The Trial Court Employment Protection and Governance Act establishes a trial court employee personnel system that provides authority to hire trial court personnel, regulates the classification and compensation of trial court employees, labor relations, and personnel files, and requires each trial court to establish a system of employment selection and advancement and an employment protection system.

Existing law authorizes state agencies to use personal services contracts to achieve cost savings if specified standards are satisfied, including, among other things, the contract does not cause the displacement of civil service employees and the contract is awarded through a publicized, competitive bidding process. The State Personnel Board is required to review a proposed contract upon the request of an employee organization for compliance with those standards.

This bill would establish specified standards if a trial court intends to enter into a contract for any services that are currently or customarily performed by that trial courts employees. Among other things, the bill would require the trial court to clearly demonstrate that the proposed contract will result in actual overall cost savings to the trial court. The bill would provide that those standards do not apply to a contract under certain circumstances, including, among others, when the services are incidental to a contract for the purchase or lease of real or personal property.

This bill would provide that its provisions are severable.

The Trial Court Employment Protection and Governance Act establishes a trial court employee personnel system that provides authority to hire trial court personnel, regulates the classification and compensation of trial court employees, labor relations, and personnel files, and requires each trial court to establish a system of employment selection and advancement and an employment protection system.

Existing law authorizes state agencies to use personal services contracts to achieve cost savings if specified standards are satisfied, including, among other things, the contract does not cause the displacement of civil service employees and the contract is awarded through a publicized, competitive bidding process. The State Personnel Board is required to review a proposed contract upon the request of an employee organization for compliance with those standards.

This bill would establish specified standards if a trial court intends to enter into a contract for any services that are currently or customarily performed by that trial courts employees. Among other things, the bill would require the trial court to clearly demonstrate that the proposed contract will result in actual overall cost savings to the trial court. The bill would provide that those standards do not apply to a contract under certain circumstances, including, among others, when the services are incidental to a contract for the purchase or lease of real or personal property.

This bill would provide that its provisions are severable.

The Trial Court Employment Protection and Governance Act establishes a trial court employee personnel system that provides authority to hire trial court personnel, regulates the classification and compensation of trial court employees, labor relations, and personnel files, and requires each trial court to establish a system of employment selection and advancement and an employment protection system.

Existing law authorizes state agencies to use personal services contracts to achieve cost savings if specified standards are satisfied, including, among other things, the contract does not cause the displacement of civil service employees and the contract is awarded through a publicized, competitive bidding process. The State Personnel Board is required to review a proposed contract upon the request of an employee organization for compliance with those standards.

This bill would establish specified standards if a trial court intends to enter into a contract for any services that are currently or customarily performed by that trial courts employees. Among other things, the bill would require the trial court to clearly demonstrate that the contract will result in actual overall cost savings to the trial court. The bill would provide that those standards do not apply to a contract under certain circumstances, including, among others, when the services are incidental to a contract for the purchase or lease of real or personal property.

This bill would require a trial court to provide a report by February 1, 2016, to the Department of Finance, the Chairperson of the Joint Legislative Budget Committee, and the Chairpersons of the Senate Committee on Judiciary and the Assembly Committee on Judiciary if the trial court entered into, or renewed or extended, a contract between July 1, 2015, and December 31, 2015, inclusive, for services that were provided or are customarily provided by its trial court employees and the contract has a term extending beyond March 31, 2016. The bill would require that report to provide specified information relating to these contracts, including an analysis of whether the contract resulted in the displacement of trial court employees.

This bill would provide that its provisions are severable.

The Trial Court Employment Protection and Governance Act establishes a trial court employee personnel system that provides authority to hire trial court personnel, regulates the classification and compensation of trial court employees, labor relations, and personnel files, and requires each trial court to establish a system of employment selection and advancement and an employment protection system.

Existing law authorizes state agencies to use personal services contracts to achieve cost savings if specified standards are satisfied, including, among other things, the contract does not cause the displacement of civil service employees and the contract is awarded through a publicized, competitive bidding process. The State Personnel Board is required to review a proposed contract upon the request of an employee organization for compliance with those standards.

This bill would establish specified standards if a trial court intends to enter into, or renew or extend, into a contract for any services that are currently or customarily performed by that trial courts employees. Among other things, the bill would require the trial court to clearly demonstrate that the contract will result in actual overall cost savings to the trial court. The bill would provide that those standards do not apply to a contract under certain circumstances, including, among others, when the services are incidental to a contract for the purchase or lease of real or personal property.

This bill would require a trial court to provide a report by February 1, 2016, to the Department of Finance, the chairperson Chairperson of the Joint Legislative Budget Committee, and the chairpersons Chairpersons of the Senate Committee on Judiciary and the Assembly Committee on Judiciary if the trial court entered into, or renewed or extended, a contract between July 1, 2015, and December 31, 2015, inclusive, for services that were provided or are customarily provided by its trial court employees and the contract has a term extending beyond March 31, 2016. The bill would require that report to provide specified information relating to these contracts, including an analysis of whether the contract resulted in the displacement of trial court employees.

This bill would provide that its provisions are severable.

The Trial Court Employment Protection and Governance Act establishes a trial court employee personnel system that provides authority to hire trial court personnel, regulates the classification and compensation of trial court employees, labor relations, and personnel files, and requires each trial court to establish a system of employment selection and advancement and an employment protection system.

Existing law authorizes state agencies to use personal services contracts to achieve cost savings if specified standards are satisfied, including, among other things, the contract does not cause the displacement of civil service employees and the contract is awarded through a publicized, competitive bidding process. The State Personnel Board is required to review a proposed contract upon the request of an employee organization for compliance with those standards.

This bill would establish specified standards if a trial court intends to enter into, or renew or extend, a contract for any services that are currently or customarily performed by that trial courts employees. Among other things, the bill would require the trial court to clearly demonstrate that the contract will result in actual overall cost savings to the trial court. The bill would provide that those standards do not apply to a contract under certain circumstances, including, among others, when the services are incidental to a contract for the purchase or lease of real or personal property.

This bill would require a trial court to provide a report by February 1, 2016, to the Department of Finance, the chairperson of the Joint Legislative Budget Committee, and the chairpersons of the Senate Committee on Judiciary and the Assembly Committee on Judiciary if the trial court entered into, or renewed or extended, a contract between July 1, 2015, and December 31, 2015, for services that were provided or are customarily provided by its trial court employees and the contract has a term extending beyond March 31, 2016. The bill would require that report to provide specified information relating to these contracts, including an analysis of whether the contract resulted in the displacement of trial court employees.

This bill would provide that its provisions are severable.

 VETO  

Bill No: SB 682

Author: Leno (D), et al.

Amended: 8/31/15

Vote: 21

SENATE JUDICIARY COMMITTEE: 5-1, 4/28/15

AYES: Jackson, Hertzberg, Leno, Monning, Wieckowski

NOES: Anderson

NO VOTE RECORDED: Moorlach

SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/28/15

AYES: Lara, Beall, Hill, Leyva, Mendoza

NOES: Bates, Nielsen

SENATE FLOOR: 24-14, 6/2/15

AYES: Allen, Beall, Block, De León, Galgiani, Hall, Hancock, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Pan, Pavley, Wieckowski, Wolk

NOES: Anderson, Bates, Berryhill, Fuller, Gaines, Glazer, Huff, Moorlach, Morrell, Nguyen, Nielsen, Roth, Runner, Vidak

NO VOTE RECORDED: Cannella, Stone

SENATE FLOOR: 25-15, 9/3/15

AYES: Allen, Beall, Block, De León, Galgiani, Hall, Hancock, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Pan, Pavley, Roth, Wieckowski, Wolk

NOES: Anderson, Bates, Berryhill, Cannella, Fuller, Gaines, Glazer, Huff, Moorlach, Morrell, Nguyen, Nielsen, Runner, Stone, Vidak

ASSEMBLY FLOOR: 51-28, 9/2/15 - See last page for vote

SUBJECT: Courts

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

Laborers’ Locals 777 and 792

Orange County Employees Association

Service Employees International Union

DIGEST: This bill requires a trial court to meet certain standards if it intends to enter into a contract for any services that are currently or have been customarily performed by that trial court’s employees, except as specified.

ANALYSIS:

Existing law:

1. Permits a state agency to contract out for personal services only if specified standards are satisfied, including, among other things:

• The agency clearly demonstrates actual overall cost savings, as specified;

• Proposals to contract out are not approved solely on the basis that savings will result from lower contractor pay rates or benefits, except that proposals to contract out work are eligible for approval if the contractor’s wages are at the industry’s level and do not significantly undercut state pay rates;

• The contract does not displace civil service employees, as specified;

• The savings are large enough to ensure they will not be eliminated by cost fluctuations that could normally be expected during the contracting period;

• The amount of savings clearly justify the size and duration of the agreement;

• The contract is awarded through a publicized, competitive bidding process;

• The potential economic advantage of contracting is not outweighed by the public’s interest in having a particular function performed directly by state government.

2. Exempts personal services contracting from the above requirements under specified circumstances, including, among other things, where:

• The contract is for a new state function and the Legislature has specifically mandated or authorized the performance of the work by independent contractors;

• The services contracted are not available within civil service, cannot be performed satisfactorily by civil service employees, or are of such a highly specialized or technical nature that the necessary expert knowledge, experience, and ability are not available through the civil service system;

• The services are incidental to a contract for the purchase or lease of real or personal property;

• The legislative, administrative, or legal goals and purposes cannot be accomplished through the utilization of persons selected pursuant to the regular civil service system, as specified;

• The nature of the work is such that specified existing law standards for emergency appointments apply;

• The contractor will provide equipment, materials, facilities, or support services that the state could not feasibly provide in the location where the services are to be performed;

• The services are of such an urgent, temporary, or occasional nature that the delay incumbent in their implementation under civil service would frustrate their very purpose.

This bill:

1. Provides that the purpose of its provisions is to establish standards when a trial court intends to enter into a contract for any services that are currently or have been customarily performed by that trial court’s employees and generally authorizes a trial court to contract for such services to achieve cost savings in that trial court if all of the following conditions are met:

• The trial court clearly demonstrates that the proposed contract will result in actual overall cost savings to the trial court, as specified;

• The contract shall not be approved solely on the basis that savings will result from lower contractor pay rates or benefits, except contracts shall be eligible for approval if the contractor’s wages are at the industry level and do not significantly undercut trial court pay rates;

• The contract does not displace trial court employees, as specified;

• The savings are large enough to ensure they will not be eliminated by private sector and trial court cost fluctuations that could normally be expected during the contracting period;

• The amount of savings clearly justifies the size and duration of the contracting agreement;

• The contract is awarded through a publicized, competitive bidding process;

• The contract includes specific provisions pertaining to the qualifications of the staff that will perform the work under the contract, and assurance that the contractor’s hiring practices meet applicable nondiscrimination standards;

• The potential for future economic risk to the trial court from potential contractor rate increases is minimal;

• The contract is with a “firm,” as defined;

• The potential economic advantage of contracting out is not outweighed by the public’s interest in having a particular function performed directly by the trial court; and

• The contract shall comply with any additional requirements imposed by the Judicial Branch Contracting Manual, as specified.

2. Exempts contracts from the above requirements if:

• The contract is for a new trial court function and the Legislature has specifically mandated or authorized the performance of the work by independent contractors;

• The contract is between a trial court and another trial court or a government entity for services to be performed by employees of the other trial court or employees of the government entity;

• The services contracted for cannot be satisfactorily performed by trial court employees, or are of such a highly specialized or technical nature that the necessary expert knowledge, experience, and ability cannot be obtained from the court’s trial court employees;

• The services are incidental to a contract for the purchase or lease of real or personal property;

• The legislative, administrative, or legal goals and purposes cannot be accomplished through the utilization of trial court employees for specified reasons. These contracts shall include, but not be limited to, obtaining expert witnesses in litigation;

• Due to an emergency, a contract is necessary for the immediate preservation of the public health, welfare, or safety;

• The contractor will conduct training courses for which appropriately qualified trial court employee instructors are not available from the court, provided that permanent instructor positions shall be filled through the process for hiring trial court employees;

• The contractor will provide equipment, materials, facilities, or support services that could not feasibly be provided by the trial court in the location where the services are to be performed, except as specified;

• The services are of such an urgent, temporary, or occasional nature that the delay incumbent in their implementation through the process for hiring trial court employees would frustrate their very purpose, except as specified;

• The contract is a personal services contract developed pursuant to rehabilitation programs, as specified, or pursuant to a program vendored or contracted through a regional center or the Statement Department of Developmental Services, as specified, and the contract will not cause an existing trial court employee to incur a loss of his or her employment or employment seniority; a reduction in wages, benefits, or hours; or an involuntary transfer to a new location requiring a change in residence;

• The contract is for the services of any court interpreter, which shall be governed by specified laws, and any memorandum of understanding or agreement entered into pursuant to those acts, as specified; or

• The contract is for services provided to a court by a traffic assistance program, as specified.

