AB 215: Local agency employment contracts: maximum cash settlement.
- Session Year: 2015-2016
- House: Assembly
- Latest Version Date: 2015-09-02
Existing law requires all employment contracts between an employee and a local agency employer to contain a provision that provides for the amount of a cash settlement that may be paid out if the contract is terminated, as specified. Existing law provides that the maximum settlement that an employee can receive is an amount equal to the monthly salary of the employee multiplied by the number of months left on the unexpired term of the contract, or, if the unexpired terms of the contract is greater than 18 months, an amount equal to the monthly salary of the employee multiplied by 18.
This bill would provide that in the case of a district superintendent of schools, for contracts of employment executed on or after January 1, 2016, the maximum cash settlement shall be an amount equal to the monthly salary of the employee multiplied by 12.
Existing law limits the amount of a cash or noncash settlement that a local agency employer may provide its district superintendent of schools to an amount no greater than the superintendents monthly salary multiplied by zero to 6, if it terminates the superintendents contract of employment and confirms pursuant to an independent audit that the superintendent engaged in fraud, misappropriation of funds, or other illegal fiscal practices. In this case, existing law requires an administrative law judge, after a hearing, to determine the amount of the cash settlement.
This bill, with regard to a contract for employment executed on or after January 1, 2016, would instead provide that a cash or noncash settlement in any amount may be paid by a local agency employer to its district superintendent of schools under these provisions.
Existing law requires all employment contracts between an employee and a local agency employer to contain a provision that provides for the amount of a cash settlement that may be paid out if the contract is terminated, as specified. Existing law provides that the maximum settlement that an employee can receive is an amount equal to the monthly salary of the employee multiplied by the number of months left on the unexpired term of the contract, or, if the unexpired terms of the contract is greater than 18 months, an amount equal to the monthly salary of the employee multiplied by 18.
This bill would provide that in the case of a district superintendent of schools, for contracts of employment executed on or after January 1, 2016, the maximum cash settlement shall be an amount equal to the monthly salary of the employee multiplied by 12.
Existing law limits the amount of a cash or noncash settlement that a local agency employer may provide its district superintendent of schools to an amount no greater than the superintendents monthly salary multiplied by zero to 6, if it terminates the superintendents contract of employment and confirms pursuant to an independent audit that the superintendent engaged in fraud, misappropriation of funds, or other illegal fiscal practices. In this case, existing law requires an administrative law judge, after a hearing, to determine the amount of the cash settlement.
This bill, with regard to a contract for employment executed on or after January 1, 2016, would instead provide that a cash or noncash settlement in any amount may be paid by a local agency employer to its district superintendent of schools under these provisions.
Existing law requires all employment contracts between an employee and a local agency employer to contain a provision that provides for the amount of a cash settlement that may be paid out if the contract is terminated, as specified. Existing law provides that the maximum settlement that an employee can receive is an amount equal to the monthly salary of the employee multiplied by the number of months left on the unexpired term of the contract, or, if the unexpired terms of the contract is greater than 18 months, an amount equal to the monthly salary of the employee multiplied by 18.
This bill would provide that in the case of a district superintendent of schools, for contracts of employment negotiated executed on or after January 1, 2016, the maximum cash settlement shall be an amount equal to the monthly salary of the employee multiplied by 12, or, if the employee was terminated for cause, an amount equal to the monthly salary of the employee multiplied by 6. 12.
Existing law limits the amount of a cash or noncash settlement that a local agency employer may provide its district superintendent of schools to an amount no greater than the superintendents monthly salary multiplied by zero to 6, if it terminates the superintendents contract of employment and confirms pursuant to an independent audit that the superintendent engaged in fraud, misappropriation of funds, or other illegal fiscal practices. In this case, existing law requires an administrative law judge, after a hearing, to determine the amount of the cash settlement.
This bill, with regard to a contract for employment negotiated executed on or after January 1, 2016, would change the maximum instead provide that a no cash or noncash settlement amount that may be paid by a local agency employer to its district superintendent of schools under these provisions to an amount no greater than the superintendents monthly salary multiplied by zero to 3. provisions.
Existing law requires all employment contracts between an employee and a local agency employer to contain a provision that provides for the amount of a cash settlement that may be paid out if the contract is terminated, as specified. Existing law provides that the maximum settlement that an employee can receive is an amount equal to the monthly salary of the employee multiplied by the number of months left on the unexpired term of the contract, or, if the unexpired terms of the contract is greater than 18 months, an amount equal to the monthly salary of the employee multiplied by 18.
This bill would provide that in the case of a district superintendent of schools, for contracts of employment negotiated on or after January 1, 2016, the maximum cash settlement shall be an amount equal to the monthly salary of the employee multiplied by 12, or, if the employee was terminated for cause, an amount equal to the monthly salary of the employee multiplied by 6.
