BILL ANALYSIS                                                                                                                                                                                                    






          SENATE PUBLIC EMPLOYMENT & RETIREMENT    BILL NO: AB 1592
          Lou Correa, Chair           Hearing date:  August 3, 2010
          AB 1592 (Buchanan)    as amended  8/2/10     FISCAL:  YES

           MEMORANDA OF UNDERSTANDING FOR STATE BARGAINING UNITS 8, 16,  
          AND 19
          
           HISTORY  :

              Sponsor:  California Department of Forestry Firefighters  
          (CDF Firefighters)
                       Union of American Physicians and Dentists (UAPD)
                       American Federation of State, County and  
          Municipal Employees (AFSCME)
                       Department of Personnel Administration (DPA)

           ASSEMBLY VOTES  :

           Not relevant - new bill with August 2, 2010 Senate amendments
          
          SUMMARY  : 

          This bill provides legislative ratification for memoranda of  
          understanding between the administration and three state  
          bargaining units:  CDF Firefighters (BU 8); Physicians,  
          Dentists, and Podiatrists (BU 16); and Health and Service  
          Professionals (BU 19).   URGENCY BILL  .

           BACKGROUND AND ANALYSIS : 
          
          1)   Existing law  :

            a)  establishes the Ralph C. Dills Act, which requires the  
            State to collectively bargain with official representatives  
            of employee groups (i.e., bargaining units) regarding wages  
            and working conditions, and to define negotiated agreements  
            in memoranda of understanding (MOU).

            b)  requires that any MOU between the State and an official  
            representative must be ratified by the Legislature.

            c)  establishes the Public Employees Retirement Law, which  
            provides health and retirement benefits for state  
          Pamela Schneider
          Date:  8/2/10                                          Page 1  










            employees.

            d)  establishes 5 separate retirement classes for state  
            employees:  State Miscellaneous and Industrial (which  
            receive substantially the same benefits), State Safety,  
            State Peace Officer/Firefighter, and State Patrol.

            e)  specifies that if the provisions of certain statutes  
            are in conflict with an MOU, the terms of the MOU shall be  
            prevailing in those cases.



            f)  requires the Legislative Analyst's Office to analyze  
            all state MOUs and to provide analyses of the MOUs and  
            their fiscal impact to the Legislature within 10 days of  
            receipt of the MOUs from the Department of Personnel  
            Administration (DPA).

          2)   This bill :

            a)  provides legislative ratification for MOUs agreed to  
            between the State and the following state employee  
            representatives:

             BU 8:  California Department of Forestry Firefighters  
            (Firefighters and Foresters),
                  BU 16:  American Federation of State, County and  
               Municipal Employees (Physicians,     Dentists, and  
               Podiatrists), and
                BU 19:  American Federation of State, County and  
              Municipal Employees (Health and   Social Services  
              Professionals).

            b)  requires new employees, as specified, to receive lower  
            pension benefits than current employees.

            c)  requires new employees, as specified, to receive a  
            retirement benefit based on the highest averaged three  
            years of compensation, instead of the highest one year.

            d)  requires all employees covered by the agreements to pay  
            10 or 11 percent of compensation in employee contributions  
          Pamela Schneider
          Date:  8/2/10                                          Page 2  










            to fund retirement benefits.

            e)  requires that compensation for employees covered by  
            these agreements shall be continuously appropriated in the  
            event of a late budget.

            f)  includes statutory changes that apply to these  
            bargaining units and also state bargaining units 5, 12, and  
            18, which MOUs are to be ratified in SB 846 (Correa), and  
            makes this bill operative only if SB 846 is also passed.

            g)  ratifies other terms and conditions of the MOUs, which  
            are summarized in the chart below:


           ---------------------------------------------------------------- 
          |Retirement     |2010 Tentative          |Current Requirements   |
          |Class and BU   |Agreements              |                       |
          |---------------+------------------------+-----------------------|
          |Miscellaneous  |2% at age 60 for new    |2% at age 55           |
          |Employees      |hires                   |                       |
          |(BUs 5, 8, 12, |                        |                       |
          |16, 18,19)     |                        |                       |
          |               |                        |                       |
          |Retirement     |                        |                       |
          |Formula        |                        |                       |
          |---------------+------------------------+-----------------------|
          |Member         |10% of pay after first  |5% of pay after first  |
          |Contribution   |$513                    |$513                   |
          |to PERS        |                        |                       |
          |(BUs 5, 8, 12, |                        |                       |
          |16, 18,19)     |                        |                       |
          |---------------+------------------------+-----------------------|
          |Employer       |80%/80% for employees   |No statutory formula   |
          |Health         |and dependents          |for these BUs (most    |
          |Contribution   |                        |other BUs have         |
          |(BUs 12, 18)   |                        |statutory              |
          |               |                        |formulas-either        |
          |               |                        |85%/80% or 80%/80%)    |
          |---------------+------------------------+-----------------------|
          |Employee       |.5% of base salary      |No contribution        |
          |Contribution   |                        |currently              |
          |to prefund     |                        |                       |
          Pamela Schneider
          Date:  8/2/10                                          Page 3  










