BILL ANALYSIS �
AB 1222
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 1222 (Bloom and Dickinson)
As Amended September 4, 2013
2/3 vote. Urgency
----------------------------------------------------------------------
|ASSEMBLY: | |(May 9, 2013) |SENATE: |32-6 |(September 6, 2013) |
----------------------------------------------------------------------
(vote not relevant)
------------------------------------------------------------------------
|COMMITTEE VOTE: |6-0 |(September 10, |RECOMMENDATION: |concur |
|(P.E., R. & | |2013) | | |
|S.S.) | | | | |
------------------------------------------------------------------------
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
AB 1222
Page 2
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:
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
AB 1222
Page 3
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.
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
AB 1222
Page 4
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.
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:
AB 1222
Page 5
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.
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
FN: 0002745