Thanks to federal and state laws, public employee unions have enormous power over the pension benefits paid by local governments. This week, a hearing officer in Los Angeles has proposed giving city unions even more say, requiring their approval before the City Council changes pension benefits for future employees.
As my colleagues David Zahniser and Emily Alpert Reyes reported Tuesday, Luella Nelson, the hearing officer, found that the city had violated its agreements with a host of local unions when it created a new, less-generous pension tier in 2012 for workers hired after July 1, 2013. Under those agreements, Nelson wrote, the city had to "meet and confer" — that is, negotiate — with unions before making any changes to pension plans for union members, even those who aren't yet in the union because they haven't been hired.
Nelson's written opinion is merely advisory. The city's Employee Relations Board will make the final call next month, and City Atty. Mike Feuer will continue making the case (which Nelson found unpersuasive) that workers who haven't been hired aren't "employees" covered by existing collective bargaining agreements.
That definitional question is the key to the unions' claim. How far does the word "employee" stretch?
From the union's point of view, employees aren't people so much as they are positions, all of which they represent regardless of who is in them. From the city's point of view, the union has bargaining power only for its membership, and someone who hasn't been hired is, by definition, not a member.
Nelson relied on National Labor Relations Board rulings to declare "frivolous" the distinction the city was drawing between current and future employees. But the implications of her proposed ruling are huge. If it's adopted by the board, city unions will have veto power over any changes the city might want — or need — to make to worker pensions until the end of time.
Union leaders would argue, no doubt, that that's appropriate. What's the point of collective bargaining if the employer can unilaterally set new terms for successive generations of workers? But I'm receptive to the city's argument that unions represent their members; if the city sets terms for new employees that are unattractive, people don't have to take those jobs. It's very different from the position current workers are in and the protection they may need as they negotiate contracts.
One thing that remains true is that new pension plans for city workers can have lower benefits than the plans for current workers. By contrast, a city can't reduce any specific pension benefit for current workers, even if the union agrees, unless it provides a new benefit of equal value. A city that provides an overly generous pension can negotiate for larger worker contributions to the fund, but that's about the only relief available.
If Nelson's ruling holds, cities will convince unions that less-generous pensions for future employees are crucial to stopping the cost of workers' benefits from gobbling up an ever-larger portion of the budget, even though the savings take years to become meaningful. Otherwise, there will be less money not just for street repairs and fire trucks but also for wages, which means smaller raises and more layoffs.
That's exactly what's happening in the City of Angels. As Zahniser and Reyes put it: "Public employee pension costs have created huge stress on the city's budget in recent years. In departments supervised by the council, contributions for civilian employee retirement costs were expected to climb from $260 million in 2005 to $410 million in the fiscal year that starts July 1, according to City Administrative Officer Miguel Santana, the top budget official."
One of the great things about a pension plan is that once the benefits have been offered, they can't be taken away. Unfortunately, that also means that if a city adopts a badly designed pension plan, it's stuck with it for all of its current employees. With Nelson's proposed decision, there's a chance Los Angeles could be stuck with its pre-2013 pensions for future employees too — unless its unions recognize that they have a long-term interest in healthy city finances.