3. Includes a severability clause.

Background

Under California law, most governmental entities can use personal services contracts (i.e. contracting out) to achieve cost savings only if specified standards are satisfied, chief among them being that the entity clearly demonstrates actual overall cost savings based upon certain information. These entities include executive branch agencies, public schools, community colleges, and libraries.

In recent years, California’s judicial branch has experienced catastrophic budget reductions that have crippled California’s court system by, among other things, forcing the closure of courts and self-help centers, which has resulted in delayed access to justice for a large number of Californians. In response, many courts have begun seeking ways in which to operationalize those budget reductions. According to information provided to this Committee by the Judicial Council of California, examples of services that trial courts currently contract out for include: court reporters; interpreters; child custody evaluations; probate investigations; family law facilitators; minor’s counsel in dependency cases; child custody mediation services; mediators/alternative dispute resolution; security guards; personnel services; payroll; information services; collections; adoption investigation services; services for self-represented litigants; labor negotiation services; transcripts for electronically recorded proceedings; and more.

Over the last two years, bills have been introduced in an effort to impose various contracting out standards upon the trial courts. The first bill, AB 566 (Wieckowski, 2013) was ultimately vetoed by the Governor, and the second bill, AB 2332 (Wieckowski, 2014) died on the Senate Appropriations Committee’s Suspense File. This bill similarly seeks to impose certain standards upon courts when entering into contracts for services currently or customarily performed by the trial court’s employees, largely based upon standards imposed on state agencies.

Comments

As stated by the author:

The major government entities in California either face explicit limits (cities and counties) on privatization of public services or must meet due diligence requirements (State, community colleges, K-12 school districts, libraries) prior to privatizing their services.

Historically, trial courts in California were county entities, funded by the [c]ounties and thus subject to the privatization restrictions that applied to [c]ounties. But in 1997, the Legislature passed the Lockyer-Isenberg Trial Court Funding Act [ . . . ] and shifted the responsibility for funding from the [c]ounties to the State. Subsequently, many of the laws that had previously applied to the trial courts no longer applied once they were removed from the [c]ounties’ jurisdictions, such as open meetings, access to public records, whistleblower protections, public contract code requirements for contracting purposes and provisions relating to privatization.

As a result of recent budget cuts to the trial courts, some courts have sought alternative ways to provide critically important services to the public, including privatizing some of the most sensitive services that help preserve the integrity of our impartial trial court system. Alternatives being considered include privatizing the handling and maintenance of private, confidential and sensitive information contained in official court records.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Assembly Appropriations Committee:

1. Unknown, significant costs, potentially in the millions of dollars (General Fund), to the extent the standards established in this bill limit the courts’ ability to negotiate contracts for services and to renew or extend existing contracts. (Based on a survey of the courts, the Judicial Council estimates increased costs of $25 million to hire employees for work currently performed by contract staff.)

2. Offsetting a portion of the above costs will be savings in cases where the decision to continue or resume performing functions with court employees is more cost effective.

3. Unknown, significant loss of future savings, potentially in the millions of dollars (General Fund) annually, to the extent this bill restricts the ability of courts to transition to technology-based services for existing court services.

SUPPORT: (Verified 10/20/15)

American Federation of State, County and Municipal Employees, AFL-CIO (co-source)

Laborers’ Locals 777 and 792 (co-source)

Orange County Employees Association (co-source)

Service Employees International Union (co-source)

Alliance of California Judges

California Court Reporters Association

California Labor Federation

California Professional Firefighters

Center for Judicial Excellence

Glendale City Employees Association

Orange County Employees Association

Organization of SMUD Employees

San Bernardino Public Employees Association

San Diego County Court Employees Association

San Luis Obispo County Employees Association

OPPOSITION: (Verified 10/20/15)

California Chamber of Commerce

Judicial Council

Los Angeles Superior Court

Ventura County Superior Court, Presiding Judge

ARGUMENTS IN SUPPORT: The Service Employees International Union (SEIU), co-sponsor of this bill, writes that “SB 682 would ensure that trial courts operate within the norms of good government practices by requiring them to show diligence prior to privatizing important trial court services.” SEIU argues:

[T]ax dollars have the dual responsibility of being well spent for quality services, as well as being an investment in the larger society. In fact, it could be argued that the level of accountability should be higher for trial court services. Being a nation of laws, a fair and impartial judicial system 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. [ . . . ]

SEIU also asserts that SB 682’s provisions “are neither radical nor a departure from current law governing most other parts of government and will ensure that tax dollars are accountable. In a time of budget austerity it is even more important to ensure that scarce judicial dollars are well spent. Every misspent dollar is a dollar taken away from a taxpayers’ ability to access much needed court services.”

ARGUMENTS IN OPPOSITION: Judicial Council takes an “oppose unless amended” position, writing that this bill would severely hamper the trial courts’ ability to contract for personal services. Judicial Council writes that the bill:

• presumes no personal services contract is valid unless it meets one of several very limited exceptions or has achieved the impossible balance of attaining actual savings without reducing labor and benefit costs;

• applies to any services “currently or customarily” performed by trial court employees which is not only “overly broad, it’s also vague and retroactive;”

• inhibits the trial courts’ ability to manage their staff and resources;

• reduces local control and discretion over trial court management;

• conflicts with recent legislation regarding judicial branch contracting; and

• affects circumstances that are more appropriately addressed at the local level through collective bargaining agreements.

Judicial Council further argues that while this bill appears to be modeled upon the Government Code section limiting contracting in the executive branch for services that could be performed by civil service employees, that “model is inappropriate for trial courts because . . . the trial courts must operate independently from one jurisdiction to the next.” Additionally, unlike executive branch agencies that “can manage the amount of work they receive, the number and types of people they serve, and the services provided . . . trial courts must accept all filings form the public, have no control over the number and types of cases they must process, and have no ability to limit court users. [ . . . ]”

GOVERNOR'S VETO MESSAGE:

I am returning Senate Bill 682 without my signature.

This bill requires trial courts to meet specified standards when entering into personal service contracts, and provide an analysis of all such contracts, to the Legislature.

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. 

ASSEMBLY FLOOR: 51-28, 9/2/15

AYES: Alejo, Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Roger Hernández, Holden, Irwin, Jones-Sawyer, Lopez, Low, McCarty, Medina, Mullin, Nazarian, O'Donnell, Olsen, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber, Williams, Wood, Atkins

NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang, Chávez, Dahle, Beth Gaines, Gallagher, Grove, Hadley, Harper, Jones, Kim, Lackey, Levine, Linder, Maienschein, Mathis, Mayes, Melendez, Obernolte, Patterson, Steinorth, Wagner, Waldron, Wilk

NO VOTE RECORDED: Gray

Prepared by: Ronak Daylami / JUD. / (916) 651-4113

11/4/15 14:01:16

**** END ****

SENATE THIRD READING

STR Bill Id:SB 682

Author:(Leno)

As Amended Ver:August 31, 2015

Majority vote

SENATE VOTE: 24-14

SUMMARY: Requires courts to comply with specified requirements before contracting out services that are currently or customarily performed by a trial court's employees. Specifically, this bill:

1. Provides that contracts for services currently or customarily performed by trial court employees are permissible if all of the following conditions are met:

   1. The court clearly demonstrates that the proposed contract will result in actual, overall cost savings to the court, considering specified factors, as provided;

   2. The contract may 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 significantly undercut trial court pay rates;

   3. The contract does not cause displacement of court employees, as provided;

   4. The contract savings are large enough to ensure they will not be lost by various cost fluctuations during the contract period;

   5. The amount of the savings justifies the size and duration of the contract;

   6. The contract is awarded through a competitive bidding process;

   7. The contract provides for qualified staff, and the contractor's hiring practices are nondiscriminatory;

   8. The potential for future economic risk to the court from future contract rate increases is minimal;

   9. The contract is with a firm, as defined;

   10. The potential economic advantage of contracting out is not outweighed by the public's interest in having the function performed directly by the court; and

   11. The contract complies with any additional requirements imposed by the Judicial Branch Contracting Manual.

2. Does not preclude a trial court or the Judicial Council from adopting more restrictive rules regarding contracting of court services.

3. Contracting is also permissible if one of the following conditions is met:

   1. Contract is for a new trial court function for which the Legislature has specifically authorized the performance of the services by independent contractors;

   2. Contract is between a trial court and another trial court or a government entity for services to be performed by employees of that trial court or government entity;

   3. Services contracted for cannot be satisfactorily performed by court employees or are of such a highly specialized or technical nature that necessary expertise cannot be obtained from court employees;

   4. Services are incidental to a contract for purchase of property, except for contracts to operate equipment or computers (other than service or maintenance agreements);

   5. Contract is needed to protect against conflict of interest or ensure independent unbiased findings;

   6. Emergency situations in which contract is necessary for immediate preservation of public health, welfare or safety;

   7. Training courses when qualified instructors are not available from court employees;

   8. Contractor will provide equipment, materials, facilities or support services that cannot feasibly be provided in the location, except these will not be used to open closed courthouses or for ongoing operation at new or reopened courthouses;

   9. Services 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;

   10. Contract is for services with individuals with developmental disabilities pursuant to rehabilitation programs;

   11. Contract is for services of court interpreters; or

   12. Contract is for services provided to a court by a traffic assistance program.

4. Contains a severability clause.

EXISTING LAW:

1. Provides that employees of the state be appointed through the civil service system.

2. Limits personal service contracts (contracting out) for work done by state employees to when specified conditions are satisfied, including:

   1. The contracting state agency clearly demonstrates actual overall savings;

   2. 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;

   3. The contract does not cause displacement of state civil service employees;

   4. The amount of the savings clearly justifies the agreement;

   5. The contract is awarded through a competitive bidding process;

   6. The potential for future economic risk for the state from the contractor is minimal; and

   7. 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.

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.

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.

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.

6. Allows a county to contract out for "special services," as provided.

FISCAL EFFECT: According to the Assembly Appropriations Committee:

1. Unknown, significant costs, potentially in the millions of dollars (General Fund), to the extent the standards established in this bill limit the courts’ ability to negotiate contracts for services and to renew or extend existing contracts. (Based on a survey of the courts, the Judicial Council estimates increased costs of $25 million to hire employees for work currently performed by contract staff.)

2. Offsetting a portion of the above costs will be savings in cases where the decision to continue or resume performing functions with court employees is more cost effective.

3. Unknown, significant loss of future savings, potentially in the millions of dollars (General Fund) annually, to the extent this bill restricts the ability of courts to transition to technology-based services for existing court services.

COMMENTS: Nearly all government entities in California are restricted from contracting out functions that are customarily done by public employees, unless specified conditions are satisfied. These requirements are designed to ensure not only that work is done cost-effectively, but also 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, community college districts and public libraries are also required to comply with generally the same standards that apply to the state. This bill, jointly sponsored by SEIU, AFSCME, Laborers' Locals 777 and 792, and the Orange County Employees Association, seeks to extend these same due diligence protections to the trial courts.

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 satisfy certain due diligence requirements. The due diligence requirements in this bill are, almost verbatim, identical to requirements in current law that apply to all state agencies, as well as schools, community colleges and libraries. In order to ensure that the trial courts can operate effectively, the bill provides twelve exemptions to permit contracting out of court services without having to go through the due diligence review outlined above, which are similar to exemptions provided to some other government entities.

Last year, AB 2332 (Wieckowski), which was similar to this bill, passed the Assembly and the Senate Judiciary Committee, but was held on the Senate Appropriations Committee suspense file. In 2013, the Governor vetoed AB 566 (Wieckowski), which also was similar to this bill. This bill seeks to address the Governor’s concerns -- and the issues last year in the Senate Appropriations Committee – by increasing the exemptions, narrowing the scope of contracts to which the bill applies, and making the requirements of the bill nearly identical to the limitations that today apply to state agencies.

Analysis Prepared by: Leora Gershenzon / JUD. / (916) 319-2334 FN: 0001627

 UNFINISHED BUSINESS  

Bill No: SB 682

Author: Leno (D), et al.

