CSR's legislative advocate Ted Toppin reviews the governor's proposed budget
CSR's legislative advocate Ted Toppin had this to say about the governor's proposed state budget:
Budget deliberation kicked off in the Capitol this morning with the release of Governor Brown’s proposed 2015-2016 state budget. He proposes $113.3 billion in general fund and $51.4 billion in special fund expenditures making for a $164.7 billion spending plan. This represents a 1.4 percent bump over current year spending.
The budget has a $534 million operating reserve to be used to cover emergencies during the budget year and it squirrels away $2.8 billion in the Budget Stabilization Account created by the passage of Proposition 2 in November. In his remarks, the governor made clear that he intended to hold onto this money for the next economic downturn.
As has been the Administration’s consistent practice, the budget urges “fiscal restraint and prudence” claiming that the “Budget remains precariously balanced,” the state still faces “$227 billion in long-term costs, debts and liabilities,” and “another recession is inevitable.”
Here are the budget proposals that will be of interest to CSR members:
State Retiree Healthcare Benefits
The budget includes the $1.9 billion required to cover the pay-as-you-go health and dental costs for current state retirees in FY 2015-16. But as promised, the Governor’s budget proposes the prefunding of state employee retiree healthcare through the collective bargaining process as state employee bargaining units expire. Four bargaining units (BU 6 – Correctional Officers, BU 9 – Engineers, BU 10 – Scientists and BU 12 -- Operating Engineers) have contracts that expire in the first week of July 2015. The Administration’s goal is to split retiree healthcare costs equally between employee and the state – much like pensions.
The budget reports the unfunded state employee healthcare liability at $72 billion. However, the budget includes no state revenue at this time to address that liability.
The budget also envisions some fundamental changes to CalPERS health benefits aimed at reducing costs to the state and its employees. Most of these changes will impact new employees. Specifically, the budget calls for a rise in the retiree healthcare vesting period from 10-20 to 15-25 years for newly hired employees. It also proposes that “newly hired workers should not expect a higher subsidy for health care premiums in retirement than what they received during their working years.”
However, existing state retirees and employees could be impacted by some of the proposed healthcare reforms. The budget proposes “changes to lower the state’s premium subsidy, currently based on a formula using the average premiums of the four highest enrolled plans, to encourage employees to select lower-cost health plans.” The budget also envisions a CalPERS run High Deductible Health Plan as an option for employees supplemented by a proposed state funded Health Savings Account.
We are working to get additional details about the budget’s proposed healthcare changes.
Here is the write-up on the issue from the budget summary:
Eliminating the $72 billion unfunded liability for retiree health care will be expensive, complex, and take many decades. Currently, the state pays retiree health care costs on a pay as you go basis. Unlike pension funding, this means the state and employees do not set aside funds during an employee’s working years to pay for future benefits. Consequently, funds are not invested and there are no investment returns to help pay for future costs for retirees. Absent any change, the $72 billion liability is expected to increase significantly over the next five years to more than $90 billion. Though the state has established prefunding agreements with three of its labor unions, the state must go further to eliminate this liability. Paying down the retiree health care unfunded liability is a shared responsibility between employers and employees. The Budget calls for employees and employers to equally share in the prefunding of the normal costs of retiree health care, similar to the new pension funding standard. The normal costs represent the actuarially determined value of retiree health care benefits that are earned by the employee during a current year. The Administration will seek to phase in this critical, cost sharing agreement as labor contracts come up for renewal. Once fully implemented, this plan will increase state costs by approximately $600 million annually but ultimately decrease the retiree health care liability, saving billions of dollars in the long term.
State Employee Compensation
The Budget includes funds to cover collectively bargained state employee pay raises scheduled for 2015 and the increased healthcare costs of all state employees The budget states that money is also included to extend those pay increases to state managers and supervisors. Importantly, the budget also includes $5 billion for the state’s contribution to CalPERS for state pension costs and makes no mention of any additional “reforms” in state employee pensions. In fact, it acknowledges that “the Governor and Legislature over the past several years have taken significant steps to address the long-term costs of pensions.”
