BILL ANALYSIS                                                                                                                                                                                                    ”

                                                                    AB 2197

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          2197 (Cristina Garcia)

          As Enrolled  August 30, 2016

          2/3 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         |                    |
          |                |     |HernŠndez, Holden,    |                    |
          |                |     |Quirk, Santiago,      |                    |
          |                |     |Weber, Wood           |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |


                                                                    AB 2197

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          |ASSEMBLY:  |51-27 |(June 2, 2016) |SENATE: |25-13 |(August 22,      |
          |           |      |               |        |      |2016)            |
          |           |      |               |        |      |                 |
          |           |      |               |        |      |                 |
          |           |      |               |        |      |                 |

          SUMMARY: 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  
            public school employees as follows:

             a)   Two weeks effective July 1, 2017

             b)   Four weeks effective July 1, 2018

             c)   Six weeks effective July 1, 2019

             d)   Seven 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.


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          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.

          3)Permits public employers to provide UI benefits to their  
            employees on a reimbursement basis in lieu of paying payroll  

          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  


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          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). To the extent a budget appropriation  
            was made for this purpose, it would have to augment the SEF  
            commensurate with the increase.  Schools are 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 School Employees Fund (SEF).  Employment  
            Development Department (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.)


          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  


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            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  
            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  


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            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  
            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  


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          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  
            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) 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.  


               This bill allows classified school employees to  
               collect unemployment insurance benefits between school  

               This bill creates several conformity issues with the  


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               federal Unemployment Insurance laws, which could  
               result in sanctions from the federal government,  
               including the loss of significant tax credits for  
               California's employers.

          Analysis Prepared by:                                             
          Paul Riches / INS. / (916) 319-2086  FN: 0005121