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  








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          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  








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             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  








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          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:








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             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 


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