Existing law limits the amount of a cash or noncash settlement that a local agency employer may provide its district superintendent of schools to an amount no greater than the superintendents monthly salary multiplied by zero to 6, if it terminates the superintendents contract of employment and confirms pursuant to an independent audit that the superintendent engaged in fraud, misappropriation of funds, or other illegal fiscal practices. In this case, existing law requires an administrative law judge, after a hearing, to determine the amount of the cash settlement.
This bill would, bill, with regard to a contract for employment negotiated on or after January 1, 2016, would change the maximum cash or noncash settlement amount that may be paid by a local agency employer to its district superintendent of schools under these provisions to an amount no greater than the superintendents monthly salary multiplied by zero to 3.
Existing law requires all employment contracts between an employee and a local agency employer to contain a provision that provides for the amount of a cash settlement that may be paid out if the contract is terminated, as specified. Existing law provides that the maximum settlement that an employee can receive is an amount equal to the monthly salary of the employee multiplied by the number of months left on the unexpired term of the contract, or, if the unexpired terms of the contract is greater than 18 months, an amount equal to the monthly salary of the employee multiplied by 18.
This bill would provide that in the case of a district superintendent of schools, regardless of the number of months left on the unexpired term of the contract, for contracts of employment negotiated on or after January 1, 2016, the maximum cash settlement shall be an amount equal to the monthly salary of the employee multiplied by ___ 6.
Existing law limits the amount of a cash or noncash settlement that a local agency employer may provide its district superintendent of schools to an amount no greater than the superintendents monthly salary multiplied by zero to 6, if it terminates the superintendents contract of employment and confirms pursuant to an independent audit that the superintendent engaged in fraud, misappropriation of funds, or other illegal fiscal practices. In this case, existing law requires an administrative law judge, after a hearing, to determine the amount of the cash settlement.
This bill would, with regard to a contract for employment negotiated on or after January 1, 2016, change the maximum cash or noncash settlement amount that may be paid by a local agency employer to its district superintendent of schools under these provisions to an amount no greater than the superintendents monthly salary multiplied by zero to ___ 3.
Existing law requires all employment contracts between an employee and a local agency employer to contain a provision that provides for the amount of a cash settlement that may be paid out if the contract is terminated, as specified. Existing law provides that the maximum settlement that an employee can receive is an amount equal to the monthly salary of the employee multiplied by the number of months left on the unexpired term of the contract, or, if the unexpired terms of the contract is greater than 18 months, an amount equal to the monthly salary of the employee multiplied by 18.
This bill would provide that in the case of a district superintendent of schools, regardless of the number of months left on the unexpired term of the contract, the maximum cash settlement shall be an amount equal to the monthly salary of the employee multiplied by ___.
Existing law limits the amount of a cash or noncash settlement that a local agency employer may provide its district superintendent of schools to an amount no greater than the superintendents monthly salary multiplied by zero to 6, if it terminates the superintendents contract of employment and confirms pursuant to an independent audit that the superintendent engaged in fraud, misappropriation of funds, or other illegal fiscal practices. In this case, existing law requires an administrative law judge, after a hearing, to determine the amount of the cash settlement.
This bill would, with regard to a contract for employment negotiated on or after January 1, 2016, change the maximum cash or noncash settlement amount that may be paid by a local agency employer to its district superintendent of schools under these provisions to an amount no greater than the superintendents monthly salary multiplied by zero to ___.
(a)All contracts of employment between an employee and a local agency employer shall include a provision that provides that regardless of the term of the contract, if the contract is terminated, the maximum cash settlement that an employee may receive shall be an amount equal to the monthly salary of the employee multiplied by the number of months left on the unexpired term of the contract, with the following exceptions:
(1)If the unexpired term of the contract is greater than 18 months, the maximum cash settlement shall be an amount equal to the monthly salary of the employee multiplied by 18.
(2)In the case of a district superintendent of schools, for contracts of employment executed on or after January 1, 2016, the maximum cash settlement shall be an amount equal to the monthly salary of the employee multiplied by 12.
(b)(1)Notwithstanding subdivision (a), if a local agency employer, including an administrator appointed by the Superintendent, terminates its contract of employment with its district superintendent of schools, that local agency employer shall not provide a cash or noncash settlement to its superintendent in any amount if the local agency employer believes, and subsequently confirms, pursuant to an independent audit, that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices.
(2)This subdivision applies only to a contract for employment executed on or after January 1, 2016.
(c)The cash settlement formulas described in subdivision (a) are maximum amounts that may be paid by a local agency employer to an employee and not a target or example of the amount of the cash settlement to be paid by a local agency employer to an employee in all contract termination cases.
(a)All contracts of employment between an employee and a local agency employer shall include a provision that provides that regardless of the term of the contract, if the contract is terminated, the maximum cash settlement that an employee may receive shall be an amount equal to the monthly salary of the employee multiplied by the number of months left on the unexpired term of the contract, with the following exceptions:
(1)If the unexpired term of the contract is greater than 18 months, the maximum cash settlement shall be an amount equal to the monthly salary of the employee multiplied by 18.
