HomeMy WebLinkAbout8.2 City Mgr Report on Proposition 61 S �
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CITY OF DUBLIN
AGENDA STATEMENT
CITY COUNCIL MEETING DATE: October 13, 1986
SUBJECT Report from City Manager Re Proposition 61
EXHIBITS ATTACHED Resolution; Gann Initiative ; League of California
Cities Special Bulletins ; Cal-Tax Analysis
RECOMMENDATION Consider Resolution
FINANCIAL STATEMENT: Immediate Costs to the City $35 , 000 to pay off
general leave balances of employees . Long term costs
are unknown.
DESCRIPTION The Gann Fair Pay Initiative (Proposition 61 ) has
qualified to appear on the ballot at the -General Election of November 4,
1986 . Attached is a copy of the text of Proposition 61 for Council
information.
Numerous analyses of Proposition 61 by the League of California Cities ,
California Taxpayers Association, as well as other organizations conclude
that Proposition 61 is ambiguous and unclear , and will in all likelihood be
litigated in the courts for sometime if the Proposition passes , in order to
clarify the meaning of the provisions of the Proposition.
OVERVIEW: '
The Initiative appears to have the following objectives :
Salaries to Fringe Benefits :
1 . To limit salaries paid by State and local government to
their elected officials and employees .
Contracts :
2 . To limit the contract duration as well as compensation
paid to private contractors by State and local
government .
Leave Benefits :
3. To limit the ability of State and local government
employees to carry over earned vacation and sick leave
from one year to the next .
Retirement :
4 . To reduce excessive retirement benefits to persons who
have served in more than one paid public position.
If passed , it appears that the Initiative would have an
effective date of November 5 , 1986 . However , this would
be subject to legal interpretation.
IMPACTS ON THE CITY OF DUBLIN
1 . Salaries & Fringe Benefits
Proposition 61 precludes any state , or local government from
compensating elected or appointed employees in excess of 80% of the
Governor ' s salary which is established at $80 , 000 . There is a provision of
the Proposition that provides that a majority of the voters could approve an
increase in salary. The problem with this portion of the initiative is
defining .compensation" . Does "compensation" mean salary or salary plus
fringe benefits?
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COPIES TO :
ITEM No . , 2s
If the initiative refers to only salary , no Dublin employees
would have their salaries reduced at this time . However , either future
salary compaction between employees in the City would develop or the -
salaries of all employees would be frozen in order to maintain acceptable
relationships between salary and level of skill and responsibility required
of positions throughout the organization. The long term impact on the City
would be the inability to attract qualified individuals to the public
sector . The City might be able to hire qualified employees on a part-time
basis , if it permitted those employees to also work in the private• sector .
However , this would result in the need to have more employees and could
possibly increase the cost of providing services to the public .
If the initiative refers to compensation, the City Manager ' s
salary and benefits would be immediately reduced at this time and the same
problems identified above would occur much sooner .
2 . Contracts
The impact that the initiative has on private contract
services is very unclear . Section 26(b) of the initiative limits the
Cities ' ability to compensate individuals working under contract in excess
of $64 , 000 per year . Section 26(h) of the initiative specifies that the
Legislature can enact no laws authorizing a public official to compensate
private subcontractors in excess of $751-hour , or an individual under a
subcontract in excess of $64 ,000/year , or enter into a contract in excess of
two years duration. The problem with these sections of the initiative is in
determining what "individual" under contract refers to , as well as "private
subcontractors" . If "individual" refers to only a contract between a City
and an individual , the City would have to restructure its contract with the
City Attorney to limit his compensation to $64,000/year. Legal work
required in "excess of $64 , 000/year would probably have to be subcontracted
to other attorneys on a fee for service basis since the hourly rate for
subcontract services would be limited to $75. 00/hour . It is important to
note that the City Attorney ' s present hourly rate includes office overhead,
insurance , etc . The City would also be limited in its ability to hire other
individuals under contract in the future . These might include engineers ,
architects , special legal counsel , etc .
