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November 07, 2011  |  04:30 PM 

Last Wednesday, on November 2nd, the County gave SEIU a Last, Best and Final Offer (LBFO). This comes after more than seven months of negotiations, including an unsuccessful effort to reach an agreement through a State mediator. SEIU has not responded to the County’s LBFO and is, therefore, deemed to have rejected the County’s offer. Today, the County declared negotiations to be at an impasse. While some negotiations may still occur, the declaration of impasse does allow the County to implement the terms of the LBFO.
Throughout these many months of negotiations the County has pursued wage and benefit concessions necessary in order to sustain vital County services and reduce the likelihood of additional employee layoffs in the coming years. Unfortunately, rather than engage with the County in meaningful and productive negotiations, SEIU has largely refused to discuss the County’s proposals and offered union proposals which either increase County costs, such as wage and benefit increases for part-time employees, or are simply unacceptable to the County for policy reasons, such as forcing all employees into the Kaiser Health Insurance Plan. Much of SEIU’s efforts have focused on demanding reductions in salary and benefits for employees the union does not represent. Many of these non-SEIU employees, including all unrepresented groups, made substantial salary concessions last year; meanwhile SEIU represented employees received salary increases. As many of you may remember, in 2010 a number of represented bargaining groups as well as all unrepresented employees, including elected officials, deferred their scheduled COLA, equities, and merit adjustments for 18 months until January 2012 in an attempt to help the County balance its budget.
As I reported to the Board of Supervisors prior to the June Final Budget Hearings, staffing costs represented 35% of the total County budget in FY 2000-01. However, in FY 2010-11, with 1,000 fewer positions than ten years previous, staffing costs have risen and consumed 46% of the total County budget. The two primary drivers of the County’s current and future fiscal distress are the ever-increasing cost of medical and retirement benefits to employees. Over the last ten years, the County’s cost for employee pensions has more than quadrupled reaching over $100 million in FY 2010-11. The contribution rate paid by the County (as the employer) has increased from 10.3% of payroll in 2001 to 31.9% in 2010; and is expected to rise to nearly 40% over the next several years. Meanwhile, individual employee contribution rates during this period have remained relatively flat (between 2% and 4%). The County’s cost for employee health benefits have also escalated during this period. In FY 2010-11, the County spent over $52 million for employee health insurance. Combined, the County’s costs for employee pension and health benefits now represent 32% of the total salary and benefit expenses of $556 million for our full-time workforce.
The Board of Supervisors has taken prudent steps over the last three years to avoid mass layoffs and cuts to community services by re-directing $117 million in capital and reserve funds, as well as utilizing $28 million in one-time federal grants to support ongoing operations. Even the County’s FY 2011-12 budget was partially balanced with over $31 million in these one-time funds. However, the use of the one-time funds is not sustainable. The County must reduce its expenses to match its ongoing revenues if it is to achieve a structurally balanced budget.
Following are key elements in the County’s LBFO: 1) employees with employee-only coverage will pay 20% of the health insurance premiums, which is the same as those with dependent coverage; 2) the County and employees will contribute equally for post-employment cost-of-living adjustment (this means most employees will pay an additional 2.35% of their salary toward their pension); 3) the County will implement 6 furlough days annually for the duration of the contract through March 31, 2013 (this equates to 2.3% of the base salary); and 4) a 2nd tier retirement benefits for new hires. Many of these same ideas have become commonly accepted in other jurisdictions throughout the State during the current fiscal crisis. Click here for more details on the LBFO.
SEIU flyers portraying the reinstatement of the deferrals made last year as if they are new raises for management is a gross mischaracterization of the facts. Those employees deferred all of their scheduled COLA’s and merit increases for 18 months. It is important to recognize that, as with SEIU members, unrepresented employees will also be asked to increase their future contribution for retirement. There will also be significant changes in the cafeteria plan for unrepresented employees including a rollback in value, a cap, and elimination of the benefit for many new hires. The overall percentage value of additional concessions asked of unrepresented employees is nearly identical to the value of concessions being asked of SEIU represented employees.
It is unfortunate that the County has been unable to reach agreement on the terms for a new agreement with SEIU. The recession has made funding for local government very difficult across the nation. Millions of people are having to deal with reduced salaries and benefits. San Joaquin County residents have been hit particularly hard. Probably every single one of us has been affected in one way or another by the economic downturn. It is paramount to also accept our duty to provide services to the nearly 700 thousand people we serve. Even these concessions do not guarantee that we will have all the resources necessary to retain sufficient staff to provide those services but without the concessions, our mission to give high quality services cannot be achieved.
Lastly, I want to say “Thank You” to the many people who have offered words of support and encouragement as we attempt to resolve the very real problem of a fiscally imbalanced budget with real solutions. No one likes concession-bargaining and I recognize the negative impacts it creates. Nevertheless, it is my sincere hope that we recognize the necessity of the actions being taken and continue to do our best to serve the community as well as we can.