BILL ANALYSIS �
AB 2332
Page 1
Date of Hearing: April 8, 2014
ASSEMBLY COMMITTEE ON JUDICIARY
Bob Wieckowski, Chair
AB 2332 (Wieckowski) - As Amended: March 27, 2014
As Proposed to be Amended
SUBJECT : COURTS: PERSONAL SERVICES CONTRACTS
KEY ISSUE : IN ORDER TO PROTECT THE INTEGRITY OF OUR COURTS AND
ENSURE THAT SCARCE JUDICIAL RESOURCES ARE SPENT EFFICIENTLY,
SHOULD TRIAL COURTS COMPLY WITH DUE DILIGENCE STANDARDS BEFORE
PRIVATIZING WORK DONE BY TRIAL COURT EMPLOYEES?
SYNOPSIS
Unless specified conditions are satisfied, nearly all government
entities in California are restricted from contracting out
functions customarily done by public employees. These
requirements are designed to ensure that not only is the work
done cost-effectively, but that the public interest in the
particular government function remains paramount. As a general
rule, work performed for the state must be done by state
employees unless the proposed contract for personal services
meets specified criteria, including a clear demonstration of
cost savings. Schools and community college districts are also
reasonably required to comply with the same standards that apply
to state departments. Three years ago, the Legislature passed,
and the Governor signed, almost identical due diligence
standards for public libraries in AB 438 (Williams), Chap. 611,
Stats. 2011. This bill, sponsored jointly by the Service
Employees International Union (SEIU) and the American Federation
of State, County and Municipal Employees (AFSCME), extends these
same due diligence protections to the trial courts and their
employees, but with 10 exemptions to ensure that courts can
function effectively and efficiently in these difficult budget
times.
As proposed to be amended, this bill is co-authored by
Assemblymembers Alejo, Chau, Dickinson, Garcia, Muratsuchi,
Rendon, Skinner, Stone, and Williams, and is supported by
numerous labor organizations. This bill is substantially
similar to last year's AB 566 (Wieckowski), which passed the
Legislature but was vetoed by the Governor. However, the bill
AB 2332
Page 2
has been narrowed to address concerns raised by the Governor.
SUMMARY : Requires courts to comply with specified requirements
before contracting out services currently or customarily
performed by trial court employees. Specifically, this bill :
1)Provides that if a trial court seeks, on or after January 1,
2015, to enter into a contract, or renew or extend an existing
contract, for services currently or customarily performed by
trial court employees, all of the following apply:
a) The contract may not be approved if, in light of the
services provided by the trial courts and the special
nature of the judicial function, it would be inconsistent
with the public interest to have the services performed by
a private entity.
b) The court clearly demonstrates that the contract will
result in actual, overall cost savings to the court for the
duration of the contract, considering specified factors, as
provided.
c) The contract shall not be approved solely on the basis
that savings will result from lower contractor pay rates or
benefits, provided the contract is eligible for approval if
the contractor's wages are at the industry standard and do
not undercut trial court pay rates.
d) The contract does not cause existing trial court
employees to lose employment, as provided.
e) The contract is awarded through a competitive bidding
process.
f) The contract provides for qualified staff, and the
contractor's hiring practicing are nondiscriminatory.
g) The contract allows for immediate termination by the
trial court, without penalty, for material breach.
h) For contracts over $100,000, requires the contract to
(i) disclose specified information, (ii) provide measurable
performance standards; and (iii) require a performance
audit and a cost audit be done and considered prior to any
contract renewal.
i) The contract is limited to no more than five years.
2)Does not preclude a trial court or the Judicial Council from
adopting more restrictive rules regarding contracting of court
services.
