MOU Fiscal Analysis:
Bargaining Unit 18 (Psychiatric Technicians)

On December 20, 2019, the administration submitted to the Legislature a proposed memorandum of understanding (MOU) between the state and Bargaining Unit 18. This bargaining unit represents state-employed psychiatric technicians and is represented by the California Association of Psychiatric Technicians (CAPT). The administration has posted on the California Department of Human Resources’ (CalHR’s) website the agreement, a summary of the provisions of the agreement, and the administration’s estimates of the annual costs resulting from the proposed MOU. In addition, the union has posted resources on its website.

This analysis of the proposed MOU between the state and CAPT fulfills our statutory requirement under Section 19829.5 of the Government Code.

Major Provisions

Term. Employees represented by CAPT currently work under an agreement that expired July 1, 2019. State law generally provides that the terms of an expired MOU remain in effect until a successor agreement is ratified. The proposed agreement would go into effect immediately after being ratified and would remain in effect through July 1, 2022.

Provisions Related to Pay

Pay Increases for All. The proposed agreement would provide all Unit 18 members a pay increase on three separate occasions. Specifically, the agreement provides employees a 2.75 percent General Salary Increase (GSI) effective January 1, 2020 and July 1 of 2020 and 2021. These GSIs apply to all employees represented by the bargaining unit, regardless of classification or pay range. If the agreement is ratified after January payroll is processed, employees would receive back pay to January 1.

Additional Pay Increase for Employees at Top Step of Salary Range. In addition to the GSIs, the top step of the salary range for specified classifications would be increased by 2.5 percent, effective the month following ratification of the agreement. Employees who have been at the top step of the affected salary ranges for at least one year would receive the pay increase immediately. Employees not at the top step would not be affected. The administration indicates that nearly two-fifths of the bargaining unit is eligible to receive the pay increase.

Weekend Shift Differential Increase. When working a regularly scheduled weekend shift, the agreement would provide Unit 18 members a $0.50 per hour pay differential. This increased pay would be subject to pension, Medicare, and Social Security (if applicable) contributions from the state and employees.

Provisions Related to Health Benefits

Increases State Contributions to Maintain Current Share of Premium Costs. The state contributes a flat dollar amount to Unit 18 members’ health benefits that was last updated in January 2019. Under the agreement, the state’s contribution would be adjusted so that the state pays a dollar amount equivalent to 80 percent of an average California Public Employees’ Retirement System (CalPERS) premium cost, plus 80 percent of average CalPERS premium costs for enrolled family members—equivalent to what is referred to as the “80/80 formula.” The 80/80 formula is the most common type of state contribution towards state employee health benefits.

Provisions Related to Retirement Benefits

Specifies Conditions to Increase Employer and Employee Contributions to Pensions and Retiree Health Benefits. Retirement benefit costs consist of two components: normal cost and unfunded liabilities. The normal cost is the amount of money that actuaries determine—based on assumptions about future investment returns and the number of years people will live in retirement—must be set aside to pay for the benefit that employees earn today but will not receive until they retire. To the extent that actuarial assumptions do not materialize—for example, investment returns fall short of assumptions or people live longer in retirement—an unfunded liability results. For both pensions and retiree health benefits, the state’s policy generally is that employees and the state each contribute one-half of the normal cost to prefund the benefit and the state takes full responsibility of any unfunded liabilities. The contributions paid by the state and employees are established as a percentage of pay. Effective July 1, 2021, the agreement establishes conditions that would increase contributions to pension and retiree health benefits in the future, described below.

