BILL ANALYSIS
SENATE LOCAL GOVERNMENT COMMITTEE
BILL NO: AB 827 HEARING: 8/30/10
AUTHOR: De La Torre FISCAL: Yes
VERSION: 8/27/10 CONSULTANT: Detwiler
LOCAL PUBLIC EMPLOYEES (URGENCY)
Background and Existing Law
The Meyers-Milias-Brown Act governs local governments'
relations with their employees and portions of the
Education Code govern school districts and community
college districts' employee relations. These collective
bargaining and representation procedures generally do not
apply to executive employees --- county administrators,
city managers, special district managers, school
superintendents, community college presidents --- who are
employed by, and report directly to, local elected
governing boards.
The governing bodies of local agencies must ratify their
executive employees' contracts of employment in open
session and reflect those decisions in their minutes.
Copies of these employment contracts and settlement
agreements must be publicly available. When a contract
with an executive employee is terminated, the maximum cash
settlement that a local agency can pay is an amount equal
to 18 months' salary. If the executive's contract has less
than a year to run, then the amount can't exceed the
remaining expected salary. These provisions apply to
general law counties, general law cities, special
districts, school districts, and community college
districts (SB 1996, Hart, 1992).
The Ralph M. Brown Act requires local agencies' meetings to
be "open and public," with specific exceptions. For
example, a local agency's legislative body may meet in
closed session to consider the appointment, employment,
evaluation, discipline, or dismissal of an employee unless
the employee requests a public session. However, the Brown
Act prohibits local officials from taking final action in a
closed session on an unrepresented employee's compensation.
The California Public Records Act requires public records
to be open to inspection during office hours and gives
every person a right to inspect public records, with
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specific exceptions. The Act also provides the procedures
for requesting copies of public records. Among the
specific exemptions are employment contracts between public
agencies and public officials or employees.
The City of Bell's contracts with its former city manager
provided for automatic annual renewals, plus automatic
compensation increases of up to 12% a year. The contracts'
settlement agreements may exceed the statutory limits.
Proposed Law
Assembly Bill 827 prohibits a local agency's contract
executed or renewed on or after January 1, 2011 with an
"excluded employee" from containing:
An automatic contract renewal.
An automatic compensation increase that exceeds a
cost-of-living adjustment.
An automatic compensation increase that is linked
to a third-party contract, including agreements under
the Meyers-Milias-Brown Act or the Education Code's
employee relations provisions.
A severance payment greater than the amount allowed
by current law.
AB 827 requires local agencies to complete a performance
review before it can increase the compensation of an
"excluded employee." This requirement does not apply to
cost-of-living adjustments. The records, procedures, and
actions must follow current law, including the Brown Act
and the Public Records Act.
The bill defines its terms:
"Compensation" means:
o Annual salary or stipend.
o Local agency's payments for deferred
compensation or defined benefits program.
o Automobile and equipment allowances.
o Supplemental incentive and bonus
payments.
o Local agency's payments in excess of
standard benefits.
"Cost of living" is the Consumer Price Index that
applies to the local agency, as calculated by the
State Department of Finance.
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"Excluded employee" is a person who is or will be
employed by, and report directly to, a local agency's
legislative body and is not subject to the
Meyers-Milias-Brown Act or the Education Code's
employee relations provisions.
"Local agency" means a county, city, city and
county, school district, district or other local
public agency.
AB 827 contains legislative declarations in support of
applying its provisions to charter cities. The measure is
an urgency bill.
Comments
1. Pay and performance . Reacting to the City of Bell's
contracts with its former city manager, AB 827 requires all
local governments to conduct performance reviews before
hiking the compensation of their key executive staff.
Local professional leaders --- city managers, county
executives, special district managers, school
superintendents, community college presidents --- must have
performance reviews before their employers give raises and
expand benefits. The bill bans so-called "evergreen
contracts," forcing local governing boards to connect top
staffers' performance with their pay decisions. The
message behind AB 827 is plain and simple. Whether it's
the city council of a big charter city or the board of
directors of a tiny, rural public cemetery district,
governing bodies need to link their compensation decisions
to their evaluations of staff performance.
2. Home rule and local control . The California
Constitution allows cities that adopt charters to control
their own "municipal affairs." In all other matters,
charter cities must follow the general, statewide laws.
