BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 46 HEARING: 4/27/11
AUTHOR: Correa FISCAL: Yes
VERSION: 4/6/11 TAX LEVY: No
CONSULTANT: Detwiler
DISCLOSURE OF PUBLIC OFFICIALS' COMPENSATION (URGENCY)
Requires state and local officials to annually disclose
their compensation.
Background and Existing Law
Local Elected Officials' Salaries and Stipends
The California Constitution requires county boards of
supervisors to set their compensation by ordinance.
The California Constitution allows charter cities to
determine the process for setting the compensation of their
municipal officers and employees.
General law cities may pay salaries to their council
members, using a statutory schedule based on population.
By ordinance, a city council can increase its salaries
beyond the statutory amounts, but a raise can't exceed 5% a
year since the last increase. State law prohibits
automatic salary increases. With majority-voter approval,
city council members can receive higher or lower salaries
than the statute prescribes. Unless specifically
authorized by state law, general law cities can't provide
higher compensation for their council members' service on
other commissions, committees, boards, or authorities.
Some state laws limit the compensation that city council
members can receive when they serve on other bodies.
However, if another statute allows compensation, but does
not set an amount, state law limits the maximum amount to
$150 a month. These limits on general law cities do not
apply to what a city can provide its council members for
retirement, health and welfare, and federal social security
benefits, if the city pays the same benefits for its
employees. These limits do not apply to the reimbursement
of council members' actual and necessary expenses (AB 11,
SB 46 -- 4/6/11 -- Page 2
De La Torre, 2005).
Most special districts pay stipends to the members of their
governing boards; usually a statutorily set amount for each
meeting or each day of service. A few districts can pay
monthly salaries to their governing boards.
State law allows the governing boards of school districts
and community college districts to receive monthly
salaries, based on the districts' average daily attendance
and the counties' populations. The county boards of
education may receive monthly salaries based on their
counties' populations.
Local Executives' Contracts
The governing bodies of all local agencies, including
school districts, must ratify their executive employees'
contracts in open session and reflect those decisions in
their minutes. This requirement applies to
superintendents, deputy superintendents, assistant
superintendents, associate superintendents, community
college presidents, community college vice presidents,
community college deputy vice presidents, general managers,
city managers, county administrators, or similar chief
administrative or executive officers. Copies of these
employment contracts and settlement agreements must be
publicly available (SB 1996, Hart, 1992).
Local Officials' Expenses and Ethics Training
Counties, cities, and special districts (but not school
districts) must adopt written policies that control their
reimbursements for expenses. In addition, if a local
agency compensates its governing body or key staff, those
local officials must receive ethics training every two
years (AB 1234, Salinas, 2005).
Statements of Economic Interest
When the voters passed Proposition 9 (1974), a statutory
initiative, they enacted the Political Reform Act of 1974.
The Act requires state, county, and city elected officials
and key appointed officials to file annual statements of
economic interest that disclose their investments, property
interests, and sources of income.
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The Act also requires state agencies and local government
agencies (counties, cities, special districts, school
districts) to adopt conflict of interest codes. Each
agency's conflict of interest code must list its
"designated employees" who make decisions that may
materially affect their financial interests. These
designated employees must also file annual statements of
economic interest.
Often called the "Form 700," these statements of economic
interest are open for public inspection and copies must be
available within two business days of receipt. Conditions
cannot be imposed on persons who want to inspect or
reproduce these forms. Information or identification
cannot be required from the requester. Copying charges
can't exceed 10� a page, but a maximum retrieval fee of $5
is allowed for copies of statements that are more than five
years old.
Bell's Controversy
Starting last summer, newspapers reported compensation
controversies in the City of Bell that involving city
council members and executive staff. While Bell's city
council members received $1,800 in annual salaries for
their council service, most also received salaries for
service on the City's Public Financing Authority, Surplus
Property Authority, Housing Authority, Planning Commission,
and Community Redevelopment Agency. As a result, most of
Bell's city council members received nearly $100,000 a year
in compensation.
Bell's contract with its former city manager paid him
$23,000 for each biweekly pay period, with automatic 12%
raises if the City had a "positive cash position" in the
previous fiscal year. Among other benefits, the contract
required the City to pay for the employee's costs of PERS
membership for retirement benefits. The City agreed to
fully reimburse any expenses of the employee and his
dependents that were not covered by the City's medical,
dental, and vision insurance policies. The contract also
allowed the employee to borrow up to $80,000 from the City,
repaid with the employee's vacation leave time.
