NEWS

Excluded Employee Compensation Questions Remain Even as the Legislature Prepares to Pass a State Budget

The State Budget continues to evolve as the Legislature and Governor continue negotiations, which include the details of possible pay raises along with reductions in state employee compensation.

With a legislative rule that bills must be in print for 72 hours, the Legislature on June 10, 2020 released the latest version of the State Budget in Senate Bill 808. The Legislature is expected to pass this version of the State Budget with votes on the June 15 constitutional deadline. What it means for excluded employee compensation is far from clear, and additional legislative action impacting state employee compensation outside the main State Budget bill remains likley.

Senate Bill 808 includes funding for the previously planned July 1, 2020 excluded employee salary increases and funding for raises included in bargaining unit labor contracts. While this is potentially good news, the possibility remains that the Governor could use his budget authority to remove this funding from the State Budget and not provide those July 1, 2020 pay raises to excluded employees.

With Senate Bill 808, the Legislature also expects that employee compensation will be reduced by approximately ten percent, to be achieved through collective bargaining and reductions for excluded employees. If those compensation decreases and savings are not in place by July 1, 2020, the Legislature “expects to pursue alternative legislative options” to authorize those reductions, presumably through a personal leave program or furloughs for excluded employees.

Also of concern, if additional federal funding is not obtained by September 1, 2020, trigger language may authorize additional employee compensation reductions beginning October 1, 2020. The details and intent of this language are uncertain.

With this framework, a lot will depend on collective bargaining and agreements to reduce compensation and the Governor’s action regarding the possible July 1, 2020 general salary increases and special salary adjustments.

ACSS’ legislative advocates and legal team are continuing to advocate for the interests of excluded employees. As “budget trailer bills” and bills approving any agreements reached by rank-and-file organizations are presented to the legislature for approval and funding, ACSS will continue its aggressive advocacy for excluded employees. While we await more clarity from the adoption of the final State Budget and any impacts from collective bargaining, ACSS will also continue advocacy with CalHR over salaries and the details of any temporary reductions to excluded employee compensation.

Legislature’s Version of the State Budget Avoids Suspending Salary Increases and Delays Possible Salary Reductions

Legislative leadership has announced agreement between the Senate and Assembly on a legislative version of the 2020-2021 State Budget. The Legislature has proposed its own version of the budget modifying the Governor’s proposed May Revision budget. While there is still a long way to go before a final state budget agreement is reached, the “Legislature’s Version” of the budget differs from the Governor’s May Revision in significant ways concerning state employee compensation.

The Governor’s May Revision budget proposal would suspend all planned pay raises for July 1, 2020 and would also temporarily reduce employee compensation by 10 percent. The temporary cuts would be “triggered off” if federal money is received by the state.

The Legislature’s Version instead assumes that congress will pass an economic stimulus package, noting there is “growing confidence” that federal funds will be received. If the federal funds are not received by September 1, 2020, trigger cuts for employee compensation would be authorized effective October 1, 2020. The details of the proposed employee compensation reduction authority are not yet published in bill form.

The Legislature’s Version notes that it “excludes proposed savings related to employee pay and suspending employee pay increases.” If this version of the budget were adopted, it would not authorize the Administration to furlough state employees or cut pay. It is uncertain whether the Governor could (or would) take action through the state budget process to suspend the planned July 1, 2020 salary increases. The Legislature also notes that state employee unions are being asked to agree to cost saving reductions through the collective bargaining process. The results of collective bargaining could also impact compensation for related excluded employees.

The Legislature’s Version of the state budget has not been published in bill form. The details of the employee compensation sections of the budget will matter. Negotiations between the Legislature and the Governor over the treatment of state employee compensation will continue with a budget resolution expected by the June 15 constitutional deadline. ACSS’ legislative advocates will be there to continue to protect the interests of excluded employees.

ACSS Seeks to Mitigate Impact of Employee Compensation Reduction Proposals

As the state budget moves forward in the next few weeks, it is very likely that excluded employee compensation reductions and a delay of anticipated salary increases will be part of the budget solutions.

While ACSS cannot collectively bargain over these proposed reductions, the Administration’s planned salary reductions cannot be achieved without legislative approval. ACSS is therefore taking active steps to mitigate the impact of reductions through the legislative process and with CalHR. Mitigating the reductions includes:

• Avoid Straight Cuts in Pay 
  If salary has to be reduced, it should be through a temporary furlough or personal leave program that provides leave in exchange for the salary reduction and does not change salary ranges, nor negatively impact retirement calculations.
  
