BILL ANALYSIS Ó
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: AB 1222
Jim Beall, Chair HEARING DATE: September 6, 2013
AB 1222 (Bloom) as amended 9/04/2013 FISCAL: YES
PUBLIC EMPLOYEES' PENSION REFORM ACT OF 2013 (PEPRA):
EXEMPTION FOR PROTECTED TRANSIT WORKERS
HISTORY :
Sponsor: Governor Jerry Brown
Other legislation: AB 160 (Alejo), 2013
Currently in Assembly Appropriations
Committee
AB 340 (Furutani)
Chapter 296, Statutes of 2012
ASSEMBLY VOTES :
Not applicable - New bill with September 4, 2013 Amendments
SUMMARY :
AB 1222 would exempt certain public transit workers from the
requirements of the Public Employees' Pension Reform Act of
2013 (PEPRA) for a specified period of time pending a ruling
from the federal district court, and authorize cash flow
loans-totaling up to $26 million-to local mass transit
providers.
This is an URGENCY BILL .
BACKGROUND AND ANALYSIS :
1) Existing state law :
a) creates comprehensive public employee pension reform
through enactment of PEPRA (and related statutory
changes) that apply to all public employers (including
public transit agencies) and public pension plans on and
after January 1, 2013, excluding the University of
California and charter cities and counties that do not
participate in a retirement system governed by state
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statute.
b) under PEPRA, changed the retirement benefit plans
that may be offered to new public employees, including:
i. establishing uniform retirement formulas, including a
2% at age 62 formula for non-safety workers;
ii. requiring a 3-year final compensation period for
determining a pension;
iii. requiring employee member contributions equal to 50%
of the normal cost of the employee's benefit plan;
iv. capping the amount of compensation that can count
toward a pension (currently approximately $113,000);
and
v. restricting the pay items that may be included in
pensionable compensation.
a) protects the vested benefits of workers employed
prior to the implementation of PEPRA and allows public
workers to collectively bargain over wages, working
conditions, and the impact of changes to their wages and
working conditions.
b) specifies, with some exceptions, that the PEPRA
requirements (including those listed above) are
applicable to new retirement plan members who first
become members on and after January 1, 2013.
2) Existing federal law :
a) protects the collective bargaining rights of
specified transit workers employed in certain transit
agencies and districts that were, mostly in the 1960's
through the 1970's, converted from private to public
agencies. (Many such agencies are now included in
CalPERS, 1937 Act, or other public retirement systems
and plans.)
b) requires, under Section 13(c) of the Federal Transit
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Law, that these employee protections, commonly referred
to as "protective arrangements" or "Section 13(c)
arrangements" must be certified by the United States
Department of Labor (US DOL) and in place before federal
transit funds can be released to a mass transit employer
subject to the Federal Transit Law.
Section 13(c) requires, among other things, the
continuation of collective bargaining rights, and
protection of transit employees' wages, working
conditions, pension benefits, seniority, vacation, sick
and personal leave, travel passes, and other conditions
of employment.
c) allows the US DOL to determine if the collective
bargaining rights of an employee group protected under a
13(c) arrangement have been impaired, and if so
determined, to stop the flow of federal transportation
funding until such time as the those rights have been
restored.
3) This bill :
a) makes an exemption to PEPRA for employees who are
covered by 13(c) arrangements until either:
i. a federal district court rules that the United States
Secretary of Labor (or his or her designee) erred in
determining that application of PEPRA precludes
certification of federal transit funding; or
ii. January 1, 2015, whichever is sooner.
a) specifies that if the federal district court upholds
the determination of the United States Secretary of
Labor (or his or her designee) that application of PEPRA
precludes certification of federal transit funding, then
PEPRA shall not apply to an employee protected under a
13(c) arrangement.
b) does not exempt employees of a transit agency who are
not protected under section 13(c).
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c) authorizes the Director of Finance, in coordination
with the State Controller, to provide cash flow
loans-totaling up to $26 million-from monies in the
Public Transportation Account in the State
Transportation Fund to local mass transit providers upon
their request to the Director, as specified.
d) provides a system for repayment of the loans, with
interest, under the following circumstances, as
specified:
i. The federal district court determines that the US
Secretary of Labor erred in its determination to
decertify federal funding.
ii. The US Secretary of Labor provides certification that
results in the receipt of funds.
iii. By not later than January 1, 2019, if neither of the
above contingencies have occurred.
a) states that a cash flow loan, as authorized in this
bill, does not constitute a budgetary expenditure and
that the loan or repayment of the loan shall not affect
the budgetary reserve.
b) states that this is an urgency statute, necessary to
preserve funding for essential infrastructure projects
while balancing the need to control the costs of pension
benefits
FISCAL:
According to the author, decertification would result in the
state losing up to $1.6 billion this year in federal grant
funding for transit projects which could threaten thousands
of jobs throughout the state.
COMMENTS :
1)Background :
Last year the state adopted PEPRA, which became
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effective on January 1, 2013. Since that time, labor
unions representing certain public transit employees
have asserted to the US DOL that PEPRA impairs pension
benefits contained in existing collective bargaining
agreements and restricts collective bargaining rights,
in violation of the protections in Section 13(c) of the
Federal Transit Act.
In response, the US DOL has withheld certification of
federal grants to California transit agencies.
In response to the US DOL, the Secretary of the
California Labor and Workforce Development Agency
outlined why he believes PEPRA does not violate the
goals and requirements of section 13(c), citing the
belief that PEPRA modifies, prospectively, certain
aspects of the defined benefit pension plan than can be
offered by a public employer while retaining the ability
of current and future employees to engage in good faith
collective bargaining.
According to the press release on August 4, 2013 by Governor
Jerry Brown:
"Federal transit money creates jobs and this legislation
keeps those funds flowing while allowing the state to
defend in court our landmark pension reforms."
This morning, the U.S. Department of Labor notified the
Sacramento Regional Transit District that it is refusing to
certify millions of dollars in transit grants to the
district because it asserts that the provisions of the
California Public Employee Pension Reform Act of 2013
(PEPRA) are incompatible with federal labor law.
The proposed legislation will temporarily exempt local
agencies' transit workers from PEPRA, but preserves the
state's ability to fight for the pension reform law in
court. The legislation also creates a $26 million state
loan program to assist transit operators, like Sacramento
Regional Transit, that are at risk of losing federal
transit grants.
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As stated by the author:
Recently, the US Department of Labor (US DOL) notified the
Sacramento Regional Transit District that it is refusing to
certify millions of dollars in transit grants to the
district because it asserts that the provisions of the
California Public Employee Pension Reform Act of 2013
(PEPRA) are incompatible with federal labor law.
If this situation is not addressed by the end of this
legislative year, September 13, 2013, the US DOL could
begin notifying other transit authorities across the state
that they will also be decertified and no longer be able to
receive federal grants for projects.
2)SUPPORT :
American Federation of State, County and Municipal
Employees (AFSCME), AFL-CIO
California Conference Board of the Amalgamated Transit
Union
California Conference of Machinists
California Teamsters Public Affairs Council
California Transit Association
Peninsula Corridor Joint Powers Board (Caltrain)
Riverside Transit Agency (RTA)
San Francisco Bay Area Rapid Transit District
San Mateo County Transit District (SamTrans)
San Mateo County Transportation Authority
Santa Cruz Metropolitan Transit District
3)OPPOSITION :
None to date
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