BILL ANALYSIS                                                                                                                                                                                                    

                                                                  AB 53
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          Date of Hearing:   April 1, 2009

                                 Ed Hernandez, Chair
                   AB 53 (Portantino) - As Amended:  March 25, 2009
          SUBJECT  :   State employment: salary freeze.

           SUMMARY  :   Prohibits specified state employees whose annual base  
          salary is over $150,000 from receiving a salary increase or  
          overtime pay until January 1, 2012.  Specifically,  this bill  :  

          1)Prohibits an employer from providing a pay raise or overtime  
            pay to a person employed by the state whose annual base salary  
            is over $150,000.

          2)Defines "person employed by the state" as any person employed  
            by the executive, legislative or judicial branches of  
            government, appointees to state boards and commissions, and  
            employees of the California State University system.

          3)Exempts from these provisions a state employee whose salary is  
            governed by Memoranda of Understanding, as set forth in the  
            Ralph C. Dills Act, the Meyers-Milias-Brown Act, or pursuant  
            to another collective bargaining agreement, a person who  
            occupies a classification that is deemed necessary to public  
            safety and security by the Governor through an executive  
            order, or a person whose salary is set by the State  

          4)Authorizes the Controller to reject a request for a  
            disbursement of funds that violates these provisions.

          5)Urges the University of California system to adopt this  

          6)Specifies that this section will remain in effect until  
            January 1, 2012.

           EXISTING LAW  requires the Department of Personnel Administration  
          (DPA) to set and adjust salaries for each classification in  
          state service.

          AB 2936 (Ridley-Thomas), Chapter 240, Statutes of 2006, among  


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          other things, gives DPA special salary setting authority for  
          certain statutorily exempt employees, primarily department and  
          agency secretaries, commissioners, and directors allowing DPA to  
          make salary determinations on a case-by-case basis after  
          considering a number of factors, including growth in the  
          position's stature and responsibilities, compensation paid in  
          similar positions in other jurisdictions, the need to avoid  
          salary compaction, and special recruitment needs.

          AB 257 (Chesbro), Chapter 748, Statutes of 2006, among other  
          things, allows the Board of the California Housing Financing  
          Agency to set the compensation of key exempt management  
          positions, including the executive director, chief deputy  
          director, the general counsel, director of financing, director  
          of homeownership programs, director of multifamily programs,  
          director of insurance, and financial risk management director.

          SB 269 (Soto), Chapter 856, Statutes of 2003, allows the boards  
          of administration of the California Public Employees' Retirement  
          System (CalPERS) and the California State Teachers' Retirement  
          System (CalSTRS) to set the compensation for specified key  
          executive and investment positions.  These include the chief  
          executive officer, system actuary, chief investment officer, and  
          other investment officers and portfolio managers whose positions  
          are classified managerial by state civil service standards.  In  
          setting these salaries, the Boards must be guided by the  
          principles contained in existing civil service laws, to  
          compensate employees at levels competitive with the compensation  
          paid to employees in other retirement and financial service  
          entities.  AB 1317 (Mullin). Chapter 333, Statutes of 2007,  
          expands the list of key positions to include the general  

          AB 743 (Keeley), Chapter 792, Statutes of 1999, requires that  
          supervisors of state employees represented by Bargaining Units  
          (BU) 5 (California Highway Patrol Officers), 6 (correctional  
          peace officers), and 8 (state firefighters) receive salary and  
          benefits that are at least generally the economic equivalent to  
          the salary and benefits granted to the employees they supervise.

          AB 2801 (W. Brown), Chapter 762, Statutes of 1994, establishes  
          the policy of the state to compensate sworn members of the  
          California Highway Patrol at the average compensation, including  
          specified benefits, paid to the equivalent officers in five  
          specified agencies.  Any increase in compensation is determined  


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          through collective bargaining.

           FISCAL EFFECT  :   Unknown.

           COMMENTS  :   According to the author, "Over the past few years,  
          various state agencies have given inappropriate and excessive  
          compensation increases while California is grappling with a  
          budget crisis.  Particularly at the University of California and  
          the California State University, the governing bodies of those  
          systems have approved numerous compensation increases and  
          personnel moves for executives and staff who already make six  
          figure salaries.  In order to solve this budget crisis, everyone  
          will need to help shoulder the burden, including the state's  
          highest paid employees.

          In a March 25, 2009, San Francisco Chronicle article, reporter  
          Jim Doyle wrote, "The University of California's worst financial  
          crisis in years has not prevented the hiring of high-salaried  
          administrative talent or the awarding of pay raises, promotions  
          and perks to a dozen executive, university records show.  The  
          new appointments reflect the university's commitment to  
          providing 'management effectiveness and accountability,' said UC  
          spokesman Paul Schwartz, adding that the system also needs to  
          provide competitive salaries and benefits to attract and retain  
          those qualified to run a major academic institution.  Last week,  
          for example, the governing Board of Regents appointed two  
          executives at salaries of more than $350,000 a year and  
          authorized paid administrative leaves to two former campus  
          chancellors - one receiving $402,200 a year and the other  
          $315,000.  Over the last two months, the board also granted pay  
          increases of as much as 22.3% to a half dozen senior managers  
          and approved higher salary ranges for several additional  
          department manager positions at UCSF and at the university's  
          headquarters in Oakland."

          The Boards of Administration of both CalPERS and CalSTRS took  
          "oppose unless amended" positions on the introduced version of  
          the bill citing concerns that they would be unable to hire,  
          motivate and retain high quality investment staff which  
          ultimately could result in higher investment staff vacancy  
          rates, higher recruitment costs and the need for a more costly  
          externally managed investment program.

          Opponents state, "While the University acknowledges its  
          responsibility to assist the State in addressing the growing  


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          fiscal crisis in California, we believe that AB 53 would have a  
          tremendous and long-lasting negative impact on the University of  
          California, the ability of UC to carry out its educational  
          mission, and its ability to help the State during this critical  

          Opponents go on to state, "The CSU has serious concerns with  
          this proposal and its effects on the ability of the system to  
          govern itself and attract and retain the best available faculty,  
          staff, and executives to lead this complex institution through  
          tough time such as today.  The CSU has taken action to reduce  
          costs during this fiscal crisis to protect our students, faculty  
          and staff and to preserve the quality of our universities.  The  
          Chancellor's Office and all of its 23 campuses have taken the  
          following mandatory measures: travel restrictions for employees;  
          cancellation of all non-critical equipment and supply purchases;  
          and a hiring freeze on all positions except those essential to  
          the operation of the university.  In addition to this, the CSU  
          has implemented a salary freeze for all vice president level  
          positions and above including presidents' and vice chancellors'  
          salaries, and the Chancellor effective immediately through the  
          2009-10 budget year."

          According to the State Controller's Office, this bill will  
          impact 94 state agencies, including state hospitals,  
          correctional facilities, and the California State University.   
          Approximately 785 state employees meet this bill's criteria.

          The Committee is recommending a technical amendment be made to  
          clarify that the bill's provisions apply to anyone moving into a  
          position making $150,000 after the effective date of the bill or  
          anyone whose salary increases after the effective date of the  
          bill to be more than $150,000.


          None on file

          California State University
          University of California


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          Analysis Prepared by  :    Karon Green / P.E., R. & S.S. / (916)