Unions limit state's budget-cutting options

Some say Legislature gave up too much power in 2002

By Kathie Durbin, Columbian staff writer

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Five years ago, the state of Washington began collective bargaining with its workers on a large scale over pay and benefits.

Now the state is hoping to extract enough in wage and benefit concessions from its 63,500 unionized government and higher education employees to make a significant dent in the $5.7 billion budget chasm it faces in the next budget cycle.

But with state employee unions and the governor’s office now on equal footing in contract negotiations, and the Legislature relegated to the role of approving or rejecting their agreements, the state’s ability to achieve deep cuts in compensation at a time of fiscal crisis is limited.

“The unions are doing exactly what they are supposed to do,” said Jason Mercier, a budget analyst for the conservative Washington Policy Center. “They’re representing the interests of their members.”

The question, Mercier says, is whether the Legislature gave up too much power when it passed the 2002 Personnel System Reform Act.

“If you really want to get back control of the budget, that law has to be repealed and the Legislature has to be put back in the driver’s seat in making budget decisions,” he says.

Today, 47,652 of the state’s 63,674 general government employees —74 percent — are represented by unions, from marine engineers and ferry agents to state troopers and fish and wildlife biologists.

In addition, 15,811 of the state’s 41,237 higher education faculty and staff — 38 percent — are union members, from nurses at the University of Washington to members of the Washington State University Police Guild.

The clout of those unions may be tested in coming weeks, now that Gov. Chris Gregoire has called them back to the bargaining table in an effort to trim the cost of their benefits. In all, wages and benefits make up 23 percent of overall state spending, a percentage that has remained more-or-less constant since 2000.

In the face of multi-billion-dollar budget deficits, state worker unions have agreed since 2008 to a two-year wage freeze, unpaid furloughs and to pay increased out-of-pocket health care costs.

But the governor, a staunch friend of labor, says she is out of options and must ask state workers to do more.

“I don’t have an extra penny,” she said in October. “We can’t afford the escalating cost of health care and therefore we’re asking them to get us through the recession by paying more.”

Powerful unions

Repealing the 2002 civil service reform law, which gave state employee unions the power to negotiate salary and benefits with the executive branch, isn’t on anyone’s immediate legislative agenda.

State labor unions are politically powerful in Washington. They contribute generously to the campaigns of both Democrats and Republicans, which wins them access to influential lawmakers. They have helped secure middle-class salaries and benefits for their members.

Organizing by Service Employees International Union has brought higher reimbursement rates, health coverage and training benefits to thousands of state-subsidized caregivers who tend to the elderly, disabled and low-income families.

Driven largely by the state housing boom, in 2006-08 Washington’s growing economy produced big revenue surpluses. The state work force grew. Employment peaked in 2009 at the equivalent of 112,500 full-time workers.

During this period, Gov. Chris Gregoire won legislative approval of major education and social service initiatives, including creation of a new state Department of Early Learning.

The cost of health care also took off during this period, rising at a rate that far exceeded the overall rate of inflation. Last year alone the cost of health care premiums for state workers rose 7.5 percent, presenting the state with an extra $500 million expense going into the 2011-13 budget cycle that it can’t afford to pay.

In late 2008, when the revenue boom turned bust, the state was left with stark choices: Cut costs and employees in discretionary social services, health and higher education programs, or ask its unions for concessions.

The pain was delayed somewhat by $3.6 billion in federal stimulus money that flowed into state government beginning in 2009. It helped the state cover Medicaid benefits and assistance to state colleges and universities.

Complicating the task of cutting billions, according to the governor, is that more than 70 percent of the general fund budget is essentially off-limits, either because of constitutional provisions or because of strings that came with those federal stimulus funds.

Through next June 30, the state is required to maintain current levels of spending for higher education, a requirement known as “maintenance of effort.”

In the past 18 months, state government has eliminated about 3,000 positions, and an estimated 725 more soon will be eliminated as a result of Gregoire’s 6.3 percent across-the-board cuts. In addition, the state has negotiated 10 unpaid furlough days annually for about one-third of its workers, both union and non-union. Additional furlough days may be in the works.

