BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2013-2014 Regular Session
AB 2332 (Wieckowski)
As Amended May 23, 2014
Hearing Date: June 24, 2014
Fiscal: Yes
Urgency: No
RD
SUBJECT
Courts: Personal Services Contracts
DESCRIPTION
This bill would require specified standards to be met if a trial
court intends to enter into a new contract, or renew or extend
an existing contract, for any services that are currently or
customarily performed by that trial court's employees. Among
other things, the bill would require the trial court to clearly
demonstrate that the contract will result in actual overall cost
savings to the trial court for the duration of the entire
contract as compared with the trial court's actual costs of
providing the same services. This bill would also require
specific, measurable performance standards for any contract for
services in excess of $100,000 annually and require audits, as
specified.
This bill would also authorize courts to execute personal
service contracts under certain circumstances, without meeting
the required standards, including where:
the contract is between a trial court and another trial court
or a local government entity for services to be performed by
employees of the other trial court or employees of the local
government entity; or
due to an emergency, a contract is necessary for the immediate
preservation of the public health, welfare, or safety.
BACKGROUND
Under California law, most governmental entities can use
personal services contracts (i.e. contracting out) to achieve
(more)
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cost savings only if specified standards are satisfied, chief
among them being that the entity clearly demonstrates actual
overall cost savings based upon certain information. These
entities include executive branch agencies, public schools,
community colleges, and libraries. (See AB 3336 (Ryan, Ch.
1057, Stats. 1982); SB 1419 (Alarcon, Ch. 894, Stats. 2002); AB
438 (Williams, Ch. 611, Stats. 2011).)
In recent years, California's judicial branch has experienced
catastrophic budget reductions that have crippled California's
court system by, among other things, forcing the closure of
courts and self-help centers, which has resulted in delayed
access to justice for a large number of Californians.
In response, many courts have begun seeking ways in which to
operationalize those budget reductions. According to
information provided to this Committee by the Judicial Council
of California, examples of services that trial courts currently
contract out for include: court reporters; interpreters; child
custody evaluations; probate investigations; family law
facilitators; minor's counsel in dependency cases; child custody
mediation services; mediators/alternative dispute resolution;
security guards; personnel services; payroll; information
services; collections; adoption investigation services; services
for self-represented litigants; labor negotiation services;
transcripts for electronically recorded proceedings; and more.
Last year, AB 566 (Wieckowski, 2013), which was substantially
similar to this bill and approved by this Committee, sought to
limit the types of personal service contracts entered into by
courts for services previously performed by that trial court's
employees.
Similarly, this bill would permit the trial courts to engage in
personal service contracts for any services that are currently
or customarily performed by that trial court's employees, only
if certain requirements are met, or if a specified exception
applies.
CHANGES TO EXISTING LAW
Existing law provides that civil service includes every officer
and employee of the State, except as otherwise provided in the
California Constitution. That article also specifies that
certain employees are exempt from civil service, including among
others: officers and employees appointed or employed by
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councils, commissions or public corporations in the judicial
branch or by a court of record or officer thereof. (Cal.
Const., article VII.)
Existing law permits a state agency to contract out for personal
services only if specified standards are satisfied, including,
among other things, that:
the contracting agency clearly demonstrates actual overall
cost savings, as specified;
proposals to contract out work are not approved solely on the
basis that savings will result from lower contractor pay rates
or benefits, except that proposals to contract out work are
eligible for approval if the contractor's wages are at the
industry's level and do not significantly undercut state pay
rates;
the contract does not cause the displacement of civil service
employees, as specified;
the savings must be large enough to ensure that they will not
be eliminated by cost fluctuations that could normally be
expected during the contracting period;
the amount of savings clearly justify the size and duration of
the agreement;
the contract is awarded through a publicized, competitive
bidding process;
the potential for future economic risk to the state from
potential contractor rate increases is minimal; and
the potential economic advantage of contracting is not
outweighed by the public's interest in having a particular
function performed directly by state government. (Gov. Code
Sec. 19130(a)(1)-(11).)
