The high-tech hub and the cheese-loving state have seen their financial fortunes fall over the past three years. Each has responded by zeroing in on labor unions, though in drastically different ways.
Wisconsin made national headlines earlier this year when its Republican legislators passed a law curtailing the collective-bargaining rights of state employees.
In Palo Alto, the cost-cutting effort has been far less dramatic but, to union members, no less real. Since 2009, the City Council and City Manager James Keene have made a commitment to extract concessions from each labor union, including permanent "structural" changes to pension and health care benefits. The council also voted in July to place a measure on the ballot that would eliminate binding arbitration for disputes between the city and its public-safety unions. These efforts have prompted some labor leaders to cry foul and compare the city's reform efforts to Wisconsin's.
The council's drive to slash benefits has made many City Hall employees unhappy, though, to paraphrase Leo Tolstoy, each labor group has been unhappy in its own way. The city's largest union, the Service Employees International Union (SEIU), Local 521, initially rallied against the reforms but has been largely silent since the city imposed the new conditions on its roughly 630 members in October 2009. Last year, the union voted to extend a contract that includes a two-tiered pension plan (with newly hired employees subject to a less generous formula) and a cost-sharing arrangement for medical expenses — moves that the union had fiercely resisted in 2009.
The management-and-professionals group — the only major labor group that's not a union — began giving serious thought to becoming one. Last year, the group briefly flirted with joining the Teamsters. Meanwhile, two subgroups of employees splintered off to become their own, more specialized unions. The Palo Alto Police Managers Association, which represents police captains and lieutenants, was born in fall 2009. The Utilities Managers Professionals Association of Palo Alto, which includes 45 members of the Utilities Department, officially sprung into existence in June. Both small unions were formed out of general frustration that their particular concerns aren't being met, members said.
Public-safety unions have also been grumbling. Two years ago, Palo Alto's largest police union, the Palo Alto Police Officers Association, offered to forego its members' negotiated raises to help the city close its budget deficit — a gesture that reduced the city's expenditures by about $800,000. Now, the union finds itself fighting to keep the city from chopping away at its benefits.
City Manager James Keene made it clear he would seek the type of concessions from the officers as were imposed on the SEIU workers. The city's contract negotiations with the police union formally launched in June, but the union could lose much of its negotiating leverage in November if voters approve Measure D and repeal the binding-arbitration provision from the city's charter. Sgt. Wayne Benitez, president of the police union, said many in the union are disappointed by the council decision to place the measure on the ballot.
"What the city has done is they created an atmosphere of a lot of unhappy people," Benitez said when asked about the impact of recent negotiations. "In general, people are appreciative that they have jobs in the city. It's a nice city to work for. But, in general, most people feel very underappreciated, and they don't feel like the City Council or the city manager is truly backing them."
The most heated battle, and one with perhaps the greatest implications for both the city budget and labor relations, is the two-year jostle between management and the city's firefighters union, Palo Alto Professional Firefighters, Local 1319. Unlike other labor groups, whose complaints have generally remained behind closed doors, the firefighters' feud with the city has been public, political and litigious. The union last year sponsored a measure that would have frozen staff levels in the Fire Department and required the city to hold an election before it could reduce Fire Department staff or close a fire station. The measure lost overwhelmingly, with more than 70 percent of voters rejecting it.
The firefighters union is also the main driver behind the council's decision to place Measure D on the ballot. The Fire Department's budget has risen by 37 percent between fiscal years 2006 and 2010. So far, the city's firefighters have not had to face the type of benefits cuts that the city has imposed on SEIU workers and managers.
To explain the escalating expenditures in the Fire Department, some on the council point to the city's binding-arbitration provision. The provision, which voters added to the City Charter in 1978, enables a panel of arbitrators to settle disputes between the city and its unions. Unlike most of the other employees (with some exceptions in Utilities and Public Works), police and firefighters are barred by law from striking. The provision was meant to ensure that despite this restriction, police and firefighters would have some leverage in their negotiations with the city.
