BILL ANALYSIS �
AB 566
Page 1
Date of Hearing: April 9, 2013
ASSEMBLY COMMITTEE ON JUDICIARY
Bob Wieckowski, Chair
AB 566 (Wieckowski) - As Amended: April 2, 2013
As Proposed to Be Amended
SUBJECT : COURTS: CONTRACTING
KEY ISSUE : IN ORDER TO PROTECT THE INTEGRITY OF OUR COURTS AND
ENSURE THAT SCARCE JUDICIAL RESOURCES ARE SPENT EFFICIENTLY,
SHOULD TRIAL COURTS NEED TO ADHERE TO DUE DILIGENCE STANDARDS
BEFORE PRIVATIZING WORK DONE BY TRIAL COURT EMPLOYEES?
FISCAL EFFECT : As currently in print this bill is keyed fiscal.
SYNOPSIS
Unless specified conditions are satisfied, nearly all government
entities in California are restricted from contracting out
functions customarily done by public employees. These
requirements are designed to ensure that not only is the work
done cost-effectively, but that the public interest in the
particular government function remains paramount. As a general
rule, work performed for the state must be done by state
employees unless the proposed contract for personal services
meets specified criteria, including a clear demonstration of
cost saving. Schools and community college districts are
therefore also reasonably required to comply with the same
standards that apply to state departments. Just two years ago,
the Legislature passed, and the Governor signed, almost
identical due diligence standards for public libraries in AB 438
(Williams), Chap. 611, Stats, 2011. This bill, sponsored
jointly by the Service Employees International Union (SEIU) and
the American Federation of State, County and Municipal Employees
(AFSCME), extends these same due diligence protections to the
trial courts and their employees. As proposed to be amended,
this bill is co-authored by Assemblymembers Alejo, Chau,
Dickinson, Garcia, Gomez, Jones-Sawyer, Muratsuchi, Rendon,
Skinner and Stone, and it is supported by numerous labor
organizations. The Judicial Council belatedly indicated last
Thursday that it had taken an oppose position on the bill, and
it did not deliver its opposition letter to the Committee until
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last Friday, so the author and interested parties were not given
an appropriate opportunity to discuss any concerns.
SUMMARY : Requires courts to comply with specified requirements
before contracting out services currently, customarily or
previously performed by trial court employees. Specifically,
this bill :
1)Provides that if a trial court seeks to contract for services
currently, previously or customarily performed by trial court
employees, all of the following apply:
a) The contract may not be approved if, in light of the
services provided by the trial courts and the special
nature of the judicial function, it would be inconsistent
with the public interest to have the services performed by
a private entity.
b) The court clearly demonstrates that the contract will
result in actual, overall cost savings to the court,
considering specified factors, as provided.
c) The contract savings are not the result of lower
contractor pay rates or benefits, provided the contract is
eligible for approval if the contractor's wages are at the
industry standard and do not undercut trial court pay
rates.
d) The contract does not cause existing trial court
employees to lose employment, as provided.
e) The contract is awarded through a competitive bidding
process.
f) The contract provides for qualified staff, and the
contractor's hiring practicing are nondiscriminatory.
g) The contract allows for immediate termination by the
trial court, without penalty, for material breach.
h) For contracts over $100,000, requires the contract to
(i) disclose specified information, (ii) provide measurable
performance standards; and (iii) require a performance
audit and a cost audit be done and considered prior to any
contract renewal.
i) The contract is limited to no more than five years.
2)Does not preclude a trial court or the Judicial Council from
adopting more restrictive rules regarding contracting of court
services.
3)Provides that any contract entered into or extended between
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the date the bill is enacted and the date it is effective that
does not comply with the requirements in #1), above,
terminates 90 days after the date the bill becomes operative,
unless the contract terminates earlier.
4)Contains a severability clause.
EXISTING LAW :
1)Provides that employees of the state be appointed through the
civil service system. (Cal. Constitution, Article VII,
Section 1.)
