Unit 9 (Professional Engineers)
MOU Analysis

On August 22, 2022, our office received a proposed memorandum of understanding (MOU) between the state and Bargaining Unit 9 (Professional Engineers). This analysis of the proposed agreement fulfills our statutory requirement under Section 19829.5 of the Government Code. State Bargaining Unit 9’s members are represented by Professional Engineers in California Government (PECG). The administration has posted the agreement and a summary of the agreement and the administration’s estimated fiscal effects of 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.)

Major Provisions of Proposed Agreement

Term. The current MOU between the state and Unit 9 expired June 30, 2022. Under the Ralph C. Dills Act, provisions of an expired MOU generally remain in effect until a successor agreement is ratified. The proposed agreement would be in effect from July 1, 2022 through June 30, 2025.

Provisions Related to Pay

General Salary Increases (GSIs) The agreement would provide three separate GSIs to all Unit 9 members over the course of the MOU. Specifically, (1) effective July 1, 2022, all Unit 9 members would receive a 2.5 percent GSI; (2) effective July 1, 2023, all Unit 9 members would receive a 3 percent GSI; and (3) effective July 1, 2024 all Unit 9 members would receive a 2 percent GSI.

Longevity Pay. Under the current MOU, employees with 20 or more years of service receive a longevity pay differential where employees with 20 years, 21 years, 22 years, or 23 or more years of service receive a 2 percent, 3 percent, 4 percent, and 5.5 percent pay differential, respectively. The proposed agreement would increase and expand the existing pay differential so that employees with at least 17 years of service would receive a differential. Specifically, employees with (1) 17 years of service would be eligible to receive 2 percent of base salary, (2) 18 years of service would be eligible to receive 3 percent of base salary, (3) 19 years of service would be eligible to receive 4 percent of base salary, and (4) 20 years or more of service would be eligible to receive 5.5 percent of base salary.

Geographic Pay Differential. Under the current MOU, employees whose worksite is located in the Counties of Alameda, Marin, San Mateo, Santa Clara, or San Francisco receive a $250 per month pay differential. Effective the first day of the pay period following ratification, the proposed agreement would provide Unit 9 members whose worksite is located in Contra Costa County a pay differential of $250 per month. The agreement specifies that this pay differential shall not be considered compensation for purposes of calculating employees’ retirement benefits.

Professional Society and Organization Dues. The proposed agreement increases from $100 to $250 the reimbursement Unit 9 members may receive for paying the dues of one or more job-related professional society or organization.

Long-Term Differential. California Department of Transportation (Caltrans) employees who are assigned to Long-Term Assignments (LTA) for more than one year receive a monthly pay differential in lieu of long-term per diem for meals and receipted lodging. The proposed agreement would increase the monthly LTA reimbursement amount from $1,800 to $3,000 per month effective the first day of the pay period following ratification.

Diving Pay. Employees who receive Pay Differential 42 under the current MOU receive an additional $12 per hour they spend diving. The proposed agreement would increase the hourly rate paid to eligible employees while they are diving to $25 per hour.

Transportation Surveyor Recruitment and Retention Pay Differential. The proposed agreement would provide a $300 monthly pay differential to all employees in the Transportation Surveyor, Caltrans classification (Class Code 3029). The agreement specifies that this pay differential shall not be considered as compensation for purposes of calculating retirement benefits.

Range C Special Salary Adjustment Joint Labor Management Committee. The proposed agreement specifies that the state and PECG shall establish a committee to study Range C of 13 Unit 9 classifications. The study would be completed no later than March 1, 2023. The committee would mutually decide on appropriate salary adjustments that would go into effect July 1, 2023. The agreement specifies that the total cost of these salary adjustments shall not exceed 1 percent of payroll for Unit 9 members (estimated to be $24 million by the agreement).

Reimbursement of Specified Examination Fees. The proposed agreement would reimburse employees for the application and/or examination fees from successfully completing the examination for the Certified Professional in Erosion and Sediment Control, the Qualified Storm Water Pollution Prevention Plan (SWPPP) Developer certificate, or the Qualified SWPPP Practitioner certificate. In addition, full-time employees would be reimbursed for renewal fees once every three years.

