Unit 8 (Firefighters) MOU Analysis

On August 25, 2022, our office received a proposed memorandum of understanding (MOU) between the state and Bargaining Unit 8 (Firefighters). This analysis of the proposed agreement fulfills our statutory requirement under Section 19829.5 of the Government Code. State Bargaining Unit 8’s members are represented by the California Department of Forestry and Fire Protection Firefighters, CalFire Local 2881 (Local 2881). 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

Term. The current MOU between the state and Unit 8 expired on 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, 2024.

Provisions Related to Pay

General Salary Increases (GSIs). The agreement would provide Unit 8 members three GSIs over the course of the term of the agreement: effective July 1, 2022, a 2.5 percent GSI; effective January 1, 2023, a 2 percent GSI; and effective July 1, 2023, a 2 percent GSI. These compound to a 6.6 percent pay increase over the two years of the agreement.

Reduction in Hours of Duty Week. Under the agreement, the state and union would agree to reduce the duty week from 72 hours to 66 hours—a 24-hour reduction per pay period—subject to appropriation in the 2024-25 budget. The agreement specifies that the reduction to 66 hours would go into effect November 1, 2024. Pursuant to the agreement, a joint labor management committee would be established “to determine the changes needed to implement the reduction.” The agreement specifies that the committee would begin to meet no later than September 1, 2022 and that the topics discussed by the committee would include, but not be limited to: hours of work, shift patterns, retention and recruitment, and classifications. Pursuant to the agreement, the committee would present to the Director of Finance a mutual agreement by July 1, 2023 to be included in the Governor’s budget proposed in January 2024. If the Governor declares a fiscal emergency and General Fund monies over the multiyear forecasts of the 2024-25 Governor’s budget are not available to support the reduction to a 66-hour duty week on an ongoing basis, “including the estimate of direct costs and any increases in the cost of overtime driven by the proposal,” the agreement specifies that the parties agree to reopen the provision regarding how and when to implement the hours reduction.

Longevity Pay Differential. Under the current MOU, Unit 8 members with at least 17 years of service receive a pay differential that increases as the employee works more years for the state. The pay differential increases for each year of service up to 25 years of service. The proposed agreement would increase the longevity pay differentials by 2 percentage points so that employees with 17 or 18 years of service would receive an additional 3 percent of pay (compared to 1 percent now); 19 years of service would receive an additional 4 percent of pay (compared to 2 percent now); 20 years of service would receive an additional 5 percent of pay (compared to 3 percent now); 21 years of service would receive an additional 6 percent of pay (compared to 4 percent now); 22, 23, and 24 years of service would receive an additional 7 percent of pay (compared to 5 percent now); and employees with 25 or more years of service would receive an additional 9 percent of pay (compared to 7 percent now).

Monthly $260 Payment. Beginning the first day of the pay period following ratification through June 30, 2024, the proposed agreement would provide all Unit 8 members enrolled in a state-sponsored health plan a monthly payment of $260. The payment would not be considered as compensation for purposes of retirement. The administration indicates that 78 percent of Unit 8 members are enrolled in a state-sponsored health plan and would be eligible for the payment.

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. The administration’s fiscal estimates indicate that no Unit 8 members use this benefit.

Educational Incentive Pay. Effective the first day of the pay period following ratification, the proposed agreement would increase the educational incentive pay available to Unit 8 members from $75 to $150 per pay period. Among the possible criteria that makes an employee eligible for this benefit is to be in the Battalion Chief, Forrester I, or Fire Captain classifications. These three classifications account for about 35 percent of the full-time employees represented by Unit 8.

Other Major Provisions

Employer and Employee Contributions to Prefund Retiree Health Benefits Would Fluctuate With Changes in Normal Cost. The state and Unit 8 members currently each contribute a percentage of pay, specified in the MOU, to prefund Unit 8 retiree health benefits. Similar to provisions that have been included in MOUs for other bargaining units, the proposed agreement would allow the state and employees’ contributions to fluctuate as normal cost (as calculated as percentage of pay by the administration) fluctuates over time. The intent of the provision is that the state and employee would each contribute one-half of the actuarially determined normal cost.

