BILL ANALYSIS Ó SENATE GOVERNANCE & FINANCE COMMITTEE Senator Lois Wolk, Chair BILL NO: AB 583 HEARING: 6/19/13 AUTHOR: Gomez FISCAL: No VERSION: 2/20/13 TAX LEVY: No CONSULTANT: Weinberger COUNTY LIBRARIES Requires a city or library district that withdraws from a county library system to comply with specified conditions before operating a library with a private contractor. Background and Existing Law More than a century ago, the Legislature authorized counties to establish county free library systems (SB 289, Hans, 1911). Before Proposition 13 (1978), a county could levy a separate property tax rate to support its library system. Nearly 30 county free libraries had separate rates. A county could extend the property tax rate to parcels in a city that wanted to join the library system and would cease to levy the rate within a city that withdrew from the system. After Proposition 13, the Legislature divided the remaining property tax revenues among local governments. Although they were not separate institutions, state law treated county free libraries as if they were special districts because they had their own property tax rates before Proposition 13. The county free libraries received shares of the property tax revenues and they could receive money from the Special District Augmentation Fund (AB 8, L. Greene, 1979). In general, to withdraw from a county library system, a city must negotiate the amount of property tax revenues, if any, that it will receive from the county library system. Different procedures apply to city withdrawals from county free library systems in Los Angeles and Riverside counties (AB 1998, Mountjoy, 1996 and AB 927, Thompson, 1997). Two years ago, the Legislature imposed additional requirements on a city or library district that intends to withdraw from a county free library system and operate a AB 583 -- 2/20/13 -- Page 2 library with a private contractor (AB 438, Williams, 2011). Specifically, state law provides that a city or library district that "intends to withdraw from the county free library system and operate the city or district's library with a private contractor that will employ library staff to achieve cost savings" must: Provide public notice. Demonstrate specified cost savings. Publicly and competitively bid contracts. Limit a contract's term to five years or less. Include, in a contract, provisions related to staff qualifications, hiring practices, contract termination, contractor disclosure, audits, and performance standards. Not approve a contract solely to produce savings from lower contractor pay rates or benefits. Last year, a Ventura County Superior Court decision in Service Employees International Union Local 721 v. City of Simi Valley found that the requirements enacted by AB 438 apply only to a city or district that concurrently intends to withdraw from a county library system and operate its library with a private contractor. The decision suggests that these requirements do not apply to a local entity that withdraws from the county library to operate its own library, even if the withdrawal ultimately may lead to privatization at a later date. Labor union officials want the Legislature to clarify that a city or library district that withdraws from a county library after 2011 must comply with specified statutory requirements before operating a library with a private contractor, regardless of whether the city or district intended to privatize at the time it withdrew from the county system. Proposed Law Assembly Bill 583 requires the board of trustees, common council, or other legislative body of a city or the board of trustees of a library district in which a withdrawal from the county free library system becomes effective on or after January 1, 2012 to comply with specified requirements before entering into a contract to operate the city's or the district's libraries with a private contractor that AB 583 -- 2/20/13 -- Page 3 will employ library staff to achieve cost savings. AB 583 provides that the specified requirements do not apply if the city or district libraries are funded only by the proceeds of a special tax imposed by the city or district, pursuant to state law. State Revenue Impact No estimate. Comments 1. Purpose of the bill . Assembly Bill 583 closes a loophole in current law that lets a city or library district use a two-step process to circumvent requirements enacted by the Williams bill in 2011. A city or library district that first withdraws from a county library system without expressing its intent to operate libraries with a private contractor can later operate libraries with a private contractor without meeting the additional statutory requirements. AB 583's proponents argue that the Legislature did not intend to limit the Williams bill's requirements to only those cities and library district that intend, at the time they withdraw from a county system, to contract with a private entity for services. The bill amends current law to apply the additional statutory requirements to any city or district that withdraws from a county library system after January 1, 2012, when that city or district chooses to operate libraries with a private contractor. 2. Home rule . Deciding how to provide municipal services to city residents is what city council members and special district directors are elected to do. AB 583 exacerbates the 2011 Williams bill's erosion of local officials' ability to manage local affairs, making it more difficult for them to preserve essential public services during tough financial times. Local elected officials are well-positioned to judge the merits of a library service contract and can either negotiate better terms or reject a contract altogether. The Committee may wish to consider whether AB 583 imposes unnecessary new restrictions on these local contracting decisions. AB 583 -- 2/20/13 -- Page 4 3. Back to the future ? On February 28, 2013 the City of Simi Valley entered into a contract with Library Systems and Services, Inc. to operate the Simi Valley Public Library beginning on July 1, 2013. Because the Ventura County Superior Court ruled that Simi Valley's effective withdrawal date from the county library system was January 11, 2012 and AB 583 applies to any city or district that withdraws from a county library system on or after January 1, 2012, Simi Valley officials worry that AB 583 could be interpreted to retroactively disallow the city's contract with LSSI. If AB 583 becomes law, its provisions take effect on January 1, 2014. Article I, Section 9 of the California Constitution prohibits the Legislature from passing laws that impair obligation of contracts and AB 583's provisions do not convey any intent to retroactively abrogate contracts entered into before the bill's effective date. A plain interpretation of AB 583 is that it applies the Williams bill's contracting requirements to any city or district that: Withdraws from a county library after January 1, 2012, and Enters into a contract for library services after the bill takes effect. The Committee may wish to consider whether it is necessary to clarify further that AB 538 does not apply retroactively to library services contracts. Assembly Actions Assembly Local Government Committee: 7-1 Assembly Floor: 52-19 Support and Opposition (6/13/13) Support : SEIU; AFSME; California Fair Elections Campaign (SCV Fair Elections Committee); California Labor Federation; Glendale City Employees Association; Los Angeles Alliance for a New Economy; Organization of SMUD Employees; San Bernardino Public Employees Association; San Luis Obispo County Employees Association; Sana Rosa City Employees Association, more than 400 individuals. Opposition : City of Simi Valley; League of California Cities; Library Systems and Services, Inc. AB 583 -- 2/20/13 -- Page 5