Existing law, the State Civil Service Act, establishes standards for the use of personal services contracts by state agencies. The act provides that personal services contracting is permissible to achieve cost savings when certain conditions are met, including, but not limited to, that the contracting agency demonstrates that the proposed contract will result in actual overall cost savings to the state and that the contract will not cause the displacement of civil service employees. The act also authorizes state agencies to enter into personal services contracts for functions exempted from civil service. The California Constitution excludes the officers and employees of the California State University from the state civil service.

Existing law authorizes the trustees Trustees of the California State University to enter into agreements with any public or private agency, person, or institution for the furnishing of services, facilities, goods, supplies, or equipment, among others, and requires the trustees to prescribe policies and procedures for the acquisition of those services, facilities, materials, goods, supplies, or equipment.

This bill would establish standards for the use of personal services contracts by the trustees of the California State University similar to those in the State Civil Service Act. Act for services that are currently or customarily performed by employees of the university.

Existing law establishes the California State University and its various campuses under the administration of the Trustees of the California State University. Existing law requires the trustees to adopt rules and regulations not inconsistent with the laws of this state for the governance of the trustees, their appointees and employees, and the California State University.

This bill would make nonsubstantive changes to that provision.

SENATE COMMITTEE ON EDUCATION

Senator Carol Liu, Chair

2015 - 2016 Regular

Bill No: AB 2183

Subject: California State University: personal services contracts

SUMMARY

This bill establishes standards for the use of personal services contracts by the California State University (CSU).

BACKGROUND

Existing law:

1. Authorizes the CSU Trustees to enter into agreements with any public or private agency, officer, person, or institution, corporation, association, or foundation for the performance of acts or the furnishing of services, facilities, materials, goods, supplies, or equipment by or for the Trustees or for the joint performance of an act or function or the joint furnishing of services and facilities by the Trustees and the other party to the agreement. Specifies that the Trustees shall prescribe policies and procedures for the acquisition of services, facilities, materials, goods, supplies, or equipment; and, said policies shall include competitive bids or proposals as, specified. (Education Code § 89036)
2. Provides standards for the use of personal service contracts by state agencies with specific criteria for contracting outside state service. The criteria includes demonstration of cost savings, definition of costs, and requirements that work is not contracted out solely on the basis of lower pay rates or benefits, and justification of savings based on the size and duration of the contract. (Government Code § 19130)
3. Establishes the State Civil Service Act and establishes the State Personnel Board, a 5 member body appointed by the Governor and approved by the Senate, to enforce and administer civil service statutes. The Constitution establishes several exemptions from the civil service, including officers and employees of the University of California and the California State University. (Article 7 of the California Constitution)

ANALYSIS

This bill:

1. Specifies that the purpose of this section is to establish standards for the use of personal services contracts.
2. Provides that if the California State University (CSU) Trustees enter into a new contract, or renew or extend an existing contract, for services that are currently or customarily performed by the CSU’s employees, the following requirements shall apply:
   1. The Trustees clearly demonstrate that the proposed contract will result in actual overall savings to the state, consistent with specific elements in comparing costs, including:
3. The university’s additional cost of providing the same service as proposed by a contractor, as specified.
   • • 1. Exclusion of the university’s indirect overhead costs unless these costs can be attributed solely to the function in question and would not exist if that function was not performed by university employees.
   1. Proposals to contract out shall not be approved solely on the basis that savings will result from lower contractor pay rates or benefits. Provides that proposals to contract out work shall be eligible for approval if the contractor’s wages are at the industry’s level and do not significantly undercut university pay rates.
   2. The contract does not cause the displacement of university employees, as specified.
   3. The contract does not adversely affect the university’s nondiscrimination standards.
   4. The savings shall be large enough to ensure that they will not be eliminated by private sector and university cost fluctuations that could normally be expected during the contracting period.
   5. The amount of savings clearly justify the size and duration of the contracting agreement.
   6. The contract is awarded through a publicized, competitive bidding process.
   7. The contract includes specific provisions pertaining to the qualifications of the staff that will perform the work under the contract, as well as assurance that the contractor’s hiring practices meet applicable nondiscrimination standards.
   8. The potential for future economic risk to the university from potential contractor rate increases is minimal.
   9. The contract is with a firm, defined as a corporation, partnership, nonprofit organization, or sole proprietorship.
   10. The potential economic advantage of contracting is not outweighed by the public’s interest in having a particular function performed directly by the university.
4. Permits personal services contracts when any of the following conditions can be met:
   1. The contract is for a new university function and the Legislature has specifically mandated or authorized the performance of the work by independent contractors.
   2. The services contracted are not available within the university, cannot be performed satisfactorily by university employees, or are of a highly specialized or technical nature that the necessary expert knowledge, experience, and ability are not available from the university’s employees.
   3. The services are incidental to a contract for the purchase or lease of real or personal property, as specified.
   4. The legislative, administrative, or legal goals and purposes cannot be accomplished through the utilization of university employees because of the need to protect against a conflict of interest or to ensure independent and unbiased findings in cases where there is a clear need for a different, outside perspective, including obtaining expert witnesses in litigation.
   5. Due to an emergency, a contract is necessary for the immediate preservation of the public health, welfare, or safety.
   6. The contractor will provide equipment, materials, facilities, or support services that could not feasibly be provided by the university in the location where the services are to be performed.
   7. The contractor will conduct training courses for which appropriately qualified university instructors are not available.
   8. The services are of an urgent, temporary, or occasional nature, as specified.

