BILL ANALYSIS
AB 53
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Date of Hearing: April 29, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 53 (Portantino) - As Amended: April 14, 2009
Policy Committee: P.E.R. &
S.S.Vote: 6-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill prohibits certain 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) Applies to individuals employed by the executive, legislative
or judicial branches of government, appointees to state boards
and commissions, and employees of the California State
University system. The bill urges the University of California
system to adopt this policy.
2)Exempts from these provisions (a) state employees whose
salaries are governed by a memoranda of understanding
pursuant to a collective bargaining agreement, (b) employees
who occupy a classification that is deemed necessary to public
safety and security by the governor through an executive
order, or (c) a person whose salary is set by the State
Constitution.
3) Does not preclude an employer from providing pay increases to
workers taking a different position or classification, nor
does it restrict bonuses or incentive payments to employees,
to the extent that such compensation is authorized under
existing law.
4)Authorizes the controller to reject a request for a
disbursement of funds that violates these provisions.
FISCAL EFFECT
1)About 820 state employees meet this bill's criteria. Assuming
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that 50% of these employees would, under current law, receive
raises averaging 3% between January 1, 2010 and January 1,
2012, the statewide savings would be about $2.5 million during
this period.
2)If UC were to adopt this policy for all of its employees
(faculty and administration) the comparable savings would be
much larger - $17 million.
3)Reduced savings and/or offsetting costs would occur if:
a) A significant number of employees are exempted by the
governor (under the public safety exemption) or federal
court actions.
b) CalPERS, CalSTRs, or HCD offset the cap on base salary
through increased employee incentive payments.
c) The restrictions on base pay hamper the retirement
systems' ability to recruit and retain qualified investment
managers, which may either impact the funds' overall
rate-of-return or require the funds to increase reliance on
higher-cost outside investment management services. CalPERs
estimates that outside management costs are about $20
million for each $10 billion in investments. The current
market value of the CalPERS retirement fund is about $175
billion.
d) If UC adopts this policy, the freeze could impacts the
ability of the system to attract and retain top professors,
which could in turn jeopardize receipt of millions of
dollars in federal and private research grants, and hamper
the ability of the system to operate revenue-producing
hospitals and health clinics.
COMMENTS
1)Background . Statewide there are about 3,200 employees,
exclusive of UC, that have a base salary of more than $150,000
per year. Of this total, about 2,400 are covered by collective
bargaining agreements, leaving about 820 that would be covered
by this bill. U.C. faculty and administrators account for
another 5,000 employees, the great majority of which are not
covered by collective bargaining agreements.
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Current law gives the Department of Personnel administration
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.
Current law authorizes CalSTRS and CalPERS to set the
compensation for specified key executive and investment
positions, including 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.
The 2009-10 budget assumes furloughs and reductions in pay for
state employees through 2009-10. Both the University of
California and the California State University systems have
established salary freeze policies affecting high level
non-faculty employees.
2)Rationale . The author asserts that "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."
3)Opponents (CalSTRS, CalPERS, UC, and CSU) raise a variety of
objections to the bill. CalSTRS and CalPERS contend that, even
in the current weak job market, the funds face severe
competition for top-flight investment personnel. They also
indicate their personnel are already subject to job furloughs,
and that the additional restrictions imposed by the bill will
negatively affect their ability to hire and retain high
quality investment staff. UC states that the freeze would have
a long-lasting negative impact on its ability to carry out its
educational mission. The CSU states that the proposal would
affect the system's ability to attract and retain the best
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available executives.
4)Other issues and concerns. Since the bill does not apply to
workers covered by MOUs, it could raise issues related to wage
compaction. This would occur if, in 2010-11 and/or 2011-12,
rank and file employees receive increases that, when combined
with overtime pay, significantly reduce the wage differentials
between managers and those who they are managing.
Also, a main criticism raised by the author and cited in
recent articles have been the pay practices with respect to
newly hired top administrators at UC and CSU. These practices
would not be affected by the bill, as it does not place
restrictions on compensation levels for new hires.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081