BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                    THIRD READING


          Bill No:  AB 1377
          Author:   Assembly Public Employees, Retirement and Social  
          Security Committee
          Amended:  6/20/13 in Assembly
          Vote:     27 - Urgency

           
           SENATE PUBLIC EMPLOY. & RETIRE. COMMITTEE  :  3-1, 6/27/13
          AYES:  Beall, Block, Yee
          NOES:  Gaines
          NO VOTE RECORDED:  Walters
           
          SENATE APPROPRIATIONS COMMITTEE  :  4-2, 7/1/13
          AYES:  De León, Hill, Lara, Steinberg
          NOES:  Walters, Gaines
          NO VOTE RECORDED:  Padilla
           
          ASSEMBLY FLOOR  :  63-9, 6/25/13 - See last page for vote


           SUBJECT  :    State employees:  memorandum of understanding

           SOURCE  :     Department of Human Resources
                      SEIU, Local 1000


           DIGEST  :    This bill 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  
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          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)

           ANALYSIS  :    

          Existing law:

          1. 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.

          2. Requires the Legislative Analyst's Office (LAO) to analyze  
             state MOUs and to report on its findings to the Legislature  
             within 10 days of receiving the MOU from CalHR.

          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.

           Comments
           
          According to the Senate Public Employement and Retirement  
          Committee analysis, beginning in 2008, state employees saw a  
          significant erosion in their earnings.  Most employees saw  
          salary reductions of 15% pursuant to Governor Schwarzenegger's  
          furlough program.  According to the LAO, the average state  
          worker saw his/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 the California Public Employees' Retirement System (CalPERS)  

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          -an overall reduction of 8% to 10%.  With the end of the  
          personal leave program and a salary adjustment on July 1  
          equivalent to the increase in member contributions, state  
          employees will finally be made whole after approximately five  
          years of reduced compensation.

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

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

          1.  Retirement benefit formula calculation  .  BU 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.

             BU 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.

             BU 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.
           
           2.  Employee pension contributions  .  All BU 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.


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             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 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.

          3.  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 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 $0.50 per hour GSI.

             If the projected state revenues are not achieved, effective  
             July 1, 2015, the seasonal clerk classification shall have a  
             $0.50 per hour GSI effective July 1, 2015.

          4.  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  

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             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.
           
           5.  Health benefits - dependent coverage  .  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.

          6.  Business and Travel  .  The state increased the meal  
             reimbursement rates by $2.  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                         |                          |
              ---------------------------------------------------------- 

          7.  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  

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             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 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.

           FISCAL EFFECT  :    Appropriation:  Yes   Fiscal Com.:  Yes    
          Local:  No

          According to the Senate Appropriations Committee:

             Fiscal year (FY) 2013-14 costs of approximately $1.4 million  
             ($373,000 General Fund (GF))

             FY 2014-15 costs of $134.6 million ($56.7 million GF)

             FY 2015-16 costs of $$303 million ($127.6 million GF)

          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  

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          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 GF).

          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 GF costs.

           SUPPORT  :   (Verified  7/2/13)

          Department of Human Resources (co-source)
          SEIU, Local 1000 (co-source)
          AFSCME, AFL-CIO



           ASSEMBLY FLOOR  :  63-9, 6/25/13
          AYES:  Achadjian, Alejo, Ammiano, Atkins, Bigelow, Bloom,  
            Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown,  
            Buchanan, Ian Calderon, Campos, Chau, Chesbro, Conway, Cooley,  
            Daly, Dickinson, Eggman, Fong, Fox, Frazier, Garcia, Gatto,  
            Gomez, Gonzalez, Gordon, Gray, Hagman, Hall, Roger Hernández,  
            Holden, Jones-Sawyer, Levine, Linder, Logue, Medina, Mitchell,  
            Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan, Perea, V.  
            Manuel Pérez, Quirk, Quirk-Silva, Rendon, Salas, Skinner,  
            Stone, Ting, Waldron, Weber, Wieckowski, Wilk, Williams,  
            Yamada, John A. Pérez
          NOES:  Dahle, Donnelly, Beth Gaines, Grove, Maienschein,  
            Mansoor, Morrell, Patterson, Wagner
          NO VOTE RECORDED:  Allen, Chávez, Gorell, Harkey, Jones,  
            Lowenthal, Melendez, Vacancy


          JL:k  7/2/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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