Amended: 8/31/15

Vote: 21

SENATE JUDICIARY COMMITTEE: 5-1, 4/28/15

AYES: Jackson, Hertzberg, Leno, Monning, Wieckowski

NOES: Anderson

NO VOTE RECORDED: Moorlach

SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/28/15

AYES: Lara, Beall, Hill, Leyva, Mendoza

NOES: Bates, Nielsen

SENATE FLOOR: 24-14, 6/2/15

AYES: Allen, Beall, Block, De León, Galgiani, Hall, Hancock, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Pan, Pavley, Wieckowski, Wolk

NOES: Anderson, Bates, Berryhill, Fuller, Gaines, Glazer, Huff, Moorlach, Morrell, Nguyen, Nielsen, Roth, Runner, Vidak

NO VOTE RECORDED: Cannella, Stone

ASSEMBLY FLOOR: 51-28, 9/02/15 - See last page for vote

SUBJECT: Courts

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

Laborers’ Locals 777 and 792

Orange County Employees Association

Service Employees International Union

DIGEST: This bill requires a trial court to meet certain standards if it intends to enter into a contract for any services that are currently or have been customarily performed by that trial court’s employees, except as specified.

Assembly Amendments 1) require that the contract comply with any additional requirements imposed by the Judicial Branch Contracting Manual, as specified; 2) expand and clarify the exceptions to the contracting out requirements; 3) remove requirements for contracts entered into, renewed, or extended between July 1, 2015 and December 31, 2015; and 4) make other technical or clarifying changes.

ANALYSIS: Existing law:

1. Permits a state agency to contract out for personal services only if specified standards are satisfied, including, among other things:

• The agency clearly demonstrates actual overall cost savings, as specified;

• Proposals to contract out are not approved solely on the basis that savings will result from lower contractor pay rates or benefits, except that proposals to contract out work are eligible for approval if the contractor’s wages are at the industry’s level and do not significantly undercut state pay rates;

• The contract does not displace civil service employees, as specified;

• The savings are large enough to ensure they will not be eliminated by cost fluctuations that could normally be expected during the contracting period;

• The amount of savings clearly justify the size and duration of the agreement;

• The contract is awarded through a publicized, competitive bidding process;

• The potential economic advantage of contracting is not outweighed by the public’s interest in having a particular function performed directly by state government.

2. Exempts personal services contracting from the above requirements under specified circumstances, including, among other things, where:

• The contract is for a new state function and the Legislature has specifically mandated or authorized the performance of the work by independent contractors;

• The services contracted are not available within civil service, cannot be performed satisfactorily by civil service employees, or are of such a highly specialized or technical nature that the necessary expert knowledge, experience, and ability are not available through the civil service system;

• The services are incidental to a contract for the purchase or lease of real or personal property;

• The legislative, administrative, or legal goals and purposes cannot be accomplished through the utilization of persons selected pursuant to the regular civil service system, as specified;

• The nature of the work is such that specified existing law standards for emergency appointments apply;

• The contractor will provide equipment, materials, facilities, or support services that the state could not feasibly provide in the location where the services are to be performed;

• The services are of such an urgent, temporary, or occasional nature that the delay incumbent in their implementation under civil service would frustrate their very purpose.

This bill:

1. Provides that the purpose of its provisions is to establish standards when a trial court intends to enter into a contract for any services that are currently or have been customarily performed by that trial court’s employees and generally authorizes a trial court to contract for such services to achieve cost savings in that trial court if all of the following conditions are met:

• The trial court clearly demonstrates that the proposed contract will result in actual overall cost savings to the trial court, as specified;

• The contract shall not be approved solely on the basis that savings will result from lower contractor pay rates or benefits, except contracts shall be eligible for approval if the contractor’s wages are at the industry level and do not significantly undercut trial court pay rates;

• The contract does not displace trial court employees, as specified;

• The savings are large enough to ensure they will not be eliminated by private sector and trial court cost fluctuations that could normally be expected during the contracting period;

• The amount of savings clearly justifies the size and duration of the contracting agreement;

• The contract is awarded through a publicized, competitive bidding process;

• The contract includes specific provisions pertaining to the qualifications of the staff that will perform the work under the contract, and assurance that the contractor’s hiring practices meet applicable nondiscrimination standards;

• The potential for future economic risk to the trial court from potential contractor rate increases is minimal;

• The contract is with a “firm,” as defined;

• The potential economic advantage of contracting out is not outweighed by the public’s interest in having a particular function performed directly by the trial court; and

• The contract shall comply with any additional requirements imposed by the Judicial Branch Contracting Manual, as specified.

2. Exempts contracts from the above requirements if:

• The contract is for a new trial court function and the Legislature has specifically mandated or authorized the performance of the work by independent contractors;

• The contract is between a trial court and another trial court or a government entity for services to be performed by employees of the other trial court or employees of the government entity;

• The services contracted for cannot be satisfactorily performed by trial court employees, or are of such a highly specialized or technical nature that the necessary expert knowledge, experience, and ability cannot be obtained from the court’s trial court employees;

• The services are incidental to a contract for the purchase or lease of real or personal property;

• The legislative, administrative, or legal goals and purposes cannot be accomplished through the utilization of trial court employees for specified reasons. These contracts shall include, but not be limited to, obtaining expert witnesses in litigation;

• Due to an emergency, a contract is necessary for the immediate preservation of the public health, welfare, or safety;

• The contractor will conduct training courses for which appropriately qualified trial court employee instructors are not available from the court, provided that permanent instructor positions shall be filled through the process for hiring trial court employees;

• The contractor will provide equipment, materials, facilities, or support services that could not feasibly be provided by the trial court in the location where the services are to be performed, except as specified;

• The services are of such an urgent, temporary, or occasional nature that the delay incumbent in their implementation through the process for hiring trial court employees would frustrate their very purpose, except as specified;

• The contract is a personal services contract developed pursuant to rehabilitation programs, as specified, or pursuant to a program vendored or contracted through a regional center or the Statement Department of Developmental Services, as specified, and the contract will not cause an existing trial court employee to incur a loss of his or her employment or employment seniority; a reduction in wages, benefits, or hours; or an involuntary transfer to a new location requiring a change in residence;

• The contract is for the services of any court interpreter, which shall be governed by specified laws, and any memorandum of understanding or agreement entered into pursuant to those acts, as specified; or

• The contract is for services provided to a court by a traffic assistance program, as specified.

3. Includes a severability clause.

Background

Under California law, most governmental entities can use personal services contracts (i.e. contracting out) to achieve cost savings only if specified standards are satisfied, chief among them being that the entity clearly demonstrates actual overall cost savings based upon certain information. These entities include executive branch agencies, public schools, community colleges, and libraries.

In recent years, California’s judicial branch has experienced catastrophic budget reductions that have crippled California’s court system by, among other things, forcing the closure of courts and self-help centers, which has resulted in delayed access to justice for a large number of Californians. In response, many courts have begun seeking ways in which to operationalize those budget reductions. According to information provided to this Committee by the Judicial Council of California, examples of services that trial courts currently contract out for include: court reporters; interpreters; child custody evaluations; probate investigations; family law facilitators; minor’s counsel in dependency cases; child custody mediation services; mediators/alternative dispute resolution; security guards; personnel services; payroll; information services; collections; adoption investigation services; services for self-represented litigants; labor negotiation services; transcripts for electronically recorded proceedings; and more.

Over the last two years, bills have been introduced in an effort to impose various contracting out standards upon the trial courts. The first bill, AB 566 (Wieckowski, 2013) was ultimately vetoed by the Governor, and the second bill, AB 2332 (Wieckowski, 2014) died on the Senate Appropriations Committee’s Suspense File. This bill similarly seeks to impose certain standards upon courts when entering into contracts for services currently or customarily performed by the trial court’s employees, largely based upon standards imposed on state agencies.

Comment

As stated by the author:

The major government entities in California either face explicit limits (cities and counties) on privatization of public services or must meet due diligence requirements (State, community colleges, K-12 school districts, libraries) prior to privatizing their services.

Historically, trial courts in California were county entities, funded by the [c]ounties and thus subject to the privatization restrictions that applied to [c]ounties. But in 1997, the Legislature passed the Lockyer-Isenberg Trial Court Funding Act [ . . . ] and shifted the responsibility for funding from the [c]ounties to the State. Subsequently, many of the laws that had previously applied to the trial courts no longer applied once they were removed from the [c]ounties’ jurisdictions, such as open meetings, access to public records, whistleblower protections, public contract code requirements for contracting purposes and provisions relating to privatization.

As a result of recent budget cuts to the trial courts, some courts have sought alternative ways to provide critically important services to the public, including privatizing some of the most sensitive services that help preserve the integrity of our impartial trial court system. Alternatives being considered include privatizing the handling and maintenance of private, confidential and sensitive information contained in official court records.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Assembly Appropriations Committee:

1. Unknown, significant costs, potentially in the millions of dollars (General Fund), to the extent the standards established in this bill limit the courts’ ability to negotiate contracts for services and to renew or extend existing contracts. (Based on a survey of the courts, the Judicial Council estimates increased costs of $25 million to hire employees for work currently performed by contract staff.)

2. Offsetting a portion of the above costs will be savings in cases where the decision to continue or resume performing functions with court employees is more cost effective.

3. Unknown, significant loss of future savings, potentially in the millions of dollars (General Fund) annually, to the extent this bill restricts the ability of courts to transition to technology-based services for existing court services.

SUPPORT: (Verified 9/2/15)

American Federation of State, County and Municipal Employees, AFL-CIO (co-source)

Laborers’ Locals 777 and 792 (co-source)

Orange County Employees Association (co-source)

Service Employees International Union (co-source)

Alliance of California Judges

California Court Reporters Association

California Labor Federation

California Professional Firefighters

Center for Judicial Excellence

Glendale City Employees Association

Orange County Employees Association

Organization of SMUD Employees

San Bernardino Public Employees Association

San Diego County Court Employees Association

San Luis Obispo County Employees Association

OPPOSITION: (Verified 9/2/15)

California Chamber of Commerce

Judicial Council

Los Angeles Superior Court

Ventura County Superior Court, Presiding Judge

ARGUMENTS IN SUPPORT: The Service Employees International Union (SEIU), co-sponsor of this bill, writes that “SB 682 would ensure that trial courts operate within the norms of good government practices by requiring them to show diligence prior to privatizing important trial court services.” SEIU argues:

[T]ax dollars have the dual responsibility of being well spent for quality services, as well as being an investment in the larger society. In fact, it could be argued that the level of accountability should be higher for trial court services. Being a nation of laws, a fair and impartial judicial system 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. [ . . . ]

SEIU also asserts that SB 682’s provisions “are neither radical nor a departure from current law governing most other parts of government and will ensure that tax dollars are accountable. In a time of budget austerity it is even more important to ensure that scarce judicial dollars are well spent. Every misspent dollar is a dollar taken away from a taxpayers’ ability to access much needed court services.”

ARGUMENTS IN OPPOSITION: Judicial Council takes an “oppose unless amended” position, writing that this bill would severely hamper the trial courts’ ability to contract for personal services. Judicial Council writes that the bill:

• presumes no personal services contract is valid unless it meets one of several very limited exceptions or has achieved the impossible balance of attaining actual savings without reducing labor and benefit costs;

• applies to any services “currently or customarily” performed by trial court employees which is not only “overly broad, it’s also vague and retroactive;”

• inhibits the trial courts’ ability to manage their staff and resources;

• reduces local control and discretion over trial court management;

• conflicts with recent legislation regarding judicial branch contracting; and

• affects circumstances that are more appropriately addressed at the local level through collective bargaining agreements.

Judicial Council further argues that while this bill appears to be modeled upon the Government Code section limiting contracting in the executive branch for services that could be performed by civil service employees, that “model is inappropriate for trial courts because . . . the trial courts must operate independently from one jurisdiction to the next.” Additionally, unlike executive branch agencies that “can manage the amount of work they receive, the number and types of people they serve, and the services provided . . . trial courts must accept all filings form the public, have no control over the number and types of cases they must process, and have no ability to limit court users. [ . . . ]”

ASSEMBLY FLOOR: 51-28, 9/02/15

AYES: Alejo, Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Roger Hernández, Holden, Irwin, Jones-Sawyer, Lopez, Low, McCarty, Medina, Mullin, Nazarian, O'Donnell, Olsen, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber, Williams, Wood, Atkins

NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang, Chávez, Dahle, Beth Gaines, Gallagher, Grove, Hadley, Harper, Jones, Kim, Lackey, Levine, Linder, Maienschein, Mathis, Mayes, Melendez, Obernolte, Patterson, Steinorth, Wagner, Waldron, Wilk

NO VOTE RECORDED: Gray

Prepared by: Ronak Daylami / JUD. / (916) 651-4113

9/2/15 15:53:19

**** END ****

Date of Hearing: July 8, 2015

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Jimmy Gomez, Chair

SBPCA Bill Id:SB 682

Author:(Leno) – As Amended Ver:June 24, 2015

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

SUMMARY:

This bill places conditions on trial courts' use of contracts for personal services. Specifically, this bill:

1. Allows a trial court to enter into a contract for services currently or customarily performed by that trial court's employees if all of the following conditions are met:

1. Demonstration that actual contract savings, in comparison as specified, with the court's costs of providing the same services.

