Aug. 4, 2010: City Compensation Agreements Can't Be Changed at Will

By Carolyn Schuk

Most would agree that Santa Clara residents receive high quality city services. One reason is that most city services are delivered by city employees – giving the City full control over delivery. Reflecting this, employee compensation accounts for nearly 80 percent of the City's operating budget – a percentage that has been consistent throughout the years.

With the city's budget in a tailspin, some are questioning the pay scales and benefit packages – which unquestionably drive Santa Clara's budget and, with it, a growing deficit.
Santa Clara is hardly alone. Across the U.S., cities and states face deficits driven by benefit and pay increases won by public employees during boom times.

Before assigning blame, it's important to understand why negotiation processes and compensation agreements themselves constrain City flexibility. One reason is that they don't factor in Santa Clara's second major budget driver: revenues. And that almost guarantees deficits in an economic downturn.

Another reason is public compensation agreements' ironclad nature. Wages, hours and employment terms and conditions are spelled out in contracts – Memorandums of Understanding (MOUs) – between the City and employee bargaining units (unions).

While the City Manager's office develops the detail of job classifications and pay schedules, it's the City Council's responsibility to approve and implement them (City Charter, Section 1104). Further, state law (California Government Code, Secs. 3500-3510) – including the George Brown Act of 1961 and later the Meyers-Milias-Brown Act of 1968 (MMBA) – governs City relations with employees, with the exceptions of temporary employees and the City Manager, City Attorney, City Clerk, and Police Chief.  

As directed by the City Council, the City Manager directs the City negotiating team and can make recommendations to the Council in closed session. The City charter and state law also specify the negotiation process, called "Meet and Confer." Agreements take effect after being first ratified by bargaining group members, and then approved by the City Council during a regularly scheduled meeting.

Once an MOU is approved –"zipped" – it can only be opened for discussion – "unzipped" – by mutual agreement of the City and bargaining unit. The City can leave jobs vacant – a hiring "freeze" – and cut positions, but neither party can make changes to the contract unilaterally. The City's annual budget must reflect existing contracts.

Santa Clara's contracts with its 10 bargaining units 

were written between 2006 and 2008 and expire at 

different dates between 2010 and 2012.

Currently, Santa Clara has contracts with 10 bargaining units. These were written between 2006 and 2008 – before the late 2008 economic bust – and expire at different dates between 2010 and 2012. 

In recent years, Santa Clara has cut about 10 jobs and left more than 100 positions unfilled – about 15 percent of the City's total staffing. This is reflected in the 2010-2011 City Budget. The City has also reduced overtime as well as the numbers and hours of temporary workers. Some programs have been reduced – for example, library hours – while others are distributing additional sharing work among employees.

And benefit cuts for future City employees are on under consideration. Last April, the City Manager requested City Council direction on a Local Government Policy Statement on Retirement Benefits. Developed by the City Manager Associations of Santa Clara and San Mateo Counties, this would reduce future costs – principally state pension fund (CalPERS) contributions. With City Council approval, the City Manager can call for bargaining unit discussions on the proposed changes.

"City employees are aware of the severe financial problems being faced by Santa Clara," says Deputy City Manager Carol McCarthy. "While some programs have been reduced during these budget difficulties, many programs and services continue with the work being shared among the remaining employees. All the while, the City and its employees are still trying to maintain, as much as possible, the services that our residents and businesses enjoy."

In what may point to the future of public sector compensation, this month the League of California Cities announced it was working with state legislators to increase public accessibility to city, county and state salary information, and is drafting city administrator compensation guidelines.

You can get more information online about the City budget and MOUs.