BILL ANALYSIS                                                                                                                                                                                                    






          SENATE PUBLIC EMPLOYMENT & RETIREMENT   BILL NO:  AB 1377
          Jim Beall, Chair             HEARING DATE:  June 27, 2013
          AB 1377 (Asm. PER&SS Comm)    as amended   6/20/13        
          FISCAL:  YES

           MEMORANDUM OF UNDERSTANDING BETWEEN THE STATE AND SERVICE  
          EMPLOYEES INTERNATIONAL UNION
           
           HISTORY  :

            Sponsors:  California Department of Human Resources (CalHR)
                   Service Employees International Union, Local 1000  
          (SEIU)

           ASSEMBLY VOTES  :

            PER & SS                 5-2       4/24/13
            Appropriations           12-1      5/24/13
            Assembly Floor      PENDING
           
          SUMMARY  :

          AB 1377 approves the recent memoranda of understanding (MOU)  
          agreed to by the state and the state bargaining units (BUs)  
          represented exclusively by the Service Employees  
          International Union (SEIU), Local 1000, including the  
          following state bargaining units:

          BU 1 (Professional, Administrative, Financial, and Staff  
          Services)
          BU 3 (Professional Educators and Librarians)
          BU 4 (Office and Allied)
          BU 11 (Engineering and Scientific Technicians)
          BU 14 (Printing and Allied Trades)
          BU 15 (Allied Services)
          BU 17 (Registered Nurses)
          BU 20 (Medical and Social Services)
          BU 21 (Educational Consultant and Library)

          This is an URGENCY BILL.

           BACKGROUND AND ANALYSIS  :
          
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          Date:  June 26, 2013                                    Page  
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           1)Existing law  :  
                
             a)   requires, under the State Employee-Employer Relations  
               Act (the Ralph C. Dills Act), that the state,  
               represented by the Department of Human Resources  
               (CalHR), collectively bargain with exclusive employee  
               representatives over all aspects related to wages and  
               working conditions, and that agreements be formalized in  
               MOUs that are subsequently approved by the Legislature.

             b)   requires the Office of the Legislative Analyst to  
               analyze state MOUs and to report on its findings to the  
               Legislature within 10 days of receiving the MOU from  
               CalHR.

           1)This bill  approves the agreement between the state and the  
            state bargaining units represented by SEIU, Local 1000.

          This agreement affects approximately 91,077 full-time  
          equivalents.

          The duration of this agreement is three years:  July 2, 2013,  
          through July 1, 2016.
           
          FISCAL  :

          According to CalHR:

          Fiscal Year 2013-2014 Cost:  $1.4 million (General Fund -  
          $0.4 million and Other Funds - $1.0 million)

          Total Incremental Cost:  $303.0 million (General Fund -  
          $127.6 million and Other Funds - $175.4 million)

          Total Budgetary Cost:  $439.0 million (General Fund - $184.7  
          million and Other Funds - $254.3 million)

           COMMENTS  :

           1)Comments of the Committee

             Beginning in 2008, state employees saw a significant  
            erosion in their earnings.  Most employees saw salary  
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          Date:  June 26, 2013                                    Page  
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            reductions of 15% pursuant to Governor Schwarzenegger's  
            furlough program.  According to the Office of the  
            Legislative Analyst, the average state worker saw his or  
            her salary reduced by approximately $21,000 over the course  
            of the furlough period.

            In 2011, with the furlough program ended, most state  
            contracts required a 5% pay reduction in exchange for one  
            personal leave day per month and increases of 3% to 5% in  
            member contributions to CalPERS-an overall reduction of 8%  
            to 10%.  With the end of the personal leave program and a  
            salary adjustment on July 1st equivalent to the increase in  
            member contributions, state employees will finally be made  
            whole after approximately 5 years of reduced compensation.

            Prior to the reductions detailed above, the last general  
            salary increase for state employees (3.4%) occurred in  
            2007.

