BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
88 (Hernandez)
Hearing Date: 8/27/2009 Amended: 8/20/2009
Consultant: Maureen Ortiz Policy Vote: PE&R 5-2
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BILL SUMMARY: AB 88, an urgency measure, ratifies the
Memoranda of Understanding between the State and Bargaining
Units 1, 3, 4, 11, 14, 15, 17, 20, and 21 (Service Employees
International Union, Local 1000). The bill appropriates $9.474
million in augmentation of the 2009 Budget Act for state
compensation.
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Fiscal Impact (in thousands)
Major Provisions 2008-09 2009-10 2010-11 Fund
Health benefits $4,357 $20,500*
General
$5,117
$21,900
Specials
Quality Institute $0 $1,000
General
Elimination of 2 holidays $0 ($1,467)**
General
($15)**
Salary inc: seasonal $86
$260 General
$27
$81
Specials
Sick leave/over time ($1,085)**
($3.755)** General
$0
($2,504)** Specials
* $9.474 million appropriated in bill.
**Staff notes that these two provisions have been enacted
pursuant to SBX3 8, Chapter 4, Statutes of 2009, Third
Extraordinary Session
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STAFF COMMENTS: This bill meets the criteria for referral to
the Suspense file.
AB 88 appropriates approximately $9.5 million ($4.4 million
General Fund, and $5.1 million other funds) in augmentation of
the 2009 Budget Act to cover the costs of the health care
contribution that is discussed below. However, staff notes that
while $9.5 million may have been sufficient to fund those costs
for the 2008 budget year, if the appropriation is meant to cover
the increases in health benefits for 2009, the appropriation
should be closer to the above noted costs. An additional
appropriation would then be necessary to reimburse employees for
health costs incurred in 2008 budget year.
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AB 88 (Hernandez)
Costs of Reducing the Furlough
The Memoranda of Understanding provides that employees in Local
1000 will be subject to a one day furlough beginning February
2009 and continuing through the
terms of the contract which ends June 30, 2010. Since the
Governor's Executive Order had proclaimed a furlough of two days
from February through June 2009, reducing the furlough to one
day for each of the five months remaining in the 2008-09 FY
would result in additional costs of approximately $62 million of
which about $27.9 million would be derived from the General Fund
and $34.1 million would come from various other funds for
2008-09.
The Governor's Executive Order S-13-09 then subjected all state
employees, including those in Local 1000, to a three day per
month furlough effective July 1, 2009 which resulted in a total
salary reduction of approximately 13.86%. The savings realized
from the three day furlough were considered as part of the
finalization of the 2009-10 Budget Act. Ratifying this MOU, and
consequently reducing the mandatory furlough for Local 1000
employees to one day per month will result in additional costs
for FY 2009-10 of approximately $624 million of which
approximately $281 million would be a General Fund cost.
However, staff notes that is it unlikely that ratification of
this MOU will result in a reduction in the furlough days since
the issue is expected to ultimately be decided by the courts.
Contract Vs. Contract
According to information provided by the Department of Personnel
Administration earlier this year, this MOU will result in net
savings of approximately $337 million ($156 General Fund) for
the implementation of one furlough day when compared to the
prior SEIU Local 1000 contract that expired June 2008 and which
did not contain any furloughs or reductions in salaries.
The Memoranda of Understanding
There are approximately 86,783 full-time equivalents in SEIU
Local 1000. The major provisions of the MOU are as follows:
1) Mandatory Personal Furlough Leave Program :
Effective February 2009 through June 30, 2010, all employees
will be furloughed one day per month resulting in a reduction in
salary of 4.62%. Leave credits accrued will not have cash value
and must be used by July 1, 2012. Further, the leave program
will not negatively impact an employee's retirement or other
employer paid benefits, or service credit for the purpose of
computing benefits or leave credits.
This program will be in lieu of the Governor's 3 day per month
furlough program, two days of which were established by
executive order beginning February 1, 2009, and the
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AB 88 (Hernandez)
third day was established beginning July 1, 2009. Since some
employees have already realized as many as15 furlough days since
February 2009, it is assumed that DPA and SEIU will coordinate
to equitably spread out the remaining furlough pay reductions
over the remaining months of the contract.
