BILL ANALYSIS Ó
SENATE COMMITTEE ON BUDGET AND FISCAL REVIEW
Senator Mark Leno, Chair
2015 - 2016 Regular
Bill No: AB 131 Hearing Date: September
11, 2015
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|Author: |Committee on Budget |
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|Version: |September 8, 2015 Amended |
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|Urgency: |Yes |Fiscal: |Yes |
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|Consultant|Anita Lee |
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Subject: State public employment.
Summary: This bill provides legislative ratification for
memoranda of understanding (MOU) agreements between the state
and various state bargaining units (BU), and provides for
statutory changes to the state civil service system.
Background:
Retiree Health Benefit
Currently, the state and state employees do not make
contributions to prefund retiree health care costs for most
state employees. The state has already established at least
partial prefunding agreements with three of its labor unions, BU
5 (Highway Patrol), BU 12 (Operating Engineers-Craft and
Maintenance), and BU 16 (Physicians, Dentists, and Podiatrists).
For BU 5 (Highway Patrol), contributions are made by the state
in lieu of salary increases. For BU 12 (Operating
Engineers-Craft and Maintenance) and BU 16 (Physicians, Dentists
and Podiatrists), only the employees are making contributions.
Currently, fully vested state retirees (i.e., with 20 or more
years of state employment) are entitled to an employer
contribution for retiree health care equal to 100 percent of
the weighted average premium of the four health plans most
highly utilized by all members. Dependents are eligible for a
contribution based on 90 percent of the average additional
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premiums paid for dependents during the benefit year in which
the formula is applied. This is referred to as the 100/90
formula. Currently, there is no formula based solely on the most
highly utilized Medicare-coordinated health plans.
Currently, most state employees (those first hired after 1985 or
1989, depending on class) must work for 10 years to receive 50
percent of the 100/90 formula. They then add 5 percent per year
of service until, after 20 years, they are vested to receive 100
percent of the 100/90 formula. Individuals hired prior to 1985
or 1989 could be subject to either 5 year or 10 year vesting for
full coverage of the 100/90 formula. One bargaining unit, BU 12
(Operating Engineers-Craft and Maintenance), agreed via
collective bargaining, beginning in 2011, to be subject to a
15/25 year vesting schedule.
Current law requires that Medicare-eligible retirees enroll in
Medicare and choose a Medicare-coordinated health plan. These
plans may be cheaper than non-Medicare (or "Basic" plans) and,
as a result some portion of the employer contribution goes
unused. Current law requires that any unused portion of the
100/90 formula contributions may be applied to reimburse
retirees for the costs of Medicare Part B premiums. These
reimbursements are made in the form of an additional payment to
the retiree on the retirement warrant up to the cost of the Part
B premium. Whether or not a retiree receives the Medicare Part B
reimbursement in full or in part depends upon the cost of that
retiree's health plan.
State Civil Service System: Ranking of Civil Service Employees
and Applicants
In general, state employment is based on a system of merit
achieved through competitive examination. Applicants for
promotion or employment are ranked based on exam scores and
employers may promote or hire from either the top three names or
ranks, as specified. An employee may receive a passing score on
an exam, but not score high enough to place in the top three
ranks, and therefore, may not be eligible for hire or promotion.
As people in the top three ranks are hired, promoted, or
otherwise fall off the hiring list, individuals who have passed
the exam may move up into the top three ranks and become
eligible for hire or promotion.
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Career Executive Assignments (CEA)
CEAs are state employees in high-level managerial positions that
serve at the top levels in a department. Their responsibility
includes developing and implementing policy, and may serve in a
department director's cabinet or form a department's executive
staff.
In general, CEAs in state employment must be hired from among
individuals with permanent civil service status. In addition,
CEA applicants can include legislative employees, executive
branch appointees (i.e., exempt employees), or former military,
as specified. CEAs are not subject to the same job protections
or hiring and disciplinary standards as apply to non-executive
state civil service employees. CEAs may be terminated "at will."
CEAs must be hired or promoted via a competitive process that is
overseen by the State Personnel Board (SPB). Former civil
service employees who become CEAs and are subsequently
terminated have certain rights to return to civil service
positions following termination, as specified.
Proposed Law: This bill provides legislative approval of the
MOUs entered into between the state and BU 9, (Professional
Engineers), on August 31, 2015 and the state and BU 10,
(Professional Scientists) on September 4, 2015. The BU 9 MOU
shall be effective from July 2, 2015 through June 30, 2018, and
BU 10 MOU shall be effective from July 2, 2015 through July 1,
2018. Specifically, this bill enacts the following:
Retiree Health Benefit Reforms
1.Prefunding of Other Post-Employment Benefits . Applicability to
all BU 9 (Professional Engineers) and BU 10 (Professional
Scientists) employees, including related excluded and exempt
employees.
a. The state and all Unit 9 members will prefund
retiree healthcare with the goal of each reaching 50
percent cost-sharing of actuarially-determined total
normal cost for employer and employees by July 1, 2019.
The state and employees will each make the following
contributions:
i.Effective July 1, 2017, 0.5 percent of pensionable
compensation.
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ii.Effective July 1, 2018, an additional 0.5 percent
for a total of 1.0 percent of pensionable
compensation.
iii.Effective July 1, 2019, an additional 1.0 percent
for a total of 2.0 percent of pensionable
compensation.
b. The state and all Unit 10 members will prefund
retiree healthcare with the goal of each reaching 50
percent cost-sharing of actuarially-determined total
normal cost for employer and employees by July 1, 2019.