          2)The following information summarizing the general  
            provisions of the MOUs was provided by CalHR:

              a)   Retirement Benefit Formula Calculation
           
               Bargaining Unit 1, 3, 4, 11, 14, 15, 17, 20, and 21  
               employees who become CalPERS miscellaneous members on or  
               after January 1, 2013, are subject to the Public  
               Employees' Pension Reform Act (PEPRA) Retirement Formula  
               of 2% at age 62.

               Bargaining Unit 1, 3, 4, 11, 14, 15, 17, 20, and 21  
               employees who become CalPERS safety members on or after  
               January 1, 2013, are subject to the State Safety PEPRA  
               Retirement Formula of 2% at age 57.

               Bargaining Unit 1, 3, 4, 11, 14, 15, 17, 20, and 21  
               employees who become CalPERS miscellaneous members on or  
               after January 1, 2013, and who elect the Second Tier  
               retirement plan are subject to the Second Tier PEPRA  
               retirement formula of 1.25% at age 67.

              b)   Employee Pension Contributions
           
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               All Bargaining Unit 1, 3, 4, 11, 14, 15, 17, 20, and 21  
               members in the First Tier miscellaneous retirement  
               classification shall contribute 8% of monthly  
               compensation over $513.

               Effective July 1, 2013, all BU 1, 3, 4, 11, 14, 15, 17,  
               and 20 members in the First Tier industrial retirement  
               classification shall have their contribution increased  
               from 8% to 9% of monthly compensation over $513.

               Effective July 1, 2013, all BU 1, 3, 4, 11, 14, 15, 17,  
               and 20 members in the First Tier industrial retirement  
               classification who do not participate in Social Security  
               shall have their contribution increased from 9% to 10%  
               of monthly compensation over $317.

               Effective July 1, 2013, all members in the Second Tier  
               shall contribute 1.5% of monthly pensionable  
               compensation and the contribution will increase by 1.5%  
               points annually.  The final annual increase in the  
               contribution rate shall be adjusted as appropriate to  
               reach fifty percent (50%) of normal cost.

               Effective July 1, 2013, all BU 1, 3, 4, 11, 14, 15, 17,  
               20, and 21 members in the state safety retirement  
               classification shall have their contribution increased  
               from 9% to 10% of monthly compensation over $317.

               Effective July 1, 2014, all BU 1, 3, 4, 11, 14, 15, 17,  
               20, and 21 members in the state safety retirement  
               classification shall have their contribution increased  
               from 10% to 11% of monthly compensation over $317.

              c)   Compensation - Cost of Living Increase
           
               Effective July 1, 2014, contingent on the projected  
               state revenues of the 2014-15 budget, all BU 1, 3, 4,  
               11, 14, 15, 17, 20, and 21 represented classifications  
               (excluding seasonal clerks) will receive a 2% General  
               Salary Increase (GSI).

               Effective July 1, 2015, all BU 1, 3, 4, 11, 14, 15, 17,  
               20, and 21 represented classifications (excluding  
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               seasonal clerks) will receive a 2.5% GSI.

               If the projected state revenues are not achieved, all BU  
               1, 3, 4, 11, 14, 15, 17, 20, and 21 represented  
               classifications (excluding seasonal clerks) will receive  
               a 4.5% GSI effective July 1, 2015.

               Effective July 1, 2014, contingent on the projected  
               state revenues of the 2014-15 budget, the seasonal clerk  
               classification shall receive a 50 cents per hour GSI.

               If the projected state revenues are not achieved,  
               effective July 1, 2015, the seasonal clerk  
               classification shall have a 50 cents per hour GSI  
               effective July 1, 2015.

              d)   Health Benefits - Employer Contribution
           
               The state employer's monthly contribution to the health  
               insurance portion of the BU 1, 4, 11, 14, 15, 17, 20,  
               and 21 employee's allowance shall be an amount equal to  
               80% of the weighted average of the premiums for the four  
               basic health benefit plans with the largest enrollment  
               (the 80/80 formula).

