THIRD READING  

Bill No: AB 369

Author: Weber (D), et al.

Introduced: 2/5/19

Vote: 21

SENATE EDUCATION COMMITTEE: 5-1, 6/12/19

AYES: Leyva, Wilk, Durazo, McGuire, Pan

NOES: Glazer

NO VOTE RECORDED: Chang

SENATE APPROPRIATIONS COMMITTEE: 5-2, 8/30/19

AYES: Portantino, Bradford, Durazo, Hill, Wieckowski

NOES: Bates, Jones

ASSEMBLY FLOOR: 69-3, 5/23/19 - See last page for vote

SUBJECT: Public postsecondary education: California State University: support staff employees: merit salary adjustments

SOURCE: California State University Employees Union

Service Employees International Union

DIGEST:

This bill requires each support staff employee of the California State University (CSU) to receive an annual five percent merit salary adjustment upon meeting the standards for satisfactory performance in their position.

ANALYSIS: Existing law establishes the Higher Education Employer-Employee Relations Act (HEERA) to provide a statutory framework to regulate labor relations at the University of California, CSU, and Hastings College of Law, and their employees. The Public Employment Relations Board has the authority to enforce HEERA. Employees at CSU are explicitly exempt from civil service, and their salary terms are a negotiated item in collective bargaining agreements and subject to approval by the Trustees.

This bill:

1. Requires the CSU, upon completion of each CSU support staff employees’ first year and after completion of each subsequent year, to provide a five percent merit salary intermediate step adjustment.
2. Specifies that the merit adjustment may only occur when employees meet the standard for satisfactory performance in the position, as determined by the employees’ appropriate administrator pursuant to a uniform employee evaluation process.
3. Requires that on or after the operative date of this measure, any language that effectuates its provisions shall automatically be incorporated into any pertinent memorandum of understanding or collective bargaining agreement entered into, or renewed, by the CSU.
4. Mandates that any costs the CSU incurs to implement this bill shall be paid for by existing CSU resources.
5. Sunsets the provisions of this bill on January 1, 2031.

Comments

1. Need for the bill. According to the author, “The California State University (CSU) is the only California state agency that does not provide salary steps to its staff.” The author contends that, “This inequity has created a $95.4 million inversion gap between the salaries for newly-hired and long-employed CSU support staff”. The author argues, “Maintaining a high quality CSU depends on the retention of experienced employees vested in the long-term health and growth of the university; the current salary structure does not facilitate that.”
2. Salary step increases at other state agencies. State law charges the California Department of Human Resources (CalHR) with establishing and adjusting salary ranges for each position class in state civil service, with each salary range consisting of minimum and maximum salary limits and intermediate steps within the limits to govern salary adjustments. State law also establishes the merit salary adjustment (MSA), an annual salary increase for employees below the maximum step of their salary range. The MSA is contingent on satisfactory job performance and is effective on the employee’s anniversary date. The amount of each step increase—defined for most represented employees in a Memorandum of Understanding and in CalHR regulations for non-represented employees—is five percent.

While CSU employees are exempt from civil service, they received MSAs consistent with civil service employees until the early 1990s.

1. CSU collective bargaining history and status. In April 1994, during collective bargaining, the CSU Trustees proposed that MSAs be replaced with discretionary performance pay. Labor fought this proposal, but after exhausting the statutory impasse procedures of mediation and fact-finding, the CSU withdrew salary steps on April 1, 1996. The MSA was replaced with the Service Salary Increase (SSI), which was set at 2.5 percent. Unlike MSAs, SSIs are not automatic and are awarded only in years when they are funded.

In October 2017, the CSU and CSU Employees Union (CSUEU) reached a tentative agreement on a successor contract. The new three-year collective bargaining agreement will run through June 2020. CSUEU represented employees will receive three percent general salary increases on July 1, 2017 (retroactive), July 1, 2018, and July 1, 2019. Current full-time employees will receive a one-time recognition bonus of $650 upon ratification of the successor agreement by the CSU Trustees.

1. Wages are within the mandatory scope of the Higher Education Employer-Employee Relations Act. HEERA is the law that governs labor relations between public institutions of higher education and their employees. Under HEERA, terms and conditions of employment, such as wages, hours, and working conditions are considered to be within the mandatory scope of bargaining or scope of representation. Matters that are not within the scope of representation include: “consideration of the merits, necessity, or organization of any service, activity, or program established by statute or regulations adopted by the trustees, except for the terms and conditions of employment of employees who may be affected thereby.”