2)Limits personal service contracts (contracting out) for work
done by state employees to when specified conditions are
satisfied, including:
a) The contracting state agency clearly demonstrates actual
overall savings.
b) The contract savings are not the result of lower
contractor pay rates or benefits, provided the contract is
eligible for approval if the contractor's wages are at the
industry standard and do not undercut existing pay rates.
c) The contract does not cause displacement of state civil
service employees.
d) The amount of the savings clearly justifies the
agreement.
e) The contract is awarded through a competitive bidding
process.
f) The potential for future economic risk for the state
from the contractor is minimal.
g) The potential economic advantage of contracting out is
not outweighed by the public's interest in having a
particular function performed directly by the state.
(Government Code Section 19130(a).)
3)Permits contracting out of work done by state employees in
limited specified situations, including new state functions,
services that cannot be performed within civil service, and
emergency situations. (Government Code Section 19130(b).)
4)Prevents a school district or community college district from
contracting out services currently or customarily performed by
classified employees, unless conditions similar to those set
out in #2), above, are satisfied. (Education Code Sections
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45103.1 and 88003.1.)
5)Prevents, until January 1, 2019, a city or library district
from withdrawing from a county free library system and
operating libraries with a private contractor, unless
conditions similar to #2), above, are satisfied. (Education
Code Section 19104.5.)
6)Allows a county to contract out for "special services," as
provided. (Government Code Section 31000.)
COMMENTS : Nearly all government entities in California are
restricted from contracting out functions customarily done by
public employees, unless specified conditions are satisfied.
These requirements are designed to ensure that not only is work
done cost-effectively, but that the public interest in
government activities remains paramount. As a general rule,
work performed for the state must be done by state employees
unless the proposed contract for personal services meets
specified criteria, including a clear demonstration of cost
savings. Schools and community college districts are also
required to comply with the same standards that apply to state
departments. Just two years ago, the Legislature passed, and
the Governor signed, almost identical provisions to limit the
privatization of public libraries in AB 438 (Williams), Chap.
611, Stats, 2011. This bill, jointly sponsored by SEIU and
AFSCME, seeks to extend these same due diligence protections to
the trial courts.
The author writes that this bill is necessary not only to ensure
that scarce court resources are used as effectively and
efficiently as possible, but also to protect the very integrity
of the court process: "AB 566 is consistent with the law today
for the state, school districts, community colleges, and our
libraries. This bill simply puts the trial courts on par with
other important government functions by ensuring that our tax
dollars are accountable and that the public's interest in fair
and judicious courts is considered before privatizing critical
court functions."
Under this bill, if a trial court intends to privatize a
function that is currently, customarily, or previously performed
by trial court employees, the court must first:
Protect the public interest in judicial integrity : The
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contract cannot be approved if, in light of the services to
be provided by the trial court and the special nature of
the judiciary, it would be inconsistent with the public
interest to have the services covered by the contract
performed by a private entity.
Demonstrate cost savings : The court must clearly
demonstrate that the contract will result in actual,
overall cost savings to the court, and:
o The court's additional cost of providing the same
services as proposed by the contract must be included.
These additional costs include the salaries and benefits
of additional staff that would be needed and the cost of
additional space, equipment, and materials needed to
perform the necessary functions of the court.
o The court's indirect overhead costs is not included
unless those costs can be attributed solely to the
function in question and would not exist if that function
was not performed by the court.
o The cost of a contractor providing a service for any
continuing court costs that would be directly associated
with the contracted function must be included.
Continuing court costs include costs for inspection,
supervision, and monitoring.
Show savings not solely from reduced wages and benefits :
The contract savings may not be solely the result of lower
contractor pay rates or benefits. However, the contract
may be approved if the contractor's wages are at the
industry standard and do not undercut trial court pay
rates.
Show no employee displacement : The contract may not
cause existing trial court employees to be displaced,
including loss of employment or seniority, reduction in
wages, benefits or hours, or involuntary transfer to a new
location requiring a change of residence. Displacement,
however, does not include changes in shifts or days off,
nor does it include reassignment to other positions within
the same classification and general location.
Use competitive bidding : The contract must be awarded
through a competitive bidding process.
