#1 Develop a Complete and Accurate Understanding of Public Agency Cost-Drivers and Ability to Pay: First, public agencies must be honest about and fully understand the nature of their cost increases, particularly those which pertain to public employee salary and benefit costs over the short, medium and long-term.
This is the first and most important step, and really drives everything that happens in collective bargaining. Your public agency must first understand its cost-drivers and its ability to fund these cost drivers. Failing to come to terms with this financial context, or having a complete and accurate understanding of these factors will lead to certain failure in collective bargaining.
#2 Be Honest Regarding the Extent of Projected Cost Increases, Particularly Health and Pension Costs and Unfunded Liabilities: Most public agencies and elected officials fail to understand the nature to which public employee health and pension costs are reframing collective bargaining negotiations before both parties even get to the table.
It is not uncommon for public employee benefit costs to be increasing at 10-20% per year even before raises or COLAs are considered. Furthermore, adding raises or COLAs can serve to compound the problem and place public agencies on a path where public employee wage and benefit costs will never be brought back into line with what the agency can afford.
#3 Consider Adopting a Zero-Sum Economic Policy: As mentioned above, it is not uncommon for public employee benefit costs to be increasing at 10-20% or more per year, even in the absence of raises or other economic enhancements. Public agencies need to strongly consider an economic strategy, which I call “zero-sum economic policy,” that accounts for these built-in increases in public employee compensation, and factors these increases into an equation of what is reasonable to provide in this context.
Moreover, once these costs are built into the equation it is not uncommon for a public agency to realize that its public employees are already getting built in benefit increases in terms of the value of their benefit package. If these benefits are increasing at 10% per year, and wages are increased at 3% per year—that’s equal to a 13% increase in compensation, not a 3% increase in compensation. (note: public employees may not receive extra benefits from many of these costs increases, and are not even likely aware of them, but they do significantly increase public employee costs and an agency’s bottom line)
Many public agencies are failing to accurately assess their baseline increases in public employee costs before examining their ability to fund raises or COLAs.
#4 Do Not Expect Positive Results From Doing Things The Way You Have Always Done Them: Public agencies need to realize that we are operating in a new era in collective bargaining in California. The public sector unions are highly sophisticated and extremely effective at winning both at the bargaining table as well as gaining the upper hand in the public’s eye through the use of effective organizing campaigns.
The unions would prefer public agencies to come into collective bargaining ill-prepared and use internal staff to represent the agency at the bargaining table, as opposed to an outside negotiator. This is a sure fire way to fail before bargaining even gets underway due to the conflicts of interest cited in a previous column, click here for link to report.
Public agencies need to strongly consider hiring an outside negotiating expert, and retaining the services of other professionals to help them win at the bargaining table. Internal staff and analysts will simply get outmatched at the bargaining table, particularly when coupled with a strong union public contract campaign.
The environment in which collective bargaining is very different now from a few years ago, given the limited revenue growth we are seeing from public revenues and the steep public employee cost increases, particularly with regard to pension and health benefits.
#5 Do Not Be Afraid to Be Called “Anti-Labor,” Do What is Right for Your Public Agency: Public sector unions are quick to label anyone who does not bow to their full list of demands as “anti-labor.” The reality is that almost anything that a public agency does which will significantly improve its financial position at the expense of public sector employees could be potentially called “anti-labor.” Being pro-taxpayer and pro-government necessitates that public officials and public managers make tough, and sometimes unpopular, decisions about what is right for the future of their public agency. Failing to do so, only puts the problem off until it gets worse, and could end up threatening the very financial stability of the whole agency and its ability to serve the public and retain its workforce.
David Kersten is an independent expert in public sector labor policy and bargaining and has been closely involved in dozens of major labor negotiations over the past decade.