If "individual" refers to individual employees who work for a firm
with which the City contracts , contracts with the following contractors
would have to be substantially altered or restructured .
TAUGHER & ASSOCIATES (Building & Safety)
More contract employees would have to be hired and the hours
of existing employees limited . The City may have to separate
insurance costs from the hourly rate and pay those costs
directly.
SANTINA & THOMPSON (Engineering)
The City Engineer and individual public works inspectors '
hours would have to be reduced . This would necessitate 'the
use of more contract employees to perform the same amount of
work at the inspector level , and would probably make it
necessary for the City to hire an employee who could perform
the City Engineer function on a regular basis . However , the
ability of the City to find a qualified engineer who would be
willing to work in the public sector under the compensation
limits of Proposition 61 is questionable .
TJKM (Traffic Engineering)
The present hourly rates which the City is charged by TJKM
for work undertaken by Senior members of their firm exceeds
$75 . 00/hour limit imposed by the initiative . This may result
in the City having to hire its own Traffic Engineer on a full
time basis to provide traffic engineering services to the
City . This would result in additional costs for traffic
engineering services incurred by the City.
MCE Corporation (Public Works)
With respect to the Public Works function performed by MCE
Corporation, the primary issue would relate to the duration
of the contract .
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Presently , the City has a three year agreement with MCE
Corporation for public works services . The City entered into
this agreement with MCE Corporation in order to give MCE a
sufficient commitment to purchase equipment required to
serve the City . The initiative limits the duration of
contracts to 2 years. It is uncertain whether or not this
limitation on contract duration would impact the
contractor ' s ability to continue to provide public works
services to the City.
There is also a question as to whether or not the two year
contract duration would impact the City ' s ability to continue
to provide services through private contracts with all the
above contractors , if the continuity to the City ' s operations
was disrupted every two years .
Miscellaneous Contractors
The City ' s ability to retain architectural firms , legal
firms , planning firms , engineering firms on a project-by-project basis would
also be limited in such a way that individuals working under the contract
would be limited to $64 ,000/year and the hourly rate to possibly
$75 . 00/hour . It is impossible to determine at this time what kind of impact
that would have on the City ' s ability to do business .
3. Leave Benefits .
Presently, the City of Dublin has a very conservative leave
program compared to many older public agencies . City employees are
currently limited to approximately two years accrued leave on the books .
This maximum leave balance coincides with the City ' s long term disability
program. It also gives the employee some level of protection in the event
of a serious illness . If employees were limited to carrying a maximum of
one year ' s accrued leave , this type of plan could not be provided . The only
other alternative would be for the City to obtain State disability insurance -
through the State of California with the employee bearing the cost . -
If the initiative passes , it is also likely that the City
would have to pay all employees for existing leave on the books as of
November 5 , 1986 . If this should occur , staff has estimated that cost to
the City of paying this leave balance would be approximately $35 , 000 .
4 . Retirement
As indicated above , one of the primary purposes or objectives
of the initiative appeared to be to reduce excessive retirement benefits to
persons who have served more than one paid public position. As shown in the
analysis of the Gann Iniative undertaken by the California Taxpayerer ' s
Association, the retirement benefits that Gann sought to curtail are
actually increased by the initiative . This particular portion of the
initiative does not have any direct impact on the City at this time .
5 . Conclusion
The passage of Proposition 61 on the City of Dublin will in
all likelihood lower the quality of services provided by the City and at the
same time increase the costs of providing those services . This will be
particularly true in the case of the City of Dublin, if it is found that
Proposition 61 will inhibit the City ' s ability to continue to enter into
contracts for various services .
It is the Staff ' s recommendation that the City Council review
the above report and consider the attached resolution indicating the City ' s
opposition to Proposition 61 .
