BILL ANALYSIS AB 964 Page 1 Date of Hearing: April 1, 2009 ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL SECURITY Ed Hernandez, Chair AB 964 (P.E.,R & S.S. Com.) - As Amended: March 23, 2009 SUBJECT : State employees: memorandum of understanding. SUMMARY : Approves the recent memoranda of understanding (MOU) agreed to by the state and the state bargaining units (BUs) represented exclusively by the Service Employees International Union (SEIU), Local 1000, including BU 1 (Professional, Administrative, Financial, and Staff Services), BU 3 (Professional Educators and Librarians), BU 4 (Office and Allied), BU 11 (Engineering and Scientific Technicians), BU 14 (Printing and Allied Trades), BU 15 (Allied Services), BU 17 (Registered Nurses), BU 20 (Medical and Social Services), and, BU 21 (Educational Consultant and Library). EXISTING LAW requires, under the State Employee-Employer Relations Act (the Dills Act), that collective bargaining agreements (MOUs) that are negotiated between the state and exclusive representatives of each of the 21 state bargaining units be ratified by the Legislature. FISCAL EFFECT : The Department of Personnel Administration (DPA) has provided the following fiscal information: Section 3.90 of the recent Budget Act reduced state employee compensation and directed that the reductions be achieved through a combination of collective bargaining, with proportionate reductions for nonrepresented employees, and existing administration authority. Section 3.90 further directed DPA to include with MOUs submitted to the Legislature an estimate of the cost savings achieved. The reduction in Section 3.90 was based on factors that included an assumption that SEIU represented employees would be subject to a 1 day per month self-directed furlough beginning February 1, 2009 and ending June 30, 2010. This bill appropriates $9.5 million ($4.4 million General Fund [GF] and $5.1 million Other Funds [OF]) to the current budget year to cover the costs of the health care contribution and the AB 964 Page 2 Institute for Quality Public Services. When subtracted from the gross savings achieved by this contract, the net savings is estimated as follows: ----------------------------------------------------------------- | |2008/2009 |2009/2010 |Total | ----------------------------------------------------------------- |--------+--------+--------+--------+--------+--------+--------| |Savings |GF |OF |GF |OF |GF |OF | |--------+--------+--------+--------+--------+--------+--------| |SEIU |$ 52 |$ 60.6 |$128.5 |$147.9 |$180.5 |$208.5 | |MOU | | | | | | | |--------+--------+--------+--------+--------+--------+--------| |Excluded|$ 16.5 |$ 19 |$ 39.7 |$ 45.6 |$ 56.2 |$ 64.6 | | | | | | | | | |--------+--------+--------+--------+--------+--------+--------| |Costs | | | | | | | |--------+--------+--------+--------+--------+--------+--------| |SEIU |$ 4.4 |$ 5.1 |$ 20.5 |$ 21.9 |$ 24.9 |$ 27 | |MOU | | | | | | | |--------+--------+--------+--------+--------+--------+--------| |Excluded|0 |0 |0 |0 |0 |0 | | | | | | | | | |--------+--------+--------+--------+--------+--------+--------| |Net |$ 64.2 |$ 74.5 |$147.7 |$ 171.6 |$211.9 |$246.1 | |Savings | | | | | | | -------------------------------------------------------------- COMMENTS : The following information regarding the MOUs was provided by DPA: This agreement affects approximately 86,783 full-time equivalents. The major provisions include the following: Compensation: Mandatory Personal Furlough Leave Program (PFLP) Effective February 2009 through June 30, 2010, all employees will be furloughed 1 day per month for 17 months. For most employees 1 day is equivalent to 8 hours per month. This "self-directed" furlough program will reduce take home pay by 4.62%. This program will be in lieu of the Governor's 2 day per month furlough program, established by executive order beginning AB 964 Page 3 February 1, 2009 and extending through June 30, 2010. Since these employees' take home pay will have already been reduced for 4 furlough days in February and March, DPA and SEIU will work together to equitably spread out the remaining furlough pay reductions over the remaining months of the contract. Employees will be given personal discretion to use PFLP time in cooperation with their managers. Employees receive no cash value for leave credits accrued under the PFLP and must use accrued PFLP time by July 1, 2012. Unused PFLP time cannot be carried over beyond that date. The PFLP will not negatively impact an employee's retirement or other employer paid benefits, or service credit for the purposes of computing benefits or leave credits. AB 964 amends laws governing the California Public Employees' Retirement System (CalPERS) and the California State Teachers' Retirement System (CalSTRS) to ensure this provision. Compensation: Seasonal Clerks There shall be no general salary increases during the term of the MOU with the exception of Seasonal Clerks. Effective April 1, 2009, the hourly pay rate for the Seasonal Clerk Classification will increase $0.50 per hour. Overtime The tentative agreement, dated February 13, 2009, exempts sick leave from being counted in the computation for overtime. In addition, the contract also explicitly states that should the Legislature enact any provision allowing the State to exclude leave from the computation of overtime, that provision, to the extent that it be in conflict with the MOU, would be controlling over and immediately supersede the provisions of the MOU without further action. The Legislature subsequently enacted, and the Governor signed, SBX3 8 (Ducheny), Chapter 4, Statutes of 2009, which excludes all leave from being counted as time worked for the purpose of computing overtime. Therefore, no leave may be used in computing 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 AB 964 Page 4 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. Contract