Legislative Analyst: Reject Governor’s Personnel Costs Plan

California state government has roughly 356,000 employees.

One-third work for the University of California or in the State University system.

Total state payroll is $24 billion.

Excluding university employees, some $10 billion in General Fund revenue – about 12 percent of the current year’s budget — is devoted to salaries, health benefits, pension contributions and other personnel costs.

Of that $10 billion in General Fund personnel costs, two-thirds is in the state prison system.

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Gov. Arnold Schwarzenegger’s proposals to boost state employee pension payments by 5 percent and lower personnel costs by at least another 5 percent should be rejected by lawmakers, the Legislative Analyst said January 27 in an assessment of the idea.

Shifting a higher pension burden on employees through legislation rather than collective bargaining might be illegal and will certainly be the subject of a lawsuit.

“Courts have repeatedly negated attempts to create substantial savings from altering pension payments for current employees without offering comparable offsetting benefits in exchange,” the analyst says.

Therefore, the analyst recommends, “in light of the other risky elements of the governor’s budget package and the need to pass a credible, balanced budget, we recommend the Legislature reject the administration’s pension contribution proposal.”

Schwarzenegger proposes saving $802 million — $450 million in the General Fund – through a ”workforce cap,” an unallocated cut in personnel costs generated by a 5 percent reduction in worker salaries. Most of the savings would come simply from state workers retiring and leaving job slots vacant.

But the analyst says the current budget already relies on major unallocated reductions.

“It’s unclear  … if and how departments would achieve these additional proposed reductions and, if they do achieve them, what state priorities will be stressed and which activities will be sacrificed.”

Additionally, authorizing unspecified cuts is an abdication of priority setting by the Legislature.

Nor does the GOP governor’s cost-cutting proposal consider the disproportionate effect it would have on the state’s prison system.

The analyst estimates the governor’s personnel costs proposal would reduce the Department of Corrections and Rehabilitation’s budget by $300 million. That does not include another $1.1 billion in corrections cost savings cChwarzenegger seeks. And, the analyst says, the department is still struggling to make the cuts it is required to this year.

Absent major changes in sentencing or the operation of state prisons, “we do not believe (the department) would be able to implement an unallocated reduction of this magnitude,” the analyst concludes.

“It is imperative that the Legislature consider the specific policies and operations of (the prison system) if it wants to reduce General Fund costs of this department’s workforce.

“Without specific changes in prison policies and operations, achieving savings through unallocated reductions … would prove illusory.”

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