• Pensions. Employee contributions will increase July 1, 2021 if CalPERS determines that (1) the total normal cost has increased by more than 1 percent of pay and (2) 50 percent of the total normal cost (rounded to the nearest quarter of 1 percent) is greater than the employee contribution rate. Each year thereafter, employee contribution rates would be adjusted if CalPERS determines the total normal cost rate has increased by more than 1 percent of pay since the last time employee contributions had been adjusted. The agreement specifies that the increase to employee contribution rates would not exceed 1 percent of pay in any given year. The administration assumes that Unit 18 members in the safety retirement tier would contribute 0.5 percent of pay more towards their pensions beginning in 2021‑22 as a result of this provision.
• Retiree Health. Employee and state contributions will increase July 1, 2021 and every year thereafter if the total normal cost for Unit 18 retiree health benefits increases by more than 0.5 percent of pay from the prior year. The agreement specifies that the employee contribution rate would not increase by more than 0.5 percent of pay in any given year. (This language is similar to what was included in the Unit 5 [Highway Patrol] agreement that the Legislature ratified last year.) The agreement does not specify who determines if normal cost has increased as a percentage of payroll; however, both the union and the administration indicated that the administration (Department of Finance and CalHR) will make this determination.

Mandatory Overtime

Reduces Number of Allowable Mandatory Overtime Shifts. The current MOU imposes limitations on the use of mandatory overtime. Specifically, the current MOU specifies that—except in the case of emergency—employees shall not be mandated to work (1) more than five mandated overtime shifts of at least two hours duration in a month, (2) more than 16 continuous hours, (3) more than two overtime shifts within an employee’s scheduled work week, or (4) on two consecutive calendar days. Effective January 1, 2021, the agreement further reduces the allowable number of mandated shifts each month from five to four. In addition, the proposed agreement (1) specifies that outside contract registry staff may be offered overtime prior to mandating Unit 18 members to work overtime and (2) directs the Department of State Hospitals (DSH), Department of Developmental Services (DDS), and California Department of Corrections and Rehabilitation (CDCR) to continue meeting quarterly with CAPT with the goal of reducing mandatory overtime.

Administration’s Fiscal Estimate

Increased Net Annual State Costs of $67 Million by End of Agreement. As Figure 1 shows, the administration estimates that the proposed agreement would increase annual state costs, on net, by about $67 million by 2021‑22. This includes annual savings of $1.7 million beginning in 2021‑22 resulting from Unit 18 safety members contributing more towards their pension benefits. The administration assumes that these savings will not result in a reduction in departmental appropriations.

LAO Assessment

Costs to Extend Provisions to Excluded Employees. The administration’s estimates above do not include any costs resulting from the state extending provisions of the agreement to managers, supervisors, and other employees who are excluded from the collective bargaining process but associated with Unit 18. To avoid salary compaction between rank-and-file and managerial classifications, the administration typically provides excluded employees compensation increases (subject to legislative appropriation) comparable to what is provided to rank-and-file employees pursuant to an MOU. We estimate that extending the provisions of the agreement to excluded employees could increase annual state costs by a few million dollars by 2021‑22.

Pay Increases

Most Recent Compensation Study From 2019. State law generally requires the administration to submit a compensation study to the Legislature six months before an agreement is scheduled to expire. These compensation studies can inform the Legislature to better understand how the state’s compensation for its employees compares with compensation provided by other employers for similar employees. The current agreement with CAPT expired in July 2019. The last compensation study was submitted to the Legislature in January 2019—about six months before the current agreement expired. The compensation study relied on data from 2017 and found that state-employed psychiatric technicians earn a median salary that is comparable to the market average but that median total compensation (accounting for salary and benefits) for state-employed psychiatric technicians is about 16 percent above the market average.

GSIs Provided by Agreement Expected to Roughly Keep Pace With—or Slightly Exceed—Inflation in the Broader Economy. The agreement would provide all Unit 18 members a 2.75 percent GSI in each of the three fiscal years of the agreement’s term. This level of annual growth in salary is similar to anticipated inflation in the broader economy over the same time period and is in line with the GSIs provided in MOUs ratified by the Legislature in 2019. In the case of senior Unit 18 members who would receive the top step of their salary increase in addition to the GSI, the agreement likely provides pay increases above inflation over the period.

