SACRAMENTO -- An economic slide that started nearly two years ago in the private sector has rippled through government and is shaking up public employee unions.
Faced with mounting costs and shrinking revenues, cities and counties from Sacramento to Modesto to Los Angeles are curbing employee benefits, clawing back pay and cutting jobs.
California's finances are so dismal that the Democrat-controlled Legislature recently went along with Republican Gov. Schwarzenegger to enact fundamental changes to state worker overtime and holiday pay rules.
Things are so dire that unions representing public employees often consider pay cuts, furloughs and reduced benefits a win.
"We've never been here before," said Yvonne Walker, president of Service Employees International Union Local 1000, which recently negotiated a contract that included several concessions in pay and benefits for about 95,000 state employees. "This goes beyond tough times."
The recession's relentless squeeze on investments and consumer spending has choked off tax revenues to government at all levels. The problem is particularly acute for California's cities and counties, because 50 percent or more of their budgets can go to pay and benefits to employees, leaving little else to cut when times are tough.
More layoffs in Modesto?
Modesto Mayor Jim Ridenour is preparing another round of layoffs in City Hall that he would turn to if he can't win $4.8 million in labor concessions from public employee unions.
The city's police union wants a guarantee that its members won't be laid off if it agrees to defer its scheduled raises, saving the city $820,000. Ridenour won't commit to that pledge, leading to a standoff between a mayor with deep roots in law enforcement and the city's rank-and-file officers.
Both sides appear willing to open the door to new talks.
"The association does not like to be in a position in opposition of the city and the mayor, but we do have to look out for what's best for our members," MPOA President Tony Arguelles said.
In Sacramento, the police union has agreed to salary concessions to keep about 70 officers employed, and the city's building trades workers tentatively have agreed to freezing wages and one day off without pay each month for two years.
But firefighters went the other way -- rejecting pay concessions last week that would have saved 50 jobs. The city is trying to close a $50 million deficit.
The Los Angeles City Council, facing a $7 billion budget hole, last month started the layoff process for up to 400 workers and voted to chop 1,200 vacant positions. The city's employee union hoped the council would hold off until talks over an early retirement plan had wrapped up.
And although employee pay accounts for less than 10 percent of the state's shrinking $92 billion general fund, Schwarzenegger is furloughing about a quarter- million state workers two days each month.
Last month he ordered departments to ax 5,000 budgeted positions.
'We all have to chip in'
Schwarzenegger has said public employment costs are hobbling the state -- and local government, too.
"I think the bottom line is, we all have to chip in. It's a crisis," he said.
California's fiscal crisis also has rippled through the state's public school systems, because kindergarten through 12th grade education accounts for nearly 40 percent of the state's budget.
School districts and teachers unions are weighing whether to pay teachers less for working a shorter school year, ax jobs outside the classroom, increase class sizes and eliminate teachers, or some blend of cuts.
"Government unions are in a defense mode," said labor analyst Kent Wong of UCLA's Center for Labor Research and Education. "They're trying to stop the worst cuts."
About 20 percent of all California workers had union coverage in 2008, down from almost 26 percent in 1983.
Despite that, unions are representing a greater percentage of California's public employees than ever, from 57 percent in 1983 to nearly 61 percent last year.
While individual contracts can vary widely depending on the job and the level of government, "unionized workers, including those in the public sector, make on average 30 percent more in wages and benefits than nonunionized workers," said Wong, the UCLA labor expert.
Until now, government hasn't fought the unions, "or have done so only minimally," said Ruth Milkman, a UCLA sociology professor who studies labor movements.
One reason: The unions pour big money into politics.
Last year, SEIU Local 1000, California's largest state worker union with 95,000 state employees, spent more than $3 million on campaigns.
The California Correctional Peace Officers Association, whose 33,000 members work in the state's prisons, spent nearly $4 million on state campaigns.
And the California Teachers Association, representing 340,000 educators, put $10 million toward political causes.
While the unions maintain that they are waging a pitched battle for their members with business interests and other well-financed lobbies, taxpayer reformers say that public employee unions are a big reason that the governments are struggling.
"The unions' tentacles are deep," said Ted Costa of People's Advocate, a taxpayer group. "And they play both sides -- Republicans and Democrats."
Changing rules of game
Costa sees the seeds of structural change in the crisis.
Orange County late last year enacted an ordinance that makes county public employee retirement contracts contingent on voter approval.
And California lawmakers, over the objections of the unions, cut two days off the state's paid holiday list, tightened overtime accrual rules and ended premium pay for holiday work.
Costa considers those policies baby steps toward bigger changes that government at all levels needs to make.
He hopes the recession speeds up that agenda.
"I think that the economy has knocked Humpty Dumpty off the wall," Costa said, "and the unions aren't going to be able to put him back together."
Modesto Bee staff writer Adam Ashton contributed to this report.