Weeks before the Palo Alto City Council voted to slash $40 million from the city budget and eliminate more than 70 full-time positions, the city's largest labor union approached management with an offer that members claimed would save more than $3 million.
Service Employees International Union, Local 521, which represents more than half of the city's workforce, proposed foregoing the 3% raises that its members were entitled to receive on Dec. 1 under a three-year contract that expires on Dec. 31, 2021, according to Margaret Adkins, chair of the union's Palo Alto chapter. The union and the city had been negotiating since April and members thought the offer, as well as the union's willingness to accept furloughs in the coming year, would obviate the need for significant layoffs, Adkins said.
There was, however, one major catch. The union insisted that employees who are set to retire in the coming months be exempted from the freeze. Asking them to forego their raises would mean getting smaller pensions, Adkins told this news organization.
"If they left, they'd be making lifetime concessions," Adkins said. "We didn't think it was fair. Their pension would be affected forever."
That request proved to be a deal-breaker, according to the union and the city. Meghan Horrigan-Taylor, the city's chief communications officer, said the union proposal did not include a salary freeze. And because of their proposed exemptions, the SEIU offer "fell short of the $3 million gap we were working together to address," Horrigan-Taylor said.
"In addition, SEIU included other operational challenges in their proposal that the city could not accept," Horrigan-Taylor added, without specifying what those challenges are.
The failure of management and union leaders to reach an agreement before the June 22 deadline will have repercussions both in the immediate future and beyond. In the current fiscal year, the lack of concessions means that the city was forced to cut more services and positions than it otherwise would have to meet the council's goal of trimming expenses by $40 million. This includes significant cuts to Children's Theatre programs, Palo Alto Art Center exhibits and park maintenance. It also means reducing hours at libraries and eliminating the city's shuttle program.
In the long term, it threatens to undermine what has been a relatively amicable relationship between the SEIU and the city. Over the past decade, the two sides have successfully negotiated numerous multiyear contracts that provided union members with salary increases in exchange for concessions on pensions and benefits. And in March, when the city began shutting down recreation services and community services in response to the COVID-19 pandemic, the council voted to keep paying all employees, even those who can no longer work because of the shutdown, until the end of the fiscal year. That provision expired on June 30.
That sense of solidarity has given way to an aura of mistrust. Chris Brickner, a substation electrician in the Utilities Department, said at the June 22 council meeting that when the union was approached by the city this spring with a request for concessions, he was more than willing to help other union members keep their jobs. In later meetings, the union learned that the city was planning to cut services even with the proposed concessions.
Brickner said at the June 22 meeting that the union returned multiple times with "generous concessions" that surpassed the $3 million mark, only to be told by the city that it was not enough.
"It seems to me there is some other plan or agenda being pushed on all city employees," Brickner said at the June 22 meeting, just before the council approved the budget.
The city had more success with other labor groups. All the public safety unions agreed to delay their 3% raises for a year and were rewarded by the city with "attrition ramps" that effectively delay the position reductions. Because of their concessions, no sworn positions will be slashed until either this fall in the Police Department or at the end of the year in the Fire Department. This will give them some time to achieve cost reductions through retirements, rather than by laying off recently recruited employees (the city sweetened the pot for retirees by offering $30,000 payments to those opting for retirement).
The "management and professional" group, which represents more than 200 employees and which is the only group that is not in a union, had agreed to 13 furlough days in the coming year, about half of what it had agreed to earlier. Its new compensation agreement also specifies that there will be "no base salary increases or compensation adjustments tied to the performance appraisal process." These concessions from the management group are expected to save the city about $3 million, according to the Administrative Services Department.
Kiely Nose, the city's chief financial officer, noted that the city was planning to ask the management group for 26 unpaid furlough days. Absent a deal with the SEIU, which represents more than 550 positions, this was no longer a viable option, she told the council.
"Without any sort of agreement with our largest labor workforce, implementing something like that seemed impractical and infeasible," Nose said.
The failed negotiations process also exposed a rift between the SEIU and the management group. Adkins said the SEIU asked the city during the negotiation process to perform a "span of control" study, which evaluates the number of employees that report to managers. In some cases, Adkins told this news organization, there are managers who are supervising just one or two employees.
As an example of the city's top-heavy structure, Adkins pointed to the Library Department, where she said the city had hired a senior librarian in April before proceeding to let go of other librarians. Martha Walters, a business analyst in the Library Department, made a similar point at the June 22 meeting, where she described the staffing cuts in the department as "a bitter pill to swallow."
"What is more perplexing and spine-chilling is the fact that not one library manager who directly manages any rank-and-file (employees) is slated to be laid off," said Walters, a SEIU employee who serves as secretary of the Palo Alto chapter.
Adkins told this news organization that the union was hoping that the city's budget process would look at "restructuring" at City Hall.
"We knew it would hurt both sides, but it was needed to stabilize the budget for the long term," she said.
As the new fiscal year kicked in on July 1, Adkins said the union was trying to mitigate the budget pain by looking for new positions for employees whose jobs are being eliminated. She said she is still going through the process of seeing which employees can be bumped up to positions that had previously been left vacant, and which employees would have to be let go (last year, the SEIU had about 70 vacant positions, according to a staff report).
Some employees, she said, may have to "bump down" to lower positions to keep their employment. Most, however, will remain with the city in some capacity. Adkins said about seven workers will have to be let go.
City leaders have generally kept silent on the topic of union negotiations, limiting all discussions to closed sessions with no reportable actions. Unlike in 2010, when the city and the SEIU were fighting over pension reform in the midst of an economic downturn (which resulted in the elimination of 56 positions), none of the offers or counteroffers in the recent negotiation session were made public. Both the SEIU and the city have declined to release their respective offers, or any other documents to substantiate their claims, to this news organization.
Given the impasse, SEIU members will receive the 3% raises on Dec. 1 of this year, consistent with the terms of a contract that the council approved in April 2019. The contract expires on Dec. 31, 2021.
Because the city's agreement with SEIU is a "closed contract" that is legally binding on both sides, the city had little leverage to violate its terms without the cooperation of the union. As such, council members said very little during the marathon budget sessions about employee compensation (the city's only open contract is with the Utilities Managers and Professionals Association of Palo Alto, a group of utility workers whose contract expired on June 30). The only council member who publicly expressed frustration about the city's failure to negotiate concessions with the SEIU was Greg Tanaka, who frequently criticizes his colleagues and city staff for excessive spending.
"We're giving raises. It's just mind-boggling," Tanaka said at the June 22 meeting, just before the council adopted its budget.
At the same time, Tanaka echoed the SEIU's concerns about the number of managers at City Hall and similarly called for a span-of-control study. Tanaka estimated that about 20% of the city's employees are managers and argued that proportion is too high. He had also proposed on May 26 that the city move ahead with a "span of control" study but his colleagues did not accept the recommendation.
Tanaka noted at that meeting that the city is making "very deep cuts in this budget."
"It would behoove us to understand: Are there structural changes we can make to move some of the dollars we have on the management side to more of the people doing the work?" Tanaka said.