California State Workers Facing Layoffs

Los Angeles Times, October 19, 2003

Davis signed off on $1.1 billion in payroll cuts, but he has made few.
Thousands could lose jobs by Christmas if Schwarzenegger acts.

By Jeffrey L. Rabin Times Staff Writer

It's one more item on the list of state budget headaches that Arnold
Schwarzenegger is inheriting: To keep the current year's budget in
balance, the new governor may need to lay off thousands of state
workers - just in time for Christmas.

That prospect exists because the current budget, which Gov. Gray Davis
signed in August, counts on saving $1.1 billion by reducing state
payroll costs. The savings were supposed to come from a combination of
layoffs, leaving vacant positions open and renegotiating union
contracts.

During the summer, the Davis administration notified about 12,000
state workers that they could be laid off. The state has approximately
200,000 employees, not including people employed by the state
university systems whose jobs are not covered by the
spending-reduction plan.

Davis, who was seeking support from state workers and their unions in
the recall campaign, did not follow through on the layoffs. So far,
fewer than 500 workers actually have been let go, and administration
officials agree that the governor has little incentive to lay off
anyone else in his remaining weeks on the job.

"I don't think there is going to be much of that for the next month,"
said state Personnel Director Marty Morgenstern.

That leaves Schwarzenegger with the tough choice of whether to accept
a billion-dollar hole in the budget or to terminate thousands of state
workers, a move that could be politically difficult and harm
California's economy by increasing unemployment.

Schwarzenegger is to be sworn in as governor in mid-November. If he
issues the required 30-day notices of layoffs right away, workers will
lose their jobs during the holiday season. If he delays, more workers
will have to be cut to accumulate the required savings by June 30, the
end of the fiscal year. Already, a quarter of the fiscal year is gone,
and the state is nowhere near its target for payroll reductions.

"There are a number of issues related to the state budget that the
governor-elect is going to have to address," said H.D. Palmer, a
spokesman for Schwarzenegger. "This will be one of them."

Palmer noted that the budget passed by the Legislature and signed by
the governor last summer is law unless it is changed. It requires a
reduction in state spending on its workforce.

State Budget Director Steve Peace said Friday that most departments of
state government have prepared spending reduction plans that he has
approved. But the Department of Personnel Administration also must
review layoff plans before the final 30-day notices can go out to
employees. Morgenstern said most decisions on whether to proceed with
the layoffs would fall to the next administration.

"If he came in here and continued with our procedures, some of these
layoff could occur during the holidays," Morgenstern said.

During the campaign, Schwarzenegger said one way he would cut spending
would be to renegotiate pay and benefit packages for state workers.
One of the planks in his 10-point plan for his first 100 days in
office calls for him to "renegotiate state employee union contracts to
get better deal for taxpayers." He has provided no details.

Jim Hard, director of the California State Employees Assn.'s civil
service division, said the new two-year contract, which expires June
30, 2005, does not allow Schwarzenegger to unilaterally reopen
negotiations with the union, which represents more than 90,000 state
workers. Under the contract, the union - not the governor - has that
right, he said, adding that the union would agree to do so only if it
benefits the workers.

But Schwarzenegger may have some leverage in the decision: Reopening
negotiations to cut pay and benefits could mean fewer layoffs.

The prospect of layoffs has created "tremendous concern" among state
workers, Hard said. "The issue of layoffs is our No. 1 issue," he
said. "He's going to come in and have to deal with it. It's very bad
for our membership. We're very, very concerned."

Hard said he had sent a letter of congratulation to Schwarzenegger
after the election and had offered to discuss ways to reduce the
number of layoffs. To date, the union has not received a response from
the governor-elect's transition staff. The association is affiliated
with the Service Employees International Union, one of the biggest
supporters of Davis during the recall campaign.

Unlike Davis, who drew his major financial support during the recall
from unions, Schwarzenegger refused to accept donations from organized
labor, noting that, as governor, he would have to negotiate with
unions that represent state workers.

Economists who study California's labor force also have expressed
worries about the possible effect of layoffs. The UCLA Anderson
Forecast of the state economy has noted that concentrated layoffs of
large numbers of state and local government employees could slow
economic growth.

That, in turn, could reduce state revenues, worsening the budget
picture.

Hard said officials of the State Employees Assn. assume that there
will not be 12,000 layoffs. But he said the ultimate number of state
workers who lose their jobs is likely to be "significantly larger than
500."

The effort to reduce the state payroll got seriously underway in May,
when Davis called for cutting $800 million in spending on state
employee salaries as part of an overall effort to close what was then
a $38-billion hole in the budget for this year. The Legislature later
increased the amount of savings from state employee salaries to $1.1
billion.

Other steps that went into closing the budget gap included borrowing
money by selling bonds, tripling the car tax, changing accounting
procedures and cutting some spending. Of those measures, the bond
sales are being challenged in court, and Schwarzenegger has said he
wants to roll back the car-tax increase - a step that would create a
$4-billion budget hole.

To meet the target for payroll savings while avoiding layoffs, the
Davis administration sought contract concessions from state employee
unions. But that effort succeeded in saving only an estimated $185
million. As a result, if the $1.1-billion goal is to be met, layoffs
of employees will have to be the main tool, according to state budget
officials.

Morgenstern said court orders and staffing requirements restrict the
state's ability to eliminate some jobs. Because of that, the chances
of being laid off vary from department to department, he said.

Beyond the legal restrictions, budget cutters face political
constraints as well. For instance, of the 12,000 people who were
notified this summer that their jobs could be at risk, more than 3,000
work for the state prison system, which employs about 15% of the
state's employees.

Laying off workers in the prisons could require releasing some
inmates, corrections department officials have warned.

"If I were a nurse in a state prison, I would be fairly confident they
weren't going to lay me off," Morgenstern said. But, he added, if he
were an employee in an area that is "not an essential service of
government, I would be fairly uncomfortable."