BILL ANALYSIS Ó SB 879 Page 1 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 SB 879 Page 2 (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 SB 879 Page 3 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 SB 879 Page 4 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. SB 879 Page 5 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