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