BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
AB 1586 (Holden) - Public contracts: priority hiring
consideration.
Amended: May 7, 2014 Policy Vote: GO 6-2
Urgency: No Mandate: No
Hearing Date: June 30, 2014
Consultant: Mark McKenzie
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 1921 would expand the requirements for
providing priority hiring consideration for state contracts for
services exceeding $200,000 by requiring contractors to hire all
qualified job applicants that receive or have exhausted
unemployment insurance (UI) benefits, and those who reside in
specified targeted employment areas (TEAs) prior to hiring any
other applicant.
Fiscal Impact:
Unknown impact on state contracting costs. There may be
increased costs to the extent that the requirements
discourage contractors from bidding on state contracts.
Reducing the pool of contractors could decrease competition
and increase contract costs. In addition, any increased
costs to the contractor related to vetting employment
qualifications and determining eligibility for the hiring
preference could be added into bid prices. (General and
special funds)
There could be reduced costs to the state (Unemployment
Fund) if the bill results in the hiring of persons currently
receiving unemployment benefits who are not also currently
recipients of aid under the California Work Opportunity and
Responsibility to Kids (CalWORKs) program.
Likely minimal cost impacts on the Employment Development
Department (EDD) because, unlike the current requirements to
notify CalWORKs recipients of available jobs, this bill does
not require EDD to notify persons residing in TEAs, or those
who receive or have exhausted UI benefits of available jobs
related to a state contract.
SB 1586 (Holden)
Page 1
Background: Existing law requires a contractor filling vacancies
funded by a state agency contract for services in excess of
$200,000 to give priority consideration to qualified recipients
of CalWORKs aid. This requirement applies to contracts for the
furnishing of equipment, materials, or supplies, and explicitly
excludes consulting services contracts and contracts for
construction projects related to state structures, buildings,
roads, or other improvements, as specified. A complementary
provision of law enacted by the same statute that added this
hiring preference (SB 487 (Greene), Chap. 1259/1984) also
requires a contractor to notify EDD of job openings associated
with state contracts, and requires EDD to notify qualified
CalWORKs recipients of the job openings and to refer them to the
contractor within five working days (Welfare and Institutions
Code 11349.2).
Existing law provides welfare services and cash aid for eligible
families under the California Work Opportunity and
Responsibility to Kids (CalWORKs) program. According to the
Department of Social Services (DSS) there were 283,166 adult
CalWORKs recipients as of April of 2014.
Existing law authorizes individuals who are currently unemployed
or working part-time to apply to EDD for UI benefits. An
unemployment claim is effective for one year and claimants can
receive 12-26 weeks of full benefits. During periods of high
unemployment, additional benefits may be granted by Congress or
the Legislature. According to EDD statistics from June of 2014,
there are more than 557,000 individuals certifying for benefits
on a regular unemployment claim in California, and there are
nearly 1,275,000 unemployed workers who have exhausted benefits.
Recently repealed statutes, the Enterprise Zone Act, defined a
"targeted employment area" as an area within a city or county
that is composed of census tracts designated by the U.S.
Department of Housing and Urban Development as having at least
51 percent of its residents of low- or moderate-income levels.
It is unknown how many Californians are residents of a TEA under
the former Enterprise Zone Act, but the San Francisco TEA alone
accounted for nearly 375,000 residents as of the 2010 census, so
it is likely that the statewide figure could be in the low
millions.
SB 1586 (Holden)
Page 2
Proposed Law: AB 1586 would require a contractor filling
vacancies funded by a state agency contract for services in
excess of $200,000 to give priority consideration to job
applicants who are one or more of the following (in addition to
CalWORKs recipients):
Receiving or have exhausted UI benefits.
Residents of specified TEAs.
The bill defines "priority consideration" as a requirement that
the contractor hire all qualified applicants, as determined by
the employer, who meets one or more of the specified criteria
and applies for a position within five working days of the job
opening being listed with EDD, before hiring any other
applicant.
Staff Comments: There is no data available to assess whether the
current hiring preference is successful at reducing the
population of Californians receiving CalWORKs benefits. There
are also no effective enforcement measures or metrics to judge
contractor compliance with the requirement to hire all qualified
CalWORKs recipients prior to hiring any other qualified
applicants. As such, there would be no way to effectively
measure whether expanding the preference to include persons
living in lower income census tracts and those currently or
formerly receiving UI benefits would provide the intended
benefits. However, to the extent that the bill results in
contractors hiring current recipients of UI benefits who are not
also CalWORKs recipients, the bill could result in some measure
of unquantifiable state savings to the unemployment insurance
program.
As noted above, SB 487 (Greene) established the hiring
preference for CalWORKs recipients, requiring contractors to
immediately notify EDD of job openings related to the contract,
and requiring EDD to notify qualified CalWORKs recipients of the
job openings within five working days. AB 1586 requires
contractors to hire all qualified persons who meet one or more
of the specified criteria and who apply for a job opening listed
with EDD within five working days, but unlike the current
requirements associated with CalWORKS recipients, this bill does
not require EDD to notify job seekers who reside in a former TEA
or those currently or formerly receiving UI benefits of the job
openings or require EDD to refer prospective applicants directly
to the contractor. The absence of this extra linkage between
employer and prospective employee may reduce the effectiveness
SB 1586 (Holden)
Page 3
of the bill. EDD indicates that the current bill would have
little fiscal impact because the department would not have the
same intermediary role for persons qualifying under the expanded
criteria as they currently provide for CalWORKs recipients. If
EDD were required to notify persons meeting the expanded
criteria for the hiring preference and refer them to
contractors, costs could be significant.
AB 1586 would dramatically expand the population of persons
qualifying for priority hiring consideration related to
specified state contracts from approximately 280,000 CalWORKs
recipients to include potentially millions of persons residing
in lower income areas and those who receive or have exhausted UI
benefits. The majority of the onus in the bill falls to the
contractors themselves. The bill would reduce the flexibility
of a contractor to make hiring decisions that may be their best
interests since they must hire all applicants who meet the
hiring preference criteria and meet minimum qualifications
before hiring any other applicant, even those with superior
qualifications, experience, or employment history. Under the
current preference, EDD notifies the contractor whether a
referred applicant is currently a CalWORKs recipient. AB 1586
would require contractors to vet all applicants to see whether
they reside in a particular qualifying census tract or whether
they receive or have exhausted UI benefits before hiring others.
Contractors may increase bid prices to account for these
extra duties, or could decide that the requirements are too
intrusive and opt not to bid on state contracts. Any state
fiscal impacts are difficult to quantify, but there could be an
overall increase in state contracting costs to the extent that
contractors increase bid prices or to the extent that the bill
discourages contractors from bidding on state contracts.
Reducing the pool of contractors could decrease competition and
increase contract costs.