Jerry Brown’s budget calls for more state workers, less job outsourcing

01/20/2014 12:00 AM

10/20/2014 2:17 PM

After several years of tamping down the size of California’s state bureaucracy, Gov. Jerry Brown is ready to grow it again.

The governor’s new budget proposal barely increases the number of government workers in the coming fiscal year, but about halfway through the voluminous 271-page summary, Brown makes clear that he wants to expand the civil service corps. The trade-off: less work for outside contractors.

“(T)here is value and utility in training and developing state employees to perform ongoing tasks,” the 2014-15 budget summary says, and the Brown administration “continues to identify ways that the state can reduce its reliance on contractors.”

Anti-tax advocates and Brown’s Republican opponents in the Legislature say those words, along with Brown’s plan to add another 1,600 state jobs next year, signal that the Democratic governor is cozying up to his union allies.

“It’s pretty obvious he’s doing the bidding of labor unions,” said Jon Coupal of the Howard Jarvis Taxpayers Association. “They want to grow their turf and crowd out the private sector. These decisions aren’t based on the public good.”

Brown’s 2014-15 budget and Coupal’s comments about it distill a long-running debate over a central question: Does government run more efficiently with civil service employees or when it outsources tasks to the private sector?

The governor’s plan for next year converts some work now handled by contractors for the state teachers’ retirement system and a few departments providing technology, health care and social services. Those changes would create 102 new civil service jobs, nearly all of them information technology positions that maintain computer programs.

One of the agencies, the Department of Child Support Services, also would convert contracted work in 2014-15 and 2015-16, adding another 65 in-house positions over the two-year span. Brown estimates a small savings from the moves.

“These are fairly small-scale conversions,” said Michael Shires, a state budget expert at Pepperdine University. “But (Brown) is making a point to the unions. He’s saying, ‘Hey, I’m thinking of you.’ ”

The governor’s budget includes an estimated $26.6 billion in salaries for about 355,000 state employees in fiscal 2014-15. Those numbers are up slightly from the current year but still represent about 17,000 fewer workers than the state employed when Brown entered office in the middle of fiscal 2010-11.

State law already leans toward giving state work to state workers, allowing exceptions for emergencies, lack of civil service talent and a few other circumstances. Cost savings are a justification for farming out work, although the state has 11 caveats, including a requirement that the contracting firm pay wages that are “at the industry’s level and do not significantly undercut state pay rates.”

Departments sometimes ignore the law and contract out services that overlap with state civil service jobs or extend what are supposed to be temporary agreements. Unions can challenge those contracts – if they know about them – but the process can require so much time that the agreements sometimes run their course before the disputes are resolved.

Two years ago, for example, the state attorneys’ union successfully contested a $5 million legal services contract between the Department of Corrections and Rehabilitation and a private law firm. By the time the union had discovered the contract, challenged it before the State Personnel Board and won the case, the agreement was just a few weeks from expiring so the department didn’t terminate it.

Corrections officials then executed a second $6 million contract with the same firm that started the day after the first deal expired. The attorneys union contested that agreement as well and won a year later.

State labor unions for many years have argued that their members are more committed to their work than outside contractors who sometimes charge double or more to do the same thing.

Those costs often extend beyond the contracts themselves because government still has to staff up to oversee contracted work, said Donald Cohen, a former AFL-CIO political director who now chairs In the Public Interest. The nonprofit organization describes itself as “a resource center on privatization and responsible contracting.”

Pro-contracting interests – often the vendors themselves – counter that outsourcing often brings in skills not found in the government talent pool. It also saves money, they contend, by injecting market competition and work ethics into moribund bureaucracies. When contracts cost more up front, outsourcing advocates say, the arrangement still saves money for the state in the long term because there are no lifetime health care and pension costs shouldered by taxpayers.

Shires said that it often makes sense to make ongoing work part of civil service, such as maintaining and operating an established computer system. Outsourcing makes sense for temporary jobs, he said, such as installing a new computer system.

“The advantage of outsourcing is that you don’t have to hire and fire people through the civil service system,” Shires said. “That’s a big deal.”

The debate isn’t merely philosophical. Hundreds of millions of dollars and thousands of jobs are at stake.

A Sacramento Bee analysis of state contract data shows that in the fourth quarter of last year, 45 departments entered into “personal services contracts” with a combined value of $281.5 million. The agreements covered work ranging from landscaping and courier services to custodial work and office painting. A third of the dollars committed, $95.6 million, was for medical staff for the state’s prison system. Contracts for another $37.1 million covered psychiatric technician services at state hospitals.

A report last spring by SEIU Local 1000 figured that the state was bound to about $26 billion in personal services contracts to private-sector vendors at the beginning of the 2011-12 fiscal year. By comparison, salaries for 359,000 state employees that year cost the state $24.9 billion. Pensions, health care and other benefits, which are not included in the salary figure, add an average 35 percent to the government’s compensation costs.

Local 1000 spokesman Jim Zamora did not respond to calls, emails and texts seeking comment for this story, but the union for years has pressed lawmakers to curb contracts for services that it believes should go to state employees. The information technology job conversions in Brown’s budget would add to SEIU Local 1000’s ranks.

The local parlayed its agenda into gubernatorial policy in 2012 when Brown, seeking to burnish his cost-cutter credentials as he campaigned for his Proposition 30 tax-hike initiative, asked state employee unions to accept furloughs. Local President Yvonne Walker countered with a demand that the state form a special committee of union and administration officials to review departments’ personal services contracts.

Brown agreed. Last fall, the “budget solutions task force” issued its first eight-page report. The 12-member panel of Local 1000 members and government officials painted a picture of a state that relies so much on contracted help that it has given training short shrift, particularly in the field of information technology. This drains the state technology talent pool, which forces the state to contract out even more.

Better training, along with requirements that IT consultants transfer their knowledge to state workers, would “reduce the need for regularly recurring contracts that result from the lack of civil service experts,” the task force concluded.

Smaller-government advocates say those kinds of proposals sound reasonable but quickly turn into bureaucratic bloat. Although Brown’s budget adds a little over 100 government jobs by converting outsourced work to civil service jobs next year, Republican Sen. Mimi Walters said Brown is “taking us down the path of increasing the size of government. In my opinion, this is just the beginning.”

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