Mandatory Overtime

Mandatory Overtime a Long Standing Issue. The facilities where Unit 18 members work provide care to patients 24 hours a day, seven days a week. When there are not enough psychiatric technicians scheduled to adequately provide care to patients—either due to lack of resources, unexpected absences, scheduling error, emergency, or other causes—the state may require staff to work overtime. Employees may receive very little notice that they will be required to work additional shifts. Since 2001, state law has prohibited private sector medical providers from requiring nursing staff to work mandatory overtime. Past legislation aimed at establishing prohibitions or limitations on the state’s ability to use mandatory overtime have been vetoed by past governors under the premise that it is an issue best handled at the bargaining table. In 2016, the Little Hoover Commission released a report on the issue and found that the state relies heavily on overtime to meet staffing needs. The report indicated that state nursing staff worked 3.8 million hours of overtime (417,000 of which was mandatory) in 2014‑15. Although the Little Hoover Commission identified the state’s use of mandatory overtime as a problem, it found that excessive overtime—whether mandatory or voluntary—“is neither safe for patients nor staff, and should be significantly reduced.”

Long Shifts Increase Risk of Injury and Harm. At the Little Hoover Commission’s August 27, 2015 public hearing on the matter, state-employed nurses as well as psychiatric technicians described the risks associated with long hours. In particular, this testimony and the Little Hoover Commission’s 2016 report identified that long hours increase the likelihood of (1) employees being injured on the job—either as the result of accidental injury (most likely a back injury) or by being assaulted by patients in a correctional setting (CAPT informs us that there were 2,700 assaults on staff at DSH in 2017), (2) nursing staff administering improper dosages or other accidental lapses in patient care, and (3) employees driving home drowsy—witnesses testified at the hearing that employees have gotten into car accidents after working long hours. A position paper issued by the American Nurses Association indicates that, although the Institute of Medicine recommends that nurses not exceed 12 hours of work in a 24-hour period and 60 total hours of work within seven days, research suggests that working more than 40 hours a week can adversely affect patient safety and the health of nurses. It likely is not good practice for nursing staff to work 16-hour days (regardless of whether eight of those hours are due to voluntary or involuntary overtime).

Departments Rely Heavily on Mandatory Overtime. In our analysis of the Service Employees International Union, Local 1000 (Local 1000) MOU last year, we included an assessment of the use of mandatory overtime among nursing staff represented by Local 1000. That analysis found that—although the state and union acknowledge that mandatory overtime is ineffective, the administration has not noticeably reduced its reliance on mandatory overtime among nursing staff over the past five years. Below, we describe how the use of mandatory overtime has changed at DSH, DDS, and CDCR. Overall, the number of mandatory overtime hours worked at some facilities decreased between 2014‑15 and 2018‑19 while it increased at other facilities. Based on our conversations with CAPT, it seems that departments rely heavily on mandatory overtime for Unit 18 members and there have been instances of departments requiring employees to work more mandatory overtime shifts than are allowed by the current agreement.

• DSH. As Figure 2 shows, the total number of mandatory overtime hours worked across the five DSH facilities has declined by about 28 percent from 139,000 hours in 2014‑15 to 100,000 in 2018‑19. However, while three facilities (Atascadero, Coalinga, and Metropolitan) reduced their use of mandatory overtime during this period, Napa increased its use of mandatory overtime by 65 percent and Patton increased its use of mandatory overtime by nearly 150 percent. This difference between facilities possibly is due to several factors, including differences in patient acuity, available staff, and number of treatment beds across state hospitals. As part of the 2019‑20 budget, the Legislature approved two proposals from the administration that could affect the department’s reliance on mandatory overtime going forward (here is the first proposal and our analysis of that proposal; here is the second proposal and our analysis of that proposal).
• DDS. As Figure 3 shows, mandatory overtime worked by Unit 18 members has decreased significantly over the past five calendar years at Porterville Developmental Center and Canyon Springs Community Facility. Although DDS recently has operated other large facilities—like Fairview Developmental Center—that employed psychiatric technicians who had to work mandatory overtime hours, the department has been in the process of closing these facilities and will be moving the final residents to community-based settings in January 2020.
• CDCR. As Figure 4 shows, the total number of hours of mandatory overtime at CDCR has increased significantly between 2014‑15 and 2018‑19. The dramatic increase in mandatory overtime at state prisons—in particular the California Health Care Facility—likely is at least partially attributable to the “lift and shift,” where inmate inpatient psychiatric services were transferred from DSH to CDCR. In addition, mandatory overtime likely is affected by changes in the number of patients needing inpatient psychiatric services. While the number of patients needing inpatient psychiatric services increased by roughly 14 percent between 2014 and 2017, it declined slightly in 2018. The number of inpatient psychiatric patients is projected to continue to decline over the next five years as a result of various measures to reduce the overall prison population.

