BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 879
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          SENATE THIRD READING
          SB 879 ( Budget and Fiscal Review Committee)
          As Amended  August 22, 2014
          Majority vote

           SENATE VOTE  :   Vote not relevant

           BUDGET              14-10                                       
           
           ----------------------------------------------------------------- 
          |Ayes:|Skinner, Bloom, Campos,   |     |                          |
          |     |Chesbro, Daly, Dickinson, |     |                          |
          |     |Jones-Sawyer, Mullin,     |     |                          |
          |     |Muratsuchi, Nazarian,     |     |                          |
          |     |Rodriguez, Stone, Ting,   |     |                          |
          |     |Weber                     |     |                          |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Gorell, Chávez, Grove,    |     |                          |
          |     |Harkey, Mansoor,          |     |                          |
          |     |Melendez, Allen,          |     |                          |
          |     |Nestande, Patterson,      |     |                          |
          |     |Wagner                    |     |                          |
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           SUMMARY  :  Provides legislative ratification for the memoranda of  
          understanding (MOU) agreed to by the state and the following  
          state bargaining units (BUs).  Specifically,  this bill  :  

          1)BU 2 (Attorneys and Hearing Officers), represented exclusively  
            by the California Attorneys, Administrative Law Judges and  
            Hearing Officers in State Employment (CASE). 

          2)BU 10 (Professional Scientists), represented exclusively by  
            the California Association of Professional Scientists (CAPS).

           EXISTING LAW  :  
           
          1)Establishes the Ralph C. Dills Act, which requires the state  
            to collectively bargain with official representatives of  
            employee groups (i.e., bargaining units) regardless of wages  
            and working conditions, and to define negotiated agreements in  
            MOUs.

          2)Establishes the California Department of Human Resources  








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            (CalHR) as the official representative of the Governor in all  
            matters related to collective bargaining.

          3) Requires the any MOU between the state and an official  
            representative must be ratified by the Legislature.

          4)Requires that an addendum to a ratified MOU must be submitted  
            to the Joint Legislative Budget Committee (JLBC) for analysis,  
            and, if so required by the JLBC, must also be approved by the  
            Legislature.

          5)Establishes the California Public Employees' Retirement System  
            (CalPERS), which provides health and retirement benefits for  
            the state employees.

          6)Requires the Legislative Analyst's Office (LAO) to analyze all  
            state MOUs and to provide analyses of the MOUs and their  
            fiscal impact to the Legislature within 10 days of receipt of  
            the MOUs from CalHR.  

          7)Establishes comprehensive public employee pension reform  
            through enactment of the Public Employees' Pension Reform Act  
            of 2013 (PEPRA) that apply to all public employee 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 the  
            state statute.  

           FISCAL EFFECT  :  Appropriates $12,629,000 for BU 2 and $3,124,000  
          for BU 10 for FY 2014-15.    

           COMMENTS  :  The 2014-15 Budget Act included preliminary funding  
          for BUs 2 and 10, in anticipation of the MOUs.  This bill will  
          increase the overall 2014-15 budget by $9.027 million in  
          accordance with the two MOUs.  

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

          Number of Employees:

          The BU 2 agreement affects approximately 3,869 full-time  
          equivalents.

          The BU 10 agreement affects approximately 2,870 full-time  








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          equivalents.

          Retirement Benefit Formula Calculation:

          BUs 2 and 10 employees who become CalPERS members on or after  
          January 1, 2013, are subject to the Public Employees' Pension  
          Reform Act (PEPRA) Retirement Formula of 2% at age 62.

          BUs 2 and 10 employees who become CalPERS State Safety members  
          on or after January 1, 2013, are subject to the State Safety  
          PEPRA Retirement Formula of 2% at age 57. 

          BUs 2 and 10 employees who become CalPERS members on or after  
          January 1, 2013, are subject to the Second Tier PEPRA Retirement  
          Formula of one and 1.25% at age 67.

          Pensionable compensation caps will apply to new CalPERS members  
          subject to PEPRA as defined under PEPRA.

          Employee Pension Contribution - Attorneys and Hearing Officers:
           
           BU 2 Miscellaneous and Industrial members in the First Tier  
          retirement subject to social security, contribute 9% of monthly  
          pensionable compensation.

          BU 2 Miscellaneous and Industrial members in the First Tier  
          retirement not subject to social security, contribute 10% of  
          monthly pensionable compensation. 

          Effective July 1, 2013, all BU 2 State Safety members began  
          contributing 11% of monthly pensionable compensation.

          Effective July 1, 2013, all BU 2 Second Tier members began  
          contributing 1.5% of monthly pensionable compensation and the  
          contribution will increase by 1.5% annually.  The final annual  
          increase in the contribution rate shall be adjusted as  
          appropriate to reach 50% of normal cost.
           
           Employee Pension Contribution - Scientists:
           
           All BU 10 Miscellaneous First Tier members contribute 8% of  
          monthly pensionable compensation.

          Effective July 1, 2013, all BU 10 State Safety members began  
          contributing 10% of monthly pensionable compensation.  Effective  








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          July 1, 2014, all Bargaining Unit 10 State Safety members shall  
          contribute 11% of monthly pensionable compensation.

          Effective July 1, 2013, all BU 10 Industrial members began  
          contributing 9% of monthly pensionable compensation.

          On July 1, 2013, all BU 10 Second Tier members began  
          contributing 1.5% of monthly pensionable compensation and the  
          contribution will increase by 1.5% annually.  The final annual  
          increase in the contribution rate shall be adjusted as  
          appropriate to reach 50% of normal cost.

          Compensation BU 2:

          Effective July 1, 2014, all BU 2 represented classifications  
          receive a 2% General Salary Increase (GSI).

          Effective July 1, 2015, all BU 2 represented classifications  
          receive a 2.5% GSI.

          Compensation BU 10:

          The month following ratification of the MOU, all BU 10  
          represented classifications shall receive a one-time bonus of  
          $1,000. 

          Effective July 1, 2015, all BU 10 represented classifications  
          shall receive a 3% GSI.

          Heath Benefits - Employer Contribution:

          BU 2 - The pay period following ratification, the employer  
          health benefits contribution to the health insurance portion of  
          the BU 2 Consolidated Benefits (CoBen) allowance will be set at  
          a dollar amount that equals the 80/80 formula. The amounts shall  
          be increased on January 1, 2015, and January 1, 2016.
           
           Heath Benefits - Dependent Coverage: 

          BU 10 - Thirty days following ratification, BU 10 employees who  
          first become eligible for health enrollment 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.








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           Miscellaneous: 

          The agreements contain various miscellaneous provisions.

          Duration:  

          BU 2 - Three years - July 2, 2013, through July 1, 2016

          BU 10 - Two years - July 2, 2013, through July 1, 2015


           Analysis Prepared by  :    Genevieve Morelos / Budget / (916)  
          319-2099


                                                                FN: 0005309