BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1592 (Buchanan)
Hearing Date: 08/09/2010 Amended: 08/04/2010
Consultant: Maureen Ortiz Policy Vote: PE&R: 6-0
_________________________________________________________________
____
BILL SUMMARY: AB 1592, an urgency measure, ratifies the
Memoranda of Understanding between the state and Bargaining Unit
8 (CDF Firefighters), Unit 16 (Physicians, Dentists, and
Podiatrists), and Unit 19 (Health and Service Professionals).
_________________________________________________________________
____
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Unit 8:
Increase in PERS contrib. ($3,520) ($4,308)
($4,392)General
($4,617) ($5,652) ($5,763) Special
Salary adjustment: $0 $3,058 $6,116 General
One-time effective 1-1-12 $0
$4,013$8,026 Special
Unit 16 :
Increase in PERS contrib. ($11,394) ($12,430)
($12,806) General
($1,521) ($1,659)
($1,709) Special
Salary adjustment: $0 $7,228 $14,456
General
One-time effective 1-1-12 $0 $965
$1,930Special
Twelve days PLP ($15,305)
($1,391)$0 General
($2,044)($186)
$0 Special
EE health benefit contribution $0
$0($1,525) General
$0
$0 ($204) Special
Holiday premium $1,453 $1,743 $1,743 General
$103
$123 $123 Special
Unit 19 :
Increase in PERS contrib. ($10,039) ($11,788)
($11,788) General
($3,646)
($4,258) ($4,258) Special
Salary adjustment $0 $3,226
$6,452 General
One-time effective 1-1-12 $0 $1,165
$2,330 Special
Twelve days PLP ($13,666) ($1,242) $0
General
($4,937)
($449) $0 Special
Holiday premium $1,236 $1,484
$1,484 General
$208
$249 $249 Special
Total net costs/savings: ($67,689) ($20,109) $464
_________________________________________________________________
____STAFF COMMENTS: This bill meets the criteria for referral to
the Suspense file.
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AB 1592 (Buchanan)
First year savings from the ratification and implementation of
the MOUs for Units 8, 16, and 19 are approximately $67.6 million
of which $51.2 million result in savings to the General Fund.
The net fiscal impact for FY 2011-12 is a total savings of
approximately $20.1 million; and about $464,000 in costs for FY
2012-13. The costs shown above for salary increases that are
effective January 1, 2012 have been adjusted from the estimates
provided by the Department of Personnel Administration (DPA)
because those estimates were based upon 100% of the employees in
each of the affected bargaining units being at the top of their
pay scale and, consequently, eligible for the salary increase.
Since it is more likely that between 50% and 80% of these
employees are at the top of their pay scales, the estimates
provided in this analysis are based on the assumption that 80%
of the employees will be eligible for the step increase.
In addition, there will be potentially millions of dollars in
savings in future years as new state employees are hired after
the implementation date of this legislation and will be subject
to a significantly lesser retirement benefit formula. Those
savings, however, have not been actuarially identified at this
time, and will not be realized to the state until those affected
new employees retire. The contracts being ratified for Units 8,
16, and 19 will increase the employee's contribution by either
4% or 5% which will ultimately result in a corresponding
reduction in the state rate. According to CalPERS, if all
state employees were required to contribute an additional 5%
toward the pension fund, the potential savings to the General
Fund in FY 2010-11 would be approximately $500 million.
There will be additional long-term future savings from the
adjustment in final compensation for employees of Unit 8 from
the highest one-year salary to the highest three-year
compensation.
BARGAINING UNIT 8 - CDF Firefighters
There are approximately 4,627 full-time equivalents in Unit 8
that represents state firefighters. The terms of this contract
extend from July 1, 2010 through July 1, 2013. The MOU contains
the following provisions:
Retirement Benefit Formula
- Peace Officers/Firefighter (POFF) members first employed
effective October 31, 2010 will be subject to a retirement
formula of 3% at age 55 (from the current 3% at 50).