SB 46 -- 4/6/11 -- Page 4
State Controller's Reports
The State Controller must annually collect and publish
information about the financial transactions of counties,
cities, special districts, school districts, and
redevelopment agencies. Local officials must provide their
information in the time, manner, and format that the
Controller requests.
Responding to the Bell controversy, State Controller John
Chiang asked for information about local officials'
compensation and reported the results on his website. The
Controller posts results from counties, cities, and special
districts and intends to report state employees'
information in May 2011. The Controller presents each
agency's information by job classification, not by the
official's name, including:
Employee's salary range (minimum and maximum annual
salary).
Employee's total wages that are subject to Medicare
reporting (the so-called "Box 5" amount: wages,
overtime, cash and bonus payments).
Employee's defined benefit pension formula.
Employer contribution to the employee's share of
pension benefits.
Employer contribution to the employee's deferred
compensation plan.
Employer contribution to the employee's health,
dental, or vision benefits.
Proposed Law
Senate Bill 46 requires public officials to file annual
compensation disclosure forms. SB 46 applies to state,
county, and city elected officials and key state, county,
and city appointed officials who must file statements of
economic interest under the Political Reform Act. The bill
also applies to state and local officials who are
designated employees under their agencies' conflict of
interest codes.
Compensation disclosure form . By October 1, 2011, the
State Controller must adopt emergency regulations to
implement the bill's requirements. SB 46 requires the
SB 46 -- 4/6/11 -- Page 5
State Controller's regulations to include the format of the
compensation disclosure form, including:
The public agency's cost of the public official's
annual salary or stipend.
The public agency's cost to provide benefits to the
public official.
The public agency's reimbursements for the public
official's expenses.
The public agency's cost of the public official's
perquisites.
When the public official completed ethics training,
if applicable.
A public official must also disclose any amounts received
from another entity if the other governing board shares
membership with the public agency.
Filing methods . When filing the annual compensation
disclosure forms, state and local officials must follow the
Political Reform Act's procedures and deadlines.
Alternatively, if a public agency has a website, SB 46
allows the agency to compile and post the required
information for each of its public officials. If a public
agency has a website, it must post the information from its
public officials' compensation disclosure forms and, if
applicable, the agency's written policy for reimbursing
expenses.
Enforcement . A district attorney or any interested person
can file a lawsuit to compel a public official or agency to
comply with these requirements. Before filing the suit,
the district attorney or interested person must make a
written demand that clearly describes the nature of the
alleged violation. Within 30 days, the public official or
agency must either correct the alleged violation and notify
the demanding party, or inform the demanding party of its
decision not to correct the alleged violation. The bill
deems inaction within this 30-day period as a decision not
to correct the alleged violation. Within 15 days, the
demanding party must either file the lawsuit or "thereafter
be barred" from filing the suit. SB 46 requires the court
to dismiss a lawsuit with prejudice if the court determines
that the alleged violation has been corrected.
Oversight and sunset . By July 1, 2012, the State
Controller must recommend to the Governor and Legislature
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methods for compiling the information from the compensation
disclosure forms in publicly accessible databases. SB 46
requires the State Controller's recommendations to include
proposals for the establishment, operation, oversight, and
funding for these databases.
By January 1, 2018, the Bureau of State Audits may report
to the Governor and Legislature regarding the bill's
implementation and effectiveness, including the
compensation disclosure forms' accuracy, completeness, ease
of use, and timeliness.
The requirements created by SB 46 automatically terminate
on January 1, 2019, unless the Legislature extends that
date or makes the requirements permanent.
Legislative declarations . SB 46 contains legislative
findings and declarations relating to the constitutional
rights of access to information. The bill also contains
findings and declarations that the disclosure of
compensation is a statewide issue and not a municipal
affair; these requirements apply to charter cities. SB 46
is an urgency bill that takes effect when signed and
chaptered.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . The California Constitution
declares that The people have the right of access to
information concerning the conduct of the people's
business, and therefore, the meetings of public bodies and
the writings of public officials and agencies shall be open
to public scrutiny. Exposing government decisions and
documents to public review is an important ingredient of an
informed democracy because scrutiny can prevent mischief
and even corruption. As the late U.S. Supreme Court
Justice Brandeis wrote in 1913, Sunlight is said to be the
best of disinfectants. SB 46 advances public participation
and government accountability by opening to scrutiny state
and local decisions about public officials' compensation.
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Californians should be able to find out what it costs to
support their state and local officials.
2. A half-year later . "Transparency and Accountability:
Pursuing the Public's Right to Know" was the topic of the
former Senate Local Government Committee's October 20, 2010
hearing. Legislators learned from more than 20 speakers.