2. The contract shall not be approved solely because of savings from lower contractor pay rates or benefits.

3. The contract shall not cause loss of an existing employee's job, seniority, a reduction in wages or benefits, or an involuntary transfer.

4. The savings will be large enough to ensure they will not be eliminated by normally expected private sector and trial court fluctuations.

5. The savings clearly justifies the size and duration of the contract, and the potential for economic risk to the trial court is minimal.

6. The contract shall be awarded through a competitive bidding process, and will include provisions regarding qualifications of those performing the work.

7. The economic advantage of contracting out is not outweighed by the public interest in having a particular function performed directly by the trial court.
   
   

1. States that contracting is also permissible under any of the following conditions:

1. For a new trial court function for which the Legislature has mandated or authorized use of contractors.

2. For contracts between trial courts or between a trial court and another government agency, with the contracted services being provided by employees of the other trial court or government agency.

3. For contracts where the services required are highly specialized or require technical expertise outside the courts' capabilities.

4. For services that are incidental to a lease of real or personal property.

5. For contracts required due to potential conflicts of interest regarding trial court employees.

6. Contracting is due to an emergency and necessary to protect public health and safety.

7. Contracts involving training courses not requiring permanent instructor positions.

8. Equipment, materials, facilities, or services provided under the contract could not feasibly by provided by the trial court in the location where the services would be performed.

9. For services of an urgent nature where the process for hiring court employees would frustrate the purpose of the contract. This exception does not apply to court reporters, except on a pro tempore basis.

10. Developed pursuant to rehabilitation programs under the Welfare and Institutions Code.

11. For court interpreter services that are consistent with existing law for such contracts.

3. Requires every trial court, by February 1, 2016, to report specified information to the Legislature and the Department of Finance regarding contracts for services that were provided or are customarily provided by trial court employees and were entered into, renewed or extended between July 1, 2015, and December 31, 2015, with a term extending beyond March 31, 2016.

FISCAL EFFECT:

1. Unknown, significant costs, potentially in the millions of dollars (General Fund), to the extent the standards established in this bill limit the courts’ ability to negotiate contracts for services and to renew or extend existing contracts. (Based on a survey of the courts, the Judicial Council estimates increased costs of $25 million to hire employees for work currently performed by contract staff.)

2. Offsetting a portion of the above costs will be savings in cases where the decision to continue or resume performing functions with court employees is more cost effective.

3. Unknown, significant loss of future savings, potentially in the millions of dollars (General Fund) annually, to the extent this bill restricts the ability of courts to transition to technology-based services for existing court services.

COMMENTS:

1. Purpose. Most government entities in California are restricted from contracting out functions that are customarily done by public employees, unless certain conditions are satisfied. These requirements are designed to ensure not only that work is done cost-effectively, but also 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, community college districts and public libraries are also required to comply with generally the same standards that apply to the state.

SB 682, co-sponsored by the American Federation of State, County, and Municipal Employees (AFSCME), Laborers' Local 777 and 792, the Orange County Employees Association, and the Service Employees International Union (SEIU), extends these same contracting requirements to the courts. The bill generally follows the requirements for contracting by state agencies, as delineated in Government Code Section 19130.

2. Opposition. The Judicial Council argues that the bill: 1) is too prescriptive and will make it impossible to contract out for services; 2) has language applying to services "currently or customarily" performed by trial court employees that is vague and could impact existing contracts when they come up for renewal or extension; 3) inhibits a court's ability to manage its staff and resources; 4) reduces local control; 5) conflicts with the Judicial Branch Contracting Manual; and 6) affects circumstances that are more appropriately addressed through collective bargaining at the local level.

3. Prior Legislation. Last year a similar bill, AB 2332 (Wieckowski), was held on Suspense in Senate Appropriations. In 2013, AB 566 (Wieckowski), also a similar bill, was vetoed by the Governor, who opined that the bill contained unclear provisions and required courts to meet overly detailed requirements, particularly in light of the courts' funding constraints.

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

Date of Hearing: June 23, 2015

ASSEMBLY COMMITTEE ON JUDICIARY

Mark Stone, Chair

SBPCA Bill Id:SB 682

Author:(Leno) – As Amended Ver:May 5, 2015

As Proposed to be Amended

SENATE VOTE: 24-14

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 THAT IS CURRENTLY OR CUSTOMARILY PERFORMED 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 also 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 a 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 basically the same standards that apply to the state. Most recently, the Legislature established similar 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), the American Federation of State, County and Municipal Employees (AFSCME), Laborers’ Locals 777 and 792, and the Orange County Employees Association, extends the same due diligence protections to the trial courts and their employees, but with 11 exemptions to ensure that courts can function effectively and efficiently in these still difficult budget times.

This bill is substantially similar to last year's AB 2332 (Wieckowski), which passed the Assembly, but was held in the Senate Appropriations Committee, and AB 566 (Wieckowski), 2013, which passed the Legislature but was vetoed by the Governor. However, the bill has been narrowed to track much more closely the language in the state agency contracting statute and to address concerns raised by the Governor.

The bill is supported by many labor organizations, including the California Labor Federation and the California State Sheriffs Association. It is opposed by the Chamber of Commerce, the Los Angeles Superior Court and, unless amended, by the Judicial Council, which proposes amendments that would make it much easier for the courts, as compared to state agencies, schools and libraries, to contract out significant judicial branch functions to private entities. The author has agreed to amend the bill to address some, but not all, of the Judicial Council's concerns.

SUMMARY: Requires courts to comply with specified requirements before contracting out services that are currently or customarily performed by trial court employees. Specifically, this bill:

1. Provides that contracts for services currently or customarily performed by trial court employees are permissible if all of the following conditions are met:

   1. The court clearly demonstrates that the contract will result in actual, overall cost savings to the court, considering specified factors, as provided;

   2. The contract may 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 significantly undercut trial court pay rates;

   3. The contract does not cause displacement of court employees, as provided;

   4. The contract savings are large enough to ensure they will not be lost by various fluctuations during the contract period;

   5. The amount of the savings justifies the size and duration of the contract;

   6. The contract is awarded through a competitive bidding process;

   7. The contract provides for qualified staff, and the contractor's hiring practices are nondiscriminatory;

   8. The potential for future economic risk to the court from future contract rate increases is minimal;

   9. The contract is with a firm, as defined; and

   10. The potential economic advantage of contracting out is not outweighed by the public's interest in having the function performed directly by the court.

2. Does not preclude a trial court or the Judicial Council from adopting more restrictive rules regarding contracting of court services.

3. Contracting is also permissible if one of the following conditions is met:

   1. Contract is for a new trial court function for which the Legislature has specifically authorized the performance of the services by independent contractors;

   2. Contract is 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;

   3. Services contracted for cannot be satisfactorily performed by court employees or are of such a highly specialized or technical nature that necessary expertise cannot be obtained from court employees;

   4. Services are incidental to a contract for purchase of property, except for contracts to operate equipment or computers (other than service or maintenance agreements);

   5. Contract is needed to protect against conflict of interest or ensure independent unbiased findings;

   6. Emergency situations in which contract is necessary for immediate preservation of public health, welfare or safety;

   7. Training courses when qualified instructors are not available from court employees;

   8. Contractor will provide equipment, materials, facilities or support services that cannot feasibly be provided in the location, except these will not be used to open closed courthouses or for ongoing operation at new or reopened courthouses;

   9. Services 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;

   10. Contract is for services with individuals with developmental disabilities pursuant to rehabilitation programs; or

   11. Contract is for services of court interpreters.

4. Requires each trial court that enters into a personal services contract between July 1, 2015, and December 31, 2015, with a term beyond March 31, 2016, to report to the Department of Finance and the Legislature by February 1, 2016, on the contract, as provided.

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, Section 1.)

2. Limits personal service contracts (contracting out) for work done by state employees to when specified conditions are satisfied, including:

   1. The contracting state agency clearly demonstrates actual overall savings;

   2. 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;

   3. The contract does not cause displacement of state civil service employees;

   4. The amount of the savings clearly justifies the agreement;

   5. The contract is awarded through a competitive bidding process;

   6. The potential for future economic risk for the state from the contractor is minimal; and

   7. 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.)

FISCAL EFFECT: As currently in print this bill is keyed fiscal.

COMMENTS: Nearly all government entities in California are restricted from contracting out functions that are customarily done by public employees, unless specified conditions are satisfied. These requirements are designed to ensure not only that work is done cost-effectively, but also 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, community college districts and public libraries are also required to comply with generally the same standards that apply to the state. (See AB 3336 (Ryan), Chap. 1057, Stats. 1982; SB 1419 (Alarcon), Chap. 894, Stats. 2002; AB 438 (Williams), Chap. 611, Stats. 2011.) This bill, jointly sponsored by SEIU, AFSCME, Laborers’ Locals 777 and 792, and the Orange County Employees Association, seeks to extend these same due diligence protections to the trial courts. This bill is similar to last year's AB 2332 (Wieckowski), which passed the Assembly, but was held in Senate Appropriations Committee, and AB 566 (Wieckowski), 2013, which passed the Legislature, but was vetoed by the Governor.

The author writes that this bill is necessary to not only ensure that scarce court resources are used as effectively and efficiently as possible, but also to protect the very integrity of the judicial process:

As a result of recent budget cuts to the trial courts, some courts have sought alternative ways to provide critically important services to the public, including privatizing some of the most sensitive services that help preserve the integrity of our impartial trial court system.

In all sectors of government, California requires that some due diligence standards be satisfied prior to the privatization of public services. However, trial courts are currently exempt from similar accountability measures.

Given the critical importance of the trial courts and the sensitivity of the information that is processed and maintained in confidence by the courts and their employees, trial courts should be held to at least the same standards of due diligence as other public entities.

SB 682 requires the courts to show they used due diligence in deciding to employ a private contractor to perform court services that are currently or have customarily been performed by trial court employees. . . .

The purpose of this bill is not to infringe upon the independent discretion of the trial courts. Rather, it is to ensure that trial courts meet the same common-sense standards when contracting out for services as all other governmental agencies in this state.

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:

• Demonstrate cost savings: The court must clearly 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.

• Public interest: The potential economic advantage of the contract is not outweighed by the public's interest in having the function performed directly by the court.

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 State Agencies and to Schools, Community Colleges, and Libraries. The due diligence requirements in this bill are, almost verbatim, identical to requirements in current law 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.

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 can 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.4^th 585, 593.) Another exception applies when 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 when the “special services” exception applies, only those employees who are specifically trained, experienced and expert to perform those services can be replaced with contract employees. Unlike the limitation for general law counties, this bill does not, in its current form, prevent courts from contracting out services that are not "special services." It simply requires due diligence standards before permitting courts to contract out judicial functions.

The Bill Provides Eleven Exemptions to Ensure That Courts Can Operate Effectively and Efficiently. In order to ensure that the trial courts can operate effectively, the bill provides eleven exemptions to 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 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;

• Difficult to access location: Contracts for provision of equipment, materials or support services that cannot be feasibly provided by the trial court in that location, although this provision does not permit services to reopen a closed courthouse or for the ongoing operation of a courthouse;

• 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. 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 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 courts have taken 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 $129 million and the 2015-16 budget includes an additional $166 million for the trial courts on top of last year’s $129 million, one-time fixes have expired and large reserves have been eliminated. As a result, courts could still be looking for additional ways to reduce expenditures, unless there is an 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, since renamed by the Judicial Council as the Judicial Council) on a regular basis. Two years ago, 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.) Creating more transparency and more accountability before contracting out for services should help ensure that the courts receive the best price.

The State Auditor again audited the AOC and the courts in late 2013 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 that same 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 send a special letter to the Governor and legislative leaders about this just last year: “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.)

In the most recent audit completed at the end of last year, the State Auditor again found problems with procurement and found that none of the courts audited "fully complied with the judicial contracting manual's guidance." (State Auditor, Judicial Branch Procurement: Five Superior Courts Did Not Consistently Follow Judicial Branch Contracting Practices 1 (Nov. 2013).) The Auditor discovered that two of the courts audited (Fresno and Yuba) made contract payments without proper authorization and one court -- Alameda -- failed to authorize any payment reviewed by the Auditor, which resulted in an overpayment to one vendor. Additionally all five courts audited -- the above three, along with Butte and San Luis Obispo -- failed to properly document justification for noncompetitive (sole-source) contracting. Without the documentation, there is no guarantee that these contracts are reasonably or fairly priced. (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 approximately $600,000 in savings in the 2013-14 fiscal year. However, according to the sponsors, court employees agreed to reduce 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. The Placer Court disputes the claims 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, it is reasonable to question 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 save money for the courts, but most importantly, are also 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 be 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. SB 682 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 mandate a higher standard to be realized before important court functions can be privatized. It simply requires the same due diligence to be used that is already required for other government functions.