The Public Employer-Employee Relations Board is responsible for enforcing HEERA. PERB has issued thousands of decisions regarding what matters are within the scope of HEERA, which generally are those matters that: (a) are reasonably related to wages, hours, or conditions of employment, (b) areas where management and employees are likely to conflict, and (c) areas that would not significantly abridge the employer’s freedom to exercise managerial choices.

1. Audit of California State University management growth and compensation. In stating the need for this bill, the sponsors cite an April 2017 report by the California State Auditor concerning the growth and compensation of CSU management personnel. The report finds that stronger oversight is needed for hiring and compensating management personnel and for monitoring campus budgets. The report specifically cites the following:
   1. Staffing levels and compensation for CSU management personnel have increased at a faster rate than for other employee groups. While staffing levels and compensation for CSU employees have grown over a nine-year period, the number and compensation of management personnel significantly outpaced those of other types of employees.
   2. Campuses do not adequately oversee their budgets, of the six campuses audited none had written policies in place that require periodic comparisons of spending levels to budget limits and only two documented the results for their budget oversight.
   3. State law exempts CSU from many of the budget oversight mechanisms that apply to other state agencies; CSU does not need authorization to establish new employee positions.
   4. CSU has recently granted minimal raises to its executives, but board policy does not cap reimbursements of relocation costs. CSU granted nominal raises to its executives who also receive substantial amounts of other compensation, such as car and housing allowances.

The report also makes the following recommendations:

• 1. The Legislature should require the CSU to submit annual information that demonstrates how its activities meet the State’s goals for students.
  2. The Chancellor’s Office should take action to:
     1. Require that its departments and campuses prepare and maintain written justifications for any proposed new management positions.
     2. Ensure campus create, implement and adhere to written merit evaluation plans for management personnel.
     3. Work with the board to develop, approve, and implement an executive compensation policy that prohibits the use of foundation funds to pay campus presidents and establish caps on the relocation reimbursements it pays to executives as well as require campuses to establish similar caps for nonexecutive staff.

7) CSU response to audit recommendations. In response to the recommendations made by the California State Auditor, the CSU Chancellor’s Office adopted two policies relative to management personnel. The adopted policies require:

• 1. Written justifications for both the purpose and the specific number of proposed additional management positions. The justification should include the number of management personnel to be hired for a specific position as well as information about assessments of skills, knowledge and other qualifications outlined in regulations.
  2. The creation and implementation of and adherence to a written merit evaluation plan for management personnel. In addition campuses and the Chancellor’s Office must comply with their written merit evaluation plans and grant raises to management personnel based on merit as evidenced by current, documented performance evaluations.

Related/Prior Legislation

Last year, a substantially similar measure, AB 1231 (Weber, 2018) was vetoed by former Governor Brown, who stated:

“While the bill is laudable in its goals of trying to raise wages and create salary progression for support staff at the CSU, most of whom are within lower paid classifications, collective bargaining should be the tool to effectuate such changes. I do believe, however, that the CSU should undertake a diligent examination of pay disparities and opportunities for upward mobility for its lowest wage workers. 

As I stated in a message to the University of California last year, "As the UC prides itself on being an agent of social mobility for students, it might follow that UC could similarly be an agent of social mobility for lower-wage workers at its campuses." I believe that CSU can and should strive to do the same.”

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

According to the Senate Appropriations Committee, this bill will result in General Fund costs of approximately $78 million in the first year and $85 million in the second year, with ongoing growth in costs as the base amount grows and five percent merit salary increases are provided to approximately 26,000 support staff. This estimate assumes all support staff would receive satisfactory annual performance reviews. To the extent other bargaining actions occur, such as negotiations on the merit salary step schedule, this cost estimate could change.

SUPPORT: (Verified 8/29/19)

California State University Employees Union (co-source)

Service Employees International Union (co-source)

American Federation of State, County and Municipal Employees
California Labor Federation
California Nurses Association

California School Employees Association

California State Council of Service Employees
California Teamsters Public Affairs Council

OPPOSITION: (Verified 8/29/19)

California State University

ARGUMENTS IN SUPPORT: Proponents of this bill argue that salary steps are foundational to public service, and can be found at every state agency, as well as the other public higher education systems. For 20 years, the CSU has been unwilling to reinstate salary steps, despite the failure of the existing salary structure and the inability of employees to earn a fair and equitable wage. As employee salaries have become marginalized, a 2017 state audit showed CSU management positions grew at twice the rate of support staff, with a half-billion dollars per year total compensation that far outpaced the salary increases of other employees.