STAFF COMMENTS

1. Need for the bill. According to the author’s office, “existing statute does not require the California State University (CSU) to abide by the same standards of accountability that apply to state agencies when it enters into personal service contracts. In turn, on several occasions, the CSU has contracted out for services without either clearly expressing justification or proving fiscal savings, or has entered into contracts with financially unstable contractors that discontinue business, all of which prove losses to the taxpayer.” Further, the author contends this has "resulted in several debunk contracts, including: a California State University (CSU) that ended a three-year agreement with its employees and entered into a five-year contract with a private and external custodial firm, which resulted in displacement of those other custodial employees." The intent of this bill is to provide the CSU employees the same contracting out protections that apply to state workers.
2. Personal services contract. A personal services contract is any contract, requisition, purchase order, etc. (except public works contracts) under which labor or personal services is a significant, separately identifiable element. The business or person performing these contractual services must be an independent contractor that does not have status as an employee of the State.

A cost-savings based personal services contract is a personal services contract proposed to achieve cost savings and subject to the provisions of existing law.

1. Current CSU practice. According to the CSU, in 2012-13 it had over 7,000 personal services contracts valued at a cost of over $500 million for various services within the University. These contracts are for services that include animal boarding, agricultural chemicals, archaeologists, portable toilet suppliers, demolition contractors, stonemasons, furniture suppliers, fire protection providers, pest and vermin control, hazardous waste disposal providers, and more. The CSU contends that, per the requirements of Higher Education Employer-Employee Relations Act (HEERA), the University meets and confers with unions to negotiate the various provisions in the collective bargaining agreements. Under HEERA, terms and conditions of employment, such as wages, hours and working conditions are considered to be within the mandatory scope of bargaining or scope of representation. HEERA was passed to promote “harmonious and cooperative labor relations between the public institutions of higher education and their employees.”
2. Collective Bargaining. Provisions regarding contracting out are an element of both the California State University Employees Union - CSUEU (Article 3) and State Employees Trades Council - SETC (Article 4) collective bargaining agreements. The CSUEU agreement authorizes contracting out provided that it does not displace bargaining unit employees, and defines displacement to include layoff, demotion, involuntary transfer to a new classification, or to a new satellite campus location, or a location requiring a change of residence, and involuntary time base reductions. The CSU is required to notify the Union when contracting out is to be on a long-term basis and the Union is authorized to request to meet and confer on the impacts of long-term contracting out work. Prior to meeting, the CSU is required to provide the CSUEU all existing relevant information, including request for proposals, copies of bids received, and any cost analysis used to evaluate the need for contracting out.

The SETC agreement, prior to contracting out, requires a campus to consider the availability of SETC employees to perform the work, whether they have the special skills and licensure necessary, whether the work can be completed within time constraints applicable to the project, the availability of required materials and/or equipment, and the cost involved in performing the work in-house versus contracting out. Notification of the Chief Campus Steward is required prior to the start of any such contracted work.