•
RESOLUTION NO . - 86
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF DUBLIN
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OPPOSING BALLOT PROPOSITION 61
WHEREAS , Proposition 61 , the Gann Initiative , has
qualified for the November 4 , 1986 ballot ; and
WHEREAS , Proposition 61 was drafted using terminology
and definitions not substantiated or confirmed by California ' s
legal system; thereby creating many years of litigation in state
courts to define the measure ; and
WHEREAS , implementation of Proposition 61 on the basis
of preliminary studies is believed to cost California taxpayers in
excess of $7 billion; and
WHEREAS , Proposition 61 would impact all pay levels of
all city , county, state and public employees by setting an
arbitrary limit on compensation, which would drastically decrease
salaries and make it difficult to maintain salary levels based on
skills required and level of responsibility thoroughout public
organizations ; and
WHEREAS , Proposition 61 would impact the benefits of all
public employees by prohibiting the carryover of earned but unused
vacation time and sick leave from one year to the next ; and
WHEREAS , Propostion 61 is unworkable , unfair ,
counterproductive and would :
( 1 ) compromise the quality of individuals recruited for -
public services ;
(2) reduce the effectiveness of our court system by
forcing district attorneys and judges into the private sector ;
(3) reduce the effectiveness of our law enforcement and
public safety agencies by reducing their ability to contract with
the private sector for emergency services ;
(4) make government less efficient , more costly and less
productive by disrupting the services provided by private
contract ;
(5) have a devastating effect on medical research, care , _
teaching resources and impair recruitment and retention of medical
personnel ;
(6) take away local control over local issues ;
(7 ) impact the private sector by regulating the business
relationship between government and contracting businesses ;
NOW, THEREFORE, BE IT RESOLVED that the City Council of
the City of Dublin opposes Proposition 61 and urges the citizens
of Dublin to vote "NO" on the measure .
PASSED, APPROVED AND ADOPTED this 13th day of October ,
1986 .
AYES :
NOES :
ABSENT:
Mayor
ATTEST:
City Clerk
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CGi-Tax News 6
Gann Fair Pay Amendment, Initiative Constitutional and Statutory Amendment O
SECTION I:Sections 11550 through 11569 of the California Govern- of that jurisdiction.All other sections of the California Elec-
ment Code are hereby repealed. . tions Code or a local jurisdiction's Charter shall govern the
SECTION II:Section 26 is hereby added to Article XX of the Califor- process for such initiatives.
nia Constitution: (h) After the date this section becomes effective,the Legislature;
Section 26. Public Salary Limitations. shall enact no laws authorizing any public official covered
by this section to engage the services of private subcontrac-
(a) On the effective date of this Section, the salary of the tors wherein the contractual amount of compensation exceeds
Governor shall be set at$80,000.00 per year and the salary seventy-five dollars per hour and no contract may exceed
of all other Constitutional officers and members of the Board two years in duration,and in no event may the total compen-
of Equalization shall be set at$52,000.00 per year subject to sation for an individual exceed the amount set forth in subsec-
adjustment as set forth in subsection(c)of this Section 26. tion(b)of this Section 2VFurthermore,no state official or
agency shall employ,hire,contract with,pay or otherwise com-
b) Notwithstanding Article III,Section 4 or any other section _ _. pensate any attorney or legal firm to act on behalf of the state
ti this Constitution,but subject to subsection(g)of this Sec- or any agency thereof is a plaintiff or defendant unless staff
employee,y state,city,county,city and county or special district counsel for the agency in question and the California Attorney
employee,elected or appointed,which shall include individuals General have formally noted a conflict in representing the
working under contract,may receive compensation in excess
of eighty percent of the Governor's salary.Under special cir- agency.
cumstances the Legislature may appropriate funds for (i) If any provision of this section or the application thereof
employee services contracted for by agencies in state govern- to any person or circumstances is held invalid,such invalidity
went in excess of eighty percent of the Governor's salary if shall not affect the other provisions of this section which
the contract or contracts in question do not exceed four years can be given effect without the invalid provision or its
in length and are approved by both houses by a two-thirds application and to this end the provisions of this section are
roll call vote.Insofar as this section may conflict with a city, severable. -
county,or city and county's power to set salaries pursuant
to Article XI, Sections 3 through 5, this section shall take SECTION III.Article III,Section 4(b)of the Constitution is hereby
precedence. repealed.
