BILL ANALYSIS
AB 1699
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Date of Hearing: April 21, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1699 (Hernandez) - As Introduced: February 1, 2010
Policy Committee: P.E.R. &
S.S.Vote: 4-1
Urgency: Yes State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill provides that state employees will continue to be paid
even if a budget is not enacted by the beginning of the new
fiscal year. Specifically, the bill states that:
1)In any fiscal year in which the budget is not enacted by July
1, an amount will be continuously appropriated from the
General Fund and special funds to pay state employee salaries
and benefits.
2)If there is a memorandum of understanding (MOU) in effect, pay
and benefits will be consistent with the MOU's provisions. Pay
and benefits of excluded employees will be consistent with the
compensation package approved by the Department of Personnel
Administration (DPA) prior the beginning of the fiscal year.
3)If no MOU is in effect and/or if DPA has not approved a
compensation package for excluded employees, the compensation
payments will be at the rate in effect the prior year.
FISCAL EFFECT
Assuming that under current law most state employees would
receive only minimum wage during late budget periods (then
receive full reimbursement once the budget is signed), the bill
would have the following fiscal impacts on the state:
1)The continuous appropriation of full wages could reduce the
amount of funds that would otherwise earn pooled money
interest, and increase the state's need to borrow to meet its
cash flow needs.
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As an illustration, a two-month delay in the budget's
enactment would reduce interest earnings by about $2.5 million
(of which about one-half would be attributable to the GF).
2)During periods in which the state is facing particularly
severe cash-flow shortfalls, the bill could significantly
curtail short-term cash-management options. This would occur
because the state would be precluded from deferring about $300
million in monthly GF expenditures.
COMMENTS
1)Rationale. The bill seeks to ensure that state employees
receive their full salary in the event a budget is not passed
in a timely manner. Proponents (including representatives of
the state's bargaining units) argue that the recent Supreme
Court decision leaves state workers vulnerable to sharply
reduced pay during late budget periods. They assert that the
measure is of particular importance given that workers are
already facing financial hardship due to furloughs.
2)Background . The California Constitution requires the
Legislature to pass a budget bill by June 15 for the fiscal
year commencing the following July 1. The state Constitution
also specifies that money can be drawn from the Treasury only
through an appropriation made by law (either through the
budget act or separate legislation).
In past years, most state workers have been paid during
late-budget periods due to various court rulings and
interpretations of law. In 2005, however, the California
Supreme Court upheld an appellate court decision that ruled
state workers who are paid by the hour and don't work overtime
in a particular pay period, are entitled only to the federal
minimum wage if the state enters a new fiscal year without a
budget. The controller opined at the time that the Supreme
Court decision left him with the authority to decide how much
to pay state employees. He argued that, because decisions on
overtime cannot be made in advance, he would have to pay all
workers in full or risk violating the law.
However, in July 2008, the governor ordered state workers' pay
to be reduced due to the lack of a budget. When the controller
did not implement the order, the administration filed suit
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arguing that the law compelled the controller to pay the
federal minimum wage absent an on-time budget. The court found
in favor of the governor, stating that, 'while state workers
have the ultimate right to their full wages, the law does not
authorize the full pay until the money is appropriated in the
state budget.
3)Related Legislation. This bill is similar to AB 1523 (Soto) of
2007 and AB 1125 (Hernandez) of 2009, both of which were held
under submission by this committee, and to AB 790 (Hernandez
and Ruskin) which is currently pending action on the Senate
floor. SB 1864 (Strickland), also before this committee,
provides continuous appropriations for certain Medi-Cal
payments during late budget periods.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081