(2)In the case of a district superintendent of schools, for contracts of employment executed on or after January 1, 2016, the maximum cash settlement shall be an amount equal to the monthly salary of the employee multiplied by 12.
(b)(1)Notwithstanding subdivision (a), if a local agency employer, including an administrator appointed by the Superintendent, terminates its contract of employment with its district superintendent of schools, that local agency employer shall not provide a cash or noncash settlement to its superintendent in any amount if the local agency employer believes, and subsequently confirms, pursuant to an independent audit, that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices.
(2)This subdivision applies only to a contract for employment executed on or after January 1, 2016.
(c)The cash settlement formulas described in subdivision (a) are maximum amounts that may be paid by a local agency employer to an employee and not a target or example of the amount of the cash settlement to be paid by a local agency employer to an employee in all contract termination cases.
(a)All contracts of employment between an employee and a local agency employer shall include a provision that provides that regardless of the term of the contract, if the contract is terminated, the maximum cash settlement that an employee may receive shall be an amount equal to the monthly salary of the employee multiplied by the number of months left on the unexpired term of the contact, contract, with the following exceptions:
(1)If the unexpired term of the contract is greater than 18 months, the maximum cash settlement shall be an amount equal to the monthly salary of the employee multiplied by 18.
(2)In the case of a district superintendent of schools, for contracts of employment negotiated executed on or after January 1, 2016, the maximum cash settlement shall be an amount equal to the monthly salary of the employee multiplied by 12, or, if the employee was terminated for cause, an amount equal to the monthly salary of the employee multiplied by 6. 12.
(b)(1)Notwithstanding subdivision (a), if a local agency employer, including an administrator appointed by the Superintendent, terminates its contract of employment with its district superintendent of schools, that local agency employer shall not provide a cash or noncash settlement to its superintendent in an any amount greater than the superintendents monthly salary multiplied by zero to 3 if the local agency employer believes, and subsequently confirms, pursuant to an independent audit, that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices. The amount of the cash settlement described in this paragraph shall be determined by an administrative law judge after a hearing.
(2)This subdivision applies only to a contract for employment negotiated executed on or after January 1, 2016.
(c)The cash settlement formulas described in subdivisions (a) and (b) subdivision (a) are maximum amounts that may be paid by a local agency employer to an employee and not a target or example of the amount of the cash settlement to be paid by a local agency employer to an employee in all contract termination cases.
(a)All contracts of employment between an employee and a local agency employer shall include a provision that provides that regardless of the term of the contract, if the contract is terminated, the maximum cash settlement that an employee may receive shall be an amount equal to the monthly salary of the employee multiplied by the number of months left on the unexpired term of the contact, with the following exceptions:
(1)If the unexpired term of the contract is greater than 18 months, the maximum cash settlement shall be an amount equal to the monthly salary of the employee multiplied by 18.
(2)In the case of a district superintendent of schools, for contracts of employment negotiated on or after January 1, 2016, the maximum cash settlement shall be an amount equal to the monthly salary of the employee multiplied by 12, or, if the employee was terminated for cause, an amount equal to the monthly salary of the employee multiplied by 6.
(b)(1)Notwithstanding subdivision (a), if a local agency employer, including an administrator appointed by the Superintendent, terminates its contract of employment with its district superintendent of schools, that local agency employer may shall not provide a cash or noncash settlement to its superintendent in an amount greater than the superintendents monthly salary multiplied by zero to 3 if the local agency employer believes, and subsequently confirms, pursuant to an independent audit, that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices. The amount of the cash settlement described in this paragraph shall be determined by an administrative law judge after a hearing.
(2)This subdivision applies only to a contract for employment negotiated on or after January 1, 2016.
(c)The cash settlement formula formulas described in subdivisions (a) and (b) are maximum ceiling on the amounts that may be paid by a local agency employer to an employee and is not a target or example of the amount of the cash settlement to be paid by a local agency employer to an employee in all contract termination cases.
(a)All contracts of employment between an employee and a local agency employer shall include a provision that provides that regardless of the term of the contract, if the contract is terminated, the maximum cash settlement that an employee may receive shall be an amount equal to the monthly salary of the employee multiplied by the number of months left on the unexpired term of the contact, with the following exceptions:
(1)If the unexpired term of the contract is greater than 18 months, the maximum cash settlement shall be an amount equal to the monthly salary of the employee multiplied by___. 18.
(2)In the case of a district superintendent of schools, regardless of the number of months left on the unexpired term of the contract, schools, for contracts of employment negotiated on or after January 1, 2016, the maximum cash settlement shall be an amount equal to the monthly salary of the employee multiplied by ___ 6.