Given that these contracting out provisions already exist through collective bargaining, the Committee may wish to consider whether this bill is necessary.

1. Civil Service exemption. This bill is modeled on State Civil Service Act language used to govern personal services contracting within the state. Provisions of the California Constitution specifically exclude officers and employees of the California State University (CSU) from State Civil Service, and the Legislature has granted the CSU other exemptions from civil service provisions, including:
   1. Exclusion from Public Contract Code provisions regarding the acquisition of goods and services.
   2. Authority to promulgate regulations without having to utilize the procedures outlined in the Administrative Procedures Act, thereby exempting CSU from Office of Administrative Law review.

Therefore, the Committee may wish to consider whether the CSU’s current contracting out practices rise to a level of concern that warrants the CSU being subject to civil service-like provisions.

1. Arguments in opposition. The CSU indicates that the bill places it into its own version of state civil service contracting-out laws and restricts the Trustees’ authority to manage the system. “Current law already allows for a contracting-out process at the CSU and protections for our employees through our labor contracts. These changes would subject the system to contrary statutes, reduce our ability to leverage limited resources in cost-effective ways, and result in increased administrative costs without any benefit to students.”
2. Purview of the Trustees? The provisions of this bill are substantively similar to the requirements outlined for state agencies under the Civil Service Act. However, unlike state agencies, statute extends the authority to administer the CSU and to adopt rules and regulations consistent with the laws of the state, to the CSU Trustees, a body appointed by the Governor and confirmed by the Senate.

If the Committee believes there is a need for greater clarity around the use of personal services contracts at the CSU, staff recommends that the bill be amended to: 1) authorize the Trustees to enter into personal services contracts; 2) require the Trustees to establish standards and conditions for their use by January 1, 2018, while specifying that the standards and conditions included in the bill shall be considered by the Trustees; and 3) require the Trustees to submit a report on the standards and conditions established to the relevant policy and budget committees of the Legislature, the Legislative Analyst’s Office, the Governor, and the Department of Finance no later than June 30, 2018.

1. Fiscal impact. According to the Assembly Appropriations Committee, CSU will have one-time and ongoing costs of around $100,000 to establish and implement the new process, including establishing new policy followed by training of procurement personnel throughout the system.
2. Related and prior legislation.

SB 376 (Lara, 2015) would have modified the requirements for qualifying as a lowest responsible bidder or best value awardee for contracts for specified services at the University of California (UC). This measure was vetoed by the Governor with the following message:

Senate Bill 376 seeks to bring wage and benefit parity to the University of California's contracted workers in specific job categories, such as custodial, clerical and food services, and other services associated with the University's medical enterprises. The bill touches several issues - from contracting out service industry work that could be performed by employees, to the pay and working conditions of contracted workers, to the need for more vigorous oversight of contract employers.

Without a doubt, these are all serious matters to consider, and they reflect the difficulty in balancing things we commonly value, such as increasing the wages of low-income workers and keeping operational costs down. It's worth noting that the University of California recently responded to criticisms of its wage and contracting practices with a plan to incrementally increase its minimum wage for both employees and contract workers, and a pledge to better oversee contracts generally.

The effort to provide increased compensation to those who work for UC - either directly or on a contract basis - is well-intentioned, but I'm not prepared to embrace the provisions of this bill.

I would caution the University, however, to provide a transparent accounting of its contracts and clearly demonstrate how the interests of all its lower paid workers are being protected.

SB 669 (Pan, 2015) was substantively similar to this bill and proposed to establish standards for the use of personal services contracts by the CSU. This bill was scheduled to be heard in this Committee on April 22, 2015, but canceled at the author’s request.

SB 943 (Beall, 2014) was also substantively similar to this bill. In addition it assigned the State Personnel Board oversight of California State University (CSU) contracting practices. SB 943 was heard by this Committee on April 30, 2014 and failed passage by a vote of 2-2.

AB 2225 (Lowenthal, 2002) proposed similar personal services contracting standards for the CSU. AB 2225 was heard by this Committee in June 2002, and was held without recommendation.

