BILL ANALYSIS Ó
AB 241
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Date of Hearing: April 8, 2015
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Brian Maienschein, Chair
AB 241
(Gordon) - As Introduced February 5, 2015
SUBJECT: Bankruptcy: retired employees: disclosure of names
and mailing addresses.
SUMMARY: Requires a local public entity to provide the name and
mailing address of each retired employee to an organization
representing retired employees of the local public entity,
in specified instances leading up to and when a local public
entity files for bankruptcy. Specifically, this bill:
1)Requires, notwithstanding any other law, including the
California Public Records Act, a local public entity to
provide the name and mailing address of each retired employee,
or his or her beneficiary receiving the retired employee's
retirement benefit, to any organization that is incorporated
as a California nonprofit mutual benefit corporation, as
specified, for the purpose of representing retired employees
of the local public entity, upon that organization's request,
if any of the following occur:
a) The local public entity began the process of
participating in a neutral evaluation process;
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b) The local public entity declared a fiscal emergency and
adopted a resolution by a majority of the governing board,
as specified; or,
c) The local public entity filed a petition pursuant to
applicable federal bankruptcy law.
2)Requires an organization receiving the name and mailing
address of a retired employee or his or her beneficiary
receiving the retired employee's retirement benefit to use
that information only for the purpose of representing the
retired employee or his or her beneficiary as a member of the
organization as an interested party in a neutral evaluation
process, the declaration of a fiscal emergency and adoption of
a resolution, or a bankruptcy proceeding.
3)Requires an unspecified civil penalty for an organization that
violates 2), above, under conditions that are not specified.
4)Finds and declares that Section 1 of the bill furthers, within
the meaning of paragraph (7) of subdivision (b) of Section 3
of Article 1 of the California Constitution, the purposes of
that constitutional section as it relates to the right of
public access to the meetings of local public bodies or the
writings of local public officials and local agencies, and
declares, pursuant to paragraph (7) of subdivision (b) of
Section 3 of Article 1 of the California Constitution, that
the Legislature makes the following findings:
This act ensures that public retirees and their beneficiaries
have the opportunity to meaningfully participate in the legal
processes of a local public entity filing a petition and
exercising powers pursuant to applicable federal bankruptcy
law.
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5)Provides that no reimbursement is required because the only
costs that may be incurred by a local agency or school
district under this act would result from a legislative
mandate that is within the scope of paragraph (7) of
subdivision (b) of Section 3 of Article I of the California
Constitution.
EXISTING LAW:
1)Declares, pursuant to the California Constitution, that people
have the right of access to information concerning the conduct
of the people's business, and, therefore, the meetings
of public bodies and the writings of public officials and
agencies shall be open to public scrutiny.
2)Requires, as specified in paragraph (7) of subdivision (b) of
Section 3 of Article I of the California Constitution, that in
order to ensure public access to the meetings of public bodies
and the writings of public officials agencies, each local
agency is required to comply with the California Public
Records Act and the Ralph M. Brown Act, and with any
subsequent statutory enactment amending either act, enacting a
successor act, or amending any successor act that contains
findings demonstrating that the statutory enactment furthers
the purposes
of this section of the Constitution.
3)Provides, pursuant to Section 6 of Article XIII B of the
California Constitution, that whenever the Legislature or any
state agency mandates a new program or higher level of service
on any local government, the state shall provide a subvention
of funds to reimburse that local government for the costs of
the program or increased level of service, except that the
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Legislature may, but need not, provide a subvention of funds
for the following mandates:
a) Legislative mandates requested by the local agency
affected;
b) Legislation defining a new crime or changing an existing
definition of a crime;
c) Legislative mandates enacted prior to January 1, 1975,
or executive orders or regulations initially implementing
legislation enacted prior to January 1, 1975; and,
d) Legislative mandates contained in statutes within the
scope of paragraph (7) of subdivision (b) of Section 3 of
Article I.
4)Specifies, pursuant to the California Public Records Act, that
the Act does not require the disclosure of personnel, medical,
or similar files, if the disclosure of which would constitute
an unwarranted invasion of personal privacy.
5)Provides, pursuant to the California Public Records Act, that
information regarding persons paid by the state to provide
in-home supportive services, as specified, is not subject to
public disclosure pursuant to the Act, except as provided in
6), below.
6)Requires copies of names, address, and telephone numbers of
persons described in 5), above, to be made available, upon
request, to an exclusive bargaining agent and to any labor
organization seeking representation rights, as specified, and
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provides that this information shall not be used by the
receiving entity for any purpose other than the employee
organizing, representation, and assistance activities of the
labor organization.