  
• Flexibility in a Furlough Program 
  If excluded employees are furloughed, there must be flexibility for supervisors and managers to continue meeting the workload with reduced staff. ACSS is requesting that CalHR implement the program in a way that allows maximum flexibility for excluded employees by not requiring the leave be used in the same month it is accrued.
  
  
• Suspend Employee Contributions to Pre-fund Retiree Health Care 
  Each month excluded employees have a deduction labeled “CERBT” which stands for California Employers’ Retiree Benefit Trust. This deduction is to pay the employee share of pre-funding retiree health care. Most ACSS members are scheduled to pay between 3.5 to 4.5 percent of salary per month. Suspending the payment for at least the duration of the salary reductions will mitigate the reduction in take home salary with no impact on eligibility for health care benefits in retirement.
  
  
• Health Care Affordability Payment 
  SEIU Local 1000 negotiated a $260 per month payment for employees enrolled in a health plan. ACSS asked that this payment be provided to all excluded employees. The current proposal is to allow the $260 per month payment to go forward July 1, 2020 for both SEIU rank-and-file employees and related excluded employees.
  
  For some ACSS members, suspending the retiree health care deduction and providing the $260 per month would almost completely offset the salary reduction of a two-day furlough. For others, getting one or both would partially offset the temporary salary reduction.
  
  
• Federal Trigger Language 
  The Administration is proposing that the salary reduction authority would end if federal money is received. While this is positive, the details have not been developed. ACSS will push for language to directly address the impact of federal funding on excluded employees.
  
  
• Salary Adjustments 
  Most ACSS members were scheduled for general salary increases and thousands anticipated special salary adjustments (SSA) July 1, 2020. The Administration is proposing no increases. While the treatment of delaying these raises will certainly be impacted by rank-and-file bargaining, it needs to be acknowledged that SSAs were planned to address recruitment and retention issues. Delaying these increases, and exacerbating recruitment and retention problems by cutting pay, will almost certainly lead to more attrition through retirement. The SSAs need to be paid as soon as possible to address likely retention issues.

ACSS is aware that other groups have proposed retirement incentives as a cost saving measure and that nothing in the Administration’s current proposals address incentives for those excluded employees providing front line COVID-19 response. If there is room to advocate on these issues, ACSS will do so through the state budget deliberative process and with CalHR.

We will keep you apprised as these significant budget decisions and proposed reductions move forward.

CA Budget Deficit a Direct Result of Coronavirus Pandemic

Governor Gavin Newsom appeared on “State of the Union”, a televised CNN program, on Sunday to discuss the COVID-19 Pandemic and the effect on the California economy. During the interview, Governor Newsom said that “the nearly $54 billion budget deficit the state is facing is a direct result of the impact from the coronavirus pandemic and not because of existing financial troubles.”

In January, Newsom projected a surplus after paying off 100% of inherited debts and pay down long-term financial obligations. However, last week Newsom revealed a revised budget deficit of $54 billion, affecting state worker’s salaries and many other state-funded programs.

Newsom, along with other western states, has asked Congress to send more financial aid to state governments. “We are not looking for charity. … It is incumbent upon the federal government to help support these states through difficult times.

Click here to read the full CNN article.

State Budget Deficit Leads to Employee Compensation Reduction Proposals as Part of the May Revise

In response to a state revenue reduction of over 30 percent, the Administration is proposing a number of costs savings measures including reductions in employee compensation of 10% from June 2020 levels and proposed reductions in state operations costs (office space, leases, travel, and procurement).

The plans were outlined to labor representatives yesterday in connection with today’s release of the Governor’s “May Revision” to the state budget proposal. CalHR Director Eraina Ortega and Deputy Director Paul Starkey held a call this morning with ACSS Executive Director Rocco Paternoster and ACSS attorney Gerald James to discuss the proposals and impacts for excluded employees.

As part of the budget process, the Administration is seeking to “pull back” all salary increases (general salary increases and special salary adjustments) scheduled for July 1, 2020 for excluded employees and rank-and-file employees. They will also seek authority to reduce employee compensation by 10% effective July 1, 2020.

CalHR will attempt to negotiate the 10% reductions with each rank-and-file bargaining unit. If agreements cannot be reached with those units, the authority sought from the Legislature would allow CalHR to impose two days of unpaid furloughs per month, which would result in a 9.24% salary reduction, on state employees effective July 1, 2020. As of this morning, CalHR intends to link employee compensation reductions for supervisors and managers with their related bargaining units.

