PECG Weekly Update

Weekly Update
July 2, 2009

The big story, and actually the only story, in Sacramento this week was the ongoing failure of the Governor and the Legislature to reach agreement on how to address the $24 billion General Fund budget deficit. The Legislature sent a few bills to the Governor to deal with part of the issue, which he vetoed. An attempt was made to delay and shift some funding to allow enough cash to pay the State’s bills, but the Governor and Senate Republicans blocked those efforts. As a result, State Controller John Chiang has announced that he will start sending out IOUs on July 2, initially to state vendors and those who are waiting to receive State income tax refunds.

On July 1, the Governor issued his Executive Order to add a third furlough day per month for State employees. PECG’s lawsuit challenging the first two days of furlough is going through the process (currently written briefs or arguments are being submitted by both sides) before it is heard by the Court of Appeal. PECG’s grievance alleging that the furloughs also violate the provisions of the Unit 9 MOU which are still currently in effect should be in arbitration, but DPA is resisting participating in that mandatory process, so it appears it will be necessary to go to court to force them to do so. PECG’s attorneys and leaders are looking at the alternatives on challenging the Governor’s new Executive Order.

The Governor is also demanding that reductions in the retirement plan be implemented for new employees as part of a new budget deal, although it would have no impact on the budget for many years. His proposal would also increase employee contributions to PERS. PECG and other public employee organizations, along with Legislative Democrats, are strongly opposed to the Governor’s efforts to use the budget crisis to enact some of his policy goals, but the issue will no doubt be debated.

Until some action is taken to address the combined budget deficit and cash shortfall, the economic impact on a growing number of Californians will increase as the State is unable to pay its bills. Under a federal Court ruling, State employees cannot be paid with IOUs, but exactly what will occur by the end of July is not certain if no action to resolve the problem is taken before then.

Weekly Update
June 26, 2009

State Controller John Chiang has confirmed with PECG that state employees will receive paychecks, not IOUs, for June.

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The Legislature continues to achieve nothing as we near the end of the fiscal year on June 30. There is already a budget in place which was adopted in February, but very soon there won’t be money to pay for anything and no ability for the state to borrow if the Legislature and Governor don’t take effective action to resolve the $24 billion deficit.

Votes have been more or less along party lines, which means no one achieves the two-thirds required for action, but even the party lines change. Democratic Assemblyman Juan Arambula announced this week he was switching from Democrat to Independent.

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PECG filed a formal request for DPA to provide the long-overdue salary increase to PECG-represented supervisors, retroactive to last July 1. DPA has authority to approve the pay increase (assuming there is funding available in the budget) and has an obligation to do so under state law regarding providing equal salaries for comparable work. As Bargaining Unit Seniors received a pay raise last July 1 and their Supervisory counterparts, sometimes in the same classifications, did not, the request asks DPA to either grant the raises immediately or conduct a hearing to determine if the raises are required by state law. PECG has been seeking to achieve the raises through the meet and confer process, with support from several department heads, but that has not been successful. Thus, the statutory request and hearing process will now be pursued.

Weekly Update
June 19, 2009

The Legislature plans to send a package of bills to the Governor next week to address the $24 billion budget deficit facing the General Fund. Major issues include how big the budget reserve should be, whether up to $2 billion should be borrowed from local government funds to help balance the budget, and whether there should be tax increases on cigarettes, oil, or other sources. The Governor said he would veto any tax or fee increases.

The legislative package does not include the 5% pay cut for state employees which the Governor has proposed. PECG sent members and feepayers an email asking them to go to the PECG website to send letters to their legislators urging their opposition to the Governor’s pay cut proposal. More than 1300 letters were faxed to the legislators in the first 24 hours! State employees have already lost nearly 10% in pay due to furloughs, so the Legislature has been receptive to the argument from PECG members and others that the additional 5% cut should not be imposed.

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Because there is a budget already in place for the upcoming fiscal year beginning July 1, although it is way out of balance, there is no issue this year regarding whether state employees should be paid in the absence of a budget. However, there is a serious cash flow concern. State Controller John Chiang has said the state’s General Fund will run out of money in late July if some budget solution isn’t implemented by then. Both the Controller and DPA are saying that it is “likely” that state employees will be paid on time in July but August could be a problem for the state to pay any of its bills to anyone if the Legislature and the Governor do not act before then. PECG has raised the issue that employees paid out of Special Funds (including 95% of PECG’s members) should be paid regardless of the General Fund situation because there will be money in all or most of those funds. The Controller’s Office is analyzing that question. Once in the past, the state issued IOUs to state employees, but the Courts have ruled that that practice is illegal.

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CalPERS has issued its premium rates for health plans for 2010. The basic increases for HMOs (Blue Shield and Kaiser) average 3.4%, while the PPO plans (PERS Choice, PERS Select, and PERS Care) are 3.3%. CalPERS has said this is the lowest increase in health care premiums in 14 years. Proposals to create some new plans with lower premiums but higher co-payments and other negative features were rejected by CalPERS. Revised state contributions to the plans are being calculated.