          |Retiree Health |                        |                       |
          |(BUs 12, 16)   |                        |                       |
          |---------------+------------------------+-----------------------|
          |Vesting for    |Hew hires vest for 50%  |50% after 10 years,    |
          |Retiree Health |after 15 years,         |increasing 5% annually |
          |(BU 12)        |increasing 5% annually  |to 100% after 20 years |
          |               |to 100% after 25 years  |                       |
           ---------------------------------------------------------------- 
           ---------------------------------------------------------------- 
          |Final          |BUs 12, 16, 18, 19:  No change; new hires at    |
          |Compensation   |highest 3 years since    2006                   |
          |Calculation    |BUs 5 and 8:  New hires go to highest 3 years   |
          |for New Hires  |                                                |
           ---------------------------------------------------------------- 
          |Personal Leave |Duration=12 months:  Reduces pay by approx.     |
          |Program        |4.8% in exchange for 1 day off per month.  Time |
          |(BUs 12, 16,   |off has no cash value and can be used for       |
          |18, 19)        |vacation or sick leave.                         |
          |---------------+------------------------------------------------|
          |Pay Increase   |5% increase to top step of relevant classes,    |
          |(BUs 5, 8, 12, |effective 1/1/2012:  Allows employees who are   |
          |16, 18, 19)    |topped out (i.e., no longer receive annual      |
          |               |merit salary increases) to receive a 5%         |
          |               |increase.                                       |
           ---------------------------------------------------------------- 
           ---------------------------------------------------------------- 
          |State Safety   |2% at age 55 increasing |2.5% at age 55         |
          |Employees      |to 2.5% at age 60       |                       |
          |(BUs 12, 16,   |                        |                       |
          |18, 19)        |                        |                       |
          |               |                        |                       |
          |Retirement     |                        |                       |
          |Formula for    |                        |                       |
          |New Hires      |                        |                       |
          |---------------+------------------------+-----------------------|
          |Member         |11% of pay after first  |6% of pay after first  |
          |Contribution   |$513                    |$513                   |
          |to PERS        |                        |                       |
           ---------------------------------------------------------------- 
           ---------------------------------------------------------------- 
          |Final          |No change:  New hires at highest 3 years since  |
          |Compensation   |2006                                            |
          |for New Hires  |                                                |
          Pamela Schneider
          Date:  8/2/10                                          Page 4  










           ---------------------------------------------------------------- 
           ---------------------------------------------------------------- 
          |Employer       |80%/80% for employees   |No statutory formula   |
          |Health         |and dependents          |for these BUs (most    |
          |Contribution   |                        |other BUs have         |
          |(BUs 12, 18)   |                        |statutory              |
          |               |                        |formulas-either        |
          |               |                        |85%/80% or 80%/80%)    |
           ---------------------------------------------------------------- 
          |Employee       |.5% of base salary      |No contribution        |
          |contribution   |                        |currently              |
          |to prefund     |                        |                       |
          |Retiree Health |                        |                       |
          |(BUs 12, 16)   |                        |                       |
          |---------------+------------------------+-----------------------|
          |Vesting for    |Hew hires vest for 50%  |50% after 10 years,    |
          |Retiree Health |after 15 years,         |increasing 5% annually |
          |(BU 12)        |increasing 5% annually  |to 100% after 20 years |
          |               |to 100% after 25 years  |                       |
           ---------------------------------------------------------------- 
           ---------------------------------------------------------------- 
          |Personal Leave |Duration=12 months:  Reduces pay by approx.     |
          |Program        |4.8% in exchange for 1 day off per month.  Time |
          |(BUs 12, 16,   |off has no cash value and can be used for       |
          |18, 19)        |vacation or sick leave.                         |
          |---------------+------------------------------------------------|
          |Pay Increase   |5% increase to top step of relevant classes,    |
          |(BUs 12, 16,   |effective 1/1/2012: Allows employees who are    |
          |18, 19)        |topped out (i.e., no longer receive annual      |
          |               |merit salary increases) to receive a 5%         |
          |               |increase.                                       |
           ---------------------------------------------------------------- 
           ---------------------------------------------------------------- 
          |Firefighters   |3% at age 55            |3% at age 50           |
          |(BU 8)         |                        |                       |
          |               |                        |                       |
          |Retirement     |                        |                       |
          |Formula for    |                        |                       |
          |New Hires      |                        |                       |
           ---------------------------------------------------------------- 
          |Member         |10% of pay after first  |8% of pay after first  |
          |Contribution   |$238                    |$238                   |
          |to PERS        |                        |                       |
          Pamela Schneider
          Date:  8/2/10                                          Page 5  