(b)(1)Notwithstanding subdivision (a), if a local agency employer, including an administrator appointed by the Superintendent, terminates its contract of employment with its district superintendent of schools, that local agency employer may not provide a cash or noncash settlement to its superintendent in an amount greater than the superintendents monthly salary multiplied by zero to ___ 3 if the local agency employer believes, and subsequently confirms, pursuant to an independent audit, that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices. The amount of the cash settlement described in this paragraph shall be determined by an administrative law judge after a hearing.
(2)This subdivision applies only to a contract for employment negotiated on or after January 1, 2016.
(c)The cash settlement formula described in subdivisions (a) and (b) are maximum ceiling on the amounts that may be paid by a local agency employer to an employee and is not a target or example of the amount of the cash settlement to be paid by a local agency employer to an employee in all contract termination cases.
(a)All contracts of employment between an employee and a local agency employer shall include a provision which that provides that regardless of the term of the contract, if the contract is terminated, the maximum cash settlement that an employee may receive shall be an amount equal to the monthly salary of the employee multiplied by the number of months left on the unexpired term of the contract. However, if contact, with the following exceptions:
(1)If the unexpired term of the contract is greater than 18 months, the maximum cash settlement shall be an amount equal to the monthly salary of the employee multiplied by 18.___.
(2)In the case of a district superintendent of schools, regardless of the number of months left on the unexpired term of the contract, the maximum cash settlement shall be an amount equal to the monthly salary of the employee multiplied by ___.
(b)(1)Notwithstanding subdivision (a), if a local agency employer, including an administrator appointed by the Superintendent, terminates its contract of employment with its district superintendent of schools, that local agency employer may not provide a cash or noncash settlement to its superintendent in an amount greater than the superintendents monthly salary multiplied by zero to six ___ if the local agency employer believes, and subsequently confirms, pursuant to an independent audit, that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices. The amount of the cash settlement described in this paragraph shall be determined by an administrative law judge after a hearing.
(2)This subdivision applies only to a contract for employment negotiated on or after the effective date of the act that added this subdivision. January 1, 2016.
(c)The cash settlement formula described in subdivisions (a) and (b) are maximum ceiling on the amounts that may be paid by a local agency employer to an employee and is not a target or example of the amount of the cash settlement to be paid by a local agency employer to an employee in all contract termination cases.
|
Date
|
Status
|
|---|---|
| Jun 4, 2015 | In Senate. Read first time. To Com. on RLS. for assignment. |
| Sep 2, 2015 | Chaptered by Secretary of State - Chapter 240, Statutes of 2015. |
| Sep 2, 2015 | Approved by the Governor. |
| Aug 24, 2015 | Enrolled and presented to the Governor at 3:30 p.m. |
| Aug 18, 2015 | In Assembly. Ordered to Engrossing and Enrolling. |
| Aug 17, 2015 | Read third time. Passed. Ordered to the Assembly. (Ayes 36. Noes 0. Page 2053.). |
| Aug 17, 2015 | Read third time. Passed. Ordered to the Assembly. |
| Jul 9, 2015 | Read second time. Ordered to third reading. |
| Jul 8, 2015 | From committee: Do pass. (Ayes 8. Noes 0.) (July 8). |
| Jun 18, 2015 | Referred to Com. on ED. |
| Jun 4, 2015 | Read third time. Passed. Ordered to the Senate. (Ayes 78. Noes 2. Page 1908.) |
| Jun 4, 2015 | Read third time. Passed. Ordered to the Senate. |
| Feb 2, 2015 | Read first time. To print. |
| Jun 2, 2015 | Read third time and amended. Ordered to third reading. (Page 1761.) |
| Jun 2, 2015 | Read third time and amended. Ordered to third reading. |
| May 18, 2015 | Read second time. Ordered to third reading. |
| May 14, 2015 | From committee: Do pass. (Ayes 6. Noes 1.) (May 13). |
| May 5, 2015 | Re-referred to Com. on ED. |
| May 4, 2015 | From committee chair, with author's amendments: Amend, and re-refer to Com. on ED. Read second time and amended. |
| Apr 7, 2015 | Re-referred to Com. on ED. |
| Apr 6, 2015 | From committee chair, with author's amendments: Amend, and re-refer to Com. on ED. Read second time and amended. |
| Feb 9, 2015 | Referred to Com. on ED. |
| Feb 3, 2015 | From printer. May be heard in committee March 5. |
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Date
|
Description
|
Location
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Votes
|
|
|---|---|---|---|---|
| Aug 17, 2015 | Assembly 3rd Reading AB215 Alejo By Leyva | Senate Floor |
Passed |
|
| Jul 8, 2015 | Do pass | Senate Standing Committee on Education |
Passed |
|
| Jun 4, 2015 | AB 215 ALEJO Assembly Third Reading | Assembly Floor |
Passed |
|
| May 13, 2015 | Do pass. | Assembly Standing Committee on Education |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
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Organization
|
Position
|
Date
|
|---|---|---|
| California School Boards Association | ** Against | Jul 8, 2015 |
| u Association of California School Administrators | ** Against | Jul 8, 2015 |
AB 215
Page 4
|
Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 |
THIRD READING
Bill No: AB 215
Amended: 6/2/15 in Assembly
SENATE EDUCATION COMMITTEE: 8-0, 7/8/15
AYES: Liu, Runner, Block, Hancock, Leyva, Monning, Pan, Vidak
NO VOTE RECORDED: Mendoza
ASSEMBLY FLOOR: 78-2, 6/4/15 - See last page for vote
SUBJECT: Local agency employment contracts: maximum cash settlement
DIGEST: This bill reduces the maximum cash settlement that may be paid to a school district superintendent upon termination from 18 times of that employee’s monthly salary to 12 times of that employee’s monthly salary. This bill also prohibits a cash settlement in the case of a termination in which the school district believes and subsequently confirms that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices.