Provide for staff qualifications and hiring : The
contract must provide qualifications of staff, and the
contractor's hiring practices must be nondiscriminatory.
Allow for contract termination : The contract allows for
immediate termination by the trial court, without penalty,
for material breach.
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Require specified contractor disclosures : For contracts
over $100,000,
o A contractor must disclose the following information
as part of its bid:
� A description of all charges, claims, or
complaints filed against the contractor by any
federal, state, or local administrative agency
during the prior 10 years.
� A description of all civil complaints
filed against the contractor in any state or federal
court during the prior 10 years.
� A description of all state or federal
criminal complaints or indictments filed against the
contractor, or any of its officers, directors, or
managers, at any time.
� A description of any debarments of the
contractor by any public agency or licensing body at
any time.
o The contract must include specific, measurable
performance standards and require a performance audit by
the court, or an independent auditor to determine whether
the performance standards are being met and whether the
contractor is in compliance with applicable laws and
regulations. The court is prohibited from renewing or
extending the contract before receiving and considering
the audit report.
o The contract must include provisions for an audit by
the court, or an independent auditor to determine whether
and to what extent the anticipated cost savings have been
realized. The court is prohibited from renewing or
extending the contract prior to receiving and considering
the audit report.
Limit contract duration : The contract is limited to no
more than five years.
The bill's author notes that these requirements are necessary
and appropriate to ensure that any private contract both results
in actual savings for the court and retains the integrity of the
judicial system. One of the sponsors, AFSCME, states succinctly
that these requirements provide "an efficient way of evaluating
whether privatizing trial court jobs is in the best interest of
the state."
These Requirements Are Nearly Identical to Requirements that
Already Apply Today to the State, and to Schools, Community
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Colleges, and Libraries : The due diligence requirements in this
bill are, almost verbatim, identical to requirements today that
apply to all state agencies, as well as schools, community
colleges and libraries. Like the courts, these entities, with
the exception of the libraries, receive the bulk of their
funding from and through the state.
Indeed, contracting out work performed by state employees is
even more limited than what is proposed by this bill. The state
constitution and case law make clear that, before considering
the due diligence standards, work done by state employees may
only be contracted out to private companies if it fits into
certain allowable exceptions. One exception is that the work
represents a legislatively created "new state function" that
does not displace existing civil service functions.
(Professional Engineers v. Dep't of Transportation (1993) 13
Cal.App.4th 585, 593.) Another exception is that the "nature of
the services" is such that they cannot be performed adequately,
satisfactorily or competently by state employees. (Burum v.
State Compensation Ins. Fund (1947) Cal.2d 575, 582.) In its
current form, this bill does not seek to mandate those further
restrictions on contracting out, but just adds the initial due
diligence protections.
Similar to restrictions on state agencies, the Attorney General
has opined that general law counties (the vast majority of
California counties are general law counties, although the
larger ones tend to be charter counties), may not, solely to
save money, contract out personal services for work that is
provided by civil service employees. (76 Ops. Cal. Atty. Gen.
86 (1993).) However, there is statutory authority to contract
out for enumerated "special services," but even then only with
those specifically trained, experienced and expert to perform
those services. Unlike the limitation for general law counties,
this bill does not in its current form prevent courts from
contracting out non-"special services." It simply requires due
diligence standards before permitting courts to contract out
judicial functions.
Now More Than Ever Scare Court Resources Must be Expended
Prudently to Help Ensure Justice for All . Historically, trial
courts in California were county entities, funded by the
counties, but in 1997, after significant problems came to light
with the county-based court funding model, the Legislature
passed the Lockyer-Isenberg Trial Court Funding Act, AB 233
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(Escutia and Pringle), Ch. 850, Stats. 1997. Under that bill,
the state assumed responsibility for funding the courts and
helping ensure equal access to a quality judicial system
statewide. After the state took over funding, the courts
received significant funding increases and historically
underfunded courts saw greater increases. Unfortunately, the
recession forced significant reductions in state General Fund
support for the courts, but "one-time" fixes, backfills and new
revenues have, to date, spared the court system the full brunt
of the General Fund reductions.