Existing law provides that in determining whether the proposed
contract will result in actual savings to the state, in
comparing costs, the contracting agency must clearly demonstrate
actual overall cost savings as follows:
the state's additional cost of providing the same service as
proposed by a contractor, including the salaries and benefits
of additional staff that would be needed and the cost of
additional space, equipment, and materials needed to perform
the function must be included;
the state's indirect overhead costs, as defined, must not be
included unless these costs can be attributed solely to the
function in question and would not exist if that function was
not performed in state service; and
in the cost of a contractor providing a service, any
continuing state costs (such as inspection, supervision, and
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monitoring) that would be directly associated with the
contracted function must be included. (Gov. Code Sec.
19130(a)(1)(A)-(C).)
Existing law exempts personal services contracting from the
above requirements if, among other things:
the functions contracted are exempt from civil service under
the State Constitution;
the contract is for a new state function and the Legislature
has specifically mandated or authorized the performance of the
work by independent contractors;
the services contracted are not available within civil
service, cannot be performed satisfactorily by civil service
employees, or are of such a highly specialized or technical
nature that the necessary expert knowledge, experience, and
ability are not available through the civil service system;
the legislative, administrative, or legal goals and purposes
cannot be accomplished through the utilization of persons
selected pursuant to the regular civil service system, such as
where there is a conflict of interest or to ensure independent
and unbiased findings in cases where there is a clear need for
a different, outside perspective (e.g., obtaining expert
witnesses in litigation);
the nature of the work is such that specified existing law
standards for emergency appointments apply;
the contractor will provide equipment, materials, facilities,
or support services that the state could not feasibly provide
in the location where the services are to be performed; or
the services are of such an urgent, temporary, or occasional
nature that the delay incumbent in their implementation under
civil service would frustrate their very purpose. (Gov. Code
Sec. 19130(b).)
Existing law provides similar requirements and exceptions for
personal service contracting for school districts, community
college districts, and libraries. (See Ed. Code Secs. 19104.5,
45103.1, 88003.1.)
This bill would provide that if a trial court intends to enter
into a contract, or renew or extend an existing contract, for
any services that are currently or customarily performed by that
trial court's employees, all of the following must be met:
the trial court must clearly demonstrate that the contract
will result in actual overall cost savings to the trial court
for the duration of the entire contract as compared with the
trial court's actual costs of providing the same services, as
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specified;
the contract must not be approved solely on the basis that
savings will result from lower contractor pay rates or
benefits, except contracts are eligible for approval if the
contractor's wages are at the industry level and do not
undercut trial court pay rates;
the contract cannot cause an existing trial court employee to
incur a loss of his or her employment or employment seniority,
a reduction in wages, benefits, or hours, or an involuntary
transfer to a new location requiring a change in residence;
the contract cannot be approved if, in light of the services
provided by trial courts and the special nature of the
judicial function, it would be inconsistent with the public
interest to have the services performed by a private entity;
the contract must be awarded through a publicized, competitive
bidding process;
the contract must include specific provisions pertaining to
the qualifications of the staff that will perform the work
under the contract, as well as assurances that the
contractor's hiring practices meet applicable
nondiscrimination standards;
the contract must provide that it may be terminated at any
time by the trial court without penalty if there is a material
breach of the contract and notice is provided within 30 days
of termination;
the term of the contract shall not be more than five years
from the date on which the trial court approves the contract;
and
if the contract is for services over $100,000 annually, the
contract must include certain audit-related provisions, and
the trial court must (1) meet certain auditing requirements,
as specified, and (2) require the contractor to disclose a
description of all of the following as part of its bid,
application, or answer to a request for proposal:
o all charges, claims, or complaints filed against the
contractor with a federal, state, or local administrative
agency during the prior 10 years;
o all civil complaints filed against the contractor in a
state or federal court during the prior 10 years;
o all state or federal criminal complaints or indictments
filed against the contractor, or any of its officers,
directors, or managers, at any time; and
o any debarments of the contractor by a public agency or
licensing body at any time.
This bill would require that the audits required for contracts
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over $100,000, above, be made available to the public upon
request within 10 calendar days from receipt of the request. A
charge per page, per copy, may be charged representing the
direct costs of equipment, supplies, and staff required to
duplicate or produce the requested audit.
