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Nick Schroeder

MOU Analysis
September 7, 2021

MOU Fiscal Analysis:
Bargaining Unit 8 (Firefighters)

On August 16, 2021, the Department of Finance (DOF) submitted to the Joint Legislative Budget Committee (JLBC) a labor agreement between the administration and Bargaining Unit 8. Unit 8 represents state firefighters, most of whom work for the California Department of Forestry and Fire Protection (CalFire). Bargaining Unit 8 members are represented by CalFire Local 2881. Unit 8 members currently work under the terms and conditions of a memorandum of understanding (MOU) that expired on July 1, 2021. Under state law, the provisions of an expired MOU generally remain in effect until a successor MOU is ratified by the Legislature and union members. The letter from DOF that accompanied the agreement identifies the proposed agreement as an addendum to the expired Unit 8 MOU. The California Department of Human Resources’ (CalHR’s) website includes the administration’s summary of the major provisions of the agreement and the fiscal effects of these provisions as well as the full text of the agreement.

As we discuss later in this analysis, although the administration treats this agreement as a side letter or an addendum to the expired Unit 8 MOU, we consider the agreement to be a successor MOU. As such, our office is required to produce an analysis of the agreement and the agreement must be submitted to the Legislature for determination. This analysis of the proposed labor agreement between the state and Bargaining Unit 8 fulfills our statutory requirement under Section 19829.5 of the Government Code. Our State Workforce webpages provide additional information about this and other bargaining units and includes links to our analyses of MOUs proposed in the past.

Major Provisions of Proposed Agreement

Extends Term of Expired MOU. The proposed agreement specifies that it extends the term of the expired MOU through June 30, 2022.

Increases Pay for All Members by 2.5 Percent. Effective July 1, 2021, the proposed agreement would provide all Unit 8 members a general salary increase of 2.5 percent. The administration estimates that this will increase state annual costs by $19.8 million ($9 million General Fund).

Increases Employee Pay for Specified Classifications by 2.62 Percent. Effective January 1, 2022, the proposed agreement would (1) increase the maximum of the salary range of most Unit 8 classifications by 2.62 percent and (2) increase the pay of employees in these classifications by 2.62 percent for the term of the agreement. This pay increase applies to all employees in the affected classifications, regardless of their current step in their classification’s pay range. With the maximum of the salary ranges being increased by 2.62 percent, employees who were at the old top step would be at the new top step after receiving the 2.62 percent pay increase. The administration estimates that this provision will increase state costs in 2021-22 by $8.3 million ($3.8 million General Fund). Because the agreement specifies that the pay increase will be in effect for the term of the agreement, the administration advises us that employees will not receive the 2.62 percent pay increase after June 30, 2022 without a successor agreement extending the provision beyond 2021-22.

Establishes Joint Labor Management Committee. Within 60 days of its ratification, the agreement specifies that the administration and union shall establish a committee to “address issues of mutual concern.” The issues include, but are not limited to, hours of work, work schedules, and retention and recruitment issues. The administration informs us that the committee would be advisory in nature and has no power to directly implement policies that address these issues. Instead, the administration indicates that the committee’s recommendations would inform future bargaining.

Includes Essential Worker Premium Pay Contract Reopener. Like the agreements that the Legislature ratified earlier this summer with the other 20 state bargaining units (see our analysis of those agreements here), the Unit 8 agreement includes a provision specifying that the parties agree to meet and confer as soon as practicable after the federal government promulgates guidance and regulations on the use of federal funds for premium pay of essential workers during the coronavirus disease 2019 (COVID-19) pandemic.

LAO Comments

Administration’s Fiscal Estimates

Increased Ongoing Costs. Overall, the administration estimates that the agreement would increase state costs. In 2021-22, the agreement would increase state costs by $25.9 million ($11.8 million General Fund). Further, extending the compensation increases provided to rank-and-file employees under the agreement to managers and supervisors would increase state costs in 2021-22 by an additional $3 million ($1.4 million General Fund). Beginning in 2022-23, ongoing state costs would increase $19.5 million ($8.9 million General Fund), relative to current law, assuming that the 2.62 percent pay increase for specified classifications does not remain in effect beyond 2021-22.

Accounts for Growth in CalFire Staffing Levels. The 2021-22 budget includes significant increases in the number of firefighter employees. Much of the staffing increase is related to a January proposal to establish CalFire “hand crews.” (For more information on this proposal, please see page three of this analysis.) The administration’s fiscal estimates take into consideration the growth in CalFire staffing levels and assume that staffing at CalFire increases by 565 full-time-equivalent employees—relative to staffing levels in 2020-21—about 85 percent of these positions are in the Firefighter I classification.

