BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 280
                                                                  Page  1

          Date of Hearing:   May 8, 2013

                           ASSEMBLY COMMITTEE ON EDUCATION
                                Joan Buchanan, Chair
                     AB 280 (Alejo) - As Amended:  April 11, 2013
           
          SUBJECT  :   Local agency employment contracts:  maximum cash  
          settlement

           SUMMARY  :   Reduces the maximum cash settlement that can be  
          provided to a school district superintendent and other  
          high-level district officials who are terminated before their  
          contracts expire and limits the amount that can be paid for a  
          leave of absence, as specified.  Specifically,  this bill  :  

          1)Provides that in the case of a voluntary termination of the  
            employment contract of a district superintendent, deputy  
            superintendent, assistant superintendent, or associate  
            superintendent of schools the maximum cash settlement shall be  
            three times the monthly salary, regardless of the number of  
            months left in the contract.

          2)Provides that in the case of an involuntary termination of the  
            employment contract of a district superintendent, deputy  
            superintendent, assistant superintendent, or associate  
            superintendent of schools the maximum cash settlement shall be  
            six times the monthly salary, regardless of the number of  
            months left in the contract.

          3)Provides that the maximum cash settlement shall be one month's  
            salary in the case of a district superintendent, deputy  
            superintendent, assistant superintendent, or associate  
            superintendent of schools who the district believes, and  
            subsequently confirms, pursuant to an independent audit, has  
            engaged in fraud, misappropriation of funds, or other illegal  
            fiscal practices.

          4)Provides that if a school district places a district  
            superintendent, deputy superintendent, assistant  
            superintendent, or associate superintendent of schools on a  
            paid leave of absence, the maximum pay during the leave shall  
            be the employee's monthly salary multiplied by an unspecified  
            number.

          5)States that the formula for determining the maximum pay during  








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            a leave of absence is a maximum and not a target amount to be  
            paid.

          6)Requires the employee on leave to exhaust all of his or her  
            accrued sick leave and vacation time before receiving pay  
            under the formula.

          7)Applies these provisions to contracts negotiated on or after  
            January 1, 2014.

           EXISTING LAW  authorizes the cash settlement of a terminated  
          school district superintendent to be equal to the monthly salary  
          of the superintendent multiplied by the number of months left on  
          the unexpired term of the contract, not to exceed 18, and limits  
          the cash settlement in the case of termination for fraud or  
          other illegal fiscal practices to three month's salary.

           FISCAL EFFECT  :   This bill is keyed non-fiscal.

           COMMENTS  :   According to the author's office, there is an  
          ongoing problem with school district superintendent turnover,  
          and it is becoming extremely costly to school districts due to  
          the size of cash settlements of terminated superintendents.  The  
          author's office states that "By placing limits on cash  
          settlements for superintendents, we can save money for students,  
          begin to improve our schools [sic] administrative processes, and  
          demonstrate fiscal discipline in the administration of taxpayer  
          dollars."

           Arguments in support  .  Supporters of the bill argue point to a  
          2012 report in the Sacramento Bee showing that the annual pay  
          for the highest paid school district superintendents ranged from  
          $265,773 to $322,159, which would translate into an 18-month  
          severance pay of $398,599 to $483,238.  Supporters also state  
          that, between 2006 and 2009, 45% of all superintendents and 71%  
          of superintendents in the largest districts left their jobs.   
          They do not indicate, however, how many left their job because  
          of retirement or transfer out (without a buyout) vs. how many  
          received a settlement for unexpired months in their contracts.

           Arguments in opposition  .  Opponents of the bill address three  
          issues:  voluntary termination, involuntary termination, and  
          paid leaves of absence.  Regarding involuntary terminations,  
          opponents argue that if the unexpired term of the contract is  
          more than six months, then termination amounts to a breach of  








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          contract, and the district should be required to pay up to the  
          current statutory maximum of 18 months.  According to the Small  
          School Districts' Association (SSDA), this bill's "contract  
          provision would penalize school superintendents who are hired by  
          a school board, relocate to the school district and then, for  
          reasons that are not related to fraud, misappropriation of funds  
          or other illegal practices, are fired by the school board  
          without notice and prior to the end of their mutually bargained  
          and agreed upon contract.  SSDA believes contracts should be  
          honored and, if unilaterally broken, then there should be a  
          significant penalty for breaking the contract."   Opponents also  
          argue that the cost of unilaterally terminating a contract  
          serves as a disincentive for terminating a superintendent for  
          political, and not job performance-related, purposes.  Although  
          the author's office argues that this bill is in response to "an  
          ongoing problem with school district superintendent turnover,"  
          this bill could actually increase turnover by reducing the  
          penalty to districts for terminating contracts before their  
          terms expire.  

          Regarding voluntary terminations, The Association of California  
          School Administrators (ACSA) argues that voluntary terminations  
          are sometimes negotiated in order to avoid an involuntary  
          termination.  This can save the district money.  For example, a  
          negotiated voluntary termination with six month's pay would be  
          less expensive than an involuntary termination with 12 month's  
          pay.  This bill would eliminate this cost-saving tool.

          Regarding paid leaves of absence, opponents argue that paid  
          leaves of absence are sometimes provided for legal or employment  
          reasons and sometimes must remain confidential, and should not  
          be subject to arbitrary limitations.  If a superintendent is  
          falsely accused of wrong-doing, for example, he or she may be  
          put on a leave of absence pending an investigation.  Even if  
          exonerated, the superintendent would not be entitled to pay if  
          the investigation and leave exceed the limit imposed by this  
          bill.  Rather than imposing a statewide, arbitrary cap, the  
          committee may wish to consider requiring school districts to  
          adopt policies regarding leaves of absence and to include in the  
          policy the requirement that paid leaves must be approved by the  
          governing board in a public hearing.

          In general, this bill could have four major unintended  
          consequences.  First, it could increase superintendent turnover  
          by reducing the penalty districts pay for terminations prior to  








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          the fulfillment of a contract.  Second, it could cost districts  
          money by limiting the ability to negotiate lower-cost voluntary  
          terminations in lieu of involuntary terminations.  Third, it  
          could result in limitations on paid leaves of absence that could  
          unfairly punish superintendents.  Fourth, it could have a  
          chilling effect on the willingness of highly-qualified  
          individuals to seek top-level district positions by increasing  
          the financial uncertainty of assuming such positions.   
          Accordingly, staff recommends that the bill be amended to strike  
          its current provisions and insert a provision requiring school  
          district governing boards to adopt a policy governing paid  
          leaves of absence and requiring the policy to include the  
          requirement that paid leaves must be approved by the governing  
          board in a public hearing.

           Related legislation  .  AB 2155 (Hueso) in 2011, among other  
          things, limited the cash settlement for terminated school  
          superintendents to 12 month's salary.  That bill died in  
          Assembly Appropriations.

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          California Federation of Teachers

           Opposition 
           
          Association of California School Administrators
          California Association of School Business Officials
          California School Boards Association
          Small School Districts' Association
           
          Analysis Prepared by  :    Rick Pratt / ED. / (916) 319-2087