After the hearing, the Committee's staff found:
Unanimous support for statutory changes that will
require more public disclosure of public officials'
compensation.
General support that public officials should
disclose all forms of their compensation. However,
there was no consensus on whether public officials
should disclose their reimbursement payments, and
there were cautionary notes about privacy concerns
regarding medical benefits and worksites.
General support for requiring all public officials
to disclose their compensation. However, K-12
schools, community colleges, and the University of
California contended that the current laws are
adequate.
General support for public disclosure methods that
produce public disclosure reports which are precise,
reliable, accessible, and inexpensive.
Mixed advice on how to collect, store, and
distribute reports. Should the Legislature use the
"Form 700" approach in SB 501 (Correa, 2010) or build
on the State Controller's recent work?
After the hearing, State Controller John Chiang
posted an online database of the salaries, pensions,
and other compensation for nearly 600,000 county and
city employees.
SB 46 builds on those findings and last year's SB 501 by
requiring disclosure by state as well as local officials,
expanding the types of compensation that officials must
disclose, avoiding disclosure of information that may
compromise medical privacy and personal safety, and
producing disclosure documents that voters and public
officials can compare.
3. Three questions to ask . As they approach the debate
over disclosing public officials' compensation, legislators
may want to compare how the requirements in SB 46 differ
from the State Controller's existing compensation
disclosure program. The appendix on page 9 compares the
SB 46 -- 4/6/11 -- Page 8
SCO's program with SB 46. Legislators can organize their
thinking by exploring three broad policy questions:
Which public officials should disclose their
compensation?
What compensation should public officials disclose?
How should public officials disclose their
compensation?
4. Goose and gander . Which public officials should
disclose their compensation? The impetus for collecting
and reporting local officials' compensation may have
started with last summer's Bell controversy, but most of
the speakers at last fall's hearing called for disclosure
by all public officials. The SCO currently reports data
for counties, cities, and special districts; state
officials' information may appear in May. The SCO reports
this information by job classifications, covering all
county, city, and special district jobs, not just
executives or managers. There are no current plans for the
SCO to collect data from school districts and community
college districts. In contrast, SB 46 requires reporting
by those state and local officials who currently file
annual conflict of interest forms ("Form 700"). One
section of the Political Reform Act requires filings by
elected state, county, and city officials and by key
appointed state, county, and city officials. Among the
state officials who must file are constitutional officers,
legislators, judges, and members of the Public Utilities
Commission, the California Energy Commission, and the Fair
Political Practices Commission. Among the local officials
who must file are county supervisors, city mayors and
council members, planning commissioners, and county and
city top executives, legal counsels, treasurers, and
investment managers. In addition, the Act requires each
state and local agency to adopt a list of its designated
employees who must file annual conflict of interest forms.
This requirement affects special districts, school
districts, and community college districts, in addition to
counties, cities, and state departments. For example, all
40 State Senators must file under the first section and
about 800 Senate staffers must file because the Senate's
conflict of interest code lists them as "designated
employees." Some local agencies have adopted lists of
designated employees that reach deep into their
organization charts. The Committee may wish to consider
whether all "designated employees" should report their
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compensation. If not, who should be exempt from filing?
5. Thinking outside Box 5 . What compensation should
public officials disclose? Compensation is more than just
an official's salary or wages. Many state and local
agencies pay for some or all of the costs of benefit
programs and provide perquisites. The State Controller's
Office collects and reports the so-called "Box 5" wages,
the total wages that are subject to federal Medicare taxes
as they appear in an employee's W-2 form. Box 5 picks up
wages, cash paid for vacation and sick leave, and bonus
payments. It was a convenient number for public agencies
to report and for the SCO to collect. The SCO collects the
employer's contribution to the employee's share of pension
benefit costs, but doesn't ask for the employer's basic
contribution to the employee's pension plan. The SCO also
collects the employer's contributions to deferred
compensation plans, and health, dental, or vision benefit
plans. While useful, this information doesn't capture a
local agency's full cost of supporting its employees. In
contrast, SB 46 asks public employees to report their
agencies' costs for their salaries, their benefits, their
reimbursed costs, and "any other monetary or nonmonetary
perquisites of office." Those four items capture a broader
range of compensation than the SCO's report. However, some
observers object to requiring public officials to report
expense reimbursements. They argue that official expenses
are different from salaries, benefits, and other perks.
The Committee may wish to consider whether SB 46 should
require public officials to report reimbursements. Are
expenses part of employees' compensation?