Unit 8 Compensation Survey

Survey Compares State Firefighter Compensation With Local Government Firefighters. We discussed the importance of compensation studies at length in our June 25, 2021 analysis of the 20 labor agreements that were ratified by the Legislature earlier this summer. In the case of Bargaining Unit 8, Section 19827.3 of the Government Code requires that, when developing the compensation study for Bargaining Unit 8, CalHR take into consideration the compensation provided by jurisdictions employing 75 or more full-time firefighters who work in California. In developing the most recent compensation study, released in January 2021, CalHR and CalFire Local 2881 mutually agreed upon a sample of 20 local fire departments in California to include in the survey (refer to page four of the study for a list of the jurisdictions included in the study). Of the 20 local jurisdictions included, 16 are cities, 2 are counties, and 2 are fire districts. The study compared four state classifications with local counterparts: Firefighter II, Fire Apparatus Engineer, Fire Captain (Range A), and Battalion Chief.

Survey Identified Significant Lag in State Compensation Relative to Local Governments. When comparing employer total compensation costs (salary plus benefits), the CalHR compensation study found that Unit 8 firefighters are compensated, on average, 24 percent less than comparable classifications employed by the 20 local governments. The severity of the lag in Unit 8 compensation varies by classification. For example, the smallest identified lag was that of Firefighter II with state compensation lagging local compensation by 16 percent and the largest identified lag was that of Battalion Chief with state compensation lagging local compensation by 41 percent. The lags in state compensation compared with the local governments surveyed is significant.

Study Does Not Include Federal Firefighters. Most other compensation studies produced by CalHR compare state classifications’ compensation with similar classifications employed by the federal government. The federal government employs many wildland firefighters in California. In some respects, the work of these federal wildland firefighters is more similar to the work of Unit 8 firefighters than that of urban local fire departments. However, the compensation study does not include federal firefighters in its analysis. Had the CalHR compensation study included federal firefighter compensation, the Legislature would have a more complete picture of the labor market for wildland firefighters in California. Based on news reports (see here and here) as well as a letter from U.S. Senator Feinstein to U.S. President Biden, it seems that the federal government has had challenges retaining wildland firefighters in California because the compensation offered is significantly less than the compensation offered to CalFire firefighters.

Side Letter or MOU?

We Agree That Agreement Requires Legislative Approval. There are two processes through which a labor agreement can be submitted to the Legislature. The first applies to successor MOUs. Specifically, Section 19829.5 of the Government Code specifies that CalHR “shall provide a memorandum of understanding pursuant to Section 3517.5 to the Legislative Analyst who shall have 10 calendar days from the date the tentative agreement is received to issue a fiscal analysis to the Legislature. […] The memorandum of understanding shall not be subject to legislative determination until either the Legislative Analyst has presented a fiscal analysis of the memorandum of understanding or until 10 calendar days has elapsed since the memorandum of understanding was received by the Legislative Analyst.” The second process applies to any side letter, appendix, or other addendum to a properly ratified MOU. Specifically, Item 9800 of the budget act directs DOF to determine if an addendum requires legislative approval—pursuant to criteria laid out under Item 9800. DOF then submits the addendum to JLBC, which has 30 days to determine if it disagrees with DOF’s determination that an agreement requires legislative approval. As mentioned above, the proposed Unit 8 agreement was submitted to the Legislature through the JLBC process to review MOU addenda. In its transmittal letter, DOF indicated that it determined that the agreement requires legislative approval. We concur.

We Disagree With Characterization of Agreement as an “Addendum” or “Side Letter.” In its transmittal letter, DOF characterizes the agreement as an addendum to the MOU. The text of the agreement itself specifies that the agreement is a side letter. The agreement specifies “except as amended by this Side Letter, all other provisions in the MOU and side letters are rolled over through the extended MOU term.” We consider the proposed Unit 8 agreement to be a successor MOU that maintains (or “rolls over,” in bargaining parlance) most of the provisions of the expired MOU. While MOUs, addenda, and side letters are all rather amorphous terms, there are some standards. Specifically, the Public Employment Relations Board (PERB) laid out its definition of a side letter in a 2011 PERB decision. In that decision, PERB defines a side letter to mean “an agreement between an employer and union that typically: (1) modifies, clarifies or interprets an existing provision in an MOU; or (2) addresses issues of interest to the parties that are not otherwise covered by the MOU.” Based on this definition, we do not think the proposed agreement is a side letter or an addendum as it (1) substantially changes (rather than modifies, which would suggest a minor change) existing provisions (for example, providing new pay increases to employees and expanding salary ranges); (2) creates new provisions (for example, establishing the essential worker premium pay reopener); and (3) amends the term of the MOU so that, rather than being expired, it is now in effect for an additional year.