(c) No increase in the salary of any constitutional officer,member SECTION IV.Article V,Section 12 of the Constitution is amended
of the Board of Equalization, member of the Legislature, to read as follows:
supreme or appellate court justice or judge of a court of record ARTICLE V, Section 12 Compensation of the Governor,
shall become operative unless such increase has been approved Lieutenant Governor,Attorney General,Controller,Secretary
by a majority of the voters of the state voting in a statewide of State,Superintendent of Public Instruction,and Treasurer C
general election. shall be prescribed by Article XX,Section 26(a)and modifced
(d) Notwithstanding any city,county,or city and county charter by the voters of the State of California pursuant to Article
adopted pursuant to Article XI,Section 3 of this Constitution, XX, Section 26(c)of this Constitution.
no increase in the salary of an elected officer of a city,county, SECTION V. Article VI, Section 5 of the Constitution is amended
city and county or special district which establishes the salary
payable to its members shall become effective unless such in- to read as follows:
crease has been approved by a majority of the voters of the ARTICLE VI,Section 5(a)Each county shall be divided into
city,county,city and county,or special district voting on the municipal court and justice court districts as provided by
question at an election. statute, but a city may not be divided into more than one
(e) On the effective date of this section,the annual salary for those district.Each municipal and justice court shall have one or
employees and officials referenced in subsections(b)and(c) more judges.
above, except the Governor, Constitutional officers and There shall be a municipal court in each district of more
members of the Board of Equalization,shall not exceed eighty than 40,000 residents and a justice court in each district of
percent of the annual salary paid to the Governor as of that than 4 residents en less. The number of residents-shall of
date.No elected or appointed official,or any employee subject ascertained as provided by statute. be
to the provisions of this section shall be permitted to ac-
cumulate sick leave or vacation time from one calendar year The Legislature shall provide for the organization and
to another. prescribed the jurisdiction of municipal and justice courts.
(f) Any public employee on the state or local level who serves It shall prescribe for each municipal court and provide for each
in more than one paid public position in this state may not justice court the number,qualifications,and compensation,
receive a total aggregate compensation, including pension subject to Article XX, Section 26(c), of judges,officers,and
payments derived in whole or in part from public funds, in employees.
excess of eighty percent of the Governor's salary. (b)Notwithstanding the provisions of subdivision(a),any city
(g) The electorate of any city,county,city and county or special in San Diego County may be divided into more than one
district may,by initiative,adjust the salary of any elected municipal court or justice court district if the Legislature
or appointed official in that jurisdiction in excess of the limita- determines that unusual geographic conditions warrant such
tion set forth in subsection(f)of this Section 26.Notwithstand- division.
ing Article II, Section 11 or Article XI, Section 3, no SECTION VI:Article VI,Section 19 of the Constitution is amended
legislative body shall enact laws which restrict the electorate's to read as follows:
right to use the initiative process to increase or decrease the
compensation or the conditions of any future accruals of ARTICLE VI, Section 19. The Legislature shall prescribe O
employee benefits of their elected or appointed officials.Any compensation for judges of courts of record,subject to Article
laws existing on the effective date of this measure which pur- XX, Section 26(c)of the Constitution. A judge of a court of
port to limit the electorate's right to do so are null and void. record may not receive the salary for the judicial office held
Notwithstanding any other provision of law,the signatures by the judge while any cause before the judge remains pending
of not less than 10 percent of the voters of any jurisdiction and undetermined for 90 days after it has been submitted for
shall qualify the initiative for the next general election ballot decision.