Existing law:
Permits, if the contract with a school district superintendent is terminated, a cash settlement equal to the monthly salary of the superintendent multiplied by the number of months left on the unexpired term of the contract up to a maximum of 18 months.
Permits a cash settlement of up to six months times the monthly salary in the case of a superintendent who is terminated because the school district believes and subsequently confirms through an independent audit that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices.
This bill:
Reduces the maximum cash settlement that a local agency employer can provide to a district superintendent upon termination from 18 months of that employee’s monthly salary to 12 months of that employee’s salary.
Prohibits a local agency employer from providing a cash or noncash settlement to a superintendent upon termination if the local agency believes, and subsequently confirms, pursuant to an independent audit, that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices. This provision applies only to a contract for employment executed on or after January 1, 2016.
Comments
According to the California Department of Education, the average annual salaries for unified school district superintendents, by district size, in 2012-13, is as follows:
$116,606 for districts with less than 1,500 average daily attendance (ADA);
$151,912 for districts with 1,500 to 4,999 ADA;
$183,557 for districts with 5,000 to 9,999 ADA;
$206,292 for districts with 10,000 to 19,999 ADA; and
$227,183 for districts with more than 20,000 ADA.
The author’s office indicates that the highest salaries range from $265,773 to $322,159, which would translate to a range in cash settlements from $398,660 to $483,239 under existing law. Some settlements have generated public scrutiny. In one instance, a school district put its superintendent on a paid leave of absence for six months and then provided an 18-month cash settlement, essentially providing a 24 month “buy-out” at a cost of approximately $325,000.
Unintended consequences. While the purpose of this bill is to save money for students by placing a cap on school district superintendents’ severance pay, it could have several unintended consequences. First, by reducing and/or eliminating some of the “protections” in place for superintendents in existing law, this bill could provide potential disincentives for highly-qualified candidates to become a superintendent. This could also affect the school district’s recruitment efforts and its ability to hire a quality superintendent.
Further, this bill could increase superintendent turnover by reducing the penalty districts pay for terminations prior to the fulfillment of a contract. While this bill reduces the cost of a cash settlement in which there is more than 12 months remaining on a contract, it is not clear that it will necessarily reduce the cost of cash settlements overall. For example, to the extent that the relatively high cost of a settlement serves as a disincentive to terminate a contract, reducing the cost of a settlement could have the opposite effect and increase terminations. This would then increase the cost of such settlements.
FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No
None received
Association of California School Administrators
California School Boards Association
Small School Districts’ Association
ARGUMENTS IN SUPPORT: According to the author’s office, “the combination of high paying salaries and high superintendent turnover is a costly issue. By placing a cap on district superintendent’s severance pay, we can save money for students, begin to improve our school administrative processes, and demonstrate fiscal discipline in the administration of taxpayer dollars.”
ARGUMENTS IN OPPOSITION: The Association of California School Administrators (ASCA) indicates that this bill “unfairly singles out school superintendents (arguably the most visible local official) and reduces the Early Termination Clause for a breach of contract to up to 12 months. Claiming that Early Termination Clauses occur more frequently with school superintendents can in part be attributed to the number of school districts (1,000) nearly twice the total number of cities (482) and counties (58) combined.” ACSA further argues that superintendents are at-will employees, who have no due process rights and can be terminated any time with cause. When a superintendent is released from his or her duties, it can be difficult to find another superintendent’s job and the release is often career ending. “Early Termination Clauses are not considered extra pay nor are they a gift of public funds.” Rather, cash settlements are “damages paid to an employee who is released by breach of contract.”
ASSEMBLY FLOOR: 78-2, 6/4/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O’Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins
NOES: Chávez, Levine
Prepared by: Lenin Del Castillo / ED. / (916) 651-4105
7/10/15 14:06:10
**** END ****
AB 215 (Alejo) Page 3 of 3
SENATE COMMITTEE ON EDUCATION
Senator Carol Liu, Chair
2015 - 2016 Regular
Bill No: AB 215
Author: |
Alejo |
||
Version: |
June 2, 2015 Hearing Date: July 8, 2015 |
||
Urgency: |
No |
Fiscal: |
No |
Consultant: |
Lenin Del Castillo |
||
Subject: Local agency employment contracts: maximum cash settlement
SUMMARY
This bill reduces the maximum cash settlement that may be paid to a school district superintendent upon termination from 18 times of that employee’s monthly salary to 12 times of the employee’s monthly salary, and also prohibits a cash settlement in the case of a termination in which the school district believes and subsequently confirms that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices.
