| Coalition of University Employees (CUE) | 2855 Telegraph Ave., Suite #302, Berkeley, CA 94705 Contact CUE (510) 845-2221 (phone), (510) 845-7444 (FAX) |
Re: Fact-Finding Report
Hearing: November 1, 2, 12, 16. 19, 2004
McKay No. 04-30.1
FACT-FINDING RECOMMENDATION
GERALD R. McKAY, NEUTRAL FACT-FINDER
PETER CHESTER , EMPLOYER FACT-FINDER
HENRY LEVY, UNION FACT-FINDER
Appearances By:
| Employer: | Union: |
|---|---|
| Therese M. Leone, Esq. Office of the General Counsel 1111 Franklin Street, 8th Floor Oakland, CA 94607-5299 |
Arthur Krantz, Esq. Leonard Carder, LLP 1330 Broadway, Suite 1450 Oakland, CA 94612 |
| Ms. Sharon Hayden Office of the President University of California 300 Lakeside Drive, 12th Floor Oakland, CA 94612 |
STATEMENT OF PROCEDURE
This matter arises out of an impasse in negotiations, which exists between the above-identified Union and Employer. Pursuant to the provisions of Government Code Section 3592,
the matter was submitted to a Panel of Fact-finders selected by the parties to hear the matter.
The Panel conducted conference calls on August 13 and September 30, 2004, and exchanged
numerous emails concerning issues regarding the process. In addition, the Panel conducted
hearings on November 1, November 2, November 12, November 16, and November 19, 2004 in
Oakland, California. During the course of these hearings, the parties had an opportunity to
present evidence and to cross-examine witnesses. At the conclusion of the hearings, the parties
submitted written briefs in argument of their respective positions. The Panel received copies of
those briefs on or about December 7, 2004. Having had an opportunity to review the record, the
Fact-finders are prepared to issue their recommendations. This writing is a reflection of the
recommendations made by a majority of the Fact-finders.1 Either or both parties may publicize
this report beginning 10 days after it is issued if they wish to do so, and, at a minimum, a
majority of the Fact-finders agree that this report should be made available to the public in the
manner described in PERB regulation 32800(c).
ISSUES
RELEVANT STATUTORY LANGUAGE
3592. Factfinding panel; hearings, investigations and inquiries; powers
The panel shall, within 10 days after its appointment, meet with the parties or their representatives and consider their respective positions. The panel may make additional inquiries and investigations, hold hearings, and take other steps which it may deem appropriate. For the purpose of the hearings, investigations, and inquiries, the panel may issue subpoenas requiring the attendance and testimony of witnesses and the production of evidence. The Regents of the University of California, the Directors of Hastings College of the Law, and the Trustees of the California State University shall furnish the panel, upon its request, with all records, papers, and information in their possession relating to any matter under investigation by or in issue before the panel, except for those records, books and information which are confidential by statute.
3593. Findings of fact and advisory recommended terms of settlement; submission to parties and to public; payment of costs
(a) If the dispute is not settled within 30 days after the appointment of the panel, or, upon agreement by both parties, within a longer period, the panel shall make findings of fact and recommend terms of settlement, which recommendations shall be advisory only. Any findings of fact and recommended terms of settlement shall be submitted in writing to the parties privately before they are made public. The panel, subject to the rules and regulations of the board, may make those findings and recommendations public 10 days thereafter. During this 10-day period, the parties are prohibited from making the panel's findings and recommendations public.
(b) The costs for the services of the panel chairperson, including per diem fees, if any, and actual and necessary travel and subsistence expenses, shall be borne by the board. Any other mutually incurred costs shall be borne equally by the employer and the exclusive representative. Each party shall bear the costs its incurs for the penal member it selects.
BACKGROUND
The University of California employs approximately 180,000 employees as of November 2004. CUE represents the clerical employees, which constitutes approximately 16,000 employees (approximately 14,492 FTE's) of the total number of employees. The Collective Bargaining Agreement between the University and CUE permitted the parties to open issues on an annual basis, which resulted in the Union proposing a wage increase, an adjustment to healthcare benefits, and a freeze on parking rate increases. The parties negotiated over the terms of those proposals and reached a deadlock. The services of the California State Conciliation Service were used in an effort to mediate a resolution. However, those efforts were not successful. The parties then moved to send the matter to fact-finding, and presented the facts to this Panel of Fact-finders for their deliberation and recommendation.
The parties submitted more than 1,000 pages of material in support of their respective positions. The University concluded its case by asserting that no wage increase was warranted under the circumstances, no freeze on parking rates was warranted, and no adjustment to the healthcare premiums were warranted. The Union concluded its case by asserting the University had failed to establish any case supporting no wage increase, and proposed instead an across-the-board wage increase, and various other adjustments. The Union also proposed a freeze in parking rate increases at the campuses at issue, and proposed an adjustment to healthcare premiums for members of the bargaining unit. The positions expressed by the parties at the outset of the fact-finding process were the same positions expressed at the conclusion of the fact-finding process.
The Employer asserted that it was unwilling to provide any wage increase to the employees in the clerical bargaining unit because the State of California had not provided any funding to the University for wage increases. The State's budget for fiscal year 2003-04 provided the Employer with a billion dollars less than it requested. The evidence presented established that the State provides approximately 14.5% of the University's overall funding. The evidence established that the University had sought a 6% increase in the portion of State money used by the University for wages, but had been granted no wage increase. In order to fund a 6% wage increase for this particular bargaining unit, the University was prepared, based on its funding request to the State Legislature to commit approximately $30 million to a wage increase for this bargaining unit. Of the $30 million it committed to the 6% wage increase, $20 million would have been from non-State sources, while the University was seeking $10 million from the State.
The University presented Jerry Kissler, the Employer's Assistant Vice President of Building Planning and Fiscal Analysis, as its witness with respect to wages. Mr. Kissler was asked what happened to the $20 million in non-State money that the University had committed to a wage increase since it provided no wage increase to the unit for which that commitment had been made. Mr. Kissler testified that the funds were reabsorbed into other projects, such as expanding dormitories and parking facilities, or other activities related to the University's academic mission. According to Mr. Kissler, the University, generally, does not preserve separate accounts in which money earmarked for one purpose may be tapped for other purposes. Budgets are part of a fluid process that change as times and circumstances change. While the University was committed to put the $20 million into the wage increase from non-State funds, had it received the 6% wage request from the State, Mr. Kissler stated, once that was not possible, the funds flowed into other areas of concern for the University.
The University stated that it has a policy, which provides that if the State gives no money for a wage increase then the University provides no increase to its employees. On the other hand, if the State provides extra money for a wage increase, the University will pass that wage increase onto its employees. Since the State provided no wage increase, the members of the CUE bargaining unit were not entitled to a wage increase under the University's policy even though the parties stipulated that approximately 68% of the wage increase for the CUE bargaining unit members is not covered from State funding. The University stated explicitly that its decision not to grant a wage increase was due to its labor policies, and was not due to its inability to pay. The University maintained that it could not give wage increases to those employees "housed on campus" if the State gave no increase. In spite of this policy, however, the University provided wage increases to approximately 42,217 other FTE employees: the research and support group received a wage increase amounting to approximately .7%; the technical group received a wage increase amounting to approximately .06%; the senate faculty, lecturers, librarians, and academic student employees received approximately 1.7%; patient care technical employees received approximately 2%; nurses received approximately 2.5%; healthcare professionals received approximately 1.5%; and the police and safety employees received approximately a 5% wage increase. The University denied that these raises constituted an "across the board wage increase," which was what CUE was requesting. However, the large number of employees who received increases, combined with the fact that many of these employees were housed on campus, as well as the fact that the police and the academic employee groups receiving increases are almost entirely State funded, yet the State provided no money for an increase for these groups, made it difficult for the majority of Fact-finders to reconcile the University's position.
In addition, approximately 49,000 employees, not represented by the unions, such as professionals and supervisors, senior professionals, and academic administrative officers, did not receive an across-the-board increase, but some of these individuals in these groups received various equity increases. The individual equity increases for this group of employees were not available to the Fact-finders. The majority of Fact-finders, believe, however, that based on the evidence presented, almost 90,000 FTE employees out of 115,000 FTE employees received wage increases of one size or another for the fiscal year 2003-04. The position of the University regarding their offer of neither a wage increase nor any equity adjustments for the clerical workers, who are among the lowest paid of all the employees at the University, seemed unfair to the majority of Fact-finders.
The University asserted that it was unwilling to provide a wage increase from funds that are not ongoing. According to the University's case, ongoing salary increases should be funded by ongoing sources of income. The University made this distinction with respect to wages because it tied wages to allocations it received from the State. Allocations from the State are given on a one-year basis. However, since the State only provides 32% of the University's funding for clerical salaries, the greatest portion of any wage increase given to employees would not come from State funding. The State has made agreements with the University to provide funding, but in recent years has not made good on those agreements.