The main proponents of Measure D, Councilman Greg Scharff and Councilwoman Karen Holman, have argued over the past two years that the provision restricts the council's ability to balance its budgets and creates a disparity between public-safety employees and all other city workers.
Scharff said at the July 18 meeting that the mere threat of binding arbitration prevents the council from making important budget decisions. Holman said the provision's presence has forced the City Council to "settle for something less than where we needed to be."
In fact, even though binding arbitration has been used six times and the verdicts have been split fairly evenly, the arbitration panels have consistently sided with the unions on the major issue of pension reform. In 1980, the panel rejected the city's attempt to add a second tier in the pension formula for new employees in the fire union. The panel also sided with the police union in 1983, when it ruled that the city should pay both the employer's and the employees' share of pension contribution.
For the public-safety unions, the implications of Measure D are potentially dire. If the measure were to pass, the council would have the power to impose on its police officers and firefighters the types of concessions it has extracted from the SEIU and the managers. The firefighters union responded to the council's decision to place the item on the ballot by filing an "unfair practice charge" against the city with the state's Public Employment Relations Board and by seeking an injunction that would have blocked the measure from appearing on the Nov. 8 ballot. The board rejected this request.
Tony Spitaleri, the president of the firefighters union, immediately described the council's action as "another attack on the basic rights of workers, just like the attacks on collective bargaining we have seen this year all around the country." He also predicted that city voters would reject Measure D.
"Palo Alto is no Wisconsin," Spitaleri said. "Unlike the City Council, Palo Alto voters value fairness."
Other union leaders were less blunt, but they also said they see the recent reforms in Palo Alto as part of a broader national response to the economic downturn and the populist anger against public workers that this downturn has engendered. Benitez and Lt. Ron Watson, president of the Palo Alto Police Managers Association, both said they accept the fact that the city is struggling financially and that their unions will need to contribute. But in their view, as in the view of many city workers, the cuts are also shaped in some part by the philosophical debate taking place across the nation about public workers.
"There's a national tide against workers," Watson said. "We kind of fly under the radar in good times and then pop up in bad times."
Palo Alto is far from the only place where labor unions are seeing their fortunes decline. The economic downturn that shook the globe in 2008 continues to linger. Plummeting sales-tax revenues have taken a bite out of local and state budgets across the nation, prompting lawmakers to slash budgets and take a fresh look at employee expenditures.
In Ohio, much like in Wisconsin, a newly elected Republican governor passed a law this year severely curtailing the collective-bargaining rights of state employees. In New Jersey, Gov. Chris Christie's opposition to public unions has made him a political rock star among fiscal conservatives and Tea Party stalwarts.
Public employees have also been feeling the pinch on the local level in California. Budget woes have prompted San Jose and Oakland to whittle down their respective police forces. San Jose voters also passed a ballot measure last year that reformed the city's binding-arbitration provision, empowering a retired judge to settle disputes between the city and its public-safety workers. Voters in Vallejo, which went bankrupt in 2008 after failing to win union concessions, narrowly passed a ballot measure last year abolishing binding arbitration for police and firefighters. In August, voters in San Luis Obispo did the same thing through a mail-in ballot. More than 70 percent voted for the repeal.
But Palo Alto isn't Oakland, Vallejo or San Luis Obispo. Though the city's tax revenues have dipped as a result of the global recession, its fortunes have been slowly picking up over the past year, and officials expect revenues to increase by $2.5 million between 2011 and 2012. Politically, the city's leadership is about as far from the Wisconsin Legislature as it is geographically. The council, while nonpartisan, leans heavily to the left. The city's elected representatives in Sacramento and Washington, D.C., are all Democrats, and 53 percent of the city's voting population are registered Democrats (compared to 17 percent who are Republicans). And unlike Govs. Christie, John Kasich and Scott Walker of New Jersey, Ohio and Wisconsin, respectively, Palo Alto officials have been careful not to frame their recent reforms as ideological stances on labor unions but as necessary steps to balance the books.