               The state employer's monthly contribution to the health  
               insurance portion of BU 3 employee allowance will be set  
               at a dollar amount that equals the 80/80 formula.  The  
               amounts shall be increased on January 1, 2014, January  
               1, 2015, and January 1, 2016.

              e)   Health Benefits - Dependent Coverage
           
               Thirty (30) days after ratification, employees will  
               become eligible for the full employer contribution for  
               dependent health coverage after one year of state  
               employment.  The state will contribute 75% of the normal  
               amount for dependents during the vesting period.
           
             f)   Business and Travel  

               The state increased the meal reimbursement rates by  
               $2.00.  The state increased lodging rates as follows:
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          Date:  June 26, 2013                                    Page  
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                ---------------------------------------------------------- 
               |County                         |Lodging Rate              |
               |-------------------------------+--------------------------|
               |All counties except those      |$90                       |
               |listed below                   |                          |
               |-------------------------------+--------------------------|
               |Los Angeles, Orange, Ventura,  |$120                      |
               |Edwards AFB, less the City of  |                          |
               |Santa Monica                   |                          |
               |-------------------------------+--------------------------|
               |Sacramento, Napa, Riverside    |$95                       |
               |-------------------------------+--------------------------|
               |San Diego, Monterey, Alameda,  |$125                      |
               |San Mateo, Santa Clara         |                          |
               |-------------------------------+--------------------------|
               |San Francisco, City of Santa   |$150                      |
               |Monica                         |                          |
                ---------------------------------------------------------- 

              g)   Miscellaneous
           
               The state will not mandate a reduction in work hours  
               (furlough/Personal Leave Program) for BU 1, 3, 4, 11,  
               14, 15, 17, 20, and 21 employees during the term of this  
               agreement.

               The state and SEIU, Local 1000 agree to present to the  
               Legislature, as part of the legislation implementing  
               this MOU, a provision to appropriate funds to cover the  
               economic terms of this agreement through July 1, 2016.

               State Owned Housing:  Rental rates will be frozen until  
               July 1, 2015, for those employees required to live in  
               state housing.

               Organ Donation was incorporated into the MOU agreements  
               consistent with AB 1825 (Nakano), Chapter 869, Statutes  
               of 2002.

               The state continues its commitment to work with SEIU  
               within the already established Contracting Out  
               Committees in an effort to reduce unnecessary costs in  
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          Date:  June 26, 2013                                    Page  
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               contracting out.

               The state agrees to ensure that retired annuitants work  
               in accordance with PEPRA requirements and will be  
               utilized for mission critical work.

               The state agrees to continue to provide student  
               assistants the opportunity to gain work experience  
               consistent with their field of study.

          1)The report of the Office of the Legislative Analyst is  
            available on its website:
             http://www.lao.ca.gov/laoapp/main.aspx  

          2)The full test of the MOUs and accompanying summaries may be  
            found on the website of CalHR:
             http://www.calhr.ca.gov/state-hr-professionals/Pages/bargain 
            ing-contracts.aspx  

           3)ARGUMENTS IN SUPPORT:

             According to CalHR:

               These contracts represent savings in pension changes for  
               employees as enacted last year by the legislature in the  
               Public Employee Pension Reform Act (PEPRA).  This bill  
               also allocates prudent cost of living increases in 2014,  
               and 2015, contingent upon projected state revenues, as  
               determined by the Department of Finance.  There are no  
               mandatory furloughs or Personal Leave Program (PLP) days  
               in this contract.  These are modest agreements that  
               recognize the role state workers have played over the  
               past few years in stabilizing California's finances.

            SEIU states that "AB 1377 approves the most recent MOU so  
            that California's workers can feel more employment security  
            in the future."
           


          4)SUPPORT  :

            California Department of Human Resources (CalHR),  
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          Date:  June 26, 2013                                    Page  
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          Co-Sponsor
            Service Employees International Union, Local 1000 (SEIU),  
          Co-Sponsor
            American Federation of State, County and Municipal  
          Employees (AFSCME), AFL-CIO

           5)OPPOSITION  :

            None to date




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          Pamela Schneider
          Date:  June 26, 2013                                    Page  
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