3)Provides that the requirements for contracting out in #1)
AB 2332
Page 3
above, do not apply to:
a) Contracts between a trial court and another trial court
or a local government entity for services to be performed
by employees of that trial court or local government
entity;
b) Contracts for a new trial court function for which the
Legislature has specifically mandated or authorized the
performance of the services by independent contractors;
c) Services contracted for that are of such a highly
specialized or technical nature that necessary expertise
cannot be obtained from court employees;
d) Services incidental to a contract for purchase of
property, except for contracts to operate equipment or
computers (other than service or maintenance agreements);
e) Contracts needed to protect against conflict of interest
or ensure independent unbiased findings;
f) Emergency situations;
g) Training courses when qualified instructors not
available from court employees;
h) Services that are of such an urgent, temporary or
occasional nature that delay in hiring employees would
frustrate their very purpose, but this provision does not
apply to court reporters, except individual pro tempore
court reporters may be used as appropriate;
i) Contracts for services with individuals with
developmental disabilities pursuant to rehabilitation
programs; and
j) Contracts for services of court interpreters.
4)Requires each trial court that enters into a personal services
contract between July 1, 2014, and January 1, 2015, with a
term beyond March 1, 2015, to report to the Legislature by
February 1, 2015, on the contract, as provided. States the
intent of the Legislature to consider reducing future budget
appropriations to a trial court if such a contract would not
have been allowed under the terms set forth in #s 1) and 3),
above.
5)Contains a severability clause.
EXISTING LAW :
1)Provides that employees of the state be appointed through the
civil service system. (Cal. Constitution, Article VII,
AB 2332
Page 4
Section 1.)
2)Limits personal service contracts (contracting out) for work
done by state employees to when specified conditions are
satisfied, including:
a) The contracting state agency clearly demonstrates actual
overall savings.
b) The contract savings are not the result of lower
contractor pay rates or benefits, provided the contract is
eligible for approval if the contractor's wages are at the
industry standard and do not undercut existing pay rates.
c) The contract does not cause displacement of state civil
service employees.
d) The amount of the savings clearly justifies the
agreement.
e) The contract is awarded through a competitive bidding
process.
f) The potential for future economic risk for the state
from the contractor is minimal.
g) The potential economic advantage of contracting out is
not outweighed by the public's interest in having a
particular function performed directly by the state.
(Government Code Section 19130(a).)
3)Permits contracting out of work done by state employees in
limited specified situations, including new state functions,
services that cannot be performed within civil service, and
emergency situations. (Government Code Section 19130(b).)
4)Prevents a school district or community college district from
contracting out services currently or customarily performed by
classified employees, unless conditions similar to those set
out in #2), above, are satisfied. (Education Code Sections
45103.1 and 88003.1.)
5)Prevents, until January 1, 2019, a city or library district
from withdrawing from a county free library system and
operating libraries with a private contractor, unless
conditions similar to #2), above, are satisfied. (Education
Code Section 19104.5.)
6)Allows a county to contract out for "special services," as
provided. (Government Code Section 31000.)
AB 2332
Page 5
FISCAL EFFECT : As currently in print this bill is keyed fiscal.
COMMENTS : Nearly all government entities in California are
restricted from contracting out functions customarily done by
public employees, unless specified conditions are satisfied.
These requirements are designed to ensure that not only is work
done cost-effectively, but that the public interest in
government activities remains paramount. As a general rule,
work performed for the state must be done by state employees
unless the proposed contract for personal services meets
specified criteria, including a clear demonstration of cost
savings. Schools and community college districts are also
required to comply with the same standards that apply to state
departments. Three years ago, the Legislature passed, and the
Governor signed, almost identical provisions to limit the
privatization of public libraries in AB 438 (Williams), Chap.
611, Stats, 2011. This bill, jointly sponsored by SEIU and
AFSCME, seeks to extend these same due diligence protections to
the trial courts. This bill is substantially similar to the
author's AB 566 from last year, which passed the Legislature but
was vetoed by the Governor.
The author writes that this bill is necessary not only to ensure
that scarce court resources are used as effectively and
efficiently as possible, but also to protect the very integrity
of the judicial process: "AB 2332 is consistent with the law
today for the state, school districts, community colleges, and
our libraries. This bill simply puts the trial courts on par
with other important government functions by ensuring that our
tax dollars are accountable and that the public's interest in
fair and judicious courts is considered before privatizing
critical court functions."
