BILL ANALYSIS                                                                                                                                                                                                    Ó


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                                    THIRD READING

          Bill No:  AB 1222
          Author:   Bloom (D)
          Amended:  9/4/13 in Senate
          Vote:     27 - Urgency

          AYES:  Beall, Block, Gaines, Yee
          NO VOTE RECORDED:  Walters

          ASSEMBLY FLOOR  :  75-0, 5/9/13 (Consent) - See last page for vote

            SUBJECT  :    Public employees retirement:  collective  
                      bargaining:  transit workers:  transportation 

           SOURCE  :     Author

           DIGEST  :    This bill exempts 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 authorizes cash flow  
          loans-totaling up to $26 million-to local mass transit  

           ANALYSIS  :    



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          Existing federal law:

           1. 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 California Public Employees'  
             Retirement System (CalPERS), 1937 Act, or other public  
             retirement systems and plans.)

           2. Requires, under Section 13(c) of the Federal Transit 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.

           3. 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.

          Existing state law:

           1. 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 statute.

           2. Under PEPRA, changed the retirement benefit plans that may  
             be offered to new public employees, including:

              A.    Establishing uniform retirement formulas, including a  



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                2% at age 62 formula for non-safety workers;

              B.    Requiring a three-year final compensation period for  
                determining a pension;

              C.    Requiring employee member contributions equal to 50%  
                of the normal cost of the employee's benefit plan;

              D.    Capping the amount of compensation that can count  
                toward a pension (currently approximately $113,000); and

              E.    Restricting the pay items that may be included in  
                pensionable compensation.

           1. 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.

           2. 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.

          This bill:

           1. Makes an exemption to PEPRA for employees who are covered by  
             13(c) arrangements until either:

              A.    A federal district court rules that the U.S. Secretary  
                of Labor (or his/her designee) erred in determining that  
                application of PEPRA precludes certification of federal  
                transit funding; or

              B.    January 1, 2015, whichever is sooner.

           1. Specifies that if the federal district court upholds the  
             determination of the U.S. Secretary of Labor (or his/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.

           2. Does not exempt employees of a transit agency who are not  
             protected under Section 13(c).



                                                                    AB 1222

           3. 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.

           4. Provides a system for repayment of the loans, with interest,  
             under the following circumstances, as specified:

              A.    The federal district court determines that the U.S.  
                Secretary of Labor erred in its determination to decertify  
                federal funding.

              B.    The U.S. Secretary of Labor provides certification  
                that results in the receipt of funds.

              C.    By not later than January 1, 2019, if neither of the  
                above contingencies have occurred.

           1. 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  

           2. 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.

          Last year the state adopted PEPRA, which became 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  



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          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.

          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.

           FISCAL EFFECT  :    Appropriation:  Yes   Fiscal Com.:  Yes    
          Local:  No



                                                                    AB 1222

          According to the Senate Appropriations Committee:

             One-time start-up administrative costs of approximately  
             $109,000 to CalPERS and ongoing $90,000 to establish a  
             process for employers to provide notification of which  
             employees will be exempted from PEPRA, and to administer that  
             enrollment appropriately.

             An estimate of actuarial costs/savings from exempting these  
             employees from PEPRA is not available as it is not known how  
             many employees will be affected at this time.

             Loans of up to $26 million from the State Transportation  
             Fund to local mass transit providers, to be repaid, as  
             specified.  This bill requires the loans to be repaid with  
             interest, but allows the Director of Finance to waive all  
             interest charges.

           SUPPORT  :   (Verified  9/6/13)

          AFSCME, AFL-CIO
          California Conference Board of the Amalgamated Transit Union
          California Conference of Machinists
          California Labor Federation
          California Teamsters Public Affairs Council
          California Transit Association
          Peninsula Corridor Joint Powers Board 
          Riverside Transit Agency 
          Sacramento Regional Transit
          Sacramento Area Council of Governments
          San Francisco Bay Area Rapid Transit District
          San Joaquin Regional Transit District
          San Mateo County Transit District 
          San Mateo County Transportation Authority
          Santa Cruz Metropolitan Transit District

           ASSEMBLY FLOOR  :  75-0, 5/9/13
          AYES:  Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,  
            Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown,  
            Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway,  
            Cooley, Dahle, Daly, Dickinson, Eggman, Fong, Fox, Frazier,  
            Beth Gaines, Garcia, Gatto, Gomez, Gordon, Gorell, Gray,  
            Grove, Hagman, Hall, Harkey, Roger Hernández, Jones,  



                                                                    AB 1222

            Jones-Sawyer, Levine, Linder, Lowenthal, Maienschein, Mansoor,  
            Medina, Melendez, Mitchell, Morrell, Mullin, Muratsuchi,  
            Nazarian, Nestande, Olsen, Pan, Patterson, Perea, V. Manuel  
            Pérez, Quirk, Quirk-Silva, Rendon, Salas, 
          Skinner, Stone, Ting, Torres, Wagner, Weber, Wieckowski, Wilk,  
            Williams, Yamada, John A. Pérez
          NO VOTE RECORDED:  Donnelly, Holden, Logue, Waldron, Vacancy

          JL:k  9/6/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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