- Miscellaneous and Industrial First Tier first members
employed effective October 31, 2010 will be subject to a
retirement formula of 2% at age 60 (from the current 2% at 55).
- For all new employees in Unit 8 that are hired after October
31, 2010, retirement benefits will be calculated based on the
employees' highest consecutive 36 month salary (from the current
highest 12 month).
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AB 1592 (Buchanan)
Employee Pension Contribution
- Members of POFF will have their pension contribution
increased from 6% to 10% of monthly compensation over $238
effective September 1, 2010 or the pay period following
enactment of this legislation, whichever is later.
- Miscellaneous and Industrial members will have their pension
contribution increased from 5% to 10% of monthly compensation
over $513.
Adjusted Pay Ranges
- Effective January 1, 2012 all members of Unit 8 subject to
POFF retirement will have the maximum step of the pay range
increased by 4%, and members of the state Miscellaneous
classification will have the maximum step increased by 5%. This
increase will only apply to employees who reach the top step of
the pay range.
BARGAINING UNIT 16 - UNION OF AMERICAN PHYSICIANS AND DENTISTS
There are approximately 1,941 full-time equivalents in Unit 16
representing physicians, surgeons, and psychiatrists who work in
institutionalized settings such as prisons and state hospitals.
The terms of this contract extend from July 1, 2010 through July
1, 2012.
Retirement Benefit Formula
- Effective the first pay period following legislative
enactment, BU 16 state safety retirement members first employed
by the state will be subject to a retirement formula of 2% at
age 55 (from the current 2.5% at 55).
- Effective the first pay period following legislative
enactment, Miscellaneous and Industrial First Tier members first
employed by the state will be subject to a formula of 2% at age
60 (from the current 2% at 55).
Employee Pension Contribution
- Miscellaneous and Industrial members will have their
contribution increased from 5% to 10% of the monthly
compensation over $513.
- BU 16 state safety members will have their contributions
increased from 6% to 11% of monthly compensation over $317.
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AB 1592 (Buchanan)
Adjusted Pay Ranges
- Effective January 1, 2012, the classification for members of
Unit 16 will be adjusted by increasing the maximum step of the
pay range by 5%. This salary increase will only apply to
employees who reach the top step of the pay range.
Personal Leave Program
- All Unit 16 employees will receive one personal leave day per
month for twelve months and will realize a reduction in salary
equivalent to 4.6% of pay for that one year.
Pre-Funding of Retiree Health Benefits
Effective July 1, 2012, all Unit 16 employees will contribute
0.5% of base salary towards pre-funding their retiree health
benefits.
Miscellaneous Items
- The agreement provides four hours of administrative time off
for working on New Year's Day, Memorial Day, Fourth of July,
Labor Day, Thanksgiving, and Christmas.
BARGAINING UNIT 19 - Health and Social Services Professionals
(AFSCME)
There are approximately 4,640 full-time equivalents in Unit 19
representing health and social services professionals such as
psychologists, rehabilitation therapists, pharmacists, social
workers, and others. The terms of this contract extend from
July 1, 2010 through July 1, 2012.
Retirement Benefit Formula
- Effective the pay period following legislative enactment,
Unit 19 Miscellaneous and Industrial members first employed by
the state will be subject to a retirement formula of 2% at age
60 (from the current 2% at 55).
- Effective the pay period following legislative enactment Unit
19 state safety members first employed by the state will be
subject to the formula of 2% at age 55 (from the current 2.5% at
55).
Employee Pension Contribution
- Unit 19 Miscellaneous and Industrial members will have their
contribution increased from 5% to 10% of monthly compensation
over $513.
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AB 1592 (Buchanan)
- Unit 19 state safety members will have their contribution
increased from 6% to 11% of their monthly compensation over
$317.
