BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 846
                                                                  Page  1

          Date of Hearing:   August 3, 2010

            ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL  
                                      SECURITY
                               Alberto Torrico, Chair
                    SB 846 (Correa) - As Amended:  August 2, 2010

           SENATE VOTE  :   (vote not relevant)
           
          SUBJECT  :   State employees: memorandum of understanding.

           SUMMARY  :   Ratifies the provisions of a memorandum of  
          understanding (MOU) between the state and the following three  
          state bargaining units (BUs): BU 5 (Highway Patrol), represented  
          exclusively by the California Association of Highway Patrolmen;  
          BU 12 (Craft and Maintenance), represented exclusively by the  
          International Union of Operating Engineers; and, BU 18  
          (Psychiatric Technicians), represented exclusively by the  
          California Association of Psychiatric Technicians.   
           Specifically, this bill  :

          1)Provides legislative ratification for MOUs agreed to between  
            the State and state BUs 5, 12, and 18.

          2)Requires new employees, as specified, to receive lower pension  
            benefits than current employees.

          3)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.

          4)Requires all employees covered by the agreements to pay 10 or  
            11 percent of compensation in employee contributions to fund  
            retirement benefits.

          5)Requires that compensation for employees covered by these  
            agreements will be continuously appropriated in the event of a  
            late budget.

          6)Includes statutory changes that apply to these bargaining  
            units and also state bargaining units 8, 16, and 19, which  
            MOUs are to be ratified in AB 1592 (Buchanan, Huber and Nava),  
            and makes this bill operative only if AB 1592 is also passed.   










                                                                  SB 846
                                                                  Page  2

           EXISTING LAW  :

          1)Requires, under the State Employee-Employer Relations Act (the  
            Dills Act), 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.

          2)Establishes five 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.

          3)Specifies that if the provisions of certain statutes are in  
            conflict with a MOU, the terms of the MOU are prevailing.

          4)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.

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

           ----------------------------------------------------------- 
          |  Bargaining  |  Estimated Savings   |   Estimated Costs   |
          |     Unit     |                      |                     |
           ----------------------------------------------------------- 
          |--------------+---------+-----------+----------+----------|
          |              |Gen Fund |Other Fund |Gen Fund  |Other     |
          |              |         |           |          |Fund      |
          |--------------+---------+-----------+----------+----------|
          |              |         |           |          |          |
          |--------------+---------+-----------+----------+----------|
          |5             |$0       |$8.8       |$0        |$8.8      |
          |--------------+---------+-----------+----------+----------|
          |              |         |           |          |          |
          |--------------+---------+-----------+----------+----------|
          |12            |$13.4    |$28.7      |$3.7      |$6.4      |
          |--------------+---------+-----------+----------+----------|
          |              |         |           |          |          |
          |--------------+---------+-----------+----------+----------|
          |18            |$20.5    |$7.6       |$5.5      |$2.3      |
           ---------------------------------------------------------- 









                                                                  SB 846
                                                                  Page  3



           COMMENTS  :   The terms and conditions of the MOUs 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     |                        |                       |
          |Retiree Health |                        |                       |
          |(BU 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                      |








                                                                  SB 846
                                                                  Page  4

          |Calculation    |BUs 5 and 8: New hires go to highest 3 years    |
          |for New Hires  |                                                |
           ---------------------------------------------------------------- 
          |Personal Leave |Duration=12 months: Reduces pay by approx. 4.8% |
          |Program        |in exchange for 1 day off per month. Time off   |
          |(BUs 12, 16,   |has no cash value and can be used for vacation  |
          |18, 19)        |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  |                                                |
           ---------------------------------------------------------------- 
           ---------------------------------------------------------------- 
          |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     |                        |                       |








                                                                  SB 846
                                                                  Page  5

          |Retiree Health |                        |                       |
          |(BU 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. 4.8% |
          |Program        |in exchange for 1 day off per month. Time off   |
          |(BUs 12, 16,   |has no cash value and can be used for vacation  |
          |18, 19)        |or sick leave.                                  |
          |               |                                                |
          |---------------+------------------------------------------------|
          |Pay Increase   |5% increase to top step of relevant classes,    |
          |(BUs 12, 16,   |effective 12/1/2012: 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        |                        |                       |
          |---------------+------------------------+-----------------------|
          |Final          |3 Highest Years         |1 Highest Year         |
          |Compensation   |                        |                       |
          |Calculation    |                        |                       |
          |for New Hires  |                        |                       |
           ---------------------------------------------------------------- 
           ---------------------------------------------------------------- 
          |Pay Increase   |4% increase to top step of relevant employee    |
          |               |classes, effective 12/1/2012: Allows employees  |
          |               |who are topped out (i.e., no longer receive     |
          |               |annual merit salary increases) to receive a 4%  |
          |               |increase.                                       |
           ---------------------------------------------------------------- 








                                                                  SB 846
                                                                  Page  6

           ---------------------------------------------------------------- 
          |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 12/1/2012: 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.            |
          |               |                                                |
           ---------------------------------------------------------------- 

          In addition, the contracts contain the following agreed upon  
          elements:

             1.   No Furlough Program for the duration of the contracts.   
               (This provision is not included in the MOUs for BU 12 or BU  
               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.  (This provision  
               is not included in the MOUs for BU 12 or BU 16.)








                                                                  SB 846
                                                                  Page  7

             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 the California Public Employees' Retirement  
               System to use supportable assumptions and data that will be  
               evaluated by another party agreeable to the Department of  
               Personnel Administration and the bargaining units.

          Contract Duration:

          BU 5: 3 years - July 3, 2010 to July 3, 2013
          BUs 12 and 18: 2 years - July 1, 2010 to July 1, 2012







           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          California Association of Highway Patrolmen (Sponsor)
          Department of Personnel Administration (Sponsor)
          California Association of Psychiatric Technicians
           
            Opposition 
           
          None on file

           Analysis Prepared by  :    Karon Green / P.E., R. & S.S. / (916)  
          319-3957