BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 1592|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
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THIRD READING
Bill No: AB 1592
Author: Buchanan (D), et al
Amended: 8/4/10 in Senate
Vote: 27 - Urgency
SENATE PUBLIC EMP. & RET. COMMITTEE : 6-0, 8/3/10
AYES: Correa, Ashburn, Corbett, Ducheny, Hollingsworth,
Liu
SENATE APPROPRIATIONS COMMITTEE : 8-0, 8/9/10
AYES: Kehoe, Ashburn, Corbett, Emmerson, Leno, Price,
Wolk, Yee
NO VOTE RECORDED: Alquist, Walters, Wyland
ASSEMBLY FLOOR : Not relevant
SUBJECT : State employees: memorandum of understanding
SOURCE : California Department of Forestry Firefighters
Union of American Physicians and Dentists
American Federation of State, County and
Municipal
Employees, AFL-CIO
Department of Personnel Administration
DIGEST : This bill provides legislative ratification for
memoranda of understanding between the Administration and
three state bargaining units: CDF Firefighters (Bargaining
Unit 8); Physicians, Dentists, and Podiatrists (Bargaining
Unit 16); and Health and Service Professionals (Bargaining
CONTINUED
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Unit 19)
ANALYSIS :
Existing Law
1.Establishes the Ralph C. Dills Act, which requires the
State to collectively bargain with official
representatives of employee groups (i.e., bargaining
units) regarding wages and working conditions, and to
define negotiated agreements in memoranda of
understanding (MOU).
2.Requires that any MOU between the State and an official
representative must be ratified by the Legislature.
3.Establishes the Public Employees Retirement Law, which
provides health and retirement benefits for state
employees.
4.Establishes five separate retirement classes for state
employees: State Miscellaneous and Industrial (which
receive substantially the same benefits), State Safety,
State Peace Officer/Firefighters, and State Patrol.
5.Specifies that if the provisions of certain statutes are
in conflict with an MOU, the terms of the MOU shall be
prevailing in those cases.
6.Require the Legislative Analyst's Office to analyze state
MOU's and to provide analyses of the MOUs and their
fiscal impact to the Legislature within 10 days of
receipt of the MOUs from the Department of Personnel
Administration (DPA).
This bill:
1.Provides legislative ratification for MOUs agreed to
between the State and the following State employee
representatives:
A. Bargaining Unit 8: California Department of
Forestry and Firefighters (Firefighters and
Foresters)
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B. Bargaining Unit 16: American Federation of State,
County and Municipal Employees (Physicians, Dentists
and Podiatrists)
C. Bargaining Unit 19: American Federation of State,
County and Municipal Employees (Health and Social
Services Professionals)
2.Requires new employees, as specified, to receive lower
pension benefits than current employees.
3.Requires new employees, as specified, to receive a
retirement benefit based on the highest averaged three
years of compensation, instead of the highest one year.
4.Requires all employees covered by the agreement to pay 10
or 11 percent of compensation in employee contributions
to fund retirement benefits.
5.Requires that compensation for employees covered by these
agreements shall be continuously appropriated in the
event of a late budget.
6.Includes statutory changes that apply to these bargaining
units and also state bargaining units 5, 12, and 18,
which MOUs are to be ratified in SB 846 Correa), and
makes this bill operative only if SB 846 is also passed.
