BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015 - 2016 Regular Session
SB 682 (Leno)
Version: February 27, 2015
Hearing Date: April 28, 2015
Fiscal: Yes
Urgency: No
RD
SUBJECT
Courts
DESCRIPTION
This bill would require specified standards to be met if a trial
court intends to enter into, or renew or extend, a contract for
any services that are currently or customarily performed by that
trial court's employees. Among other things, the bill would
require the trial court to clearly demonstrate that the contract
will result in actual overall cost savings to the trial court.
This bill would also authorize courts to contract out without
meeting the requisite standards, in certain circumstances
including where:
the contract is between a trial court and another trial court
or a local government entity for services to be performed by
employees of the other trial court or employees of the local
government entity; or
due to an emergency, a contract is necessary for the immediate
preservation of the public health, welfare, or safety.
This bill would impose certain reporting requirements on any
trial court that enters into, renews or extends, a contract
between July 1, 2015, and December 31, 2015, for services that
were provided or customarily provided by its trial court
employees, if the contract has a term extending beyond March 31,
2016.
BACKGROUND
Under California law, most governmental entities can use
personal services contracts (i.e. contracting out) to achieve
cost savings only if specified standards are satisfied, chief
among them being that the entity clearly demonstrates actual
overall cost savings based upon certain information. These
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entities include executive branch agencies, public schools,
community colleges, and libraries. (See AB 3336 (Ryan, Ch.
1057, Stats. 1982); SB 1419 (Alarcon, Ch. 894, Stats. 2002); AB
438 (Williams, Ch. 611, Stats. 2011).)
In recent years, California's judicial branch has experienced
catastrophic budget reductions that have crippled California's
court system by, among other things, forcing the closure of
courts and self-help centers, which has resulted in delayed
access to justice for a large number of Californians. In
response, many courts have begun seeking ways in which to
operationalize those budget reductions. According to
information provided to this Committee by the Judicial Council
of California, examples of services that trial courts currently
contract out for include: court reporters; interpreters; child
custody evaluations; probate investigations; family law
facilitators; minor's counsel in dependency cases; child custody
mediation services; mediators/alternative dispute resolution;
security guards; personnel services; payroll; information
services; collections; adoption investigation services; services
for self-represented litigants; labor negotiation services;
transcripts for electronically recorded proceedings; and more.
Over the last two years, bills have been introduced in an effort
to impose various contracting out standards upon the trial
courts. The first bill, AB 566 (Wieckowski, 2013) was
ultimately vetoed by the Governor, and the second bill, AB 2332
(Wieckowski, 2014) passed this Committee but died on the
Suspense File in the Senate Appropriations Committee. Those
bills were modeled upon various statutes that required
governmental entities (executive branch agencies, public K-12
schools, community colleges, and public libraries) to meet
specified standards before executing personal service contracts.
This bill would similarly seek to impose certain standards upon
courts when entering into, renewing or extending, contracts for
services currently or customarily performed by the trial court's
employees, but would largely base those requirements on the
standards imposed on state agencies.
CHANGES TO EXISTING LAW
Existing law provides that civil service includes every officer
and employee of the State, except as otherwise provided in the
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California Constitution. That article also specifies that
certain employees are exempt from civil service, including among
others: officers and employees appointed or employed by
councils, commissions or public corporations in the judicial
branch or by a court of record or officer thereof. (Cal.
Const., article VII.)
Existing law permits a state agency to contract out for personal
services only if specified standards are satisfied, including,
among other things, that:
the contracting agency clearly demonstrates actual overall
cost savings, as specified;
proposals to contract out work are not approved solely on the
basis that savings will result from lower contractor pay rates
or benefits, except that proposals to contract out work are
eligible for approval if the contractor's wages are at the
industry's level and do not significantly undercut state pay
rates;
the contract does not cause the displacement of civil service
employees, as specified;
the savings must be large enough to ensure that they will not
be eliminated by cost fluctuations that could normally be
expected during the contracting period;
the amount of savings clearly justify the size and duration of
the agreement;
the contract is awarded through a publicized, competitive
bidding process;
the potential for future economic risk to the state from
potential contractor rate increases is minimal; and
the potential economic advantage of contracting is not
outweighed by the public's interest in having a particular
function performed directly by state government. (Gov. Code
Sec. 19130(a)(1)-(11).)