ARGUMENTS IN OPPOSITION: The California State University has previously stated that it recently completed its negotiations with the CSU Employees Union and a compensation pool of nine percent over the next three years was agreed to by both parties. The negotiations occurred in good faith and came to a successful agreement, as envisioned by the labor relations act that guides public higher education. This bill is contrary to that act, which was enacted to create a “harmonious and cooperative process” on issues related to wages, hours, and working conditions. Statutorily mandating salary adjustments for one group of employees above all other budget priorities undermines the ability of the board to manage its budget to address other high priority needs of the system.

ASSEMBLY FLOOR: 69-3, 5/23/19

AYES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bloom, Boerner Horvath, Bonta, Burke, Calderon, Carrillo, Cervantes, Chau, Chiu, Choi, Chu, Cooper, Cunningham, Daly, Diep, Eggman, Flora, Frazier, Friedman, Gabriel, Gallagher, Cristina Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Mullin, Muratsuchi, Nazarian, O'Donnell, Patterson, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Waldron, Weber, Wicks, Wood, Rendon

NOES: Kiley, Melendez, Obernolte

NO VOTE RECORDED: Bigelow, Brough, Chen, Cooley, Dahle, Fong, Eduardo Garcia, Voepel

Prepared by: Ian Johnson / ED. /

9/1/19 10:14:02

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2019 - 2020 Regular Session

AB 369 (Weber) - Public postsecondary education: California State University: support staff employees: merit salary adjustments

Bill Summary:

This bill requires each support staff employee of the California State University (CSU) to receive a five percent merit salary intermediate step adjustment after his or her first year in the position, upon meeting the standards for satisfactory performance in their position.

Fiscal Impact:

According to CSU, this bill would result in General Fund costs of approximately $78 million in the first year and $85 million in the second year, with ongoing growth in costs as the base amount grows and five percent merit salary increases are provided to approximately 26,000 support staff. This estimate assumes all support staff would receive satisfactory annual performance reviews. To the extent other bargaining actions occur, such as negotiations on the merit salary step schedule, this cost estimate could change.

Background:

Employees at CSU are explicitly exempt from civil service, and their salary terms are a negotiated item in collective bargaining agreements and subject to approval by the Trustees. The Higher Education Employer-Employee Relations Act (HEERA) provides a statutory framework to regulate labor relations at the University of California, CSU, and Hastings College of Law, and their employees. . Under HEERA, terms and conditions of employment, such as wages, hours, and working conditions are considered to be within the mandatory scope of bargaining or scope of representation. Matters that are not within the scope of representation include: “consideration of the merits, necessity, or organization of any service, activity, or program established by statute or regulations adopted by the trustees, except for the terms and conditions of employment of employees who may be affected thereby.”

The Public Employment Relations Board (PERB) has the authority to enforce HEERA. PERB has issued thousands of decisions regarding what matters are within the scope of HEERA, which generally are those matters that: (1) are reasonably related to wages, hours, or conditions of employment, (2) areas where management and employees are likely to conflict, and (3) areas that would not significantly abridge the employer’s freedom to exercise managerial choices.

Proposed Law:

This bill requires each support staff employee of the CSU to receive a five percent merit salary intermediate step adjustment after his or her first year in the position, upon meeting the standards for satisfactory performance in their position. The bill specifies that if its’ provisions are in conflict with a provision of a memorandum of understanding but is not in conflict with a provision of a collective bargaining agreement, the provision of the memorandum of understanding shall prevail. Further, if a provision is in conflict with a collective bargaining agreement or a provision of a collective bargaining agreement and a provision of a memorandum of understanding, the provision of the collective bargaining agreement shall prevail.

-- END --

SENATE COMMITTEE ON EDUCATION

Senator Connie Leyva, Chair

2019 - 2020 Regular

Bill No: AB 369 Hearing Date: June 12, 2019

Subject: Public postsecondary education: California State University: support staff employees: merit salary adjustments.

SUMMARY

This bill requires each support staff employee of the California State University (CSU) to receive an annual five percent merit salary adjustment upon meeting the standards for satisfactory performance in their position.

BACKGROUND

Existing law establishes the Higher Education Employer-Employee Relations Act (HEERA) to provide a statutory framework to regulate labor relations at the University of California, CSU, and Hastings College of Law, and their employees. The Public Employment Relations Board has the authority to enforce HEERA.

Employees at CSU are explicitly exempt from civil service, and their salary terms are a negotiated item in collective bargaining agreements and subject to approval by the Trustees.

