BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 2115 HEARING: 6/20/12
AUTHOR: Alejo FISCAL: Yes
VERSION: 5/31/12 TAX LEVY: No
CONSULTANT: Weinberger
HEALTH CARE DISTRICTS' EMPLOYMENT CONTRACTS
Requires local health care districts to enter into written
employment agreements to employ or contract for a hospital
administrator or chief executive officer.
Background and Existing Law
California's local health care districts are governed by
directly elected boards of directors. As hospitals, they
face market pressures to compete with other health care
providers. As local governments, they must follow the
Brown Act, the Public Records Act, the Political Reform
Act, public contracting laws, and other statutory
restrictions.
Local agencies' governing bodies 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
AB 2115 -- 5/31/12 -- Page 2
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
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.
State law allows a local health care district to enter into
a contract of employment with a hospital administrator, the
duration of which cannot exceed four years, but which may
periodically be renewed upon expiration for not more than
four years (SB 2460, Bradley, 1974)
The Salinas Valley Memorial Healthcare District was formed
more than 60 years ago to serve the City of Salinas and
other nearby Monterey County communities. In 1953, the
District opened Salinas Valley Memorial Hospital. A recent
state audit found many shortcomings in the transparency of
the District's compensation decisions. During a former
District CEO's 26 years as the health care system's top
administrator, he was not party to a written contract,
making it difficult for District board members to know what
compensation the CEO was receiving. One of the audit's
many recommendations was that the District should engage
its next permanent CEO in a written employment contract.
Proposed Law
Assembly Bill 2115 requires a local health care district
that employs or contracts for a hospital administrator or
chief executive officer to enter into a written employment
agreement with the hospital administrator or chief
executive officer, not to exceed four years, but which may
periodically be renewed for not more than four years.
State Revenue Impact
No estimate.
Comments
AB 2115 -- 5/31/12 -- Page 3
1. Purpose of the bill . The responsibility for protecting
the public's interest in a health care district's fiscal
resources lies with the district's elected board of
directors and the voters who elect them. Employing an
administrator or CEO without a written contract makes it
difficult for board members make informed decisions about
executive compensation and makes it harder for voters to
hold their elected representatives accountable for
compensation decisions. AB 2115 benefits health care
districts' directors and voters by increasing the
transparency of hospital administrators' terms of
employment and compensation.
2. Why stop there ? The transparency and accountability
benefits produced by entering into written contracts are
not unique to health care districts. Recent experience
demonstrates that other types of local governments,
including cities, school districts, and other types of
special districts, are susceptible to excessive
compensation problems, like those that were revealed by the
Salinas Valley Health Care District's audit. The Committee
may wish to consider amending AB 2115 to require all local
governments to enter into written contracts with their
executive employees.
3. Mandate . The California Constitution requires the
state government to reimburse the costs of new or expanded
state mandated local programs. Legislative Counsel says
that AB 2115 creates a new state mandated local program by
requiring a health care district to enter into a written
contract with its executive employees. Section 2 of the
bill requires the state to reimburse any costs identified
by the Commission on State Mandates.
4. Double-referral . Because AB 2115 relates to health
care districts, which are both local governments and health
care service providers, the Senate Rules Committee
double-referred AB 2115, first to the Senate Health
Committee and then to the Senate Governance & Finance
Committee. On June 13, the bill passed out of Senate
Health Committee on a 7-0 vote.
Assembly Actions
AB 2115 -- 5/31/12 -- Page 4
Assembly Local Government Committee: 9-0
Assembly Appropriations Committee:17-0
Assembly Floor: 76-0
Support and Opposition (6/14/12)
Support : Association of California Healthcare Districts;
California Nurses Association.
Opposition : Department of Finance.