On July 18, as the council was preparing to vote on placing the repeal of binding arbitration on the ballot, several members went out of their way to point out how much they value city workers. Five members said they oppose the repeal (though one of the five, Vice Mayor Yiaway Yeh, voted with the four who support the repeal to place the item on the ballot). Council members Nancy Shepherd and Gail Price stressed their support for the labor movement and for collective bargaining, while Mayor Sid Espinosa, addressing city workers, told them that the city appreciates them and values the work they do.
"This policy should not be seen as not valuing the significant contributions you make every day — putting your lives at risk to save citizens here," Espinosa said — a comment one might find hard to imagine coming from Christie or Walker.
Despite these caveats, union officials were quick to link Palo Alto's reforms and its drive to repeal binding arbitration to the sea change taking place nationwide. Spitaleri wasn't the only union member to make the Wisconsin comparison. The Santa Clara County Democratic Party sounded a similar note earlier this month when it took a formal position against Measure D.
"Just like the attempts to take away the collective bargaining rights of workers in Wisconsin, Measure D aims right at the heart of working people," party Chair Steve Preminger said in a statement.
Like other labor and party officials, the party is keeping a close eye on the Palo Alto election. Preminger said in a recent interview that while the Palo Alto council bears little similarity to Wisconsin lawmakers, both bodies have turned public workers into scapegoats during the economic downturn. Preminger, himself a former Palo Alto employee and a former SEIU representative, said he hopes the city's leadership would sit down with the unions and reach a "mutually beneficial relationship" after the November election.
"This is significant because Palo Alto is a unique community and it's a large community — larger than some of the other cities that have done this," Preminger said. "I hope that the voters, when they vote for this, really understand the issue and aren't just paying attention to folks who say we can't afford it (binding arbitration) and that it's bankrupting the city and all that.
"The Wisconsin comparison is really a comparison about attacks on public employees," he added.
When City Manager James Keene talks about the recent labor reforms, the focus is usually on the numbers, not ideology. Pension costs in Palo Alto, as elsewhere, have been going through the roof and are expected to continue their ascent over the next two years. According to the city's Long Term Financial Forecast, pension obligations are expected to jump from about $19.5 million this year to about $28.9 million in 2015.
Medical costs are also skyrocketing. Staff projects the city's medical expenses for active employees and retirees to increase from about $23 million in the current fiscal year to $30 million in 2015, according to the forecast.
"What we've tried to do as a city is to try to tackle these root issues to try to make systemic ongoing solutions so that we can ultimately come out of it faster and better than others," Keene said.
It was these twin trends, along with continuing uncertainty over the economy, that have prompted the city's recent reform movements, Keene told the Weekly. He acknowledged that these changes have hit the unions hard but maintained that they are necessary to ensure the city can meet its long-term commitments.
"The things that have driven our need as a city to make systemic changes in our long-term cost structure have been extremely difficult," Keene told the Weekly. "They've required sacrifices by our employees, and they've required concessions from our labor unions. That is difficult, and it's impossible for those sorts of changes to not have an impact on morale."
The four council members who support the repeal of binding arbitration — Scharff, Holman, Pat Burt and Greg Schmid — have also couched their support for Measure D largely in financial, rather than philosophical, terms. Scharff noted at several meetings that the city's 2012 budget assumes $4.3 million in concessions from the two major public-safety unions. Without binding arbitration, the city could've made the necessary cuts sooner and would not have a gaping hole in its budget, he said.
Schmid called the city's budget situation — namely, rising expenditures and falling revenues — the "single most pressing issue I've run into consistently over four years." The time is ripe, he said, to scrap binding arbitration.
The recent strife over salaries and benefits, and power, has taken its toll on the entire staff — not just on the union workers bearing the brunt of fiscal cuts. The city's reforms, particularly its recent requirement that workers chip in for medical care, have prompted an exodus of employees from City Hall. The flight came in three waves roughly corresponding to the reforms and has left top management and the remaining staff in a logistical pickle. It doesn't help that between 2009 and 2011, the city reduced the number of full-time employees supported by the city's general fund from 652 to 580.
To deal with the smaller staff size, the city has turned to familiar faces — its recent retirees. According to a report the Santa Clara County Grand Jury released earlier this year, Palo Alto had a higher percentage of employees who are rehired retirees — 5.8 percent — than any other city in the county. The other cities in the county averaged 1.6 percent.