To mitigate the impact of any compensation reductions, the state is also considering a pause on state employees paying to prefund retiree healthcare. If passed by the Legislature, relief from excluded employees paying this “OPEB” contribution would range from 4.6% of salary to 1.4% of salary (for the highest paid state employees). ACSS realizes this does not come near offsetting the proposed reduction in take home pay, but it is a helpful mitigating step.

The proposed reductions are based on current economic projections from the Administration. The Legislature makes its own economic projections. The budget authority sought by the Administration will include a provision that if additional federal funding is received (related to the pandemic), these employee compensation reductions can be revisited.

While the employee compensation reduction plan will likely be impacted by bargaining conducted by the rank-and-file bargaining units, ACSS has already begun discussions with CalHR over the details related to excluded employees. ACSS will also seek to ensure that the authority to reduce compensation provided by the Legislature to CalHR is done in a manner that protects the interests of excluded employees as best as possible by ensuing compensation decreases are equitable. We will keep you apprised as these significant budget decisions and proposed reductions move forward.

California Supreme Court Hears Argument in Local Pension Case

The California Supreme Court held oral argument on May 5, 2020 in Alameda County Deputy Sheriff's Association v. Alameda County Employees’ Retirement Association. This is one of the two significant pension cases pending before the state high court concerning pension cuts for local public employees following the Public Employees’ Pension Reform Act of 2013 (PEPRA).

Although it is a local pension case, the legal issues argued may impact the long standing “California Rule.” Since 1955, the courts have held under the California Rule that once pension benefits are granted to a public employee, they are vested and cannot be modified for the duration of an employee’s career. ACSS joined in the requests for the high court to hear these types of pension cases to preserve the long-standing California Rule to protect from the possibility of your pension being changed by future legislation or through an initiative measure.

In Alameda, the Deputy Sheriff's union and others challenged the elimination of overtime pay, on-call pay, call-back pay, vacation and sick leave sold back, recruitment bonuses, and other items from pension calculations. The lower appellate court had ruled that many of these pension cuts for current employees were legal, but ruled some pension benefits required further review under the California Rule. Allowing the pension reductions for current employees is a significant deviation from the California Rule. Both sides had asked the high court to review the case.

At oral argument, the county retirement boards argued that including these “pension spiking” items in a pension calculation was never lawful and that employees had no reasonable expectation that they would be included in a pension calculation for future service. The unions argued that this deferred compensation cannot be changed for existing employees during their public employee careers.

It is unclear whether the Supreme Court’s decision in this case will be decided on broad constitutional grounds with possible impacts on the California Rule and implications for all public employees and their pensions, or will be decided on a narrow basis, affecting only the parties to the litigation or local employers and employees. The matter was taken under submission with a decision expected in the next month or two.

ACSS will continue to keep you apprised of important pension issues and inform you of actions taken to protect the interests of excluded state employees.

Department of Finance Implements Cost Savings Measures – Leave Buy Back Cancelled

In response to decreased state revenue and increased costs associated with the COVID-19 pandemic, the Department of Finance issued a Budget Letter on April 30, 2020 calling for current fiscal year expenditure reductions. Effective immediately, the Budget Letter requires state agencies and departments to take the following actions:

• Leave Buy-Back — Cancellation of the annual leave buy back of accumulated vacation or annual leave in 2019-20
• New Goods and Services Contracts — Bans purchases or service contracts unless they directly support teleworking strategies or respond to COVID-19 (including PPE and hand sanitizer), or meet other time-sensitive critical needs
• Travel — Continues the non-essential travel ban for in state and out-of-state travel
• Hiring — Advises departments to use discretion when filling vacancies to maintain flexibility in an environment of severely constrained resources

We know many ACSS members count on leave-cash out to reduce leave balances below the cap and provide additional income. While it is extremely disappointing the program will not be offered this year, especially for those working long hours responding to the pandemic, the Administration has complete discretion in authorizing the program on an annual basis.

In mid-May, the Governor will unveil his “May Revise” to the proposed state budget for the fiscal year beginning July 1, 2020. While the Governor has already indicated the revision to the budget will not match the blueprint he laid out in January, it will be the first glimpse at how the Governor intends to address declining state revenues and unanticipated costs.