New Shift Pattern for Forestry Pilots. Unit 8 employees work shift patterns that specify the number of hours in a week spent on “work” or “standby.” The agreement would create a “shift pattern 6.” Under this shift pattern, a seven-day period would be divided such that the first two days consist of 10 hours of work and 14 hours of standby; the third day would consist of 10 hours of work and 2 hours of standby; the fourth, fifth, and sixth days would consist of 10 hours of work and 14 hours of standby; and the seventh day would consist of 10 hours of work and 2 hours of standby. The agreement would make this shift pattern available to forestry pilots.

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 Estimate

Increases Annual State Costs by More Than $80 Million. On net, the administration estimates that the proposed agreement would increase the state’s annual employee compensation costs by $81.2 million ($41.2 million General Fund) through June 30, 2024.

LAO Comments

Fiscal Effects

Largest Fiscal Effect of Agreement Likely Beyond Term of Agreement and Not Included in Administration’s Fiscal Estimates. As we discuss in greater detail later in this analysis, the proposal to reduce the 72-hour duty week to a 66-hour duty week could be a major policy change with significant fiscal implications for the state. Although the specifics of what the policy could contain are still uncertain and dependent on the committee’s decisions, the associated costs likely would be significantly larger than the administration’s estimated fiscal effects of the MOU—in the range of hundreds of millions of dollars annually. The administration does not include the estimated fiscal effects of this new policy because it would be implemented after the MOU expires and the committee’s recommendations are not known. The administration’s fiscal estimates included no fiscal effects beyond 2023-24.

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 8 who are excluded from collective bargaining, we estimate that the state’s annual costs would increase by several millions of dollars (excluding any associated costs for changes to the duty week).

Firefighter Compensation

CalHR Compensation Study Finds State Firefighter Compensation Lags Local Governments. The most recent compensation study produced by CalHR evaluating Unit 8 compensation was published in 2021 and uses 2020 data. The methodology for this compensation study was agreed to by both Local 2881 and CalHR. As Table 2 of that report indicates, the study compares state firefighter compensation with the compensation received by firefighters employed by 20 local government fire departments across the state. The study relies on a simple average of the compensation earned by firefighters at these jurisdictions and finds that state compensation lags the 20 local jurisdictions by 24 percent. We note that the compensation study does not include federal firefighters in its analysis.

72-Hour Duty Week for Firefighters. Firefighters are compensated differently than most other state employees. Firefighters typically work—on average—four 72-hour workweeks in a 28-consecutive-day cycle. Employees on a 72-hour duty week receive overtime for all hours worked in excess of 212 hours during the 28-consecutive-day work period. (According to the CalHR Unit 8 compensation study, 212 hours is the maximum duty hours allowed before overtime is paid for a 28-consecutive-day pursuant to federal law.) This compensation structure results in 19 hours in a typical work week being paid at 1.5 times an employee’s hourly rate for scheduled overtime, referred to as Extended Duty Week Compensation. For any time worked in excess of 72 hours in a workweek, employees receive additional pay for Unplanned Overtime, which is also paid at 1.5 times an employee’s hourly rate. Especially during fire season, this pay structure results in Unit 8 receiving significant levels of overtime. In calendar year 2021, Unit 8 members received a total of $358 million in regular pay and $224 million in overtime pay.

Compensation Study Suggests State Firefighters Required to Work More Than Local Counterparts. Of the local governments surveyed in CalHR’s compensation study, CalHR reports that most local firefighters are required to work an average of 242 hours a month versus the state requiring its firefighters to work an average of 312 hours a month. If reducing the duty week to 66 hours resulted in state firefighters actually working fewer hours and not simply receiving more hours paid as overtime, burnout and fatigue among state firefighters likely would improve. This reduction in work hours, however, likely only would result if the state were to significantly increase the number of firefighters in its employment. While the budget has provided funding for many additional firefighters, the intent of these positions was to increase the number of available fire crews and increase staffing ratios to provide more capacity to backfill positions (such as during vacations). Whether positions will be available to support the proposed reduction in the duty week is unclear. Additionally, we are not sure how quickly the administration will be able to fill and train those positions.