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The Legislative Budget Committee also approved continuing the 90% state staff/10% outsourcing staff for Caltrans’ Capital Outlay Support, its major engineering program. A contentious item in the past, there was no controversy or disagreement between PECG and the Administration, so the ratio was approved unanimously by the Committee.

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PECG’s lawsuit challenging the furloughs is working its way slowly through the Court of Appeal process. The decision and record from the lower Court have now been officially documented. This will be followed by about three months of briefings (written arguments) by the parties, after which a hearing date will be scheduled by the Court of Appeal. PECG has also filed a grievance, challenging that the furloughs violate the Unit 9 MOU, but DPA thus far has balked at going to arbitration.

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One of the Governor’s budget proposals is to save $70 million by closing most state parks. Sacramento State’s study concluded that California would lose $1.66 billion from non-residents who visit California’s parks each year. The total park visitor expenditures are $4.32 billion. As with several other budget cutting proposals, saving money winds up costing more money than would be saved.

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James Oberstar, Chairman of the federal House Transportation Committee, has proposed a 57% increase in federal highway spending over the next several years. The total federal package in the 6-year authorization bill would be $450 billion. The Obama Administration is encouraging an 18-month reauthorization to provide more time to study alternatives, such as increasing the gas tax, to pay for the additional highway funding.

Weekly Update
June 11, 2009

The big news this week was the Governor’s issuance of an Executive Order which prohibits State departments “from entering into any new contracts, amending existing contracts” or issuing purchase orders. This will stay in effect until each department prepares a plan to reduce contracting in the upcoming fiscal year “by at least 15 percent” and the plan is approved. Exemptions must be approved by the Department of Finance and agency heads.

We will be working with the various departments to monitor the implementation of the provisions of the Executive Order. Some projects were exempted, such as those funded through federal stimulus money. Another exemption is “public-private partnerships that require no direct State expenditures”, a condition which does not currently exist (to best of our knowledge) for any State infrastructure projects.

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Assembly Democrats, as well as various organizations affected by the projected $24 billion General Fund budget deficit and proposed program cuts, are now publicly saying that cuts alone will not solve the problem. Various suggestions have been made for revenue enhancements and tax increases. Legislative debate is expected to be lengthy and contentious.

