Labor deal approved by San Diego’s largest union raises pay, “saves” city money

As San Diego councilmembers last week began digging into the details of Mayor Todd Gloria’s grim proposed budget for the upcoming year, the largest union of city workers were casting votes on a new, three-year contract.

The two events were connected by more than just timing. The terms of the contract for workers of the Municipal Employees Association are a key piece of  the mayor’s spending plan for the upcoming fiscal year, which begins July 1.

Union members overwhelmingly approved the new contract with 97.8% voting yes. MEA represents more than 5,000 workers, primarily the city’s white collar workforce of technical, supervisory and administrative employees.

The City Council still needs to approve the deal in an open session, which will happen some time in June. But approval is a virtual certainty: the council had approved the terms of the deal in a closed session vote last month.

The new contract calls for a one-week furlough for workers in the first two years, which Mayor Todd Gloria said at an April 15 news conference “is actually saving us money this fiscal year and next.” 

But workers will not see permanent pay reductions. They’re actually set to receive what will amount to a nearly 10% raise at the end of the three-year deal, though they may not see the increases right away.

Here’s why: The employees will get a 2% raise in year one. But the furlough they must take reduces their paychecks by roughly the same amount, making the deal a “net zero” package the first year.

In year two, workers will again take another weeklong furlough, but they’ll receive a 3.5% raise. That’s on top of year one’s increase.

The final year of the deal calls for a 4% increase and no furlough.

The furloughs amount to a portion of $26 million in savings the city is counting on in the budget for the 2027 fiscal year. The city’s four other labor groups still have to make their deals, said Communications Director Nicole Darling. 

Overall the concessions amount to “meaningful savings, and reduce the needws for deeper cuts in the budget elsewhere,” Darling said.

But the savings are not in the form of the city lopping millions off the current payroll next year. 

Instead, in the somewhat obscure budgeting practices of the city, the savings represent less money than the city anticipated it would have to spend on employee pay under the Five Year Financial Outlook. That document contains baseline revenues and expenditures and forecasts how the city thinks they will shrink, or grow. It is the basis for the city’s annual budget plan.

In that document, the city assumed employee wages would increase 2.94% annually through the FY 2030-31 year. The increase of 2% for the coming year and 3.5% the following year represents a reduction in that projected spending.

The weight of the contract falls in the final year’s increase of 4%. The total cumulative pay increase over the three years comes to  9.8%, with the compounding effect – in whichwhere annual increases are applied to the higher base salary from the previous year. 

That also impacts the city’s pension payment obligations, as higher base employee pay increases pension costs. Here again assumptions come into play.

The actuary for the system assumes annual pay increases of 3.25 percent, according to the projections in the outlook. The new contract’s 9.8% cumulative pay jump slightly exceeds that projection.

The contract also contains a new health benefit. The city will pay a $75,000 lump sum benefit to any employee hired after July 1, 2005 when they turn 55 years old, provided they have 20 years of service.

The employee will be able to invest the money while they continue to work. The money can be used to pay for health care until the worker is eligible for Medicare.