While there are no guarantees, so far as the present record demonstrates, that the University will have any continuing funding of any sort for any of its ongoing projects, the University has been able to increase its total revenues as well as its net income on an annual basis for every year for the past 14 years, according to data presented by the expert for the Union, Dr. Peter Donohue. The University's net income (revenues minus expenses) for this past fiscal year ($786 million in 2003-04) was higher than it was for the prior fiscal year ($559 million in 2002-03). Mr. Kissler testified that he was not predicting any change in the University's pattern of taking in millions of dollars more than it spent in a particular year. On the contrary, because the University has a commitment to the State to expand its educational mission, Mr. Kissler said the University must continue to grow annual revenues to achieve that mission.
The evidence presented during the fact-finding established that the clerical employees are among the lowest paid employees working in the University system. The University's own salary surveys over the past years have shown that the clerical workers are significantly underpaid. One of the University's witnesses, Mr. Robbin, testified that he believed the gap was approximately 10% from market rates. Both the University and the Union gave differing assessments of turnover. And, although it is unclear whether turnover is higher or lower than it has been, it is clear that turnover among the lowest paid clericals is fairly high.
The Consumer Price Index information that the Union provided established that it has increased approximately 26.3% over the past seven years during which time clerical pay increases have gone up approximately 9.5%. Clericals, in this sense, have suffered a cumulative wage loss of 17% to 20% over the past seven years. The Union's expert on market comparisons, Ms. Kathleen J. Hurley, concluded that the blank assistants at Levels 1 and 2 lag the market by approximately 24 while blank assistants above Level 2 lag the market by approximately 13%. The library assistants are significantly below this level.3
Ms. Hurley also found that the wage bands at the University are narrow compared to the market, and only half as wide as the California State University system. Providing a study done at UC San Diego and another done at UC Berkeley, it appears that both of those campuses concluded that the wages of clerical employees are no longer competitive even when benefits are factored into the mix. When blank assistant positions at UC are compared to comparable positions at the CSU system, the UC blank assistants earn approximately 22.7% less. Library assistant positions at CSU are paid 33% more than comparable employees at UC. The salary ranges at CSU are at least 50% from top to bottom, which is twice as high as those at UC.
The parties agreed that the discrepancy between the library assistants and blank assistants at UC is a phenomenon which arose when library jobs were not as difficult or technically oriented as they are presently. No evidence was presented, which would justify a continuing disparity between library assistants and blank assistants. Library Assistant IV, Holliday Cullimore, explained her belief_that she would earn $2,000 more per year as a Blank Assistant III at UC and $7,000 a year more as a Blank Assistant IV at UC Davis, and $9,000 more if she worked for the CSU system. The dispatchers working at the Irvine Campus lagged the market by 25% or more according to the Union's data. Dispatchers at other campuses have all had significant wage increases, but the dispatchers at the Irvine Campus for whatever reason were not included in that general increase for dispatchers. San Diego nutrition workers received a 20% pay cut in the 1990's. While most of that cut has been restored, it has still left the nutrition workers significantly behind where they would have been had there not been a 20% cut.
The Union raised an issue referred to as Blank Assistant IV. The Union proposed that a step in the blank assistant grouping be restored so that employees currently at a Blank Assistant III could progress to the level of Blank Assistant IV. The Employer took the position that this was not an appropriate issue before the Fact-finders since it was not a mandatory subject of bargaining, but only a permissive subject of bargaining. The Employer asserted that the issue of mandatory and permissive subjects of bargaining needed to be resolved by PERB. In addition, the Employer argued the Union failed to properly reopen the Article that contains the classifications in the barging unit, Article 2. The Union's position is that the Blank Assistant IV is part of the wage article and constitutes a form of wages, and on that basis, it is properly before the Fact-finders. The Union pointed out that in the initial unit determination, there was an Administrative Assistant IV. In 1995, the Employer sent a notice purporting to consolidate the blank assistant and administrative assistant title. The notice clearly earmarked Levels I, II and III for consolidation, but it did not specifically cover Administrative Level IV.
The Employer has reinstituted the Blank Assistant IV level at the Davis Campus, and has negotiated with the Union regarding wages for this classification. According to the Union, the work previously performed at the Level IV continues to be performed typically by clericals at the Blank Assistant III level. The Union stated that as clerical wages lag behind, there has been a noticeable trend towards reclassifying people out of the clerical unit and into professional titles in order to retain them and increase their pay. The individuals, according to the Union, are still performing clerical work, but are provided with a professional title to get around the restrictions in the steps. Reinstating the Blank Assistant IV position, the Union stated, would not cost the University money because the Employer would have sole discretion concerning whether to transfer or hire any employees into that position. It may save the Employer money by providing a lower cost option for employees who are presently being reelassified into professional titles.
The healthcare benefits were a subject of bargaining and the positions of the parties relative to this issue were presented to the Fact-finders. The Employer's position regarding health benefits is that the University has a system-wide healthcare program for all employees. It is a four-tiered program geared to the level of an employee's wages. Employees making $40,000 or less per year pay a lower premium than employees paid at a higher rate. The highest paid employees pay the highest premium. The Employer asserted that it is not possible to change the benefit contributions paid by the clerical unit without affecting the entire package of benefits for all of the employees in the University. The Union asserted that the California State University system has been hit with far more medical inflation than the Employer, and yet CSU pays a greater percentage of employee health benefits than does the UC system. The increased premiums in the University's policy, the Union asserted, have been disproportionately paid by employee contributions in contrast to Employer contributions. The Union stated that its demand to institute a stipend for rural employees, who are not eligible to join cheaper HMO plans, is a benefit that CSU provides to its rural employees who are not within the coverage of an HMO plan. The Employer observed that the Union has not provided any proposals to leave the University's health plan, and establish a new plan for clerical employees. The Employer asserted that it recognized the impact of increased healthcare costs on lower paid employees and changed a two-tier premium program based on income received to a four-tier banding systems so that the lowest paid employees paid the least of all for health insurance premiums. The Employer stated that the medical premium cost for 2003-04 increased for employees by a reasonable amount in light of medical inflation, and dental and vision plans continued to be offered free of charge for employees and their dependents. Witnesses on behalf of the Union testified that they were unable to take advantage of the pre-tax Flexible Spending Account plan because they could not afford even the first month in which their wages would be deferred.
The issue of parking was a subject of bargaining and the issues involving parking were presented to the Fact-finders. There are apparently six locations where the Employer is seeking to increase the cost of parking. The ranges of increases vary from 3.64% ($2 per month) at UCLA up to 25% ($5 per month) at the Merced Campus. Representatives from each of the campuses presented testimony regarding the reasons and the need for parking rate increases at their various locations. The University treats the parking facilities as an auxiliary service, which under the University's policy must be self-supporting. Standard projections are used to determine whether campus parking departments need to raise rates. As a rule of thumb, the annual net operating income must be 1.25 times the amount of annual debt service. However UCLA, Berkeley, San Diego, and San Francisco all exceed that ratio. The Union asserted that the representatives from the various campuses who testified included in their projections justifying the need for parking rate increases estimates for wage increases for employees working at the facilities. These increases range from 3% to 6%. Because the University offered no wage increase, these sums were never spent. According to the Union, for this reason alone, the parking rate increases are not supportable.
The University stated that the rate increases are reasonable and supported by sound financial principles. Parking rates are set and paid by all employees, not simply the clerical employees. Creating a differentiated parking rate for various groups of employees, the Employer stated, would be impractical and difficult to effectuate. The Union's presentation regarding parking revenues, the Employer argued, is misleading and widely exaggerates the financial resources of these auxiliary enterprises. The Employer argued that the attempt to compare the CSU parking rates with the UC parking rates does not take into account the differences in the mission and operations of the two systems. The Union did not know whether CSU had current debt financing for parking, or what type of parking facilities each campus uses. The University concluded that having differentiated rates for various parkers is untenable and violates the University policy which does not permit subsidizing staff parking by forcing other users of the same service, namely the faculty and students, to pay more. The University did not make clear why differentiated rates would be untenable in this context, in light of the fact it instituted this concept for health care premiums, and where the University's own management report from the San Diego Campus suggested such an approach.