Under this bill, if a trial court intends to privatize a
function that is currently or customarily performed by trial
court employees, the court must first:
Protect the public interest in judicial integrity: The
contract cannot be approved if, in light of the services to
be provided by the trial court and the special nature of
the judiciary, it would be inconsistent with the public
interest to have the services covered by the contract
performed by a private entity.
Demonstrate cost savings: The court must clearly
AB 2332
Page 6
demonstrate that the contract will result in actual,
overall cost savings to the court.
Show savings not solely from reduced wages and that
employees will not be displaced: The contract savings may
not be solely the result of lower contractor pay rates or
benefits, but may be approved if the contractor's wages are
at the industry standard. The contract may not cause
existing trial court employees to be displaced.
Use competitive bidding: The contract must be awarded
through competitive bidding.
Provide for staff qualifications and hiring: The
contract must provide qualifications of staff, and the
contractor's hiring practices must be nondiscriminatory.
Allow for contract termination: The contract allows for
immediate termination by the trial court, without penalty,
for material breach of contract.
Protect the integrity of the process: For contracts
over $100,000:
o A contractor must make specified disclosures
regarding criminal or administrative charges against the
contractor.
o The contract must include specific, measurable
performance standards and require both a performance
audit and a cost audit before renewing or extending the
contract.
Limit contract duration: The contract is limited to no
more than five years.
The bill's author notes that these requirements are necessary
and appropriate to ensure that any private contract both results
in actual savings for the court and retains the integrity of the
judicial system. One of the sponsors, AFSCME, states succinctly
that these requirements provide "an efficient way of evaluating
whether privatizing trial court jobs is in the best interest of
the state."
These Requirements Are Nearly Identical to Requirements that
Already Apply Today to the State, and to Schools, Community
Colleges, and Libraries : The due diligence requirements in this
bill are, almost verbatim, identical to requirements today that
apply to all state agencies, as well as schools, community
colleges and libraries. Like the courts, these entities, with
the exception of the libraries, receive the bulk of their
funding from and through the state.
AB 2332
Page 7
Indeed, contracting out work performed by state employees is
even more limited than what is proposed by this bill. The state
constitution and case law make clear that, before considering
the due diligence standards, work done by state employees may
only be contracted out to private companies if it fits into
certain allowable exceptions. One exception is that the work
represents a legislatively created "new state function" that
does not displace existing civil service functions.
(Professional Engineers v. Dep't of Transportation (1993) 13
Cal.App.4th 585, 593.) Another exception is that the "nature of
the services" is such that they cannot be performed adequately,
satisfactorily or competently by state employees. (Burum v.
State Compensation Ins. Fund (1947) Cal.2d 575, 582.)
Similar to restrictions on state agencies, the Attorney General
has opined that general law counties (the vast majority of
California counties are general law counties, although the
larger ones tend to be charter counties), may not, solely to
save money, contract out personal services for work that is
provided by civil service employees. (76 Ops. Cal. Atty. Gen.
86 (1993).) However, there is statutory authority to contract
out for enumerated "special services," but even then only with
those specifically trained, experienced and expert to perform
those services. Unlike the limitation for general law counties,
this bill does not in its current form prevent courts from
contracting out non-"special services." It simply requires due
diligence standards before permitting courts to contract out
judicial functions.
The Bill Provides 10 Exemptions to Ensure That Courts Can
Operate Effectively and Efficiently : In order to ensure that
the trial courts can operate effectively, the bill provides 10
exemptions that permit contracting out of court services without
having to go through the due diligence review outlined above.