6. Too much or too little ? How should public officials
disclose their compensation? Most of the information that
SB 46 requires is already in the public domain. The Ralph
M. Brown Act, the Public Records Act, and the Political
Reform Act already give access to information about how
much money local elected officials and key executive staff
make. Speakers at last fall's hearing wanted legislators
to pass a law that pulled these data into a single,
statewide, searchable data base. Some local officials have
grumbled about the cost of compiling compensation
information for posting on the SCO's website. SB 46 takes
a decentralized approach, requiring public officials to
file the new compensation disclosure forms the same way
that they already file their Form 700s. If an agency has a
SB 46 -- 4/6/11 -- Page 10
website, it must post the employees' compensation
disclosure information. As an alternative to individual
filings, AB 46 allows an agency to post the compensation
information on its website. The bill also requires the
State Controller to recommend methods for compiling this
information on publicly accessible databases. The
Committee may wish to consider amending SB 46 to shift the
burden of reporting from the individuals to the public
agency employers. How much would the state government have
to reimburse local agencies for that state-mandated local
program?
7. Home rule and local control . The California
Constitution requires county supervisors to set their own
compensation by adopting referendable ordinances. Cities
that adopt charters have the constitutional authority to
control their own "municipal affairs." State law already
regulates the amounts of compensation that general law
cities, special districts, and school districts can pay
their governing bodies. Some say that Sacramento is in no
position to tell communities how to run their local
governments. Because local governments are closer to the
people than the Legislature and the Governor, compensation
and personnel decisions belong at the local level. Instead
of poking into local politics, legislators should let a
community's voters control their elected officials. That's
why the constitutional home rule provision exists.
8. A clear distinction . While the California Constitution
appears to give counties and charter cities control over
employment practices, a series of court opinions explains
"that there is a clear distinction between the substance of
a public employee labor issue and the procedure by which it
is resolved." The 2009 Sonoma County decision repeated the
rule that "procedural statutes do not conflict with the
constitutional powers of local governments." SB 46's
requirement for local officials and employees to file
annual compensation disclosure statements appears to be a
procedural statute that's within the Legislature's power.
The bill doesn't control what local agencies pay their
governing bodies or their staff.
9. Looks familiar . Several of SB 46's features are
similar to existing laws. The bill's reference to written
policies for reimbursement payments relies on the 2005
Salinas bill. The timing and procedures for filing the new
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compensation disclosure forms rely on the existing
provisions of the Political Reform Act, as do the
requirements for inspecting and copying those forms. The
enforcement provisions track the Ralph M. Brown Act's civil
enforcement procedures. By putting these new requirements
within the context of existing statutes instead of creating
new procedures, SB 46 makes compliance easier for public
officials and public agencies. Many of SB 46's features
appeared in SB 501 (Correa, 2010) which died on the Senate
Floor when the Senate failed to take up the bill for
concurrence in the Assembly amendments.
Support and Opposition (4/21/11)
Support : Secretary of State Debra Bowen; American
Federation of State, County and Municipal Employees;
California Newspaper Publishers Association.
Opposition : Association of California Healthcare Districts;
Association of California School Administrators;
Association of California Water Agencies; California
Association of Clerks and Election Officials; California
State Association of Counties; California Special Districts
Association; Regional Council of Rural Counties; County of
Stanislaus; City of Lakewood.
SB 46 -- 4/6/11 -- Page 12
Appendix: Comparing Requirements for Disclosing Public
Officials' Compensation
State Controller's Office Senate Bill 46
(Correa)
Statutory authority? Gov't Code �12463 &
�53895Amends the Political Reform Act
Who reports? Counties, cities,
special districtsEveryone who files a Form 700:
State departments (May 2011) * Local
officials
* State officials
How reported? By job classificationBy
individual name
What's reported? Salary range (min/max)Agency cost
of salary/stipend
Box 5 wages (Medicare)Agency cost of
benefits
Pension formulaAgency cost of reimbursements
Employer pension contributionAgency cost of
other perquisites
Employer paid deferred compDate of last
ethics training
Employer paid benefits:
*Health, dental, vision
When reported? Annually; 2009 data filed in 2010Annually,
starting in 2012
Where filed? State Controller's OfficeSame
methods as Form 700
Internet posting? http://lgcr.sco.ca.gov Only if
agency has website, plus
SCO must recommend
database
Enforcement? SCO notifies agencies
thatMandamus or injunction, but only
fail to comply after chance to correct
Penalties? Noncompliant agencies oweCourt-ordered
SB 46 -- 4/6/11 -- Page 13
performance
forfeiture payments
Copies available? Required by Public Records
Act Required by Political Reform Act
(CD copies of spreadsheets)
Evaluation? None planned State Auditor may
evaluate in 2018
Permanent? Yes Sunsets on January 1,
2019