Reimbursement Rates for Mass Transit and Vanpools. The state reimburses employees for some costs related to their commute. The proposed agreement increases the amount of reimbursement that employees may receive for their costs related to mass transit and vanpools from 75 percent to 100 percent—up to the maximum monthly exclusion amount allowed by the U.S. Internal Revenue Services (IRS). In 2022, the IRS monthly exclusion for qualified transportation benefits is $280.

Safety Footwear. Under the current MOU, the state reimburses Unit 9 employees who are required to wear safety footwear up to $100 every 18 months. The proposed agreement changes this reimbursement to be up to $150 every 12 months.

Other Major Provisions

Nonindustrial Disability Insurance (NDI). Effective no earlier than July 1, 2023, the proposed agreement would make employees who are enrolled in the Annual Leave Program (as opposed to receiving vacation and sick leave) eligible to receive NDI Family Care Leave (NDI-FCL). The program provides eligible employees up to six weeks of paid leave within a 12-month period for the care of a seriously ill family member or to bond with a new child. From the benefit, employees would receive 50 percent of their gross monthly salary but have the option to supplement the paid leave with leave credits to replace 75 percent or 100 percent of their salary. The parties agree to support legislation to amend applicable sections of the Government Code to provide NDI-FCL to Unit 2 members.

State Payroll System Project Reopener. The parties agree to reopen provisions of the agreement that require changes per the California State Payroll System Project.

Administration’s Fiscal Estimates

Increases State Annual Costs by More Than $220 Million. As Figure 1 shows, the administration estimates that, by 2024-25, the agreement would increase state annual costs by $220.3 million ($6.5 million General Fund).

LAO Comments

Fiscal Effect

Extending Provisions to Excluded Employees Would Increase Costs Further. The costs discussed above are only those associated with rank-and-file employees. Many of the compensation increases likely would be extended to managers and supervisors to avoid “salary compaction” (where rank-and-file pay increases faster than managerial pay). If the provisions of the agreement that affect rank-and-file pay were to be extended to the employees affiliated with Unit 9 who are excluded from collective bargaining, we estimate that the state’s annual costs would increase by roughly $76 million ($4.5 million General Fund).

Professional Engineer Compensation

Compensation Study Found State Engineers Compensated Above Market. The most recent compensation study for Unit 9 conducted by CalHR was released in 2022 and relied on 2020 data. The compensation study looked at three types of professional engineers: civil engineers, environmental engineers, and electrical engineers. CalHR indicates that these job categories account for 68 percent of Unit 9. (The 32 percent of state engineers not included in the compensation study include engineering jobs such as mechanical engineers and architects.) The compensation study found that state civil (representing 52 percent of the bargaining unit) and environmental (representing 11 percent of the bargaining unit) engineers are compensated above market. Compared with local government counterparts, the compensation study found that civil and environmental engineers are compensated 6 percent and 17 percent more, respectively. While the compensation study found that state electrical engineers (accounting for 6 percent of the bargaining unit) are compensated more than similar employees in the private sector or federal government, the study found that state electrical engineers are compensated 10 percent less than their local government counterparts.

No Evidence of Statewide Recruitment or Retention Issues. The CalHR compensation study indicates that Unit 9 vacancy rates and turnover rates are similar to state averages. This suggests that the state likely does not face any systemic statewide recruitment or retention issues for state engineers. There may be department or job specific recruitment or retention issues that are not evident in the available data, however.

Pay Increase Might Not Keep Pace With Inflation. The proposed agreement would increase pay for Unit 9 members by a compounded 7.7 percent over the term of the agreement. Inflation has accelerated recently, with prices increasing close to 9 percent over the last year. The consensus among economic forecasts is that inflation will moderate over the next year. However, where inflation is headed over the term of the agreement is unknown. Persistently high inflation over the term of the agreement could significantly weaken the purchasing power of Unit 9 members. To the extent that local governments provide higher GSIs to their engineers, the state’s lead in professional engineer classification could diminish by the end of the term of the agreement.

Unit 6 (Corrections) Agreement Possibly Interacting With Other Bargaining Units

Unit 6 Agreement Includes Reopener if Other Bargaining Units Get Higher Pay Increase. Bargaining Unit 6 is represented by the California Correctional Peace Officers Association (CCPOA) and includes state correctional peace officers and parole agents. As we indicated in our June 25, 2021 analysis of the 2021 Unit 6 agreement with the state, the Unit 6 agreement provided Unit 6 a 2.5 percent GSI in 2022-23 and specified that CCPOA could choose to reopen that agreement should another bargaining unit receive a GSI in 2022that is greater than 2.5 percent. The Legislature ratified the agreement that included this clause.