These exemptions, which are similar to exemptions provided to
some other government entities, are:
Contracts with other governmental entities: Contracts
between a trial court and another trial court or a local
government entity for services to be performed by employees
of that trial court or local government entity;
New functions: Contracts for a new trial court function
for which the Legislature has authorized that services be
performed by independent contractors;
Technical services: Services contracted for that are of
AB 2332
Page 8
such a highly specialized or technical nature that
necessary expertise cannot be obtained from court
employees;
Purchase of property: Services incidental to a contract
for purchase of property, except for contracts to operate
equipment or computers (other than service or maintenance
agreements);
Conflict of interest: Contracts needed to protect
against conflict of interest or ensure independent unbiased
findings;
Emergencies: Emergency situations;
Training: Training courses when qualified instructors
not available from court employees;
Urgent, temporary or occasional services: Services that
are of such an urgent, temporary or occasional nature that
delay in hiring employees would frustrate their very
purpose, but this provision does not apply to court
reporters; however, individual pro tempore court reporters
may be used as appropriate;
Developmentally disabled individuals: Contracts for
services with individuals with developmental disabilities
pursuant to rehabilitation programs; and
Court interpreters: Contracts for services of court
interpreters.
Now More Than Ever Scare Court Resources Must Be Expended
Prudently to Help Ensure Justice for All : Historically, trial
courts in California were county entities, funded by the
counties, but in 1997, after significant problems came to light
with the county-based court funding model, the Legislature
passed the Lockyer-Isenberg Trial Court Funding Act, AB 233
(Escutia and Pringle), Chap. 850, Stats. 1997. Under that bill,
the state assumed responsibility for funding the courts and
helping ensure equal access to a quality judicial system
statewide. After the state took over funding, the courts
received significant funding increases and historically
underfunded courts saw greater increases. Unfortunately, the
recession forced significant reductions in state General Fund
support for the courts, but "one-time" fixes, backfills and new
revenues have, to date, spared the court system the full brunt
of the General Fund reductions.
Nevertheless the state's trial courts and their employees, and
all court users in the state, have been experiencing tragic
reductions in court services and basic access to justice. Trial
AB 2332
Page 9
courts have been taking dramatic and painful steps to address
the budget cuts, including (1) closing courthouses and
courtrooms, some on selected days and others completely; (2)
laying off or furloughing employees; and (3) reducing services,
including substantial cuts to self-help and family law
facilitator assistance, and providing fewer court reporters and
court interpreters. While this year's budget increased trial
court funding by $60 million and the Governor's budget for
2014-15 includes an additional $100 million for the trial courts
on top of this year's $60 million, some of the one-time fixes
are expiring. As a result, it is anticipated that courts may be
looking for additional ways to reduce expenditures, unless there
is a hoped-for, needed infusion of additional funds. Courts may
therefore understandably be tempted to consider contracting out
important court functions in an attempt to reduce expenses. If
this is the case, it is important to ensure that such
contracting out will actually save the courts money and continue
to strongly protect the integrity of the judicial system.
According to the author, this bill proposes to do exactly that.
Concerns Raised by Recent State Audits of Judicial Branch
Procurements : The 2011 public safety budget trailer bill, SB 92
(Committee on Budget and Fiscal Review), Chap. 36, Stats, 2011,
mandated that the State Auditor audit the trial courts and the
Administrative Office of the Courts (AOC) on a regular basis.
Last year, the Auditor did a pilot audit on the goods and
services procurement practices of six trial courts and reported
its findings in Judicial Branch Procurement: Six Superior Courts
Generally Complied With the Judicial Branch Contracting Law, but
They Could Improve Some Policies and Practices (March 2013).
While noting that the six courts audited - Napa, Orange,
Sacramento, Stanislaus, Sutter and Yuba - "generally
demonstrated good contracting practices," the Auditor uncovered
instances where courts used sole-source contracts for which
there was no justification, managers approved contracts for
amounts above their authority, and inaccurate cost data were
reported. The audit summed up the problems: "Each of the
issues described here appears to be an isolated lapse in policy
rather than a systemic failure. However, when courts do not
comply with the judicial contracting manual and other state
procurement requirements, they risk not receiving the best price
for goods and services." (Id. at 3.) Clearly, creating more
transparency and more accountability before contracting out for
services should help ensure that the courts receive the best
price.
