BILL ANALYSIS Ó SB 857 Page 1 Date of Hearing: August 10, 2016 ASSEMBLY COMMITTEE ON BUDGET Philip Ting, Chair SB 857 (Committee on Budget and Fiscal Review) - As Amended August 8, 2016 SENATE VOTE: 25-11 SUBJECT: Budget Act of 2016 SUMMARY: Makes necessary statutory and technical changes to implement the Budget Act of 2016 related to Civil Service improvement provisions. Specifically, this bill: 1) Provides legislative ratification of the memoranda of understanding (MOU) agreed to by the state and bargaining unit (BU) 7, Protective Services and Public Safety, represented exclusively by California Statewide Law Enforcement Association (CSLEA). 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 SB 857 Page 2 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 is applied. This is SB 857 Page 3 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 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 5 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). SB 857 Page 4 10) Provides that the employer contribution for active state employee health care shall be determined through collective bargaining. FISCAL EFFECT: Appropriates $38.6 million for State BU 7 for expenditure in 2016-17, in augmentation of the funds appropriated under the Employee Compensation items of the 2016 Budget Act. COMMENTS: The following information summarizing the general provisions of the MOU was provided by CalHR: Number of Employees: The BU 7 agreement affects approximately 7,204 full-time equivalents. HEALTH BENEFITS 1)Employer Contribution for Active State Employees a) The state's monthly health consolidated 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 SB 857 Page 5 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 enrollment. 3)Prefunding of Other Post-Employment Benefits a) The state and BU 7 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, 1.3% for a total of 1.9% of pensionable compensation. ii) Effective July 1, 2018, an additional 1.4% for a total of 2.7% of pensionable compensation. iii) Effective July 1, 2019, an additional 1.3% for a total of 4.0% 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 SB 857 Page 6 a) All employees first hired on or after January 1, 2017, will no longer be eligible to use the employer contribution for retiree health benefits for Medicare Part B premiums. COMPENSATION 1)General Salary Increase (GSI) a) Effective July 1, 2016, BU 7 employees shall receive a 3% GSI. b) Effective July 1, 2017, BU 7 employees shall receive a 3% GSI. c) Effective July 1, 2018, BU 7 employees shall receive a 2% GSI. 2)Special Salary Adjustments a) Effective July 1, 2016 BU 7 employees in the Public Safety Dispatcher, Public Safety Operator, and Communications Operator classifications shall receive a special salary adjustment of 5%. b) Effective July 1, 2016, BU 7 employees in the Motor Carrier Specialist I classifications shall receive a special salary adjustment of 3%. c) Effective July 1, 2016, BU 7 employees in the State Park Peace Officer (Ranger and Lifeguard) classifications shall receive a special salary adjustment of 5%. d) Effective July 1, 2016, BU 7 employees in specified SB 857 Page 7 investigator classifications shall receive a special salary adjustment of 5%. e) Effective July 1, 2016, BU 7 employees in the Agent, Alcoholic Beverage Control classification shall receive a special salary adjustment. f) Effective July 1, 2016, BU 7 employees in the Coordinator (Fire and Rescue Services, and Law Enforcement) classifications shall receive a special salary adjustment. 3)Longevity Peace Officer Pay Differential a) Effective the first day of the pay period following ratification, each step of the Longevity Pay Differential for peace officers shall be increased by 1%. 4)Education Incentive Pay a) Effective the first day of the pay period following ratification, the monthly education incentive pay shall increase from $50 to $75 for an Associate of Arts or Associate of Science Degree and from $100 to $125 for a Bachelor of Arts or Bachelor of Science Degree. 5)Uniform Allowance a) Effective the first day of the pay period following ratification, the uniform replacement allowance shall be increased as follows: i) From $640 to $950 for full-time employees in specified classifications; ii) From $540 to $640 for less than full-time employees in specified classifications; iii) From $20 to $55 for specified Lifeguards; SB 857 Page 8 iv) From $385 to $950 for Oil Spill Prevention Specialist; v) From $450 to $950 for Communications Operators employed at the Department of Forestry and Fire Protection. b) Effective the first day of the pay period following ratification, specified employees shall receive a uniform maintenance and cleaning allowance of $25 per month. c) Effective the first day of the pay period following ratification, employees in the Motor Carrier Specialist I and School Pupil Transportation Safety Coordinator classifications shall receive an annual boot reimbursement of $150. MISCELLANEOUS 1)The maximum amount of leave that can be deducted from each employee for the Union Release Time Bank shall increase from 1.5 hours to 2 hours. 2)Effective May 1, 2017, and depending on the availability of department funds, the amount of leave that can be cashed out each year shall increase from 20 hours to 80 hours. 3)Incorporates the Wounded Warriors Transitional Leave Act, which provides up to 96 hours of additional sick leave for employees hired after January 1, 2016, who is a military veteran with a service connected disability rated 30%. 4)Allows an employee to transfer up to three months of leave credits to a family member under certain conditions. 5)Removes the requirement that a new employee must work two years before receiving the full employer health contribution. SB 857 Page 9 6)Effective the first day of the pay period following ratification, the lodging reimbursement rates shall increase from $125 to $140 for Alameda, San Mateo, and Santa Clara Counties and from $150 to $250 for San Francisco. 7)Effective the first day of the pay period following ratification, the Overtime Meal Allowance shall increase from $7.50 to $8.00. 8)Requires the state to provide specified items of protective equipment based on an employee's classification and place of employment. 9)Effective the first day of the pay period following ratification, physical fitness pay shall be included in regular base pay. 10)Extends the amount of time between voluntary transfers from 12 months to 24 months for Special Agents and Special Agent Supervisors at the Department of Justice. 11)Requires Special Agents and Special Agent Supervisors at the Department of Justice who reinstate or are hired from a reemployment list to work 24 months before requesting a voluntary transfer. DURATION 1)July 1, 2015 through July 1, 2019. SB 857 Page 10 REGISTERED SUPPORT / OPPOSITION: None on file. Analysis Prepared by:Genevieve Morelos / BUDGET / (916) 319-2099