Existing law provides that in comparing costs to demonstrate
that the proposed contract will result in actual overall savings
to the state:
the state's additional cost of providing the same service as
proposed by a contractor, including the salaries and benefits
of additional staff that would be needed and the cost of
additional space, equipment, and materials needed to perform
the function must be included;
the state's indirect overhead costs, as defined, shall not be
included unless these costs can be attributed solely to the
function in question and would not exist if that function was
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not performed in state service; and
in the cost of a contractor providing a service, any
continuing state costs (such as inspection, supervision, and
monitoring) that would be directly associated with the
contracted function must be included. (Gov. Code Sec.
19130(a)(1)(A)-(C).)
Existing law exempts personal services contracting from the
above requirements if:
1)the functions contracted are exempt from civil service under
the state constitution;
2)the contract is for a new state function and the Legislature
has specifically mandated or authorized the performance of the
work by independent contractors;
3)the services contracted are not available within civil
service, cannot be performed satisfactorily by civil service
employees, or are of such a highly specialized or technical
nature that the necessary expert knowledge, experience, and
ability are not available through the civil service system;
4)the services are incidental to a contract for the purchase or
lease of real or personal property. Contracts under this
criterion, known as "service agreements," shall include, but
not be limited to, agreements to service or maintain office
equipment or computers that are leased or rented;
5)the legislative, administrative, or legal goals and purposes
cannot be accomplished through the utilization of persons
selected pursuant to the regular civil service system, such as
where there is a conflict of interest or to ensure independent
and unbiased findings in cases where there is a clear need for
a different, outside perspective (e.g., obtaining expert
witnesses in litigation);
6)the nature of the work is such that specified existing law
standards for emergency appointments apply;
7)state agencies need private counsel because a conflict of
interest on the part of the Attorney General's office prevents
it from representing the agency without compromising its
position, subject to the written consent of the Attorney
General, as specified;
8)the contractor will provide equipment, materials, facilities,
or support services that the state could not feasibly provide
in the location where the services are to be performed;
9)the contractor will conduct training courses for which
appropriately qualified civil service instructors are not
available, provided that permanent instructor positions in
academies or similar settings shall be filled through civil
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service appointment; or
10)the services are of such an urgent, temporary, or occasional
nature that the delay incumbent in their implementation under
civil service would frustrate their very purpose. (Gov. Code
Sec. 19130(b).)
This bill would provide that the purpose of its provisions is to
establish standards when a trial court intends to enter into, or
renew or extend, a contract for any services that are currently
or have customarily been performed by that trial court's
employees.
This bill would provide that contracts for services that are
currently or customarily performed by trial court employees are
permissible in a trial court when all of the following
conditions are met:
the trial court clearly demonstrates that the contract will
result in actual overall cost savings to the trial court, as
specified;
the contract shall not be approved solely on the basis that
savings will result from lower contractor pay rates or
benefits, except contracts shall be eligible for approval if
the contractor's wages are at the industry level and do not
undercut trial court pay rates;
the contract does not cause the "displacement" of trial court
employees, which includes layoff, demotion, loss of employment
or employment seniority, involuntary transfer to a new class,
involuntary transfer to a new location requiring change of
residence, and time base reductions, but does not include
changes in shifts or days off, or reassignment to other
positions within the same class and general location;
the savings shall be large enough to ensure that they will not
be eliminated by private sector and trial court fluctuations
that could normally be expected during the contracting period;
the amount of savings clearly justify the size and duration of
the contracting agreement;
the contract is awarded through a publicized, competitive
bidding process;
the contract includes specific provisions pertaining to the
qualifications of the staff that will perform the work under
the contract, as well as assurance that the contractor's
hiring practices meet applicable nondiscrimination standards;
the potential for future economic risk to the trial court from
potential contractor rate increases is minimal;
the contract is with a "firm," which means a corporation,
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partnership, nonprofit organization, or sole proprietorship;
and
the potential economic advantage of contracting out is not
outweighed by the public's interest in having a particular
function performed directly by the trial court.
This bill would provide that in comparing costs to demonstrate
that the contract will result in actual overall cost savings to
the trial court:
the trial court's additional costs of providing the same
services as proposed by a contractor, including salaries and
benefits of additional staff that would be needed and the cost
of additional space, equipment, and materials needed to
perform the function, must be included;
the trial court's indirect overhead costs, as defined, shall
not be included unless those costs can be attributed solely to
the function in question and would not exist if that function
was not performed by the trial court; and
the cost of a contractor providing a service for any
continuing trial court costs (such as costs for inspection,
supervision, and monitoring) that would be directly associated
with the contracted function must be included.
This bill would provide that these provisions do not preclude a
trial court or the Judicial Council from adopting more
restrictive rules regarding the contracting of court services.