Adjusted Pay Ranges
- Effective January 1, 2012, all Unit 19 classifications will
be adjusted by increasing the maximum step of the pay range by
5%. Only employees who have reached the top step of the pay
range will be eligible for the salary increase.
Personal Leave Program
- Effective with the first pay period following legislative
enactment, employees of Unit 19 will receive one day leave per
month for twelve months, and will be subject to an equivalent
salary reduction of approximately 4.6% of pay.
Miscellaneous Items
- Employees covered under the Fair Labor Standards Act will
receive one and one-half times the regular rate of pay for each
hour worked on January 1, Memorial Day, July 4th, Labor Day,
Thanksgiving, or Christmas.
Additional Items Applicable to Units 8, 16, and 19:
-- To ensure the sustained funding and solvency of the
retirement system, Unit 8, Unit 16, and Unit 19 agree not to
oppose legislation that requires CalPERS to use supportable
assumptions and data that will be evaluated by another party who
is agreeable to DPA and Units 8, 16, and 19.
- The state agrees not to implement a new furlough program for
employees of Units 8 and 19 during the term of their contracts.
- Units 8, 16, and 19 retain the right to reopen the economic
provisions of their contracts if any other state bargaining
units enter into an agreement that does not include pension
reform, and provides a great value than that provided in these
MOUs.
- The state and Units 8, 16, and 19 agree to delete Lincoln's
Birthday and Columbus Day from the list of holidays that receive
holiday-in-lieu designation.
- The state agrees to the continuous appropriation of funds to
cover the economic terms of this agreement in the event that the
state budget is not enacted by July 1 of each year during the
contract periods.
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AB 1592 (Buchanan)
The Ralph C. Dills Act requires that the economic provisions of
collective bargaining agreements that are negotiated between the
state and bargaining units must be ratified by the Legislature.
Staff notes that the three agreements ratified by AB 1592 were
reached on the following dates: Unit 8 on June 16, 2010; Unit
16 on June 25, 2010; and Unit 19 on June 16, 2010 and were
presented to the Legislature at that time. Pursuant to Chapter
499, Statutes of 2005 (SB 621, Speier), the Legislative
Analyst's Office prepared and distributed an analysis of this
MOU on July 14, 2010. Senate Rule 29.4 requires the final
version of an MOU to be available to the Legislature for 7
legislative days before the Senate may act on the MOU. These
MOUs between the state and Bargaining Units 8, 16, and 19 have
been delivered in sufficient time to be acted upon by the
Senate.
The Alternate Retirement Program requires employees during their
first twenty four months of employment to contribute 5% or 6% of
the monthly compensation to this separate fund. During this two
year period, neither the employee's contribution nor any
contribution by the state, are paid into CalPERS. At the end of
the two year period, the employee is then given the option of a
return of his or her contributions, or of using those
contributions to purchase service credit for those two prior
years. If the employee chooses to "buy-back" those two years,
the state must then also make a corresponding contribution. AB
1592 increases the amount the employee pays to the Alternate
Retirement Program to the same amount that employees in the same
employment classifications in the same state bargaining units
are required to contribute to CalPERS.
Staff notes that the fiscal estimates do not include costs and
savings applicable to excluded employees of the affected
bargaining units which have been calculated as part of the cost
of MOUs ratified in prior years. It is the intent of the
Administration to seek separate legislation pertaining to the
retirement formula, employee compensation and other items for
excluded employees such as managers, supervisors, and others
since statutory changes will be needed for their implementation.
AB 1592 contains statutory provisions that are necessary to
implement the increase in employer contribution rates, the new
retirement formulas, and the continuous appropriation for
employee compensation that relate to the state bargaining units'
contracts that are ratified in this bill, as well as those
pertaining to Unit 5, Unit 12, and Unit 18 which are ratified by
SB 846 (Correa). SB 846 is currently pending in the Assembly.
Furthermore, AB 1592 will not become operative unless SB 846 is
also enacted and takes effect on or before January 1, 2011.