SB 131: State public employment: memorandum of understanding: approval.

(1)Existing law provides that a provision of a memorandum of understanding reached between the state employer and a recognized employee organization representing state civil service employees that requires the expenditure of funds does not become effective unless approved by the Legislature in the annual Budget Act.

This bill would approve provisions requiring the expenditure of funds in the memorandum of understanding entered into between the state employer and State Bargaining Unit 16, Physicians, Dentists, and Podiatrists.

This bill would provide that provisions of the memorandum of understanding described above and approved by this bill that require the expenditure of funds will not take effect unless funds for those provisions are specifically appropriated by the Legislature. The bill would authorize the state employer and State Bargaining Unit 16 to meet and confer to renegotiate the affected provisions if funds for those provisions are not specifically appropriated by the Legislature. The bill would require that the provisions of this memorandum of understanding that require the expenditure of funds to become effective even if these provisions are approved by the Legislature in legislation other than the annual Budget Act.

The bill would appropriate to the Controller from the General Fund unallocated special funds, including federal funds and unallocated nongovernmental cost funds, and any other fund from which state employees are compensated, the amount necessary for the payment of compensation and employee benefits to state employees covered by the memorandum of understanding described above if the Budget Act is not enacted on or before July 1 in the 201718, 201819, or 201920 fiscal year, as specified.

(2)The Public Employees Retirement Law (PERL) creates the Public Employees Retirement System for the purpose of providing pension and other benefits to public employees, which are funded by employee and employer contributions and investment returns. PERL prescribes different normal rates for employee contributions depending on bargaining unit, employer, and inclusion of service in the federal Social Security system, among other factors.

This bill, on and after July 1, 2017, would adjust the normal rate of contribution for specified employees of State Bargaining Unit 16 to 50% of the normal cost rate rounded to the nearest quarter 1%, as specified, if certain conditions occur. The bill would authorize the Director of the Department of Human Resources to exercise his or her discretion to establish the normal rate of contribution for a related state employee or an officer or employee of the executive branch who is not a member of the civil service.

(3)The Public Employees Medical and Hospital Care Act (PEMHCA), which is administered by the Board of Administration of the Public Employees Retirement System, prescribes methods for calculating the state employer contribution for postemployment health care benefits for eligible retired public employees and their families and for the vesting of these benefits. PEMHCA requires the employer contribution for an employee or annuitant who is in the employment of or retired from state service to be adjusted by the Legislature in the annual Budget Act, as specified. PEMHCA prescribes different ways of calculating the employer contributions for employees and annuitants depending on date of hire, years of service, and bargaining unit.

This bill, for state employees who are first employed and become members of the retirement system on or after April 1, 2017, as specified, and are represented by, or related to, State Bargaining Unit 16, would limit the employer contribution for annuitants to 80% of the weighted average of the health benefit plan premiums for an active employee enrolled for self alone, during the benefit year to which the formula is applied, for the 4 health benefit plans with the largest state civil service enrollment, as specified. The bill would similarly limit the employer contribution for an enrolled family member of an annuitant to 80% of the weighted average of the additional premiums required for enrollment of those family members during the benefit year to which the formula is applied and would provide the same limit on employer contributions for annuitants enrolled in Medicare health benefit plans.

This bill would prohibit state employees who are first employed and become members of the retirement system on or after April 1, 2017, as specified, and are represented by, or related to, State Bargaining Unit 16, from receiving any portion of the employer contribution payable for annuitants unless the person is credited with at least 15 years of state service at the time of retirement. The bill would prescribe the percentage of the employer contribution payable for postretirement health benefits for these employees based on the number of completed years of credited state service at retirement, with 50% after 15 credited years of service and 100% after 25 or more years of service.

(4)PEMHCA generally requires that an employee or annuitant who is enrolled in, or whose family member is enrolled in, a Medicare health benefit plan be paid the amount of the Medicare Part B premiums, as specified, and prohibits this payment from exceeding the difference between the maximum employer contribution and the amount contributed by the employer toward the cost of premiums for the health benefit plan in which the employee or annuitant and his or her family members are enrolled. Existing law excepts from this requirement state employees who are first employed and become members of the retirement system on or after specified dates and are represented by, or related to, specified state bargaining units.

This bill would also except from the requirement described above state employees who are first employed and become members of the retirement system on or after April 1, 2017, as specified, and are represented by, or related to, the State Bargaining Unit 16.

(5)PEMHCA establishes the Public Employees Contingency Reserve Fund for the purpose of funding health benefits and funding administrative expenses. PEMHCA establishes the Annuitants Health Care Coverage Fund, which is continuously appropriated, for the purpose of prefunding health care coverage for annuitants, including administrative costs. PEMHCA defines prefunding for these purposes. Existing law requires the state and employees of State Bargaining Unit 2, 7, 9, 10, or 12 to prefund retiree health care with the goal of reaching a 50% cost sharing of normal costs by July 1, 2019, and prescribes schedules of contribution percentages in this regard. For the state and employees of State Bargaining Unit 6, the date for reaching the goal is July 1, 2018.

This bill would require the state and employees of State Bargaining Unit 16 to prefund retiree health care with the goal of reaching a 50% cost sharing of normal costs by July 1, 2018. The bill would prescribe a schedule of contribution percentages in this regard for the affected bargaining unit, with the contributions to be deposited in the Annuitants Health Care Coverage Fund. By depositing new revenue in a continuously appropriated fund, this bill would make an appropriation.

(6)Existing law, the State Employees Dental Care Act, authorizes the state to enter into contracts, upon negotiations with employee organizations, with carriers for dental care plans for employees, annuitants, and eligible family members. Existing law permits these plans to include premiums to be paid by employees and annuitants and also authorizes the plans to be self-funded if an employer determines it to be cost effective. Existing law prohibits specified employees from receiving an employer contribution for these benefits for annuitants unless the person is credited with 10 or more years of state service or for other specified employees unless the person is credited with 15 or more years of state service.

This bill would prohibit state employees, as specified, who are first employed and become members of the retirement system on or after April 1, 2017, as specified, and are represented by, or related to, State Bargaining Unit 16, from receiving an employer contribution for dental benefits, as described above, for annuitants unless the person is credited with 15 or more years of state service. The bill would prescribe the percentage of the employer contribution payable for these dental benefits for these employees based on the number of completed years of credited state service at retirement, with 50% after 15 credited years of service and 100% after 25 or more years of service.

(7)This bill would become operative only if SB 496 is enacted and becomes operative.

This bill would declare that it is to take effect immediately as a bill providing for appropriations related to the Budget Bill.