BILL ANALYSIS �
AB 7
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Date of Hearing: March 30, 2011
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Warren T. Furutani, Chair
AB 7 (Portantino) - As Introduced: December 6, 2010
SUBJECT : State employment: salary freeze.
SUMMARY : Prohibits certain state employees whose annual base
salary is over $150,000 from receiving a salary increase or a
bonus until January 1, 2014. Specifically, this bill :
1)Prohibits state employees whose base salary is greater than
$150,000 per year from receiving a salary increase or a bonus,
until January 1, 2014, while employed in the same position or
classification.
2)Defines "person employed by the state" as any person employed
by the executive, legislative or judicial branches of
government, appointees to state boards and commissions, and
employees of the California State University system.
Specifies that local trial court employees are excluded from
this definition.
3)Exempts from these provisions state employees whose salaries
are governed by a Memoranda of Understanding, pursuant to a
collective bargaining agreement, a person who occupies a
classification that is deemed necessary to public safety and
security by the Governor through an executive order, or a
person whose salary is set by the State Constitution.
4)Authorizes the Controller to reject a request for a
disbursement of funds that violates these provisions.
5)Urges the University of California system to adopt this
policy.
6)Specifies that this section will remain in effect until
January 1, 2014.
EXISTING LAW :
1)Requires the Department of Personnel Administration (DPA) to
set and adjust salaries for each classification in state
AB 7
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service. DPA also has special salary setting authority for
certain statutorily exempt employees, primarily department and
agency secretaries, commissioners, and directors allowing DPA
to make salary determinations on a case-by-case basis after
considering a number of factors, including growth in the
position's stature and responsibilities, compensation paid in
similar positions in other jurisdictions, the need to avoid
salary compaction, and special recruitment needs.
2)Authorizes the California State Teachers' Retirement System
(CalSTRS) and the California Public Employees' Retirement
System (CalPERS) to set the compensation for specified key
executive and investment positions, including the chief
executive officer, system actuary, chief investment officers,
and other investment officers and portfolio managers whose
positions are designated as managerial.
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, "California is currently
grappling with a fiscal crisis. As a result of the recession
and a $25 billion plus California budget shortfall, important
state services and programs have already been cut or eliminated,
with more likely to come next year. California is continuing to
face an economic crisis that could soon leave the state without
cash to pay its expenses. Given the state fiscal crisis and
with unemployment rates in California hovering around 12%, it is
not unreasonable to place a salary freeze upon the highest paid
state employees."
Opponents state, "The California State University has serious
concerns with this proposal and its effects on the ability of
the system to govern itself and attract and retain the best
available faculty, staff and executives to lead this complex
institution through these difficult fiscal times."
The University of California is all opposed to the bill stating,
"This prohibition would directly affect the University's ability
to carry out its core educational mission of teaching, research,
and public service with the highest quality. It could
compromise UC's academic reputation nationally and
internationally with the loss of renowned faculty drawn to other
institutions that are able to offer more competitive salaries,
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including the potential for merit increases on a regular basis."
CalSTRS is concerned that imposing a salary freeze and
eliminating incentive compensation could make it very difficult
for them to recruit and retain experienced and talented staff.
Currently there are 31 CalSTRS employees whose compensation
would be limited by the bill. CalSTRS states that if they were
to lose 20% of its senior investment staff, "the board would be
required by its fiduciary responsibility to outsource more of
the portfolio management, which would cost ten times more than
current internal asset management staff, as found by a joint
CalSTRS and CalPERS study by McKinsey, which was completed in
2003."
This bill is similar to AB 53 (Portantino) from 2009 which was
held on suspense in the Assembly Appropriations Committee. It
is also similar to the following special session bills from last
session: ABX2 1 (Portantino); ABX3 80 (Portantino); and, ABX8 33
(Portantino). None of the three special session bills were
heard in committee.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
California State Teachers' Retirement System (unless amended)
California State University
University of California
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957