With California facing yet another budget crisis that threatens state jobs and pay, employee unions are moving on several fronts to push use of civil service workers instead of private contractors for state government work.
Unions had a say in Gov. Jerry Brown's 2012-13 budget revision last month, which proposes axing outside contracting for a range of work, from computer consulting to custodial services.
State employee unions also threw their weight behind recent legislation that, among other things, would have given civil service employees first crack at all state government jobs. The measure failed but is likely to resurface.
Last month, the state attorneys' union successfully contested a multimillion-dollar contract with a private law firm for legal services.
"We've got a bunch more (cases) in the pipeline," said Patrick Whalen, general counsel for California Attorneys, Administrative Law Judges and Hearing Officers in State Employment, or CASE. "When it's crunch time, you look for every penny you can."
The union efforts have intensified the debate over privatizing government functions, especially with California confronting a budget deficit of at least $15.7 billion through June 2013. Brown has suggested closing some of that gap by eliminating thousands of state jobs next year and putting roughly 214,000 employees on a four-day workweek schedule that would cut their pay by 5 percent.
In that same vein, Brown and labor leaders say curbing what the state spends on contractors would save money.
Pepperdine University political scientist Michael Shires said another motive is also at work: "Clearly, the unions are trying to protect their members' jobs."
Sometimes it makes good sense to contract for services, Shires said. "Once someone is a monopoly, the competitive forces of the market won't hold them accountable," Shires said, "including when government grants the monopoly to itself."
The unions long have argued that keeping jobs in-house is cheaper than outsourcing. They press their case hardest during tight budget cycles.
Ron Yank, who served as Brown's Department of Personnel Administration director until March, said that his office last year asked unions for cost-cutting ideas to help close the 2011-12 budget deficit.
"Seven unions offered savings suggestions," Yank said. "Six of the seven mentioned excessive contracting out."
The state's largest public employees union, Service Employees International Union Local 1000, said its analyses show California spent $210.6 billion on outside contracts from fiscal 2003-04 through fiscal 2010-11, about 8 percent of all state expenses during that period.
Of that, $130.6 billion went to private-sector firms for services ranging from private prison administration to food service and business consultation.
Despite those numbers, the law tilts in favor of civil service. The state can bring in outside help only under certain circumstances, such as a lack of in-house expertise, a temporary emergency or when it would be demonstrably less expensive than using government employees.
Local 1000 and several other state worker unions backed Assembly Bill 1655, which sought to strengthen rules that give priority to state employees over private contractors for government work.
The measure came under fire from the business community for codifying state working terms that are normally collectively bargained. Opponents also didn't like the idea that the bill made it harder for the private sector to compete for state work.
"There are instances when jobs should stay in-house and cases when they should be contracted," said Mitch Zak, a Republican strategist whose firm, Randle Communications, works with a number of trade organizations. "But the standard should be what's best for California, not what's best for the unions or for individual businesses."
Although AB 1655 by Assemblyman Roger Dickinson, D-Sacramento, died in committee last month, the job protections it offered remain on unions' collective wish list.
The cost of contracting came up in Brown's May budget revision, as well. While the governor wants to cut about 11,000 state positions, his budget also calls for departments to pare back on outsourcing information technology consulting and to develop the "professional expertise in the state workforce."
Brown also wants the state's Department of General Services to review all personal services consultants agreements, "including janitorial and security service," and eliminate contracts for jobs that state employees could do.
State IT workers, custodians and security guards are among the 95,000 workers represented by Local 1000.
The state historically has had trouble recruiting and keeping high-skill workers in areas such as high-tech, law, science and finance, Yank said, because the state's pay and benefits are less than in local government or the private sector.
"Contracting for those jobs – it's a horrid, vicious cycle," he said. The compensation gap empties the in-house talent pool, which causes the state to spend money on contractors that could be used to make pay more competitive.
While labor groups are flexing their political muscle to curb contracting, they're also ramping up legal challenges.
Last month, the state's legal professionals' union successfully challenged a multimillion-dollar agreement for services between the California's prison department and a private law firm.
The three-year deal between the Department of Corrections and Rehabilitation and Williams & Associates started in 2009 at $1 million to defend the state against inmate lawsuits normally handled by civil service lawyers. After two revisions, it ballooned to $5 million for the three years ending June 30.
Although state law requires departments to notify the affected unions of such contracts, the attorneys' association learned of the deal after a staff researcher found it by combing through a state expenditure database.
The discovery prompted a union challenge before the State Personnel Board, a five-member panel that rules on a range of employer-employee disputes.
Corrections officials said the department had taken its legal business private because there weren't enough state attorneys to handle the work normally handled by the attorney general's office.
CASE countered that there wasn't evidence of a shortage of state attorneys or an urgent need that prompted the contracts. A decision to move attorneys from one section to another is a priority shift, not a shortage, the union said.
The arrangement was a budget-buster, CASE said, because state lawyers earn far less than their private-sector counterparts.
"Our top attorneys make $50 per hour," said CASE's Whalen, a tenth of what contract attorneys can bill. "So by definition you can't save money by hiring out because you already have some of the cheapest attorneys on the planet."
Last month the Personnel Board ruled that the corrections agency had illegally contracted for the work. To avoid harming current litigation, the board said Williams & Associates could continue handling cases until its contract expires at the end of this month.
Meanwhile, corrections officials must make plans to transfer the work back to the attorney general's lawyers by July 1.
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