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Legislative Analyst's OfficeAnalysis of the 2001-02 Budget Bill |
A significant portion of state government expenditures is for compensation of state employees. The Governor's budget projects $16.7 billion in salary and wage expenditures for more than 317,000 authorized personnel-years in 2001-02 (including $5.5 billion and more than 105,000 personnel-years in higher education). Including benefits (such as contributions to retirement and health insurance), estimated employee compensation expenditures are projected to exceed $19 billion for the budget year.
State Civil Service Employees. In September 1999, the Legislature approved memoranda of understanding (MOUs) for all of the state's 21 collective bargaining units. (This does not include employees in higher education.) These agreements are effective through June 30, 2001. The MOUs provided two 4 percent general salary increases effective July 1, 1999 and September 1, 2000. For employees not covered by collective bargaining (such as managers and supervisors), the Department of Personnel Administration (DPA) approved a compensation package similar to that approved in the MOUs. Figure 1 shows a history of general salary increases for state civil service employees and the consumer price indices for the United States and California since 1981-82.
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Figure 1 |
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State General Salary Increases |
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1981-82 Through 2001-02 |
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Consumer Price Indices |
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Fiscal Year |
State General Salary Increases |
United States |
California |
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1981-82 |
6.5% |
8.8% |
10.7% |
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1982-83 |
— |
4.2 |
2.3 |
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1983-84 |
6.0 |
3.7 |
3.6 |
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1984-85 |
8.0 |
3.9 |
4.9 |
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1985-86 |
6.0 |
2.9 |
4.0 |
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1986-87 |
6.0 |
2.2 |
3.3 |
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1987-88 |
3.8 |
4.1 |
4.2 |
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1988-89 |
6.0 |
4.6 |
4.8 |
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1989-90 |
4.0 |
4.8 |
5.0 |
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1990-91 |
5.0 |
5.5 |
5.3 |
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1991-92 |
— |
3.2 |
3.6 |
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1992-93 |
— |
3.1 |
3.2 |
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1993-94 |
5.0 |
2.6 |
1.8 |
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1994-95 |
3.0 |
2.9 |
1.7 |
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1995-96 |
— |
2.7 |
1.4 |
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1996-97 |
— |
2.9 |
2.3 |
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1997-98 |
— |
1.8 |
2.0 |
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1998-99 |
5.5 |
1.7 |
2.5 |
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1999-00 |
4.0 |
2.9 |
3.1 |
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2000-01a |
4.0 |
3.0 |
4.0 |
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2001-02a |
—b |
2.3 |
2.8 |
a Legislative Analyst's Office estimate of consumer price indices. |
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b To be determined through collective bargaining. |
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The Governor's budget does not include any budget-year funding for employee compensation. However, DPA will begin collective bargaining negotiations to replace the expiring MOUs this spring. Consequently, we anticipate the state will face some increased costs for employee compensation in 2001-02. Based on the estimated state employee salary level, we estimate that a 1 percent salary increase for state employees increases General Fund costs approximately $55 million.
Employees in Higher Education. In higher education, the Governor's budget proposes $131 million for the University of California and $96 million for the California State University for employee compensation to provide salary and benefit increases to faculty and staff. Figure 2 shows how the budget proposes to allocate these amounts.
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Figure 2 |
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Higher Education |
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General Fund |
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University of California |
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Merit salary increases |
$43.0 |
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Average 2 percent cost-of-living increase |
38.4 |
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Full-year cost of 2000-01 salary increases |
19.5 |
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Health benefit cost increases |
13.1 |
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Parity adjustments for staff and nonfaculty academic employees |
10.0 |
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Parity adjustments for faculty |
7.1 |
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Subtotal |
($131.1) |
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California State University |
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4 percent compensation pool (effective July 1, 2001) |
$81.5 |
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Health and dental benefit cost increases |
13.2 |
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Full-year cost of 2000-01 salary increases |
1.5 |
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Subtotal |
($96.2) |
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Higher Education Total |
$227.3 |
To strengthen the Legislature's oversight of collective bargaining, we recommend that the Legislature require a minimum 30-day review period for collective bargaining proposals and review proposals at budget
hearings for adoption in the budget act. Further, the Department of Personnel Administration should report to the budget committees during budget hearings on the administration's collective bargaining proposals and the status of negotiations.
In the past, the Legislature has received MOUs for approval late in the session. In addition, assessments of the total cost of the MOUs have not always been available or complete for consideration with the proposals. To ensure that the Legislature has the opportunity to appropriately review any proposed MOUs, we recommend that the Legislature (1) require a minimum 30-day review period between the submittal of proposed MOUs to the Legislature and hearings on the proposals to ensure that their fiscal and policy implications are fully understood and (2) review the administration's MOU proposals at the budget hearings and adopt them in the annual budget act (or as amendments to the act if they are not available for review during budget hearings). This is consistent with our recommendation in past analyses and with supplemental report language adopted by the Legislature with the 1996-97 Budget Act. Given this need to strengthen the Legislature's oversight of collective bargaining agreements, we further recommend that DPA report to the budget committees during budget hearings on the administration's collective bargaining proposals and the status of negotiations.