DISCUSSION
The process of fact-finding in this present matter is a necessary step in the procedure between the parties before either side may engage in economic self-help to achieve the ends which they are seeking. One would hope that the parties would view the process of fact-finding as more than simply a step on the road to a strike, but as the parties have made clear to the fact-finders during the course of the fact-finding process, the results of the fact-finding are merely recommendations.4 Neither side is bound to accept the recommendation of the Fact-finders. The Fact-finders did make an effort to use the process as a means for the parties to reach an agreement during the course of the fact-finding hearings, but it became abundantly clear that the position of both the Union and the Employer were fixed, particularly on the issue of wages and no compromise appeared to be possible. In light of the reception the Fact-finders' efforts at conciliation had, it is highly likely that the Fact-finders' report will share the same fate. The Fact-finders are preparing this report, not with the anticipation that the parties are going to adopt it as the appropriate settlement for their dispute, but are preparing it instead simply based on the evidence that was presented and the resolution that the evidence justifies.
The issue of wages was and is the most difficult issue for the parties. The University was clear that with its budgeting challenges, it would not provide any sort of wage increase whatsoever for clerical employees. The University asserted that this decision was not based on its inability to pay, but was based on a policy, which does not provide wage increases when no wage increase money is provided by the State. Since the University did not receive money from the State for across-the-board wage increases, none of the employees will receive across-the-board wage increases. The University also asserted that if it provides a wage increase for one group of employees, it will be obligated to do the same for other groups of employees, which will increase the real cost of any wage increase for this particular unit many fold as its implications are felt in the other units who also want wage increases.
There are fundamental flaws in the University's basic position that it will not grant a wage increase to clerical employees because the State did not provide for wage increases in its legislative grant. The first flaw in the Employer's position is that the bulk of the wage increases for the members of the present clerical unit do not come from State revenue generated from legislative grants. The record establishes that at least 68% of the wage increase for clerical employees comes from sources other than State money. The Employer witnesses conceded that when they represented to the State that a 6% across-the-board wage increase was justified that they had budgeted for such an across-the-board wage increase if the State had provided them the 6% the University was seeking. In other words, the University had found the 68% of the wage increase it needed to find from non-State revenues in order to effectuate a 6% wage increase, which it represented to the State the employees were entitled to receive. In this sense, the Union's observation that the University budgeted sufficient monies to pay the 68% of the increase is an accurate observation.
The University could not have paid all members of this bargaining unit a 6% wage increase with the wage increase money provided by the State. It would have been necessary to supplement the State funds with other funds. Since the University did not receive the funding requested from the State, the University has redirected the money budgeted for the wage increase to other purposes. The Employer called this process "reabsorbing money and redirecting money for other activities." The Fact-finders have no doubt that the University has many good places to spend its money; all of which can be justified. The question, however, is whether not providing wage increases to clerical employees who, even the University concedes, are paid lower than clericals in the comparable market is a justifiable policy.
The other aspect of the University's assertion that it will not pay a wage increase when the State does not provide money for a wage increase is not supported by the record either. Groups of employees who primarily obtain their funding from the State, such as Senate faculty, lecturers, librarians, and academic student employees are all receiving wage increases for the year 2003-04 in an average cumulative total of approximately 1.7%. When one looks at the list of employees receiving various forms of wage increases, either across-the-board or equity adjustments, a significant number of employees received wage increases. While it is true that the University has not provided an across-the-board wage increase per se for all of the employees (with the exception of health care employees, such as nurses and other healthcare professionals, and the police), it has provided equity and individual wage adjustments for at least half of the employees who work for the University.
When one considers first the fact that the University budgeted non-State funds for salary increases based on its proposal to the State and, secondly, the University does provide wage increases for the bulk of the employees, the University's assertion that it has a hard and fast policy about no wage increases to employees when the State does not provide that in its legislative grant is simply not true. The University does provide wage increases, but it does so in areas where, in the University's opinion, those wage increases are more necessary or more justified. The University agrees that the clerical employees are an important part of the University's overall operation, and that the clerical employees are underpaid relative to the market and should receive a wage increase. Nevertheless, the University ultimately concluded that it needed to fund salary increases for certain other employees rather than provide them to its clerical employees, as well as other employees who received no wage increases.
The University asserted that it would not pay wage increases from one-time source funds, meaning that unless the University could contemplate a future for the funding source from which it paid wages, it would not use that money to pay wage increases. While on the face of it, this argument appears to be good economic policy, it is not supported by the record. Presumably, the University is using money from general funding sources to pay the wage increases for other employees who work at the University. Based on the record before the Fact-finders, this other money has no more guarantees with respect to its future continuation than does money coming from the State. There is no guarantee that the State will provide any funding for wages or any other operation of the University. As the State has demonstrated in the last several years, it is more than willing to ignore its promises to the University to provide funding for staff and other University needs. One would hope that if the State provided a 3% wage increase for this year that it would continue that level of funding so that the 3% wage increase could be paid on into the future in subsequent budget requests. However, based on the recent history of the State's performance, it is not clear that it will provide that ongoing funding.
As the Union pointed out, the University has been consistently taking in more money than it has spent even after it has expended money for capital improvements. The University is not losing money, nor is it on the verge of going bankrupt. For whatever reason, the University has been able to generate an ongoing source of funds, which to some extent are discretionary year after year. In the record before the Fact-finders, there has not been a year in the last four or five years where the University has actually spent as much money as it has generated in revenue. It is the ongoing nature of its ability to generate income that the University needs to address rather than its concern about a so-called one-time source.
By way of example, let us presume that a service provider, with a large and diverse group of clients, provides a service that significantly disappoints one of those clients. It is likely that the disappointed client would discontinue doing business with the service provider and cease providing a revenue stream to the provider. Nevertheless, the service provider based on past experience, will probably generate income at about the same level next year as it has generated this year based on the total source of funding that it receives. Even though payment from the disgruntled client in this context is a one-source or a one-time funding that does not mean that this funding will cause the provider's overall operation to be reduced by that amount in the subsequent years. It is simply one bucket of water in the river of revenue.
Based on the record before the Fact-finders, there is no question that the University is in a position to afford a wage increase for the clerical employees in the present unit. There is no question that the University should pay the clerical employees a wage increase based on their relative position in the marketplace. The amount of increase is tempered by the State's failure to provide funds. Specifically, the Library Assistants need a significant wage adjustment to bring them into line with Blank Assistants. The Blank Assistants need a wage adjustment to bring them in line with the marketplace as reflected by way of example at the CSU system. The Dispatchers in Irvine need a wage adjustment to bring them in line with other dispatchers in the UC system. The Irvine dispatchers should be aligned with the salary range of the UCLA dispatchers. The Nutrition Workers in San Diego need an adjustment to bring them back into line with where they would have been had they not suffered a 20% wage cut. There is no evidence from the University in this record at all that would dispute the Union's claim that these adjustments are clearly justified.
The University has no dispute that these employees should receive salary increases. The University asserts that providing such increases are contrary to sound fiscal policy and would not be equitable to the other staff employees who did not receive increases. The University's claim that it does not have the money to pay is not based on a financial inability to pay, but is instead based on the University's desire to use the funding that would be a source of payment for these clerical employees for other purposes or to add to reserves. The Union demonstrated, and the University did not dispute, that the University's consistently positive net income has led to significant growth in the University's reserves in the past decade, including an increase of $400 million in 2003-04 alone. Some portion of this growth of reserves in 2003-04 must be attributed to the University's decision to forego spending on clerical salaries the non-State money that it had originally earmarked for that purpose. Ultimately, the University may or may not prevail in its refusal to provide a wage increase to clerical employees, but the University's claim that it does not have the money to spend on them is not supported by the evidence.
The University has made a case, in some respects, that across-the-board wage increases have not been provided to significant number of the employees working for the system. While the Panel has pointed out that many of these employees have received adjustments, including step increases and other equity payments, most of the employees have not received a straight across-the-board wage increase. Faculty, for example, received wage increases, but only one-third of the faculty each year receives the increase. The faculty, as a whole, has not received an across-the-board wage increase. The Panel understands that it would be very difficult for the University, if the Panel v/ere to recommend an across-the-board wage increase, to justify an across-the-board wage increase for this unit without addressing an across-the-board wage increase for all of the other units. At some point in the financial process, an across-the-board wage increase is going to generate more cost than the University can actually afford. The fragmented nature of bargaining at the University makes if difficult to create a rational system of wage adjustments, which are fair and predictable.
The University has chosen the process of making various equity and individual adjustments so as to use its revenue more effectively and efficiently. The only problem with the University's approach is that for whatever reason, it has left out the clerical employees as recipients of these equity adjustments. The Panel of Fact-finders does conclude that the University's refusal to provide an across-the-board wage increase for the clerical employees is consistent with the manner in which other employees in the University system have been treated. However, the Panel also concludes that the University's treatment of other employee groups and the University's ability to pay, together with the particularly severe market lags experienced by classifications within the clerical unit, warrant equity wage adjustments for those classifications. The University's failure to make such equity wage adjustments for the clerical employees cannot be justified.