*SPECIAL BULLETIN #3*
August 15, 1986
PROPOSITION 61: GANN PAY LIMITATION INITIATIVE
Information Package Index
Page
Number
I. Summary of Legal Proceedings to Change Voter
Pamphlet Information . . . . . . . . . . . . . . . . . 1
II . Management Issues Paper II:
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . 3
III. Management Issues Paper III:
Impact on Collective Bargaining . . . . . . . . . . . . . . . 6
IV. Voter Registration Information . . . . . . . . . . . . . . . . 9
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®v„ League of California Cities
® 1400 K STREET • SACRAMENTO,CA 95814 • (916)444-5790
",NNW=,
California Cities
Work Together
Sacramento, CA
August 15, 1986
TO: MAYORS, CITY MANAGERS, CITY ATTORNEYS, CITY CLERKS IN NON-MANAGER
CITIES, POLICE CHIEFS, FIRE CHIEFS, DIRECTORS OF PUBLIC WORKS,
PERSONNEL DIRECTORS & DIRECTORS OF PARKS AND RECREATION
SUBJECT: SPECIAL BULLETINS: PROPOSITION 61
This is the third in a series of Special Bulletins on Proposition 61 -- the -
Gann Pay Limitation Initiative. The League is distributing these Bulletins in
an effort to inform city officials and employees of the potential impacts of
the measure and how to prepare for them.
Since this ballot measure will affect all municipal officials and employees,
there is a great deal of interest in disseminating the information to as many
of them as possible. For this reason, we would appreciate it if you would
copy and distribute these Bulletins to other city officials, department heads
and employees.
SUMMARY OF LEGAL PROCEEDINGS TO
CHANGE VOTER PAMPHLET INFORMATION
Court challenges to ballot arguments, rebuttals, analyses and summaries were
filed last week on behalf of both the opponents and proponents of Proposition
61. The challenges to the ballot and voter pamphlet information sought to
strike information which was "false and misleading" and to include additional
information to assure impartial analyses. The filings by the pro-Prop. 61
forces (Gann v. Eu) and the anti-Prop. 61 coalition (Ross v. Eu) were heard in
a consolidated case by Sacramento County Superior Court Judge John Sapunor.
His rulings are summarized below:
1. All references to pensions were-struck from ballot arguments and
rebuttals based on the understanding that this is not a pension
initiative, but a salary initiative.
2. The potential one-time $7 billion cost to state and local
governments to buy out sick leave and vacation accruals will remain
in the Legislative Analyst's impartial analysis and will be
inserted in the ballot summary and label . If not included, the
voters would have had only information regarding the reduction in
costs due to salary cuts of approximately $250 million, without
information on the possible offsetting costs involved.
3. The assertion by Paul Gann in his rebuttal argument that civil
service employees would be exempt from the initiative was struck by
the court as false and misleading.
4. Phrasing of ballot arguments and rebuttals stating the initiative
"would" result in a $7 billion cost to taxpayers were changed to
"could" result in a $7 billion cost, reflecting the uncertainty of
the interpretation of the initiative.
Based on these rulings, which the Secretary of State has now incorporated the
changes in the appropriate documents and they have been sent to the State
Office of Printing.
In a subsequent letter to the Court, Paul Gann requested his name be withdrawn_
from his ballot arguments and rebuttals because of the extent of the changes.
However, no legal challenge was brought in this regard and his name will
remain as the sole signature on the argument in favor of Proposition 61. He
has stated that he will continue to campaign vigorously on behalf of the
Proposition.
An appeal from Judge Sapunor's rulings has been filed by attorneys for Paul
Gann. However, no court dates have been set yet and there is considerable
question as to any reversal of the rulings at this late date in the election
materials printing process.
—1—
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MANAGEMENT ISSUES PAPERS
These are the second and third in a series of management issues papers
addressing the immediate impact, whether approved or not, of Gann's Public
Salary Limitation Initiative (Proposition 61) on the November ballot. The
first management issues paper addressed the sick leave and vacation provisions
of the initiative and was included in the League Special Bulletin dated August
1, 1986.