Some observers are asking whether it makes sense to keep eliminating staff and programs instead of asking all state workers to accept cuts in compensation in the spirit of sacrificing for the greater good. (Unions have no control over the governor’s decisions to cut staff).

Those cuts are “on the table” in current negotiations, said Glenn Kuper, spokesman for the budget-writing Office of Financial Management. “But it has to be agreed on by the unions for it to happen. It’s not something we can just unilaterally agree to do. We have to collectively bargain. There are federal legal protections that the unions have.”

Tim Welch, spokesman for the Washington Federation of State Employees, says it’s important to remember that the state workers who remain are shouldering an extra burden. “As the economy goes down, the demand for services goes up,” he said. “The solution can’t all come from state employees. If you cut their pay drastically, you do hurt the recovery of the economy. That’s money taken out of the consumer market.”

Balancing the budget solely on the backs of state workers is not a realistic option, Kuper agrees.

To plug a $5 billion deficit would require roughly a 25 percent cut in pay and benefits for all state employees and all K-12 school employees, he calculated.

“From a purely practical perspective, it’s impractical to expect that state workers could absorb a 25 percent pay cut, “ Kuper said. “From a fairness perspective, it’s not fair to require that the entirety of the problem be resolved by cutting pay and benefits for workers. The job market isn’t great, but people would still leave.”

Teacher salaries

Teachers in K-12 schools are not state employees, but the Legislature sets their salary and benefit schedules and makes basic education payments to local school districts directly. Those payments constitute 41.4 percent of the state’s general fund budget and are largely off-limits as the state looks for places to cut its budget, Kuper said.

Because the Washington Constitution defines basic education as the state’s paramount duty, and because the state is under a court order to dramatically increase its funding of basic education, cutting salary and benefits for teachers is a challenge, Kuper said.

“We might have some ways we can trim around the edges,” he said. “But we’ve already encountered significant issues. The courts have ruled that we aren’t adequately funding basic education.”

Mercier of the Washington Policy Center says that in the area of education funding, as in collective bargaining with state workers, the Legislature has given up control of a large portion of its budget — in this case, to local school districts and community college districts.

Although the state pays the bill for K-12 salaries, bargaining with teacher unions over “time, resources and incentives” is left to those local districts, he said.

“If we are going to be a state system that is responsible for K-12 salaries, the state should have a master contract” with the teacher unions, Mercier says. “You shouldn’t have 295 separate contracts.”

Health costs

The escalating cost of health care is the sleeper issue in current negotiations with state employee unions.

By far the majority of the state budget goes to payroll costs, and health benefits are a big piece of that.

According to Gregoire’s Labor Relations Office, the state’s share of employee benefits for health, life, dental, vision, disability and retiree subsidies costs about $1 billion a year for nearly 110,000 state and higher education employees.

State workers are the biggest cost driver in state government, and right now they are using a lot of health care, says Steve Hill, director of the Washington Health Care Authority.

“I think what’s happening is, state employees are becoming concerned about their jobs,” Hill told Austin Jenkins of the Northwest News Network in March. “With this insecurity, they’re going out and getting the treatments they need.”

Budget director Marty Brown says the state is offering to continue paying the same $850 per month per worker for health, dental, vision and life insurance benefits in 2011-13 that it’s paying currently. But health care costs are rising at a rate of 7.5 percent annually, and the 2009 Legislature kicked in just 3 percent to cover health care inflation. That means the state’s $850 contribution now covers just 74 percent of premium costs for an individual workers, down from 88 percent in the current contracts, which expire next June 30.

With the latest revenue forecast, the state’s budget picture has worsened. And public employee unions clearly feel embattled.

Union leaders packed the October meeting of the Public Employee Benefits Board and asked board members to join them in asking the state to tap the state’s health care reserve account to save their health benefits.

But budget director Brown said the reserve is too low to touch.

“Basically, we’re not going to put in any more than we did last time per person,” he declared.

On Nov.17, state workers represented by AFSCME Council 28 held a massive demonstration at the Capitol and delivered letters from members describing how the cut in benefits would affect their bottom line. Carol Dotlich, president of the Washington Federation of Employees, told the governor’s representative, “To have our people scapegoated and to have their health care taken from them in this way is perhaps the cruelest thing the governor could do.”