The state and employees will each make the following
contributions:
i.Effective July 1, 2017, 0.7 percent of pensionable
compensation.
ii.Effective July 1, 2018, an additional 0.7 percent
for a total of 1.4 percent of pensionable
compensation.
iii.Effective July 1, 2019, an additional 1.4 percent
for a total of 2.8 percent of pensionable
compensation.
c. All employees eligible for health care benefits
shall contribute in proportion to their working
time-base.
d. Any contributions made by the employee shall not be
recoverable under any circumstances by the employee or
the employee's beneficiary or survivor (e.g., if the
employee should retire, die, or separate from service
before becoming eligible for a health care benefit).
2.Employer Contribution for Future Retirees' Health Care . 80/80
formula applicability to all new BU 9 and BU 10 employees
first hired on or after January 1, 2016, including related
excluded and exempt employees.
a. For non-Medicare-eligible retirees, the employer
contribution for retiree health benefits shall be an
amount equal to 80 percent of the weighted average
premiums of the four health benefit plans most highly
utilized by active state employees.
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The employer contribution for a non-Medicare-eligible
retiree's dependent shall be an amount equal to 80
percent of the weighted average of the additional
premiums required for enrollment of those family members
during the benefit year in which the formula is applied.
b. For Medicare-eligible retirees, the employer
contribution for retiree health benefits shall be an
amount equal to 80 percent of the weighted average
premiums of the four Medicare-coordinated plans most
highly utilized by Medicare eligible retirees.
The employer contribution for a Medicare -eligible
retiree's dependent shall be an amount equal to 80
percent of the weighted average of the additional
premiums required for enrollment of those family members
during the benefit year in which the formula is applied.
The contribution for a Medicare-eligible retiree shall
not exceed the formula whether or not the individual is
enrolled in Medicare.
c. A retiree shall not be able to use any portion of
the employer's retiree health care contribution toward
the payment of Medicare Part B premiums.
3.Post-Employment Health Benefit Vesting Schedule . All BU 9 and
BU 10 employees first hired into state employment on or after
January 1, 2016, will be subject to an extended vesting
schedule for retiree health benefits.
Specifically, BU 9 and BU 10 retirees first hired into state
employment on or after January 1, 2016 will receive 50 percent
of the employer contribution upon completion of 15 years of
state service, increasing 5 percent for each additional year
of service, until the employee is vested for 100 percent of
the employee contribution after 25 years of state service.
4.Additionally, the MOU agreements provided the following
General Salary Increases (GSI) to BU 9 and BU 10:
a. Effective July 1, 2016, all Unit 9 represented
classifications shall receive a five percent GSI.
b. Effective July 1, 2017, all Unit 9 represented
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classifications shall receive a two percent GSI.
c. Effective July 1, 2016 through July 1, 2018, all
Unit 10 represented classifications shall annually
receive a five percent GSI.
Civil Service Reform. This bill makes the following statutory
changes to laws governing the civil service system for state
employees. Specifically, this bill impacts two key areas of law
governing 1) the competitive ranking of state civil service
employees and applicants, and 2) eligibility and hiring of state
employees in "Career Executive Assignments (CEA).
1.Eliminates the "Rule of Three Names," which requires hiring
managers to consider only the top three individuals on
promotional hiring eligibility lists whose examination scores
result in them being in the top three names.
2.Eliminates the "Rule of Six Ranks," which requires all
managerial hiring eligibility lists to be organized into six
ranks, depending on the scores applicants receive on the
classification's exam, and limits a department's hiring
manager to only consider applicants whose examination scores
result in them being in the top three ranks.
3.Eliminates the "Rule of One Rank," which requires departmental
hiring managers to only consider individuals whose examination
scores result in them being in the first rank for supervisory
positions.
4.Consolidates various hiring eligibility list requirements into
a single process, the "Rule of Three Ranks", which would apply
to all promotional or open state jobs. This change will allow
hiring managers to consider eligible persons whose examination
scores result in them being in the top three ranks for rank
and file and managerial lists, as specified.
This bill expands the pool of CEA candidates by making the
following changes:
1.Eliminates the requirement that a former legislative or
non-elected exempt employee be separated from employment for
no more than 12 months prior to applying for the CEA position.
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2.Expands the pool of eligible candidates that can be appointed
to a CEA position to include individuals from the private
sector who meet the requirements of the applicable position.
3.Provides terminated CEAs hired from outside state civil
service the right to appeal to the SPB for restoration of
their assignment.
4.Clarifies that terminated CEAs who were previously employed by
the state and had permanent civil service status, have return
rights to a (non-CEA) civil service position, with at least
the same salary level as the last position they held. If the
employee had a minimum of five years of state service, he or
she may return to a position that has the same salary level as
the last position or at least the same salary level that is at
least two steps lower than the CEA position from which the
employee is being terminated. These provisions are consistent
with existing law.
5.Additionally, this bill states that terminated CEAs hired from
outside civil service would be eligible for deferred
examination for any open position at the department they were
employed at and meet the minimum qualifications.
6.Eliminates rules prohibiting a CEA applicant from competing in
multiple civil service promotional exams at more than one
department in the same class.
7.Provides $300,000 one-time General Fund for the Department of
Finance (DOF) to post all budget requests included as a part
of the Governor's Budget on DOF's website. The funds will be
used to purchase high-speed industrial scanners and additional
software programming.
Fiscal Effect:
BU 9 and BU 10 MOU Fiscal Impact
Fiscal Year 2015-16: $0
Estimated Total Incremental Cost from 2016-17 through 2019-20:
$190.9 ($14.2 million General Fund)
Estimated Budgetary Cost from 2016-17 through 2019-20: $617.7
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million ($43 million General Fund)
Support: None received.
Opposed: None received.
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