BILL ANALYSIS SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: AB 1699 Lou Correa, Chair Hearing date: June 23, 2010 AB 1699 (Hernandez) as introduced 2/01/10FISCAL: YES STATE EMPLOYEES: SCIENTIFIC SUPERVISORS: SALARY DETERMINATIONS HISTORY : Sponsor: Professional Engineers in California Government (PECG) California Association of Professional Scientists (CAPS) Prior legislation: AB 790 of 2010 (Hernandez), Senate Floor ASSEMBLY VOTES : PER & SS 4-1 4/07/10 Appropriations 12-5 5/28/10 Assembly Floor 54-19 6/03/10 SUMMARY : Would provide-in any year in which a budget is not enacted by July 1st -a continuous appropriation to pay state employee salaries and benefits for the period of time between July 1st and when the budget is enacted. URGENCY BILL . This bill also : 1) specifies that employees shall be paid at rates consistent with memoranda of understanding or the salaries they were receiving in the fiscal year immediately preceding the new budget year. 2) allows the Department of Finance to reduce the new budget, once it is enacted and without further legislative action, to reflect the monies already paid for employee compensation under the continuous appropriation. Pamela Schneider Date: 6/15/10 Page 1 BACKGROUND AND ANALYSIS : 1) Existing law : 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, or 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. The California Constitution requires the Legislature to pass a budget bill by June 15 of each year for the fiscal year commencing on July 1. Under the California Constitution, money may be drawn from the Treasury only through an appropriation made by law and upon a Controller's duly drawn warrant. 2) Why is this bill necessary ? 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 (currently $7.25/hour) if the State enters a new fiscal year without a budget. 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 was the federal minimum wage at that time. 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." Pamela Schneider Date: 6/15/10 Page 2 3) This bill : a) provides for a continuous appropriation to pay state employee wages, in any year in which a budget is delayed, for the period of time beginning July 1st and ending upon enactment of the new budget; b) specifies that wages be paid consistent with memoranda of understanding, or according to the rate of pay prior to the end of the previous fiscal year for non-represented employees; and c) allows the Department of Finance to deduct from the new budget-without further legislative action-any monies paid for compensation under the continuous appropriation during the time when the new budget was delayed. COMMENTS : 1) Arguments in Support According to the sponsors, CAPS and PECG: AB 790 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. Not doing so will severely impact the ability of state employees to meet their financial obligations, care for their families and participate in California's economic recovery. 2) SUPPORT : Professional Engineers in California Government (PECG), Sponsor California Association of Professional Scientists (CAPS), Sponsor Service Employees International Union, Local 1000 (SEIU), Co-Sponsor American Federation of State, County, and Municipal Employees, AFL-CIO American Federation of State, County, and Municipal Employees Local 2620, AFL-CIO (AFSCME) Pamela Schneider Date: 6/15/10 Page 3 California Association of Highway Patrolmen (CAHP) California Attorneys, Administrative Law Judges and Hearing Officers in State Employment (CASE) California Correctional Peace Officers Association (CCPOA) California Labor Federation California State Employees Association (CSEA) CDF Firefighters 3) OPPOSITION : None to date ##### Pamela Schneider Date: 6/15/10 Page 4