BILL ANALYSIS                                                                                                                                                                                                    Ó






          SENATE PUBLIC EMPLOYMENT & RETIREMENT   BILL NO:  AB 1783
          Norma Torres, Chair        HEARING DATE:  August 22, 2014
          AB 1783 (Jones-Sawyer)    as amended   8/18/14            
          FISCAL:  YES

           PUBLIC EMPLOYEES' PENSION REFORM ACT OF 2013 (PEPRA):   
          EXEMPTION FOR PROTECTED TRANSIT WORKERS
           
           HISTORY  :

            Sponsor:  Author

              Other legislation:  AB 340 (Furutani)
                            Chapter 296, Statutes of 2012
                        AB 1222 (Bloom)
                            Chapter 527, Statutes of 2013

           ASSEMBLY VOTES  :

          Not applicable - New bill with August 18, 2014 amendments
           
          SUMMARY  :

          AB 1783 would continue to exempt certain public transit  
          workers from the requirements of the Public Employees'  
          Pension Reform Act of 2013 (PEPRA) until January 1, 2016,  
          pending a ruling from the federal district court with regard  
          to whether or not the implementation of PEPRA, with regard to  
          the impacted transit workers, justified the federal Secretary  
          of Labor's determination in 2013 that the implementation of  
          PEPRA precluded certification of certain transit projects and  
          related federal funding.

           BACKGROUND AND ANALYSIS  :
          
           1)Existing federal law  :

             a)   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.  (Many such agencies are now included in  
               CalPERS, 1937 Act, or other public retirement systems  
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          Date:  August 20, 2014                                  Page  
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               and plans.)

             b)   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 (US DOL) and in place before federal  
               transit funds can be released to a mass transit employer  
               subject to the Federal Transit Law.

               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.

             c)   allows the US DOL to determine if the collective  
               bargaining rights 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.

           1)Existing state law  :

             a)   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.

             b)   under PEPRA, changed the retirement benefit plans  
               that may be offered to  new  public employees, including:

            i.   establishing uniform retirement formulas, including a  
                 2% at age 62 formula for non-safety workers;

            ii.    requiring a 3-year final compensation period for  
                 determining a pension;
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          Date:  August 20, 2014                                  Page  
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            iii.   requiring employee member contributions equal to 50%  
                 of the normal cost of the employee's benefit plan;

            iv.    capping the amount of compensation that can count  
                 toward a pension (currently approximately $113,000);  
                 and

            v.   restricting the pay items that may be included in  
                 pensionable compensation.

             a)   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.

             b)   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.

             c)   makes an exemption to PEPRA for employees who are  
               covered by 13(c) arrangements  until  either:

            i.   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

             ii.    January 1, 2015  , whichever is sooner.


           1)This bill  

             a)   extends the sunset date until  January 1, 2016  .

             b)   states that this is an urgency statute, necessary in  
               order to remain eligible for federal transportation  
               funds that would be forfeited if transit employees are  
               not exempt from PEPRA.

           COMMENTS  :
          Pamela Schneider
          Date:  August 20, 2014                                  Page  
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           1)Background  :

               In 2012, the state adopted PEPRA, which became effective  
               on January 1, 2013.  In 2013, labor unions representing  
               public transit employees began asserting to the US DOL  
               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, in 2013 the US DOL withheld certification  
               of a federal grant to the Sacramento Regional Transit  
               District, which in turn brought an action in federal  
               court to challenge the US DOL determination.  That case  
               is still pending and is unlikely to be resolved in 2014.

               While the case is ongoing, transit workers have been  
               exempted from PEPRA and federal transit monies have been  
               allowed to flow.
               
          According to the press release on August 4, 2013, by Governor  
          Jerry Brown in regard to AB 1222:

            "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."

           2)Issues  :  

             This bill should be amended to prevent chaptering out by SB  
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          Date:  August 20, 2014                                  Page  
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            1251 (Huff), which is currently on the Assembly floor,  
            because both bills amend the same Government Code section.   
            Provisions in SB 1251 are unrelated to the transit worker  
            exemption that would be extended by this bill.


           3)SUPPORT  :

            California Transit Association
            Golden Gate Bridge, Highway and Transport District
            Los Angeles Metropolitan Transportation Authority (Metro)
            Riverside County Transportation Commission (RCTC)
            Sacramento Regional Transit (RT)
            San Francisco Bay Area Rapid Transit District (BART)
            Santa Clara Valley Transportation Authority (VTA)

           4)OPPOSITION  :

            None.

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          Pamela Schneider
          Date:  August 20, 2014                                  Page  
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