ANALYSIS

This bill:

1. Requires the CSU, upon completion of each CSU support staff employees’ first year and after completion of each subsequent year, to provide a 5 percent merit salary intermediate step adjustment.
2. Specifies that the merit adjustment may only occur when employees meet the standard for satisfactory performance in the position, as determined by the employees’ appropriate administrator pursuant to a uniform employee evaluation process.
3. Requires that on or after the operative date of this measure, any language that effectuates its provisions shall automatically be incorporated into any pertinent memorandum of understanding or collective bargaining agreement entered into, or renewed, by the CSU.
4. Mandates that any costs the CSU incurs to implement this measure shall be paid for by existing CSU resources.
5. Sunsets the provisions of this measure on January 1, 2031.

STAFF COMMENTS

1. Need for the bill. According to the author, “The California State University (CSU) is the only California state agency that does not provide salary steps to its staff”. The author contends that, “This inequity has created a $95.4 million inversion gap between the salaries for newly-hired and long-employed CSU support staff”. The author argues, “Maintaining a high quality CSU depends on the retention of experienced employees vested in the long-term health and growth of the university; the current salary structure does not facilitate that”.
2. Salary step increases at other state agencies. State law charges the California Department of Human Resources (CalHR) with establishing and adjusting salary ranges for each position class in state civil service, with each salary range consisting of minimum and maximum salary limits and intermediate steps within the limits to govern salary adjustments. State law also establishes the merit salary adjustment (MSA), an annual salary increase for employees below the maximum step of their salary range. The MSA is contingent on satisfactory job performance and is effective on the employee’s anniversary date. The amount of each step increase—defined for most represented employees in a Memorandum of Understanding and in CalHR regulations for non-represented employees—is five percent.

While CSU employees are exempt from civil service, they received MSAs consistent with civil service employees until the early 1990s.

1. CSU collective bargaining history and status. In April 1994, during collective bargaining, the CSU Trustees proposed that MSAs be replaced with discretionary performance pay. Labor fought this proposal, but after exhausting the statutory impasse procedures of mediation and fact-finding, the CSU withdrew salary steps on April 1, 1996. The MSA was replaced with the Service Salary Increase (SSI), which was set at 2.5 percent. Unlike MSAs, SSIs are not automatic and are awarded only in years when they are funded.

In October 2017, the CSU and CSU Employees Union (CSUEU) reached a tentative agreement on a successor contract. The new three-year collective bargaining agreement will run through June 2020. CSUEU represented employees will receive 3 percent general salary increases on July 1, 2017 (retroactive), July 1, 2018, and July 1, 2019. Current full-time employees will receive a one-time recognition bonus of $650 upon ratification of the successor agreement by the CSU Trustees.

1. Wages are within the mandatory scope of the Higher Education Employer-Employee Relations Act. California's Higher Education Employee-Employer Relations Act (HEERA) is the law that governs labor relations between public institutions of higher education and their employees. Under HEERA, terms and conditions of employment, such as wages, hours, and working conditions are considered to be within the mandatory scope of bargaining or scope of representation. Matters that are not within the scope of representation include: “consideration of the merits, necessity, or organization of any service, activity, or program established by statute or regulations adopted by the trustees, except for the terms and conditions of employment of employees who may be affected thereby.”

The Public Employer-Employee Relations Board is responsible for enforcing HEERA. PERB has issued thousands of decisions regarding what matters are within the scope of HEERA, which generally are those matters that: (1) are reasonably related to wages, hours, or conditions of employment, (2) areas where management and employees are likely to conflict, and (3) areas that would not significantly abridge the employer’s freedom to exercise managerial choices.

1. Audit of California State University (CSU) management growth and compensation. In stating the need for this bill, the sponsors cite an April 2017 report by the California State Auditor concerning the growth and compensation of CSU management personnel. The report finds that stronger oversight is needed for hiring and compensating management personnel and for monitoring campus budgets. The report specifically cites the following:
   1. Staffing levels and compensation for CSU management personnel have increased at a faster rate than for other employee groups. While staffing levels and compensation for CSU employees have grown over a nine-year period, the number and compensation of management personnel significantly outpaced those of other types of employees.
   2. Campuses do not adequately oversee their budgets, of the six campuses audited none had written policies in place that require periodic comparisons of spending levels to budget limits and only two documented the results for their budget oversight.
   3. State law exempts CSU from many of the budget oversight mechanisms that apply to other state agencies; CSU does not need authorization to establish new employee positions.
   4. CSU has recently granted minimal raises to its executives, but board policy does not cap reimbursements of relocation costs. CSU granted nominal raises to its executives who also receive substantial amounts of other compensation, such as car and housing allowances.