Nevertheless the state's trial courts and their employees, and
all court users in the state, have been experiencing tragic
reductions in court services and basic access to justice as
vividly described by the Chief Justice in her recent address to
the Legislature. Trial courts have been taking dramatic and
painful steps to address the budget cuts, including (1) closing
courthouses and courtrooms, some on selected days and others
completely; (2) laying off or furloughing employees; and (3)
reducing services, including substantial cuts to self-help and
family law facilitator assistance, and providing fewer court
reporters and court interpreters. While the Governor's budget
for 2013-14 does not propose any additional cuts to the trial
courts, some of the one-time fixes are set to expire. As a
result, it is anticipated that courts will be looking for
additional ways to reduce expenditures, unless there is a
hoped-for needed infusion of additional funds. Courts may
therefore understandably be tempted to consider contracting out
important court functions in an attempt to reduce expenses. If
this is the case, it is important to ensure that such
contracting out will actually save the courts money and continue
to strongly protect the integrity of the judicial system.
According to the author, this bill proposes to do exactly that.
Placer Court Has Recently Contracted Out All of Its Court
Reporting, Although it Appears Without Any Savings : The Placer
Superior Court has reportedly gone so far as to lay off all its
court reporters and contract out all of their work to private
court reporters. The Placer Court states that the contract will
result in $600,000 in anticipated savings in the 2013-14 fiscal
year. However, according to the sponsors, court employees
agreed to reduce their wages and benefits to the level of the
private contract and attain the $600,000 savings, but the Placer
Court nevertheless pursued the private contract even though
there were no longer savings. Moreover, the contract has not
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increased either the number or type of cases for which court
reporters are present. Thus, court reporting in all cases in
Placer County, including juvenile court cases which are closed
to the public, will now be performed by a private, for-profit
company.
Given the apparent lack of savings, lack of increased court
reporter coverage and the critical and sensitive nature of
making the official record, the author reasonably worries
whether this private contract was actually in the public's best
interest. This bill would help ensure that future contracts of
this sort not only actually save money for the courts, but also
are, most importantly, in the public's interest.
Need for Bill Highlighted by Helpful Recent Audit of Judicial
Branch Procurement by the State Auditor : The 2011 public safety
budget trailer bill , SB 92 (Committee on Budget and Fiscal
Review), Chap. 36, Stats, 2011, mandated that the State Auditor
audit the trial courts and the Administrative Office of the
Courts (AOC) on a regular basis. The Auditor did a pilot audit
on the goods and services procurement practices of six trial
courts and just reported its findings in Judicial Branch
Procurement: Six Superior Courts Generally Complied With the
Judicial Branch Contracting Law, but They Could Improve Some
Policies and Practices (March 2013). While noting that the six
courts audited - Napa, Orange, Sacramento, Stanislaus, Sutter
and Yuba - "generally demonstrated good contracting practices,"
the Auditor uncovered instances where courts used sole-source
contracts for which there was no justification, managers
approved contracts for amounts above their authority, and
inaccurate cost data were reported. The audit summed up the
discoveries well: "Each of the issues described here appears to
be an isolated lapse in policy rather than a systemic failure.
However, when courts do not comply with the judicial contracting
manual and other state procurement requirements, they risk not
receiving the best price for goods and services." (Id. at 3.)
Clearly, creating more transparency and more accountability
before contracting out for services should help ensure that the
courts receive the best price.
It is worth noting that this audit also reviewed the AOC's
reporting of procurements and found instances where the AOC
inappropriately failed to report certain transactions to the
Legislature, including failing to report contract activities for
court security, court reporters and interpreters. The audit
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also found instances where the AOC reported inaccurate cost
data. The audit summarized the problem of inaccurate data very
succinctly. "Without an accurate report of procurement
transactions, the Legislature cannot make informed decisions
regarding court procurements. The AOC asserted that it has
corrected the problems that caused these errors and that they
will not occur in future semiannual reports." (Id. at 2.) Were
it not for this audit discovering the problems, the AOC might
not have learned of the problems and might not have been able to
correct them. Clearly this audit process has already begun to
lead to helpful improvements available to the trial courts and
the AOC.
