MOU Fiscal Analysis: Bargaining Unit 19 (Health and Social Services/Professional)

MOU Fiscal Analysis: Bargaining Unit 19 (Health and Social Services/Professional) Translate Our Website This Google ™ translation feature provided on the Legislative Analyst's Office (LAO) website is for informational purposes only. The LAO is unable to guarantee the accuracy of this translation and is therefore not liable for any inaccurate information resulting from the translation application tool. 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Unit 19 consists of roughly 5,600 full-time equivalent (FTE) state employees who provide evaluations and assessments of client counseling and consultation or client follow-up service of a health, social, or employment nature. Nearly 60 percent of Unit 19 members work for either the California Department of Corrections and Rehabilitation (CDCR) or Department of State Hospitals (DSH). Unit 19 s current members are represented by the American Federation of State, County, and Municipal Employees ( Local 2620). The administration posted on its website the agreement , a summary of the agreement , and a summary of the administration s estimate of the agreement s fiscal effects . (Our State Workforce webpages include background information on the collective bargaining process, a description of this and other bargaining units, and our analyses of agreements proposed in the past.) Under state law, a tentative agreement does not go into effect as the MOU for a bargaining unit unless it is ratified by both the Legislature and union membership. Major Provisions Term. The agreement would be in effect from July 2, 2023 through June 30, 2025. This means that the agreement would be in effect for two fiscal years: 2023 24 and 2024 25. This is consistent with our standing recommendation that the Legislature only approve agreements with terms of one or two years in order to maintain flexibility to respond to changing economic conditions. Provisions Related to Pay General Salary Increases (GSIs) for All. The agreement would provide two GSIs. A GSI provides the same salary increase to all employees represented by the bargaining unit. 2023 24 GSI: 3 Percent. Effective July 1, 2023, all Unit 19 employees would receive a 3 percent salary increase. 2024 25 GSI: 2.5 Percent. Effective July 1, 2024, all Unit 19 employees would receive a 2.5 percent salary increase. 2023 24 Top Step Increases for Specified Classifications. Each classification has established salary ranges that determine how much an employee in that classification is paid. Typically, the salary range consists of steps and eligible employees receive merit salary adjustments each year as they advance to higher paid steps within the range until they reach the top step of the salary range. The proposed agreement would increase the top step of specified classifications salary ranges. Employees who have been at the top step of an eligible classification for at least a year would automatically receive the specified pay increase. The below top step pay increases would go into effect July 1, 2023. 10 Percent: Psychologist Classifications. The top step of specified Psychologist classifications would increase 10 percent. The administration indicates that 1,583 FTE employees work in one of these classifications and estimates that 76 percent of these employees are at the top step and eligible to receive the pay increase. Ranging From 2.65 Percent to 3 Percent: Clinical Social Worker Classifications. The top step of specified Clinical Social Worker classifications would be increased by a specified amount, ranging from 2.65 percent to 3 percent. The administration indicates that 2,325 FTE employees work in one of these classifications and estimates that 40 percent of these employees would be eligible to receive the pay increase. 2023 24 Special Salary Adjustments (SSAs) for Specified Classifications. An SSA increases all the pay steps within a classification s pay range and so benefits all employees who work in a specified classification. Effective either July 1, 2023 or August 2, 2023, the agreement would provide various classifications identified in provision 7.18 of the agreement (beginning on page 86 of the agreement ) a specified SSA ranging from 2.5 percent to 9.66 percent. Nearly 2,000 FTE employees would be eligible to receive one of these SSAs under the agreement. Additional Caseload Differential for Psychologists. Effective the first day of the pay period following ratification by both parties, but expiring June 30, 2025, psychologists would be compensated at their base salary hourly rate hour-for-hour for additional caseload responsibilities assigned to them beyond the normal psychologist caseload. These payments would not be considered compensation for retirement purposes. Retention Bonus for Specified Classifications. Existing Pay Differential 324 provides employees in specified psychologist classifications at CDCR and DSH $5,000 one-time payments after 3, 6, 9, 12, 24, 60, and 84 continuous months of employment. Under the existing pay differential, employees can receive up to $35,000 in payments over the course of the 84 months. The proposed agreement would amend the pay differential and add specified social worker classifications to be eligible for it. Under the amended pay differential, employees hired after the first day of the pay period following ratification by both parties would receive bonus payments equal to a specified percentage of base pay after every 12 consecutive months worked. Specifically, eligible employees would receive a payment equal to 1 percent of base salary after 12 months, 2 percent of base salary after 24 months, 3 percent of base salary after 36 months, 4 percent of base salary after 48 months, 5 percent of base salary after 60 months, 6 percent of base salary after 72 months, and 7 percent of base salary after 84 months. Existing employees who have not yet worked 84 consecutive months would be eligible to receive the next qualifying bonus. (The agreement provides the example that an employee with 62 consecutive months of service would be eligible for the 6 percent of base pay salary at 72 consecutive months worked.) Employees who have worked more than 84 consecutive months would not be eligible for any additional payment; however, the agreement would provide eligible employees who were hired prior to August 1, 2016 and who never received Pay Differential 324 a one-time $10,000 payment. These payments are not considered as compensation for purposes of retirement. Changes to Optometrist Classification, Including 69.46 Percent SSA. Currently, there is one authorized position in the Optometrist classification (Class Code 7971 ) at California Men s Colony. Effective the first day of the pay period following ratification by both parties, the agreement would (1) convert the salary range of the classification from a daily salary range to a monthly salary range and (2) provide an SSA of 69.46 percent to the classification. While there currently is one authorized position in this classification, the administration s fiscal estimates indicate that the administration proposes adding 10.5 additional positions in the classification. The administration notes that this increase in positions was determined using CDCR registry data. Monthly Pay Differentials for Specified Jobs. The agreement would provide to employees in specified Psychologist, Audiologist, and Dietitian classifications who work at Porterville Developmental Center a monthly payment of either $400 per month (in the case of Dietitians), $800 per month (in the case of unlicensed Psychologists), or $1,000 per month (in the case of Audiologists and Psychologists). The agreement also would provide Occupational Therapists who work for the California School for the Deaf (Riverside) a monthly payment equal to 10 percent of base pay. Lastly, the agreement would increase the monthly differential paid to employees who provide clinical supervision to unlicensed individuals from $100 to $500. Other Provisions. The agreement includes other provisions that affect employees pay. We do not summarize these provisions as they are numerous and have ongoing fiscal effects of less than $300,000 less than 0.3 percent of the ongoing annual increased costs resulting from the agreement. For a detailed discussion of these provisions and their individual costs, refer to the administration s summary of the agreement and its fiscal effect . Other Major Provisions Reduced Employee Pension Contributions to Align With PEPRA Standard. The Public Employees Pension Reform Act (PEPRA) established a standard, but not a requirement, that employees and the state each contribute one-half of the normal cost to fund employee pension benefits. The actual rates paid by state employees varies and has been established through the collective bargaining process. As this table from recent California Public Employees Retirement System Board meeting materials indicates, Unit 19 members pay among the highest state employee contribution rates. For example, Unit 19 miscellaneous members pay 10 percent of pay to fund the benefit when most other state employees in that pension tier pay 8 percent or 8.5 percent of pay. The proposed agreement would reduce Unit 19 members employee contribution rates towards their pension benefits by 0.5 percent of pay effective July 1, 2024 and again July 1, 2025. Effective July 1, 2026, similar to what has been adopted for other bargaining units, the employee contribution rate would be reevaluated each year to maintain the standard that employees pay one-half of normal cost. Specifically, if the actuarially determined blended total normal cost increases or decreases by more than 1 percent of pay, the employee contribution will increase or decrease to one-half of the actuarially determined blended total normal cost, rounded to the nearest quarter of 1 