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.