New SEIU deal to cost Santa Cruz $3.4 million, but budget cuts not anticipated

Have something to say? Lookout welcomes letters to the editor, within our policies, from readers. Guidelines here.

Nearly 600 Santa Cruz city workers represented by Service Employees International Union Local 521 (SEIU 521) continued their usual duties Monday morning after the union reached a tentative agreement with the city on a new three-year contract Sunday afternoon. That agreement now goes to both the union and the city council for formal approval.

The deal is expected to cost the city’s general fund $3.4 million in total over the contract’s three years, according to city officials. The general fund for the 2022-23 fiscal year totals about $126 million. Despite previous concerns, the city’s financial position will allow it to implement the new contract without cuts to other city programs or departments.

In the thick of summer negotiations, City Manager Matt Huffaker pointed to the narrow failure of Measure F (City of Santa Cruz sales tax) in the June primary election as a major concern for the city’s budget outlook. He said the city’s financial health is better than was initially expected.

“Fiscal year 2022 ended better than we anticipated. Revenues were higher than expected, and expenses were lower,” he told Lookout on Monday. “That improved our financial position for the short term, and allowed us to structure an agreement with SEIU that meets our employees’ short-term needs while addressing the city’s need to stabilize its long-term financial picture.”

In fact, the current state of the city’s budget indicates that there will be enough funding to go around, even with the tentative agreement’s added cost.

“We are not anticipating any cuts this fiscal year to fund the labor agreement,” said Lisa Murphy, director of human resources for the City of Santa Cruz.

Here is how the allocation of revenue from the city’s general fund stacks up for fiscal year 2022-23:

The agreement marks the second time this year that local SEIU-represented workers reached a deal just hours before a scheduled strike, after workers settled with Santa Cruz County in January.

Sunday’s tentative agreement, which SEIU members will vote to ratify this week, includes a 12% total compensation increase over three years, with a 4.5% increase in the first year, 4% in the second and 3.5% in the third. The agreement also includes a one-time payment of $1,100 per worker, and goes into effect in the workers’ first pay period after union ratification and city council approval.

The city previously reached agreement with four other labor groups, including fire local, fire management, middle managers and department heads.

What’s next?

Juan Molina, vice president of the SEIU 521 City of Santa Cruz chapter, says the agreement is a “move forward” on the issues of employee retention and attracting new workers to the city. Staffing shortages have long plagued Santa Cruz’s service-worker rosters, forcing remaining employees to pick up the slack. The hope, Molina says, is that the pay increases won by the new agreement will make Santa Cruz more competitive with other cities.

“We’ve had multiple applicants who apply and interview — go through the whole process — and they see some numbers and they’re like, ‘Wait, never mind. I can make a little more going somewhere else,’” Molina said. “Through my five years, I’ve seen a lot of turnover, a lot of people coming to the city getting drained and taking off to other cities and municipalities.”

Huffaker agreed.

“The structure of the agreement gives us time to work with our employees and community to develop thoughtful long-term strategies for addressing the fiscal health of the city, and to better align our services with our budget as well as rebuild reserves,” he said. “In the near term, the city’s improving financial situation allows us to address some of the immediate challenges we’re facing, including employee compensation, retention and attraction.”

An increase in the meal allowances granted to workers on 12-hour shifts or longer — a major topic of debate when negotiations came to a head this summer — also made it into the tentative deal. Workers will now receive $25 per shift, up from $15. There was no update to the $175 allowance for work supplies currently granted to SEIU workers.

Still, Molina says, the 12%-over-three-years increase doesn’t bring all city service-worker wages up to parity with Santa Cruz’s neighbors. He referenced a January compensation study commissioned by the City of Santa Cruz that found that while total compensation — including wages and benefits — for local SEIU workers was 8.71% lower on average than the median wages of workers in cities like Alameda, Daly City, Palo Alto and others, some city positions are “25-30% underpaid.” In Molina’s division — wastewater — one supervisorial worker’s total compensation was 20.8% below the average in the study’s survey area.

In fact, the questions of comparative wages, and which jurisdictions to compare local wages to, is a continuing and increasingly knotty one.

The final word on what impact the new compensation increases would have on city worker retention awaits a new compensation study, the release of which Molina says could be “years down the line.”