BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
AB 1222 (Bloom) - Public Transit Workers
Amended: September 4, 2013 Policy Vote: PE&R: unavailable
Urgency: Yes Mandate: No
Hearing Date: September 6, 2013
Consultant: Maureen Ortiz
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 1222 exempts certain public transit workers
from the requirements of the Public Employees' Pension Reform
Act (PEPRA) until January 1, 2015, or earlier contingent on
specified events. The bill also authorizes up to $26 million in
cash flow loans from the Public Transportation Account in the
State Transportation Fund to local mass transit providers.
Fiscal Impact:
One-time start-up administrative costs of approximately
$109,000 to CalPERS and ongoing $90,000 to establish a process
for employers to provide notification of which employees will
be exempted from PEPRA, and to administer that enrollment
appropriately.
An estimate of actuarial costs/savings from exempting these
employees from PEPRA is not available as it is not known how
many employees will be affected at this time.
Loans of up to $26 million from the State Transportation Fund
to local mass transit providers, to be repaid according to
three different scenarios described under the "Proposed Law"
section of this analysis. AB 1222 requires the loans to be
repaid with interest, but allows the Director of Finance to
waive all interest charges.
Background:
1) Existing State Law :
a) Creates comprehensive public employee pension reform
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through enactment of PEPRA (and related statutory changes)
that apply to all public employers (including public
transit agencies) and public pension plans on and after
January 1, 2013, excluding the University of California and
charter cities and counties that do not participate in a
retirement system governed by state statute.
b) Under PEPRA, changed the retirement benefit plans that
may be offered to new public employees, including:
i. establishing uniform retirement formulas, including a 2%
at age 62 formula for non-safety workers;
ii. requiring a 3-year final compensation period for
determining a pension;
iii. requiring employee member contributions equal to 50% of
the normal cost of the employee's benefit plan;
iv. capping the amount of compensation that can count toward
a pension (currently approximately $113,000); and
v. restricting the pay items that may be included in
pensionable compensation.
a) Protects the vested benefits of workers employed prior
to the implementation of PEPRA and allows public workers to
collectively bargain over wages, working conditions, and
the impact of changes to their wages and working
conditions.
b) Specifies, with some exceptions, that the PEPRA
requirements (including those listed above) are applicable
to new retirement plan members who first become members on
and after January 1, 2013.
2) Existing Federal Law :
a) Protects the collective bargaining rights of specified
transit workers employed in certain transit agencies and
districts that were, mostly in the 1960's through the
1970's, converted from private to public agencies. (Many
such agencies are now included in CalPERS, 1937 Act, or
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other public retirement systems and plans.)
b) Requires, under Section 13(c) of the Federal Transit
Law, that these employee protections, commonly referred to
as "protective arrangements" or "Section 13(c)
arrangements" must be certified by the United States
Department of Labor (USDOL) and in place before federal
transit funds can be released to a mass transit employer
subject to the Federal Transit Law.
Section 13(c) requires, among other things, the
continuation of collective bargaining rights, and
protection of transit employees' wages, working conditions,
pension benefits, seniority, vacation, sick and personal
leave, travel passes, and other conditions of employment.
c) Allows the USDOL to determine if the collective
bargaining rights of an employee group protected under a
13(c) arrangement have been impaired, and if so determined,
to stop the flow of federal transportation funding until
such time as those rights have been restored.
Last year the state adopted PEPRA, which became effective on
January 1, 2013. Since that time, labor unions representing
certain public transit employees have asserted to the USDOL that
PEPRA impairs pension benefits contained in existing collective
bargaining agreements and restricts collective bargaining
rights, in violation of the protections in Section 13(c) of the
Federal Transit Act.
In response, the USDOL has withheld certification of federal
grants to California transit agencies. In response to the
USDOL action, the Secretary of the California Labor and
Workforce Development Agency outlined why he believes PEPRA does
not violate the goals and requirements of section 13(c), citing
the belief that PEPRA modifies, prospectively, certain aspects
of the defined benefit pension plan that can be offered by a
public employer while retaining the ability of current and
future employees to engage in good faith collective bargaining.
Proposed Law:
AB 1222 contains the following provisions:
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a) Makes an exemption to PEPRA for employees who are
covered by 13(c) arrangements until either:
i. a federal district court rules that the United States
Secretary of Labor erred in determining that application
of PEPRA precludes certification of federal transit
funding; or
ii. January 1, 2015, whichever is sooner.
a) Specifies that if the federal district court upholds the
determination of the United States Secretary of Labor that
application of PEPRA precludes certification of federal
transit funding, then PEPRA shall not apply to an employee
protected under a 13(c) arrangement.
b) Authorizes the Director of Finance, in coordination with
the State Controller, to provide a cash flow loan of up to
$26 million from moneys in the Public Transportation
Account in the State Transportation Fund to local mass
transit providers upon their request to the Director. The
loans shall be in an amount equal to the federal
transportation grant not received by the provider due to
noncertification by the US Secretary of Labor.
c) Requires the Director of Finance to provide a schedule
to the State Controller for the disbursement of the loan
amount for each local mass transit provider, and requires
the Controller to draw warrants against the Public
Transportation Account within 14 days of receiving the
schedule.
d) Provides a system for repayment of the loans, with
interest, under the following circumstances:
i. Within 60 days of the federal district court determining
that the US Secretary of Labor erred in its determination
to decertify federal funding.
ii. Within 60 days of the US Secretary of Labor providing
certification that result in the receipt of funds by the
local mass transit provider.
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iii. By not later than January 1, 2019, if neither of the
above contingencies have occurred.
a) Allows the Director of Finance to waive interest charges
on repayment of the loans.
b) States that a cash flow loan, as authorized in this
bill, does not constitute a budgetary expenditure and that
the loan or repayment of the loan shall not affect the
budgetary reserve.
c) States that this is an urgency statute, necessary to
preserve funding for essential infrastructure projects
while balancing the need to control the costs of pension
benefits.
Staff Comments: To the extent a public agency has employees
that are exempted from PEPRA, and as a result, those employees
receive higher retirement benefits, then that agency's potential
savings due to PEPRA will be reduced. However, the amount of
those costs will depend on the number of employees who will now
be exempted from the provisions of PEPRA.
AB 1222 will temporarily exempt local agencies' transit workers
from PEPRA, but preserves the state's ability to fight for the
pension reform law in court. The legislation also creates a $26
million state loan program to assist transit operators, such as
Sacramento Regional Transit, that are at risk of losing federal
transit grants.