BACKGROUND
Existing law:
Permits, if the contract with a school district superintendent is terminated, a cash settlement equal to the monthly salary of the superintendent multiplied by the number of months left on the unexpired term of the contract up to a maximum of 18 months.
Permits a cash settlement of up to six months times the monthly salary in the case of a superintendent who is terminated because the school district believes and subsequently confirms through an independent audit that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices.
ANALYSIS
This bill:
Reduces the maximum cash settlement that a local agency employer can provide to a district superintendent upon termination from 18 months of that employee’s monthly salary to 12 months of the employee’s salary.
Prohibits a local agency employer from providing a cash or noncash settlement to a superintendent upon termination if the local agency believes, and subsequently confirms, pursuant to an independent audit, that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices. This provision applies only to a contract for employment executed on or after January 1, 2016.
STAFF
COMMENTS
Need for the bill. According to the author's office, "the combination of high paying salaries and high superintendent turnover is a costly issue. By placing a cap on district superintendent's severance pay, we can save money for students, begin to improve our school administrative processes, and demonstrate fiscal discipline in the administration of taxpayer dollars.”
This bill reduces from 18 times the monthly salary to 12 times the monthly salary the maximum cash settlement that may be paid to a school district superintendent whose employment has been terminated. In the case of a termination in which the school district believes and subsequently confirms that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices, this bill reduces the maximum cash settlement from six times the monthly salary to zero.
According to the California Department of Education (CDE), the average annual salaries for unified school district superintendents, by district size, in 2012-13, is as follows:
One hundred sixteen thousand six hundred six dollars for districts with less than 1,500 average daily attendance (ADA);
One hundred fifty-one thousand nine hundred twelve dollars for districts with 1,500 to 4,999 ADA;
One hundred eighty-three thousand five hundred fifty-seven dollars for districts with 5,000 to 9,999 ADA;
Two hundred six thousand two hundred ninety-two dollars for districts with 10,000 to 19,999 ADA; and
Two hundred twenty-seven thousand one hundred eighty-three dollars for districts with more than 20,000 ADA.
The author's office indicates that the highest salaries range from $265,773 to $322,159, which would translate to a range in cash settlements from $398,660 to $483,239 under existing law. Some settlements have generated public scrutiny. In one instance, a school district put its superintendent on a paid leave of absence for six months and then provided an 18-month cash settlement, essentially providing a 24 month “buy-out” at a cost of approximately $325,000.
Arguments in opposition. The Association of California School Administrators (ASCA) indicates that this bill “unfairly singles out school superintendents (arguably the most visible local official) and reduces the Early Termination Clause for a breach of contract to up to 12 months. Claiming that Early Termination Clauses occur more frequently with school superintendents can in part be attributed to the number of school districts (1,000) nearly twice the total number of cities (482) and counties (58) combined.” ACSA further argues that superintendents are at-will employees, who have no due process rights and can be terminated any time with cause. When a superintendent is released from his or her duties, it can be difficult to find another superintendent’s job and the release is often career ending. “Early Termination Clauses are not considered extra pay nor are they a gift of public funds.” Rather, cash settlements are “damages paid to an employee who is released by breach of contract.”
Unintended consequences. While the purpose of the bill is to save money for students by placing a cap on school district superintendents’ severance pay, it could have several unintended consequences that the Committee may wish to consider. First, by reducing and/or eliminating some of the “protections” in place for superintendents in current law, the bill could provide potential disincentives for highly-qualified candidates to become a superintendent. This could also affect the school district’s recruitment efforts and its ability to hire a quality superintendent. One could argue the bill unfairly punishes superintendents by placing limitations on paid leaves of absence.
Further, the bill could increase superintendent turnover by reducing the penalty districts pay for terminations prior to the fulfillment of a contract. While the bill would reduce the cost of a cash settlement in which there is more than 12 months remaining on a contract, it is not clear that it will necessarily reduce the cost of cash settlements overall. For example, to the extent that the relatively high cost of a settlement serves as a disincentive to terminate a contract, reducing the cost of a settlement could have the opposite effect and increase terminations. This would then increase the cost of such settlements.
Related and prior legislation. The early versions of AB 280 (Alejo, 2013) were nearly identical to this measure and proposed to place a cap on the severance pay of a school district’s superintendent. However, the bill was amended to deal with prohibitions for firearms dealers and eventually held in the Senate Appropriations Committee.
SUPPORT
None received.