Similar Legislation Has Stalled in the Last Two Years. Last year, AB 2332 (Wieckowski), which was similar to this bill, passed the Assembly and the Senate Judiciary Committee, but was held on the Senate Appropriations Committee suspense file. In 2013, the Governor vetoed AB 566 (Wieckowski), which also was 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 -- and the issues in the Senate Appropriations Committee -- by increasing the exemptions, narrowing the scope of contracts to which the bill applies, and making the requirements of the bill nearly identical to the limitations that today apply to state agencies. For example, like existing state agency statute -- Government Code Section 19130 -- this bill requires the trial court to clearly demonstrate that the contract will result in actual overall cost savings to the trial court, as specified. Unlike AB 2332 and AB 566, however, this bill does not additionally require that the actual cost savings must be for the duration of the entire contract as compared with the trial court’s actual costs of providing the same services. Additionally, unlike its predecessors, this bill does not impose additional standards for contracts over $100,000.

Judicial Council Opposes the Bill Unless Amended and its Proposed Amendments Would Significantly Reduce the Effect of the Bill and Significantly Depart From the Contracting Limitations that Apply to Other State Agencies. The Judicial Council opposes the bill because it would "severely hamper the trial courts' ability to contract for personal services," and requests amendments which would greatly change the scope of the bill and the personal services to which the law would apply. The proposed amendments would also create a contracting rule that would be substantially different from the rules that now apply to state agencies, schools and libraries. As discussed above, the current version of the bill is almost identical to the law that applies to state agencies. The Judicial Council requests amendments that would completely change that and greatly expand, from the current version of the bill, the courts' ability to privatize key court functions.

The key concerns raised by Judicial Council are that the bill: 1) is too prescriptive and will make it impossible to contract out for services; 2) has language applying to services "currently or customarily" performed by trial court employees that is vague and could impact existing contracts when they come up for renewal or extension; 3) inhibits a court's ability to manage its staff and resources; 4) reduces local control; 5) conflicts with the Judicial Branch Contracting Manual; and 6) affects circumstances that are more appropriately addressed through collective bargaining at the local level.

In particular, the Judicial Council believes that the bill's language, applying to contracts for services currently or customarily performed by trial court employees is problematic because the term customarily is not defined in the bill and could be read to bring back in all sorts of services that have been contracted out for years. The Judicial Council requests the word customarily be deleted or that all existing contracts be "grandfathered in."

The author responds that the word "customarily" has a settled legal meaning, defined as "usually, habitually, according to the customs, general practice or usual order of things, regularly."  (Jones v. Robertson (1947) 79 Cal.App.2d 813, 818-19; Black's Law Dictionary 462 (4th ed. 1951).) Additionally, the word appears in similar statutes without a definition (Education Code Sections 45103.1, 88003.1), so adding a definition of "customarily" in this bill would raise questions about whether the word means something different than what it means in the other statutes. Moreover, continues the author, the bill was amended in the Senate specifically to remove renewals and extensions from the bill, making clear the bill does not apply to existing contracts. However, an explicit grandfathering clause would create "evergreen" contracts, which could allow existing contracts to exist in perpetuity without review. In the past few years, the Legislature has taken action to either eliminate or reduce the potential for these contracts. The author writes that "[a]llowing them in the judicial branch is particularly imprudent given the critical nature of trial court services and because the ​branch has a poor history of managing contracts to ensure quality services and containing costs."

Proposed Amendment: The author does concede that one of Judicial Council's requested amendments makes the bill better and agrees to amend the bill accordingly. Currently the bill exempts any contract between a trial court and another trial court or a local government entity from the due diligence standards. However, this exemption is too narrow and would not permit a court to contract with the, say, Judicial Council for the provision of various services or the Franchise Tax Board for assistance with debt collection. Therefore, the author rightly proposes to eliminate the word "local" from that provision and allow courts to contract with all government entities without having to comply with the due diligence requirements. This is accomplished by the following amendments:

1. On page 4, line 10, delete "local"

2. On page 4, line 11, delete "local"

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. Outsourcing can result in less accountability, public access, and transparency. Such practices can lead to substantially reduced wages, increasing demand for taxpayer funded public assistance. Public interest becomes secondary to profit maximization when for-profit corporations are responsible for delivery of public services.

California requires due diligence standards be satisfied in all sectors of government prior to privatization of public services. However, trial courts are exempt from even this minimum standard, which applies to other public entities. Privatization of court services means that justice truly is in the hands of private contractors whose primary concern is profits for shareholders over fairness to the public. For these reasons it is essential to have safeguards in the law protecting the public interest.

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 begun 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.

ARGUMENTS IN OPPOSITION: In opposition to the bill, the Los Angeles Superior Court writes:

The Legislature has established a decentralized system of trial court management that appropriately provides for countywide administration of the courts, with local personnel plans and with local control and discretion over trial court management. Within the constraints of the California Judicial Branch Contract Law, the Trial Court Employment Protection and Governance Act, and local employee bargaining agreements, each local trial court has the responsibility and the authority to decide when and to what extent contracting for services is the most effective, efficient and responsible use of resources. SB 682 would contravene this well-considered approach, and would effectively substitute overly broad statewide limitations on contracts for personal services.

Adds the California Chamber of Commerce:

A functioning judicial system is important for all members of the public, including businesses. . . .

SB 682 would restrict a trial court from utilizing a private contractor for duties that are "currently or customarily" performed by trial court employees, unless the trial court can "clearly demonstrate" actual cost savings, not including existing overhead costs or contractors' lower wages or benefits. This provision restricts courts from using their reduced budgets in the most efficient manner possible in order to provide necessary services for all members of the public, and will potentially interfere with existing contracts. We believe the judicial branch is in the best position to determine how to balance the needs of the public with their existing budget, including whether private contractors are necessary.

REGISTERED SUPPORT / OPPOSITION:

Support

American Federation of State, County and Municipal Employees, AFL-CIO (co-sponsor)

Laborers’ Locals 777 and 792 (co-sponsor)

Orange County Employees Association (co-sponsor)

Service Employees International Union (co-sponsor)

California Court Reporters Association

California Labor Federation

California Official Court Reporters Association

California Professional Firefighters

California State Sheriffs' Association

Glendale City Employees Association

Organization of SMUD Employees

Professional and Technical Engineers, IFPTE Local 21

San Bernardino Public Employees Association

San Diego County Court Employees Association

San Luis Obispo County Employees Association

Opposition

California Chamber of Commerce

Judicial Council (unless amended)

Los Angeles Superior Court

Analysis Prepared by: Leora Gershenzon / JUD. / (916) 319-2334

 THIRD READING  

Bill No: SB 682

Author: Leno (D)

Amended: 5/5/15

Vote: 21

SENATE JUDICIARY COMMITTEE: 5-1, 4/28/15

AYES: Jackson, Hertzberg, Leno, Monning, Wieckowski

NOES: Anderson

NO VOTE RECORDED: Moorlach

SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/28/15

AYES: Lara, Beall, Hill, Leyva, Mendoza

NOES: Bates, Nielsen

SUBJECT: Courts

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

Laborers’ Locals 777 and 792

Orange County Employees Association

Service Employees International Union

DIGEST: This bill requires a trial court to meet certain standards if it intends to enter into a contract for any services that are currently or have been customarily performed by that trial court’s employees, except as specified.

ANALYSIS:

Existing law:

1. Permits a state agency to contract out for personal services only if specified standards are satisfied, such as:

• The agency clearly demonstrates actual overall cost savings, as specified;

• Proposals to contract out are not approved solely on the basis that savings will result from lower contractor pay rates or benefits, except that proposals to contract out work are eligible for approval if the contractor’s wages are at the industry’s level and do not significantly undercut state pay rates;

• The contract does not displace civil service employees, as specified;

• The savings are large enough to ensure they will not be eliminated by cost fluctuations that could normally be expected during the contracting period;

• The amount of savings clearly justify the size and duration of the agreement;

• The contract is awarded through a publicized, competitive bidding process;

• The potential economic advantage of contracting is not outweighed by the public’s interest in having a particular function performed directly by state government. (Government Code Section 19130)

2. Exempts personal services contracting from the above requirements if:

• The functions contracted are exempt from civil service under the state constitution;

• The contract is for a new state function and the Legislature has specifically mandated or authorized the performance of the work by independent contractors;

• The services contracted are not available within civil service, cannot be performed satisfactorily by civil service employees, or are of such a highly specialized or technical nature that the necessary expert knowledge, experience, and ability are not available through the civil service system;

• The services are incidental to a contract for the purchase or lease of real or personal property;

• The legislative, administrative, or legal goals and purposes cannot be accomplished through the utilization of persons selected pursuant to the regular civil service system, as specified;

• The nature of the work is such that specified existing law standards for emergency appointments apply;

• State agencies need private counsel because a conflict of interest on the part of the Attorney General’s office prevents it from representing the agency without compromising its position, as specified;

• The contractor will provide equipment, materials, facilities, or support services that the state could not feasibly provide in the location where the services are to be performed;

• The contractor will conduct training courses for which appropriately qualified civil service instructors are not available, provided that permanent instructor positions in academies or similar settings shall be filled through civil service appointment; or

• The services are of such an urgent, temporary, or occasional nature that the delay incumbent in their implementation under civil service would frustrate their very purpose. (Government Code Section 19130)

This bill:

1. Provides that the purpose of its provisions is to establish standards when a trial court intends to enter into a contract for any services that are currently or have been customarily performed by that trial court’s employees and authorizes trial courts to contract for such services if all of the following conditions are met:

• The trial court clearly demonstrates that the contract will result in actual overall cost savings to the trial court, as specified;

• The contract shall not be approved solely on the basis that savings will result from lower contractor pay rates or benefits, except contracts shall be eligible for approval if the contractor’s wages are at the industry level and do not significantly undercut trial court pay rates;

• The contract does not displace trial court employees, as specified;

• The savings are large enough to ensure they will not be eliminated by private sector and trial court fluctuations that could normally be expected during the contracting period;

• The amount of savings clearly justify the size and duration of the contracting agreement;

• The contract is awarded through a publicized, competitive bidding process;

• The contract includes specific provisions pertaining to the qualifications of the staff that will perform the work under the contract, and assurance that the contractor’s hiring practices meet applicable nondiscrimination standards;

• The potential for future economic risk to the trial court from potential contractor rate increases is minimal;

• The contract is with a “firm,” as defined; and

• The potential economic advantage of contracting out is not outweighed by the public’s interest in having a particular function performed directly by the trial court.

2. Provides that these provisions do not preclude a trial court or Judicial Council from adopting more restrictive rules regarding the contracting of court services.

3. Exempts contracts from the above requirements if:

• The contract is for a new trial court function and the Legislature has specifically mandated or authorized the performance of the work by independent contractors;

• The contract is between a trial court and another trial court or a local government entity for services to be performed by employees of the other trial court or employees of the local government entity;

• The services contracted for cannot be satisfactorily performed by trial court employees, or are of such a highly specialized or technical nature that the necessary expert knowledge, experience, and ability cannot be obtained from the court’s trial court employees;

• The services are incidental to a contract for the purchase or lease of real or personal property. Such contracts, known as “service agreements,” shall include, but not be limited to, agreements to service or maintain office equipment or computers that are leased or rented. Service agreements do not include contracts to operate equipment or computers for purposes other than service or maintenance;

• The legislative, administrative, or legal goals and purposes cannot be accomplished through the utilization of trial court employees because of the need to protect against a conflict of interest or to ensure independent and unbiased findings in situations where there is a clear need for an independent, outside perspective;

• Due to an emergency, a contract is necessary for the immediate preservation of the public health, welfare, or safety;

• The contractor will conduct training courses for which appropriately qualified trial court employee instructors are not available from the court, provided that permanent instructor positions shall be filled through the process for hiring trial court employees;

• The contractor will provide equipment, materials, facilities, or support services that could not feasibly be provided by the trial court in the location where the services are to be performed, except as specified;

• The services are of such an urgent, temporary, or occasional nature that the delay incumbent in their implementation through the process for hiring trial court employees would frustrate their very purpose, except as specified;

• The contract is a personal services contract developed pursuant to rehabilitation programs, as specified, or pursuant to a program vendored or contracted through a regional center or the Statement Department of Developmental Services in accordance with the Lanterman Developmental Disabilities Services Act, as specified, and the contract will not cause an existing trial court employee to incur a loss of his or her employment or employment seniority, a reduction in wages, benefits, or hours; or an involuntary transfer to a new location requiring a change in residence; or

• The contract is for the services of any court interpreter, which shall be governed by the Trial Court Interpreter Employment and Labor Relations Act or by the other provisions of the Trial Court Employment Protection and Governance Act, and any memorandum of understanding or agreement entered into pursuant to those acts, as specified.