The Panel, therefore, recommends that the University provide to the clerical employees in this unit for the year 2003-04 the following wage adjustments:
The Fact-finders have included an equity adjustment for Blank Assistant Levels III and IV. One of the issues before the Fact-finders is the inclusion of a Blank Assistant Level IV. The Employer asserted that this was not appropriately before the Fact-finders since it was not a matter of wages and that the creation of a classification is an inherent management right. The Fact-finders disagree with the Employer because the structure of the wage system at the University is such that wage increases occur primarily in steps, particularly when across-the-board wage increases are not available on an annual basis. In this sense, the available steps are an integral part of the wage system and cannot be addressed independently of that process. By adding a Blank Assistant IV, employees have an opportunity to receive adjustments even if they receive no across-the-board wage increase. Who fills the Blank Assistant IV position, of course, is at the discretion of the University, but it does provide both the employees and the University with an opportunity to give wage adjustments to long term employees who are deserving of those wage adjustments. Therefore, the Panel recommends that the University reinstated the Blank Assistant IV position across all campuses.
Turning now to the issue of the healthcare premiums, the Fact-finders note that the University has addressed the concerns of the unit by creating a banded system where higher paid employees pay a greater premium for the same coverage than do lower paid employees. What the Union is seeking from the Fact-finders in terms of a recommendation is to reduce the premium the clerical employees have to pay for the same coverage. The Panel recognizes that the current below-market wage paid to the clerical unit has made the payment of any increases in costs a difficult economic burden, and believes that perhaps the system needs to be rebanded so that even lower costing bands exist. However, in the context of the present negotiations for this one-year period, a majority of the Fact-finders conclude that the Union has failed to present sufficient evidence to justify the impact on the University's integrated healthcare system its proposal would have.
Any recommendation the Fact-finders make relative to the premiums paid by this unit would necessarily have an impact across-the-board. Either the University would have to take funds from some other source to make up the difference in premium costs for the employees in this bargaining unit, or it would have to increase the premiums paid by employees in other bands. Changing the health premium structure in this sense for this one particular bargaining unit in a fully integrated system is not appropriate. The Union needs to address this question in a broader context perhaps in coordinated bargaining. Addressing it at this level, given the University-wide nature of the system, is not productive. Similarly, while the Union's proposal for a rural stipend appears warranted, it would again have systemwide implications that a majority of the Panel is unwilling to endorse at this time. The Panel again recommends coordinated bargaining.
Turning now to the issue of parking, the Union is seeking to have the increases the University has proposed rolled back. It is the Fact-finders' opinion that parking is a universal subject for all employees in the system, just as healthcare is. The Union would have the Fact-finders determine that the employees in this bargaining unit should pay less to park than other employees who work in the University system. Such a recommendation would require some type of practical identification of members of this bargaining unit so that they could appropriately receive their reduced parking costs. This issue, just like healthcare, needs to be addressed on a broader basis than simply one bargaining unit. The other problem the Panel of Fact-finders has with the Union's request is that the impact of the benefit of parking is not universal within this bargaining unit. The facts do not support a conclusion that every member of the bargaining unit uses the University's parking facilities. In fact, the evidence does not establish that a majority of the employees in the bargaining unit use the University's parking facilities. The Union's request, in this sense, is a benefit for a smaller group of individuals who benefit by driving to the campus and parking. They will receive a greater economic benefit by way of a reduced parking rate than employees who arrive on campus by some other mode. The Fact-finders do recommend that the University consider a banded system, such as now exists in healthcare, which would take into account the lower-paid workers. For the moment, however. the money that the few bargaining unit members who park receive in the way of this subsidy in the Fact-finders' opinion would be better applied across-the-board to wage adjustments, which is something all the members of the bargaining unit need. The Panel again recommends coordinated bargaining on the issue of parking.
In summary, the Fact-finders conclude that the University has the ability to pay the CUE employees wage adjustments for the year 2003-04. To make adjustments of this nature does not violate the University's policy, which the University has not consistently enforced, nor does it require the University to use funds which will not be available on an ongoing basis. The equity adjustments, which the Panel of Fact-finders believe to be appropriate are the following: (1) Parity adjustments for Library Assistants to bring them in line with Blank Assistants step by step. Adding the step of Blank Assistant IV to the mix; (2) a 2% market equity adjustment for Blank Assistants at Levels I and II; (3) a 1% market equity adjustment for Blank Assistants at Levels III and IV should be provided; (4) a 17% market equity adjustment for Irvine Dispatchers; and (5) a 2% equity increase for San Diego Nutrition Workers. The Union's request for premium adjustments for health coverage for this particular bargaining unit is rejected. A majority of the Panel is unable to endorse the Union's proposal regarding health benefits or parking at this time for the reasons discussed above, and the Panel instead recommends coordinated bargaining with other Unions on these subjects.
Date: 2/7/05
Gerald R. McKay
Peter Chester
Concur in part/Dissent in part
Henry C. Levy
Concur in part/Dissent in part
I concur in part and dissent in part from the Neutral fact-finder's report.
During the fact-finding process the University and CUE continued their efforts to resolve the 2003-04 reopener negotiations regarding wages, benefits and parking rates. The University, in particular, introduced a new proposal aimed at bridging the differences between the parties. Although those efforts were not successful, the University remains committed to the statutory process and will continue to engage in good faith negotiations.
The University appreciates the extensive preparation that preceded the fact-finding hearing, the very informative presentations each side made at the hearing itself, and the collegial deliberations of the panel following the hearing. Of special note, however, and contrary to the generally positive tenor of the proceedings, was CUE'S decision to amend its bargaining position regarding wages on the last day of the hearing. After five days of hearing, CUE amended its proposal on wages such that its wage demand went from a 1% across the board increase to a 3% across the board increase.
Wages
Concurrence:
The University concurs in the Neutral Fact-finder's determination that it would not be appropriate to provide 1) an across the board increase for all members in the CX bargaining unit and 2) a one-half step merit increase. The University's decision not to provide such increases to the CX unit was consistent with its longstanding policy that general salary increases are contingent upon receipt of salary funding from the State of California. The University requested funds from the State for salary increases for fiscal year 2003-04, but those funds were not forthcoming. Consequently, consistent with its policy, the University decided not to provide across the board increases to its employees for 2003-04. The University demonstrated at the hearing that approximately 70% of University employees, including CX employees, did not receive an across the board increase for that fiscal year.
Dissent:
For the reasons stated below, the University must dissent from the majority's recommendation of the following changes:
Equity Increases for Such a Large Number of CX Employees Are the Equivalent of an Across the Board Increase and Contrary to the Neutral's Recommendation
There are approximately 12,550 full time equivalents (FTE) in the affected Blank Assistant and Librarian Assistant classifications out of approximately 14,000 FTE in the entire bargaining unit. These positions constitute approximately 90% of the entire bargaining unit. The majority of the panel recommended equity increases for each of these classifications notwithstanding the fact that the Neutral (with my concurrence) concluded that an across the board increase was not warranted.
The panel's recommendation, however, cannot be reconciled with its earlier finding that the University was justified in not providing across the board increases to the clerical unit because the majority of UC employees received no such increase. Equity increases for each Blank Assistant and Librarian Assistant classification would result in approximately 90% of the bargaining unit receiving some form of base-building salary increase. The University respectfully submits that providing across the board increases to such a large portion of the CX unit cannot be justified in light of the fact that approximately 70% of the University employees received no increase for fiscal year 03-04.
Increases for the CX Unit would be Unfair to Other UC Employees and would Create a Permanent Budget Cut
The University provided evidence that its principles regarding salary increases rest on three tenets which are as follows: 1) that general salary increases for employees be fair; 2) that any increases be paid out of continuing sources of funds that enable the University to satisfy its ongoing financial and other obligations; and 3) that any increases do not require the University to transfer funds from one area to another in light of the many restrictions or claims that exist with respect to the University's operating funds. If the University were to provide equity increases per the majority recommendation, it would necessarily violate each of these principles.
If for argument's sake, the University provided a 2% equity increase for the AA I and AA II classifications and a 1% equity increase for the AA III classification, the estimated costs would be as follows:
| AA I and II annual cost: | $4,592,686 |
| AA III annual cost: | $1.865.040 |
| Total Blank Assistant annual cost: | $6,457,726 |
The total estimated annual costs for the recommended increases for the Blank Assistant titles, alone, would be approximately $6,457,726 or roughly 1.55% of the total annual CX unit payroll' If the University were to provide such an increase within the CX unit, the University's compensation philosophy that all staff employees share in general salary adjustments would mandate providing a comparable increase for the other staff groups who (like CX employees) did not receive an across the board increase in 2003-04. A 1.55% general increase for these staff groups (including the CX unit) would cost approximately $52.7 million just for 2003-04.5
The University presented unrebutted testimony that it received no state funds for salary increases for fiscal year 2003-04; in fact, the evidence presented at the hearing demonstrated that the University has been buffeted by budget cuts over the past 4 years culminating in a $491 million shortfall that the University has not been able to offset. In addition to the cuts, the University also presented unrebutted testimony that, pursuant to a commitment to the State of California, the University will admit an additional 5,000 students per year through 2010. Such unprecedented growth, commonly referred to as Tidal Wave II, will require a commensurate expansion of the University's physical plant, staff and academic personnel.
