BILL ANALYSIS Ó
SENATE COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
DEVELOPMENT
Senator Jim Beall, Chair
2015 - 2016 First Extraordinary
Bill No: SBX1 9 Hearing Date: 8/19/2015
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|Author: |Moorlach |
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|Version: |7/16/2015 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Randy Chinn |
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SUBJECT: Department of Transportation
DIGEST: This bill requires the Department of Transportation
(Caltrans) to contract with private entities for architectural
and engineering services, for a minimum of 15% of the total
annual value of these services by July 1, 2016, and increasing
each year to a minimum of 50% by July 1, 2023.
ANALYSIS:
Existing practice, as expressed in the state budget, requires
Caltrans to contract out 10% of its Capital Outlay Support (COS)
staffing, which is roughly equivalent to architectural and
engineering services, while 90% is performed by Caltrans staff.
This practice goes back to the 1980s.
This bill:
Requires Caltrans to contract out to private entities a minimum
of 15% of the total annual value of architectural and
engineering services for the 2016-17 fiscal year and to increase
that amount by five percentage points annually until a minimum
level of 50% is reached for the 2023-24 fiscal year and beyond.
Prohibits Caltrans from using any nonrecurring funds to pay for
permanent civil service positions.
COMMENTS:
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1)Purpose. The author notes that funding for large projects is
highly variable. When workload rises, additional permanent
state employees are hired in accordance with a 90/10 ratio of
permanent state employees/contract employees, an arbitrary
ratio established through budget action for many years. This
makes it difficult to reduce engineering and support staff
when workload and funding taper off. If a greater portion of
the work were performed by private contractors, staffing could
be more easily adjusted to fit workload needs. Without the
ability to adjust the number of staff, the COS program will
continue to be overstaffed, consuming funding that could
otherwise go to build additional projects. This bill will
gradually increase the percentage of contracted-out work from
10% to 50%, providing Caltrans with the flexibility to adjust
staffing and freeing up funds to build projects. The author
believes this can be done through attrition and without
layoffs.
2)Surplus staff? Last year the Legislative Analyst's Office
(LAO) determined<1> that the COS program was overstaffed by
3,500 people, resulting in $500 million in unnecessary annual
costs which could otherwise be spent on transportation
projects. That assessment was necessarily made based on a
high-level review of Caltrans' operations because certain
project-specific data was either unreliable or not collected.
The LAO concluded that because funding for new construction
projects had declined substantially, a corresponding reduction
to COS staffing was warranted.
Caltrans disagrees. In a July 20 letter to the committee,
Caltrans observes that its COS staffing is at an 18-year low,
and that it has reduced 3,422 full-time equivalent positions
in their COS program, or 26%, since 2007-08. They argue that
staffing levels should be based on a project-specific analysis
of workload, not on funding levels.
One of the LAO's recommendations is that Caltrans improve its
project-specific data quality, and that is apparently
occurring. The COS program has also been subject to
zero-based budgeting for several years. Taken together, along
with continuing oversight through the annual budget process,
the Legislature will be better positioned to ensure
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<1> "The 2014-15 Budget: Capital Outlay Support Program
Review". LAO, May 14, 2014.
SBX1 9 (Moorlach) PageC of?
appropriate COS staffing. The trend of decreased staffing may
be reversed if substantial new funding becomes available for
bridge and highway repair and maintenance.
3)Contracting out. For many years, the Legislature has split
the COS program work, with 10% of the staffing going to
private contractors and 90% going to Caltrans. This has been
a policy of the state that has been carried out in the budget
process, apparently with little discussion or debate over the
past several years, that reflects a balance of the interests
of the public sector unions and the private engineering firms.
The principle behind this bill is that contracted workers are
more easily let go, allowing for staffing levels to better
match the workload when that workload declines. But Caltrans
has been reducing its staff almost every year for the past 10,
according to the LAO report, so the 90/10 ratio does not seem
to have limited Caltrans' ability to reduce its size. Neither
has Caltrans expressed concerns that the 10% contracting-out
ratio has impaired its ability to properly size its workforce.
This may be because Caltrans has several mechanisms to size
its workforce: normal workforce attrition, which Caltrans
estimates at about 5% annually; the use of limited-term state
employees; and the use of overtime. Those mechanisms,
combined with the 10% contract workforce, may provide Caltrans
with the flexibility to size its workforce to fit its needs.
Increased contracting out may be justified based on cost
savings, but the cost of contracted-out employees appears
higher than the cost of state employees. In 2011, the Senate
Budget Committee estimated that state COS staff cost $158,000
per year while contract staff cost $243,000, though this extra
cost may be offset by increased productivity and flexibility.
4)Caltrans' hiring practices. The Senate Transportation and
Infrastructure Development Committee has not yet been able to
determine whether or under what conditions Caltrans currently
hires permanent staff with non-recurrent revenue.
5)Staffing levels are a budget issue. The LAO report raises
important questions about the necessary level of COS staffing.
Every dollar saved in reduced COS expenses can be spent on
necessary road maintenance and repair. But determining the
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appropriate level of staffing in an organization as large and
complex as Caltrans is an intensive, data-driven exercise that
depends very much on the specific work being done. The budget
process seems to be the most appropriate way to do this, and
as well to consider the appropriate level of contracted-out
services. It may well be appropriate to increase the level of
contracted-out work, but that should be based on an analysis
of the specific work requirements, costs, and benefits.
Moreover, SB X1 1 (Beall) deals with the staffing levels
directly by requiring Caltrans to provide the California
Transportation Commission with a plan to increase its
efficiency by up to 30% over the next three years.
Related Legislation:
SB X1 1 (Beall) - establishes a program to raise permanent
funding for transportation maintenance and repair, and requires
Caltrans to provide the California Transportation Commission
with a plan to increase its efficiency by up to 30% over the
next three years. This bill is being heard in the Senate
Transportation and Infrastructure Development Committee today.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes
Local: No
POSITIONS: (Communicated to the committee before noon on
Thursday,
August 13, 2015.)
SUPPORT:
California Construction and Industrial Materials Association
California Taxpayers Association
OPPOSITION:
Professional Engineers in California Government
Sierra Club of California
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