This bill would require that in comparing costs to demonstrate
that the contract will result in actual overall cost savings to
the trial court for the duration of the entire contract as
compared with the trial court's actual costs of providing the
same services:
the trial court's additional cost of providing the same
services as proposed by the contract shall be included, such
as the salaries and benefits of additional staff that would be
needed and the cost of additional space, equipment, and
materials needed to perform the services;
the trial court's indirect overhead costs, as defined, shall
not be included unless those costs can be attributed solely to
the function in question and would not exist if that function
was not performed by the trial court; and
the cost of a contractor providing a service for any
continuing trial court costs, including costs for inspection,
supervision, and monitoring, that would be directly associated
with the contracted function shall be included.
This bill would exempt contracts from the requirements listed
above in any of the following circumstances:
the contract is between a trial court and another trial court
or a local government entity for services to be performed by
employees of the other trial court or employees of the local
government entity;
the contract is for a new trial court function and the
Legislature has specifically mandated or authorized the
performance of the services by independent contractors;
the services are incidental to a contract for the purchase or
lease of real or personal property. Those contracts shall
include, but not be limited to, agreements to service or
maintain office equipment or computers that are leased or
rented, but exclude agreements to operate equipment or
computers, except as necessary to service or maintain that
equipment;
the legislative, administrative, or legal goals and purposes
cannot be accomplished through the utilization of trial court
employees because of the need to protect against a conflict of
interest or to ensure independent and unbiased findings in
situations where there is a clear need for an independent,
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outside perspective;
due to an emergency, a contract is necessary for the immediate
preservation of the public health, welfare, or safety;
the contractor will conduct training courses for which
appropriately qualified trial court employee instructors are
not available from the court, provided that permanent
instructor positions shall be filled through the process for
hiring trial court employees;
the services are of such an urgent, temporary, or occasional
nature that the delay incumbent in their implementation
through the process for hiring trial court employees would
frustrate their very purpose. This provision does not apply
to the services of official court reporters, except individual
official reporters pro tempore may be used by a trial court
when the criteria of this provision are met;
the contract is a personal services contract developed
pursuant to specified rehabilitation programs and the contract
will not cause an existing trial court employee to incur a
loss of his or her employment or employment seniority, a
reduction in wages, benefits, or hours; or an involuntary
transfer to a new location requiring a change in residence; or
the contract is for the services of any court interpreter,
which shall be governed by the Trial Court Interpreter
Employment and Labor Relations act and any memorandum of
understanding or agreement entered into pursuant to that act,
or by other provisions of the Trial Court Employment
Protection and Governance Act, and any memorandum of
understanding or agreement entered into pursuant to that act,
as applicable.
This bill would apply the above standards and exceptions to any
contract entered into, renewed, or extended after the effective
date of this Act.
This bill would require each trial court to provide a specified
report by no later than February 1, 2015, to the chairpersons of
the Senate and Assembly Judiciary Committees and the Joint
Legislative Budget Committee if the trial court entered into a
contract between July 1, 2014, and December 31, 2014, inclusive,
for services that were provided or are customarily provided by
its trial court employees and that contract has a term extending
beyond March 31, 2015. This bill would state the intent of the
Legislature to consider the reduction of future budget
appropriations to each trial court by the amount of any contract
analyzed pursuant to the aforementioned report if the
Legislature concludes that the contract would not have been
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permissible under the provisions added by this Act.
This bill would include a severability clause.
COMMENT
1. Stated need for the bill
According to the author, this bill is needed because "[a]s a
result of recent budget cuts to the trial courts, some courts
have sought alternative ways to provide critically important
services to the public, including privatizing some of the most
sensitive services that help preserve the integrity of our
impartial trial court system. Alternatives being considered
include privatizing the handling and maintenance of private,
confidential and sensitive information contained in official
court records."
The American Federation of State, County and Municipal Employees
(AFSCME), AFL-CIO, co-sponsor of this bill, writes that "AB 2332
would provide an efficient way of evaluating whether privatizing
trial court jobs is in the best interest of the state. These
specific standards in this bill would protect trial court
services, and ensure all contracts pay living wages and cannot
undercut current employees' wages. This bill is important
because it would protect trial court employees and stops
automatic privatization of these public sector jobs."