The University also demonstrated that if it were to provide general salary increases for UC employees, the funds for such increases would necessarily come at the expense of other pressing University concerns such as academic programs, capital expansion and deferred maintenance. Moreover, the increases, like any other recurring salary expense, would have to be addressed annually. If the University were to provide a 1.55% general increase based on the fact-finder's recommendation, the University essentially would assume an ongoing and unfunded $52.7 million liability. This liability would effectively constitute an annual $52.7 million budget shortfall as the University braces for the significant financial challenges of Tidal Wave II.
This approach does not comport with sound financial principles, is not in the best interest of the University's employees and could ultimately impair the University's ability to carry out its mission of teaching, research and public service. Further, many funding sources, such as research contracts and grants, require that funds remain in the dedicated contract and/or grant. There is no mechanism in place to make such an exception to this policy.
The Majority Disregarded the Fact that CSU Provided No General Salary Increases for 03-04
The majority report does not give sufficient weight to the settlement reached between the California State University (CSU) and the union representing its clerical employees. This agreement is the only other comparable settlement submitted to the panel. The CSU settlement provides for no general increases in 2003-04 and 2004-05. Testimony before the panel indicated that CSU is subject to the same series of agreements between both universities and the Governor, the net result of which was no state money available for increases in 2003-04 and 2004-05 for either university system.
The Union's Salary Evidence Based on the Comparable Employer Data does not Support the Conclusions Drawn by the Panel
The majority apparently relied on salary data from CSU in concluding that employees in the Blank Assistant and Librarian Assistant titles were entitled to equity increases based on a conclusion that "blank assistant positions at UC earn approximately 22.7% less" and Librarian Assistants at CSU are paid "33% more than comparable employees at UC." This conclusion is unfounded because, as the Neutral factfinder states, "Ms. Hurley [CUE'S expert witness] either did not have access to or chose not to present evidence directly comparing the actual wages paid to the UC clericals against the actual wages paid to other clericals, including those at CSU." Rather, CUE'S expert witness on wages based her conclusions on a comparison of UC salary ranges to CSU salary ranges rather than a comparison of actual salaries paid to employees. The comparison ofUC salary ranges to CSU salary ranges is entirely inappropriate because CSU's salary ranges are open ranges and feature a 50% range width from bottom salary to top, while UC's salary ranges for clerical employees are step-based and are approximately 30% from bottom step to top step.
Ms. Hurley also failed to demonstrate where most CSU employees are located within any given salary range. Arguably, those CSU employees could have all been located at the bottom of the salary range. Without a comparison of weighted average salaries, the majority cannot reliably conclude that UC's clerical employees are paid below their counterparts at CSU. Finally, CUE'S wage expert did not provide job specifications of the "so called" comparable classifications at CSU. As a result, it was impossible for the fact-finders to determine whether or not the CSU job classifications and their salary ranges were truly appropriate for comparison with CX unit employees.
Recommending the AAIV Classification is a Management Right and Not Within the Panel's Power
The majority recommended that the University not only restore the AAIV classification as a system-wide classification, but provide employees in the new classification with a 1% equity increase. It is well settled that the decision to create a new classification is a management right and not a mandatory subject of bargaining. See e.g Alum Rock Union Elementary School Dist. (1983) PERB Dec. No. 322
As the University maintained throughout the hearing, the issue of the Blank Assistant IV classification was not properly before the panel since, at best, it was a permissive subject of bargaining and was not properly reopened. Whether or not the University should establish a different classification within the general clerical series, which already has 5 separate job titles, is a decision firmly within management's discretion.
Benefits
The University hereby concurs in the finding that the University may maintain those changes to Benefits implemented on January 1, 2004. However, the University respectfully dissents from the recommendation that the parties engage in coordinated bargaining. The University and the individual exclusive representatives have dealt with the issue of health and retirement benefits for many years at the separate bargaining tables and the current benefits program continues to provide excellent choice and value to the University community including CX employees. Coordinated bargaining also requires the consent of many other parties who are outside the scope of these negotiations and fact-finding process. Finally, CUE never proposed to engage in coordinated bargaining either during pre-impasse bargaining or during the mediation and fact-finding. Consequently, I submit that such a recommendation is beyond the authority of the panel.
Parking
The University hereby concurs in the finding rejecting the Union's proposal. However, the University respectfully dissents from the recommendation that the parties participate in coordinated bargaining for the reasons set forth above in the discussion on Benefits.
Conclusion
The University respects and appreciates the enormous time and energy all parties have devoted to this process and is still hopeful that the parties will achieve an appropriate and mutually acceptable settlement. To this end, the University remains committed to achieving a constructive outcome that is fair and equitable for all concerned.
Peter Chester
Assistant Director-UCOP Labor Relations
I concur in part and dissent in part. First, I concur with the Chairperson's findings on the subject of wages, although I believe that the additional considerations set forth in Part I below further support those findings, and that these considerations would in fact support higher wage increases. Second, I dissent from the Chairperson's findings with respect to benefits and parking, for the reasons set forth in Parts II and III below.
I. Wages
The Chairperson has recommended equity increases for certain job classifications, on the basis that this is more consistent with the University's practice with respect to its other employee groups. While I concur with the Chairperson's recommended equity increases, there are other employee groups at UC that received across-the-board general range adjustments and/or merit increases, in addition to equity increases, in 2003-04. In light of this fact, and given that the clerical unit is underpaid to such an extreme degree, a more complete conclusion would have been to award a combination of an across-the-board increase (1% general range adjustment and merit increases for eligible employees) plus the particular equity increases recommended by the Chairperson for the most underpaid classifications within the clerical unit.
A. Market Comparisons
1. Extent of Market Lags
Union presenter Kathleen Hurley, an expert with more than 20 years experience serving management as a personnel consultant and manager, conducted an in-depth study of clerical unit market lags, using both her own research and that of researchers hired by the University. In order to determine wage lags for the blank assistant series, Ms. Hurley used the exact data and methodology adopted in the University-commissioned study by Watson-Wyatt, and found that blank assistants at levels I and II lag the market by approximately 24 percent, while blank assistants above level II lag the market by approximately 13 percent. (Hurley presentation, pp. 7, 197).1 According to benchmark surveys done by the State of California, UC employees in the lowest paid classifications, such as the clerk/typists, are also substantially below-market, by 9% to 25%. (Id, p. 172-174).
Like Watson Wyatt, Ms. Hurley also found that the University's "wage bands" are quite narrow compared to the market, and only half as wide as those at CSU. (Hurley presentation, pp. 8, 54-60, 77-78. 169). Accordingly, the Union's proposal to add a step at the end of the range for each classification is clearly appropriate.
UC presented no contrary evidence, and has many times acknowledged significant wage lags. While many of UC's acknowledgments cite an approximate 10 percent wage lag, this is a figure given for all staff, not for clericals in particular. Accordingly, if the University is right in its estimate of a 10 percent lag for faculty and staff generally, then clericals lag the market more than other employee groups at the University.
Other studies by the University confirm Ms. Hurley's findings. As just one example, even before the recent wage freezes of the last few years, management at San Diego found that "It is common knowledge that clerical salaries (Blank Assistant I--III) are no longer as competitive with other employers in the San Diego area as they used to be." (Exhibit 43, page 6). Furthermore, a study by management at Berkeley specifically noted that UC benefits are not sufficient to make up for market disparities in wages to any degree whatsoever. (Hurley presentation, page 232).
2. Comparison to CSU
CSU is 72% state funded, while UC is only 15% state funded. (Exhibit 61; and Hurley presentation, page 149). For this reason, and .because UC is far more prestigious (and UC employees' duties can be far more complex, for instance with respect to the much more complex UC library collections and the high level scholarly work done by UC faculty and students), one would expect UC salaries to easily exceed CSU salaries, particularly in times in which state funding is declining. The opposite is true.