Unfortunately, the drafting of the initiative does not permit clean and
concise answers to many of the questions raised. The issue papers attempt to
provide a literal interpretation--a restatement of what the initiative says
and a reasonable interpretation based upon what the courts may determine to be
constitutional in carrying out the intent of the initiative should Proposition
61 be approved.
Future issue papers will deal with salary and compensation, contracting and
consultants, retirement, inflation/compaction, , and turnover and recruitment.
PROPOSITION 61 - GANN INITIATIVE
MANAGEMENT ISSUES PAPER II
EFFECTIVE DATE
While the effective date of Proposition 61 is the day following the
election--November 5, 1986 (Article XVIII, Section 4) , there are two time
frames to keep in mind: the period for calculating vacation and sick leave
accrual and the period for determining the annual salary limit.
Salary _ ..
Sec. 26(e) states:
"On the effective date of this section, the annual salary for those
employees and officials referred in subsections (b) and (c) above, except
the Governor, Constitutional Officers and members of the Board of
Equalization, shall not exceed 80% of the annual salary paid to the
Governor as of that date." (80% of $80,000 = $64,000)
Subsection (b) includes state, city, county, and special district employees, >
elected or appointed including individuals working under contract.
Subsection (c) applies to state constitutional officers, judges and members of
the Board of Equalization.
A literal interpretation would suggest that the $64,000 annual salary limit
would become effective November 5, 1986 and that an employee's annual salary
would be limited to that cap on November 5 regardless of what the pay cycle
may be. This literal interpretation would require an immediate roll -back in
any salary over $64,000. We believe the courts would approve a more
reasonable interpretation of the effective date for determining "annual
salary."
The issue presents several alternatives. One is the anniversary date of
employment. Another is the calendar year, January 1 to December 31. Still _
another is the fiscal year, July 1 to June 30. A charter, ordinance or
resolution may determine the date on which the governing body fixes salaries
and, in the absence of Prop. 61, any one of these dates may be determined by a
court to be the effective starting date for the annual salary which cannot
exceed $64,000. If there is a set annual commencement date for salary
determination, then the governing body or other salary fixing authority may
reasonably determine that Prop. 61 applies as of that date and for the
following 12 months, the annual salary cap would be $64,000.
We assume the annual salary cap of $64,000 applies as soon after Nov. 5 as the
salary fixing authority could act in the absence of Prop. 61. It is also
reasonable to conclude that if a roll -back is required as of that same date
that the council or board may also establish a new anniversary date for the
annual salary to commence.
—3— - -
Another possible interpretation is that the effective date of Prop. 61 for
annual salary purposes is the first day following the end of the monthly pay
period that the governing body could effectively change the salary in the
absence of Prop. 61 after November 5 (December 1, 1986) . If there are any
contractual salary obligations on the part of the public agency with respect
to salary,the effective date of Prop. 61 will be on termination of valid
contractual obligations.
Remembering that vested contract rights cannot be impaired even by a state
constitutional amendment, each agency will have to examine its local laws,
written policies, MOUs and other employment arrangements to determine where
salaries in excess of $64,000 are protected from Proposition 61 and for how
long they are protected. When they are no longer protected by the Federal
Constitution against impairment, denial of due process or equal protection,
Proposition 61 will be operative and from that date the "annual " compensation
limit will commence. In other words, the—annual salary or annual rate of pay
limit is $64,000 a year, broken into pay periods the total of which on an
annual basis will not exceed $64,000. For example:
-- A city manager is appointed to a position that pays an annual salary of
$96,000. He has worked from January 1, 1986, until November 5, 1986 and
will have been paid $80,000 by November 5. Obviously he will keep the
$80,000. He also will have earned four days pay at the rate of $8,000 per
month. by November 5. This, too, is not subject to impairment. If the
manager could be fired by the governing body on November 5, whatever the
city would be required to pay for immediate termination is also earned and
a part of the employment agreement or implied contractual obligation. If
the manager is not terminated but continues to be employed, then in the
absence of a contract for a specified term that .extends beyond November 5
the governing body will have to roll -back the pay on the first day it
would have adjusted annual salaries in the absence of Proposition 61.
