To: JF Quinnelly who wrote (15210 ) 11/5/2003 4:32:39 AM From: LindyBill Respond to of 793696 This is of little interest to non Californians, but Weintraub puts together the kind of info that leaves the rest of the Reporters in the dust. I would cut the Universities/College system and tell the Administrators to do the cutting in overhead and Social Science departments. And all of the Education PHDs can go. A few less Sociology Grads will be no loss. Let them get technical Degrees. And will cut down on the left in the system. The teachers would be better off with a four year degree and OTJ experience. lindybill@ifIruledtheworld.com ____________________________________________ Cutting state payroll costs not as easy as it sounds By Daniel Weintraub -- Bee Columnist - (Published November 4, 2003) As Gov.-elect Arnold Schwarzenegger goes hunting for ways to balance the state budget, he is quickly going to discover that the "bureaucracy" his supporters love to hate is not the easy target they think it is. Most of what the state spends isn't in public employees but in transfer payments to schools, welfare moms, old people and doctors and hospitals caring for the poor. About $17 billion of the state's $100 billion budget is in payroll. Add $2 billion for employee and retiree health care and another $2 billion for pension costs, and about 20 percent of the budget goes toward people who work directly for the state. Still, that number has been rising. In 1998, when Gray Davis was elected governor, employee costs totaled less than $15 billion. If Schwarzenegger could simply roll back those costs to 1998 levels, he would save roughly half of what he needs to balance the budget. But that's a huge "if." To get there the new governor would have to navigate a difficult path through employee unions protecting recent gains and constituents fighting to keep services at their current levels. Consider one much discussed number: the state added 36,000 employees between 1998 and 2002. That sounds extravagant. But 24,000 of those new workers were in the University of California and the California State University systems, where enrollment has grown almost as fast as the payroll. While I would like to know how many of those new bodies are academics and how many are pushing paper in support jobs, I'd bet it would be almost impossible to get rid of many of them now without radically reducing the course offerings available to the thousands of new students who have poured onto college campuses in the past five years. The rest of the state payroll isn't quite as inaccessible to Schwarzenegger, but most of the actions taken by the Davis administration could not be undone without the cooperation of the public employee unions, which is unlikely. In 1999, Davis negotiated new contracts with most state employees, giving them 4 percent raises retroactive to July 1, 1999, and another 4 percent that took effect a year later. Then, in 2002, Davis signed new deals promising a 5 percent raise on July 1, 2003. To save money in the midst of the budget crisis, most of the unions recently agreed to defer that raise for one year. In exchange, Davis gave them an extra day off each month, effectively paying them the same amount to work 5 percent less than they did a year ago. Health care costs also have been rising. As recently as 2000, the state was paying about $800 million a year for employee health care and about $360 million to insure retirees and their dependents. This year, those costs are nearing a combined $2 billion. And the most recent contracts signed by Davis and the unions commit the state to paying 80 percent of health care premiums that are rising at double-digit rates every year. Finally, as these columns have well documented, pension costs for state employees are soaring. A 1999 deal that gave modest increases to most workers, an across-the-board raise to those already retired and big boosts for public safety employees added at least $500 million a year to the taxpayer contribution for retirement. A stumbling stock market, meanwhile, has reduced the size of the pension fund and put taxpayers on the hook for even bigger contributions. A few years ago, at the peak of the booming stock market, taxpayers were paying nothing into the pension fund. This year the tab was $2.1 billion. Next year it could approach $3 billion. Davis agreed as part of this year's budget deal to shave $1 billion in payroll costs through layoffs and salary reductions. His administration claims this has been achieved. But past promises of administrative savings haven't always materialized. And it will be months before we know if the cuts to which Davis attests are real. Schwarzenegger has pledged to renegotiate the employee contracts to try to shave still more from the state's payroll costs. But he might have better luck focusing on the future rather than the past. The state's budget shortfall isn't just a measure of today's spending compared to revenues. It's a reflection of projected growth in spending in the years ahead. And that's where Schwarzenegger could have the most effect. Policies that trim the growth in health-care premiums and direct new employees into less expensive retirement plans would be solid steps in getting payroll costs under control. Beyond that, reducing the need for employees by re-engineering the way the state does business probably holds more promise than banging away at the unions to accept pay cuts. The state could be much smarter in the way it uses technology to improve productivity, as most private-sector employers already have done to great effect. This is not the kind of stuff that makes for sexy headlines. But if Schwarzenegger expects to make much progress on this front, it's what he is going to have to do.sacbee.com