          |---------------+------------------------+-----------------------|
          |Final          |3 Highest Years         |1 Highest Year         |
          |Compensation   |                        |                       |
          |Calculation    |                        |                       |
          |for New Hires  |                        |                       |
           ---------------------------------------------------------------- 
           ---------------------------------------------------------------- 
          |Pay Increase   |4% increase to top step of relevant employee    |
          |               |classes, effective 1/1/2012:  Allows employees  |
          |               |who are topped out (i.e., no longer receive     |
          |               |annual merit salary increases) to receive a 4%  |
          |               |increase.                                       |
           ---------------------------------------------------------------- 
           ---------------------------------------------------------------- 
          |Patrol (BU 5)  |3% at age 55            |3% at age 50           |
          |               |                        |                       |
          |Retirement     |                        |                       |
          |Formula for    |                        |                       |
          |New Hires      |                        |                       |
           ---------------------------------------------------------------- 
          |Member         |10% of pay after first  |8% of pay after first  |
          |Contribution   |$863                    |$863                   |
          |to PERS        |                        |                       |
          |---------------+------------------------+-----------------------|
          |Final          |3 Highest Years         |1 Highest Year         |
          |Compensation   |                        |                       |
          |Calculation    |                        |                       |
          |for New Hires  |                        |                       |
           ---------------------------------------------------------------- 
           ---------------------------------------------------------------- 
          |Pay Increase   |2% increase to top step of relevant employee    |
          |               |classes, effective 1/1/2012:  Allows employees  |
          |               |who are topped out (i.e., no longer receive     |
          |               |annual merit salary increases) to receive a 2%  |
          |               |increase.                                       |
          |---------------+------------------------------------------------|
          |Other          |Redirection of current 2% member contribution   |
          |Provisions     |to retiree health pre-funding.  This            |
          |               |contribution shall be paid instead as employee  |
          |               |contributions to pension until July 2013, at    |
          |               |which time the retiree health pre-funding       |
          |               |employee contributions shall resume.            |
           ---------------------------------------------------------------- 
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          Date:  8/2/10                                          Page 6  











          In addition, all contracts contain the following agreed upon  
          elements with noted exceptions:

             1.   No Furlough Program for the duration of the contracts  
               (except BUs 12 and 16; however, Governor's Executive  
               Order reinstating furloughs beginning August 2010  
               exempts BUs 12 and 16).
             2.   Continuous appropriation of wages in the event of a  
               late budget.
             3.   Requirements to reopen negotiations if any other  
               state bargaining unit enters into a contract that does  
               not include pension reforms and provides a greater value  
               than that provided to these bargaining units (except BUs  
               12 and 16).
             4.   Agreements to delete two state holidays from the  
               contracts (which were already deleted in law as of  
               February 2009):  Lincoln's Birthday and Columbus Day.
             5.   Premium pay (i.e., time and a half) for the following  
               holidays:  January 1st, last Monday in May, July 4th,  
               first Monday in September, Thanksgiving, and Christmas.
             6.   Agreements by bargaining units to not oppose  
               legislation requiring CalPERS to use supportable  
               assumptions and data that will be evaluated by another  
               party agreeable to the Department of Personnel  
               Administration and the bargaining units.



           h)  this is an urgency measure.

           Contract Duration:

             BU 8:  3 years-July 1, 2010 to July 3, 2013
             BUs 16 and 19:  2 years-July 1, 2010 to July 1, 2012

           FISCAL:
           
          DPA has submitted the following cost and savings estimates  
          (in millions) for FY 10/11:

           ----------------------------------------------------------- 
          |  Bargaining  |  Estimated Savings   |   Estimated Costs   |
          Pamela Schneider
          Date:  8/2/10                                          Page 7  










          |     Unit     |                      |                     |
           ----------------------------------------------------------- 
          |--------------+---------+-----------+----------+----------|
          |              |Gen Fund |Other Fund |Gen Fund  |Other     |
          |              |         |           |          |Fund      |
          |--------------+---------+-----------+----------+----------|
          |              |         |           |          |          |
          |--------------+---------+-----------+----------+----------|
          |8             |$2.5     |$3.3       |$0        |$0        |
          |--------------+---------+-----------+----------+----------|
          |              |         |           |          |          |
          |--------------+---------+-----------+----------+----------|
          |16            |$26.7    |$3.6       |$1.7      |$0.1      |
          |--------------+---------+-----------+----------+----------|
          |              |         |           |          |          |
          |--------------+---------+-----------+----------+----------|
          |19            |$23.8    |$8.6       |$1.5      |$0.2      |
          |              |         |           |          |          |
           ---------------------------------------------------------- 


          1)   COMMENTS  :  

           The Legislative Analyst's office has analyzed these MOUs.   
          The analysis can be accessed at:

           http://www.lao.ca.gov/reports/2010/MOU_Fiscal/MOU_Analysis_071 
          42010.pdf  
           
           2)   SUPPORT  :

               California Department of Forestry Firefighters (CDF  
          Firefighters)
               Union of American Physicians and Dentists (UAPD)
               American Federation of State, County and Municipal  
          Employees (AFSCME)
               Department of Personnel Administration (DPA)
               California-Nevada Conference of Operating Engineers

          3)   OPPOSITION  :

               None to date

          Pamela Schneider
          Date:  8/2/10                                          Page 8  













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          Pamela Schneider
          Date:  8/2/10                                          Page 9