BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 2180 HEARING: 6/13/12
AUTHOR: Alejo FISCAL: No
VERSION: 5/14/12 TAX LEVY: No
CONSULTANT: Weinberger
HEALTH CARE DISTRICT EMPLOYEES
Prohibits a health care district from offering specified
retirement benefits unless those benefits are available to
all of the district's employees.
Background and Existing Law
California's local health care districts are governed by
directly elected boards of directors. As hospitals, they
face market pressures to compete with other health care
providers. As local governments, they must follow the
Brown Act, the Public Records Act, the Political Reform
Act, public contracting laws, and other statutory
restrictions.
State law allows a health care district's board of
directors to:
Employ any officers and employees the board deems
necessary to carry on the district's business,
Prescribe the duties and powers of the health care
facility administrator, secretary, and other officers
and employees of any health care facilities of the
district, and
Determine the number of, and appoint, all district
officers and employees and to fix their compensation.
The Salinas Valley Memorial Healthcare District was formed
more than 60 years ago to serve the City of Salinas and
other nearby Monterey County communities. In 1953, the
District opened Salinas Valley Memorial Hospital. A recent
audit of the Salina Valley Memorial Health Care System
found that a "former chief executive officer (CEO) received
generous retirement and severance benefits totaling $4.9
million between 2008 and 2011, most of which were paid to
him before he retired."
AB 2180 -- 5/14/12 -- Page 2
In light of the multi-million dollar severance package
provided to the Salinas Valley District's CEO, some public
officials want legislators to amend the Local Health Care
District Law to discourage health care district boards from
providing excessive retirement benefits to hospital
executives.
Proposed Law
Assembly Bill 2180 prohibits an employer from providing to,
or on behalf of, an
officer or employee any of the following, unless the same
options are made available to all officers and employees:
A lump sum payment, including one based on service
or merit.
Any payment contingent upon severance or
retirement.
A contribution to more than one retirement plan or
other supplemental pension plan, whether public or
private.
Any other retirement benefit.
AB 2180 defines "employer" as including the board of
directors, a hospital district, and a health care facility
licensed to a hospital district.
AB 2180 defines "officer or employee" as including the
hospital administrator, a director, policymaking management
employee, or medical staff officer, and any executive or
staff of the health care facilities licensed to the
district.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . AB 2180 ensures that all
employees of a health care district are treated equally
with regard to the retirement benefits offered by the
district's board of directors. The bill reflects a need
for fairness in health care districts' compensation
practices, in contrast to recent examples of districts
AB 2180 -- 5/14/12 -- Page 3
providing excessive compensation to administrators while
considering cuts to patient services and staff salaries.
The exorbitant retirement benefits provided to the Salinas
Valley District's former CEO are not unique. Other
administrators at Salinas Valley and in other districts
enjoy multi-million dollar compensation packages. As
public agencies, health care districts have a
responsibility to handle their resources responsibly. AB
2180 prevents districts from irresponsibly diverting
district funds into providing large benefit packages to a
handful of administrators.
2. Local control . The responsibility for protecting the
public's interest in a health care district's fiscal
resources lies with the district's elected board of
directors and the voters who elect them. Health care
districts face a rapidly changing and competitive
marketplace. In confronting these challenges, district
directors need some discretion in determining what
compensation arrangements allow them to attract and retain
staff. State laws, no matter how detailed, cannot
guarantee that health care district directors will always
make wise decisions when compensating district employees.
The restrictions that AB 2180 imposes on specific types of
compensation may simply force district boards to be more
generous with other types of compensation, like insurance
benefits, low-interest loans, vehicle allowances, and other
perks. Ultimately, a health care district's voters must
hold its board members accountable for their decisions
regarding staff compensation. The Committee may wish to
consider whether, by regulating specific elements of health
care districts' retirement packages, AB 2180 unnecessarily
involves the state in local decisions about health care
districts' spending priorities.
3. Competitive disadvantage . Health care districts must
operate hospitals and other health care facilities in a
competitive market environment while also complying with
numerous requirements that state law applies to local
governments. For example, health care districts' private
sector competitors are free to conduct business without
worrying about open meeting requirements, public records
act compliance, or competitive bidding procedures. AB 2180
forces health care districts to comply with additional
statutory requirements that don't apply to private
hospitals or even to other public hospitals, like those
AB 2180 -- 5/14/12 -- Page 4
operated by counties or the University of California. The
Committee may wish to consider whether AB 2180 creates a
disadvantage for local health care districts as they
compete with other public and private health care service
providers.
4. Related bill . To increase the transparency of health
care districts' compensation practices, AB 2115 (Alejo)
requires that health care districts' contracts with
administrators or CEOs must be in writing and subject to
renewal every four years. AB 2115 is in the Senate Rules
Committee, pending referral to a policy committee.
Assembly Actions
Assembly Local Government Committee: 6-3
Assembly Floor: 49-25
Support and Opposition (6/7/12)
Support : California Conference of Machinists; California
Conference Board of the Amalgamated Transit Union;
California Labor Federation; California Nurses Association;
California Teamsters Public Affairs Council; Engineers and
Scientists of California; International Longshore &
Wharehouse Union; Monterey Bay Central Labor Council;
National Union of Healthcare Workers; Operating Engineers,
Local No. 3; Professional and Technical Engineers, Local
21; UNITE HERE; United Food and Commercial Workers Union,
Western States Council; Utility Workers Union of America,
Local 132.
Opposition : Antelope Valley Healthcare District;
Association of California Healthcare Districts; California
Hospital Association; California Special Districts
Association; Coalinga Hospital District; Corcoran District
Hospital; District Hospital Leadership Forum; Fallbrook
Healthcare District; Hospital Corporation of America; John
C. Fremont Healthcare District; Lompoc Valley Medical
Center; Los Medanos Community Healthcare District; Mayers
Memorial Hospital District; Palomar Health; Southern Mono
Healthcare District; Tri-City Medical Center, one
individual letter.
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