In Order to Protect the Integrity of Our Courts, It Could Be
Reasonably Argued the Due Diligence Standards Need to Be Even
Higher Than in Other Areas of Government, Although,
Understanding the Budget Pressures on the Courts, This Bill
Currently Keeps the Same Standards : Given the importance of
the courts as a cornerstone of our democracy, sponsor SEIU
states that the level of due diligence necessary before trial
court services can be privatized should indeed be even higher
than for other government entities:
Being a nation of laws, a fair and impartial judicial
system that is accessible to all is a critical underpinning
of democracy and is fundamental to the success of a
civilized society. Trial court services represent a
"public good," which are most effectively delivered by
government and public employees. AB 566 correctly places
the burden of altering one of the most essential public
services on those advocating it. Additionally, profit
should never be associated with any aspect of fair review
and rights to redress in an impartial judicial system that
should be accessible to all people.
As noted, however, this bill does not currently mandate a higher
standard be realized before important court functions can be
privatized. It does, however, prevent such privatization if, in
light of the special nature of the judiciary, it would be
inconsistent with the public interest to have the functions
proposed by the contract performed by a private entity.
Author's Amendments Adding Co-Authors : The author has requested
that the following members be added as additional co-authors:
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Assemblymembers Alejo, Dickinson, Garcia, Gomez, Jones-Sawyer,
Muratsuchi and Stone.
Prior Legislation : SB 163 (Alarc�n, 2003), which died in the
Senate Appropriations Committee, and SB 906 (Alarc�n, 2003),
which failed on the Assembly floor, would have required all
general law county and city contracts for services to meet due
diligence requirements. AB 3084 (Jerome Horton, 2004), which
died in the Senate Local Government Committee, would have
applied the same contracting requirements to a metropolitan
water district's contracts for services. Unlike the courts,
these entities are not state entities and not largely
state-funded.
ARGUMENTS IN SUPPORT : In support of the bill, the California
Labor Federation writes:
When entities contract out, oftentimes there are sacrifices
made in the pursuit of cost savings. Contracting out can
result in less transparency and less accountability. It
can lead to lower wages and less investment in an
experienced workforce. With the introduction of a profit
motive to the delivery of public services, the public
interest is often compromised as companies seek to cut
services and increase consumer costs.
All of these issues are particularly troubling as they
relate to the operations of our state trial courts.
Privatization of these services mans that justice truly is
in the hands of a private contractor who is primarily
concerned, not with fairness or equality, but with their
own bottom line. ? AB 566 requires that trial courts
adhere to similar standards required of other public
entities before privatizing court services.
The California Public Defenders and the San Diego County Court
Employees Association, echoed by Laborers' Locals 777 & 792, add
their concerns that critically important court services, often
involving confidential information, should not be privatized
just to potentially save money, at the expense of the justice
system:
As a result of substantial budget cuts to the trial courts,
and as a means to reduce costs, some courts have been
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providing or are considering providing critically important
services to the public via private services. This includes
privatizing the handling and maintenance of private,
confidential and sensitive information contained in
official court records.
Given the important work done by the trial courts, the
sensitivity of the information that is processes and
maintained, and the sanctity of the rights of public court
consumers, the contracting out of court work should never
be used as a cost saving measure.
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees
(AFSCME), AFL-CIO (co-sponsor)
Services Employees International Union (co-sponsor)
Association for Los Angeles Deputy Sheriffs
California Court Reporters Association
California Labor Federation
California Professional Firefighters
California Public Defenders Association
California School Employees Association
Glendale City Employees Association
Deposition Reporters Association of California
Laborers' Locals 777 & 792
Los Angeles Probation Officers Union, Local 685
Organization of SMUD Employees
Public Employees Union, Local One
Riverside Sheriffs' Association
San Bernardino Public Employees Association
San Diego County Court Employees Association
San Luis Obispo County Employees Association
Santa Rosa City Employees Association
State Building and Construction Trades Council
Opposition
Judicial Council of California
Analysis Prepared by : Leora Gershenzon / JUD. / (916) 319-2334
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