Addressing Work Hours and Fatigue Likely a Worthy Goal… The state has experienced some of the most severe wildfire seasons in its history in recent years. We understand from the administration that these wildfires have placed significant strains on the state’s firefighters, many of whom have been asked to work for extended periods of time with few breaks. This agreement attempts to address these legitimate concerns about fatigue among firefighters that has resulted from these recent wildfire seasons.

…But How Goal Would Be Achieved—and at What Cost—Is Unknown. The agreement tasks a committee with developing a policy to reduce the duty week from 72 hours to 66 hours. That policy would be incorporated into the Governor’s 2024-25 budget proposal in January 2024. Accordingly, the specifics of how the 66-hour duty week would be structured or implemented are not known. The direction given to the committee is quite broad as it develops the 66-hour duty week in that it can consider anything, including hours of work, shift patterns, retention and recruitment, and classifications. While we do not know how the committee ultimately will propose effectuating this change, in order to implement the policy, significant changes to firefighters’ employment conditions likely would be required and could have major implications for the state’s budget. To illustrate the possible fiscal effects of such a proposal, if reducing the duty week by six hours—with no changes to staffing levels—resulted in state firefighters working six additional hours of overtime each workweek, we would expect the state’s costs to increase by hundreds of millions of dollars. Additionally, if this approach were taken to implement the change, it would not address the issue of fatigue among firefighters.

Including Significant Policy Changes in the Out-Years Is Atypical. Typically, MOUs do not contain significant policy changes without the details of how those changes would be implemented. Moreover, to our recollection, we have not reviewed an MOU with such a significant policy change occurring after the agreement expires. Under the budget agreement adopted in June, the administration’s multiyear estimates beyond the budget window reflect a negative balance in the Special Fund for Economic Uncertainties, the state’s main operating account. Consequently, under these estimates, the budget likely would not have the capacity to absorb this policy change without reductions to other expenditures. Given the heightened economic uncertainty at this time, this provision of the agreement is particularly risky.

Adopting MOU’s Policy Changes Today Constrains the Legislature’s Flexibility in 2024-25. Ratifying this MOU would mean the Legislature would approve the change to a 66-hour duty week prior to knowing the details of how that policy would be implemented, its associated cost, and whether it would be effective. Per the agreement, the Governor’s 2024-25 budget would include the details of the policy change as part of the budget proposal. While the Legislature would have the ability to approve, reject, or modify the proposal at that time, having already approved the policy change in concept through the MOU could significantly diminish the Legislature’s flexibility. We strongly caution the Legislature against ceding control over this policy change.

The Legislature today cannot bind the hands of a future Legislature. As such, the Legislature approving this agreement today should not be seen as the Legislature acquiescing to whatever proposal the committee puts forward. The Legislature has the fundamental constitutional power of the purse. The Legislature’s decisions related to the 66-hour duty week in 2024-25 should be driven by the the economic conditions facing the state and the Legislature’s priorities at that time.

Interaction With Budget

Approved 2022-23 Budget Includes Large Increase to CalFire Budget. The Legislature approved more than $400 million in new ongoing funding levels to augment CalFire’s fire response. Included among these proposals is $169 million General Fund in 2022-23 ($164.3 million General Fund ongoing) to pay for 827 positions to staff and support 17 new Firefighter I crews and fund associated equipment and special repairs.

Interaction Between This Agreement and Approved Budget Not Clear. How this proposed agreement would interact with the budget augmentations already approved by the Legislature is unclear. For example, as mentioned above, it is unclear to us whether any of the approved staffing increases would be used to support the implementation of the 66-hour duty week. Additionally, it is unclear how the changes in the MOU, such as the 66-hour duty week, will affect the costs of proposals the Legislature approved in the 2022-23 budget, such as the addition of 17 new CalFire crews.