The Service Employees International Union (SEIU), co-sponsor of
this bill, adds that:
AB 2332 would allow for privatization of trial court services
if certain good government contracting standards are first
met; such as: 1) a fair cost analysis, 2) proven savings to
the taxpayers, 3) competitive bidding, 4) proven
qualifications of the contractor, 5) doesn't displace
employees, and 6) performance and financial audits are
conducted.
. . .
[T]ax dollars have the dual responsibility of being well spent
for quality services, as well as being an investment in the
larger society. In fact, it could be argued that the level of
accountability should be higher for trial court services.
Being a nation of laws, a fair and impartial judicial system
that is accessible to all is a critical underpinning of
democracy and is fundamental to the success of a civilized
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society.
Trial court services represent a "public good," which are most
effectively delivered by government and public employees. AB
2332 correctly places the burden of altering one of the most
essential public services on those advocating it.
Additionally, profit should never be associated with any
aspect of fair review and fair rights to redress in an
impartial judicial system that should be accessible to all
people.
Finally, the provisions contained in AB 2332 are neither
radical nor a departure from current law governing most other
parts of government and will ensure that tax dollars are
accountable.
2. Contracting out of services in the Judicial Branch
Modeled upon existing statutes that require various governmental
entities (executive branch agencies, public K-12 schools,
community colleges, and public libraries) to meet specified
standards before executing personal service contracts, this bill
would allow the trial courts to engage in personal service
contracts for any services that are currently or customarily
performed by that trial court's employees, or that were
performed or customarily performed by that trial court's
employees if certain requirements are met, or if a specified
exception applies.
First, the bill would require that a trial court wishing to
enter into a new contract, or to renew or extend a contract, for
personal services, clearly demonstrate that the contract will
result in actual overall cost savings to the trial court for the
duration of the entire contract as compared with the trial
court's actual costs of providing the same services. Moreover,
the contract must not be approved solely on the basis that
savings will result from lower contractor pay rates or benefits
(except that contracts would be eligible for approval if the
contractor's wages are at the industry level and do not undercut
trial court pay rates). Furthermore, this bill would prohibit
the contracting out of services if the contract would cause an
existing trial court employee to incur a loss of his or her
employment or employment seniority, a reduction in wages,
benefits, or hours, or an involuntary transfer to a new location
requiring a change in residence.
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Additionally, this bill would differ from the current statutes
that apply to state entities seeking to contract out personal
services by including elements that reflect the unique role of
trial courts. For example, the bill would provide that a
contract cannot be approved if, in light of the services
provided by trial courts and the special nature of the judicial
function, it would be inconsistent with the public interest to
have the services performed by a private entity. Also, in
contrast to the current statutes (except for the statute
relating to libraries), this bill would impose additional
requirements for any contract for services in excess of $100,000
annually. Namely, the bill would require that such a contract
also include specific, measurable performance standards and
provisions for audits on performance and cost savings, as well
as a requirement for the trial court to obtain certain
documentation from the potential contractor as to their
qualifications and any history of charges, claims, or complaints
against them.
This bill also contains several exceptions to the above
requirements that are similar to the exceptions provided under
the existing statutes. Pursuant to these exceptions, a trial
court would be permitted to contract out for services without
meeting the above standards, if, for example:
the contract is between a trial court and another trial court
or a local government entity for services to be performed by
employees of the other trial court or employees of the local
government entity;
the contract is for a new trial court function and the
Legislature has specifically mandated or authorized the
performance of the services by independent contractors;
the legislative, administrative, or legal goals and purposes
cannot be accomplished through the utilization of trial court
employees because of the need to protect against a conflict of
interest or to ensure independent and unbiased findings in
situations where there is a clear need for an independent,
outside perspective;
due to an emergency, a contract is necessary for the immediate
preservation of the public health, welfare, or safety; or
the services are of such an urgent, temporary, or occasional
nature that the delay incumbent in their implementation
through the process for hiring trial court employees would
frustrate their very purpose, except as specified for court
reporter services.
Notably, the current version of this bill includes amendments
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that were taken in this Committee with respect to a
substantially similar bill, AB 566 (Wieckowski, 2013), which
added exceptions to that bill that would permit the courts to
contract out for services that are: (1) urgent, temporary, or
occasional in nature if the delay in hiring trial court
employees would frustrate their very purpose; or (2) of such a
highly specialized nature that the requisite experience,
knowledge, or ability cannot be obtained from court employees.