AB 2332
Page 10
The State Auditor again audited the AOC and the courts late last
year and again discovered procurement problems, noting that some
courts "did not consistently use a competitive process to
procure goods and services. . . . [F]our of the judicial
entities could not demonstrate that they competitively procured
goods or services in five of the 15 instances we reviewed for
which competition was required." The State Auditor also found
that the AOC did not always correctly evaluate bids for
competitive procurements and "the AOC and the judicial entities
did not properly document their justifications for using
sole-source procurements rather than a competitive process in
nine instances totaling $1.6 million." (State Auditor,
Semiannual Reports to the Legislature Are of Limited Usefulness,
Information Systems Have Weak Controls, and Certain Improvements
in Procurement Practices Are Needed 2 (December 2013).)
In this latest audit, the State Auditor uncovered "pervasive
weaknesses in the general controls-which include the key control
categories of security management, access controls, and
contingency planning- that affect the AOC's and superior courts'
information systems, including Oracle and Phoenix. We also
noted deficiencies in the Phoenix application's general controls
related to access and business process application controls
related to procurement and accounts payable activities. The
results of our review indicate that there is an unacceptably
high risk that reliance on data from the applications the AOC
and superior courts currently use to perform their day-to-day
operations could lead to an incorrect or improper conclusion."
(State Auditor letter to the Governor, President pro Tempore of
the Senate and Speaker of the Assembly (March 2014).) The State
Auditor was concerned enough about these deficiencies to have
sent a special letter to the Governor and legislative leaders
about this just last month: "We are issuing this letter because
we believe it is important that the governor and Legislature be
made aware of the specific details related to the weaknesses we
identified." (Id.)
Placer Court Has Contracted Out All of Its Court Reporting,
Although it is Unclear if There Are Any Savings : In 2012, the
Placer Superior Court went so far as to lay off all its court
reporters and contract out all of their work to private court
reporters. The Placer Court states that the contract resulted
in $600,000 in savings in the 2013-14 fiscal year. However,
according to the sponsors, court employees agreed to reduce
AB 2332
Page 11
their wages and benefits to the level of the private contract
and attain the $600,000 annual savings, but the Placer Court
nevertheless pursued the private contract even though there were
apparently no longer savings. Note, the Placer Court disputes
that and believes that the contract resulted in overall savings
to the court.
Additionally, the contract has not increased either the number
or type of cases for which court reporters are present. Thus,
court reporting in all cases in Placer County, including
juvenile court cases, which are closed to the public, is now
performed by a private, for-profit company. Given the
questionable savings, lack of increased court reporter coverage
and the critical and sensitive nature of making the official
record, the author reasonably worries whether this private
contract was actually in the public's best interest. This bill
would help ensure that future contracts of this sort not only
actually save money for the courts, but also are, most
importantly, in the public's interest.
In Order to Protect the Integrity of Our Courts, It Could Be
Reasonably Argued the Due Diligence Standards Need to Be Even
Higher Than in Other Areas of Government, Although,
Understanding the Budget Pressures on the Courts, This Bill
Currently Keeps the Same Standards : Given the importance of the
courts as a cornerstone of our democracy, sponsor SEIU states
that the level of due diligence necessary before trial court
services can be privatized should indeed be even higher than for
other government entities:
Being a nation of laws, a fair and impartial judicial
system that is accessible to all is a critical underpinning
of democracy and is fundamental to the success of a
civilized society. Trial court services represent a
"public good," which are most effectively delivered by
government and public employees. AB 2332 correctly places
the burden of altering one of the most essential public
services on those advocating it. Additionally, profit
should never be associated with any aspect of fair review
and rights to redress in an impartial judicial system that
should be accessible to all people.
