BILL ANALYSIS                                                                                                                                                                                                    




                     SENATE GOVERNANCE & FINANCE COMMITTEE
                            Senator Lois Wolk, Chair
          

          BILL NO:  AB 130                      HEARING:  6/12/13
          AUTHOR:  Alejo                        FISCAL:  No
          VERSION:  6/3/13                      TAX LEVY:  No
          CONSULTANT:  Weinberger               

                  HEALTH CARE DISTRICTS' EMPLOYMENT CONTRACTS
          

          Prohibits a local health care district's employment  
          contract with a hospital administrator from providing  
          retirement benefits to the administrator before he or she  
          retires. 


                           Background and Existing Law  

          California's local health care districts are governed by  
          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 local health care district to enter into  
          an employment contract with a hospital administrator, the  
          duration of which cannot exceed four years, but which may  
          periodically be renewed upon expiration for not more than  
          four years (SB 2460, Bradley, 1974).

          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 2012  
          State Auditor's report found many shortcomings in the  
          transparency of the District's compensation decisions.  The  
          audit 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."  

          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  




          AB 130 -- 6/3/13 -- Page 2



          District Law to prohibit a district executive's employment  
          contract from providing retirement benefits before the  
          executive retires.


                                   Proposed Law  

          Assembly Bill 130 prohibits an employment contract between  
          a health care district and a hospital administrator, which  
          is entered into, or renewed, on or after January 1, 2014,  
          from authorizing retirement plan benefits to be paid to the  
          administrator before his or her retirement.  

          AB 130 repeals a requirement that a health care district's  
          employment contract with a hospital administrator can only  
          be renewed upon expiration.

          The bill specifies that its provisions apply to a hospital  
          administrator who is designated as Chief Executive Officer.


                               State Revenue Impact
           
          No estimate.


                                     Comment  

           Purpose of the bill  .  Health care districts confront the  
          dual challenges of competing in a rapidly changing health  
          care marketplace while managing the pressures that  
          escalating retiree costs impose on public agencies'  
          budgets.  Prompted by the findings of a state audit of the  
          Salinas Valley Healthcare District,  AB 130 imposes new  
          restrictions on health care districts' executive  
          compensation practices.  By prohibiting contracts with  
          administrators from promising inappropriately generous  
          retirement benefits, AB 130 will help local health care  
          districts control employee retirement costs, preserving  
          scarce funds for the districts' health programs.


                                 Assembly Actions  

          Assembly Local Government Committee:  9-0
          Assembly Health Committee:    18-0





          AB 130 -- 6/3/13 -- Page 3



          Assembly Floor:                    75-0


                         Support and Opposition  (6/6/13)

           Support  :  Association of California Healthcare Districts;  
          California Nurses Association; California Teamsters Public  
          Affairs Council; Camarillo Health Care District; National  
          Union of Healthcare Workers.

           Opposition  :  Unknown.