BILL ANALYSIS Ó SENATE COMMITTEE ON GOVERNANCE AND FINANCE Senator Robert M. Hertzberg, Chair 2015 - 2016 Regular ------------------------------------------------------------------ |Bill No: |AB 241 |Hearing |6/8/16 | | | |Date: | | |----------+---------------------------------+-----------+---------| |Author: |Gordon |Tax Levy: |No | |----------+---------------------------------+-----------+---------| |Version: |6/1/16 |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant|Weinberger | |: | | ----------------------------------------------------------------- Bankruptcy: retired employees: disclosure of names and mailing addresses Requires a local public entity to provide contact information for each of its retirement plan beneficiaries to an organization representing the local public entity's retired employees in certain situations related to the public entity's efforts to seek municipal bankruptcy protection. Background Federal bankruptcy law for public agencies (Chapter 9) gives government debtors time to come up with repayment plans, providing them a breathing spell from creditors' collection efforts. Only a municipality, which federal law defines as a political subdivision, public agency, or instrumentality of a state, can initiate a Chapter 9 proceeding. The municipality must be insolvent and desire to effect a plan to adjust its debts. Unlike private bankruptcy law (Chapter 11), municipal bankruptcy law must respect the states' sovereign powers. Consequently, the states can control their local agencies' access to federal bankruptcy protection. California state law allows a local government to petition for bankruptcy protection only after it either participates in a neutral evaluation process or declares a fiscal emergency (AB 506, Wieckowski, 2011). AB 241 (Gordon) 6/1/16 Page 2 of ? The California Public Records Act (PRA) requires public records to be open to inspection during office hours and gives every person a right to inspect public records, with specific exceptions. The PRA exempts from disclosure "personnel, medical, or similar files, the disclosure of which would constitute an unwarranted invasion of personal privacy." However, state law also specifically allows for disclosure of some personnel information under specific circumstances. For example, although state law generally prohibits public the public disclosure of information regarding persons paid by the state to provide in-home supportive services or personal care services, it does require that copies of names, addresses, and telephone numbers of those service providers must be made available, upon request, to an exclusive bargaining agent and to any labor organization seeking representation rights pursuant to state law (AB 515, Wright, 1999). Because a local government's bankruptcy has the potential to alter the benefits that the local government provides to its retirees, those retirees' have an interest in being represented as stakeholders in the local government's bankruptcy process. Advocates for retired public employees want to help retirees organize as a group to ensure that they are properly represented as a party in a local government bankruptcy. They want the Legislature to require that a local government that has taken steps towards a municipal bankruptcy must provide contact information for its retirement beneficiaries to an organization that is formed for the purpose of representing the local government's retired employees. Proposed Law Assembly Bill 241 requires a local public entity to provide a list of 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 pursuant to state law and qualified pursuant to Section 501(c)(5) of Title 26 of the Internal Revenue Code for the purpose of representing retired employees of the local public entity, upon that organization's request, if any of the following occur: The local public entity began the process of AB 241 (Gordon) 6/1/16 Page 3 of ? participating in a neutral evaluation process pursuant to a specified statute. The local public entity declared a fiscal emergency and adopted a resolution by a majority vote of the governing board pursuant to a specified statute. The local public entity filed a petition pursuant to applicable federal bankruptcy law. AB 241's requirements to disclose names and mailing addresses apply to a local public entity notwithstanding any other law, with one specified exception. Specifically, upon written request of any retired employee, or his or her beneficiary receiving the retired employee's retirement benefit, a local public entity must not disclose the name and home address of the retired employee, or his or her beneficiary receiving the retired employee's retirement benefit, and must 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 the bill's disclosure requirements. AB 241 requires that an organization receiving a list of the name and mailing address of a retired employee or his or her beneficiary receiving the retired employee's retirement benefit must 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. The bill requires that an organization that misuses the list of names and mailing addresses must be subject to a civil penalty in the amount of twenty-five thousand dollars ($25,000). State Revenue Impact No estimate. AB 241 (Gordon) 6/1/16 Page 4 of ? Comments 1. Purpose of the bill . AB 241 responds to a problem experienced by retirees from the City of Stockton during that city's municipal bankruptcy process. When the City of Stockton filed for bankruptcy in 2012, retirees from the city organized as a group in order to become a party to the bankruptcy. This group received approval as a labor organization under the Internal Revenue Code. They were then able to obtain donations and hire legal counsel to represent them in bankruptcy court. However, they were unable to obtain, from the city, the names and addresses of the city's retirees so they could notify them of their intent to seek representation before the bankruptcy court. AB 241 strikes a balance between retiree organizations' legitimate interests in being effective advocates for their members and individual retiree's fundamental interests in protecting the privacy of their personal information. The bill is modelled on a narrow exception in state law that allows contact information for in-home care service providers to be provided to labor organizations for specified purposes. AB 241 protects individual privacy rights by allowing individual retirees to request that their information not be disclosed and by imposing a penalty for the unauthorized use of a list of the contact information. 2. Clarification . State law requires that either a neutral evaluation process or declaration of a fiscal emergency must precede a local entity's filing a bankruptcy petition pursuant to federal law. AB 241 specifies three circumstances under which a local government must produce a list of its retirement beneficiaries upon the request of an organization representing the government's retirees: initiating a neutral evaluation process, declaring a fiscal emergency, or filing a petition pursuant to federal bankruptcy law. As a result, AB 214's language could be misconstrued as implying that a local entity can file a bankruptcy petition under federal law without having either gone through a neutral evaluation process or declared a fiscal emergency. The Committee may wish to consider amending AB 241 to clarify this provision either by deleting the reference to a local entity's filing a bankruptcy petition or by narrowing that language to apply only to local entities that filed a bankruptcy petition before the neutral evaluation and AB 241 (Gordon) 6/1/16 Page 5 of ? fiscal emergency statutes were enacted by AB 506 (Wieckowski, 2011). 3. Who pays ? The Legislative Counsel's Office says that AB 241 would impose a state-mandated local program because it requires local government officials to perform additional duties related to producing a list of contact information for retirees. The California Constitution generally requires the state government to reimburse the costs of new or expanded state mandated local programs. However, on June 3, 2014, California voters approved Proposition 42, which amended the California Constitution to require local agencies to comply with the California Public Records Act. Proposition 42 also requires local agencies to comply with any subsequent statutory enactment amending the Public Records Act that contains specified findings that the newly enacted statute furthers specified constitutional provisions guaranteeing public access to public agency meetings and records. AB 241 contains legislative findings that the bill furthers the purpose of Section 3 of Article I of the California Constitution because it "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." As a result, AB 241 disclaims the state's responsibility for reimbursing local governments' costs of complying with the bill's requirements. Assembly Actions Assembly Local Government Committee: 9-0 Assembly Privacy & Consumer Protection Committee: 11-0 Assembly Appropriations Committee: 13-4 Assembly Floor: 61-14 AB 241 (Gordon) 6/1/16 Page 6 of ? Support and Opposition (6/2/16) Support : Retired Public Employees Association of California; American Federation of State, County, and Municipal Employees, AFL-CIO; California Alliance for Retired Americans; California State Retirees. Opposition : Unknown. -- END --