This bill would exempt contracts from the above requirements if:
1)the contract is for a new trial court function and the
Legislature has specifically mandated or authorized the
performance of the work by independent contractors;
2)the contract is between a trial court and another trial court
or a local government entity for services to be performed by
employees of the other trial court or employees of the local
government entity;
3)the services contracted for cannot be satisfactorily performed
by trial court employees, or are of such a highly specialized
or technical nature that the necessary expert knowledge,
experience, and ability cannot be obtained from the court's
trial court employees;
4)the services are incidental to a contract for the purchase or
lease of real or personal property. Such contracts, known as
"service agreements," shall include, but not be limited to,
agreements to service or maintain office equipment or
computers that are leased or rented. Service agreements do
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not include contracts to operate equipment or computers for
purposes other than service or maintenance;
5)the legislative, administrative, or legal goals and purposes
cannot be accomplished through the utilization of trial court
employees because of the need to protect against a conflict of
interest or to ensure independent and unbiased findings in
situations where there is a clear need for an independent,
outside perspective;
6)due to an emergency, a contract is necessary for the immediate
preservation of the public health, welfare, or safety;
7)the contractor will conduct training courses for which
appropriately qualified trial court employee instructors are
not available from the court, provided that permanent
instructor positions shall be filled through the process for
hiring trial court employees;
8)the services are of such an urgent, temporary, or occasional
nature that the delay incumbent in their implementation
through the process for hiring trial court employees would
frustrate their very purpose. This provision does not apply
to the services of official court reporters, except with
respect to individual official reporters pro tempore used by a
trial court, as specified;
9)the contract is a personal services contract developed
pursuant to rehabilitation programs, as specified, or pursuant
to a program vendored or contracted through a regional center
or the Statement Department of Developmental Services in
accordance with the Lanterman Developmental Disabilities
Services Act, as specified, and the contract will not cause an
existing trial court employee to incur a loss of his or her
employment or employment seniority, a reduction in wages,
benefits, or hours; or an involuntary transfer to a new
location requiring a change in residence; or
10)the contract is for the services of any court interpreter,
which shall be governed by the Trial Court Interpreter
Employment and Labor Relations Act or by the other provisions
of the Trial Court Employment Protection and Governance Act,
and any memorandum of understanding or agreement entered into
pursuant to those acts, as specified.
This bill would authorize a trial court or the Judicial Council
of California to adopt more restrictive rules regarding the
contracting of court services.
This bill would specify that if a trial court entered into, or
renewed or extended, a contract between July 1, 2015, and
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December 31, 2015, inclusive, for services that were provided or
are customarily provided by its trial court employees and that
contract has a term extending beyond March 31, 2016, the trial
court shall provide a report by no later than February 1, 2016,
to the Department of Finance, chairperson of the Joint
Legislative Budget Committee and the chairpersons of the Senate
and Assembly Judiciary committees. The bill would require the
report to include:
a copy of the contract;
an analysis of whether the contract is permissible under the
standards set forth above;
an analysis of whether the contract resulted in the
displacement of trial court employees; and
an analysis of whether the contract involves the use of
contractors to perform the type of services that were
customarily performed by trial court employees.
This bill would include a severability clause.
COMMENT
1. Stated need for the bill
According to the author:
The major government entities in California either face
explicit limits (cities and counties) on privatization of
public services or must meet due diligence requirements
(State, community colleges, K-12 school districts, libraries)
prior to privatizing their services.
Historically, trial courts in California were county entities,
funded by the [c]ounties and thus subject to the privatization
restrictions that applied to [c]ounties. But in 1997, the
Legislature passed the Lockyer-Isenberg Trial Court Funding
Act, AB 233 (Escutia and Pringle), Ch. 850, Stats. 1997[,] and
shifted the responsibility for funding from the [c]ounties to
the State. Subsequently, many of the laws that had previously
applied to the trial courts no longer applied once they were
removed from the [c]ounties' jurisdictions, such as open
meetings, access to public records, whistleblower protections,
public contract code requirements for contracting purposes and
provisions relating to privatization.
As a result of recent budget cuts to the trial courts, some
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courts have sought alternative ways to provide critically
important services to the public, including privatizing some
of the most sensitive services that help preserve the
integrity of our impartial trial court system. Alternatives
being considered include privatizing the handling and
maintenance of private, confidential and sensitive information
contained in official court records.
2. Bill is largely based upon existing contract standards
imposed on state agencies
Modeled largely upon existing law, Government Code Section
19130, which requires that state agencies meet specified
standards before executing personal service contracts, this bill
would allow the trial courts to enter into, renew or extend, a
contract for any services that are currently or customarily
performed by that trial court's employees if certain
requirements are met or, alternatively, if a specified exception
applies.