2) Layoff :
Through the duration of the contract, layoffs will be limited
only to departmental closures or programs, facilities or
offices. Employees may be required to accept jobs in other
departments that are within 50 miles of current their employment
and within10 percent of their current pay.
3) Compensation: Seasonal Clerks
There will be no general salary increases during the duration of
the new contract, except that effective April 1, 2009, the
hourly pay rate for the Seasonal Clerk Classification will
increase $0.50 per hour. This increase affects approximately
1,300 seasonal clerks employed by the Franchise Tax Board and
the State Compensation Insurance Fund which currently have a
base salary of between $1,418 to $1,620 per month.
4) Health Benefits: Employer Contribution
The MOU makes two key changes with respect to health benefit
contributions:
a) Employees in BU 3 (professional educators and
librarians) will receive health benefits under the State's
"80-80" formula beginning the February 2009 pay period. This
benefit is currently provided to the other eight bargaining
units represented by SEIU. Under the "80-80" formula, the
employer contribution for single-party coverage is
80% of that year's weighted average premium of the four plans
with the highest employee enrollment, and 80% of the weighted
average cost for dependent coverage.
b) For the purpose of mitigating the fiscal effects of
the furlough, the state will raise its contribution to cover
100% of the 2009 increase in premiums charged by Blue Shield
Access, Blue Shield Net Value, and Kaiser HMO (other insurers
did not raise premiums in 2009). Amounts are $13.78 (single),
$29.96 (2-party), and $43.72 (family). A similar increase will
be provided in 2010 for employees enrolled in plans that have
premium increases in that year.
5) Business and Travel Expenses :
The per diem rate for employees on travel for the state will
increase to the current federal rate of $55 per day (from the
existing rate of $40 per day). The last increase in meal
reimbursement rates was in 1999. Increases will be absorbed by
departments in their current budgets, and if funds are not
available, travel will be reduced accordingly.
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AB 88 (Hernandez)
6) Holiday Reduction :
Effective March 1, 2009, the February 12 and Columbus Day
holidays will be eliminated (this provision has been codified in
SBX3 8, Chapter 4, Statutes of 2009). In lieu of the holiday
reduction, employees will be provided two personal holidays.
7) Overtime
The contract provides that, effective March 1, 2009, sick leave
will not be counted in the computation for overtime. For
example, if an employee is required to work for 40 hours in a
week before earning overtime, he or she must actually work 40
hours on the job before earning premium pay for overtime. Time
spent on leave for sick leave, vacation, or any other type of
leave may not be counted in the 40 hours of work needed to begin
accruing overtime. (This provision has been enacted for all
state employees pursuant to SBX3 8, Chapter 4, Statutes of 2009,
Third Extraordinary Session.)
8) Related Excluded and Exempt :
Related excluded and exempt employees will be subject to the one
day furlough and corresponding reduction in salary. This
includes employees in the Legislative Counsel Bureau (LBC) and
Bureau of State Audits (BSA) who are civil service and work in
classifications identical or similar to those represented by
SEIU. These employees traditionally receive compensation
increases when bargained for SEIU employees. For example, they
received pay increases in 2006 (3.5%) and 2007 (3.4%) as well as
other increases in prior years.
9) Institute for Quality Public Services
The State shall set aside $1 million for the establishment of a
continuing education and professional development institute.
The money will be available after July 1, 2009, and after the
development of trust documents meeting all state and federal
requirements.
10) Contract Protection
If the Legislature does not approve or fully fund any provision
of the MOU that requires the expenditure of funds, either party
may reopen negotiations on all or part of the MOU.
11) Duration :
SEIU's prior contract expired on June 30, 2008. This new
agreement is effective from July 1, 2008 through June 30, 2010.
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The Ralph C. Dills Act requires that collective bargaining
agreements that are negotiated between the state and bargaining
units must be ratified by the Legislature. Staff notes that
this agreement was reached on February 13, 2009 and presented to
the Legislature at that time. Pursuant to Chapter 499, Statutes
of 2005 (SB 621, Speier), the Legislative Analyst's Office
prepared and distributed an analysis of this MOU on March 6,
2009. Senate Rules 29.4 requires the final version of an MOU to
be available to the Legislature for 7 legislative days before
the Senate may act on the MOU. This MOU between the state and
Bargaining Units 1, 3, 4, 11, 14, 15, 17, 20, and 21 has been
delivered in sufficient time to be acted upon by the Senate.