A direct comparison of wage range maximums at UC and CSU shows that blank assistants at UC tend to cam at least 22.7% less than comparable clericals at CSU. (Id., page 155). As Ms. Hurley testified, this lag would have been calculated to be even greater had Ms. Hurley not been conservative in her matching of job descriptions -- CSU administrators told Ms. Hurley that an even higher CSU classification was in reality closer to UC's blank assistant II level. Library assistants at CSU are paid 33 percent more than comparable employees at UC. (Id., page 152). Additionally, pay ranges at CSU are all at least 50% from top to bottom, twice as high as those at UC. (Id., page 169).
CSU continues to offer full payment of the entire health premium for employees and their spouses, unlike UC. (Id., page 162). Moreover, unlike UC, CSU offers a stipend of $500 per month for rural employees who are not eligible to join cheaper HMO plans. (Id., page 170). Additionally, UC uses a less favorable retirement formula, which is only exacerbated by UC's lower wages. (Id., p. 158). As a result, a clerical retiring at age 55 after 20 years of service will receive between $400 and $600 per month more in retirement benefits at CSU, .as compared to UC. (Id., page 153, 156). CSU also provides parking at a much lower level of employee cost. (Id., p. 222).6
3. Library Assistants
Because Watson Wyatt data was very incomplete concerning library assistants, Ms. Hurley concluded that the CSU comparison was more apt. As noted above, library assistants at CSU are paid 33 percent more than library assistants at UC. (Id., page 152). This wage lag is greater than the 22.7% lag found for blank assistants because CSU, unlike UC, pays its library assistants at about the same rates as other clericals of comparable level. (Id., p. 213).
B. Miscellaneous Factors: Increases Given to Other Units and Turnover
1. Increases Given to Other Units
The Chairperson has listed the most widespread wage increases given to other employees for the year 2003-2004. Although all of these increases are expressed in percentage terms, the increases included across-the-board, merit and equity increases. The Chairperson did not list some of the most particularized (and most generous) equity increases (for instance, certain health care classifications received equity increases of between 4.5% and 10%, while certain classifications within the technical bargaining unit received equity adjustments of between 1% and 10%). Clerical employees at UC deserve an across-the-board increase, as well as merit and equity increases. The University refuses to give them any increase whatsoever.
Significantly, there are five groups of employees that are predominantly state-funded: Senate faculty, lecturers, librarians, academic student employees and police. These five state-funded groups did receive wage increases in 2003-04, contravening the University's "stated" policy, because no state funding was provided for these increases. University witness Kissler could not testify in detail where the money for these increases came from (other than to say that the money must have come from "general funds") because funding decisions are made at the campus level. While the Regents and the Office of the President make system wide mandates that the campuses must meet with respect to wage increases, the specific money transfers necessary to meet such mandates are all made at the campus level, where the local Chancellors exercise their discretion.
2. Turnover
The University itself has repeatedly lamented high turnover in the clerical unit as a problem that it wishes to ameliorate. For instance, as noted by Watson Wyatt, "UC has been experiencing some recruitment and retention problems in its clerical unit." (Hurley presentation, page 20). Similarly, the San Diego management report found that the turnover rate in the clerical unit is "significantly higher than average" for UC as a whole. (Exhibit 43, page 24). Ms. Hurley's comparison of clerical turnover to turnover as a whole at UC confirms this conclusion. (Hurley presentation, pp. 25, 72).
C. Ability to Pay and Conclusions Regarding the Appropriate Amount of Money to Be Spent on Clerical Wage Increases for 2003-04
I concur with the Chairperson's analysis on the subject of the University's ability to pay. The University has the money to pay wage increases, and the funding it receives from all of its sources meets the definition of an on-going revenue stream from which wage increases can certainly be paid.
Overall, UC's net income (total revenue minus total expenses) for the year 2003-04 was $786 million, the highest net income that the University has had (at least going back to 1991 -- no figures were presented from years prior to that), and far exceeding the $559 million in net income from the previous year and the $42 million in net income from the year before that. (Exhibit 67). Similarly, the University's unrestricted net assets grew by $390 million, from $4.7 billion to $5.13 billion, continuing a solidly upward trend over the past 14 years. (Exhibit 69). Unrestricted net assets do not include capital assets, endowments, funds functioning as endowments, and a variety of other restricted net assets.
The University at one point suggested that it needs reserves in order to fund its capital expansion plan. However, Union presenter Peter Donohue demonstrated that increased capital costs actually started several years ago when the University began spending between $2 billion and $2.5 billion per year on capital projects. (Exhibit 70). Significantly, the above-described superb year-end financial figures were calculated after taking into account capital spending at that level.
When University witness Jerry Kissler was asked whether, in his view, capital spending or other financial commitments of any type would change the pattern in which the University ends each year having taken in hundreds of millions of dollars more than it spent that year, and having added hundreds of millions of dollars to its unrestricted net assets, Mr. Kissler was clear that he was not predicting any such change. Accordingly, while no one doubts that the University will continue spending upwards of $2 billion per year on capital projects, it is also the case that no one doubts that the University has ample ability to meet these costs and still operate solidly "in the black" each year, without freezing employee salaries. Thus, far from having to dip into its reserves to fund its expansion, the University projects continuing to build those reserves.
The University relies upon an unwritten policy described by Ms. Hayden as follows: for purposes of determining wage offers, the University treats all employees who are "housed" on campus as if they were 100 percent state funded, and therefore offers only percentage increases comparable to any wage funding increases allocated by the state in its block grant to the University. However, in reality, most employee groups that are housed on campus (essentially, all employees who do not work at the University's medical centers/teaching hospitals) are not funded by the state. Moreover, as the examples noted above indicate, the University frequently deviates from this policy.
The parties stipulated that the clerical unit is 68% funded by non-state sources of funding. (Joint Exhibit C, No. 16). While the state provided no extra money in 2003-04 for wage increases, the other sources of funding for the unit increased by sufficient amounts to warrant a wage increase. (Union Exhibits 55-58, 60, 63). The most logical approach is to blend available resources to come up with a rate that is fair and appropriate overall.
By way of illustration, 25 percent of the clerical unit -- 4000 employees -- work at medical centers. Medical center revenues, like all of UC's various sources of non-State revenues, increased substantially in 2003-04 -- this is the reason that UC's total revenues grew in that year despite a cut in State revenues, and also the reason why UC had such a tremendously strong bottom line (net income) for that year. Virtually all employees at the medical centers received wage increases in 2003-04. Yet no clerical employees were offered such increases, because of the University's policy of using the "lowest common denominator" -- state funding -- to determine its wage offer for the entire unit. The University recognized this inequitable anomaly in its negotiations with the service unit, and therefore proposed to transfer thousands of service unit employees to the patient care bargaining unit, in order to provide them a wage increase. (Exhibit 21). This example demonstrates the extent to which the University's policy creates knots that are difficult for the University to unbind, and which should in fact be unbound.
It is ironic that a substantial number of clerical employees are funded by contracts and grants that included budgeted amounts to pay for salary increases for the 2003-04 period. Yet, UC did not provide such increases. UC admits to having redirected the money elsewhere, and finds this entirely justifiable.
In 2003-04, the University requested 6% funding for wage increases from the Legislature, and was prepared to offer CUE a 6% wage increase if the state provided the requested money. A 6% wage increase would have cost almost $30 million (assuming no turnover) -- almost $10 million in state money and almost $20 million in non-state money. (Union Exhibit 50). The University thereby committed to spending almost $20 million in non-state money on this unit, but when the state did not provide its $10 million, the University withdrew its $20 million. University witness Jerry Kissler postulated that this money is being held in building reserves and/or spent on buildings or used to reduce student dormitory fees, now or in the future. While erecting buildings and lowering student fees areWorthwhile goals, the result is inequitable when the money is taken from funds committed toward clerical salaries. Had the $20 million actually been spent as projected, the University's 2003-04 net income would still have been a healthy $766 million, instead of $786 million. If the University had similarly spent non-state funds projected to be spent on salaries in other units, rather than withholding this money, net income would have been further reduced, but it would still have remained healthy.5 Ironically, it must be acknowledged that the University's net income and unrestricted net assets may go up by even more in a period of poor state funding because the University reacts to a state funding freeze by withholding other money projected to be spent on salaries. This anomalous result is further evidence that a change in policy is in order.
Rather than asking the University to dip into reserves, the Union is asking that the University spend something approaching $20 million in non-state money, just as it had planned to spend. Two-thirds of this money would be spent exactly as projected, while one-third ($6.7 million) would require the shifting of money from general funds or other sources to state-funded employees. Such an approach is most appropriate. Certainly, in doing so the University must abide by any legal restrictions on its money, and the University Chancellors will want to exercise their discretion wisely in transferring money from general funds or other sources. However, the University did not establish that there are significant barriers to spending approximately $20 million in non-state money on the clerical unit for 2003-04.
