BILL ANALYSIS Ó SB 376 Page 1 Date of Hearing: August 26, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair SB 376 (Lara) - As Amended August 18, 2015 ----------------------------------------------------------------- |Policy |Higher Education |Vote:|9 - 3 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | |Accountability and | |6 - 3 | | |Administrative Review | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill requires bidders on University of California (UC) contracts for specified types of personal services to certify that their employees' total compensation does not undercut the SB 376 Page 2 compensation of UC employees doing comparable work. Specifically, this bill: 1)Applies the cost standard described above to the following types of contracts: building maintenance, cleaning or custodial services, call centers services, clerical services, dining and food service, gardening, grounds keeping, and plant nursery services, laborer services, mailroom services, parking, shuttle bus, truck driving or transportation services, security services, storekeeper services, patient care technical employee services, patient billing services, medical transcribing services, patient escort services, or nursing assistance services. 2)Requires a bidder to certify that its total employee compensation package, including fringe benefits and valued on a per-employee basis, does not materially undercut UC's total compensation for employees doing comparable work at the relevant campus, medical center, or laboratory. 3)Requires UC to include in its request for proposals, a calculation of the average per-employee value of total compensation for UC employees relevant to a particular contract, and to incorporate all known cost escalators for projecting the rate of growth of average per-employee compensation. 4)Stipulates that the current requirement that UC service contracts-other than for personal or professional services-involving expenditures of $100,000 or more annually be awarded to the lowest responsible bidder, includes the renewal or extension of such contracts. FISCAL EFFECT: SB 376 Page 3 UC estimates that, of its total annual spending on service contracts ($1.2 billion), about $120 million (10%) are for the specific types of services that would be subject to the requirements of this bill. Assuming a 30% increase in costs related to providing parity in benefits, total annual costs would be $36 million. The additional costs to provide wage parity, assuming a 10% to 20% cost impact, would be $12 million to $24 million. This impact should diminish over time due to implementation of UC's Fair Wage/Fair Work plan (See Comment #2), which will be applied to new contracts and as existing contracts are renewed/extended. These costs will come from a variety of UC fund sources, including the State General Fund, federal funds, auxiliary funds, and enterprise funds, such as from the medical centers. COMMENTS: 1)Purpose. According to the author, this bill "seeks to address the growing challenge to California of the use of contingent workers to replace employees, and the consequential effect it has on wages and worker protections." The author further states that "these arrangements are bad for workers, who receive lower wages and less workplace protections, bad for taxpayers as government shoulders the burden of providing benefits and support to these employees, and bad for conscientious employers who are placed at a competitive disadvantage in the market." This bill is supported by the American Federation of State, County, and Municipal Employees (AFSCME), and by the California Labor Federation, which argues that UC continues to contribute to the problem of regularly relying on "a SB 376 Page 4 subcontracted worker model, risking the jobs and putting downward pressure on wages of direct hire employees." 2)Opposition. In July UC announced its Fair Wage/Fair Work plan, which will establish the minimum wage for contract workers at $13 per hour starting October 2015, increasing to $15 per hour as of October 1, 2017. This plan will also involve a monitoring and compliance program to ensure contractors are complying with UC policies and all federal, state, and local laws. Finally, the program will include annual compensation audits of all contracts and spot audits of selected contracts. UC contends that this plan "substantially addresses the concerns that prompted the introduction of SB 376, in a way that is financially feasible to the university." UC argues that, in addition to increasing costs, the bill will create administrative burdens, in part by requiring an analysis to determine per-employee compensation for every type of contract and factoring in all known cost escalators to project future per-employee costs. UC also asserts the bill will hinder its ability to make its contracting more efficient by using systemwide rather than site-specific contracts. Finally, UC notes that some of its collective bargaining agreements contain provisions stating that the UC will not contract out for services solely on the basis that savings will result from lower contractor pay rates and benefits for services customarily performed by bargaining unit employees or that result in layoff of bargaining unit employees. These agreements specify the instances in which UC may contract out for services including, when there is a need for special expertise or experience, for short-term or temporary staffing needs, for special services and equipment that are not available internally, or for services at a leased facility where the services are provided by the owner. Analysis Prepared by:Chuck Nicol / APPR. / (916) 319-2081 SB 376 Page 5