BILL ANALYSIS Ó SB 848 Page 1 (Without Reference to File) SENATE THIRD READING SB 848 (Committee on Budget and Fiscal Review) As Amended June 12, 2016 Majority vote. Budget Bill Appropriation Takes Effect Immediately SENATE VOTE: 25-11 SUMMARY: Makes necessary statutory and technical changes to implement the Budget Act of 2016 related to Civil Service improvement provisions. Additionally, provides legislative ratification of the memoranda of understanding (MOU) agreed to by the state and bargaining unit (BU) 12 represented exclusively by International Union of Operating Engineers (IUOE) and makes other civil service improvement changes. Specifically, this bill: 1)Ratifies the MOU agreed to by the state and BU 12. 2)Makes technical changes to Section 19141 of the Government relating to Civil Service reinstatement to apply only to an employee in an exempt position who previously had permanent SB 848 Page 2 status in civil service. 3)Amends the conditions for when an employee who vacates a civil service position to accept an appointment to an exempt position shall be reinstated to his or her former position at the termination provided both conditions occur: a) He or she accepted the appointment without a break in the continuity of state service, and b) Within 10 working days after the effective date of the termination, he or she makes a written request to the appointing power to be reinstated to his or her former position. If an employee accepts an appointment to an exempt position and seeks reinstatement to his or her former position more than 10 working days after the effective date of the termination of the exempt appointment, Section 19140 shall apply. 4)Applies the extension or new exempt appointment is terminated, if an employee in an exempt appointment accepts an extension of the exempt appointment or accepts a new exempt appointment with no break in the continuity of state service in an exempt appointment . 5)Amends Section 19141.1 of Government Code related to Civil Service Improvement reinstatement, to only apply to employees in an exempt position who have reinstatement rights to their former positions under Section 19141. 6)States that within four years of the termination of an appointment in an exempt position, an employee who has completed a minimum of five years of state service experience SB 848 Page 3 shall be given an opportunity upon request to obtain civil service appointment list eligibility by taking a deferred examination for any class that has a current eligible list and for which the employee meets the minimum qualifications of the class. 7)Provides that a candidate appointed through the Limited Examination and Appointment Program (LEAP) is not required to serve a probation period, upon successful completion of the job examination period. 8)States that if an overpayment involves leave credits, the date of overpayment is the date that the employee receives compensation in exchange for leave erroneously credited to the employee. Defines leave hours to be considered exchanged for compensation in the order they were credited for purposes of the section. 9)Provides that for the development needs for the state's workforce, the department shall analyze, design, develop, implement, and evaluate an integrated development strategy to continually advance employee skills and improve performance productivity and service. 10)Makes changes for the supervisorial and career executive assignments training and leadership programs along with improved succession planning. 11)Adds that notwithstanding Sections 20677and 20687, on and after July 1, 2017, the normal rate of contribution for an employee of the judicial branch who is not subject to Section 7522.30 to do the following: SB 848 Page 4 a) For a state miscellaneous member: i) 9% of the compensation in excess of $317 per month paid to a member whose service is not included in the federal system ii) 8% of compensation in excess of $513 per month paid to a member whose service has been included in the federal system. b) For a peace officer/firefighter member, 11% of compensation in excess of $128. 12)Applies the employer contribution for each annuitant enrolled in a basic plan and the employer contribution for each annuitant enrolled in a Medicare health benefit plan to a judicial branch employee who is first employed by the state and becomes a state member of the system on or after January 1, 2017. Does not apply to a judge who is subject to Chapter 11 (commencing with Section 75000) or Chapter 11.5 (commencing with Section 75500) of Title 8. 13)States that a judicial branch employee who is first employed by the state and becomes a state member of the system on or after January 1, 2017, shall not receive any portion of the employer contribution payable to annuitants unless the person is credited with 15 years of state service. 14)Creates the percentage of the employer contribution payable for post-retirement health benefits for an employee based on credited state service at retirement. SB 848 Page 5 a) Applies this section only to judicial branch employees who retire for service. b) Defines state service to mean service rendered as an employee of the state or an appointed or elected officer of the state for compensation. c) Does not apply this section to the following: i) Former state employees previously employed prior to January 1, 2017, who return to state employment on or after January 1, 2017. ii) State employees on an approved leave of absence employed before January 1, 2017, who return to active employment on or after January 1, 2017. iii) A judge who retires pursuant to Chapter 11 (commencing with Section 75000) or Chapter 11.5 (commencing with Section 75500) of Title 8. 15)Does not apply Section 22780 of the Government code to a state employee in BU 12, and judicial branch employees, who is first employed by the state and becomes a state member of the system on or after January 1, 2017. 