Keene acknowledged that the city's actions in bringing its finances in order had accelerated the workers' departure and put the city "in a bit of a predicament."
Keene said the city is currently actively recruiting for 45 positions — nearly 5 percent of the workforce. The turnover, he said, has had a major impact on City Hall, forcing staff to work much harder in both filling vacancies and in performing the day-to-day functions of keeping the streets safe and the electricity flowing. But Keene also said the turnover is creating an opportunity to bring fresh talent into the organization.
"It's undoubtedly a very stressful time for all of us," Keene said. "But there are good aspects to the stress along with negative ones."
Just about every department is feeling the pinch these days. In June, Utilities Director Valerie Fong said one of the greatest challenges Utilities is facing is retaining employees. The department is now busily training employees about how the various utility systems function and what to do if one goes down.
Police officers who are eligible for retirement are also heading for the exit, in many cases to protect their lucrative health care arrangements, Benitez said. Palo Alto officers, he said, have traditionally been among the lowest paid in the region. What made the job lucrative, he said, was the city's benefits, particularly its willingness to pay 100 percent of employee medical costs. The prospect of losing this benefit has left many in the union disappointed and looking for other jobs, he said.
Benitez said he knows at least three people in his union who are looking for jobs out of state. He said the department expects the "floodgates to open up in law enforcement" around California in 2014. Statewide, Benitez said, about a third of the people working in law enforcement are expected to leave their jobs in the next decade.
In the small and nascent police manager's union, the changes are particularly dramatic. The union formed in 2009, largely in response to the city management and professionals group's effort to join the Teamsters. At that time it had seven members <0x2015> two captains and five lieutenants. Watson said three of these lieutenants retired this summer. Of the four people left in the union, two are eligible for retirement and will likely leave if they deem it financially advantageous.
"Each person looks at their own financial situation and makes a decision," Watson said. "They look at what they'd make if they retire today, based on their salary, and what they'd get for their medical benefits. Then they consider what they'd get if they retire later."
Police officers, Watson said, expect to chip in to help the city overcome its recent financial struggles. What bothers them, he said, is not knowing what type of cuts the city will seek next.
"I personally don't have a problem with the 90-10 or some different versions of that," Watson said. "But it's a little hard for folks when they don't know what's going to come."
The retirements of police managers could have deep implications for the department. The city's Independent Police Auditor Michael Gennaco alluded to the anticipated retirements in his latest report, which came out last week.
"This will pose a significant challenge to the continuity and continued high quality of internal affairs and citizen-complaint investigations," Gennaco wrote, referring to the retirements. "We are hopeful that the Department gives thoughtful consideration to these issues when developing a transitional plan so that this important function is not undermined."
Most labor leaders remain somewhat hopeful that the recent union struggles, in Palo Alto and elsewhere, could reverse. But they believe that this can only happen if the economy picks up or if the national conversation shifts from cutting costs to adding revenues. Few expect this change to happen soon, particularly given the national sentiment and the Tea Party's rise. Even if the economy were to improve, it would probably take a few years before unions see any benefits, Preminger said.
But he said he remains optimistic that the conversation could shift. He pointed to President Barack Obama's recent proposals to raise taxes for high-income residents as a step in that direction.
"There's nothing like a recovering economy for problems to go by the wayside," Preminger said. "But I think there really are problems when people look for scapegoats."
Even if the economic outlook brightens, the traditional power of unions has already taking a beating. The SEIU is no longer flexing its muscles. The management group has fewer members and, as a result, even less leverage. And if Measure D were to pass, the police and firefighter unions would no longer have a mechanism in their favor for settling disputes with the city.
Keene, for his part, said he hopes that once the city approves the new police and fire contracts, the most difficult part of the structural adjustments will have passed.
"I think the city has had to take the necessary steps for the long-term good of the city but also for the long-term good of employment in the city," he said. "We're hopeful that once we conclude this round of negotiations with public safety and we look at these pension issues, we will turn the corner for the most part, barring some new round of devastating economic news."