BILL ANALYSIS                                                                                                                                                                                                    ”



                                                                     AB 837


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          Date of Hearing:  April 7, 2015


                       ASSEMBLY COMMITTEE ON HIGHER EDUCATION


                                 Jose Medina, Chair


          AB 837  
          (Roger HernŠndez) - As Introduced February 26, 2015


          SUBJECT:  University of California:  employee salaries


          


          SUMMARY:  Prohibits the University of California (UC) from  
          paying any employees or officers a salary in excess of $500,000  
          in any fiscal year and requires reporting regarding employee  
          salaries.  Specifically, this bill:  





          1)Finds and declares that the California Constitution states  
            that UC is subject to legislative controls as necessary to  
            ensure security of funds and that there is substantial public  
            concern about the high salaries paid, out of taxpayer dollars,  
            to some UC officers and employees.



          2)Provides that, as a condition of receipt of state funding in  
            the annual Budget Act:









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             a)   The UC shall not pay any of its employees or officers a  
               salary that exceeds $500,000 in any fiscal year;



             b)   The UC shall publish, commencing on or before February  
               1, 2016, and annually, regarding each UC employee for the  
               prior calendar year:



               i)     Location of employment; 



               ii)    Original date of hire; 



               iii)   First and last name; 



               iv)    Title of employment; 



               v)     Regular pay, overtime pay, gross pay, and other pay;



               vi)    Cost of employer-paid defined benefit plan  
                 contributions;



               vii)   Cost of employer-paid contributions to deferred  








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                 compensation other than defined benefit plan  
                 contributions;



               viii)  Cost of employer-paid contributions toward medical,  
                 health, or welfare benefits, or any combination of  
                 benefits thereof;



               ix)    Total annual cost of employer-paid contributions  
                 toward deferred compensation and medical, health, or  
                 welfare benefits;



               x)     All sources of funding for compensation costs in  
                 dollar amounts by funding source;



               xi)    Personnel program.






               xii)   The three-character Occupational Subgroup Category  
                 Code if the employee is nonacademic staff, or the  
                 three-character Class Title Outline Code if the employee  
                 is academic staff.





             c)   UC shall publish, for April and October of each year,  








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               statistical summary information that includes the total  
               headcount and the total full-time equivalent count of UC  
               employees at each campus. Requires statistical summaries to  
               include a breakdown showing the number of employees in each  
               single-character and three-character Occupational Subgroup  
               Category Code for nonacademic staff within each personnel  
               group, and the number of employees in each single-character  
               and three-character Class Title Outline Code for academic  
               staff within each personnel group.



             d)   UC shall publish all of the information required by this  
               section on a publically accessible Internet Web site and  
               the information shall be downloadable from that Internet  
               Web site in either a comma delimited or Microsoft Excel  
               format.



          EXISTING LAW:  





          1)Establishes UC as a public trust and confers the full powers  
            of the UC upon the UC Regents.  The Constitution establishes  
            that the UC is subject to legislative control only to the  
            degree necessary to ensure the security of its funds and  
            compliance with the terms of its endowments.  Judicial  
            decisions have held that there are three additional areas in  
            which there may be limited legislative intrusion into  
            university operations: authority over the appropriation of  
            state moneys; exercise of the general police power to provide  
            for the public health, safety and welfare; and, legislation on  
            matters of general statewide concern not involving internal  
            university affairs.  (Constitution of California, Article IX,  
            Section 9)








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          2)Requires proposals for the compensation package of specified  
            executive officers (the Chancellor, president of an individual  
            campus, vice chancellor, treasurer, general counsel and the  
            trustee's secretary) occur in open sessions of a committee of  
            the trustees and the full board of trustees, as specified.  
            (Education Code Section 66002.7)



