Governor Terry Branstad did not succeed in changing the health insurance benefits available to most of the 20,000 state employees covered by the American Federation of State, County and Municipal Employees (AFSCME). However, the governor managed to block across-the-board salary increases for state workers during the next two fiscal years.  

AFSCME had initially requested across-the-board wage increases of 1 percent during the first year and 2 percent wage during the second year of the contract covering the 2014 and 2015 fiscal years (from July 1, 2013 to June 30, 2015).

Governor Branstad countered by proposing a cut in compensation for most state employees: no salary increase for two years and significantly higher health insurance premiums and co-pays.

To no one’s surprise, contract talks ended up in binding arbitration. AFSCME negotiators were willing to give up the proposed across the board salary increase but held firm on keeping the status quo health insurance plan.

I enclose press releases from Branstad’s office and AFSCME Iowa Council 61. Both sides declared victory: Branstad said the “aggressive” negotiations had saved Iowa taxpayers money. AFSCME highlighted the fact that Arbitrator Marvin Hill, Jr. awarded the labor union’s final offer.

Branstad promised to keep asking state employees to pay more of their health insurance costs. If that’s his priority, next time he should start negotiations with a good-faith offer to raise salaries across the board by an amount equivalent to the proposed cut in health benefits. When Iowa is running up record surpluses, and Branstad is awarding large bonuses to some of his department directors, it’s not fair to impose a cut in compensation on middle-class state employees.

UPDATE: I didn’t realize until I read William Petroski’s report for the Des Moines Register that the new contract will be the first with no across-the-board pay increase “since Iowa began collective bargaining with public employees in the 1970s.”

In real terms, a wage freeze is equivalent to a slight pay cut, because most people’s living costs rise over time. However, many public workers will get raises during the next two years, because the new AFSCME contract “includes automatic step pay increases for experience and longevity for state workers.”

SECOND UPDATE: A classic entry from the Iowa .Gif-t Shop: When the arbitrator ruled for AFSCME over Terry Branstad.

THIRD UPDATE: Added cost estimates from the Department of Management below.

Press release from Governor Branstad:

Branstad releases statement in response to today’s decision on the AFSCME contract

March 7, 2013

Today, results of the AFSCME contract negotiations were made known. Key provisions:

· The contract costs $94 million less than it would have under the contract approved two years ago, providing direct savings to the taxpayers of Iowa.

· Iowa will continue to be one of only six states in the country where the overwhelming majority of state employees pay nothing toward their health insurance

Gov. Terry E. Branstad today released the following statement in response to today’s decision on the AFSCME contract.

“I want to commend everyone who was involved in negotiating this contract. The negotiations were aggressive and were professionally conducted by all parties.

“We were able to come to an agreement with AFSCME on two of the three major components of the new contract and for the first time in bargaining history there will be no across-the-board pay increases for the duration of the contract.

“I am disappointed that Iowa will continue to be one of only six states where the overwhelming majority of state employees will continue to pay nothing toward their health insurance. This is simply unfair to the vast majority of Iowans who pay some, if not all, of their own health insurance cost and whose tax dollars continue to fund this expensive benefit for most state employees.

“I will continue to ask state workers to join those in the SPOC union who agreed to pay just 20 percent of their health care premiums, with the opportunity to pay less as they become healthier and participate in life-enhancing wellness programs. It is right, it is fair, and it will make our state worker population healthier. Everyone wins when state workers contribute to make their lives healthier. That said, arbitrating an impasse item like health insurance is a part of our system. We will live with today’s result.

“These negotiations demonstrate that we can obtain fair results. Unlike two years ago, this administration made sure taxpayers were actually represented in these negotiations. When Gov. Culver simply took the unions’ first demand, taxpayers were socked with a $202 million bill. As a result of our efforts, the cost of this contract is $94 million less than it would have been under the previous contract. This is real savings for Iowa taxpayers and I am pleased the unions agreed to these terms.”

Statement from AFSCME Iowa Council 61 President Danny Homan (emphasis in original):

Dear Sisters and Brothers,

Today, Arbitrator Marvin Hill, Jr.’s arbitration award for the 2013 – 2015 state master contract was opened in front of the AFSCME Iowa Council 61 Negotiations Committee.

The most important aspect of Arbitrator Hill’s award is that the Union’s Final Offer (Status Quo) was awarded. What this means is that the current Health Insurance Plan Designs and Premium Calculations will remain exactly as they are in the 2011 – 2013 Collective Bargaining Agreement. In other words, the Arbitrator’s Award makes no changes to health insurance for AFSCME contract covered state employees.

