State employee unions in contract talks with Gov. Jerry Brown's administration took a hit recently from a traditional ally: the California Public Employees' Retirement System.
The fund decided last week to increase state pension fund contributions and then use the extra money to close the $87 billion gap between its current assets and its future promises to retirees.
Wonky details aside, the upshot is that state pension payments will incrementally climb from $2.3 billion this year to more than $3.4 billion in 2019-20, a 47 percent increase.
The pension payment increases start in two years, but they're still a consideration as Brown talks with 10 unions representing 170,000 state workers whose contracts expire July 1, 2 or 3.
"This adds a major factor to bargaining," said Bruce Blanning, executive director of one of those groups, Professional Engineers in California Government. "It certainly makes the picture a lot fuzzier than it was just a few weeks ago."
The buzz around the Capitol is that CalPERS timed its decision to affect state labor negotiations. CalPERS' board includes a seat filled by a Brown appointee who voted for the policy change.
A fund spokesman emphatically denied the rumor.
"The assertion that CalPERS timed this decision to impact bargaining discussions is outrageous," said CalPERS spokesman Brad Pacheco, noting that the board publicly discussed the policy for 18 months.
Unions have been in hold-the-line mode for several years, whether fending off the openly hostile Republican Gov. Arnold Schwarzenegger or dealing with political fallout from the Great Recession.
Most state employee unions have measured victory by what they didn't lose. One furlough day per month? Well, at least it wasn't two.
Even July pay hikes of up to 5 percent for senior employees at the end of current contracts are illusory. Those same contracts at the outset raised all employees' pension contributions by the same percentage.
For months, Brown has signaled that state workers shouldn't expect across-the-board raises. Still, the unions saw room to maneuver: The economy is building steam, and the state's budget is healing, thanks to the labor-backed tax hike that voters approved in November.
Plus, unions helped elect Democrat Brown.
So Local 1000, for example, has a 14-point wish list that includes 5 percent longevity pay raises at 20 years of service and more pay for workers in high-cost regions such as the Bay Area.
Unions also are backing a bill to guarantee that managers earn more than the rank-and-file, since pay rates flow downhill.
But now Brown has new leverage. He can argue that employee pay and benefits are like a balloon. CalPERS inflated the pension-cost end, so there's no air left to pump up the salary end.