          3)Declares the Legislature's intent that no proposal relating to  
            the salary, benefits, perquisite, severance payments (except  
            in the case of a dismissal or litigation settlement),  
            retirement benefits or any other form of compensation paid to  
            an officer of the UC become effective unless specified notice  
            requirements have been met and action taken in an open session  
            meeting of the regents. (Education Code Section 92032.5)
          FISCAL EFFECT:  Unknown.  However, the Assembly Appropriations  
          analysis of prior legislation noted that such restrictions  
          likely increase turnover as employees leave for favorable  
          compensation prospects; at that time UC estimated that average  
          replacement cost for senior management positions at several  
          hundred thousand dollars. Costs, however, would be, at least  
          partially, offset by savings from the compensation limitations.   
          The author argues this bill would save potentially $80 million,  
          funding that could be used to offset the proposed UC fee  
          increase.





          COMMENTS:  Purpose of this bill.  According to the author, "the  
          UC's stance on increasing student tuition while at the same time  
          continuing to pay its staff over half a million dollars is  
          disturbing.   In 2013 calendar year, 387 employees made over  
          $500,000 in total annual salary, with 29 others earning more  








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          than $1,000,000 per year.  In contrast, the remainder of the  
          268,442 UC employees earns an average annual wage of $43,520.   
          According to AFSCME, the total UC spending increased by 40%  
          during the 2007-2013 timeframe, while spending on UC's richest  
          employees increased  by 270% during the same timeframe. 





          The Author argues "The UC is ignoring potential cost savings  
          that could be achieved by capping excessive pay of its highest  
          paid employees. The California Constitution states that the  
          University of California is subject to such legislative control  
          as may be necessary to ensure the security of its funds.  There  
          is substantial public concern about the high salaries paid, out  
          of taxpayer dollars, to some University of California officers  
          and employees.  It is important to place limits on excessive pay  
          at UCs as the use of taxpayer funds is being mismanaged.  UC  
          cannot only look at tuition increases as a way to balance its  
          financial books.  This bill provides an alternative solution to  
          off-set the tuition increases that hurt California's hardworking  
          families."  





          Compensation decisions.  This bill would remove the authority of  
          the Regents, who have fiduciary responsibility for UC and whose  
          members are chosen by the Governor and confirmed by the Senate,  
          for determining compensation above $500,000.  The committee may  
          wish to consider how this limitation will affect the UCs ability  
          to attract or retain certain professionals, and whether this  
          places UC at a disadvantage for recruiting leaders and  
          maintaining high quality.  

          Assembly Budget review of UC and AB 837 reporting requirements.   
          In response to concerns over the UC's proposed student fee  








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          increase, Speaker Atkins called for a thorough review of the UC  
          budget.  On February 18, 2015, the Assembly Budget Subcommittee  
          No. 2 on Education Finance reviewed UC expenditures.  A portion  
          of the hearing examined UC employee growth and compensation  
          increases.  The budget committee analysis (relevant sections  
          included below) identified areas where available UC data did not  
          provide sufficient detail.  The reporting requirements of this  
          bill appear consistent with/duplicative of some of the  
          additional data requested from UC at the Subcommittee hearing.   
          This bill would place annual reporting requirements in statute  
          and make reporting a condition of receipt of Budget Act funding.

          According to the Budget Subcommittee No. 2, "the number of  
          highly paid UC employees has grown significantly.  Nearly  
          6,000 UC employees earn gross pay of $200,000 or more. The  
          chart below indicates the growth in the number of $200,000 -  
          or - more earners between calendar year 2007 and calendar year  
          2013, based on information available on the UC website. Many  
          of these employees are athletic coaches or medical center  
          personnel that are not supported by state funds.  But this  
          list does include professors, attorneys, and administrators  
          who are supported by the state.  The database that provides  
          this information does not break down the source of salaries.