SUPPORT

American Federation of State, County and Municipal Employees

California Faculty Association

California Labor Federation

California State University Employees Union

Services Employees International Union

University Professional and Technical Employees – Communication Workers of

American Local 9119

OPPOSITION

California Chamber of Commerce

California State University

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:

Author:(Gatto)

As Amended Ver:May 31, 2016

Majority vote

SUMMARY: Establishes standards for the use of personal services contracts by the California State University (CSU) Trustees. Specifically, this bill:

1. Specifies if the CSU Trustees enter into a new contract, or renew or extend an existing contract, for services that are currently or customarily performed by CSU employees, 11 conditions must be met in order for any personal services contract to be permissible, which among others, include:
   1. Clear demonstration that the proposed contract will result in actual overall savings to the state, considering specific elements that can/cannot be included when comparing contract and in-state costs;
   2. Proposals to contract out shall not be approved solely on the basis that savings will result from lower contractor pay rates or benefits; and,
   3. The contract does not cause the displacement of university employees.
2. Permits personal services contracts when any of nine conditions can be met, which among others, include: a) that the services are not available within the university; b) cannot be performed satisfactorily by university employees; c) are of an urgent, temporary, or occasional nature such that delaying implementation through the hiring of university employees would frustrate their very purpose; and, d) or are of such a highly technical nature that is not available from the pool of university employees.
3. Defines "indirect overhead costs" as the pro rata share of existing administrative salaries and benefits, rent, equipment costs, utilities, and materials.
4. Defines "firm" as a corporation, partnership, nonprofit organization, or sole proprietorship.

EXISTING LAW:

1. Authorizes the CSU Trustees to enter into agreements with any public or private agency, officer, person, or institution, corporation, association, or foundation for the performance of acts or the furnishing of services, facilities, materials, goods, supplies, or equipment by or for the Trustees or for the joint performance of an act or function or the joint furnishing of services and facilities by the Trustees and the other party to the agreement. Specifies that the Trustees shall prescribe policies and procedures for the acquisition of services, facilities, materials, goods, supplies, or equipment; and, said policies shall include competitive bids or proposals as, specified (Education Code Section 89036).
2. Provides standards for the use of personal service contracts by state agencies with specific criteria for contracting outside state service. These criteria include demonstration of cost savings, definition of costs, and requirements that work not be contracted out solely on the basis of lower pay rates or benefits, and justification of savings based on the size and duration of the contract (Government Code Section 19130).
3. Establishes the State Civil Service Act (Act) and establishes the State Personnel Board, as a five member body appointed by the Governor and approved by the Senate, to enforce and administer civil service statutes. The Constitution establishes several exemptions from the civil service, including officers and employees of the University of California and the CSU (Article 7 of the California Constitution).

FISCAL EFFECT: According to the Assembly Appropriations Committee, CSU will have one-time and ongoing costs of around $100,000 to establish and implement the new process, including establishing new policy followed by training of procurement personnel throughout the system.

COMMENTS: Need for the measure. According to the author, the CSU is not subject to some of the same standards of accountability that apply to other state agencies regarding personal service contracts. The author contends that this has, "resulted in several debunk contracts, including: a CSU that ended a three-year agreement with its employees and entered into a five-year contract with a private and external custodial firm, which resulted in displacement of those other custodial employees."

This measure seeks to align the CSU's practice of contracting out with those required by other state agencies.

State Civil Service Act. Provisions of the Act specifically exclude officers and employees of the CSU from state civil service. Additionally, the Legislature has granted the CSU other exemptions from provisions within the Act, including: 1) exclusion from Public Contract Code provisions regarding the acquisition of goods and services; and, 2) authority to promulgate regulations without having to utilize the procedures outlined in the Administrative Procedures Act.

This measure is modeled after the State Civil Service Act used to govern personal services contracting within the state. It is unclear whether or not, due to the existing exemptions the Legislature has conferred upon the CSU, if it is warranted for the CSU to now have to align their personal services contracting provisions under the Act.

Personal services contract. A personal services contract is any contract, requisition, purchase order, etc. (except public works contracts) under which labor or personal services is a significant, separately identifiable element. The business or person performing these contractual services must be an independent contractor that does not have status as an employee of the State.