6) The report also makes the following recommendations:

• 1. The Legislature should require the CSU to submit annual information that demonstrates how its activities meet the State’s goals for students.
  2. The Chancellor’s Office should take action to:
     1. Require that its departments and campuses prepare and maintain written justifications for any proposed new management positions.
     2. Ensure campus create, implement and adhere to written merit evaluation plans for management personnel.
     3. Work with the board to develop, approve, and implement an executive compensation policy that prohibits the use of foundation funds to pay campus presidents and establish caps on the relocation reimbursements it pays to executives as well as require campuses to establish similar caps for nonexecutive staff.

7) CSU response to audit recommendations. In response to the recommendations made by the California State Auditor, the California State University (CSU) Chancellor’s Office adopted two policies relative to management personnel. The adopted policies require:

• 1. Written justifications for both the purpose and the specific number of proposed additional management positions. The justification should include the number of management personnel to be hired for a specific position as well as information about assessments of skills, knowledge and other qualifications outlined in regulations.
  2. The creation and implementation of and adherence to a written merit evaluation plan for management personnel. In addition campuses and the Chancellor’s Office must comply with their written merit evaluation plans and grant raises to management personnel based on merit as evidenced by current, documented performance evaluations.

1. Similar measure vetoed last year. Last year, a substantially similar measure, AB 1231 (Weber, 2018) was vetoed by former Governor Brown, who stated:

“While the bill is laudable in its goals of trying to raise wages and create salary progression for support staff at the CSU, most of whom are within lower paid classifications, collective bargaining should be the tool to effectuate such changes. I do believe, however, that the CSU should undertake a diligent examination of pay disparities and opportunities for upward mobility for its lowest wage workers. 

As I stated in a message to the University of California last year, "As the UC prides itself on being an agent of social mobility for students, it might follow that UC could similarly be an agent of social mobility for lower-wage workers at its campuses." I believe that CSU can and should strive to do the same.”

9) Arguments in support. Proponents of this bill argue that salary steps are foundational to public service, and can be found at every state agency, as well as the other public higher education systems. For 20 years, the CSU has been unwilling to reinstate salary steps, despite the failure of the existing salary structure and the inability of employees to earn a fair and equitable wage. As employee salaries have become marginalized, a 2017 state audit showed CSU management positions grew at twice the rate of support staff, with a half-billion dollars per year total compensation that far outpaced the salary increases of other employees.

10) Arguments in opposition. The California State University (CSU) has previously stated that it recently completed its negotiations with the CSU Employees Union and a compensation pool of nine percent over the next three years was agreed to by both parties. The negotiations occurred in good faith and came to a successful agreement, as envisioned by the labor relations act that guides public higher education. This bill is contrary to that act, which was enacted to create a “harmonious and cooperative process” on issues related to wages, hours, and working conditions. Statutorily mandating salary adjustments for one group of employees above all other budget priorities undermines the ability of the board to manage its budget to address other high priority needs of the system.

SUPPORT

California State University Employees Union (co-sponsor)

Service Employees International Union (co-sponsor)

American Federation of State, County and Municipal Employees
California Labor Federation
California Nurses Association

California School Employees Association

California State Council of Service Employees
California Teamsters Public Affairs Council

OPPOSITION

California State University

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 369

Author:(Weber)

As Introduced Ver:February 5, 2019

Majority vote

SUMMARY:

Requires the California State University (CSU) to provide a 5% merit salary intermediate step adjustment to CSU employees, as specified.

EXISTING LAW:

1. Establishes the CSU, governed by the Board of Trustees, and provides that the Trustees are responsible for the rule of government of their appointees and employees (Education Code Section 89500, et seq.).
2. Provides that officers and employees of the University of California (UC) and CSU are exempt from civil service (California Constitution, Article VII, Section 4(h)).
3. Establishes the Higher Education Employer-Employee Relations Act (HEERA) to provide a statutory framework to regulate labor relations between UC, CSU, and Hastings College of Law and their employees; provides the Public Employment Relations Board (PERB) authority to enforce HEERA (Government Code Section 3560-3599).

Major Provisions

This measure reinstates Merit Salary Adjustments (MSA) for represented, nonacademic CSU employees.

COMMENTS:

Background. In 1945, the MSA system was created in statute for state civil service employees. The MSA is a 5% annual salary increase for employees below the maximum step of their salary range. The MSA is contingent on satisfactory job performance and is effective on the employee's anniversary date.

Until the early 1990s, pay increases at CSU mirrored those provided to state civil service employees, thus CSU employees received MSAs. In April 1994, however, during collective bargaining, the CSU Trustees proposed that MSAs be replaced with discretionary performance pay. Labor fought this proposal, but after exhausting the statutory impasse procedures of mediation and fact-finding, the CSU unilaterally withdrew salary steps on April 1, 1996. The MSA was replaced with the Service Salary Increase (SSI), which was set at 2.5%. Unlike MSAs, SSIs are not automatic and are awarded only in years when they are funded.