16)Requires state employees in BU 12 to prefund retiree health care, with the goal of reaching a 50% cost sharing of actuarially determined normal costs for both employer and employees by July 1, 2019. SB 848 Page 6 17)Requires the state and state employees in the judicial branch to prefund retiree health care, with the goal of reaching 50% cost sharing of actuarially determined normal costs for both employer and employees by July 1, 2017. The judicial branch will make the following contributions: a) Effective July 1, 2016, 1.5% of pensionable compensation. b) Effective July 1, 2017, up to an additional 1.5% for a total employee contribution of up to 3.0% of pensionable compensation. The additional amount shall be determined by the Director of Finance no later than April 1, 2017, based on the actuarially determined normal costs identified in the state valuation. c) This paragraph does not apply to a judge who is subject to Chapter 11 (commencing with Section 75000) or Chapter 11.5 (commencing with Section 75500) of Title 8. 18)Makes changes to judge's salary survey as reported to the Department of Human Resources to the State Controller. EXISTING LAW: 1)Establishes the Ralph C. Dills Act, which requires the state to collectively bargain with the exclusive 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 SB 848 Page 7 (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 is applied. This is referred to as the 100/90 formula. 7)Requires that Medicare-eligible retirees enroll in Medicare and choose a Medicare-coordinated health plan. Since 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 SB 848 Page 8 Part B premium. Whether or not a retiree receives the 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 year 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 the employer contribution for active state employee health care shall be determined through collective bargaining. In its MOU effective 2013 to 2015, BU 12 (IUOE) agreed to a flat dollar amount, as specified. FISCAL EFFECT: Appropriates $45,419,000 for State Bargaining Unit 12. COMMENTS: The following information summarizing the general provisions of the MOU was provided by CalHR: Number of Employees: SB 848 Page 9 The BU 12 agreement affects approximately 10,778 full-time equivalents. HEALTH BENEFITS 1)Employer Contribution for Active State Employees a) Effective the pay period following ratification, the state's monthly health benefit contribution for each employee shall continue to be a flat dollar amount equal to 80% 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% of the weighted average of the additional premiums. The flat dollar amounts shall be increased 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% 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% of the weighted average premium of the four largest Medicare health benefit plans based on state retiree SB 848 Page 10 enrollment. 3)Prefunding of Other Post-Employment Benefits a) The state and BU 12 members will prefund retiree healthcare with the goal of reaching 50% 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, 1.4% for a total of 1.9% of pensionable compensation. ii) Effective July 1, 2018, an additional 1.4% for a total of 3.3% of pensionable compensation. iii) Effective July 1, 2019, an additional 1.3% for a total of 4.06% of pensionable compensation. 4)Post-Employment Health and Dental Benefit 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% of the employer contribution upon completion of 15 years of state service, increasing 5% for each additional year of service, until the employee is 100% 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 SB 848 Page 11 for retiree health benefits for Medicare Part B premiums. COMPENSATION 1)General Salary Increase (GSI) a) Effective July 1, 2016, BU 12 employees shall receive a 3% GSI. b) Effective July 1, 2017, BU 12 employees shall receive a 4% GSI. c) Effective July 1, 2018, BU 12 employees shall receive a 3% GSI. 2)Special Salary Adjustments a) Effective July 1, 2016 and 2017, BU 12 employees in specified Heavy Equipment Mechanic classifications shall receive a special salary adjustment of 5%. b) Effective July 1, 2016, BU 12 employees in specified Electrician classifications shall receive a special salary adjustment of 5%. c) Effective July 1, 2016, and 2017, BU 12 employees in specified Telecommunications Technician classifications shall receive a special salary adjustment of 5%. 3)Uniform Allowance SB 848 Page 12 a) Increases the uniform reimbursement from $470 to $670 for full time employees that work for the Department of Parks and Recreation, or the California Department of Forestry and Fire Protection. b) Provides an annual footwear allowance of $82 for specified permanent full-time employees that work for the Department of Corrections and Rehabilitation (CDCR) or the California Highway Patrol. MISCELLANEOUS 1)Leave Cash Out, Additional Sick Leave, Overtime Meal Allowance, Monthly Payroll Cycle a) Increases the amount of leave that can be cashed out annually from 20 hours to 80 hours depending on the available department funds effective May 1, 2017. b) Incorporates the Wounded Warriors Transitional Leave Act to provide up to 96 hours of additional sick leave for employees hired after January 1, 2016, who are military veterans and have a service connected disability rated 30%. c) Increases the Overtime Meal Allowance from $6.00 to $8.00, effective approximately three months after ratification, for employees that work for the Department of Transportation (CalTrans) or CDCR. d) Converts all CalTrans employees to a monthly payroll cycle and provides a one-time supplemental payment SB 848 Page 13 equivalent to the employee's existing semi-monthly gross salary, not to exceed $1,200 effective approximately three months after ratification. DURATION 1)July 1, 2015 through July 1, 2019. According to CalHR, this bill results in the following costs: Fiscal Year 2016-17: $37.9 million ($12.4 million General Fund) Total Incremental Cost: $139.5 million ($44.3 million General Fund) Total Budgetary Cost: $396.9 million ($126.5 million General Fund) Analysis Prepared by: Genevieve Morelos / BUDGET / (916) 319-2099 FN: 0003431