A cost-savings based personal services contract is a personal services contract proposed to achieve cost savings and subject to the provisions of existing law.

Collective bargaining. Provisions regarding contracting out are addressed in Article 3 of the California State University Employees Union (CSUEU) and Article 4 of the State Employees Trades Council (SETC) collective bargaining agreements. The CSUEU agreement authorizes contracting out provided that it does not displace bargaining unit employees, and defines displacement to include layoff, demotion, involuntary transfer to a new classification, or to a new satellite campus location, or a location requiring a change of residence, and involuntary time base reductions. The CSU is required to notify the Union when contracting out is to be on a long-term basis and the Union is authorized to request to meet and confer on the impacts of long-term contracting out work. Prior to meeting, the CSU is required to provide CSUEU all existing relevant information, including requests for proposals, copies of bids received, and any cost analysis used to evaluate the need for contracting out.

The SETC agreement, prior to contracting out, requires a campus to consider the availability of SETC employees to perform the work, whether they have the special skills and licensure necessary, whether the work can be completed within time constraints applicable to the project, the availability of required materials and/or equipment, and the cost involved in performing the work in-house versus contracting out. Notification of the Chief Campus Steward is required prior to the start of any such contracted work.

Previous legislation. SB 669 (Pan) of 2015, which never had a vote in the Senate Education Committee, is very similar in nature to this measure.

SB 943 (Beall) of 2014, which failed to receive enough votes for passage out of the Senate Education Committee, was similar to this bill; and, SB 943 assigned the State Personnel Board oversight of CSU contracting practices.

AB 2225 (Lowenthal) of 2002, which was held in the Senate Education Committee, proposed similar personal services contracting standards for the CSU.

Analysis Prepared by: Jeanice Warden / HIGHER ED. / (916) 319-3960 FN: 0003278

Date of Hearing: May 4, 2016

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 2183

Author:(Gatto) – As Amended Ver:March 15, 2016

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill establishes standards for the use of personal service contracts by the California State University (CSU) substantially similar to those currently applied to other state agencies. Specifically, the bill:

1. Requires and specifies 11 conditions that must be met in order for any personal services contract to be permissible, including:
   1. Clear demonstration that the proposed contract will result in actual overall savings to the state, considering specific elements that can/cannot be included when comparing contract and in-state costs.
   2. Proposals to contract out shall not be approved solely on the basis that savings will result from lower contractor pay rates or benefits.
   3. The contract does not cause the displacement of university employees.
2. Permits personal services contracts when any of nine conditions can be met, including: a) that the services are not available within the university; b) cannot be performed satisfactorily by university employees; c) are of an urgent, temporary, or occasional nature such that delaying implementation through the hiring of university employees would frustrate their very purpose; d) or are of such a highly technical nature that is not available from the pool of university employees.

FISCAL EFFECT:

1. CSU will have one-time costs of around $100,000 to establish the new process, including establishing new policy followed by training of procurement personnel throughout the system.
2. CSU estimates about 13,000 personal services contracts systemwide for 2015-16, an average of 565 per campus. If reviewing each contract for conformance with the bill's provision required only one-half position per campus, statewide costs would be $1.6 million annually. This bill contains no enforcement provisions, which if eventually done through regulations, could add additional costs.

[The provisions of this bill, as described in (1) and (2) in the Summary above, mirror Government Code Sections 19130(a) and 19130(b) for state agencies. All agencies proposing to execute a contract pursuant to 19130(a) must first notify the State Personnel Board (SPB). The board indicates that, among all agencies, only a handful of contracts (average of 35 annually recently) are proposed annually pursuant to this provision. Instead, almost all state agency personal service contracts are allowable pursuant to one of the exceptions provided in 19130(b).]