OPPOSITION
Association of California School Administrators
California School Boards Association
Small School Districts’ Association
-- END --
AB 215
Page 2
ASSEMBLY THIRD READING
AB 215
(Alejo)
As Amended June 2, 2015
Majority vote
Committee |
Votes |
Ayes |
Noes |
Education |
6-1 |
O'Donnell, Kim, McCarty, Santiago, Thurmond, Weber |
Chávez |
SUMMARY: Reduces, for contracts executed on or after January 1, 2016, the maximum cash settlement that may be paid to a school district superintendent in the case of terminations of employment from 18 months times the monthly salary to 12 months times the monthly salary. Prohibits a cash settlement in the case of a termination in which the school district believes and subsequently confirms through an independent audit that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices.
EXISTING LAW:
Permits, if the contract with a school district superintendent is terminated, a cash settlement equal to the monthly salary of the superintendent multiplied by the number of months left on the unexpired term of the contract up to a maximum of 18 months.
Permits a cash settlement of up to six months times the monthly salary in the case of a superintendent who is terminated because the school district believes and subsequently confirms through an independent audit that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices,
FISCAL EFFECT: Unknown. This bill is keyed non-fiscal by the Legislative Counsel.
COMMENTS: This bill reduces from 18 times the monthly salary to 12 times the monthly salary the maximum cash settlement that may be paid to a school district superintendent whose employment has been terminated. However, the cash settlement cannot exceed the number of unexpired months on the contract. In the case of a termination in which the school district believes and subsequently confirms that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices, this bill reduces the maximum cash settlement from six times the monthly salary to zero.
According to the California Department of Education (CDE) the average annual salaries for unified school district superintendents, by district size, in 2012-13 as follows:
One hundred sixteen thousand six hundred six dollars for districts with less than 1,500 average daily attendance (ADA);
One hundred fifty-one thousand nine hundred twelve dollars for districts with 1,500 to 4,999 ADA;
One hundred eighty-three thousand five hundred fifty-seven dollars for districts with 5,000 to 9,999 ADA;
Two hundred six thousand two hundred ninety-two dollars for districts with 10,000 to 19,999 ADA; and
Two hundred twenty-seven thousand one hundred eighty-three dollars for districts with more than 20,000 ADA.
There is considerable variance around these averages. Information provided by the author's office shows that the highest salaries range from $265,773 to $322,159. With salaries in this range, the maximum cash settlement could range from $398,660 to $483,239 under existing law.
Reason for the bill. The author's office argues that, "by placing a cap on district superintendent's severance pay, we can save money for students, begin to improve our school administrative processes, and demonstrate fiscal discipline in the administration of taxpayer dollars."
Analysis Prepared by: Rick Pratt / ED. / (916) 319-2087 FN: 0000881
AB 215
Page 2
ASSEMBLY THIRD READING
AB 215
(Alejo)
As Amended May 4, 2015
Majority vote
Committee |
Votes |
Ayes |
Noes |
Education |
6-1 |
O'Donnell, Kim, McCarty, Santiago, Thurmond, Weber |
Chávez |
SUMMARY: Reduces the maximum cash settlement that may be paid to a school district superintendent in the case of terminations of employment. Specifically for contracts of employment negotiated on or after January 1, 2016. Specifically, this bill:
Reduces the maximum cash settlement that may be paid to a school district superintendent from 18 times the monthly salary to 12 times the monthly salary, unless the superintendent was dismissed for cause, in which case the maximum cash settlement is six times the monthly salary.
Reduces the maximum cash settlement that may be paid to a school district superintendent in the case of a termination in which the school district believes and subsequently confirms that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices from six times the monthly salary to three times the monthly salary.
FISCAL EFFECT: Unknown. This bill is keyed non-fiscal by the Legislative Counsel.
COMMENTS: This bill reduces from 18 times the monthly salary to 12 times the monthly salary the maximum cash settlement that may be paid to a school district superintendent whose employment has been terminated. In the case of a termination in which the school district believes and subsequently confirms that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices, this bill reduces the maximum cash settlement from six times the monthly salary to three times the monthly salary. In no case can the amount of the cash settlement exceed the number of unexpired months on the contract.
According to the California Department of Education (CDE) the average annual salaries for unified school district superintendents, by district size, in 2012-13 as follows:
One hundred sixteen thousand six hundred six dollars for districts with less than 1,500 average daily attendance (ADA);
One hundred fifty-one thousand nine hundred twelve dollars for districts with 1,500 to 4,999 ADA;
One hundred eighty-three thousand five hundred fifty-seven dollars for districts with 5,000 to 9,999 ADA;
Two hundred six thousand two hundred ninety-two dollars for districts with 10,000 to 19,999 ADA; and
Two hundred twenty-seven thousand one hundred eighty-three dollars for districts with more than 20,000 ADA.
There is considerable variance around these averages. Information provided by the author's office shows that the highest salaries range from $265,773 to $322,159. With salaries in this range, the maximum cash settlement could range from $398,660 to $483,239 under existing law.
