BILL ANALYSIS Ó AB 2197 Page 1 ASSEMBLY THIRD READING AB 2197 (Cristina Garcia) As Amended May 31, 2016 Majority vote ------------------------------------------------------------------ |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+----------------------+--------------------| |Insurance |9-4 |Daly, Calderon, Chu, |Melendez, Travis | | | |Cooley, Cooper, |Allen, Bigelow, | | | |Dababneh, Frazier, |Dahle | | | |Gatto, Rodriguez | | | | | | | |----------------+-----+----------------------+--------------------| |Appropriations |14-6 |Gonzalez, Bloom, |Bigelow, Chang, | | | |Bonilla, Bonta, |Gallagher, Jones, | | | |Calderon, Daly, |Obernolte, Wagner | | | |Eggman, Eduardo | | | | |Garcia, Roger | | | | |Hernández, Holden, | | | | |Quirk, Santiago, | | | | |Weber, Wood | | | | | | | | | | | | ------------------------------------------------------------------ SUMMARY: Allows classified school employees to collect AB 2197 Page 2 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 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 3)Provides that UI benefits for classified public school employees will only be provided if funds are appropriated for that purpose in the annual budget act. EXISTING LAW: 1)Provides UI benefits to employees who lose their job through no fault of their own. 2)Requires employers to pay state and federal taxes to pay the costs of administering and providing UI benefits. AB 2197 Page 3 3)Permits public employers to provide UI benefits to their employees on a reimbursement basis in lieu of paying payroll taxes. 4)Prohibits employees of public and private non-profit educational institutions from collecting UI benefits between academic years if they have been given reasonable assurance by the employer of being employed in the next academic term. 5)Permits non-professional employees of public and non-profit educational institutions to collect UI benefits retroactively should they not be employed in the next academic term after receiving reasonable assurance of future employment. 6)Requires employers to provide documentation of the reasonable assurance when that notice is given. 7)Prohibits, as a matter of federal law, providing UI benefits to professional employees between academic years. FISCAL EFFECT: According to the Assembly Appropriations Committee: 1)This bill is contingent on a budget appropriation for the purpose of implementation. A 2015 report by the Economic Roundtable projects extending UI to classified employees over summer months would result in $153.1 million of benefit payments annually, representing an increase in UI expenditures of 76% for schools, at full implementation in year 2020-21 (School Employees Fund (SEF)). To the extent a budget appropriation was made for this purpose, it would have to augment the SEF commensurate with the increase. Schools are AB 2197 Page 4 responsible for funding their own UI costs through the SEF. 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. EDD does not track which charters rely on UI Trust Fund versus those that use a different reimbursement method, but reports that only a quarter of charters 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.) COMMENTS: 1)Purpose. According to the sponsor, classified school employees do the essential work that keeps our public schools up and running. These workers keep our campuses safe, clean, and efficient. Most importantly, they strive to improve the daily lives of our students. Despite the important and hard work of classified school employees, many struggle to support their families with incomes that are often inadequate to pay for food, housing, and health care. And while certified school employees, such as administrators, teachers, librarians, and nurses, earn middle class incomes and benefits that can last through the summer breaks, classified school employees do not. Unlike other employees who receive UI benefits during their regular seasonal breaks, classified school employees are ineligible to receive those same benefits. 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, a classified AB 2197 Page 5 school employee's only real option for summer employment is a job with a summer school program, but those jobs are scarce. Being excluded from UI benefits creates a serious financial hardship for a classified school employee that does not exist for their fellow education workers. 2)Federal Law. Federal law generally requires equal treatment for the payment of UI benefits on the basis of service 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 service 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/term. State law must deny UI benefits to professional school employees between and within the academic years or terms when a contract or reasonable assurance exists. State law may deny UI benefits to nonprofessional school employees between and within the academic years or terms when a contract or reasonable assurance exists. 3)Public Agency Costs. This bill would likely have relatively minor impact to the Unemployment Insurance Trust Fund (trust fund) that pays for most UI benefits because public K-12 school districts and community colleges commonly elect to participate in the School Employees Fund (SEF) in lieu of paying payroll taxes. The SEF is a special reimbursable financing method administered by the Employment Development Department which collects contributions based upon a percentage of total wages paid by public schools and community college districts. Money deposited in the SEF is used to reimburse the trust fund for the cost of benefits paid to former employees. All 72 community college districts and AB 2197 Page 6 1,298 county offices of education, public school districts, and charter schools participate in the SEF. The SEF had fund balance of over $582 million at the end of the 2014-15 fiscal year. The costs of paying for these additional benefits from this bill will be borne by the SEF, and the SEF costs will have to be passed on to the participating schools. Opponents note that the bill would result in significant cost increases for K-12 school districts and other local educational agencies. Last year the Assembly Appropriations Committee provided the following estimate for AB 399 (Ridley-Thomas) of 2015, which was substantially similar to this bill: There are approximately 250,000 classified, non-certificated employees throughout the state. If 60% of those 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 2019-20 (School Employees Fund). Costs to the School Employees Fund are funded by school districts, county offices of education, community college districts, and some charter schools, whose employees receive UI benefits through this fund instead of through the UI Trust Fund. 4)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 AB 2197 Page 7 school year, but was not, can collect UI benefits from the end of the prior school year. 5)Previous Legislation. In 2015, this committee passed AB 399 (Ridley-Thomas) of the current legislative session, which is identical to this bill. AB 399 was held on the Assembly Appropriations Committee Suspense File. In 2014, this committee passed AB 1638 (Bocanegra) which was nearly identical to AB 615. The bill was held on the Assembly Appropriations Committee Suspense File. In 2013, this committee passed AB 615 (Bocanegra) which proposed to extend UI benefits to classified school employees. The bill was held on the Assembly Appropriations Committee Suspense File. Analysis Prepared by: Paul Riches / INS. / (916) 319-2086 FN: 0003394