Here is the budget summary write up on the employee compensation piece:
The Budget includes an additional $560 million ($200 million General Fund) in 2015-16 for employee compensation and health care costs for active state employees. Included in these costs are collectively bargained salary increases for many of the state’s rank and file employees and state managers and supervisors. Funding has also been included for anticipated 2016 calendar year health care premium increases.
Civil Service Reforms
In 2012, the Governor’s Reorganization Plan #1 merged the State Personnel Board and the Department of Personnel Administration into the newly created California Department of Human Resources (CalHR). The goal was to streamline the civil service system and bring state hiring practices into the 21st Century.
To advance that effort, the budget proposes the creation of “a comprehensive strategy to systemically improve the civil service system. Administrative efforts will be focused on updating and streamlining the state’s job classifications; modernizing recruitment, examination, and hiring practices; developing more robust employee and management training programs; reforming probation policies; and improving employee and management evaluation processes. The Administration will also review the state’s processes and policies with the goal to eliminate antiquated, unnecessary, and/or duplicative processes and procedures and streamline overly onerous and bureaucratic ones.”
The budget promises that employee groups and the Legislature will be consulted as this reform effort progresses. We have been told that there will be working groups and that employee representatives will be invited to participate.
State Employee Position Increases
The budget proposes the creation of an additional 2,303 state positions in 2015-16. State employment is projected to increase from 221,532 to 223,835 employees. Here is a rundown on some of the new positions outlined in the budget summary:
Department of Public Health
Additional $21.8 million in special funds and 237 positions to meet mandated state and federal licensing and certification workload and implement quality improvement projects within the Licensing and Certification Program.
Department of State Hospitals
Additional $3.2 million General Fund and 14.4 limited-term positions to support a new involuntary medication authorization process for the Not Guilty by Reason of Insanity commitments in the state hospitals.
Additional $8.6 million General Fund and 75.1 positions to activate an additional 55 beds at Atascadero State Hospital.
Additional $8.7 million General Fund and 74.6 positions to activate 50 beds at Coalinga State Hospital to treat Coleman patients (currently treated at Atascadero), and use the vacated beds at Atascadero for IST commitments.
Department of Developmental Services
Increase of $9.2 million General Fund and 92.3 positions in 2014‑15 and $18.1 million General Fund and 184.5 positions in 2015‑16 to increase the Porterville Secure Treatment Program by 32 beds by the end of 2014‑15. The new beds are needed to accommodate the increasing number of clients who need to be restored to competency in order to stand trial.
Additional $21.4 million ($11.6 million General Fund) and 179.5 positions for costs related to the ongoing implementation of Program Improvement Plans at the Sonoma, Fairview, and Porterville Developmental Centers.
Department of Social Services
Additional $3 million General Fund and 28.5 positions to address a backlog of complaint cases and expand training and technical assistance in the Community Care Licensing program.
Includes the $76.4 million annually required to help add 715 positions at the California Health Care Facility to comply with staffing requirements ordered by the federal receiver.
Department of Transportation
Increase of $6.6 million, 20 traffic operations positions and 44 maintenance positions to be used to maintain and improve existing transportation management system elements and communication links on the state highway system.
Increase of $3.4 million and 25 project initiation document positions to support an additional $800 million in various state and local transportation work.
Department of Toxics Substances Control
Increase of $1.6 million Hazardous Waste Control Account and 16 positions to improve the effectiveness and timeliness of the permitting process and reduce the backlog of permit applications.
Increase of $840,000 Toxic Substances Control Account and 6 positions to support pilot projects that address hazardous wastes generated in significant quantities, posing the most significant public risks, and that disproportionately affect disadvantaged communities.
Employment Development Department
Includes 238.5 new positions to continue service improvements in multiple programs.
Department of Industrial Relations
Increase of $4.4 million Elevator Safety Account and 27.5 positions to meet annual elevator inspection requirements.
Increase of $4.6 million Occupational Safety and Health Fund to phase in 44 positions and perform nearly 1,400 additional workplace health and safety enforcement inspections each year.
The Governor’s complete budget summary and draft budget can be found here: www.ebudget.ca.gov