BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 1222
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          CONCURRENCE IN SENATE AMENDMENTS
          AB 1222 (Bloom and Dickinson)
          As Amended September 4, 2013
          2/3 vote.  Urgency
           
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          |ASSEMBLY:  |     |(May 9, 2013)   |SENATE: |32-6 |(September 6,  |
          |           |     |                |        |     |2013)          |
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                                 (vote not relevant)
           
           Original Committee Reference:   REV. & TAX. 
           
           SUMMARY  :  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 authorize cashflow loans of up to  
          $26 million to local mass transit providers.  Specifically,  this  
          bill  :

          1)Makes an exemption to PEPRA for employees who are covered by  
            13(c) arrangements until either 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 January  
            1, 2015, whichever is sooner.

          2)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.

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

          4)Authorizes the Director of the Department of Finance, in  
            coordination with the State Controller, to provide cashflow  
            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.

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








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             a)   The federal district court determines that the US  
               Secretary of Labor erred in its determination to decertify  
               federal funding.

             b)   The US 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.

             d)   States that a cashflow 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.

             e)   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.

          The Senate amendments  delete the Assembly version of the bill,  
          and instead exempt certain public transit workers from the  
          requirements of PEPRA for a specified period of time pending a  
          ruling from the federal district court, and authorize cashflow  
          loans of up to $26 million to local mass transit providers.

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

             b)   Requiring a three-year final compensation period for  
               determining a pension;








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             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.

          3)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.

          4)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.

           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.

          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 (USDOL)  
            and in place before federal transit funds can be released to a  
            mass transit employer subject to the Federal Transit Law.

          3)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.

          4)Allows the USDOL 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.








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           FISCAL EFFECT  :  According to the Senate Appropriations  
          Committee:

          1)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.

          2)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.

          3)Loans of up to $26 million from the State Transportation Fund  
            to local mass transit providers, to be repaid according to  
            three different scenarios described under the "Proposed Law"  
            section of this analysis.  AB 1222 requires the loans to be  
            repaid with interest, but allows the Director of Finance to  
            waive all interest charges.

           COMMENTS  :  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 USDOL 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 USDOL has withheld certification of federal  
          grants to California transit agencies.

          In response to the USDOL, 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  








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               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.

          According to the author,  "Recently, the US Department of Labor  
          (USDOL) 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 USDOL 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."


           Analysis Prepared by  :    Karon Green / P.E., R. & S.S. / (916)  
          319-3957 


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