4. Specifies that if a trial court entered into, or renewed or extended, a contract between July 1, 2015, and December 31, 2015, inclusive, for services that were provided or are customarily provided by its trial court employees and that contract has a term extending beyond March 31, 2016, the trial court must provide a specified report by no later than February 1, 2016.

5. Includes a severability clause.

Background

Under California law, most governmental entities can use personal services contracts (i.e. contracting out) to achieve cost savings only if specified standards are satisfied, chief among them being that the entity clearly demonstrates actual overall cost savings based upon certain information. These entities include executive branch agencies, public schools, community colleges, and libraries.

In recent years, California’s judicial branch has experienced catastrophic budget reductions that have crippled California’s court system by, among other things, forcing the closure of courts and self-help centers, which has resulted in delayed access to justice for a large number of Californians. In response, many courts have begun seeking ways in which to operationalize those budget reductions. According to information provided to this Committee by the Judicial Council of California, examples of services that trial courts currently contract out for include: court reporters; interpreters; child custody evaluations; probate investigations; family law facilitators; minor’s counsel in dependency cases; child custody mediation services; mediators/alternative dispute resolution; security guards; personnel services; payroll; information services; collections; adoption investigation services; services for self-represented litigants; labor negotiation services; transcripts for electronically recorded proceedings; and more.

Over the last two years, bills have been introduced in an effort to impose various contracting out standards upon the trial courts. The first bill, AB 566 (Wieckowski, 2013) was ultimately vetoed by the Governor, and the second bill, AB 2332 (Wieckowski, 2014) passed this Committee but died on the Suspense File in the Senate Appropriations Committee.

This bill similarly seeks to impose certain standards upon courts when entering into contracts for services currently or customarily performed by the trial court’s employees, largely based upon standards imposed on state agencies.

Comment

As stated by the author:

The major government entities in California either face explicit limits (cities and counties) on privatization of public services or must meet due diligence requirements (State, community colleges, K-12 school districts, libraries) prior to privatizing their services.

Historically, trial courts in California were county entities, funded by the [c]ounties and thus subject to the privatization restrictions that applied to [c]ounties. But in 1997, the Legislature passed the Lockyer-Isenberg Trial Court Funding Act, AB 233 (Escutia and Pringle), Ch. 850, Stats. 1997[,] and shifted the responsibility for funding from the [c]ounties to the State. Subsequently, many of the laws that had previously applied to the trial courts no longer applied once they were removed from the [c]ounties’ jurisdictions, such as open meetings, access to public records, whistleblower protections, public contract code requirements for contracting purposes and provisions relating to privatization.

As a result of recent budget cuts to the trial courts, some courts have sought alternative ways to provide critically important services to the public, including privatizing some of the most sensitive services that help preserve the integrity of our impartial trial court system. Alternatives being considered include privatizing the handling and maintenance of private, confidential and sensitive information contained in official court records.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee:

• Potentially significant loss of future cost savings in the millions of dollars (General Fund*) per year to the extent the provisions of this measure restrict the ability of courts to transition to the use of technology-based services for existing court services.

• Unknown, significant costs potentially in the millions of dollars (General Fund*) to the extent the standards established in this bill limit the courts’ ability to negotiate contracts for services prospectively, including contracts with non-local governmental agencies.

*Trial Court Trust Fund

SUPPORT: (Verified 5/29/15)

American Federation of State, County and Municipal Employees, AFL-CIO (co-source)

Laborers’ Locals 777 and 792 (co-source)

Orange County Employees Association (co-source)

Service Employees International Union (co-source)

California Professional Firefighters

Center for Judicial Excellence

Glendale City Employees Association

Orange County Employees Association

Organization of SMUD Employees

San Bernardino Public Employees Association

San Diego County Court Employees Association

San Luis Obispo County Employees Association

OPPOSITION: (Verified 5/29/15)

California Chamber of Commerce

Judicial Council

Ventura County Superior Court, Presiding Judge

ARGUMENTS IN SUPPORT: The Service Employees International Union (SEIU), co-sponsor of this bill, writes that “SB 682 would ensure that trial courts operate within the norms of good government practices by requiring them to show diligence prior to privatizing important trial court services.” SEIU argues:

[T]ax dollars have the dual responsibility of being well spent for quality services, as well as being an investment in the larger society. In fact, it could be argued that the level of accountability should be higher for trial court services. Being a nation of laws, a fair and impartial judicial system 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. [ . . . ]

SEIU also asserts that SB 682’s provisions “are neither radical nor a departure from current law governing most other parts of government and will ensure that tax dollars are accountable. In a time of budget austerity it is even more important to ensure that scarce judicial dollars are well spent. Every misspent dollar is a dollar taken away from a taxpayers’ ability to access much needed court services.”

The California Labor Federation writes in support:

When entities contract out, oftentimes there are sacrifices made in the pursuit of cost savings. Outsourcing can result in less accountability, public access, and transparency. Such practices can lead to substantially reduced wages, [thereby] increasing demand for taxpayer funded public assistance. Public interest becomes secondary to profit maximization when for-profit corporations are responsible for delivery of public services. [Whereas] California requires due diligence standards be satisfied in all sectors of government prior to privatization of public services [. . .] trial courts are exempt from even this minimum standard, which applies to other public entities. Privatization of court services means that justice truly is in the hands of private contractors whose primary concern is profits for shareholders over fairness to the public. For these reasons, it is essential to have safeguards in the law protecting the public interests.

ARGUMENTS IN OPPOSITION: Judicial Council opposes this bill because it would severely hamper the trial courts’ ability to contract for personal services. Judicial Council bases its opposition on several grounds, including that the bill:

• presumes no personal services contract is valid unless it meets one of several very limited exceptions or has achieved the impossible balance of attaining actual savings without reducing labor and benefit costs;

• applies to any services “currently or customarily” performed by trial court employees which is not only “overly broad, it’s also vague and retroactive;”

• inhibits the trial courts’ ability to manage their staff and resources, which is critical in view of substantial budget cuts in recent years and an ongoing funding gap of more than $600 million;

• reduces local control and discretion over trial court management;

• conflicts with recent legislation regarding judicial branch contracting; and

• affects circumstances that are more appropriately addressed at the local level through collective bargaining agreements.

Judicial Council further argues that while this bill appears to be modeled upon the Government Code section limiting contracting in the executive branch for services that could be performed by civil service employees, that “model is inappropriate for trial courts because . . . the trial courts must operate independently from one jurisdiction to the next.” Additionally, unlike executive branch agencies that “can manage the amount of work they receive, the number and types of people they serve, and the services provided . . . trial courts must accept all filings form the public, have no control over the number and types of cases they must process, and have no ability to limit court users. In order to effectively manage their caseloads, courts need flexibility in managing their costs and contracts.”

The California Chamber of Commerce (Cal Chamber) writes in opposition that a functioning judicial system is important for all members of the public, including business, and that this bill does not help the courts’ current funding situation, which has resulted in closed courthouses, reduced hours of service, and reduced number of employees. Cal Chamber argues that “the judicial branch is in the best position to determine how to balance the needs of the public with their existing budget, including whether private contractors are necessary.”

Prepared by: Ronak Daylami / JUD. / (916) 651-4113

5/31/15 12:40:14

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

SB 682 (Leno) - Courts

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

SB 682 would establish standards for the use of contracts by the trial courts for any services currently or customarily performed by that trial court’s employees, as specified. This bill would restrict the use of personal services contracts to those resulting in actual overall cost savings to the trial court, permitting contracts only if specified conditions are met.

Fiscal Impact:

• Potentially significant loss of future cost savings in the millions of dollars (General Fund*) per year to the extent the provisions of this measure restrict the ability of courts to transition to the use of technology-based services for existing court services.

• Unknown, significant costs potentially in the millions of dollars (General Fund*) to the extent the standards established in this bill limit the courts’ ability to negotiate contracts for services prospectively, including contracts with non-local governmental agencies.

*Trial Court Trust Fund (TCTF)

Background:

Under existing law, most governmental entities are authorized to utilize personal services contracts to achieve cost savings only if specified standards are satisfied, chief among them being that the entity clearly demonstrates actual overall cost savings based upon certain information. These entities include executive branch agencies, public schools, community colleges, and libraries.

In response to significant budget reductions experienced by the courts several years ago, many courts have sought alternative ways to provide services to the public with limited resources, including the use of personal services contracts. Examples of services that trial courts currently contract out for include court reporters, court interpreters, child custody evaluations, probate investigations, family law facilitators, minors’ counsel in dependency cases, child custody mediation services, security guards, personnel services, payroll, information services, collections, labor negotiation services, and transcripts for electronically recorded proceedings.

This bill seeks to authorize the use of service contracts subject to specified contracting standards such as competitive bidding and performance standards.

Proposed Law:

This bill would provide that if a trial court intends to enter into a contract for any services that are currently or customarily performed by that trial court’s employees, all of the following requirements shall apply:

• The trial court shall clearly demonstrate that the contract will result in actual overall cost savings to the court, as specified.

• The contract shall not be approved solely on the basis that savings will result from lower contractor pay rates or benefits, except contracts are eligible for approval if the contractor’s wages are at the industry level and do not significantly undercut trial court pay rates.

• The contract cannot cause an existing trial court employee to incur a loss of his or her employment or employment seniority, a reduction in wages, benefits, or hours, or an involuntary transfer to a new location requiring a change in residence.

• The contract must be awarded through a publicized, competitive bidding process.

• The contract must include specific provisions pertaining to the qualifications of the staff that will perform the work under the contract, as well as assurances that the contractor’s hiring practices meet applicable nondiscrimination standards.

• The contract must provide that it may be terminated at any time by the trial court without penalty if there is a material breach of the contract and notice is provided within 30 days of termination.

• Provides that the bill’s provisions do not preclude a trial court or the Judicial Council from adopting more restrictive rules regarding the contracting of court services.

This bill provides that the provisions of the bill do not apply to a contract under specified circumstances such as if the contract is between a trial court and another trial court or a local government entity, or the contract is for a new trial court function and the Legislature has specifically mandated or authorized the performance of the services by independent contractors. Additional exemptions from the above requirements include:

• If the services contracted for cannot be satisfactorily performed by trial court employees, or are of such a highly specialized or technical nature that the necessary expert knowledge, experience, and ability cannot be obtained from the court’s trial court employees.

• Exempts “service agreements,” including agreements to service or maintain office equipment or computers that are leased or rented, but contract agreements to operate equipment or computers, except as necessary to service or maintain that equipment, are not exempt.

• With the exception of the services of official court reporters, provides that the provisions of the bill do not apply to a contract if the services are of such an urgent, temporary, or occasional nature that the delay incumbent in their implementation through the process for hiring trial court employees would frustrate their very purpose. Authorizes the use of court reporters pro tempore when the criteria of the paragraph are met.

• Authorizes the use of personal services contracts developed pursuant to rehabilitation programs or programs vendored or contracted through a regional center or the Department of Developmental Services, and the contract will not cause an existing trial court employee to incur a loss of his or her employment or seniority, a reduction in wages, benefits, or hours, or an involuntary transfer to a new location requiring a change in residence.

• Exempts contracts for services of court interpreters, as specified.

• Requires each trial court to provide a report, as specified, no later than February 1, 2016, to the chairpersons of specified legislative committees if the trial court enters into a contract between July 1, 2015, and December 31, 2015, for services provided or customarily provided by its trial court employees if the contract extends beyond March 31, 2016.

Prior Legislation:

AB 2332 (Wieckowski) 2014 was substantially similar to this measure. This bill was held on the Suspense File of this Committee.

AB 566 (Wieckowski) 2013 was similar to this bill and was vetoed by the Governor with the following message:

I am returning Assembly Bill 566 without my signature. 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.

Staff Comments:

The Judicial Council has indicated the provisions of this bill will require the trial courts to potentially convert existing contracts that expire after the effective date of this measure to court employees as these contracts come up for extension and renewal, at a statewide cost potentially in the range of $10 million to $15 million (General Fund). Additionally, greater impacts could be incurred prospectively as opportunities to increase operating efficiencies are discouraged due to the contracting restrictions outlined in the bill.