            ---------------------------------------------------------- 
           |Pay Category          |2007       |2013       |% Change   |
           |----------------------+-----------+-----------+-----------|
           |Number of Employees   |3,018      |5,933      |97%        |
           |Earning $200,000+     |           |           |           |
           |----------------------+-----------+-----------+-----------|
           |Overall Base Pay      |$479.5     |$1.1       |123%       |
           |                      |million    |billion    |           |
           |----------------------+-----------+-----------+-----------|
           |Overall Overtime      |$649,318   |$4.9       |650%       |
           |Pay                   |           |million    |           |
           |----------------------+-----------+-----------+-----------|
           |Overall Extra Pay     |$364.2     |$734.8     |102%       |
           |                      |million    |million    |           |
           |----------------------+-----------+-----------+-----------|








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           |Overall Gross Pay     |$844.4     |$1.8       |114%       |
           |                      |million    |billion    |           |
            ---------------------------------------------------------- 
          UC data indicate a significant increase in administrative  
          personnel. Staffing data available on UC's website show that  
          administrative staff, both in academics and other areas, grew  
          far faster than faculty and faster than overall staff growth. 

            ---------------------------------------------------------- 
           |Position                    |Oct-2007|Oct-2014|% Change   |
           |                            |        |        |           |
           |----------------------------+--------+--------+-----------|
           |Senior Management Group     |7,824   |10,335  |32%        |
           |and Management and Senior   |        |        |           |
           |Professional                |        |        |           |
           |----------------------------+--------+--------+-----------|
           |Academic Administration     |646     |767     |19%        |
           |----------------------------+--------+--------+-----------|
           |Ladder-Rank Faculty         |8,611   |8,870   |3%         |
           |----------------------------+--------+--------+-----------|
           |Total UC Employees          |131,56  |145,90  |11%        |
           |                            |7       |1       |           |
           |                            |        |        |           |
           |                            |        |        |           |
            ---------------------------------------------------------- 



          Data on UC staffing available on the Office of the President's  
          website breaks out positions into subcategories in areas such as  
          Academic Staff and Professional Support Staff, but does not  
          include the same detail for the Senior Management Group or  
          Management and Senior Professional categories, making it  
          difficult for the public to truly assess management positions at  
          UC.












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          Prior legislation.  





          SB 8 (Yee) of 2013, held in the Senate Education Committee,  
          would have established conditions on granting executive  
          compensation increases by California State University (CSU) for  
          any employment contract after January 1, 2014; UC was requested  
          to comply with these provisions.   

          AB 1561 (HernŠndez) of 2012, held in the Assembly Appropriations  
          Committee, would have limited compensation increases for certain  
          executive-level positions at UC and CSU.





          AB 1684 (Eng) of 2012,  held in the Assembly Appropriations  
          Committee, would have limited the pay of California Community  
          College Chancellors to no more than twice the highest faculty  
          member salary.  

          SB 952 (Alquist) of 2012, held in the Assembly Appropriations  
          Committee, would have limited administrator salary increases  
          using state fund to 10% above the predecessor's salary.  

          SB 967 (Yee) of 2012, which failed passage in the Senate  
          Education Committee, capped compensation at 5% instead of 10% of  
          the predecessor's total compensation.  

          SB 1368 (Anderson) of 2012, held in the Senate Governmental  
          Organization Committee, would have limited the annual rate of  
          salary of a state officer or employee to the annual salary  
          authorized to be received by the Governor.  









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          ABx1 39 (HernŠndez, 2011), which was not heard by the  
          Legislature, was substantially similar to this bill.   
          


          SB 217 and SB 86 (Yee) of 2009 were similar to SB 967.  SB 217  
          was held in the Assembly Appropriations Committee and SB 86 was  
          vetoed by Governor Schwarzenegger.
          


          REGISTERED SUPPORT / OPPOSITION:


          


          Support


          


          American Federation of State, County and Municipal Employees  
          (AFSCME), AFL-CIO


          California Federation of Teachers 


          


          Opposition


          










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          University of California


          





          Analysis Prepared by:Laura Metune / HIGHER ED. / (916) 319-3960