In that same regard, this bill includes an exception that was
added to AB 566 as a result of concerns raised in this Committee
relating to personal services contracts developed pursuant to
rehabilitation programs. Moreover, this bill includes an
exception for services of court interpreters whose contracts are
governed by other applicable laws specific to those employees.
As a matter of public policy, any restriction on the ability for
trial courts to enter into personal service contracts must be
appropriately tailored so as to address concerns that arise when
a trial court elects to privatize services. At the same time,
those restrictions must be carefully balanced so as not to
unduly restrict a trial court's ability to perform its vital
functions in times of fiscal crisis.
In support of this bill, Laborers' Locals 777 & 792 writes that
"[a]s a result of substantial budget cuts to the trial courts,
and as a means to reduce costs, some courts have begun providing
or are considering providing critically important services to
the public via private servicers. This includes privatizing the
handling and maintenance of private, confidential and sensitive
information contained in official court records. Given the
important work done by the trial courts the sensitivity of the
information that is processed and maintained, and the sanctity
of the rights of public court consumers, the contracting out of
court work should never be used as a cost savings measure."
Similarly, the California Labor Federation writes in support
that "[c]ontracting out can result in less transparency and less
accountability. It can lead to lower wages and less investment
in an experienced workforce. With the introduction of a profit
motive to the delivery of public services, the public interest
is often compromised as companies seek to cut services and
increase consumer costs. All of these issues are particularly
troubling as they relate to the operations of our state trial
courts. Privatization of those services means that justice
truly is in the hands of a private contractor who is primarily
concerned not with fairness or equality, but their own bottom
line. For these reasons, it is essential to have safeguards in
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the law."
3. Oppose unless amended
The Judicial Council notes various problems with the bill that
require the Council to take an "oppose unless amended" position.
Specifically, according to the Judicial Council, the bill:
Presumes no personal services contract is valid unless it
meets one of several very limited exceptions or has achieved
the near impossible balance of attaining actual savings
without reducing labor and benefits costs. [ . . . ] AB 2332's
contradictory and conflicting provisions requiring that
personal services contracts demonstrate savings while
forbidding those savings from lower salary and benefit costs
present a literal Catch-22; a contract that cannot demonstrate
savings from lower contracting rates will have no savings and
thus be prohibited.
Inhibits the trial courts' ability to manage their staff and
resources, which is critical in view of a funding gap of $875
million, as detailed in the Chief Justice's Blueprint for a
Fully Functioning Judicial Branch. [ . . . ] The flexibility
of contracting out for certain services is integral to the
trial courts' ability to meet their budget obligations while
also providing access to justice for the public.
Reduces local control and discretion over trial court
management. Trial courts are uniquely and constitutionally
independent, as well as different from one another. Each
presiding judge has the responsibility to manage the court in
a manner deemed appropriate to the unique characteristics of
that court and its court users. Restrictions on the way trial
courts provide for appropriate staffing reduces the courts'
ability to serve the public. Many courts currently contract
for services, such as child custody evaluations and probate
investigations. In light of judicial branch autonomy, and
taking into consideration the budget crisis facing the trial
courts, the courts should not be even further hampered in
their ability to provide court services.
Conflicts with recently enacted legislation regarding judicial
branch contracting. The Judicial Branch Contract Law (JBCL),
Chapter 10, Statutes of 2011, is modeled after Public Contract
Code provisions governing state agency contracting. AB 2332 is
inconsistent with JBCL and the Judicial Branch Contracting
Manual (JBCM). For example, under the JBCM, not all service
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contracts need to be procured through a publicized,
competitive bidding process. [ . . . ] Further, AB 2332 goes
beyond what is required for other state entities and
undermines the goals of fair competition and efficiency
embodied in the Public Contract Code (as set forth in sections
100 and 101) and the Judicial Branch Contract Law.
Affects circumstances that are more appropriately addressed at
the local level through collective bargaining agreements. [ .