Timing of Agreement

Administration Shows Disregard of Legislature’s Role in Collective Bargaining… 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 final week of this legislative session, the Legislature is asked to review MOUs with four bargaining units (Units 2, 8, 9, and 18). In the case of this agreement, the administration expects the Legislature to read, review, and understand a complicated agreement with significant fiscal and policy implications in just a few days at the same time as the Legislature is considering policy bills that have been reviewed and analyzed by various committees of both houses for at least the past several months.

…And Administration Continues Pattern of Limiting Public Scrutiny and Legislative Review of CalFire Policies and Proposals. While jamming the Legislature on proposed labor agreements is not unique to Bargaining Unit 8, it is a continuation of a pattern from earlier this year when the administration provided the Legislature inadequate time to review CalFire’s wildfire response-related budget proposals. For example, the administration made a new request in mid-June that the Legislature approve an additional $266 million from the General Fund in 2022-23 ($249 million ongoing) and nearly 1,300 additional CalFire positions. These resources, which were beyond what had been proposed as part of the Governor’s January budget and May Revision, were proposed to support the 17 additional CalFire crews mentioned above, as well as to increase CalFire staffing ratios. By making these requests in mid-June, the administration provided the Legislature fewer than two weeks to conduct its review of these significant requests prior to the start of the new fiscal year. This amount of time was inadequate to enable the Legislature to hear these requests as part of the budget subcommittee process or evaluate them as thoroughly as would be appropriate. Given the high priority the Legislature places on wildfire response and its interest in ensuring adequate resources are in place to address increasing wildfire risks, the Legislature was under pressure to approve the proposed funding despite the administration failing to provide sufficient time to review the proposal.

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 2022 that is greater than 2.5 percent. The Legislature ratified the agreement that included this clause.

Unit 6 Agreement Seems to Have Influenced 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.

Unit 8 Agreement Provides Higher Pay Increases in 2022-23 Likely Without Triggering Unit 6 Reopener. The Unit 6 agreement specifies that the reopener is triggered if a bargaining unit receives a GSI greater than 2.5 percent “payable in 2022.” The proposed Unit 8 agreement provides for a 2.5 percent GSI effective July 1, 2022 but then provides an additional 2 percent effective January 1, 2023. This means that, over the course of fiscal year 2022-23, Unit 8 members would receive a 3.5 percent salary increase (2.5 percent for the first six months and a compounded 4.6 percent for the second six months of the year). This would be the highest pay increase in 2022-23 provided to a bargaining unit since the Unit 6 reopener was approved. Because the second GSI is payable in 2023, it provides a larger pay increase in 2022-23 than received by Unit 6 likely without triggering the Unit 6 reopener.

LAO Recommendations

Establish Policy to Not Consider Agreements Submitted to Legislature After May 15. With passage of the Ralph C. Dills Act in 1978, the Legislature created collective bargaining for state employees. Part of that collective bargaining process is that the Legislature plays the key role in determining whether or not to ratify an agreement. 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.

If Ratified, Consider Clarifying Legislative Intent and Role for Legislative Input. If despite the concerns raised here the Legislature is comfortable ratifying the agreement, we offer two options for increasing legislative input on the development of the policy change. First, we recommend including intent language in the trailer bill that lays out the goals the Legislature wishes this policy change to achieve. For example, the Legislature may wish for this policy change to result in reduced overtime and reductions in firefighter fatigue (as opposed to increased overtime). Achieving this goal likely would require significant future increases to staffing. Second, we recommend the Legislature consider ways to be involved in the policy development process. For instance, the Legislature could include a legislative representative on the committee. Alternatively, the Legislature could require biannual reporting and briefings to the Joint Legislative Budget Committee on options being considered by the committee and their associated fiscal effects. Ensuring legislative input into the development of this policy will allow the Legislature to be more comfortable with the ultimate proposal in January 2024.