BILL ANALYSIS Ó
SENATE COMMITTEE ON EDUCATION
Senator Carol Liu, Chair
2015 - 2016 Regular
Bill No: AB 215
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|Author: |Alejo |
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|Version: |June 2, 2015 Hearing |
| |Date: July 8, 2015 |
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|Urgency: |No |Fiscal: |No |
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|Consultant: |Lenin Del Castillo |
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Subject: Local agency employment contracts: maximum cash
settlement
SUMMARY
This bill reduces the maximum cash settlement that may be paid
to a school district superintendent upon termination from 18
times of that employee's monthly salary to 12 times of the
employee's monthly salary, and also prohibits a cash settlement
in the case of a termination in which the school district
believes and subsequently confirms that the superintendent has
engaged in fraud, misappropriation of funds, or other illegal
fiscal practices.
BACKGROUND
Existing law:
1)Permits, if the contract with a school district superintendent
is terminated, a cash settlement equal to the monthly salary
of the superintendent multiplied by the number of months left
on the unexpired term of the contract up to a maximum of 18
months.
2)Permits a cash settlement of up to six months times the
monthly salary in the case of a superintendent who is
terminated because the school district believes and
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subsequently confirms through an independent audit that the
superintendent has engaged in fraud, misappropriation of
funds, or other illegal fiscal practices.
ANALYSIS
This bill:
1)Reduces the maximum cash settlement that a local agency
employer can provide to a district superintendent upon
termination from 18 months of that employee's monthly salary
to 12 months of the employee's salary.
2)Prohibits a local agency employer from providing a cash or
noncash settlement to a superintendent upon termination if the
local agency believes, and subsequently confirms, pursuant to
an independent audit, that the superintendent has engaged in
fraud, misappropriation of funds, or other illegal fiscal
practices. This provision applies only to a contract for
employment executed on or after January 1, 2016.
STAFF COMMENTS
1)Need for the bill. According to the author's office, "the
combination of high paying salaries and high superintendent
turnover is a costly issue. By placing a cap on district
superintendent's severance pay, we can save money for
students, begin to improve our school administrative
processes, and demonstrate fiscal discipline in the
administration of taxpayer dollars."
This bill reduces from 18 times the monthly salary to 12 times
the monthly salary the maximum cash settlement that may be
paid to a school district superintendent whose employment has
been terminated. In the case of a termination in which the
school district believes and subsequently confirms that the
superintendent has engaged in fraud, misappropriation of
funds, or other illegal fiscal practices, this bill reduces
the maximum cash settlement from six times the monthly salary
to zero.
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According to the California Department of Education (CDE), the
average annual salaries for unified school district
superintendents, by district size, in 2012-13, is as follows:
a) One hundred sixteen thousand six hundred six dollars for
districts with less than 1,500 average daily attendance
(ADA);
b) One hundred fifty-one thousand nine hundred twelve dollars
for districts with 1,500 to 4,999 ADA;
c) One hundred eighty-three thousand five hundred fifty-seven
dollars for districts with 5,000 to 9,999 ADA;
d) Two hundred six thousand two hundred ninety-two dollars for
districts with 10,000 to 19,999 ADA; and
e) Two hundred twenty-seven thousand one hundred eighty-three
dollars for districts with more than 20,000 ADA.
The author's office indicates that the highest salaries range
from $265,773 to $322,159, which would translate to a range in
cash settlements from $398,660 to $483,239 under existing law.
Some settlements have generated public scrutiny. In one
instance, a school district put its superintendent on a paid
leave of absence for six months and then provided an 18-month
cash settlement, essentially providing a 24 month "buy-out" at
a cost of approximately $325,000.
2)Arguments in opposition. The Association of California School
Administrators (ASCA) indicates that this bill "unfairly
singles out school superintendents (arguably the most visible
local official) and reduces the Early Termination Clause for a
breach of contract to up to 12 months. Claiming that Early
Termination Clauses occur more frequently with school
superintendents can in part be attributed to the number of
school districts (1,000) nearly twice the total number of
cities (482) and counties (58) combined." ACSA further argues
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that superintendents are at-will employees, who have no due
process rights and can be terminated any time with cause.
When a superintendent is released from his or her duties, it
can be difficult to find another superintendent's job and the
release is often career ending. "Early Termination Clauses
are not considered extra pay nor are they a gift of public
funds." Rather, cash settlements are "damages paid to an
employee who is released by breach of contract."
3)Unintended consequences. While the purpose of the bill is to
save money for students by placing a cap on school district
superintendents' severance pay, it could have several
unintended consequences that the Committee may wish to
consider. First, by reducing and/or eliminating some of the
"protections" in place for superintendents in current law, the
bill could provide potential disincentives for
highly-qualified candidates to become a superintendent. This
could also affect the school district's recruitment efforts
and its ability to hire a quality superintendent. One could
argue the bill unfairly punishes superintendents by placing
limitations on paid leaves of absence.
Further, the bill could increase superintendent turnover by
reducing the penalty districts pay for terminations prior to
the fulfillment of a contract. While the bill would reduce
the cost of a cash settlement in which there is more than 12
months remaining on a contract, it is not clear that it will
necessarily reduce the cost of cash settlements overall. For
example, to the extent that the relatively high cost of a
settlement serves as a disincentive to terminate a contract,
reducing the cost of a settlement could have the opposite
effect and increase terminations. This would then increase
the cost of such settlements.
4)Related and prior legislation. The early versions of AB 280
(Alejo, 2013) were nearly identical to this measure and
proposed to place a cap on the severance pay of a school
district's superintendent. However, the bill was amended to
deal with prohibitions for firearms dealers and eventually
held in the Senate Appropriations Committee.
SUPPORT
None received.
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OPPOSITION
Association of California School Administrators
California School Boards Association
Small School Districts' Association
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