The Judicial Council has indicated that some courts have moved to contracts for a variety of services including court reporting, guardianship and conservatorship investigations, mediations, information technology, collections, data entry, and janitorial services. To the extent these services contracts could potentially be prohibited once the existing contracts expire, any of these services identified as customarily performed by court employees could potentially be subject to the restrictions in the bill. Also, given the absence of a definition of the word “customarily” and no affirmative language in the bill specifying that the bill does not apply to the renewal or extension of contracts for services that are already in place, it is very difficult to determine the full scope and fiscal impact of the bill, particularly how many existing services will be impacted.

Staff notes that in the absence of specified language limiting the prospective application of contracts entered into, whether new, renewals, or extensions, after the enactment date of the bill, contracts for specified services in place prior to the bill’s enactment date would potentially be subject to the bill’s contracting standards and guidelines once the existing contract term expires.

SB 1419 (Alarcon) Chapter 894/2002 which established personal services contracting standards for schools and community college districts, addressed this issue by including the following language to limit the prospective application of contracting standards for these entities. In essence, it narrowed the prospective application of the contracting standards only for limited contracts: 

“This section shall apply to personal service contracts entered into after January 1, 2003. This section shall not apply to the renewal of personal services contracts subsequent to January 1, 2003, where the contract was entered into before January 1, 2003, irrespective of whether the contract is renewed or rebid with the existing contractor or with a new contractor.”

Further, the Judicial Council has indicated that many courts cannot comprehensively collect delinquent debt, procure services and supplies, or undertake janitorial or building maintenance. Many of these courts have contracted with other trial courts and county entities for these services. Many courts and counties, however, contract with private entities that do not satisfy the terms of the bill, which specifically states that contracts between trial courts and local government entities must be for work performed by the employees of the trial court or local government entity. In some cases, the counties have also contracted out the work—these contracts would be prohibited when they are due for renewal or extension. To the extent this restriction prohibits trial courts to contract with the Judicial Council or other state entities, such as the Franchise Tax Board, to collect delinquent court-ordered debt, could result in additional costs.

While modeled upon existing statutes requiring governmental entities (executive branch agencies, public K-12 schools, community colleges, libraries) to meet specified standards before executing personal service contracts, this bill differs from existing statutes under specified provisions, including the following:

• GC § 19130 states that the purpose of the article is to establish standards for the use of personal services contracts by state agencies. Under this bill, the purpose is to establish standards for the use of contracts for any services that are currently or customarily performed by that trial court’s employees. This appears to be a different standard than applied to state agencies, as there is no reference to services “that have been customarily performed” by civil service employees. As “customarily” is not defined in the bill, it is also unclear how this provision will be interpreted and applied.

• Under GC § 19130(b)(3), personal services contracting is permissible if the services contracted are not available within civil service, cannot be performed satisfactorily by civil service employees, or are of such a highly specialized or technical nature that the necessary expert knowledge, experience, and ability are not available through the civil service system. Under this bill’s provisions, contracting is permissible only if the services contracted for cannot be satisfactorily performed by trial court employees, or are of such a highly specialized or technical nature that the necessary expert knowledge cannot be obtained from the court’s trial court employees. This provision appears to be a more restrictive standard for trial courts to adhere to than the standards imposed on state agencies, as the trial courts would not be able to contract out for services in the cases where (1) the services contracted are not available through the trial courts, or (2) the services are of such a highly specialized or technical nature that the necessary expert knowledge, experience, and ability are not available through the trial courts. It could be argued that trial court employees “could obtain” the necessary expert knowledge, experience, and ability through training, thereby limiting the ability of trial courts to contract out for these types of services.

• Under GC § 19130(b)(4), personal services contracting is permissible if the services are incidental to a contract for the purchase or lease of real or personal property. Contracts under this criterion are known as “service agreements” and include, but are not limited to, agreements to service or maintain office equipment or computers that are leased or rented. Under this bill’s provisions, “services agreements” do not include contracts to operate equipment or computers for purposes other than service or maintenance. This appears to be a more restrictive standard for trial courts to adhere to than imposed on state agencies.

• This bill creates an exception to the contracting standards if the contract is between a trial court and another trial court or a local government entity, but does not provide a similar exception for state and federal governmental entities. To the extent this provision restricts a court’s ability to contract with other state or federal agencies could result in increased costs.

To the extent the contracting restrictions expose the trial courts to legal action from persons or groups contesting whether the specified conditions were met, additional costs could also be incurred.

-- END --

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2015 - 2016 Regular Session

Bill No: SB 682 (Author:Leno)

Amended: Version: February 27, 2015

Hearing Date: April 28, 2015

Fiscal: Yes

Urgency: No

Consultant: RD

SUBJECT

Courts

DESCRIPTION

This bill would require specified standards to be met if a trial court intends to enter into, or renew or extend, a contract for any services that are currently or customarily performed by that trial court’s employees. Among other things, the bill would require the trial court to clearly demonstrate that the contract will result in actual overall cost savings to the trial court. This bill would also authorize courts to contract out without meeting the requisite standards, in certain circumstances including where:

• the contract is between a trial court and another trial court or a local government entity for services to be performed by employees of the other trial court or employees of the local government entity; or

• due to an emergency, a contract is necessary for the immediate preservation of the public health, welfare, or safety.

This bill would impose certain reporting requirements on any trial court that enters into, renews or extends, a contract between July 1, 2015, and December 31, 2015, for services that were provided or customarily provided by its trial court employees, if the contract has a term extending beyond March 31, 2016.

BACKGROUND

Under California law, most governmental entities can use personal services contracts (i.e. contracting out) to achieve cost savings only if specified standards are satisfied, chief among them being that the entity clearly demonstrates actual overall cost savings based upon certain information. These entities include executive branch agencies, public schools, community colleges, and libraries. (See AB 3336 (Ryan, Ch. 1057, Stats. 1982); SB 1419 (Alarcon, Ch. 894, Stats. 2002); AB 438 (Williams, Ch. 611, Stats. 2011).)

In recent years, California’s judicial branch has experienced catastrophic budget reductions that have crippled California’s court system by, among other things, forcing the closure of courts and self-help centers, which has resulted in delayed access to justice for a large number of Californians. In response, many courts have begun seeking ways in which to operationalize those budget reductions. According to information provided to this Committee by the Judicial Council of California, examples of services that trial courts currently contract out for include: court reporters; interpreters; child custody evaluations; probate investigations; family law facilitators; minor’s counsel in dependency cases; child custody mediation services; mediators/alternative dispute resolution; security guards; personnel services; payroll; information services; collections; adoption investigation services; services for self-represented litigants; labor negotiation services; transcripts for electronically recorded proceedings; and more.

Over the last two years, bills have been introduced in an effort to impose various contracting out standards upon the trial courts. The first bill, AB 566 (Wieckowski, 2013) was ultimately vetoed by the Governor, and the second bill, AB 2332 (Wieckowski, 2014) passed this Committee but died on the Suspense File in the Senate Appropriations Committee. Those bills were modeled upon various statutes that required governmental entities (executive branch agencies, public K-12 schools, community colleges, and public libraries) to meet specified standards before executing personal service contracts.

This bill would similarly seek to impose certain standards upon courts when entering into, renewing or extending, contracts for services currently or customarily performed by the trial court’s employees, but would largely base those requirements on the standards imposed on state agencies.

CHANGES TO EXISTING LAW

Existing law provides that civil service includes every officer and employee of the State, except as otherwise provided in the California Constitution. That article also specifies that certain employees are exempt from civil service, including among others: officers and employees appointed or employed by councils, commissions or public corporations in the judicial branch or by a court of record or officer thereof. (Cal. Const., article VII.)

Existing law permits a state agency to contract out for personal services only if specified standards are satisfied, including, among other things, that:

• the contracting agency clearly demonstrates actual overall cost savings, as specified;

• proposals to contract out work are not approved solely on the basis that savings will result from lower contractor pay rates or benefits, except that proposals to contract out work are eligible for approval if the contractor’s wages are at the industry’s level and do not significantly undercut state pay rates;

• the contract does not cause the displacement of civil service employees, as specified;

• the savings must be large enough to ensure that they will not be eliminated by cost fluctuations that could normally be expected during the contracting period;

• the amount of savings clearly justify the size and duration of the agreement;

• the contract is awarded through a publicized, competitive bidding process;

• the potential for future economic risk to the state from potential contractor rate increases is minimal; and

• the potential economic advantage of contracting is not outweighed by the public’s interest in having a particular function performed directly by state government. (Gov. Code Sec. 19130(a)(1)-(11).)

Existing law provides that in comparing costs to demonstrate that the proposed contract will result in actual overall savings to the state:

• the state’s additional cost of providing the same service as proposed by a contractor, including the salaries and benefits of additional staff that would be needed and the cost of additional space, equipment, and materials needed to perform the function must be included;

• the state’s indirect overhead costs, as defined, shall not be included unless these costs can be attributed solely to the function in question and would not exist if that function was not performed in state service; and

• in the cost of a contractor providing a service, any continuing state costs (such as inspection, supervision, and monitoring) that would be directly associated with the contracted function must be included. (Gov. Code Sec. 19130(a)(1)(A)-(C).)

Existing law exempts personal services contracting from the above requirements if:

1. the functions contracted are exempt from civil service under the state constitution;

2. the contract is for a new state function and the Legislature has specifically mandated or authorized the performance of the work by independent contractors;

3. the services contracted are not available within civil service, cannot be performed satisfactorily by civil service employees, or are of such a highly specialized or technical nature that the necessary expert knowledge, experience, and ability are not available through the civil service system;

4. the services are incidental to a contract for the purchase or lease of real or personal property. Contracts under this criterion, known as “service agreements,” shall include, but not be limited to, agreements to service or maintain office equipment or computers that are leased or rented;

5. the legislative, administrative, or legal goals and purposes cannot be accomplished through the utilization of persons selected pursuant to the regular civil service system, such as where there is a conflict of interest or to ensure independent and unbiased findings in cases where there is a clear need for a different, outside perspective (e.g., obtaining expert witnesses in litigation);

6. the nature of the work is such that specified existing law standards for emergency appointments apply;

7. state agencies need private counsel because a conflict of interest on the part of the Attorney General’s office prevents it from representing the agency without compromising its position, subject to the written consent of the Attorney General, as specified;

8. the contractor will provide equipment, materials, facilities, or support services that the state could not feasibly provide in the location where the services are to be performed;

9. the contractor will conduct training courses for which appropriately qualified civil service instructors are not available, provided that permanent instructor positions in academies or similar settings shall be filled through civil service appointment; or

10. the services are of such an urgent, temporary, or occasional nature that the delay incumbent in their implementation under civil service would frustrate their very purpose. (Gov. Code Sec. 19130(b).)

This bill would provide that the purpose of its provisions is to establish standards when a trial court intends to enter into, or renew or extend, a contract for any services that are currently or have customarily been performed by that trial court’s employees.

This bill would provide that contracts for services that are currently or customarily performed by trial court employees are permissible in a trial court when all of the following conditions are met:

• the trial court clearly demonstrates that the contract will result in actual overall cost savings to the trial court, as specified;

• the contract shall not be approved solely on the basis that savings will result from lower contractor pay rates or benefits, except contracts shall be eligible for approval if the contractor’s wages are at the industry level and do not undercut trial court pay rates;

• the contract does not cause the “displacement” of trial court employees, which includes layoff, demotion, loss of employment or employment seniority, involuntary transfer to a new class, involuntary transfer to a new location requiring change of residence, and time base reductions, but does not include changes in shifts or days off, or reassignment to other positions within the same class and general location;

• the savings shall be large enough to ensure that they will not be eliminated by private sector and trial court fluctuations that could normally be expected during the contracting period;

• the amount of savings clearly justify the size and duration of the contracting agreement;

• the contract is awarded through a publicized, competitive bidding process;

• 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;

• the potential for future economic risk to the trial court from potential contractor rate increases is minimal;

• the contract is with a “firm,” which means a corporation, partnership, nonprofit organization, or sole proprietorship; and

• the potential economic advantage of contracting out is not outweighed by the public’s interest in having a particular function performed directly by the trial court.

This bill would provide that in comparing costs to demonstrate that the contract will result in actual overall cost savings to the trial court:

• the trial court’s additional costs of providing the same services as proposed by a contractor, including salaries and benefits of additional staff that would be needed and the cost of additional space, equipment, and materials needed to perform the function, must be included;

• the trial court’s indirect overhead costs, as defined, shall not be included unless those costs can be attributed solely to the function in question and would not exist if that function was not performed by the trial court; and

• the cost of a contractor providing a service for any continuing trial court costs (such as costs for inspection, supervision, and monitoring) that would be directly associated with the contracted function must be included.

This bill would provide that these provisions do not preclude a trial court or the Judicial Council from adopting more restrictive rules regarding the contracting of court services.