. . ] Applying one-size-fits-all contracting restrictions on
the 58 trial courts unnecessarily interferes with the ability
of the trial courts and the respective bargaining units to
enter into agreements the courts and court employees consider
best for the individual courts, court users and court
employees
Judicial Council writes that the bill appears to be modeled
after Government Code Section that limits contracting for
executive branch for services that could be performed by civil
service employees (Gov. Code, § 19130). This contracting
restriction model is inappropriate for the trial courts because,
unlike the executive branch agencies, the trial courts must
operate independently from one jurisdiction to the next." The
Council adds that in contrast to the executive branch which can
largely manage the amount of work they receive, the number and
types of people they serve, and the services provided, trial
courts must accept all filings from the public, have no control
over the number and types of cases they must process, and have
no ability to limit court users. Hence, the courts require more
flexibility, the Council believes. Lastly, the Judicial Council
argues that the bill, as currently drafted, is both overly broad
and restrictive in comparison to the existing contracting
restrictions placed on executive branch agencies, K-12 school
districts, and community colleges, for a variety of reasons.
For example, AB 2332 has additional restrictions for contracts
over $100,000 that those other entities' statutes do not; and
unlike the statutes for those other entities, AB 2332 does not
contain a "grandfather clause" allowing for the continuation and
renewal of existing contracts without being affected by the new
restrictions.
While the Judicial Council has submitted an "oppose unless
amended" letter and has provided the author with suggested
amendments to remove their opposition, the amendments are rather
substantial. At this time, the author commits to continuing
discussions with Judicial Council as the bill moves through the
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legislative process. Staff notes that, if approved by this
Committee, this bill will be headed to the Senate Appropriations
Committee.
4. Governor's veto message of AB 566
This bill is substantially similar to AB 566 (Wieckowski, 2013),
as it was approved by this Committee. In vetoing AB 566,
Governor Brown stated that while he agrees that decisions to
change the way court services are provided should be carefully
evaluated to ensure they are both fair and cost-effective, "this
measure goes too far. It requires California's courts to meet
overly detailed and - in some cases - nearly impossible
requirements when entering into or renewing certain contracts.
Other provisions are unclear and will lead to confusion about
what services may or may not be subject to this measure."
Support : AFSCME District Council 57; Association for Los
Angeles Deputy Sheriffs; California Court Reporters Association;
California Labor Federation; California Official Court Reporters
Association; California Professional Firefighters; Glendale City
Employees Association; Laborers' Locals 777 & 792; Los Angeles
Court Reporters Association; Los Angeles Probation Officers
Union, AFSCME, Local 685; Northern California Court Reporters
Association; Orange County Employees Association (OCEA);
Organization of SMUD Employees; Professional and Technical
Engineers, IFPTE Local 21; Riverside Sheriffs' Association;
Sacramento Official San Bernardino Public Employees Association;
San Luis Obispo County Employees Association; Santa Rosa City
Employees Association
Opposition : Judicial Council (oppose unless amended)
HISTORY
Source : American Federation of State, County and Municipal
Employees, AFL-CIO; Service Employees International Union
Related Pending Legislation : None Known
Prior Legislation :
AB 566 (Wieckowski, 2013) See Background.
AB 438 (Williams, Ch. 611, Stats. 2011) See Background.
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SB 78 (Committee on Budget and Fiscal Review, Ch. 10, Stats.
2011) See Comment 3.
AB 3084 (Horton, 2004) would have applied specified contracting
requirements to a metropolitan water district's contracts for
services. AB 3084 was held in the Senate Local Government
Committee and died without a hearing.
SB 906 (Alarcon, 2003) would have required all general law
county and city contracts for services to achieve cost savings
and meet certain other requirements. SB 906 died on the
Assembly Floor.
SB 163 (Alarcon, 2003) was substantially similar to SB 906 and
was held in the Senate Appropriations Committee.
SB 1419 (Alarcon, Ch. 894, Stats. 2002) See Background.
AB 233 (Escutia and Pringle, Ch. 850, Stats. 1997) See Comment
1.
AB 3336 (Ryan, Ch. 1057, Stats. 1982) See Background.
Prior Vote :
Assembly Floor (Ayes 52, Noes 23)
Assembly Appropriations (Ayes 12, Noes 5)
Assembly Judiciary Committee (Ayes 7, Noes 3)
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