First, the bill would require that a trial court wishing to
enter into a new contract, or to renew or extend a contract, for
services currently or customarily performed by trial court
employees clearly demonstrate that the contract will result in
actual overall cost savings to the trial court. Moreover, the
contract must not be approved solely on the basis that savings
will result from lower contractor pay rates or benefits (except
that contracts would be eligible for approval if the
contractor's wages are at the industry level and do not undercut
trial court pay rates). Furthermore, this bill would prohibit
the contracting out of services if the contract would cause an
existing trial court employee to incur a loss of his or her
employment or employment seniority, a reduction in wages,
benefits, or hours, or an involuntary transfer to a new location
requiring a change in residence.
This bill also contains several exceptions to the above
requirements that are similar to the exceptions provided under
the existing law for state agencies seeking to contract out.
Pursuant to these exceptions, a trial court would be permitted
to contract out for services without meeting the above
standards, if, for example:
the contract is for a new trial court function and the
Legislature has specifically mandated or authorized the
performance of the services by independent contractors;
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the contract is between a trial court and another trial court
or a local government entity for services to be performed by
employees of the other trial court or employees of the local
government entity;
the legislative, administrative, or legal goals and purposes
cannot be accomplished through the utilization of trial court
employees because of the need to protect against a conflict of
interest or to ensure independent and unbiased findings in
situations where there is a clear need for an independent,
outside perspective;
due to an emergency, a contract is necessary for the immediate
preservation of the public health, welfare, or safety; or
the services are of such an urgent, temporary, or occasional
nature that the delay incumbent in their implementation
through the process for hiring trial court employees would
frustrate their very purpose, except as specified for court
reporter services.
This bill also includes exceptions to the contracting out
requirements that were added to AB 566 (Wieckowski, 2013) at the
request of this Committee. Specifically, those exceptions would
permit the courts to contract out for services that are: (1)
urgent, temporary, or occasional in nature if the delay in
hiring trial court employees would frustrate their very purpose;
or (2) of such a highly specialized nature that the requisite
experience, knowledge, or ability cannot be obtained from court
employees.
Staff notes that the requirements of this bill generally track
the restrictions which apply to state agencies that seek to
contract out. As such, this bill excludes certain provisions
that were included in AB 566 and AB 2332, that would be
inconsistent with the standards that are currently applicable to
state agencies. For example, like existing Government Code
Section 19130, this bill requires that the trial court clearly
demonstrate that the contract will result in actual overall cost
savings to the trial court, as specified. Unlike AB 2332 and AB
566, however, this bill does not additionally require that the
actual cost savings be for the duration of the entire contract
as compared with the trial court's actual costs of providing the
same services. Additionally, unlike its predecessors, this bill
does not impose additional standards for contracts over
$100,000.
Accordingly, this bill seeks to balance the policy concern of
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ensuring that important public court functions are not
inappropriately privatized or privatized without due diligence
against the policy concern that any restrictions placed on
privatization do not unnecessarily restrict the trial court's
ability to perform vital functions in times of fiscal crisis.
As argued by co-sponsor Labors' Locals 777 & 792, this bill
"would require the trial court to clearly demonstrate that the
contract will result in actual overall cost savings to the trial
[court], that such contracts not result in the displacement of
trial court employees, and that the potential economic advantage
of contracting-out is not outweighed by the public's interest in
having a particular function performed directly by the trial
court employee." As stated by the California Labor Federation,
in support:
When entities contract out, oftentimes there are sacrifices
made in the pursuit of cost savings. Outsourcing can result
in less accountability, public access, and transparency. Such
practices can lead to substantially reduced wages, [thereby]
increasing demand for taxpayer funded public assistance.
Public interest becomes secondary to profit maximization when
for-profit corporations are responsible for delivery of public
services. [Whereas] California requires due diligence
standards be satisfied in all sectors of government prior to
privatization of public services [. . .] trial courts are
exempt from even this minimum standard, which applies to other
public entities. Privatization of court services means that
justice truly is in the hands of private contractors whose
primary concern is profits for shareholders over fairness to
the public. For these reasons, it is essential to have
safeguard in the law protecting the public interests.