This bill would exempt contracts from the above requirements if:

1. the contract is for a new trial court function and the Legislature has specifically mandated or authorized the performance of the work by independent contractors;

2. the contract is between a trial court and another trial court or a local government entity for services to be performed by employees of the other trial court or employees of the local government entity;

3. the services contracted for cannot be satisfactorily performed by trial court employees, or are of such a highly specialized or technical nature that the necessary expert knowledge, experience, and ability cannot be obtained from the court’s trial court employees;

4. the services are incidental to a contract for the purchase or lease of real or personal property. Such contracts, known as “service agreements,” shall include, but not be limited to, agreements to service or maintain office equipment or computers that are leased or rented. Service agreements do not include contracts to operate equipment or computers for purposes other than service or maintenance;

5. the legislative, administrative, or legal goals and purposes cannot be accomplished through the utilization of trial court employees because of the need to protect against a conflict of interest or to ensure independent and unbiased findings in situations where there is a clear need for an independent, outside perspective;

6. due to an emergency, a contract is necessary for the immediate preservation of the public health, welfare, or safety;

7. the contractor will conduct training courses for which appropriately qualified trial court employee instructors are not available from the court, provided that permanent instructor positions shall be filled through the process for hiring trial court employees;

8. the services are of such an urgent, temporary, or occasional nature that the delay incumbent in their implementation through the process for hiring trial court employees would frustrate their very purpose. This provision does not apply to the services of official court reporters, except with respect to individual official reporters pro tempore used by a trial court, as specified;

9. the contract is a personal services contract developed pursuant to rehabilitation programs, as specified, or pursuant to a program vendored or contracted through a regional center or the Statement Department of Developmental Services in accordance with the Lanterman Developmental Disabilities Services Act, as specified, and the contract will not cause an existing trial court employee to incur a loss of his or her employment or employment seniority, a reduction in wages, benefits, or hours; or an involuntary transfer to a new location requiring a change in residence; or

10. the contract is for the services of any court interpreter, which shall be governed by the Trial Court Interpreter Employment and Labor Relations Act or by the other provisions of the Trial Court Employment Protection and Governance Act, and any memorandum of understanding or agreement entered into pursuant to those acts, as specified.

This bill would authorize a trial court or the Judicial Council of California to adopt more restrictive rules regarding the contracting of court services.

This bill would specify that if a trial court entered into, or renewed or extended, a contract between July 1, 2015, and December 31, 2015, inclusive, for services that were provided or are customarily provided by its trial court employees and that contract has a term extending beyond March 31, 2016, the trial court shall provide a report by no later than February 1, 2016, to the Department of Finance, chairperson of the Joint Legislative Budget Committee and the chairpersons of the Senate and Assembly Judiciary committees. The bill would require the report to include:

• a copy of the contract;

• an analysis of whether the contract is permissible under the standards set forth above;

• an analysis of whether the contract resulted in the displacement of trial court employees; and

• an analysis of whether the contract involves the use of contractors to perform the type of services that were customarily performed by trial court employees.

This bill would include a severability clause.

COMMENT

1. Stated need for the bill

According to the author:

The major government entities in California either face explicit limits (cities and counties) on privatization of public services or must meet due diligence requirements (State, community colleges, K-12 school districts, libraries) prior to privatizing their services.

Historically, trial courts in California were county entities, funded by the [c]ounties and thus subject to the privatization restrictions that applied to [c]ounties. But in 1997, the Legislature passed the Lockyer-Isenberg Trial Court Funding Act, AB 233 (Escutia and Pringle), Ch. 850, Stats. 1997[,] and shifted the responsibility for funding from the [c]ounties to the State. Subsequently, many of the laws that had previously applied to the trial courts no longer applied once they were removed from the [c]ounties’ jurisdictions, such as open meetings, access to public records, whistleblower protections, public contract code requirements for contracting purposes and provisions relating to privatization.

As a result of recent budget cuts to the trial courts, some courts have sought alternative ways to provide critically important services to the public, including privatizing some of the most sensitive services that help preserve the integrity of our impartial trial court system. Alternatives being considered include privatizing the handling and maintenance of private, confidential and sensitive information contained in official court records.

2. Bill is largely based upon existing contract standards imposed on state agencies

Modeled largely upon existing law, Government Code Section 19130, which requires that state agencies meet specified standards before executing personal service contracts, this bill would allow the trial courts to enter into, renew or extend, a contract for any services that are currently or customarily performed by that trial court’s employees if certain requirements are met or, alternatively, if a specified exception applies.

First, the bill would require that a trial court wishing to enter into a new contract, or to renew or extend a contract, for services currently or customarily performed by trial court employees clearly demonstrate that the contract will result in actual overall cost savings to the trial court. Moreover, the contract must not be approved solely on the basis that savings will result from lower contractor pay rates or benefits (except that contracts would be eligible for approval if the contractor’s wages are at the industry level and do not undercut trial court pay rates). Furthermore, this bill would prohibit the contracting out of services if the contract would cause an existing trial court employee to incur a loss of his or her employment or employment seniority, a reduction in wages, benefits, or hours, or an involuntary transfer to a new location requiring a change in residence.

This bill also contains several exceptions to the above requirements that are similar to the exceptions provided under the existing law for state agencies seeking to contract out. Pursuant to these exceptions, a trial court would be permitted to contract out for services without meeting the above standards, if, for example:

• the contract is for a new trial court function and the Legislature has specifically mandated or authorized the performance of the services by independent contractors;

• the contract is between a trial court and another trial court or a local government entity for services to be performed by employees of the other trial court or employees of the local government entity;

• the legislative, administrative, or legal goals and purposes cannot be accomplished through the utilization of trial court employees because of the need to protect against a conflict of interest or to ensure independent and unbiased findings in situations where there is a clear need for an independent, outside perspective;

• due to an emergency, a contract is necessary for the immediate preservation of the public health, welfare, or safety; or

• the services are of such an urgent, temporary, or occasional nature that the delay incumbent in their implementation through the process for hiring trial court employees would frustrate their very purpose, except as specified for court reporter services.

This bill also includes exceptions to the contracting out requirements that were added to AB 566 (Wieckowski, 2013) at the request of this Committee. Specifically, those exceptions would permit the courts to contract out for services that are: (1) urgent, temporary, or occasional in nature if the delay in hiring trial court employees would frustrate their very purpose; or (2) of such a highly specialized nature that the requisite experience, knowledge, or ability cannot be obtained from court employees.

Staff notes that the requirements of this bill generally track the restrictions which apply to state agencies that seek to contract out. As such, this bill excludes certain provisions that were included in AB 566 and AB 2332, that would be inconsistent with the standards that are currently applicable to state agencies. For example, like existing Government Code Section 19130, this bill requires that the trial court clearly demonstrate that the contract will result in actual overall cost savings to the trial court, as specified. Unlike AB 2332 and AB 566, however, this bill does not additionally require that the actual cost savings be for the duration of the entire contract as compared with the trial court’s actual costs of providing the same services. Additionally, unlike its predecessors, this bill does not impose additional standards for contracts over $100,000.

Accordingly, this bill seeks to balance the policy concern of ensuring that important public court functions are not inappropriately privatized or privatized without due diligence against the policy concern that any restrictions placed on privatization do not unnecessarily restrict the trial court’s ability to perform vital functions in times of fiscal crisis. As argued by co-sponsor Labors’ Locals 777 & 792, this bill “would require the trial court to clearly demonstrate that the contract will result in actual overall cost savings to the trial [court], that such contracts not result in the displacement of trial court employees, and that the potential economic advantage of contracting-out is not outweighed by the public’s interest in having a particular function performed directly by the trial court employee.” As stated by the California Labor Federation, in support:

When entities contract out, oftentimes there are sacrifices made in the pursuit of cost savings. Outsourcing can result in less accountability, public access, and transparency. Such practices can lead to substantially reduced wages, [thereby] increasing demand for taxpayer funded public assistance. Public interest becomes secondary to profit maximization when for-profit corporations are responsible for delivery of public services. [Whereas] California requires due diligence standards be satisfied in all sectors of government prior to privatization of public services [. . .] trial courts are exempt from even this minimum standard, which applies to other public entities. Privatization of court services means that justice truly is in the hands of private contractors whose primary concern is profits for shareholders over fairness to the public. For these reasons, it is essential to have safeguard in the law protecting the public interests.

3. Important distinctions between this bill and existing law for state agencies

Notably, the bill does not track the Government Code in some important respects in order to address the proponents’ concerns specific to the trial courts, including issues relating to court interpreters, and provisions added at the request of disability community advocates. It should also be noted that the bill, consistent with prior legislation reviewed by this Committee, would include an important discrepancy from existing law relating to state agencies. Namely, whereas existing law provides that proposals to contract out work cannot be approved solely on the basis that savings will result from lower contractor pay rates or benefits, it also provides that contracts can be eligible for approval if the contractor’s wages are at the industry’s level and do not significantly undercut state pay rates. This bill, like earlier versions of AB 2332 and AB 566 before it, leaves out the word “significantly” from its otherwise identical provision, thus essentially eliminating any cost-savings possibilities that would arise from lower wages—even by a single dollar. In other words, any costs savings would have to result from something other than lower wages. The author offers the amendment below to bring the bill closer in line to the same standard imposed on state agencies, by adding the word “significantly.”

This bill also differs from the state agency provisions in that it does not have an exemption from the contracting out requirements where the contractor will provide equipment, materials, facilities, or support services that could not feasibly be provided by the state in the location where the services are to be performed. The author offers the following amendment to add that exemption to the bill, but preclude any use of the exemption to reopen courts that had been closed during the fiscal crisis as privatized courts or to open new privatized courts.

Author’s amendments:

1. On page 3, line 9, before “undercut” add “significantly”

2. On page 4, after line 33, insert “(8) The contractor will provide equipment, materials, facilities, or support services that could not feasibly be provided by the trial court in the location where the services are to be performed. This paragraph shall not apply to services contracted in order to open closed courthouses if those services were performed by trial court employees before the closure or for the ongoing operation of new or reopened courthouses.”

Renumber accordingly.

4. Important distinction between this bill and bill approved by this Committee last year

While this bill tracks the provisions of Government Code Section 19130 that are currently applicable to state agencies, there are some differences. Whereas existing law applies to “the use of personal service contracts,” this bill applies to “contracts for services when a trial court intends to enter into, or renew or extend, a contract for any services that are currently or have been customarily performed by that trial court’s employees.” When this bill heard AB 2332 last year, it passed the bill with an amendment to remove the reference to contract renewals and extensions. The amendment below would remove that language from this bill and bring greater parity with the provision for state agencies.

Author’s amendment:

On page 2, line 4 strike “, or renew or extend,”

5. Governor’s veto message of AB 566

As noted in the Background, this bill is the third recent effort to impose standards upon the courts when contracting out for services that are currently or have customarily been performed by that trial court’s employees. The first bill, AB 566, (Wieckowski, 2013) (to which the second bill, AB 2332 (Wieckowski, 2014) was substantially similar) was ultimately vetoed.

In vetoing AB 566, Governor Brown stated that while he agrees that decisions to change the way court services are provided should be carefully evaluated to ensure they are both fair and cost-effective, “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.”

Support: California Professional Firefighters (CPF); Glendale City Employees Association (GCEA); Orange County Employees Association (OCEA); Organization of SMUD Employees (OSE); San Bernardino Public Employees Association (SBPEA); San Diego County Court Employees Association (SDCCEA); San Luis Obispo County Employees Association (SLOCEA)

Opposition: Judicial Council

HISTORY

Source: American Federation of State, County and Municipal Employees, AFL-CIO; Service Employees International Union; Laborers’ Locals 777 and 792; Orange County Employees Association

Related Pending Legislation: None Known

Prior Legislation:

AB 2332 (Wieckowski, 2014) See Background.

AB 566 (Wieckowski, 2013) See Background.

AB 438 (Williams, Ch. 611, Stats. 2011) See Background.

SB 78 (Committee on Budget and Fiscal Review, Ch. 10, Stats. 2011) See Comment 3.

AB 3084 (Horton, 2004) would have applied specified contracting requirements to a metropolitan water district’s contracts for services. AB 3084 was held in the Senate Local Government Committee and died without a hearing.

SB 906 (Alarcon, 2003) would have required all general law county and city contracts for services to achieve cost savings and meet certain other requirements. SB 906 died on the Assembly Floor.

SB 163 (Alarcon, 2003) was substantially similar to SB 906 and was held in the Senate Appropriations Committee.

SB 1419 (Alarcon, Ch. 894, Stats. 2002) See Background.

AB 233 (Escutia and Pringle, Ch. 850, Stats. 1997) See Comment 1.

AB 3336 (Ryan, Ch. 1057, Stats. 1982) See Background.

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