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Tuesday, February 12, 2008 7:37 PM


Wage Freeze for Teachers and Wage Cuts for GM


The Californian is reporting Lake Elsinore teachers were given an ultimatum Wage freeze or layoffs? One union rep had to be escorted from the room.

If [Lake Elsinore] school district employees don't accept a wage freeze for the 2008-09 school year, the district board said Saturday morning that it will eliminate class-size reduction programs in grades K-3 and issue 141 layoff notices to teachers.

The district, which held the special weekend meeting to address the local impact of the governor's proposed cuts to the education budget, is required to issue the notices before March 15, giving the teachers union and the classified employees union a little more than a month to consider the offer.

The local association, representing more than 1,000 school bus drivers, custodians and food service workers, never reached agreement on a contract for the 2007-08 school year. This week the negotiations stalled, spurring classified employees union members wearing blue T-shirts to pack the district board room Saturday to address the board.

The classified employees union is looking for a 4.38 percent raise starting March 1, the same percentage raise given to teachers before the start of the school year.

At the tail end of the four-hour meeting, Superintendent Frank Passarella said he planned to bring forward at the board's next meeting a resolution that opposes the projected education cuts. He told the audience, which grew perceptibly thinner by the end of the meeting, that the budget process is not a poker game and the district isn't bluffing when it talks about the need to make substantial cuts.

Lisa Towery [labor relations representative], sitting in the audience, interrupted Passarella and listed off some of the local school districts that have already negotiated deals with unions. After giving her a warning, Passarella had Towery escorted from the meeting by one of the two police officers monitoring the meeting. After she left, all remaining members of the association got up from their seats and followed her outside.

Before Towery was escorted out, Board Trustee Jon Gray urged union leadership to canvass its members and find out if they will accept the freeze to prevent the issuance of layoff notices, which he called the "nuclear option."
The Party's Over In California

The school district ultimatum is a direct result of across the board spending cuts mandated Schwarzenegger after years of reckless spending finally caught up to the State of California. Schwarzenegger was forced to declare a "Fiscal Emergency".

Inquiring minds my wish to read Turn out the lights California, the party is over and Mish's California Budget Proposal for more on the sad state of the state of California.

California Sales Tax Receipts Down Again in January

With a tip of the hat to Credit Bubble Stocks, California Sales Tax Receipts Down Again in January.
January Retail Sales and Use Tax revenue was $991.4 M in Jan 08 vs $1,097.7M in Jan 07, down 9.7% year-over-year.
Clearly, California's woes have only just begun. Property tax and sales tax receipts will both continue to plunge. In August California had a $4 billion surplus. By December that surplus turned into a $14 billion deficit.

Brace yourself California because that $14 billion deficit is likely to double or triple. If double another 10% budget cutback will be needed. If triple, an additional 20% in budget cuts will be needed.

Layoffs Coming in Large Numbers

Nationwide, Layoffs are Coming in Large Numbers.
Corporate executives are poised to start making substantial cutbacks in their staffing, according to a new forecast by employment consulting and legal firm Career Protection.

In fact, the firm is predicting a 37 percent increase in layoffs this year compared with last year, based on a survey of more than 1,300 corporate executives and senior-level officials that was conducted earlier this month.

The layoff forecast is the worst in the past five years, according to Career Protection officials. They also indicated that the firm has already been “inundated” with inquiries from employees at a number of companies that announced layoffs earlier this month, including Bear Stearns (BSC), Chrysler, Citigroup (C), Ford (F), Covidien (COV), General Motors (GM), IndyMac (IMB) and Sprint Nextel (S).
GM Wants Wage Cuts, Offers Buyouts

Reuters is reporting GM offers all U.S. union workers buyouts, retirement.
Top executives of GM, Ford and Chrysler all have said in recent weeks that they would take further restructuring actions if necessary because of economic conditions.

All three automakers reached agreements with the UAW that would allow them to hire new workers for some jobs starting at $14 per hour, or about half the current average hourly wage.

U.S. automakers have been cutting capacity to match their declines in market share and their new UAW contracts allow them to shift their union retiree health-care obligations to union-controlled trusts.
In news that can hardly be considered unexpected, GM posted a $722 Million Quarterly Loss.
General Motors reported a $722 million fourth-quarter loss on Tuesday and offered more buyouts to all 74,000 of its unionized employees in another bid to keep its turnaround from stalling.

Excluding what G.M. said were one-time items [one-time items that regularly occur quarter after quarter, year after year], profit was $46 million, or 8 cents a share, compared with an adjusted profit of $180 million, or 32 cents a share, in the period a year earlier.

For all of 2007, G.M. lost $38.7 billion, the biggest loss ever for an automaker. The loss, equal to $68.45 a share, is about the same amount as a noncash charge of $38.3 billion that the company took in the third quarter to write down deferred tax assets, meaning that G.M. almost broke even otherwise after losing $2 billion in 2006.
Don't you just love this math? Excluding a loss of $68.45 per share GM almost but not quite broke even. And excluding the billion dollars I do not have, I am a a billionaire.

Jobs And Wages Recap
  • Teachers in California were given an ultimatum to freeze wages.
  • The situation in California is going to get much worse.
  • Massive layoffs are coming at Bear Stearns (BSC), Chrysler, Citigroup (C), Ford (F), Covidien (COV), General Motors (GM), IndyMac (IMB) and Sprint Nextel (S).
  • GM wants union wages to drop to $14 an hour from $28 an hour.
  • GM is wants to walk away from pension obligations via buyouts.
Deflation is now hitting wages and employment. Teachers unions nationwide are not going to like what's coming one bit. The bargaining has only just begun. Unemployment is going to skyrocket.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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