7.Ratifies other terms and conditions of the MOUs, which
are summarized in the chart below:
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|Retirement |2010 Tentative |Current Requirements |
|Class and BU |Agreements | |
| | | |
|---------------+------------------------+-----------------------|
|Miscellaneous |2% at age 60 for new |2% at age 55 |
|Employees |hires | |
| | | |
|(BUs 5, 8, 12, | | |
|16, 18,19) | | |
| | | |
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|Retirement | | |
|Formula | | |
| | | |
|---------------+------------------------+-----------------------|
|Member |10% of pay after first |5% of pay after first |
|Contribution |$513 |$513 |
|to PERS | | |
| | | |
|(BUs 5, 8, 12, | | |
|16, 18,19) | | |
| | | |
|---------------+------------------------+-----------------------|
|Employer |80%/80% for employees |No statutory formula |
|Health |and dependents |for these BUs (most |
|Contribution | |other BUs have |
| | |statutory |
|(BUs 12, 18) | |formulas-either |
| | |85%/80% or 80%/80%) |
| | | |
|---------------+------------------------+-----------------------|
|Employee |.5% of base salary |No contribution |
|Contribution | |currently |
|to prefund | | |
|Retiree Health | | |
|(BUs 12, 16) | | |
| | | |
|---------------+------------------------+-----------------------|
|Vesting for |Hew hires vest for 50% |50% after 10 years, |
|Retiree Health |after 15 years, |increasing 5% annually |
|(BU 12) |increasing 5% annually |to 100% after 20 years |
| |to 100% after 25 years | |
| | | |
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|Final |BUs 12, 16, 18, 19: No change; new hires at |
|Compensation |highest 3 years since 2006 |
|Calculation | |
|for New Hires |BUs 5 and 8: New hires go to highest 3 years |
| | |
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|Personal Leave |Duration=12 months: Reduces pay by approx. |
|Program |4.8% in exchange for 1 day off per month. Time |
| |off has no cash value and can be used for |
|(BUs 12, 16, |vacation or sick leave. |
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|18, 19) | |
| | |
|---------------+------------------------------------------------|
|Pay Increase |5% increase to top step of relevant classes, |
| |effective 1/1/2012: Allows employees who are |
|(BUs 5, 8, 12, |topped out (i.e., no longer receive annual |
|16, 18, 19) |merit salary increases) to receive a 5% |
| |increase. |
| | |
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|State Safety |2% at age 55 increasing |2.5% at age 55 |
|Employees |to 2.5% at age 60 | |
| | | |
|(BUs 12, 16, | | |
|18, 19) | | |
| | | |
|Retirement | | |
|Formula for | | |
|New Hires | | |
| | | |
|---------------+------------------------+-----------------------|
|Member |11% of pay after first |6% of pay after first |
|Contribution |$513 |$513 |
|to PERS | | |
| | | |
----------------------------------------------------------------
----------------------------------------------------------------
|Final |No change: New hires at highest 3 years since |
|Compensation |2006 |
|for New Hires | |
| | |
----------------------------------------------------------------
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|Employer |80%/80% for employees |No statutory formula |
|Health |and dependents |for these BUs (most |
|Contribution | |other BUs have |
| | |statutory |
|(BUs 12, 18) | |formulas-either |
| | |85%/80% or 80%/80%) |
| | | |
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|Employee |.5% of base salary |No contribution |
|contribution | |currently |
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|to prefund | | |
|Retiree Health | | |
|(BUs 12, 16) | | |
| | | |
|---------------+------------------------+-----------------------|
|Vesting for |Hew hires vest for 50% |50% after 10 years, |
|Retiree Health |after 15 years, |increasing 5% annually |
|(BU 12) |increasing 5% annually |to 100% after 20 years |
| |to 100% after 25 years | |
| | | |
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|Personal Leave |Duration=12 months: Reduces pay by approx. |
|Program |4.8% in exchange for 1 day off per month. Time |
| |off has no cash value and can be used for |
|(BUs 12, 16, |vacation or sick leave. |
|18, 19) | |
| | |
|---------------+------------------------------------------------|
|Pay Increase |5% increase to top step of relevant classes, |
| |effective 1/1/2012: Allows employees who are |
|(BUs 12, 16, |topped out (i.e., no longer receive annual |
|18, 19) |merit salary increases) to receive a 5% |
| |increase. |
| | |
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|Firefighters |3% at age 55 |3% at age 50 |
|(BU 8) | | |
| | | |
|Retirement | | |
|Formula for | | |
|New Hires | | |
| | | |
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|Member |10% of pay after first |8% of pay after first |
|Contribution |$238 |$238 |
|to PERS | | |
| | | |
|---------------+------------------------+-----------------------|
|Final |3 Highest Years |1 Highest Year |
|Compensation | | |
|Calculation | | |
|for New Hires | | |
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| | | |
----------------------------------------------------------------
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|Pay Increase |4% increase to top step of relevant employee |
| |classes, effective 1/1/2012: Allows employees |
| |who are topped out (i.e., no longer receive |
| |annual merit salary increases) to receive a 4% |
| |increase. |
| | |
----------------------------------------------------------------
----------------------------------------------------------------
|Patrol (BU 5) |3% at age 55 |3% at age 50 |
| | | |
|Retirement | | |
|Formula for | | |