During the arbitration hearing, our Union made clear that state employees have repeatedly made wage concessions and plan design changes to maintain their health insurance. We demonstrated that the state currently has historic surpluses and that state government’s health insurance costs for employees have been stable over the past several years. We also noted that the State’s Final Offer on health insurance was nothing more than cost shifting; it did absolutely nothing to lower the overall cost of the State’s health insurance plans. We pointed out that the State’s Final Offer would basically be a large pay cut for state employees. We also showed that the Aon Hewitt wage and benefits studies were flawed; these studies used one comparability group for the wage comparison and then used a different comparability group for the health insurance comparison.

Maintaining our health insurance benefits was the top priority of the AFSCME bargaining committee and we are pleased that the arbitrator recognized that the Union’s Final Offer was the most reasonable proposal and that the appropriate decision was to support AFSCME Iowa Council 61’s Final Offer on health insurance.

There are other changes that are part of the Arbitrator’s stipulated award. Some of these changes will be painful and some will not be painful. All of the changes will be discussed at informational meetings that will be held across the State in the coming weeks. A schedule of those meetings will be mailed shortly. Some of the changes are as follows:

• Temporary Employee Language. Elimination of the “780 hour” language, which was replaced with four (4) months or less language.

•Layoff language changes. Due to some of our current contract language being ruled permissive by the Public Employment Relations Board, the layoff language was changed.

•No across-the-board increases. There are no across-the-board increases during the term of the 2013 – 2015 Collective Bargaining Agreement.

•Step increases preserved and unchanged. The language regarding step increases did not change from the 2011 – 2013 Collective Bargaining Agreement.

• A lot of other current contract language was retained or modified slightly.

I strongly encourage you attend one of the upcoming informational meetings. You should receive that list of meeting sites and dates shortly, by US Mail. We will discuss each and every change that this arbitration award for the 2013 – 2015 State Master Contract makes to the current 2011 – 2013 Collective Bargaining Agreement.

In closing and on behalf of the bargaining committee, I want to thank you for your patience and support through this long and trying process. While I know that there will be more challenges facing us in the coming months and years, I am sure that if we continue to stand together, we can overcome those challenges.

In Solidarity,

Danny Homan, President

AFSCME Iowa Council 61

March 7 press release from the Department of Management:

Today, the Department of Management released the following information related to cost avoidance the State of Iowa obtained by entering into aggressive, professional negotiations with AFSCME.

Key elements of new state contract with the AFSCME bargaining unit:

1. 0% across-the-board (ATB) raise for FY 14 and 0% ATB for FY 15

2. Annual STEP increases for FY 14 and FY 15 included

3. No change in health insurance

Total cost of new AFSCME contract for FY 14 and FY 15:

General Fund: $56 million

All State Funds: $107 million

Key elements of Governor Culver’s AFSCME contract for FY 12 and FY 13:

1. 2.5% ATB raise for FY 12 and 2.5% ATB for FY 13

2. Annual STEP increases for FY 12 and FY 13 included

3. No change in health insurance

Total cost of Culver AFSCME contract (if applied to our current workforce):

General Fund: $104 million

All State Funds: $202 million

Savings to State of Iowa resulting from new AFSCME contract:

General Fund: $48 million

All State Funds: $94 million

According to available data, the FY 14 -15 AFSCME contract represents the first time since the inception of public sector collective bargaining in Iowa that the State has successfully negotiated no across the board pay increases in both years of a contract. Clearly, Iowa taxpayers have benefitted from having a seat at the table during the collective bargaining process with Iowa public sector unions.

The State’s Position in Arbitration:

The State and ASFSCME agreed on 0% ATB raise for by FY 14 and FY 15.

The State and AFSCME agreed on annual STEP increases for FY 14 and FY 15.

The State and AFSCME reached an impasse on health insurance. The arbitrator ruled in favor of the AFSCME position regarding health insurance.

The State’s final offer on health insurance was a 20% employee contribution for all health plans. Employees would have the opportunity to earn a credit of $90 per month towards their share of the health insurance premium by participating in a wellness program.

The State’s final offer on health insurance still exceeded the average of other states when the wellness premium incentive is included. In comparing Iowa’s wage and benefits using data provided by the National Compensation Association of State Governments:

· The employer-paid value of the State of Iowa’s status quo health insurance benefit is ranked first when compared to other states.

· The average base pay of State of Iowa employees is 33% above the base pay of other state government employees.

· The average total compensation (wages and benefits) of State of Iowa employees is 27.5% higher than the total compensation of other state government employees.

Had the arbitrator ruled in favor of the State’s offer regarding health benefits, the State had estimated additional cost avoidance of approximately $45 million over the 2 years of the contract.