As noted above, CSU employees are explicitly exempt from civil service, under the California Constitution, and instead are covered by the HEERA, which provides a framework to regulate labor relations.

Current CSU Budget Pressures. As noted by the Legislative Analyst's Office in its analysis of the 2019-20 Governor's Budget Proposal, compensation is the largest component of CSU's core budget; salaries and benefits make up a significant share of CSU's core budget (about 75%). The CSU faces cost pressures of funding collective bargaining agreements already ratified by the Board of Trustees and covering basic cost increases, such as for health care and pensions.

To note, the CSU Trustees have statutory authority to negotiate collective bargaining agreements. Additionally, Trustees are expected to manage the cost of the agreements within CSU's overall budget.

Committee Staff understands that the CSU is in the process of addressing in-range progression; which seeks to bring more salary parity between newly hired support staff and existing support staff within the same job classifications.

According to the Author:

"The California State University is the only California state agency that does not provide salary steps to its staff." The author contends that, "This inequity has created a $95.4 million inversion gap between the salaries for newly-hired and long-employed CSU support staff." The author argues, "Maintaining a high quality CSU depends on the retention of experienced employees vested in the long-term health and growth of the university; the current salary structure does not facilitate that."

Arguments in Support:

According to the co-sponsors of this measure, the California Teamsters Public Affairs Council and the Service Employees International Union, "For 20 years, the CSU has been unwilling to reinstate salary steps, despite the failures of the existing salary structure and the inability of employees to earn a fair and equitable wage." According to the California Teamsters Public Affairs Council, "The inability of support staff to move through salary ranges resulted in new in new hires earning higher salaries then existing employees – averaging $712 per month – who worked in the same classification for many years." The Teamsters contend that, "This inequity created a $95.4 million inversion gap between the salaries of newly-hired and long-employed CSU employees."

Arguments in Opposition:

The CSU contends that, "CSU has negotiated in good faith with the California State University Employees Union to come to two agreements that provided a 19% General Salary Increase from 2104 through 2019." Further, the CSU states, "This agreement represents our good faith efforts to recognize the importance and contributions of this employee group in a manner comparable to that extended to other employee groups, while staying within the fiscal realities of our budget and funding." The CSU argues that, "AB 369 sets the dangerous precedent of undermining the authority of our Board of Trustees to negotiate fair and reasonable compensation for our employees."

FISCAL COMMENTS:

According to the Assembly Appropriations Committee, General Fund cost pressures to CSU of approximately $78 million in the first year and $85 million thereafter, with ongoing growth in costs as the base amount grows.

VOTES:

ASM HIGHER EDUCATION: 8-2-2

YES: Medina, Choi, Jones-Sawyer, Gabriel, Irwin, Patterson, Santiago, Weber

NO: Kiley, Levine

ABS, ABST OR NV: Bloom, Low

ASM APPROPRIATIONS: 14-4-0

YES: Gonzalez, Bloom, Bonta, Calderon, Carrillo, Chau, Diep, Eggman, Gabriel, Eduardo Garcia, Maienschein, Petrie-Norris, Quirk, Robert Rivas

NO: Bigelow, Brough, Fong, Obernolte

UPDATED:

VERSION: February 5, 2019

CONSULTANT: Jeanice Warden / HIGHER ED. / (916) 319-3960 FN: 0000767

Date of Hearing: May 1, 2019

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 369

Author:(Weber) – As Introduced Ver:February 5, 2019

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

SUMMARY:

This bill requires the California State University (CSU), upon completion of each CSU support staff employee’s first year and after completion of each subsequent year, and subject to satisfactory performance, to provide a 5% merit salary intermediate step adjustment, beginning in the 2019-20 fiscal year with a sunset on January 1, 2031. The bill specifies the CSU shall pay the bill’s costs within its existing resources.

FISCAL EFFECT:

General Fund cost pressures to CSU of approximately $78 million in the first year and $85 million thereafter, with ongoing growth in costs as the base amount grows, to provide 5% merit salary increases to about 22,000 support staff, ranging between about $4,000 and $6,000 per staff member in the first year of implementation. This estimate’s counterfactual assumes staff wage increases as currently bargained in the first year of implementation, but does not assume any wage increases thereafter. The estimate also assumes all support staff annually receive satisfactory annual performance reviews. To the extent other bargaining actions occur, such as negotiations on the merit salary step schedule, costs could change.