3. Important distinctions between this bill and existing law
for state agencies
Notably, the bill does not track the Government Code in some
important respects in order to address the proponents' concerns
specific to the trial courts, including issues relating to court
interpreters, and provisions added at the request of disability
community advocates. It should also be noted that the bill,
consistent with prior legislation reviewed by this Committee,
would include an important discrepancy from existing law
relating to state agencies. Namely, whereas existing law
provides that proposals to contract out work cannot be approved
solely on the basis that savings will result from lower
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contractor pay rates or benefits, it also provides that
contracts can be eligible for approval if the contractor's wages
are at the industry's level and do not significantly undercut
state pay rates. This bill, like earlier versions of AB 2332
and AB 566 before it, leaves out the word "significantly" from
its otherwise identical provision, thus essentially eliminating
any cost-savings possibilities that would arise from lower
wages-even by a single dollar. In other words, any costs
savings would have to result from something other than lower
wages. The author offers the amendment below to bring the bill
closer in line to the same standard imposed on state agencies,
by adding the word "significantly."
This bill also differs from the state agency provisions in that
it does not have an exemption from the contracting out
requirements where the contractor will provide equipment,
materials, facilities, or support services that could not
feasibly be provided by the state in the location where the
services are to be performed. The author offers the following
amendment to add that exemption to the bill, but preclude any
use of the exemption to reopen courts that had been closed
during the fiscal crisis as privatized courts or to open new
privatized courts.
Author's amendments :
(1) On page 3, line 9, before "undercut" add "significantly"
(2) On page 4, after line 33, insert "(8) The contractor
will provide equipment, materials, facilities, or support
services that could not feasibly be provided by the trial
court in the location where the services are to be
performed. This paragraph shall not apply to services
contracted in order to open closed courthouses if those
services were performed by trial court employees before the
closure or for the ongoing operation of new or reopened
courthouses."
Renumber accordingly.
4. Important distinction between this bill and bill approved
by this Committee last year
While this bill tracks the provisions of Government Code Section
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19130 that are currently applicable to state agencies, there are
some differences. Whereas existing law applies to "the use of
personal service contracts," this bill applies to "contracts for
services when a trial court intends to enter into, or renew or
extend, a contract for any services that are currently or have
been customarily performed by that trial court's employees."
When this bill heard AB 2332 last year, it passed the bill with
an amendment to remove the reference to contract renewals and
extensions. The amendment below would remove that language from
this bill and bring greater parity with the provision for state
agencies.
Author's amendment:
On page 2, line 4 strike ", or renew or extend,"
5. Governor's veto message of AB 566
As noted in the Background, this bill is the third recent effort
to impose standards upon the courts when contracting out for
services that are currently or have customarily been performed
by that trial court's employees. The first bill, AB 566,
(Wieckowski, 2013) (to which the second bill, AB 2332
(Wieckowski, 2014) was substantially similar) was ultimately
vetoed.
In vetoing AB 566, Governor Brown stated that while he agrees
that decisions to change the way court services are provided
should be carefully evaluated to ensure they are both fair and
cost-effective, "this measure goes too far. It requires
California's courts to meet overly detailed and - in some cases
- nearly impossible requirements when entering into or renewing
certain contracts. Other provisions are unclear and will lead
to confusion about what services may or may not be subject to
this measure."
Support : California Professional Firefighters (CPF); Glendale
City Employees Association (GCEA); Orange County Employees
Association (OCEA); Organization of SMUD Employees (OSE); San
Bernardino Public Employees Association (SBPEA); San Diego
County Court Employees Association (SDCCEA); San Luis Obispo
County Employees Association (SLOCEA)
Opposition : Judicial Council
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HISTORY
Source : American Federation of State, County and Municipal
Employees, AFL-CIO; Service Employees International Union;
Laborers' Locals 777 and 792; Orange County Employees
Association
Related Pending Legislation : None Known
Prior Legislation :
AB 2332 (Wieckowski, 2014) See Background.
AB 566 (Wieckowski, 2013) See Background.
AB 438 (Williams, Ch. 611, Stats. 2011) See Background.
SB 78 (Committee on Budget and Fiscal Review, Ch. 10, Stats.
2011) See Comment 3.
AB 3084 (Horton, 2004) would have applied specified contracting
requirements to a metropolitan water district's contracts for
services. AB 3084 was held in the Senate Local Government
Committee and died without a hearing.
SB 906 (Alarcon, 2003) would have required all general law
county and city contracts for services to achieve cost savings
and meet certain other requirements. SB 906 died on the
Assembly Floor.
SB 163 (Alarcon, 2003) was substantially similar to SB 906 and
was held in the Senate Appropriations Committee.
SB 1419 (Alarcon, Ch. 894, Stats. 2002) See Background.
AB 233 (Escutia and Pringle, Ch. 850, Stats. 1997) See Comment
1.
AB 3336 (Ryan, Ch. 1057, Stats. 1982) See Background.
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