percent of pay. For reference, the total blended normal cost for State Miscellaneous is 17.6 percent of pay. LAO Assessment Administration s Fiscal Estimate Figure 1 Administration’s Fiscal Estimate of the Proposed Unit 19 Agreement (In Millions) Proposal Fiscal Year 2023 24 Fiscal Year 2024 25 Fiscal Year 2025 26 General Fund All Funds General Fund All Funds General Fund All Funds General Salary Increases $21.3 $25.0 $39.5 $46.5 $39.5 $46.5 Top Step Increases 25.0 25.3 25.0 25.3 25.0 25.3 Special Salary Adjustments (SSA) 12.2 14.1 12.5 14.6 12.5 14.6 Additional Caseload Differential for Psychologists 4.3 4.3 5.1 5.1 5.1 5.1 Pay Differential 324 Retention Bonus 7.7 7.7 2.0 2.0 2.0 2.0 Reduction to Employee Pension Contributions a — — 0.8 0.9 1.4 1.6 Change to Optometrist Classification and SSA 0.6 0.6 0.8 0.8 0.8 0.8 Monthly Pay Differentials for Specified Jobs 0.4 0.5 0.5 0.6 0.5 0.6 Other Provisions a 0.2 0.2 0.3 0.3 0.3 0.3 Totals $71.6 $77.7 $86.5 $96.1 $87.1 $96.8 a The administration’s estimates assume that a portion of these costs will not require additional appropriations. Agreement Would Increase Ongoing Annual Costs by Nearly $100 Million. If ratified, the proposed agreement would increase annual state costs by more than $96 million. 2023 24 Provisions Related to Pay Increases Represent 9 Percent of Current Unit 19 Payroll Costs. The state s salary and salary-driven benefit costs for Unit 19 members is about $834 million ($709 million from the General Fund). On a per FTE employee basis, this constitutes an average $148,000 per employee in salary and salary-driven benefit costs. The proposed agreement would increase Unit 19 compensation costs in 2023 24 by $77.7 million, 9.3 percent of Unit 19 payroll costs. By the end of the two-year agreement, ongoing annual costs would increase by the equivalent of 11.5 percent of current Unit 19 payroll costs to a per FTE employee cost of $165,000. Costs to Extend Provisions to Excluded Employees. The administration estimates that extending the economic provisions of the agreement to employees excluded from the collective bargaining process but associated with Unit 19 (primarily, Unit 19 managers and supervisors) would increase state costs in 2023 24 by $20 million ($19 million from the General Fund). Compensation Study 2021 Compensation Study Evaluated Six Occupations Representing 74 Percent of Unit 19 Jobs. The California Department of Human Resources (CalHR) produced the most recent compensation study of Unit 19 compensation in 2021. This study evaluated the compensation earned by six occupation groups represented by Unit 19: Clinical, Counseling, and School Psychologists (representing 25 percent of Unit 19 members); Healthcare Social Workers (representing 15 percent of Unit 19 members); Recreational Therapists (representing 11 percent of Unit 19 members); Rehabilitation Counselors (representing 10 percent of Unit 19 members); Pharmacists (representing 9 percent of Unit 19 members); and Dietitians and Nutritionists (representing 4 percent of Unit 19 members). The study compared the compensation earned by these employees who work for the state with compensation earned by employees in the same occupations who work for private sector, federal government, and local government employers. Study Found State Compensation Is Above Market for Two Occupations and Below Market for Four Occupations The compensation study found that the state s total compensation (salary and benefits) lagged the market in the case of two occupation groups: Pharmacists (found to lag the market by 13 percent) and Dietitians and Nutritionists (found to lag the market by 5 percent). Together, these occupation groups represent 24 state classifications and 13 percent of Unit 19 members. In the case of the remaining four Unit 19 occupation groups included in the study, CalHR found that the state compensation was higher than the market: Rehabilitation Counselors (found to lead the market by 19 percent); Recreational Therapists (found to lead the market by 19 percent); Clinical, Counseling, and School Psychologists (found to lead the market by 18 percent); and Healthcare Social Workers (found to lead the market by 15 percent). These four occupation groups include 17 Unit 19 classifications and represent 62 percent of Unit 19 members. Other Metrics Suggest Relative Compensation Not the Full Story. The compensation study includes some metrices that allude to possible workforce challenges other than compensation competitiveness. We discuss some of these metrics below. Vacancy Rates. If compensation alone were the primary factors affecting recruitment and retention, we would expect classifications in occupations that lead the market to have lower vacancy rates and classifications in occupations that lag the market to have higher vacancy rates. In the case of Unit 19, this expectation does not materialize. For example, although Pharmacists were found to have the greatest lag in compensation, it