COMMENTS:

1. Purpose. According to the co-sponsors of this measure, the California Teamsters Public Affairs Council and the Service Employees International Union, “For 20 years, the CSU has been unwilling to reinstate salary steps, despite the failures of the existing salary structure and the inability of employees to earn a fair and equitable wage.” The sponsors contend the lack of salary steps has resulted in new hires earning higher salaries than employees who have worked in the same classification for years.
2. Background. In 1945, California codified a merit salary adjustment (MSA) system for state civil service employees. The MSA provides a 5% annual salary increase for employees below the maximum step of their salary range, contingent on satisfactory job performance.

Until the early 1990s, CSU employees received MSAs. In April 1996, CSU replaced the MSA system with the Service Salary Increase (SSI) system. The SSI provides a 2.5% salary increase for employees in years they are negotiated as part of collective bargaining with CSU.

This bill reinstates MSA for represented, nonacademic CSU employees. While this bill does not explicitly define support staff, these employees typically include administrative support staff, technical support staff, skilled trades staff, operations support staff, healthcare support staff and academic support staff.

The CSU indicates that because the bill requires costs to be absorbed within existing state resources, it likely would either redirect funds from other areas, such as its Graduation Initiative, increase tuition to generate additional funding or hire fewer faculty and staff.

In the 2018-19 fiscal year, the CSU’s state General Fund appropriation is $3.6 billion and its estimated student tuition and fee revenue is $3.1 billion.

1. CSU Audit. The Auditor of the State of California is currently performing an audit of the CSU parking program and any accounts the CSU holds outside the State Treasury. With regard to outside accounts, the audit follows up on a 2017 letter the Legislature requested from the CSU chancellor’s office requesting certain information about the CSU’s Systemwide Investment Fund Trust, an account held outside the State Treasury. The letter indicated the CSU, as of 2017, held $3.7 billion in the account. According to that letter, about half of the funds are used for various CSU programs including parking, housing and financial aid. The other half is used for CSU operations. The sponsor of this bill, the CSU Employees Union, indicates this fund may be a funding source for this bill. The audit is likely to be released later this year.
2. Prior Legislation. AB 1231 (Weber), of the 2017-18 Legislative Session, was substantially similar to this measure. The bill was vetoed by the governor.

Analysis Prepared by: Natasha Collins / APPR. / (916) 319-2081

Date of Hearing: April 2, 2019

ASSEMBLY COMMITTEE ON HIGHER EDUCATION

Jose Medina, Chair

ABPCA Bill Id:AB 369 (

Author:Weber) – As Introduced Ver:February 5, 2019

SUBJECT: Public postsecondary education: California State University: support staff employees: merit salary adjustments.

SUMMARY: Requires the California State University (CSU) to provide a 5% merit salary intermediate step adjustment to CSU employees, as specified. Specifically, this bill:

1. Requires the CSU, upon completion of each CSU support staff employees’ first year and after completion of each subsequent year, to provide a 5% merit salary intermediate step adjustment.
2. Specifies that the merit adjustment, per (1) above, may only occur when employees meet the standard for satisfactory performance in the position, as determined by the employees’ appropriate administrator pursuant to a uniform employee evaluation process.
3. Requires that on or after the operative date of this measure, any language that effectuates the provisions of (1) and (2) above, shall automatically be incorporated into any pertinent memorandum of understanding or collective bargaining agreement entered into, or renewed, by the CSU.
4. Mandates that any costs the CSU incurs to implement this measure shall be paid for by existing CSU resources.
5. Sunsets the provisions of this measure on January 1, 2031.

EXISTING LAW:

1. Establishes the CSU, governed by the Board of Trustees, and provides that the Trustees are responsible for the rule of government of their appointees and employees (Education Code Section 89500, et seq.).
2. Provides that officers and employees of the University of California (UC) and CSU are exempt from civil service (California Constitution, Article VII, Section 4(h)).
3. Establishes the Higher Education Employer-Employee Relations Act (HEERA) to provide a statutory framework to regulate labor relations between UC, CSU, and Hastings College of Law and their employees; provides the Public Employment Relations Board (PERB) authority to enforce HEERA (Government Code Section 3560-3599).

FISCAL EFFECT: Unknown. However, based on the 2018 Senate Appropriations Committee fiscal analysis of AB 1231 (Weber), which was virtually identical to this measure, according to the CSU, this bill would result in General Fund costs of approximately $71 million in the first year and $75 million thereafter, with ongoing growth in costs as the base amount grows. This estimate assumes an average cost of $15 million for every 1 percent increase, and would apply to all staff excluding management personnel, executives, and faculty.

