California’s Monopoly Bargaining Debacle

It has long been suspected that California government employee unions wield enormous power, with glittering, golden retirement plans.  Ivan Osorio analyzes a report by Bloomberg reporters on openmarket.org.

This isn’t a case of a handful of isolated incidents. The team of Bloomberg reporters found a pattern of fiscal irresponsibility characterized by:

â– Lack of control in overtime pay and unused vacation time payouts;

â– Lack of coordination among state agencies which in one instance launched a costly salary bidding war for qualified personnel; and

â– Compensation for pension fund managers that bears little relation to performance.

However, it would take the next Democratic governor to really put the state in hock to the government unions. In Gray Davis, the unions found a compliant ally willing to break the bank for them. It led to a public backlash against Davis, who in 2003 became the first U.S. governor in 82 years to be recalled by voters. But the damage had been done. In the first part of the series, Bloomberg’s Mark Niquette, Michael B. Marois, and Rodney Yap note:

One of the first goals of state employee unions when Davis took over in 1999 after 16 years of Republican governors was to unwind curbs on pensions put in place by Governor Pete Wilson in 1991. Workers also wanted broad wage increases.

Unions persuaded the California Public Employees’ Retirement System to sponsor legislation called Senate Bill 400, which sweetened state and local pensions and gave retroactive increases for tens of thousands of retirees. Highway-patrol officers were granted the right to retire after 30 years of service with 90 percent of their top salaries, a benefit that was copied by police agencies across the state.

California’s annual payment toward pension obligations ballooned to $3.7 billion in the current fiscal year from $300 million when the bill was enacted. Some cities that adopted the highway-patrol pension plan later cited those costs for contributing to their bankruptcy filings.

But that was just the beginning.

The pay deal for the California Highway Patrol got the attention of the state’s politically potent prison guards’ union, which successfully lobbied to have its compensation tied to that of state troopers.

The result was a pay increase of more than 30 percent for members of the union over the five-year contract. The state’s auditor, Elaine Howle, in July 2002 estimated the contract cost taxpayers an extra $500 million a year.