|New Hires | | |
| | | |
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|Member |10% of pay after first |8% of pay after first |
|Contribution |$863 |$863 |
|to PERS | | |
| | | |
|---------------+------------------------+-----------------------|
|Final |3 Highest Years |1 Highest Year |
|Compensation | | |
|Calculation | | |
|for New Hires | | |
| | | |
----------------------------------------------------------------
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|Pay Increase |2% increase to top step of relevant employee |
| |classes, effective 1/1/2012: Allows employees |
| |who are topped out (i.e., no longer receive |
| |annual merit salary increases) to receive a 2% |
| |increase. |
| | |
|---------------+------------------------------------------------|
|Other |Redirection of current 2% member contribution |
|Provisions |to retiree health pre-funding. This |
| |contribution shall be paid instead as employee |
| |contributions to pension until July 2013, at |
| |which time the retiree health pre-funding |
| |employee contributions shall resume. |
| | |
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| | |
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In addition, all contracts contain the following agreed
upon elements with noted exceptions:
1.No Furlough Program for the duration of the contracts
(except BUs 12 and 16; however, Governor's Executive
Order reinstating furloughs beginning August 2010 exempts
BUs 12 and 16).
2.Continuous appropriation of wages in the event of a late
budget.
3.Requirements to reopen negotiations if any other state
bargaining unit enters into a contract that does not
include pension reforms and provides a greater value than
that provided to these bargaining units (except BUs 12
and 16).
4.Agreements to delete two state holidays from the
contracts (which were already deleted in law as of
February 2009): Lincoln's Birthday and Columbus Day.
5.Premium pay (i.e., time and a half) for the following
holidays: January 1st, last Monday in May, July 4th,
first Monday in September, Thanksgiving, and Christmas.
6.Agreements by bargaining units to not oppose legislation
requiring CalPERS to use supportable assumptions and data
that will be evaluated by another party agreeable to DPA
and the bargaining units.
Specifics of MOUs
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
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1. 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).
2. 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).
3. 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).
Employee Pension Contribution
1. 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.
2.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
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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
1.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).
2.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
1.Miscellaneous and Industrial members will have their
contribution increased from 5% to 10% of the monthly
compensation over $513.
2.BU 16 state safety members will have their contributions
increased from 6% to 11% of monthly compensation over
$317.
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
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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
1.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).
2.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
1.Unit 19 Miscellaneous and Industrial members will have
their contribution increased from 5% to 10% of monthly
compensation over $513.
2.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
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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.
Additional Items Applicable to Units 8, 16 and 19
1.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.
2.The state agrees not to implement a new furlough program
for employees of Units 8 and 19 during the term of their
contracts.
3.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.
4.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.
5.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.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
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Major Provisions 2010-11 2011-12
2012-13 Fund
Unit 8:
Increase in PERS ($3,520) ($4,308)
($4,392) General
contrib. ($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 ($11,394) ($12,430)
($12,806) General
contributions ($ 1,521) ($ 1,659)
($ 1,709) Special
Salary adjustment: $0 $7,228
$14,456 General
One-time effective 1-1-12 $0 $ 965
$ 1,930 Special
Twelve days PLP ($15,305) ($ 1,391)
$0 General
($ 2,044
($ 186) $0 Special
EE health benefit $0 $0
($ 1,525) General
contribution $0
$0 ($ 204) Special
Holiday premium $ 1,453 $ 1,743
$ 1,743 General
$ 103
$ 123 $ 123 Special
Unit 19 :
Increase in PERS ($10,039) ($11,788)
($11,788) General
contributions ($ 3,646) ($ 4,258)
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($ 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
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 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
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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.
SUPPORT : (Verified 8/10/10)
California Department of Forestry Firefighters
Union of American Physicians and Dentists
American Federation of State, County and Municipal
Employees, AFL-CIO
Department of Personnel Administration
California-Nevada Conference of Operating Engineers
CPM:cm 8/10/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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