$37.4

$8.3

$47.1

aCosts first incurred in 2015–16.

bCosts of less than $100,000.

Retiree Health Benefits and Funding

We have long recommended retiree health prefunding (see our analyses from 2015, 2014, 2011, 2007, and 2006 on this issue). As part of his 2015-16 budget proposal, the Governor proposed that the state and employees share equally the costs necessary to prefund retiree health benefits earned in a given year. The administration proposed establishing this prefunding arrangement through the collective bargaining process. In March 2015, we expressed concerns (refer to page 10 of this pdf) with making changes to retiree health benefits through the collective bargaining process, which allows for only limited legislative involvement.

Agreement Proposes Significant Changes… The administration’s summary (refer to page 4 of this pdf) lists some of the key proposals in the Unit 10 MOU concerning retiree health benefits and funding. (The full text of these provisions can be found beginning on page 124 of this pdf.)  These provisions are very similar to retiree health benefit and funding changes proposed under the tentative agreement between the state and Bargaining Unit 9 (professional engineers). Both agreements would (1) require current and future employees and the state to begin contributing a specified percentage of pay towards an invested trust fund to prefund retiree health benefits beginning in 2017-18 and (2) significantly reduce the amount of subsidies that employees hired after January 1, 2016 will receive for health benefits after they retire. The Governor and the unions of both bargaining units deserve credit for acknowledging the importance of this issue and demonstrating a willingness to set money aside to prefund these benefits. 

…With Unknown Long-Term Consequences. Like any retirement benefit policy, the provisions in the Unit 10 agreement related to retiree health benefits are complex, with fiscal and policy effects that will last many decades. As we explain in greater detail in our September 4, 2015 analysis of the proposed Unit 9 agreement, we are concerned that the administration has not addressed many important issues we raised earlier this year surrounding retiree health benefits. While the provisions likely would increase state costs in the near term and result in significant net savings over the long run, it is not possible to fully analyze the significant issues associated with these retiree health proposals during the 10-day maximum statutory time period for completion of this MOU analysis.

LAO Contact: Nick Schroeder