BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          AB 1377 (Bonta) - SEIU Memorandum of Understanding
          
          Amended: June 20, 2013          Policy Vote: PE&R 3-1
          Urgency: Yes                    Mandate: No
          Hearing Date: July 1, 2013      Consultant: Maureen Ortiz
          
          This bill meets the criteria for referral to the Suspense File.  
          However, due to the urgency of the legislation the committee may  
          wish to vote on this measure today.
          
          
          Bill 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,  These units  
          include 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), and, BU 21 (Educational Consultant and Library).

          AB 1377 appropriates $1,351,000 for expenditure in the 2013-14  
          fiscal year as follows:  $373,000 from the General Fund,  
          $655,000 from unallocated special funds, and $323,000 from other  
          unallocated nongovernmental cost funds, for the purpose of state  
          employee compensation. 

          Additionally, AB 1377 provides for a continuous appropriation  
          for the payment of employee compensation and benefits for  
          members of Bargaining Units 1, 3, 4, 11, 14, 15, 17, 20 and 21  
          for the 2013-14, 2014-15, and 2015-16 fiscal years. 

          Fiscal Impact: 
          
              FY 2013-14 costs of approximately $1.4 million ($373,000  
              General Fund)
              FY 2014-15 costs of $134.6 million ($56.7 million General  
              Fund)
              FY 2015-16 costs of $$303 million ($127.6 million General  
              Fund)









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          The costs estimates above are based on the assumption that a 2%  
          general salary increase will be implemented on July 1, 2014, and  
          that a 2.5% general salary increase will take effect on July 1,  
          2015.  The 2% increase that will take effect on July 1, 2014 is  
          contingent on a determination by the Director of Finance that  
          the state has sufficient revenue to meet its existing  
          obligations and that there is also funding available for the 2%  
          salary increase.  If the determination is that there are NOT  
          sufficient funds available on July 1, 2014, then all SEIU  
          employees will instead receive a 4.5% general salary increase on  
          July 1, 2015.  If that occurs, the fiscal impact of the salary  
          increase will be $295.4 million ($123.4 million General Fund).

          Should CalHR opt to provide the 4.5% general salary increase to  
          nonrepresented employees, additional costs would be $118.8  
          million of which $43.1 million will be General Fund costs.

          Background:    Existing law 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.

          Additionally, the Legislative Analyst Office (LAO) is required  
          to analyze state MOUs and to report on its findings to the  
          Legislature within 10 days of receiving the MOU from CalHR.  The  
          LAO presented its analysis on June 21, 2013.

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

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








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          age 57.
          
          Bargaining Unit 1, 3, 4, 11, 14, 15, 17, 20, and 21, employees  
          who become CalPERS members on or after January 1, 2013, are  
          subject to the Second Tier PEPRA Retirement Formula of 1.25% at  
          age 67.

           Employee Pension Contribution
           
          All Bargaining Unit 1, 3, 4, 11, 14, 15, 17, 20, and 21 members  
          in First Tier Miscellaneous Retirement 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 First Tier Industrial Retirement 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 First Tier Industrial Retirement 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 Second Tier members 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 State Safety Retirement shall have their  
          contribution increased from 9% to 10% of monthly compensation  
          over $317. 

          Effective July 1, 2014, all Bargaining Unit 1, 3, 4, 11, 14, 15,  
          17, 20, and 21 members in State Safety Retirement shall have  
          their contribution increased from 10% to 11% of monthly  
          compensation over $317.
          
           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,  








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          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 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 General Salary Increase effective July 1, 2015.

           Health Benefits - Employer Contribution
           
          The State'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'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.

           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.

           Miscellaneous
           








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

          The State and SEI U 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.

          Business and Travel, the State increased the meal reimbursement  
          rates by $2.00.  The State increased lodging rates as follows:

           ----------------------------------------------------------------- 
          |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                          |                                |
           ----------------------------------------------------------------- 

          State Owed Housing- rental rates will be frozen until July 1,  
          2015, for those employees required to live in state housing. 

          Nearly 900 custodians at the Department of General Services will  
          receive a $100 annual allowance to purchase oil and slip  
          resistant footwear.

          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  








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          already established Contracting Out Committees in an effort to  
          reduce unnecessary costs in 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.


          Staff Comments:  The state is experiencing a severe compaction  
          problem where state managers and supervisors earn little or no  
          higher salary than the employees that they supervise.  If CalHR  
          does not opt to provide the 4.5% salary increase to  
          nonrepresented managers and supervisors that SEIU has negotiated  
          for its rank and file employees, this compaction problem will  
          increase, likely resulting in a greater shortage of state  
          managers and supervisors.

          The last general salary increase state employees received was  
          3.4% in 2007.

          The retirement formula and employee pension contribution  
          provisions noted above were part of the Public Employees'  
          Pension Reform Act which took effect January 1, 2013.