The above described resolution would not only be consistent with what is financially feasible, but would be wholly consistent with the University's own public pronouncements, in which the University is repeatedly on record as having found severe market lags and as prioritizing quite highly the need to begin rectifying (or at least avoid exacerbating) those lags.
D. The Blank Assistant IV Issue
I concur with the Chairperson's analysis as to why it is appropriate to make use of a Blank Assistant IV position at all campuses. Moreover, additional factors further support this conclusion. First, unrebutted testimony from former Union chief negotiator Wilkinson indicates that this subject is mandatory, not permissive, in the present reopener negotiations over wages. Ms. Wilkinson testified that in previous negotiations the issue has always been discussed as part of the Wages Article. (Exhibits 30 & 31). Aside from establishing a past practice, this history indicates that the parties had every reason to believe that in agreeing to a reopener provision that provided automatic reopening of the Wages Article (Exhibit 32, § B), the blank assistant IV issue would again be subject to negotiation.
Second, as wage lags have become worse over time, there has been a noticeable trend toward reclassifying people out of the clerical unit and into "professional" titles in order to retain them, despite the fact that they are still doing clerical work and do not possess professional degrees that are required for professional titles. A University management study supports this conclusion, finding "widespread system gaming," noting that principles of game theory predict that managers will behave in this way when faced with no other option to remedy recruitment and retention problems. (Exhibit 40, page 4; Exhibit 41, Appendix 3, third and fourth pages; Hurley presentation, p. 230). Making use of a Blank Assistant IV position is an obvious step toward rectifying the "system gaming" that UC management has itself identified, and, as the Chairperson noted, this proposal costs no money (because the University would have sole discretion concerning whether to transfer or hire any employees into that position) and in fact might save money by providing a lower cost option for employees who are being inappropriately reclassified into professional titles as a result of retention problems.
II. Benefits
I dissent from the fact-finding panel's recommendation that no adjustment should be made for the clerical employees, who have experienced a dramatic increase of both their co-payments and their share of medical premiums. The Chairperson's recommendations concerning benefits were made purely on the basis of consistency with current University policy, and not due to the standards which the fact-finding panel should have used, namely the employer's ability to pay, the comparative benefits of similarly-situated workers, and the CPI. I also dissent from the recommendation that there should be no stipend for rural employees. It is my position that the poorly paid clerical employees should pay no contributions towards their health premiums; in addition, I believe that the rural employees who live in an area where no HMO plan is available should receive a stipend for the difference between what a PPO charges and what an HMO would have charged.
I do concur with the chairperson's recommendation for coordinated bargaining on health care issues, which is greatly needed at such a large institution. I do support the current "banded" system which is currently in place at the University. However, as long as the clerical unit is so underpaid, it is cruel to ask them to pay more for monthly contributions.
The experts for the union proved that the benefits offered by the University were generally no more than average, and in many cases -- especially as compared with CSU employees -- significantly worse. Using standard comparators, Ms. Hurley found that University benefits lag the market in some important respects. (Hurley presentation, page 8). The Watson Wyatt study tried to assert a contrary conclusion because it used a small group of private sector comparators (many of which offered no pension and no sick leave); even the study authors acknowledged the comparators were inappropriate. Moreover, Watson Wyatt found that UC spends only about 24.7 percent of its total compensation dollars on benefits. While this percentage was almost double the percentage spent by the 17 private sector comparators used by Watson Wyatt, Ms. Hurley showed that more typical comparators spend a little bit more on benefits than UC, in the nature of about 27% to 30%. (Id., pages 171, 183-185). Given that UC's wage lags are well-established, and the University spends the same or less on benefits as a percentage of total compensation, one can reasonably conclude that the University's benefits also lag the market.
Other analyses bear out this conclusion. For example, UC's pension formula is less favorable than that used at CSU and less favorable than those used by most other PERS employers. (Id., page 153,158).6
Moreover, until 2003 (including during 2000-2001 when Watson Wyatt conducted its study), UC provided a fully employer paid health plan. (Id., page 108). However, since then, UC has eliminated that option, even for single individuals, (Id., Page 119, 130), and UC has greatly increased its co-payments for all types of services. (Id., pages 120-123). These changes, even factoring in a few minor positive changes that were made regarding supplemental disability insurance and life insurance, result in a significant decrease in take-home pay, estimated at between 1.5% and 4.7% of a typical clerical employee's salary. (Id., pp. 125-127).
Certainly, medical inflation has been high for the University in the past couple of years. However, in the preceding decade the University saw very little medical inflation, meaning that the current medical inflation, when seen in the context of a 15 year period, is not out of the ordinary. (Id., pages 128-129). CSU, which has been hit with far more medical inflation than the University, continues to pay a greater percentage of employees' health benefits, and unlike UC continues to pay the entire health premiums for employees and their spouses. (Id., page 162).
The University has not reacted to this very recent medical inflation by simply increasing its own share of employee benefit premiums and employees' share by the same percentages. Rather, while increasing its own contribution in 2004 by only 9.44% to 12.62%, UC increased employees' shares of the premiums by 26.88% to 75.00%. (Id., pp. 131-132). At a minimum, UC should increase employees' share of premiums by no greater a percentage than it is increasing its own share of the premiums. And with wages falling further and further below market, UC should do better, freezing employee premiums for its lowest paid employees (those in the less than $40,000 per year "wage band"). Otherwise, UC's wage disparities with respect to CSU will be exacerbated by a significant benefits disparity as well.
Finally, it would be appropriate for the University to agree to the Union's demand to institute a stipend for rural employees who are not eligible to join cheaper HMO plans. Indeed, CSU provides such a benefit. (Id., page 170).
III. Parking
I dissent from the Chairperson's recommendation that parking increases requested by the University are appropriate. The Chairperson based his recommendation primarily on his belief that this issue did not affect enough of the bargaining unit to rule in favor of the union. His recommendation was not based on the merits of the matter. It is my opinion that the chairperson would have ruled in favor of the union had he felt enough employees were affected.
The University proposes parking increases at 6 locations. For the most part, the locations seeking increases are the locations that already have the highest rates. (Id., p. 217). The increases sought by the University range from a low of 3.64% at UCLA, up to 7.58% at San Diego, and 25% at Merced. (Id., p. 220). These proposed increases are unwarranted for quite a number of reasons that are not difficult to identify and illustrate, as shown below.
A. Generally Applicable Issues
1. Ratio of Operating Expenses to Debt Service
The University's first witness, Greg Winegar, noted that parking is an auxiliary, and is therefore treated by the University as self-supporting. Standard projections are used to determine whether campus parking departments need to raise rates. Annual net operating income (operating revenues minus operating expenses, before debt service) must be 1.25 times the amount of annual debt service. As noted in the campus specific findings, the major campuses at issue (UCLA, Berkeley, San Diego and San Francisco) all well exceed that ratio.7
2. Money Projected to Be Spent on Salary Increases that Was Never Actually Spent
All of the parking representatives testifying at fact-finding admitted that their projections assume salary increases upwards of 3% per year (in one case as high as 6%), but that they have not actually been providing such increases in the past several years and do not anticipate giving them in the coming years either. In other words, the projections used to support rate increases are based upon projected expenses that everyone knows are not real. Indeed, even CUE's wage demands would not require wage increases at that level. For this reason alone, the rate increases are unsupportable. Moreover, parking constitutes an important example of the points discussed above -- how significant sums of non-state money are specifically allocated toward clerical salaries, but never spent on clerical salaries, as a result of the University's policy.
3. Parking Replacement
Every University witness on the subject of parking readily acknowledged that the University often loses parking spaces because it chooses to build academic buildings on locations containing surface parking lots. The University is then forced to replace those spots by building more expensive above-ground structures elsewhere (occasionally the University is able to create relatively cheap new surface lots, but this is unusual).
Every University witness also confirmed that where the academic buildings being erected are paid for by state funds (which is the most typical case), the campus Transportation and Parking Services Department receives no reimbursement for the lost spaces, meaning that the cost of rebuilding these spaces is simply passed on to employees and anyone else purchasing parking permits. In this way. University employees are frequently required to pay part of the costs incurred by the University in creating new academic buildings. This is not a traditional "parking" cost or even an alternative transportation cost, and should not be, charged to employees. Rather, if the University is in fact prohibited from using state money for this purpose, then it should use its substantial non-state unspent net income to pay for parking replacement.
4. Market Comparisons of Employee Parking
Watson Wyatt determined that most employers provide free parking, as most employers own their own lot (UC also owns its lots). (Hurley presentation, page 109-111). CSU operates truly separate and self-supporting parking entities (unlike those at UC, which are treated as auxiliaries but are part of the University), yet CSU charges rates that are only a very small fraction of those charged by UC. (Id., p. 222). Recognizing these problems, a UC management study recommended charging lower paid employees less for parking, and providing more spaces for staff, who often cannot find spaces despite having paid for a monthly parking permit. (Exhibit 43, p. 27).
