Escalating tensions over contract negotiations for about 250 workers could disrupt, or even shut down, operations this fall at Oakland's airport and seaport, the fifth-largest container shipping facility in the country.
The Port of Oakland, the agency operating the two public facilities, must rein in rapidly increasing compensation costs. While it projects revenues will increase 9 percent from 2011 to 2015, it forecasts personnel expenditures to climb 30 percent if no action is taken.
Moreover, the agency's pension and retiree health care programs are underfunded by at least $269 million, a staggering sum equal to 5½ years of payroll. It's a debt that must be paid from future revenues.
Leaders of the Service Employees International Union Local 1021 don't care. They are not only unwilling to make concessions, they want raises tied to inflation.
Union spokesman Steve Gilbert dismisses concerns about the retirement debt. "That's something anyone could throw out at any time," he told me. And, "we're not impressed when they talk about these things."
So far, the agency's seven commissioners, nominated by the mayor and appointed by the City Council, have held tough. The two sides reached a tentative agreement in March, but workers rejected it.
Now, more than a year after the last contract expired, the standoff has moved to mediation. If that fails, new state law requires a fact-finding proceeding before the agency
The dispute involves more than half the employees working directly for the Port of Oakland. Most are janitorial, maintenance and security employees at the airport, but if they strike they will probably be supported by private-sector dock workers at the maritime facility.
Health care and retirement benefits are key because of their huge costs. For every dollar of payroll, the agency pays another 74 cents for those benefits. Here's why:
To fund it, the agency pays its share, currently 25 cents for every dollar of payroll, and picks up the employees' portion of 8 cents. Moreover, the employer payment of the employee share counts as income for workers when calculating their pensions. Thus, a 30-year worker actually receives about 87 percent of top pay in retirement.
Meanwhile, the California Public Employees Retirement System, which administers the plan, has not required adequate contributions. As a result, the agency's pension plan is only 64 percent funded, with a $159 million shortfall.
To fund the plan, the agency sets aside 23 cents for every dollar of payroll. Like a pension plan, retiree health care should be pre-funded when workers are on the job. But the agency only started setting aside money in 2007, 18 years after benefits were first promised. As a result the plan has at best only 15 percent of the funds it should, with a shortfall of at least $110 million.
The union claims the Port of Oakland can afford higher salaries by using cash on hand and expected profits. The agency points out that the cash must go toward large debt payments coming due later this year, and the profits are really the money needed for capital costs to keep facilities properly maintained and upgraded.
Moreover, the union completely ignores the huge retirement shortfall that must be paid off. There's no excess money here.
Until both sides agree that the Port of Oakland has a critical financial problem, these labor negotiations are doomed. Thus far, the union has simply ignored reality.
Daniel Borenstein is a staff columnist and editorial writer. Contact him at 925-943-8248 or email@example.com.
Scan this code with a smartphone to see a photo gallery or go to www.contracostatimes.com/daniel-borenstein and click on this column.