With state tax filings and revenues delayed through July 15, significant financial uncertainty will remain. Even though a state budget will be adopted prior to the July 1 start of the fiscal year, the Governor and Legislature are likely to continue state budget deliberations and actions beyond this date.

Through all of these state budget deliberations, ACSS will continue to advocate for equitable salaries and benefits for excluded employees with CalHR and to lobby the Legislature to protect your employment interests.

CalTrans Provides Reimbursement for Face Masks

The Department of Transportation (Caltrans) has notified the Association of California State Supervisors (ACSS) that it is issuing a new policy, (Face Covering Compensation, TIP 20-05) that will allow excluded employees deemed essential to receive reimbursement for the purchase of a cloth based face-coverings.

This is a one-time reimbursement reimbursable through a Travel Expense Claim (TEC) form FA-0302. Reimbursements for amounts of $5.00 or less do not require a receipt. For claims greater than $5.00 a receipt will be required. A maximum reimbursement amount has been set at $10.00.

If you have any questions or concerns with regards to this policy please reach out to ACSS Member Outreach Coordinator Charlotte Hoar at choar@acss.org.

CalHR Revises State Policy to Exempt Health Care Providers and Emergency Responders from the Families First Coronavirus Response Act

The Department of Human Resources (CalHR) has revised the state policy implementing the federal government’s Families First Coronavirus Response Act. The federal act allows exemptions for broadly defined categories of health care providers and emergency responders.

Although the initial policy issued by CalHR on April 1, 2020 did not exempt any state employees, the revised policy announced on April 11 provides that because health care providers and emergency responders are critical to the operations of state departments, the state will exempt certain classifications of employees from being eligible for the federal act’s additional emergency sick leave and family care leave provisions.

The state will allow exemptions of employees in classifications meeting the federal Department of Labor definitions which include, among others, health care providers and those needed to provide comfort and nutrition of patients, law enforcement, firefighters, correctional institution personnel, emergency management personnel, child welfare workers, and public works personnel.

State departments with employees meeting the federal definitions are to send their exemptions to CalHR. The Department of Corrections and Rehabilitation, Department of State Hospitals, Department of Parks and Recreation and California Highway Patrol have already sent hundreds of classifications to CalHR. More exemption requests from other state departments are expected as this policy is implemented. CalHR will maintain a list of classifications exempted from the additional emergency sick leave and family care leave on the CalHR website.

While it is not surprising that the state has modified the policy to reflect the crucial role of these state employees in providing the state’s pandemic response, this front line role deserves to be recognized equitably through additional compensation or time off when the situation allows. ACSS will request CalHR provide additional compensation or time off.

As the CalHR memo states, although not eligible for the additional Covid-19 related emergency sick leave or family leave, employees may still be eligible for ATO or other leave under CalHR’s previous guidance.

Click here to review the revised CalHR Families First Coronavirus Response Act Policy.

Click here to go directly to the CalHR list of classifications exempted from the FFCRA by Department.

CalHR Implements the “Federal Families First Coronavirus Response Act” Emergency Sick Leave and FMLA Provisions

The Department of Human Resources (CalHR) has issued a policy implementing the federal government’s Families First Coronavirus Response Act. The policy reflects an employee’s right to up to 80 hours of additional emergency sick leave related to COVID-19 and up to 12 weeks of leave to provide care for a child whose school or daycare is closed because of COVID-19.

The Emergency Paid Sick Leave Act is effective April 1, 2020 and provides up to two weeks of emergency paid sick leave to be used under certain criteria including being subject to a quarantine or isolation order, advised by a health care provider to self-quarantine, having symptoms and seeking a COVID-19 diagnosis, caring for another who is quarantined, or caring for a child whose school or daycare is closed. CalHR has confirmed to ACSS that this emergency sick leave is in addition to an employee’s regular sick leave or annual leave balance.

Also effective April 1, 2020, the Emergency Family and Medical Leave Expansion Act allows up to 12 workweeks of leave to provide care for a child whose school or daycare is closed because of COVID-19. The first two weeks are unpaid (although the sick leave mentioned above may be used for this time). Weeks 3 through 12 are paid at 2/3 of salary, up to $200 per day, which may be supplemented with leave credits.

Agencies and Departments are expected to release this information and specific instructions on requesting and using these new leave provisions.

Click here to download the new Families First Coronavirus Response Act (2127) Section on the CalHR website.

Click here to download CalHR’s April 6, 2020 FAQs – Families First Coronavirus Act.