BILL ANALYSIS                                                                                                                                                                                                    



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          Date of Hearing:  May 11, 2016


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                               Lorena Gonzalez, Chair


          AB  
          2197 (Cristina Garcia) - As Amended April 21, 2016


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          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          SUMMARY:


          This bill allows classified school employees to collect  
          unemployment insurance (UI) benefits between school years.   
          Specifically, this bill:  


          1)Exempts classified public school employees from the  
            prohibition on educational employees collecting UI benefits.


          2)Increases the maximum duration of UI benefits for classified  








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            public school employees as follows:


               a.     2 weeks effective July 1, 2017.


               b.     4 weeks effective July 1, 2018.


               c.     6 weeks effective July 1, 2019.


               d.     8 weeks effective July 1, 2020.


          FISCAL EFFECT:


          1)If 150,000 classified, non-certificated employees received the  
            maximum allotment of weeks of UI during summer vacation each  
            year, it would cost an additional $90 million per year, each  
            year for four years, until the cost reached approximately $360  
            million in fiscal year in 2020-21 (School Employees Fund).  

            The SEF would have to be augmented commensurate with the  
            increase.  Since schools are responsible for funding their own  
            UI costs through the SEF, this either results in cost pressure  
            on the GF to backfill the budget hole created by the increased  
            costs to schools, or a reduction in school resources for other  
            activities, or a combination.  



          2)There could also be a direct cost impact to the UI Trust Fund,  
            if some charter school employees receive benefits through this  
            fund instead of the SEF.  The Employment Development  
            Department (EDD) does not track which charters rely on UI  
            Trust Fund versus those that use a different reimbursement  
            method, but it reports that only a quarter of charters  








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            participate in SEF, meaning benefits paid to employees of the  
            remaining three-quarters would potentially impact the UI Trust  
            Fund (though it is unclear how many schools participate in the  
            tax-rated methodology that impacts the UI Trust Fund.  The  
            remainder of charters reimburse the UI Trust Fund directly for  
            costs incurred to provide benefits to their employees.) 

            Furthermore, EDD has previously noted increased expenditures  
            from the UI Trust Fund could potentially trigger an increase  
            in federal UI taxes due to temporary conditions placed on the  
            state as a result of the insolvency of the UI Trust Fund.  If  
            that were to occur as a result of this legislation now,  
            however, the increase would be marginal due to the improving  
            condition of the UI Trust Fund will be greater. 

          3)Since this bill will result in such a large overall increase  
            in UI benefits being paid out to school employees, there may  
            be an indirect effect on UI Trust Fund solvency.  Schools that  
            currently do not use a tax-rated UI Trust Fund methodology may  
            be financially better off to move to such a methodology, as  
            the maximum tax rates for UI are capped at 6.2% of the first  
            $7,000 of wages, a total of $434 per employee.  That rate  
            could be less than what they would end up paying through the  
            SEF.   If more schools choose to move to a tax-rated  
            methodology under this level of benefit expenditure, the  
            impact on the UI Trust Fund will be greater.

          4)EDD also warns this bill may not conform to federal law, as it  
            treats public school employees different than employees of  
            nonprofits. Sanctions for non-conformity include withholding  
            of a state's grant for administration of the UI program, and  
            the loss of a federal tax credit for a state's employers.



          COMMENTS:


          1)Purpose. According to the author, thousands of classified  








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            school employees find the months between academic years to be  
            a stressful period financially. Existing law prohibits certain  
            education employees from receiving benefits during months in  
            which school is not in session, unless they meet very specific  
            criteria. The only option for classified school employees to  
            support their families during the summer is to find another  
            job.   Yet classified school employees are often unable to  
            find work during the summer because employers are reluctant to  
            hire and invest in a short-term employee. Thus, the employee's  
            only real option for summer employment is a job with a summer  
            school program, but those jobs are scarce.  This bill would  
            relieve financial stress for workers.

          2)Federal Law.  Federal law generally requires equal treatment  
            for the payment of UI benefits to certain nonprofit  
            organizations, Indian tribes, and state and local government  
            workers in the same amount, on the same terms, and subject to  
            the same conditions, as other workers subject to state law. An  
            exception to the equal treatment requirement pertains to the  
            denial of UI for professional and nonprofessional employees of  
            educational institutions during a period between or within  
            academic years or terms when there is a contract or reasonable  
            assurance that the employee will go back to work in the same  
            or similar capacity in the ensuing academic year or term.  

            States must deny UI benefits to professional school employees  
            between and within the academic years or terms when a contract  
            or reasonable assurance exists. However, states have the  
            option of providing UI benefits to nonprofessional school  
            employees between and within the academic years or terms when  
            a contract or reasonable assurance exists. 

          3)Retroactive Benefits.  School employees expect to not work at  
            school (and generally not be paid) during the break between  
            academic years.  In recognition of this reality, current law  
            provides a mechanism for classified employees to receive  
            unemployment benefits retroactively should they not be  
            employed at the next school year.  This ensures that a  
            classified employee who expected to be employed in the next  








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            school year, but was not, can collect UI benefits from the end  
            of the prior school year.  

          4)School Employees Fund (SEF). Public school employers, K-12 and  
            community colleges may elect to participate in the SEF, which  
            is a pooled-risk fund administered by EDD that collects  
            quarterly contributions based upon a percentage of total wages  
            paid by public schools and community college districts.   
            Employers who participate in the SEF may also have to pay an  
            additional quarterly Local Experience charge if they have  
            higher UI costs charged to their individual accounts.  
            Contributions deposited in the SEF are used to reimburse the  
            UI Trust Fund for the cost of UI benefits paid to former  
            employees. 

          5)Support. This bill is sponsored by the Service Employees  
            International Union, California and supported by the  
            California Federation of Teachers.

          6)Opposition. This bill is opposed by the Association of  
            California School Administrators and the California School  
            Boards Association.
          
          7)Prior Legislation.  AB 399 (Ridley-Thomas) of 2015, AB 1638  
            (Bocanegra) of 2014, and AB 615 (Bocanegra) of 2013 were  
            similar to this bill, and were all held on the Suspense File  
            of this committee.  






          Analysis Prepared by:Lisa Murawski / APPR. / (916)  
          319-2081












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