Protection If the State enters into agreements with other bargaining units and those agreements provide greater economic packages than provided in SEIU's agreement, then SEIU may reopen related provisions of its own MOU and the State must meet and confer with SEIU over similar or equivalent provisions for SEIU. This only applies to agreements with bargaining units that do not have current MOUs, which would include all other bargaining units except Bargaining Unit 5 (CAHP). Voluntary Personal Leave Program (VPLP) The State shall provide employees currently participating in the VPLP a 60 day window period to opt-out and/or modify their VPLP participation. No Layoff From February 1, 2009 through June 30, 2010, the PFLP period, layoffs will be limited to departmental closures of programs, facilities or offices. This provision sunsets June 30, 2010. Employees may be required to accept jobs in other departments. They will be assured of retaining their state employment in positions that are within 50 miles of current employment and 10 percent of current pay. An employee who is offered a job placement and rejects it could be subject to layoff. Health Benefits: Employer Contribution Employees in BU 3 will receive health benefits under the State's "80-80" formula beginning the February 2009 pay period. Under this formula, the employer contribution for single-party coverage is 80 percent of that year's weighted average premium of the four plans with the highest employee enrollment; 80 percent for dependent coverage. This benefit is currently provided to the other 8 bargaining units represented by SEIU. For the purpose of mitigating the fiscal effects of the furlough AB 964 Page 5 during the term of this agreement, employees enrolled in one of three health care plans on January 1, 2009 (Blue Shield Access+, Blue Shield Net Value, and Kaiser HMO) will receive an additional premium contribution amount to compensate for small increases to the employees' share of the Health Benefit premiums. Amounts are $13.78 (single), $29.96 (2-party), and $43.72 (family). On and after January 1, 2010, a similar increase for employees enrolled on that date will be paid if there are premium increases in 2010. Business and Travel Expenses The daily meal and incidental rates will be increased from $40 to $55 per day while employees travel for the State. This is the average meal reimbursement rate in California for federal employees. The last increase in meal reimbursement rates for state employees occurred in 1999. The cost estimate of savings for this contract does not take into account the increased per diem rates. That is because the increase will be absorbed by departments in their current budgets. If travel budgets remain flat or are reduced, departments may have to reduce employee travel proportionally. The contract states the current practice of providing reimbursement for the cost of up to two checked bags when flying. Employees are already being reimbursed for this cost, but the contract makes the two-bag limitation clear. State-Owned Housing - Rental Rate Freeze Currently, departments may raise rents by up to 25% per year. The contract requires that rent in state-owned housing shall remain unchanged during the furlough period (from February 1, 2009 - June 30, 2010). Holidays Effective March 1, 2009, the February 12 and Columbus Day holidays will be eliminated. (Elimination of the two holidays for all state employees was also codified in SBX3 8. AB 964 Page 6 Employees shall receive 2 personal holidays. Personal holidays can be used at the employees' discretion. State Disability Insurance (SDI) Current state employees not covered by the SDI program who transfer into a SEIU Bargaining Unit shall maintain NDI (Non-industrial Disability Insurance) coverage for 6 months (waiting period for SDI eligibility). The Institute for Quality Public Services (Joint Labor Management Trust) The State shall set aside one million dollars for the establishment of a continuing education and professional development institute. This money will be made available on July 1, 2009 after development of trust documents meeting all state and federal requirements. Duration SEIU's prior contract expired on June 30, 2008. This new agreement is effective from July 1, 2008 through June 30, 2010. The economic provisions become effective during the February 2009 pay period upon approval by the Legislature unless otherwise stated in the agreement. SEIU's membership ratified the agreement in a vote taken on March 19th and 20th. Impact on Compensation for Related Excluded and Exempt Related excluded and exempt employees shall be subject to the 1 day per month self-directed furlough and related decrease in take home pay, effective February 1, 2009. They will receive the increased meal and incidental reimbursement rate. Excluded and exempt employees will not receive the health care contribution increase. Related excluded and exempt classes include employees in the Legislative Counsel Bureau (LBC) and the Bureau of State Audits (BSA). These bureaus' employees are civil service and work in AB 964 Page 7 classifications identical or similar to those represented by SEIU. They traditionally receive compensation increases when they are bargained for SEIU employees. For example, they received pay increases in 2006 (3.5%) and 2007 (3.4%), and participated in the personal leave program in 2003 and received 5% pay increases at the end of that program in 2004. Upon legislative approval of the MOU, DPA will include LCB and BSA related excluded and exempt positions in these provisions as well. REGISTERED SUPPORT / OPPOSITION : Support Department of Personnel Administration (Sponsor) SEIU Local 1000 (Sponsor) American Federation of State, County, and Municipal Employees Opposition None on file Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916) 319-3957