7)Allows a local public entity to initiate a neutral evaluation
process if the local public entity is or likely will become
unable to meet its financial obligations as and when those
obligations are due or become due and owing.
8)Allows a local public entity to file a petition and exercise
powers pursuant to applicable federal bankruptcy law (Chapter
9) if the local public entity declares a fiscal emergency and
adopts a resolution by a majority vote of the governing board
at a noticed public hearing that includes findings that the
financial state of the local public entity jeopardizes the
health, safety, or well-being of the residents of the local
public entity's jurisdiction or service area absent the
protections of Chapter 9.
9)Requires the local public entity and interested parties to
mutually agree upon a process and select the neutral evaluator
to oversee the neutral evaluation process and facilitate all
discussions in an effort to resolve their disputes.
10)Requires a neutral evaluator to have experience and training
in conflict resolution and alternative dispute resolution and
meet specified qualifications, and requires the neutral
evaluator to be impartial, objective, independent, and free
from prejudice, and prohibits the neutral evaluator from
imposing a settlement on the parties.
11)Requires the local public entity and interested parties
participating in the neutral evaluation process to negotiate
in good faith.
12)Prohibits the neutral evaluation from lasting more than 60
days following the date the evaluator is selected, unless the
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local public entity or a majority of participating interested
parties elect to extend the process for up to 30 additional
days, and prohibits the neutral evaluation process from
lasting more than 90 days unless parties agree to an
extension.
13)Require the neutral evaluation process to end if any of the
following occur:
a) The parties execute a settlement or agreement;
b) The parties reach an agreement or proposed plan of
readjustment that requires the approval of a bankruptcy
judge;
c) The neutral evaluation process has exceeded 60 days and
the parties have not reached an agreement, and no agreement
is made to extend the process past the initial 60-day time
period;
d) The local public entity initiated the neutral evaluation
process but received no responses from interested parties
during the specified time frame; or,
e) The fiscal condition of the local public entity
deteriorates to the point that a fiscal emergency is
declared and necessitates the need to file a petition for
Chapter 9.
FISCAL EFFECT: This bill is keyed fiscal and contains a
state-mandated local program.
COMMENTS:
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1)Bill Summary. This bill would require a local public entity
to provide the name and mailing address of each retired
employee or his or her beneficiary receiving the retired
employee's retirement benefit to any organization that is
incorporated as a 501(c)(5) for the purpose of representing
retired employees, upon the request of that organization, if
that local public entity has begun the process of
participating in a neutral evaluation, has declared a fiscal
emergency, or has filed a petition pursuant to applicable
federal bankruptcy law (known as Chapter 9).
The bill also prohibits a 501(c)(5) that receives the name and
mailing address of a retired employee or his or her
beneficiary from a local public entity from using the
information for any other purpose than representing the
retired employee or his or her beneficiary as a member of the
organization as an interested party in a neutral evaluation
process, the declaration of a fiscal emergency, or a
bankruptcy proceeding. The bill provides an unspecified civil
penalty for a 501(c)(5) that violates using the information
for any other purpose beyond what is specified in the bill.
The bill is sponsored by the Retired Public Employees
Association.
2)Author's Statement. According to the author, "When the City
of Stockton filed for bankruptcy, retirees from the city
attempted to organize to protect their interests in bankruptcy
court. In the case of Stockton, the retirees were able to
organize and incorporate a group to be a party to the
bankruptcy of the City. This group received approval as a
labor organization under IRS Code Section 501(c)(5). They
were then able to obtain donations and hire legal counsel to
represent the group in bankruptcy court.
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"The retiree forming the 501(c)(5) requested from the city,
the names and addresses of retired persons from the city be
provided to the organization that had been incorporated and
approved under IRS Section 501(c)(5) status so they could
notify the retirees of their intent to seek representation
before the bankruptcy court. However, the City of Stockton,
citing the California Public Records Act, refused the request
of the 501(c)(5) to provide names and addresses of city
retirees, making it very difficult for the retirees to
organize and appear in the bankruptcy proceedings.
"Although individual retired persons may appear, because they
have an individual claim, the ability to make a significant
argument in bankruptcy court to protect the retirees' interest
requires competent legal counsel. Other creditors, active
employee organizations, and public agencies that have a claim
in the bankruptcy proceedings do not have the problem of
organization and funding the legal costs.
"A similar exception to the California Public Records Act
allows the names, addresses, and telephone numbers of in home
health care workers to be provided to labor organizations for
the purpose of organization and representing these workers."
3)Background on Municipal Bankruptcy. According to the U.S.