Arguments in support. The author's office argues that, "by placing a cap on district superintendent's severance pay, we can save money for students, begin to improve our school administrative processes, and demonstrate fiscal discipline in the administration of taxpayer dollars."
Arguments in opposition. Opponents argue that superintendents are at-will employees, who have no due process rights and can be terminated any time without cause. This action can end the career of a superintendent. Rather than being extra pay or a gift of public funds, cash settlements are damages paid to a superintendent "who is released by breach of contact."
Analysis Prepared by: Rick Pratt / ED. / (916) 319-2087 FN: 0000458
AB 215
Page 2
Date of Hearing: May 13, 2015
ASSEMBLY COMMITTEE ON EDUCATION
Patrick O'Donnell, Chair
AB 215 (
Alejo) – As Amended May 4, 2015
SUBJECT: Local agency employment contracts: maximum cash settlement.
SUMMARY: Reduces the maximum cash settlement that may be paid to a school district superintendent in the case of terminations of employment. Specifically, for contracts of employment negotiated on or after January 1, 2016. Specifically, this bill:
Reduces the maximum cash settlement that may be paid to a school district superintendent from 18 times the monthly salary to 12 times the monthly salary, unless the superintendent was dismissed for cause, in which case the maximum cash settlement is 6 times the monthly salary.
Reduces the maximum cash settlement that may be paid to a school district superintendent in the case of a termination in which the school district believes and subsequently confirms that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices from 6 times the monthly salary to 3 times the monthly salary.
EXISTING LAW: Provides that, in the event of a termination of employment of a school district superintendent, the maximum cash settlement shall be the employee's monthly salary multiplied by the number of months left on the unexpired term of the contract, but no more than 18 months. In the case of a termination in which the school district believes and subsequently confirms that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices, the maximum cash settlement is 6 times the monthly salary.
FISCAL EFFECT: This bill is keyed non-fiscal by the Legislative Counsel
COMMENTS: This bill reduces from 18 times the monthly salary to 12 times the monthly salary the maximum cash settlement that may be paid to a school district superintendent whose employment has been terminated. In the case of a termination in which the school district believes and subsequently confirms that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices, this bill reduces the maximum cash settlement from 6 times the monthly salary to 3 times the monthly salary. In no case can the amount of the cash settlement exceed the number of unexpired months on the contract.
According to the California Department of Education (CDE) the average annual salaries for unified school district superintendents, by district size, in 2012-13 as follows:
$116,606 for districts with less than 1,500 average daily attendance (ADA);
$151,912 for district with 1,500 to 4,999 ADA;
$183,557 for districts with 5,000 to 9,999 ADA;
$206,292 for districts with 10,000 to 19,999 ADA; and
$227,183 for districts with more than 20,000 ADA
There is considerable variance around these averages. Information provided by the author's office shows that the highest salaries range from $265,773 to $322,159. With salaries in this range, the maximum cash settlement could range from $398,660 to $483,239 under existing law.
It has been argued that these salaries and the related cash settlements reflect the market cost of recruiting high-quality candidates to a position with inherent instability. A 2014 survey by the Brown Center on Education Policy at the Brookings Institution ("Urban School Superintendents: Characteristics, Tenure, and Salary") found that the average tenure of an urban school district superintendent is 3.18 years in 2014—up from 2.8 years in 2003.
On the other hand, some buyouts have generated negative publicity. For example, a state-appointed administrator in the Inglewood Unified School District received a six-month buyout worth $100,000 after serving only two months on the job. In another case, the Hesperia Unified School District put its superintendent on a paid leave of absence for six months and then provided an 18-month cash settlement—effectively providing a 24-month buy-out at a cost of about $325,000, plus benefits, for a district with 23,000 ADA.
The premise of the bill. The author's office argues that, "by placing a cap on district superintendent's severance pay, we can save money for students, begin to improve our school administrative processes, and demonstrate fiscal discipline in the administration of taxpayer dollars." While this bill would reduce the cost of cash settlements in individual cases where there is more than 12 months left on a contract, this does not necessarily mean that it will reduce the cost of cash settlements overall. What is unknown is the relationship between the cost of a settlement and the decision to terminate. Currently, the relatively high cost of a settlement may reduce the number of terminations. Conversely, reducing the cost of a settlement could increase terminations, reducing the already-short tenure of district superintendents and increasing the statewide costs of settlements.
Arguments in opposition. Opponents argue that superintendents are at-will employees, who have no due process rights and can be terminated any time without cause. This action can end the career of a superintendent. Rather than being extra pay or a gift of public funds, cash settlements are damages paid to a superintendent "who is released by breach of contact."
REGISTERED SUPPORT / OPPOSITION:
Support
None received
Opposition
Association of California School Administrators/
Analysis Prepared by: Rick Pratt / ED. / (916) 319-2087
Bill Author
Bill Co-Author(s):