As noted, however, this bill does not currently mandate a higher
standard be realized before important court functions can be
privatized. It does, however, prevent such privatization if, in
AB 2332
Page 12
light of the special nature of the judiciary, it would be
inconsistent with the public interest to have the functions
proposed by the contract performed by a private entity.
Governor Vetoed Similar Bill Last Year : Last year, the Governor
vetoed AB 566 (Wieckowski), which was substantially similar to
this bill. In his veto message, the Governor stated:
I agree with the author that decisions to change the way
court services are provided should be carefully evaluated
to ensure they are both fair and cost-effective. However,
this measure goes too far. It requires California's courts
to meet overly detailed and - in some cases - nearly
impossible requirements when entering into or renewing
certain contracts. Other provisions are unclear and will
lead to confusion about what services may or may not be
subject to this measure.
The courts, like many of our governmental agencies, are
under tremendous funding pressure and face the challenge of
doing their work at a lower cost. I am unwilling to
restrict the flexibility of our courts, as specified in
this bill, as they face these challenges.
This bill seeks to address the Governor's concerns by, most
specifically, narrowing the scope of contracts to which the bill
applies. Like this bill, last year's bill applied to all
services currently or customarily done by trial court employees,
but then defined customarily as "historically," which
potentially implicated many long-standing contracts. This bill
does not do that and thus should significantly reduce the reach
of the bill.
Author's Amendments Adding Co-Authors : The author has requested
that the following members be added as co-authors:
Assemblymembers Alejo, Chau, Dickinson, Garcia, Muratsuchi,
Rendon, Skinner, Stone and Williams.
ARGUMENTS IN SUPPORT : In support of the bill, the California
Labor Federation writes:
When entities contract out, oftentimes there are sacrifices
made in the pursuit of cost savings. Contracting out can
AB 2332
Page 13
result in less transparency and less accountability. It
can lead to lower wages and less investment in an
experienced workforce. With the introduction of a profit
motive to the delivery of public services, the public
interest is often compromised as companies seek to cut
services and increase consumer costs.
All of these issues are particularly troubling as they
relate to the operations of our state trial courts.
Privatization of these services mans that justice truly is
in the hands of a private contractor who is primarily
concerned not with fairness or equality, but with their own
bottom line. ? AB 2332 requires that trial courts adhere
to similar standards required of other public entities
before privatizing court services. ? With so much at
stake, these safeguards are the minimum we should require
to protect taxpayer funds and the public interest.
The San Diego County Court Employees Association and Laborers'
Locals 777 & 792 add their concerns that critically important
court services, often involving confidential information, should
not be privatized just potentially to save money, at the expense
of the justice system:
As a result of substantial budget cuts to the trial courts,
and as a means to reduce costs, some courts have been
providing or are considering providing critically important
services to the public via private services. This includes
privatizing the handling and maintenance of private,
confidential and sensitive information contained in
official court records.
Given the important work done by the trial courts, the
sensitivity of the information that is processes and
maintained, and the sanctity of the rights of public court
consumers, the contracting out of court work should never
be used as a cost saving measure.
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees
(AFSCME), AFL-CIO (co-sponsor)
Services Employees International Union (co-sponsor)
AB 2332
Page 14
AFSCME District Council 36
AFSCME District Council 57
Association for Los Angeles Deputy Sheriffs
California Court Reporters Association
California Labor Federation
California Official Court Reporters Association
Glendale City Employees Association
Laborers' Locals 777 & 792
Los Angeles Court Reporters Association
Los Angeles Probation Officers Union, Local 685
Northern California Court Reporters Association
Organization of SMUD Employees
Professional and Technical Engineers, IFPTE Local 21
Sacramento Official Court Reporters Association
San Bernardino Public Employees Association
San Diego County Court Employees Association
San Luis Obispo County Employees Association
Santa Rosa City Employees Association
Opposition
None on file
Analysis Prepared by : Leora Gershenzon / JUD. / (916) 319-2334