Because the Constitution doesn't define "municipal
affairs," the courts determine whether a topic is a
municipal affair or whether it's an issue of statewide
concern. Also, the California Constitution gives counties
control over their employees' compensation and the manner
of their appointment. Cities and counties answer to their
own voters and not to the Legislature. Some say that
Sacramento is in no position to tell local elected
officials how to run their agencies. Because counties and
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cities are closer to the people than the Legislature and
the Governor, compensation and personnel decisions belong
at the local level. Instead of poking into local politics,
legislators should let local voters control their elected
officials' behavior. That's why the constitutional home
rule and local control provisions exist.
3. A clear distinction . While the California Constitution
appears to give counties and charter cities control over
their employment practices, a series of court opinions
explains "that there is a clear distinction between the
substance of a public employee labor issue and the
procedure by which it is resolved." The 2009 Sonoma County
decision repeated the rule that "procedural statutes do not
conflict with the constitutional powers of local
governments." AB 827's requirement that local governing
bodies conduct performance reviews before raising the
compensation of their key executive staff appears to be a
procedural statute that's within the Legislature's power to
require. However, the Committee may wish to consider
whether the four contracting practices banned by AB 827 are
procedural or substantive. Prohibiting automatic contract
renewals, automatic compensation increases, and automatic
compensation increases linked to other contracts are
probably procedural requirements. Putting a limit on the
amount of settlement payments may be substantive.
4. Settlement agreements . In the early 1990s, reacting to
the public perception that school districts and other local
governments were granting overly-generous settlement
payments to induce unpopular executives to leave, the
Legislature reined in the practice. Under the 1992 Hart
bill, the most that local agencies can pay is an amount
equal to 18 months' salary. If the executive's contract
has less than a year to run, then the amount can't exceed
the remaining expected salary. The Hart legislation
specifically applies to general law cities and general law
counties, but does not mention charter cities and charter
counties. AB 827 goes further by prohibiting all local
governments --- including charter cities and charter
counties --- from signing contracts with executive staff
that exceed the statutory limits on cash settlements.
5. Theory and practice . In theory, AB 827 tightens local
governing boards' contracting practices with their key
executive staff. In practice, the bill may not do very
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much. Although there is no reliable statewide survey of
city managers' contracts, informal conversations with firms
that recruit top executives suggest that the City of Bell's
contract with its former city manger was unusual, perhaps
unique. Some city managers' compensation increases may be
linked to the compensation received by supervisory
employees or rank-and-file bargaining units. However,
automatic contract renewals and automatic compensation
increases are probably rare. AB 827 may be prophylactic,
preventing the spread of what many consider to be a
pernicious practice.
6. Legislative history . The Senate Local Government
Committee passed AB 827 (Yamada) on July 19, 2009 when the
bill authorized higher county recorders' fees. The August
18, 2010 amendments deleted the bill's earlier contents,
inserted the current provisions, and substituted Assembly
Member De La Torre as the bill's author. Under Senate Rule
29.10, the Senate Rules Committee referred AB 827 to the
Senate Local Government Committee for a hearing on the
bill's new contents. The author amended his bill again on
August 27, 2010. When the Committee hears AB 827 on August
30, it has three choices: (a) report the bill back to the
Senate Floor, (b) re-refer the bill to the Senate
Appropriations Committee, or (c) hold the bill.
7. Bell bills . AB 827 is not the Legislature's only
response to the City of Bell's compensation decisions and
practices which became public this summer. There are at
least six other bills, including:
SB 501 (Correa) which is pending on the Assembly
Floor.
AB 192 (Gatto) which is in the Senate Rules Committee
for re-referral.
AB 194 (Torrico) which is in the Senate Rules
Committee for re-referral.
AB 900 (de Le?n) which the Committee will also hear on
August 30.
AB 1955 (De La Torre) which the Committee passed on
August 12.
AB 2064 (Huber) which is in the Senate Rules Committee
for re-referral.
Assembly Actions
AB 827 -- 8/27/10 -- Page 6
Not relevant to the August 27, 2010 version of the bill.
Support and Opposition (8/27/10)
Support : Los Angeles County District Attorney.
Opposition : Unknown.