BILL ANALYSIS �
AB 906
Page 1
Date of Hearing: May 8, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 906 (Pan) - As Amended: April 25, 2013
Policy Committee: PERSSVote:5-2
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill imposes restrictions on specified personal service
contracts. Specifically, this bill:
1)Prohibits personal services contracts that provide cost
savings to the state from having a term exceeding two years.
Allows extensions for an additional two years, after which the
contracting agency shall not enter into additional contracts
for the same or substantially similar personal services.
2)Provides that contracts for new state functions where the
Legislature has specifically mandated or authorized the
performance of the work by independent contractors face the
same restrictions as to term and extension.
FISCAL EFFECT
Significant state employment costs, conservatively in the
hundreds of thousands of dollars, potentially in the tens of
millions of dollars each year. The bill targets personal
service contracts that are permissible under existing law only
because the contracting agency clearly demonstrates the proposed
contract will result in actual overall cost savings to the
state.
COMMENTS
1)Purpose . According to the author, state agencies and
departments are undermining the Legislature's appropriation
authority and the state civil service system by abusing their
ability to enter into personal services contracts. The
Department of General Services (DGS) charged with reviewing
AB 906
Page 2
and approving state departments' requests to contract out
personal services. The author contends DGS is failing to
thoroughly review requests to ensure requests make good
business sense and the cost is reasonable. The author cites
the Assembly Budget Subcommittee 4 Agenda for a February 21,
2012 hearing, and notes the state has over 14,000 personal
service contracts worth $11.8 billion. The author asserts
these expenditures occur with no substantive legislative
oversight.
The author concludes that AB 906 is a first step in ensuring
that state agencies and departments are working in conjunction
with the Legislature to build and maintain a strong civil
service system, as envisioned in the State Constitution.
2)Support . Supporters, including The American Federation of
State, County and Municipal Employees (AFSCME), argue that
California spends millions of dollars paying for contracts and
temporary employees at state institutions when it could hire
state employees at a lower cost. They state privatization
contracts are often unnecessary and violate state
constitutional and statutory prohibitions against overspending
on service contracts. According to supporters, a March 2009
study conducted by the Service Employees International Union,
Local 1000 found that the state could save approximately $350
million annually by using civil service employees instead of
unnecessary and wasteful privatization contracts.
3)Background . Existing law generally requires, based on
provisions in the California Constitution and implementing
statutes, services provided by state agencies be performed by
state civil service employees. There are a number of
exceptions, including emergencies and when outside counsel is
needed because of conflicts of interest. One of the
exceptions if for contracts that will achieve costs savings,
which have to meet the following criteria:
a) Contracts must result in cost savings to the state.
b) Contractors' wages are at the industry's level and do
not significantly under-cut state pay rates.
c) Contracts cannot cause the displacement of civil service
employees.
d) Contracts cannot adversely affect the state's
affirmative action efforts.
e) Contract savings must be large enough to ensure that the
AB 906
Page 3
savings will not be eliminated. by cost fluctuations that
could normally be expected during the contract period.
f) Contract savings clearly justify the size and duration
of the contract.
g) The contract is awarded through a publicized,
competitive bidding procedure.
h) The contract includes specific provisions pertaining to
the qualifications of the staff who will perform the work.
The Department of General Services is charged with overseeing
contracting procedures and compliance with state law. Decisions
on contracting can be appealed to the State Personnel Board
(SPB). At the request of an employee organization, SPB will
review a contract for compliance with the law.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081