Courts, "the purpose of Chapter 9 is to provide a
financially-distressed municipality protection from its
creditors while it develops and negotiates a plan for
adjusting its debts. Reorganization of the debts
of a municipality is typically accomplished either by extending
debt maturities, reducing the amount of principal or interest,
or refinancing the debt by obtaining a new loan."
Chapter 9 provides a municipal debtor with two primary
benefits: a) a breathing spell with the automatic stay; and,
b) the power to readjust debts through a bankruptcy plan
process. The process enables municipalities to continue to
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provide essential public services while allowing them to
adjust their debts.
Existing law prohibits a local public entity from filing under
federal bankruptcy law unless the local public entity has
participated in a neutral evaluation process with interested
parties, or the local public entity has declared a fiscal
emergency and has adopted a resolution by a majority vote of
the governing board at a noticed public hearing.
The requirements for a neutral evaluation process or fiscal
emergency declaration were put into place by AB 506
(Wieckowski), Chapter 675, Statutes of 2011. Prior to AB 506,
local public entities in California had unfettered access to
filing under Chapter 9 provisions of federal bankruptcy law,
meaning that there was no state involvement or state-mandated
requirements placed on the local entity in order to file for
Chapter 9. There were several years of legislative attempts
to enact some sort of "gatekeeping" provisions and state
involvement leading up to the passage of AB 506, including AB
155 (Mendoza) and SB 88 (DeSaulnier) of the 2009-10 Session.
4)Proposition 42. Proposition 42 was passed by voters on June
3, 2014, and requires all local governments to comply with the
California Public Records Act and the Ralph M. Brown Act and
with any subsequent changes to those Acts. Proposition 42
also eliminated reimbursement to local agencies for costs of
complying with the California Public Records Act and the Ralph
M. Brown Act.
This bill, in Section 2, contains language that says that the
Legislature finds and declares that Section 1 of the bill
furthers the purpose of the California Constitution as it
relates to the right of public access to the meetings of local
public bodies or the writings of local public officials and
local agencies. Pursuant to paragraph (7) of subdivision (b)
of Section 3 of Article I of the Constitution, the bill also
includes a finding that says that "This act ensures that
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public retirees and their beneficiaries have the opportunity
to meaningfully participate in the legal processes of a local
public entity filing a petition and exercising powers pursuant
to applicable federal bankruptcy law."
Section 3 of the bill specifies that no reimbursement for
local agencies to implement the bill's provisions is necessary
because "the only costs that may be incurred by a local agency
or school district?would result from a legislative mandate
that is within the scope of paragraph (7) of subdivision (b)
of Section 3 of Article I of the California Constitution."
5)Questions. The Committee may wish to ask the author the
following questions:
a) Unspecified Fines. The Committee may wish to ask the
author and sponsor to discuss the section of the bill that
creates a civil penalty if a 501 (c)(5) uses the names and
mailing addresses for any other purpose than what is
proposed in Section 1 of the bill. The existing version of
the bill does not specify the dollar amount or the
conditions for the civil penalty.
b) Confidentiality of Personnel Records. Current law
contained in the California Public Records Act does not
require the disclosure of personnel, medical, or similar
files if the disclosure would constitute unwarranted
invasion of personal privacy. This bill trumps those
provisions. There could be instances, however, that a
retired employee may not want to be contacted or have his
or her information shared in the manner provided
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for in the bill.
The Committee may wish to consider whether the author and
sponsor should add provisions into the bill which require,
upon written request of a retired employee to a local
public entity, that that local public entity shall remove
the employee's home address from any mailing list
maintained by the local public entity for the bill's
purposes.
(b)(3). Upon written request of any retired employee, or
his or her beneficiary receiving the retired employee's
retirement benefit, a local public entity shall not
disclose the retired employee's name and home address
pursuant to subdivision (a), and a local public entity
shall remove the retired employee, or his or her
beneficiary receiving the retired employee's retirement
benefit from any mailing list maintained by that local
public entity in compliance with subdivision (a).
6)Arguments in Support. According to the sponsor, "Other
creditors, employee organizations, and public agencies that
have a claim in the bankruptcy proceedings do not have the
issue of organization and funding legal costs. Retirees do.
Organizing retired workers to be represented in a bankruptcy
proceeding by their former employee should be an equivalent
exemption."
7)Arguments in Opposition. None on file.
8)Double-Referral. This bill is double-referred to the Privacy
and Consumer Protection Committee.
REGISTERED SUPPORT / OPPOSITION:
AB 241
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Support
Retired Public Employees Association [SPONSOR]
California State Retirees
Opposition
None on file
Analysis Prepared by:Debbie Michel / L. GOV. / (916) 319-3958