BILL ANALYSIS Ó SB 834 Page 1 Date of Hearing: August 31, 2016 ASSEMBLY COMMITTEE ON BUDGET Philip Ting, Chair SB 834 (Committee on Budget and Fiscal Review) - As Amended August 29, 2016 SENATE VOTE: 25-11 SUBJECT: State employment: memorandum of understanding: Bargaining Unit 2 SUMMARY: Provides legislative ratification of the memorandum of understanding (MOU) agreed to by the state and bargaining unit (BU) 2, California Attorneys, Administrative Law Judges and Hearing Officers in State Employment (CASE). Additionally, amends the definition of State Peace officer / firefighter member to mean the Sergeant-at-Arms of each house of the Legislature who has been designated as peace officers in subdivision (a) of Section 830.36 of the Penal Code, excluding the Chief Sergeant-at-Arms of the Senate. EXISTING LAW: 1) Establishes the Ralph C. Dills Act, which requires the state to collectively bargain with the exclusive SB 834 Page 2 representatives of employee groups (i.e. bargaining units) regarding wages and working conditions, and to define negotiated agreements in MOUs. 2) Establishes the California Department of Human Resources (CalHR) as the official representative of the Governor in all matters related to collective bargaining with state employees. 3) Requires that any MOU between the state and an exclusive representative must be ratified by the Legislature. 4) Establishes the California Public Employees' Retirement System (CalPERS), which administers health and retirement benefits for state employees. 5) Requires the Legislative Analyst's Office (LAO) to analyze all state MOUs and to provide analyses of an MOU and its fiscal impact to the Legislature within 10 days of receipt of an MOU from CalHR. 6) Provides that fully vested state retirees (e.g., with 20 or more years of state employment) are entitled to an employer contribution for retiree health care equal to 100% of the weighted average premium of the four health plans most highly utilized by all members. Dependents are eligible for a contribution based on 90% of the average additional premiums paid for dependents during the benefit year in which the formula applied. This is referred to as the 100/90 formula. 7) Requires the Medicare-eligible retirees enroll in Medicare and chose Medicare-coordinated health plan. Since SB 834 Page 3 these plans may be cheaper than non-Medicare (or "Basic" plans), thus resulting in some portion of the employer contribution going unused, current law requires that any unused portion of the 100/90 formula contributions may be applied to reimburse retirees for the costs of Medicare Part B premiums. These reimbursements are made in the form of an additional payment to the retiree on the retirement warrant up to the cost of the Part B premium. Whether or not a retiree receives Medicare Part B reimbursement in full or in part depends upon the cost of that retiree's health plan. 8) Provides that most state employees (those hired after 1985 or 1989, depending on class) must work for 10 years to receive 50% of the 100/90 formula, with an additional 5% per year of service until, after 20 years, they are vested to receive 100% of the 100/90 formula. Individuals hired prior to 1985 or 1989 could be subject to either five or 10 year vesting for full coverage of the 100/90 formula. 9) Provides that retirees who were covered in certain bargaining units while actively employed will receive an employer retiree health contribution based on the 80/80 formula (i.e. 80% of the weighted average premium of the four health plans most highly utilized by all members). 10) Provides that all employer contribution for active state employee health care shall be determined through collective bargaining. FISCAL EFFECT: Appropriates $32,558,000 for BU 2 for 2016-17. COMMENTS: The following information summarizing the general provision of the MOU was provided by CalHR: SB 834 Page 4 Number of Employees: The BU 2 agreement affects approximately 3,890 full-time equivalents. Health Benefits: 1) Employer Contribution for Active State Employees a. The state's monthly consolidated benefit contribution for each employee shall continue to be a flat dollar amount equal to 80 percent of the weighted average of the basic health benefit plan premiums of the four largest enrolled basic health plans. For each employee with enrolled family members, the employer shall continue to contribute an additional flat dollar amount equal to 80 percent of the weighted average of the additional premiums. The flat dollar amounts shall be adjusted as appropriate pursuant to the formulas on January 1, 2017, January 1, 2018, and January 1, 2019. 2) Employer Contribution for Future Retirees a. Employees first hired on or after January 1, 2017, will receive an employer contribution for retiree health benefits based on an "80/80" formula. Retirees and their dependents enrolled in a basic health benefit plan will receive an employer contribution equal to 80 percent of the weighted average premium of the four largest basic health benefit plans based on state active employee enrollment. Retirees and their dependents enrolled in a Medicare health benefit plan will receive an employer contribution equal to 80 percent of the weighted average premium of the four largest Medicare health benefit plans based on state retiree enrollment. 3) Prefunding of Other Post-Employment Benefits a. The state and Bargaining Unit (Unit) 2 members SB 834 Page 5 will prefund retiree healthcare with the goal of reaching 50 percent cost sharing of actuarially determined total normal cost for employer and employees by July 1, 2019. The state and employees will each make the following contributions: i. Effective July 1, 2017, 0.7 percent of pensionable compensation. ii. Effective July 1, 2018, an additional 0.6 percent for a total of 1.3 percent of pensionable compensation. iii. Effective July 1, 2019, an additional 0.7 percent for a total of 2.0 percent of pensionable compensation. 4) Post-Employment Health and Dental Vesting Schedule a. All employees first employed by the state on or after January 1, 2017, will be subject to an extended vesting schedule providing 50 percent of the employer contribution upon completion of 15 years of state service, increasing 5 percent for each additional year of service, until the employee is 100 percent vested at 25 years of state service. 5) Medicare Part B Supplemental Benefit a. All employees first hired on or after January 1, 2017, will no longer be eligible to use the employer contribution for a retiree health benefit plan for Medicare Part B premiums. Compensation: 1) General Salary Increase (GSI) a. Effective the first day of the pay period following ratification, Unit 2 employees shall receive a 5 percent (5%) GSI. b. Effective July 1, 2017, Unit 2 employees shall receive a 5 percent (5%) GSI. SB 834 Page 6 c. Effective July 1, 2018, Unit 2 employees shall receive a 4 percent (4%) GSI. Miscellaneous: 1) Prohibits the implementation of a furlough program or a mandatory Personal Leave Program during the first year of the agreement. Any furlough during the second or third year must be authorized pursuant to an act of the Legislature (Article 9.21). 2) Effective May 1, 2017, and depending on the availability of departmental funds, the amount of leave that can be cashed out each year shall increase from 20 hours to 80 hours (Article 9.23). 3) Removes the requirement that a new employee must work two years before receiving the full employer health contribution for dependents (Article 11.1). 4) Effective the first day of the pay period following ratification, the lodging reimbursement rate shall increase from $150 to $250 for San Francisco (Article 12.1). 5) Incorporates the Wounded Warriors Transitional Leave Act (Chap. 794, Stat. of 2015), which provides up to 96 hours of additional sick leave for an employee hired on or after January 1, 2016, who is a military veteran with a service-connected disability rated 30 percent (New Article). SB 834 Page 7 Duration: July 1, 2016 through July 1, 2019 REGISTERED SUPPORT / OPPOSITION: None on file. Analysis Prepared by:Genevieve Morelos / BUDGET / (916) 319-2099