COMMENTS:

1. Purpose. According to the author, the CSU is not subject to some of the same standards of accountability that apply to other state agencies regarding personal service contracts. The author contends that this has, "resulted in several debunk contracts, including: a CSU that ended a three-year agreement with its employees and entered into a five-year contract with a private and external custodial firm, which resulted in displacement of those other custodial employees." This measure aligns the CSU's practice of contracting out with those required by other state agencies pursuant to Government Code Section 19130.
2. Current CSU Personal Services Contracting. CSU's collecting bargaining agreement with the California State University Employees Union (CSUEU) authorizes contracting out provided it does not displace bargaining unit employees, and defines displacement to include layoff, demotion, involuntary transfer to a new classification, or to a new satellite campus location, or a location requiring a change of residence, and involuntary time base reductions. CSU is required to notify the union when contracting out is to be on a long-term basis and the union is authorized to request to meet and confer on the impacts of long-term contracting out work.

Under CSU's agreement with the State Employees Trades Council (SETC), prior to contracting out, a campus must consider the availability of SETC employees to perform the work, whether they have the special skills and licensure necessary, whether the work can be completed within time constraints applicable to the project, the availability of required materials and/or equipment, and the cost involved in performing the work in-house versus contracting out.

1. Opposition. CSU notes that it's employees are not part of the civil service system, and argues that, with existing contracting procedures in place, negotiated through collective bargaining pursuant to the Higher Education Employer-Employee Relations Act, this bill appears to be a solution in search of a problem.
2. Prior Legislation. SB 669 (Pan) of 2015, which was very similar to this measure, never had a vote in the Senate Education Committee.

AB 682 (Leno) of 2015, which placed similar contracting requirements on the trial courts, was vetoed. The Governor, in part, argued that the bill "…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."

SB 943 (Beall) of 2014, which failed in the Senate Education Committee, was similar to this bill but also assigned the State Personnel Board oversight of CSU contracting practices.

AB 2225 (Lowenthal) of 2002, which was substantially similar to SB 943, was held in the Senate Education Committee.

Analysis Prepared by: Chuck Nicol / APPR. / (916) 319-2081

Date of Hearing: April 19, 2016

ASSEMBLY COMMITTEE ON HIGHER EDUCATION

Jose Medina, Chair

ABPCA Bill Id:AB 2183 (

Author:Gatto) – As Amended Ver:March 15, 2016

SUBJECT: California State University: personal service contracts.

SUMMARY: Establishes standards for the use of personal services contracts by the California State University (CSU) Trustees. Specifically, this bill:

1. Establishes similar requirements and review processes for personal services contracting by the CSU as those that exist for State agencies, as specified.
2. Specifies that use of personal services contracting to achieve costs savings is permissible when the CSU clearly demonstrates that the contract will result in overall cost savings and:
   1. Prescribes the specific costs to be included/excluded in the calculation;
   2. Prohibits approval solely on the basis of savings from lower contractor pay rates or benefits, and requires that wages be at the industry's level and that they do not significantly undercut university pay rates;
   3. Displacement of university employees, as specified, is not caused by the contract; and,
   4. It does not affect nondiscrimination efforts, savings are large enough to be maintained during cost fluctuations, are clearly justified by size and duration, contracts are publicly and competitively bid, and various other requirements.
3. Restricts personal services contracting, unless the following conditions are met:
   1. The Legislature mandates or authorizes work be performed by independent contractors, and the contract is for a new university function;
   2. Services are unavailable or unable to be satisfactorily performed within the university or by university employees;
   3. Services are incidental to a purchase or lease contract;
   4. The legislative, administrative, or legal goals/purposes cannot be accomplished through the regular or ordinary hiring process;
   5. CSU employees cannot feasibly supply the equipment, materials, facilities, or support services provided by the contractor;
   6. The contract is for the provision of training courses for which qualified CSU employees are not available; and,
   7. The contract is for services of an urgent, temporary, or occasional nature.
4. Defines "indirect overhead costs" as the pro rata share of existing administrative salaries and benefits, rent, equipment costs, utilities, and materials.
5. Defines "firm" as a corporation, partnership, nonprofit organization, or sole proprietorship.

