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 Pamela Schneider Date: August 20, 2014 Page 1 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; Pamela Schneider Date: August 20, 2014 Page 2 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 3 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 Pamela Schneider Date: August 20, 2014 Page 4 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. ##### Pamela Schneider Date: August 20, 2014 Page 5