BILL ANALYSIS                                                                                                                                                                                                    






          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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          Date:  September 5, 2013                                Page  
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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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          Date:  September 5, 2013                                Page  
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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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          Date:  September 5, 2013                                Page  
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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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          Date:  September 5, 2013                                Page  
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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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          Pamela Schneider
          Date:  September 5, 2013                                Page  
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          Pamela Schneider
          Date:  September 5, 2013                                Page  
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