BILL ANALYSIS
AB 1699
Page 1
REPLACE - 06/02/2010 Technical change (Member name)
ASSEMBLY THIRD READING
AB 1699 (Hernandez)
As Introduced February 1, 2010
2/3 vote. Urgency
PUBLIC EMPLOYEES 4-1 APPROPRIATIONS 12-5
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|Ayes:|Torrico, Furutani, |Ayes:|Fuentes, Ammiano, |
| |Hernandez, Ma | |Bradford, |
| | | |Charles Calderon, Coto, |
| | | |Davis, |
| | | |Monning, Ruskin, Skinner, |
| | | |Solorio, |
| | | |Torlakson, Torrico |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Harkey |Nays:|Conway, Harkey, Miller, |
| | | |Nielsen, Norby |
| | | | |
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SUMMARY : Ensures that state employees will continue to be paid
even if a budget is not enacted by the beginning of the new fiscal
year. Specifically, this bill :
1)Requires, in any fiscal year in which the budget is not enacted
by July 1, an amount to be continuously appropriated from the
General Fund (GF) and special funds to pay state employee
salaries and benefits.
2)Specifies that if there is a memorandum of understanding (MOU)
in effect, pay and benefits will be consistent with the MOU's
provisions.
3)Specifies that for managers and other excluded state employees,
compensation and contributions will be at the rate approved by
the Department of Personnel Administration (DPA) in the prior
fiscal year.
4)Specifies that if no MOU is in effect and if DPA has not
approved a compensation package for excluded employees, the
compensation payments will be at the rate in effect the prior
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year.
5)Authorizes the Department of Finance to reduce the appropriate
budget act allocations by the amount of warrants drawn once the
budget is enacted without action having to be taken by the
Legislature or the Governor.
EXISTING LAW :
1)Provides that no state officer or employee will be deemed to
have a break in service or to have terminated his or her
employment, for any purpose, not to have incurred any change in
his or her authority, status, or jurisdiction or in his or her
salary or other conditions of employment, solely because of the
failure to enact a budget act for a fiscal year prior to the
beginning of that fiscal year.
2)Requires, under the California Constitution, the Legislature to
pass a budget bill by June 15 of each year for the fiscal year
commencing on July 1. Money may be drawn from the Treasury only
through an appropriation made by law and upon a State
Controller's duly drawn warrant.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, assuming that under current law most state employees
would receive only minimum wage during late budget periods (then
receive full reimbursement once the budget is signed), the bill
would have the following fiscal impacts on the state:
1)The continuous appropriation of full wages could reduce the
amount of funds that would otherwise earn pooled money interest,
and increase the state's need to borrow to meet its cash flow
needs. As an illustration, a two-month delay in the budget's
enactment would reduce interest earnings by about $2.5 million
(of which about one-half would be attributable to the General
Fund (GF)).
2)During periods in which the state is facing particularly severe
cash-flow shortfalls, the bill could significantly curtail
short-term cash-management options. This would occur because the
state would be precluded from deferring about $300 million in
monthly GF expenditures.
COMMENTS : According to supporters, "This is a very important
measure during these difficult financial times, especially with
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state workers being furloughed and threatened with being paid the
federal minimum wage, should a budget agreement not be reached by
the end of the fiscal year.
"The California Constitution requires the Legislature to pass a
budget bill by June 15th for the fiscal year commencing July 1st.
The Constitution also specifies that money can be drawn from the
Treasury only through an appropriation made by law and upon a
Controller's duly drawn warrant. In 2005, the California Supreme
Court upheld an appellate court decision ruling that state
workers, paid by the hour and who do not work overtime in a
particular pay period, are entitled only to the federal minimum
wage if the state enters a new fiscal year without a budget. At
that time, former State Controller Steve Westly opined that the
Supreme Court decision left him with the authority to decide how
much to pay state employees. He argued that because decisions on
overtime cannot be made in advance, he would have to pay all
workers in-full or risk violating the law.
"In July 2008, Governor Schwarzenegger ordered state workers' pay
to be reduced after the Legislature failed to pass a budget on
time. State Controller John Chiang refused to cut paychecks that
would have paid 238,000 state workers $6.55 per hour, which is the
federal minimum wage (currently federal minimum wage is $7.25 per
hour). The Department of Personnel Administration took the
Controller to court arguing the law compelled him to pay federal
minimum wage absent an on-time budget. In a ruling by the court
siding with the Governor, the court stated: 'while state workers
have the ultimate right to their full wages, the law does not
authorize the full pay until the money is appropriated in the
state budget.
"AB 1699 is a simple bill. It seeks to ensure that state
employees receive their full salary in the event a budget is not
passed in a timely manner. A recent court decision, coupled with
the three-day per month furlough order forced upon state workers
by the Administration, leaves them vulnerable to sharply reduced
pay during late budget periods."
This bill is similar to AB 1523 (Soto) of 2007 which was held in
the Assembly Appropriations Committee, AB 1125 (Hernandez) of
2009, which was held in the Assembly Appropriations Committee, and
AB 790 (Hernandez and Ruskin) which is currently pending action on
the Senate floor.
AB 1699
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Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN: 0004599