Reducing or Eliminating Mandatory Overtime Likely Will Require More Staff . . . When we reviewed the Local 1000 MOU last year, the administration indicated that it has taken measures to reduce the use of mandatory overtime. Specifically, the administration indicated that departments have relied on registries, addressed scheduling errors, and reassigned licensed staff from administration positions. Despite these efforts, the use of mandatory overtime persists. Beyond the measures that the administration has already taken, it is not clear what actions the administration will take to reduce mandatory overtime. In some cases, approving additional staff may help reduce departments’ reliance on overtime. We note that increasing the number of employees only reduces overtime utilization if the additional positions are used to address existing workload. If new positions are used to address new workload, increasing the number of positions can actually increase the need for overtime to the extent that positions go unfilled and the department must use overtime to cover its new responsibilities.

. . . But Problem Seems More Complicated Than Simply Approving More Positions. However, the problem likely will not go away simply by approving increased position authority for these departments. Facilities that have challenges filling existing authorized positions likely also will have difficulty filling any new positions without other changes. For example, regional pay differentials might help recruitment and retention issues at facilities located in high cost of living areas of the state.

Retiree Health

Allowing Contribution Rates to Change With Normal Cost Improves Prefunding Plan . . . Retiree health benefits have no relationship to pay. The primary cost pressures on the state’s retiree health benefit costs are (1) health premiums and (2) the number of people participating in the benefit. Accordingly, the normal cost of retiree health benefits grows each year at a rate independent from changes in pay. Like most of the state’s MOUs with bargaining units, the current Unit 18 agreement establishes a flat percentage of pay (4 percent of pay, in the case of Unit 18) that both the state and employees contribute to prefund retiree health benefits. When this contribution rate was established under the current MOU (ratified in 2017), the administration estimated that the total contribution (8 percent of pay) constituted the full normal cost of the benefit for Unit 18.

In past MOU analyses, we have raised concerns with the state and employees each contributing a static percentage of pay established at the bargaining table. Specifically, we found the parties likely would need to negotiate new contribution rates in each bargaining cycle in order to maintain the goal that the state and employees each contribute one-half of normal cost—resulting in pressures to provide pay increases to employees at the bargaining table. With the state and CAPT agreeing to a mechanism that automatically adjusts contribution rates without returning to the table, there is less risk that the state and employees will fall short of their goal to pay the full normal cost of the benefit.

Based on 2018‑19 data, the administration estimates that the normal cost for Unit 18 retiree health benefits currently is equivalent to 8.5 percent of pay—0.5 percent of pay more than the total contribution currently being made by the state and employees. With Unit 18 pay expected roughly to keep pace with inflation for the duration of the agreement and health premiums expected to grow at a rate faster than inflation, expecting that the state and employees will contribute more towards retiree health benefits as a result of this provision is reasonable. The administration indicates that the funding for any increase in the state’s contribution resulting from this provision would be requested through the regular budget process under Item 9800.

. . . But Language Also Raises Possibility of Future Disagreements. The language of the provision related to retiree health benefits creates the possibility of future disagreement between the administration and CAPT and/or the Legislature as to whether a contribution rate increase is necessary. Specifically, the possibility of future disagreement is due to the agreement not specifying (1) who determines that normal cost has increased by the equivalent of 0.5 percent of pay or (2) the methodology that must be used to calculate normal cost as a percentage of pay. Should a future disagreement arise, it likely will be resolved through the budget process when the administration requests funding for the rate increase. With the rate increase being included in the budget process, the Legislature will have an opportunity to modify or reject any funding increases if it disagrees with the administration’s conclusion that a contribution rate increase is necessary.