EXISTING LAW:

1. Authorizes the CSU Trustees to enter into agreements with any public or private agency, officer, person, or institution, corporation, association, or foundation for the performance of acts or the furnishing of services, facilities, materials, goods, supplies, or equipment by or for the Trustees or for the joint performance of an act or function or the joint furnishing of services and facilities by the Trustees and the other party to the agreement. Specifies that the Trustees shall prescribe policies and procedures for the acquisition of services, facilities, materials, goods, supplies, or equipment; and, said policies shall include competitive bids or proposals as, specified (Education Code Section 89036).
2. Provides standards for the use of personal service contracts by state agencies with specific criteria for contracting outside state service. These criteria include demonstration of cost savings, definition of costs, and requirements that work not be contracted out solely on the basis of lower pay rates or benefits, and justification of savings based on the size and duration of the contract (Government Code Section 19130).
3. Establishes the State Civil Service Act and establishes the State Personnel Board, as a five member body appointed by the Governor and approved by the Senate, to enforce and administer civil service statutes. The Constitution establishes several exemptions from the civil service, including officers and employees of the University of California and the CSU (Article 7 of the California Constitution).

FISCAL EFFECT: Unknown

COMMENTS: Need for the measure. According to the author, the CSU is not subject to some of the same standards of accountability that apply to other state agencies regarding personal service contracts. The author contends that this has, "resulted in several debunk contracts, including: a CSU that ended a three-year agreement with its employees and entered into a five-year contract with a private and external custodial firm, which resulted in displacement of those other custodial employees."

This measure seeks to align the CSU's practice of contracting out with those required by other state agencies.

State Civil Service Act. Provisions of the Act specifically exclude officers and employees of the CSU from state civil service. Additionally, the Legislature has granted the CSU other exemptions from provisions within the Act, including: (1) exclusion from Public Contract Code provisions regarding the acquisition of goods and services; and, (2) authority to promulgate regulations without having to utilize the procedures outlined in the Administrative Procedures Act.

This measure is modeled after the State Civil Service Act used to govern personal services contracting within the state. It is unclear whether or not, due to the existing exemptions the Legislature has conferred upon the CSU, if it is warranted for the CSU to now have to align their personal services contracting provisions under the Act.

Personal services contract. A personal services contract is any contract, requisition, purchase order, etc. (except public works contracts) under which labor or personal services is a significant, separately identifiable element. The business or person performing these contractual services must be an independent contractor that does not have status as an employee of the State.

A cost-savings based personal services contract is a personal services contract proposed to achieve cost savings and subject to the provisions of existing law.

Collective bargaining. Provisions regarding contracting out are addressed in Article 3 of the California State University Employees Union (CSUEU) and Article 4 of the State Employees Trades Council (SETC) collective bargaining agreements. The CSUEU agreement authorizes contracting out provided that it does not displace bargaining unit employees, and defines displacement to include layoff, demotion, involuntary transfer to a new classification, or to a new satellite campus location, or a location requiring a change of residence, and involuntary time base reductions. The CSU is required to notify the Union when contracting out is to be on a long-term basis and the Union is authorized to request to meet and confer on the impacts of long-term contracting out work. Prior to meeting, the CSU is required to provide CSUEU all existing relevant information, including requests for proposals, copies of bids received, and any cost analysis used to evaluate the need for contracting out.

The SETC agreement, prior to contracting out, requires a campus to consider the availability of SETC employees to perform the work, whether they have the special skills and licensure necessary, whether the work can be completed within time constraints applicable to the project, the availability of required materials and/or equipment, and the cost involved in performing the work in-house versus contracting out. Notification of the Chief Campus Steward is required prior to the start of any such contracted work.

Previous legislation. SB 669 (Pan) of 2015, which never had a vote in the Senate Education Committee, is very similar in nature to this measure.

SB 943 (Beall) of 2014, which failed to receive enough votes for passage out of the Senate Education Committee, was similar to this bill; and, SB 943 assigned the State Personnel Board oversight of CSU contracting practices.

AB 2225 (Lowenthal) of 2002, which was held in the Senate Education Committee, proposed similar personal services contracting standards for the CSU.

REGISTERED SUPPORT / OPPOSITION:

Support

American Federation of State, County and Municipal Employees, AFL-CIO

California State Council of the Services Employees International Union

California State University Employees Union

Professional Engineers in California Government

Opposition

California Chamber of Commerce

California State University

Analysis Prepared by: Jeanice Warden / HIGHER ED. / (916) 319-3960