MOU Fiscal Analysis: Bargaining Unit 10 (Professional Scientists)

On August 24, 2018, the administration released a proposed labor agreement between the state and Bargaining Unit 10 (professional scientists). This analysis of the proposed agreement fulfills our statutory requirement under Section 19829.5 of the Government Code. State Bargaining Unit 10’s current employees—about 3,300 full-time equivalents—are represented by the California Association of Professional Scientists (CAPS). The administration has posted the agreement on the California Department of Human Resources’ (CalHR’s) website. (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.)

Administration’s Timing of Release Is Not Mindful of Legislative Process. Since 2005, state law has specified that a proposed “memorandum of understanding (MOU) shall not be subject to legislative determination [historically interpreted to mean the final floor vote] until either the Legislative Analyst has presented a fiscal analysis of the memorandum of understanding or until ten calendar days has elapsed since the memorandum was received by the Legislative Analyst.” The administration submitted the proposed agreement with Bargaining Unit 10 with fewer than ten calendar days remaining in the legislative session, which ends on August 31, 2018. In 2016, voters approved Proposition 54, which places restrictions on when the Legislature can act on legislation. Specifically, Proposition 54 requires that a typical bill—including amendments to that bill—be available to legislators and on the Internet for at least 72 hours before the Legislature may pass that bill. A bill to ratify a proposed labor agreement is subject to this 72-hour rule. Consequently, in order to be ratified before the end of session, this agreement must be presented in bill form no later than August 28^th, further reducing the period of time for our analysis and legislative consideration.

Both of these review periods have been in place long enough for the administration to establish a collective bargaining schedule that respects the legislative process. In light of the very limited amount of time that we have to review this 229-page agreement and accompanying fiscal estimates provided by the administration, this analysis is based on our current understanding and interpretation of the provisions of the agreement.

Major Provisions of Proposed Agreement

The proposed Unit 10 MOU would be in effect for two years—effective from July 1, 2018 to July 1, 2020. For summaries of the major provisions of the proposed agreement, refer to the administration’s summaries posted on CalHR’s website. We highlight the major fiscal provisions below.

Pay Increase for All Unit 10 Members in 2019-20 and 2020-21. The agreement would provide all Unit 10 members a 5 percent General Salary Increase (GSI) effective July 1, 2019 and an additional 5 percent GSI effective July 1, 2020. These pay increases likely would be extended to managers and supervisors to avoid “salary compaction” (when rank-and-file pay increases faster than managerial pay). Under the current MOU, Unit 10 members received GSIs in 2016-17 (5 percent), 2017-18 (5 percent), and 2018-19 (5 percent).

Education Pay Differential. The agreement would provide a monthly pay differential equivalent to 2 percent or 3 percent of base pay for employees who work in a Unit 10 classification that requires possession of a master’s degree or doctoral degree, respectively. Unlike a Special Salary Adjustment that would adjust the salary range for affected classifications, this pay differential would not affect employees’ pension benefits.

Increased Employee Pension Contribution. In 2019-20 and 2020-21, the agreement increases employee pension contributions by up to 1 percent of pay, depending on the California Public Employees’ Retirement System’s determination of normal costs. The employee contribution would return to current levels in 2021-22.

Changes to Retiree Health Benefit Prefunding. In 2019-20 and 2020-21, if the actuarially determined normal costs to prefund retiree health benefits increases or decreases by more than 0.5 percent, the employer and employee contributions to prefund these benefits would be adjusted so that each pays one-half of total normal costs. The employee contribution would return to previous levels in 2021-22.

Retiree Dental Benefit Vesting. Currently, Unit 10 members must work 15 years to receive half of the state retiree health benefit and 25 years to receive the full benefit. Under the proposed agreement, beginning in 2019, this vesting schedule also would apply to retirement dental benefits for new hires. Retiree vision benefit vesting does not appear to be affected by the agreement.

LAO Assessment

Administration’s Fiscal Estimate

Figure 1 highlights the administration’s estimated cost for the major fiscal provisions included in the proposed agreement. A more detailed accounting of the administration’s fiscal estimates is available on the CalHR website (refer to page 2 of this pdf).

Increased Costs in 2018-19. The administration estimates that the agreement would increase state costs in the current year by more than $1 million. In addition to the costs shown in the figure, the administration estimates that extending the compensation increases to managers and supervisors would increase state costs in the current year by an additional $7 million ($1 million from the General Fund). The administration’s estimated costs in 2018-19 seem reasonable.

Future Costs Likely Higher Than Administration Presents. As we discuss below, the administration’s projected costs do not reflect some costs that likely will occur. By 2020-21, the state’s total annual costs resulting from the agreement could be millions of dollars above what is reflected in the figure for the following reasons.

• Rising Pension Costs. The administration’s estimates do not reflect any changes in state contributions towards employee pension benefits beyond 2018-19. The most recent projections from CalPERS indicate that the state’s pension contributions for miscellaneous employees will increase from 29.3 percent of pay in 2018-19 to 32.2 percent of pay by 2020-21.

• Extending Provisions to Managers and Supervisors. The administration did not identify costs associated with extending compensation increases to managers and supervisors beyond 2018-19. These annual costs could be more than $10 million by 2020-21.

Recruitment and Retention

Increasing Employment Outlook for Most Scientists. About two-thirds of Unit 10 scientists are environmental scientists. The U.S. Bureau of Labor Statistics (BLS) projects employment of environmental scientists to grow 11 percent (faster than the 7 percent growth expected across all occupations) over the next ten years. The BLS bases this projection on an assumption that there will be heightened public interest in the hazards facing the environment, as well as increasing demands placed on the environment by population growth. The most recent state total compensation survey (conducted in 2016) projected that employment among environmental scientists in California will grow 25 percent over the next ten years, suggesting that there will be greater demand for environmental scientists in California than elsewhere in the country.

State Scientist Compensation Has Been Below Market in the Past. The 2016 study compared the total compensation for state environmental scientists with the compensation of similar scientists employed by federal and local governments and the private sector. The study found that state environmental scientists’ compensation was 12 percent below market averages (34 percent below the compensation received by scientists in the private sector). The pay increases provided in the current MOU were intended help bring state environmental scientists’ compensation more in line with market averages. Without a more recent compensation study, we do not know how the current compensation package—or the proposed pay increases—compares with that provided by other employers.

Past Parity Issues Between Similar Unit 10 and Unit 9 Classifications. There are a number of classifications represented by Unit 10 that are similar to classifications represented by Unit 9 (professional engineers). There have been issues in the past with retaining Unit 10 members as they are drawn to higher compensation levels provided by the Unit 9 classifications. Although the proposed Unit 10 agreement provides higher GSIs than the proposed Unit 9 agreement, it is not clear how the agreement affects pay parity between the two bargaining units. One possible issue that we identified related to parity between these two bargaining units relates to diving pay. The proposed Unit 10 agreement increases the differential hourly rate paid to Unit 10 members when they must dive under water from $12.00 per hour to $25.00. There may be some equity issues between Bargaining Units 9 and 10 as a result of this provision as the proposed Unit 9 agreement keeps this differential hourly rate at $12.00.