has a low vacancy rate of 10 percent much lower than the Unit 19 average of 18 percent. Similarly, although compensation for state Healthcare Social Workers was found to lead the market, it has a vacancy rate of 23 percent. Turnover Rates. If compensation alone were the primary factors affecting recruitment and retention, we would expect classifications in occupations that lead the market to have lower turnover rates especially resulting from voluntary separations and classifications in occupations that lag the market to have higher turnover rates. However, this is not the case for Unit 19. For example, Dietitians and Pharmacists both have voluntary separation rates lower than the Unit 19 average despite the two occupations being compensated below market. Further, voluntary separation rates for occupation groups that were found to be compensated above market are much higher than for the bargaining unit as a whole. Importantly, voluntary separations across Unit 19 are nearly twice the rate of the rest of the state workforce. This suggests that there might be significant challenges recruiting and retaining employees for the classifications represented by Unit 19. Provisions Related to Pay Rationale for SSAs Not Provided by Administration. Based on the turnover and vacancy rates, we think that the workforce challenges facing the state s recruitment and retention of employees for Unit 19 classifications likely are numerous and go beyond simple issues of compensation. For example, there appears to be significant variation in vacancy rate of Unit 19 positions by facility as illustrated by the fact that the vacancy rate of Unit 19 positions in 2022 at Napa State Hospital averaged 20 percent while the vacancy rate at California State Prison Corcoran was 42 percent. When asked to provide a justification for the various SSAs, the administration asserted that it does not discuss the rationale for bargaining decisions. As such, it is not clear to us what methodology, if any, was used by the administration and union to identify which classifications should receive higher SSAs than other classifications and why specific SSA levels were chosen. Optometrist Positions. The administration s fiscal estimates assume 10.5 new authorized Optometrist classification positions. It is unusual for an agreement to indicate a growth in position authority. The administration explained that it would request additional optometrist position authority if California Correctional Health Care Services determines that additional positions are needed. What is assumed in the administration s fiscal estimates is a very significant increase in the number of Optometrist positions as there currently is only one authorized position. If the administration intends to request 10.5 new positions, we would expect to see such a proposal be submitted to and approved by the Legislature before the administration filled these 10.5 assumed positions. We also note that the proposed salary increase for state Pptometrists is large; however, from a statewide budget perspective, the issue is minor as it is relatively few positions and the cost of the provision, estimated to be less than $800,00, is not major. LAO Recommendations Require Administration to Justify Compensation Increases. Nearly one-half of the ongoing costs for the proposed agreement would pay for SSAs or other compensation increases that benefit specific classifications. When budget proposals of far lesser value are submitted to the Legislature by the Governor during the budget process, the administration is expected to explain why a cost increase is necessary. Much of the budget conversations circle around identifying the problem intended to be addressed by a budget proposal and evaluating whether the proposal would address the identified problem satisfactorily. When it comes to bargaining agreements, however, the administration has not provided justification for why it and a bargaining unit think that a specific change in compensation is needed for one classification but not another. The compensation studies that the administration submits to the Legislature pursuant to state law do not always support the compensation increases that the administration and bargaining units propose. This leaves the Legislature with limited tools (and often with limited time) to assess whether proposed changes in compensation are warranted. Going forward, we recommend that the Legislature direct the administration to submit to the Legislature a justification for each economic provision of a proposed labor agreement that (1) identifies the problem being addressed by the provision and (2) explains how the provision addresses the problem. Subscribe | California State Legislature | Online Voter Registration | Privacy Policy | Accessibility Legislative Analyst's Office | The California Legislature's Nonpartisan Fiscal and Policy Advisor 925 L Street, Suite 1000 Sacramento, CA 95814 | (916) 445-4656