BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Kevin de León, Chair SB 407 (Hill) - Local government employment contracts. Amended: April 1, 2013 Policy Vote: G&F 6-0 Urgency: No Mandate: Yes Hearing Date: May 23, 2013 Consultant: Mark McKenzie SUSPENSE FILE. Bill Summary: SB 407 would extend specified limitations and requirements that currently apply to local agency executive employment contracts to contracts between a local agency and certain deputy and assistant executive officers and other persons whose positions are held by an employment contract. Fiscal Impact: Unknown state-reimbursable local costs. Costs incurred by many local agencies are likely to be minimal, but if only 5% of over 6,000 local entities to which this bill would apply incur one-time costs of $1,000 and a successful reimbursement claim is filed, total statewide General Fund costs would be over $300,000. (see staff comments) Background: Existing law generally provides, under the Meyers-Milias-Brown Act and certain provisions of the Education Code, that collective bargaining and representation procedures do not apply to executive employees, such as county administrators, city managers, special district managers, school superintendents, and community college presidents that report to local elected governing boards pursuant to an employment contract. In response to the scandal involving local officials in the City of Bell in 2010, the Legislature approved AB 1344 (Feuer), Chap 692/2011, which placed new restrictions and requirements on employment contracts that apply to local agency chief executive officers and persons employed as the head of a local agency department who are not subject to collective bargaining and representation procedures in existing law. Among other things, AB 1344: Prohibits employment contracts from providing for automatic renewal of the contract if it includes automatic compensation increases that exceed a cost-of-living SB 407 (Hill) Page 1 adjustment, or a maximum cash settlement that exceeds 18 months of salary plus benefits, or remaining contracted salary, whichever is less. Requires employment contracts to provide for reimbursement of salary provided as paid leave pending an investigation, funds provided for legal defense, and cash settlements related to termination if that person is convicted of a crime involving abuse of position. Prohibits local agency legislative bodies from calling a special meeting to discuss or make compensation decisions for local agency executive employees. Existing law does not explicitly apply these requirements to local agency employment contracts with deputy or assistant chief executive employees or other persons whose position is held by an employment contract. Proposed Law: This bill would explicitly apply existing law's requirements on employment contracts between a local agency and specified local agency executive employees to employment contracts between a local agency and any person who is a deputy or assistant chief executive officer, and other persons whose positions are held by an employment contract. Staff Comments: SB 407 would impose a reimbursable state-mandated local program by placing new requirements on local officials with respect to certain employment contracts that are executed or renewed by local agencies. Specifically, the bill would prohibit local agency employment contracts with additional classes of employees from containing provisions authorizing specified automatic compensation increases or cash settlements exceeding certain statutory requirements. The bill would apply to all local public agencies, including general law cities, charter cities, counties, school districts, and special districts, and would require changes to employment contracts and human resources procedures involving legal staff time. Total reimbursable mandate costs are unknown, and would depend upon whether affected agencies submit a successful claim for reimbursement with the Commission on State Mandates. These costs would likely be relatively minor for most agencies, and many would forego reimbursement. If five percent of the over 6000 affected agencies incur costs of over $1,000 and file a successful claim, however, total statewide costs would exceed $300,000. Most of these costs would be one-time, with minor SB 407 (Hill) Page 2 ongoing costs.