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	Weekly Update July 2, 2009 The big story, and actually the only story, in Sacramento this week was the ongoing failure of the Governor and the Legislature to reach agreement on how to address the $24 billion General Fund budget deficit. The Legislature sent a few bills to the Governor to deal with part of the issue, which he vetoed. An attempt was made to delay and shift some funding to allow enough cash to pay the State’s bills, but the Governor and Senate Republicans blocked those efforts. As a result, State Controller John Chiang has announced that he will start sending out IOUs on July 2, initially to state vendors and those who are waiting to receive State income tax refunds. On July 1, the Governor issued his Executive Order to add a third furlough day per month for State employees. PECG’s lawsuit challenging the first two days of furlough is going through the process (currently written briefs or arguments are being submitted by both sides) before it is heard by the Court of Appeal. PECG’s grievance alleging that the furloughs also violate the provisions of the Unit 9 MOU which are still currently in effect should be in arbitration, but DPA is resisting participating in that mandatory process, so it appears it will be necessary to go to court to force them to do so. PECG’s attorneys and leaders are looking at the alternatives on challenging the Governor’s new Executive Order. The Governor is also demanding that reductions in the retirement plan be implemented for new employees as part of a new budget deal, although it would have no impact on the budget for many years. His proposal would also increase employee contributions to PERS. PECG and other public employee organizations, along with Legislative Democrats, are strongly opposed to the Governor’s efforts to use the budget crisis to enact some of his policy goals, but the issue will no doubt be debated. Until some action is taken to address the combined budget deficit and cash shortfall, the economic impact on a growing number of Californians will increase as the State is unable to pay its bills. Under a federal Court ruling, State employees cannot be paid with IOUs, but exactly what will occur by the end of July is not certain if no action to resolve the problem is taken before then. Weekly Update June 26, 2009 State Controller John Chiang has confirmed with PECG that state employees will receive paychecks, not IOUs, for June. ---------------------------------------------- The Legislature continues to achieve nothing as we near the end of the fiscal year on June 30. There is already a budget in place which was adopted in February, but very soon there won’t be money to pay for anything and no ability for the state to borrow if the Legislature and Governor don’t take effective action to resolve the $24 billion deficit. Votes have been more or less along party lines, which means no one achieves the two-thirds required for action, but even the party lines change. Democratic Assemblyman Juan Arambula announced this week he was switching from Democrat to Independent. ---------------------------------------------- PECG filed a formal request for DPA to provide the long-overdue salary increase to PECG-represented supervisors, retroactive to last July 1. DPA has authority to approve the pay increase (assuming there is funding available in the budget) and has an obligation to do so under state law regarding providing equal salaries for comparable work. As Bargaining Unit Seniors received a pay raise last July 1 and their Supervisory counterparts, sometimes in the same classifications, did not, the request asks DPA to either grant the raises immediately or conduct a hearing to determine if the raises are required by state law. PECG has been seeking to achieve the raises through the meet and confer process, with support from several department heads, but that has not been successful. Thus, the statutory request and hearing process will now be pursued. Weekly Update June 19, 2009 The Legislature plans to send a package of bills to the Governor next week to address the $24 billion budget deficit facing the General Fund. Major issues include how big the budget reserve should be, whether up to $2 billion should be borrowed from local government funds to help balance the budget, and whether there should be tax increases on cigarettes, oil, or other sources. The Governor said he would veto any tax or fee increases. The legislative package does not include the 5% pay cut for state employees which the Governor has proposed. PECG sent members and feepayers an email asking them to go to the PECG website to send letters to their legislators urging their opposition to the Governor’s pay cut proposal. More than 1300 letters were faxed to the legislators in the first 24 hours! State employees have already lost nearly 10% in pay due to furloughs, so the Legislature has been receptive to the argument from PECG members and others that the additional 5% cut should not be imposed. ----------------------------------------------- Because there is a budget already in place for the upcoming fiscal year beginning July 1, although it is way out of balance, there is no issue this year regarding whether state employees should be paid in the absence of a budget. However, there is a serious cash flow concern. State Controller John Chiang has said the state’s General Fund will run out of money in late July if some budget solution isn’t implemented by then. Both the Controller and DPA are saying that it is “likely” that state employees will be paid on time in July but August could be a problem for the state to pay any of its bills to anyone if the Legislature and the Governor do not act before then. PECG has raised the issue that employees paid out of Special Funds (including 95% of PECG’s members) should be paid regardless of the General Fund situation because there will be money in all or most of those funds. The Controller’s Office is analyzing that question. Once in the past, the state issued IOUs to state employees, but the Courts have ruled that that practice is illegal. ----------------------------------------------- CalPERS has issued its premium rates for health plans for 2010. The basic increases for HMOs (Blue Shield and Kaiser) average 3.4%, while the PPO plans (PERS Choice, PERS Select, and PERS Care) are 3.3%. CalPERS has said this is the lowest increase in health care premiums in 14 years. Proposals to create some new plans with lower premiums but higher co-payments and other negative features were rejected by CalPERS. Revised state contributions to the plans are being calculated. ----------------------------------------------- The Legislative Budget Committee also approved continuing the 90% state staff/10% outsourcing staff for Caltrans’ Capital Outlay Support, its major engineering program. A contentious item in the past, there was no controversy or disagreement between PECG and the Administration, so the ratio was approved unanimously by the Committee. ----------------------------------------------- PECG’s lawsuit challenging the furloughs is working its way slowly through the Court of Appeal process. The decision and record from the lower Court have now been officially documented. This will be followed by about three months of briefings (written arguments) by the parties, after which a hearing date will be scheduled by the Court of Appeal. PECG has also filed a grievance, challenging that the furloughs violate the Unit 9 MOU, but DPA thus far has balked at going to arbitration. ----------------------------------------------- One of the Governor’s budget proposals is to save $70 million by closing most state parks. Sacramento State’s study concluded that California would lose $1.66 billion from non-residents who visit California’s parks each year. The total park visitor expenditures are $4.32 billion. As with several other budget cutting proposals, saving money winds up costing more money than would be saved. ----------------------------------------------- James Oberstar, Chairman of the federal House Transportation Committee, has proposed a 57% increase in federal highway spending over the next several years. The total federal package in the 6-year authorization bill would be $450 billion. The Obama Administration is encouraging an 18-month reauthorization to provide more time to study alternatives, such as increasing the gas tax, to pay for the additional highway funding. Weekly Update June 11, 2009 The big news this week was the Governor’s issuance of an Executive Order which prohibits State departments “from entering into any new contracts, amending existing contracts” or issuing purchase orders. This will stay in effect until each department prepares a plan to reduce contracting in the upcoming fiscal year “by at least 15 percent” and the plan is approved. Exemptions must be approved by the Department of Finance and agency heads. We will be working with the various departments to monitor the implementation of the provisions of the Executive Order. Some projects were exempted, such as those funded through federal stimulus money. Another exemption is “public-private partnerships that require no direct State expenditures”, a condition which does not currently exist (to best of our knowledge) for any State infrastructure projects. -------------------------------------------------- Assembly Democrats, as well as various organizations affected by the projected $24 billion General Fund budget deficit and proposed program cuts, are now publicly saying that cuts alone will not solve the problem. Various suggestions have been made for revenue enhancements and tax increases. Legislative debate is expected to be lengthy and contentious.