B. Campus-Specific Issues
1. UCLA
UCLA has operating revenue of $34 million per year, but operating expenses far below that level, leading to net operating revenue of $18 million. (UC Exhibit F, third page). This superlative financial performance has allowed UCLA to amass $19.4 million in reserves ($15 million in accumulated earnings, plus $4.4 million in replacement reserves). (Exhibit 78).
UCLA has debt service of only $7 million per year, so its current ratio is approximately 2.5, or twice the targeted 1,25. UCLA projects that its debt service will rise to $10 million per year over the course of the next five years, but UCLA projects that its net operating revenue will also rise, up to $24 million per year, so that its ratio will remain right around 2.5, or twice the targeted level. For this reason, UCLA has failed to provide any economic rationale for its proposed rate increase.
The failure of proof is exacerbated by other factors. First, the reality is even rosier than the above described projections, since the projections contain the faulty premise that UCLA will be providing wage adjustments of 3 percent to 4 percent per year. Second, UCLA admits that after building one more parking project (incorporated into the above projections), in order to comply with environmental regulations, it will not be building any more structures, thereby further counseling against any need to continue amassing huge accumulated earnings. UCLA's proposed parking rate increase is inappropriate.
2. San Diego
San Diego has total operating revenue of $16 million per year, and operating expenses of only $8 million per year, leaving net operating revenue of $8 million per year. (Exhibit 76). This profitable circumstance has allowed San Diego to amass $20 million in accumulated earnings. (Exhibit 75).
San Diego plans to build 2 additional parking structures. The first (called "Hopkins") is projected to commence next year and will cost $29 million, of which 8 million dollars will be paid upfront and $21 million will be financed. The second (called "Revel") is projected to commence in 2006 or later, and will cost $41 million, which will be entirely financed.
Thus, even the present level of accumulated earnings (ignoring the extent to which those accumulated earnings would continue to go up each year, without any rate increase, as a result of . extremely positive net income each year), is more than 2.5 times what will be necessary for the two additional parking structures.
Like UCLA, San Diego presently has a 2.5 ratio of operating revenues to debt service, twice the targeted level. While debt service is expected to go up with the addition of the two new projects, so is net operating revenues, and San Diego witness Greg Snee testified that while he did not have exact projections, he did not have any concern that the ratio would drop below the targeted level of 1.25.
Mr. Snee testified that San Diego has in recent years lost 1600 parking spaces as a result of academic buildings being erected in areas that used to have surface parking. 600 of these parking spaces were lost to state-funded projects, meaning that employees paid for the cost of replacing these spaces (in reality a cost of the academic buildings). With respect to the other 1000 lost spots, San Diego was reimbursed $2,880 per spot, which is 7 to 10 times less than the cost of replacing the spots (over $20,000 per spot), meaning that, again, employees are being required to pay the indirect costs of building new academic buildings.
San Diego also represents an important example of the principal of "budget variance." Budgets, in our collective experience, are often worst-case projected documents, and reality is often much better. Parking is no different. In June of 2001, San Diego projected that its accumulated earnings would be about $11 million 2 years later -- as of June 2003, and would remain at about $11 million a year later -- as of June 2004. (Exhibit 6). In reality, however, accumulated earnings were nearly $18 million in 2003, and over $20 million in 2004. (UC Exhibit H, page 2). One reason for the above variance can be easily identified -- Mr. Snee testified that San Diego projected salary increases of 6% per year, which obviously has not happened.
Finally, San Diego also represents an example of a campus in which employees subsidize not only academic buildings, but also medical center patient parking. Mr. Snee testified that parking rates for patients and other members of the public have not gone up in 11 years. In contrast, employee parking rates have gone up 27 percent (from $55 per month to $71 per month) in the last three years alone. (Hurley presentation, pp. 217-221). Employees should not be required to subsidize medical center patients and other members of the public.
As with UCLA, the weight of evidence strongly tilts against San Diego's proposed rate increase.
3. Berkeley
Berkeley's net operating income (operating revenue minus operating expenses) is normally between $2 million and $3 million per year. (Exhibit 81). Berkeley presently has reserves of $11.5 million. (Id.).
Berkeley presently has 2 parking projects that it plans to build. The first project (called "Underhill") is estimated to cost $38 million, of which 8 million dollars will be paid upfront, and $30 million will be borrowed. This construction project will commence in May 2005. The second structure (called "Kleeberger"), currently projected to begin in approximately five years, is smaller. It would only cost $14.3 million, of which $2.5 million would be paid upfront, with the remainder borrowed.
As noted above, Berkeley has reserves of $11.5 million. Accordingly, even just based upon current reserves (ignoring the extent to which current reserves will continue to grow without any rate increase, because net operating revenue is several million dollars each year), there is enough money for the entire $10.5 million in down payments for the two new projects that the campus plans to build in the next 10 years. When confronted with this fact, and asked directly how he could justify a rate increase in these circumstances, Berkeley witness Nadesan Permaul noted that he also has to keep his net operating income at least 1.25 times as high as debt service. However, Berkeley's own projections (see final page of UC Exhibit D) unequivocally show that Berkeley's debt service ratio is presently 2.91, and will remain well above 1.25 for many years in the future. According to the final year of the projection, 2012-13 Berkeley's ratio will be 2.11. Therefore, Berkeley provided no economic rationale for raising rates at this time.
4. UCSF
UCSF typically has net operating income (operating revenue minus operating expenses) of approximately $2 million per year. (Exhibit 79). UCSF presently has reserves of over $5 million. (Exhibit 80). UCSF has 2 new structures that it plans to build, both at Mission Bay.
UCSF is another prime example of how budget variances play out -- UCSF's projections are simply not accurate. As of June 30, 2003, UCSF made a projection concerning its 2003-04 total net income after debt service (revenues minus expenses minus debt service), and projected a loss of $349,000. (Exhibit 2-b). In reality, however, UCSF had a very positive outcome for that year. profiting by more than $820,000, even after all debt service was paid. (UC Exhibit E). This inability to project even one year out shows that UCSF's future projections through the year 2017 (UC Exhibit E, second page) are overly conservative.
However, even if UCSF projections were accurate, they again show that UCSF will easily stay above the target ratio of 1.25. Presently, UCSF has operating revenues of $2 million, and almost no debt service (< $200,000), for a ratio of 10:1. UCSF will soon see its debt service increase with the construction of the Mission Bay projects, up to almost $3 million per year, after which it will plateau at that level. However, over the same time, UCSF projects that its operating revenue (total revenue minus total operating expenses, before debt service) will increase to between $4 million and $5 million per year, so that its ratio will be between 1.33 and 1.66, exceeding the target ratio of 1.25. (UC Exhibit E, second page).
Also, significantly, UCSF witness John Gledhill admitted that while the campus increases employee parking rates at 4% or 4.5% each year, UCSF raises, its public parking rates (used primarily by patients) at a much lower level -- only 25 cents per hour every fourth year, which amounts to an average increase of less than 2.5% annually. In this way, employee rates grow disproportionately as compared to patient rates, and employees end up subsidizing patients. The proposed rate increases are inappropriate.
5. Merced
Merced is a new campus, so there is far less data available. The main and undisputed fact is as follows: the Regents are paying for the construction of the entire Merced campus, except for parking structures, which are being paid for by employees and anyone else purchasing parking permits. While this is certainly an improvement over having employees pay for academic buildings, as occurs elsewhere, it is, not surprisingly, the subject of much dispute. Additionally, Merced has taken out a ten-year loan, rather than spreading costs over a more typical thirty-year period, thereby leading to greater short-term increases.
Whatever conclusions one might draw from the above findings, it at least must be found that Merced has determined its requested parking rate increase using calculations in which it projects 3.5 percent increases for salary adjustments each year, but. Merced is not actually providing such salary adjustments, meaning that no parking rate increase is necessary.
6. Santa Monica Hospital
No findings can be made with respect to the proposed rate increases at Santa Monica Hospital, because Santa Monica Hospital's witness, Carolyn Mclntyre, admitted that Santa Monica Hospital does not keep separate parking financial statements. The reason, she explained, is because Santa Monica Hospital is already treated by the University as an "auxiliary," so there is no need to treat parking as an auxiliary. Thus, while Ms. Mclntyre attempted to argue that the hospital runs a deficit on parking, this cannot be ascertained without looking at the hospital's entire financial statement, which was not provided. It is clear, however, that the hospital is in the enviable position of having no debt service whatsoever related to parking, and that the hospital, like the other campuses, proposed parking rate increases based upon projected salary increases of 3% or more, which have not occurred.