Unit 6 Agreement May Be Influencing Administration’s Position at Bargaining Table. The reopener clause in the Unit 6 MOU creates an incentive for the administration to provide GSIs of 2.5 percent (or lower) across bargaining units in 2022. Unit 6 is the largest General Fund supported bargaining unit, representing about one-third of the state’s General Fund payroll costs. Any Unit 6 pay increase above what is currently scheduled could significantly increase state General Fund costs. (Also, as we have indicated in numerous past Unit 6 analyses [see our analyses from 2018, 2019, and 2021], the administration has not released a compensation study for Unit 6 in years, making it virtually impossible to determine if any salary increase for Unit 6 is justified.) Since it ratified the Unit 6 agreement, the Legislature has been asked to consider MOUs for Bargaining Units 2 (pending ratification), 9 (pending ratification), 13 (ratified), and 18 (pending ratification). None of these agreements have provided GSIs in excess of 2.5 percent in 2022-23 despite the fact that (1) the compensation studies for some of these bargaining units have identified lags in state compensation and (2) while the consensus among economists is that inflation will moderate over the next year, prices have increased close to 9 percent relative to last year.

Issues for Legislative Consideration

Require Administration to Report Special Salary Adjustments Established by Committee. The agreement would give a joint labor management committee the authority to determine special salary adjustments for 13 state job classifications. The administration’s fiscal estimate includes $24.1 million in 2023-24 for the purpose of paying for the special salary adjustments established by the committee. It is unusual for a labor agreement to not specify what special salary adjustments would apply to what classifications and, moreover, to delegate the authority to implement these salary adjustments to a joint committee. Before the special salary adjustments go into place, we recommend that the Legislature require the administration to report the proposed adjustments to the Legislature. In addition, the pay increases should be included under Item 9800 of the 2023-24 budget and be reflected in the backup materials the administration provides to the Legislature for Item 9800. We recommend the Legislature ask the administration why this approach to establish these special salary adjustments was adopted and to consider whether this approach allows sufficient legislative oversight.

One Bargaining Unit Impacting the Terms of Another. The state’s rank-and-file workforce is organized into 21 bargaining units. Each bargaining unit represents the interests of a group of employees with similar jobs. As the employer, the state meets separately with each bargaining unit to discuss terms and conditions of employment for that particular bargaining unit. The collective bargaining process is structured this way as a recognition that the needs and issues faced by one group of employees might be different than those of another group. Including provisions in collective bargaining agreements that directly impact the employment conditions for an unrelated bargaining unit can limit the state’s ability to address needs specific to individual bargaining units. The Legislature ultimately holds the authority to establish salary levels for state employees. As such, the Legislature would not need to approve any future agreements with Unit 6 that provided pay increases above what is currently scheduled for that unit even if other bargaining units were to receive GSIs above 2.5 percent in 2022.

Administration and Unions Disregard Legislature’s Role in Collective Bargaining Process. In our June 2021 analysis of the labor agreements that ended the Personal Leave Program of 2020, we indicated that the administration unnecessarily thrust a sense of urgency upon the Legislature to review 20 labor agreements at that time. The administration and unions have, again, jammed the Legislature by submitting labor agreements to it for consideration shortly before a major legislative deadline. The Legislature’s calendar is highly predictable with legislative deadlines publicly known many months in advance. And, yet, the administration and unions consistently submit labor agreements to the Legislature with just days before a major legislative deadline. In the case of this agreement, days before the end of the legislative session. Jamming the Legislature and minimizing public scrutiny of labor agreements before legislative consideration prevents the Legislature and public from fully understanding the implications of the agreements before they become law. As we have recommended many times in the past, we encourage the administration and unions to be mindful of the legislative calendar. Ideally, the Legislature would receive all labor agreements at least 30 days before June 15 so that it could fully consider the implications of the agreements in the context of the state’s budget. With the exception of labor agreements that address an emergency issue, we recommend the Legislature adopt a policy to not consider any labor agreement submitted to it after May 15 of each year.