State Workers Setting Record for Retirement : Finances: More generous pension plan, hiring freeze have contributed to 16,000 vacancies, raising hopes that threat of layoffs will ease.

Facing the threat of continued budget problems and pay cuts, state workers are taking advantage of a more generous pension plan and are retiring in record numbers.

Nearly 7,200 state employees have either retired or applied to leave state service by the end of October, officials of the California Public Employees Retirement system disclosed Wednesday. The system reported that there were 4,859 retirements during the previous 12 months.

In addition, the Legislature was told Wednesday that a freeze on the hiring of new state employees ordered last year because of budget problems has created 16,000 vacancies in state government.

“State employees are bailing out in record numbers,” said Assemblyman Dave Elder (D-San Pedro), chairman of the Assembly Public Employees, Retirement and Social Security Committee.

The disclosures, made during a hearing of Elder’s committee, come at a time when Gov. Pete Wilson’s Administration has been attempting to trim $800 million from the state payroll through a combination of pay and benefit reductions, furloughs and layoffs. The reductions were ordered in the budget agreement reached last month.

With Administration officials engaged in collective bargaining talks with state employee unions over those issues, lawmakers and union members said they hope the retirements and job vacancies will ease the threat of layoffs.

Union officials greeted the news optimistically.

Yolanda Solari, the president of CSEA, said that assuming that the average state employee costs the state $40,000 a year in salary and benefits, the retirements alone could save the state up to $400 million. On top of that, she argued, vacant positions resulting from the hiring freeze could save another $650 million.

“Why does the governor need to cut an additional $800 million from state workers?” she asked.

Elder said during a meeting of his committee that he thought the departures and vacancies would produce enough savings to not only eliminate the threat of layoffs but to reduce the need for state employee pay cuts. But he said the possibility of another big deficit next year--which he said could be as high as $6 billion--would require Wilson to save as much as he could this year.

Administration officials downplayed the effect the job vacancies will have on contract talks, saying they already were taken into consideration in the deficit reduction plan put together by Wilson and the Legislature earlier this summer.

The budget plan ordered $7 billion in tax increases, which have been implemented, and an estimated $5 billion in spending cuts, along with a number of other money-saving moves.

Wilson has been able only to cut salaries of management employees, including his own, by 5%--and enforce a hiring freeze.

In July, Controller Gray Davis blocked Wilson’s attempt to boost state employees’ contributions for health insurance. Legislation the governor had hoped would give him broad authority to reduce payroll costs without specific legislative agreement is all but dead.

Wilson, unable to win agreements from any of the 21 separate bargaining groups representing state employees, has been using the threat of massive layoffs as his chief negotiating tool.

In a new development Wednesday, union officials said Wilson has retreated from earlier demands that state employees take pay cuts of up to 20%, and in some cases even more, to help produce part of the $800 million in savings anticipated in the budget.

The California State Employees’ Assn., which represents 130,000 state workers, said Administration negotiators have dropped their insistence that state employees take two mandatory days off a month in addition to a 5% across-the-board cut in pay. The union said Wilson officials also agreed to drop a proposal that would eliminate merit pay increases.

However, they said the proposal remains unacceptable because the Administration was still requiring a 5% pay cut. The plan calls for the pay cut to be restored in 10 months if the state’s financial situation improves enough to produce a $1.6-billion surplus by May of next year. The union said the Administration is also continuing to demand other wage and benefit concessions that could cost state employees 15% overall.

Elder chided Wilson for failing to obtain contract agreements with even one of 21 employee bargaining groups. “Zero for 21 . . . If this were baseball I think someone would have been traded by now,” he said.

As for the wave of retirements, Sue Myers, chief of legislative services for the Public Employees’ Retirement System, said many were sparked by a change in retirement benefits that took effect July 1. The change bases pensions on an employee’s last year’s salary, rather than an average of the last three years of salary.

Myers also said “golden handshake” programs initiated for employees of the California State University system and the University of California had produced an unusually high number of retirements. These programs offered pension enhancements to employees willing to take early retirement.

The estimates Myers released during the hearing included only those retirements expected through October. She said the number of retiring employees was likely to rise, and could reach 8,000 to 10,000 by the end of the year.

Cynthia Katz, assistant director of the Department of Finance, said the openings created by the hiring freeze and the higher than expected number of retirements “was taken into consideration” in the budget plan agreed to by Wilson and the Legislature earlier this Summer.

Katz called Elder’s warning of a $6-billion deficit “totally irresponsible.” She said with the state just a month into the new fiscal year, spending appears to be “on track.”

Retirements in Numbers

Here is a comparison of the number of state employees who retired last year and those who retired, or applied to retire, by the end of October:

MONTH 1990 1991 Jan. 281 186 Feb. 273 197 March 380 209 April 293 471 May 442 209 June 478 174 July 582 2,693* Aug. 631 783* Sept. 384 850* Oct. 421 1,399* Nov. 315 NA Dec. 379 NA TOTAL 4,859 7,171*

* Applications received by August

* Year so far

NOTE: NA indicates not available

SOURCE: Public Employees Retirement System