COMMENTS: Background. In 1945, the Merit Salary Adjustment (MSA) system was created in statute for state civil service employees. The MSA is a 5 percent annual salary increase for employees below the maximum step of their salary range. The MSA is contingent on satisfactory job performance and is effective on the employee’s anniversary date.

Until the early 1990s, pay increases at CSU mirrored those provided to state civil service employees, thus CSU employees received MSAs. In April 1994, however, during collective bargaining, the CSU Trustees proposed that MSAs be replaced with discretionary performance pay. Labor fought this proposal, but after exhausting the statutory impasse procedures of mediation and fact-finding, the CSU unilaterally withdrew salary steps on April 1, 1996. The MSA was replaced with the Service Salary Increase (SSI), which was set at 2.5 percent. Unlike MSAs, SSIs are not automatic and are awarded only in years when they are funded.

Purpose of the measure. According to the author, “The California State University is the only California state agency that does not provide salary steps to its staff”. The author contends that, “This inequity has created a $95.4 million inversion gap between the salaries for newly-hired and long-employed CSU support staff”. The author argues, “Maintaining a high quality CSU depends on the retention of experienced employees vested in the long-term health and growth of the university; the current salary structure does not facilitate that”.

This measure reinstates MSAs for represented, nonacademic CSU employees.

As noted above, CSU employees are explicitly exempt from civil service, under the California Constitution, and instead are covered by the HEERA, which provides a framework to regulate labor relations.

Current CSU Budget Pressures. As noted by the Legislative Analyst's Office (LAO) in its analysis of the 2019-20 Governor's Budget Proposal, compensation is the largest component of CSU’s core budget; salaries and benefits make up a significant share of CSU’s core budget (about 75 percent). The CSU faces cost pressures of funding collective bargaining agreements already ratified by the Board of Trustees and covering basic cost increases, such as for health care and pensions.

To note, the CSU Trustees have statutory authority to negotiate collective bargaining agreements. Additionally, Trustees are expected to manage the cost of the agreements within CSU’s overall budget.

Committee Staff understands that the CSU is in the process of addressing in-range progression; which seeks to bring more salary parity between newly hired support staff and existing support staff within the same job classifications.

Arguments in support. According to the co-sponsors of this measure, the California Teamsters Public Affairs Council and the Service Employees International Union, “For 20 years, the CSU has been unwilling to reinstate salary steps, despite the failures of the existing salary structure and the inability of employees to earn a fair and equitable wage”. According to the California Teamsters Public Affairs Council, “The inability of support staff to move through salary ranges resulted in new in new hires earning higher salaries then existing employees – averaging $712 per month – who worked in the same classification for many years”. The Teamsters contend that, “This inequity created a $95.4 million inversion gap between the salaries of newly-hired and long-employed CSU employees”.

Arguments in opposition. The CSU contends that, “CSU has negotiated in good faith with the California State University Employees Union to come to two agreements that provided a 19% General Salary Increase from 2104 through 2019”. Further, the CSU states, “This agreement represents our good faith efforts to recognize the importance and contributions of this employee group in a manner comparable to that extended to other employee groups, while staying within the fiscal realities of our budget and funding”. The CSU argues that, “AB 369 sets the dangerous precedent of undermining the authority of our Board of Trustees to negotiate fair and reasonable compensation for our employees”.

Committee comments. This measure requires that any costs incurred by the CSU in order to meet the MSAs, must be paid for using existing CSU resources. Committee Staff understands said mandate could force CSU to redirect funds from other important projects and initiatives, like Graduation Initiative 2025 (an initiative that, in part, provides students with full wrap around services, significantly increasing their likelihood of graduating in four-years).

Moving forward, the author may wish to remove the mandate that CSU must use existing resources in order to pay for on-going 5% MSA.

Additionally, this measure stipulates a 5% MSA for CSU support staff. While this increase appears to bring parity with CSU support staff and other non-CSU employees, this Committee may wish to determine whether or not the Legislature should stipulate the actual percentage, or should it be left to the bargaining units to negotiate the actual percentage.

Prior legislation. AB 1231 (Weber) of 2017-18, which was vetoed by the Governor, is substantially similar to this measure.

AB 2019 (Santiago) of 2016, which was held on Suspense in the Assembly Appropriations Committee, would have provided an annual MSA of at least 2.65% for CSU academic employees.

REGISTERED SUPPORT / OPPOSITION:

Support

California State University Employees Union (Sponsor)
California State Council of Service Employees (Co-Sponsor)
California Teamsters Public Affairs Council (Co-Sponsor)
American Federation of State, County and Municipal Employees, AFL-CIO
California Labor Federation, AFL-CIO
California Nurses Association

Opposition

California State University

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