-- An employee whose annual salary adjustment date is July 1 and whose annual
salary is $75,000 (and has received $25,000 through October 31) would have
the annual salary adjusted to $64,000 on the first pay adjustment period
following Nov. 5 in the absence of any employer contractual obligation.
-- An employee's anniversary date is December 1 and is currently receiving
$60,000. A 10% increase effective December 1, 1986 would be reduced by
$2,000 to maintain the $64,000 cap.
-- A MOU provides, among other things, that the annual salary commencing July
1 , 1986 for a specified class of employees be $60,000 with a 10% increase
each year for the term of the two-year agreement. On July 1, 1988 the
salary for the employees under the agreement would be reduced to the
$64,000 limit.
Prop. 61 limits "annual salary" initially to $64,000. It is reasonable to
assume that salary will continue to be paid for pay periods in the future
(after Nov. 5) as paid in the past, e.g. , monthly, bi-monthly or weekly. We
recognize there is a loophole that fixes no floor as to hours or time required
to earn annual salary. A reasonable assumption and interpretation is that the
time worked for annual salary prior to Nov. 5 will be the same as time worked
following Nov. 5 but we have no assurance that a court will so hold. We
recognize that a wide variety of arrangements may be made between public
employers and employees limiting the annual salary to $64,000 for 2 days a
week or 4 days a month, etc. The possibilities are endless, speculative and
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present major policy, administrative and legal decisions that should be
weighed very carefully.
Sick Leave And Vacation
(See Special Bulletin dated August 1, 1986 for a more detailed discussion of
the effective date for sick leave and vacation) .
Section 26(e) states in part:
"----no elected or appointed official ,. or any employee subject to the
provisions of this section shall be permitted to accumulate sick leave or
vacation time from one calendar year to another."
A literal interpretation of the prohibition against carrying existing
accumulated vacation and sick leave from -one calendar year to another would
lead to both financial and administrative chaos.
Because Proposition 61 cannot impair contractual obligations of any public
agency, all earned but unused vacation is a contractual obligation and can be
carried over and used or paid for as provided by written policies or
agreements. The same may be true of earned sick leave depending on the
language authorizing sick leave and its accumulation. Furthermore, any
continuing obligation to permit earning vacation or sick leave may not be
impaired by the Initiative. An agreement (MOU) that expires in 1987 or 1988
and permits both vacation and sick leave to be earned and accumulated will not
be affected by the Initiative until the agreement is terminated. In short,_
the Initiative will first apply on that date when a public agency may lawfully
change current written policies and/or agreements with respect to either
vacation or sick leave, but could not "take away" benefits earned/accrued
before November 5, 1986.
gann3.pub
—5— -
The MOU, like any other contract, includes the matters upon which the parties
to the contract have agreed and courts will look first to the language of the
contract to determine the intent of the parties. While existing valid
contracts will not be impaired by approval of Prop. 61 there will be pressure
to change existing agreements in order to avoid the impact of Prop. 61 if it
is approved.
Represented Groups
For those cities with one-year Memoranda of Understanding with employee
groups, it is reasonable to assume that the conditions of the contract in
effect on November 5, 1986 (effective date of Prop. 61) will stand until
termination of the MOU. For those with multi-year agreements, the issue
becomes even less certain. If there are no openers (clauses in the agreement
which could be re-negotiated under . certain conditions prior to its
termination) on wages, vacation or sick leave, Prop. 61 would not become
operative until termination of the agreement. If there are openers on wages,
vacation or sick leave, the answer is not clear and the issue probably would
be determined by a court. Each contract represents a different factual
situation and the contract, conduct of the parties and other factors will
determine impact and operative date of Prop. 61.
Some employee groups have already approached management asking for an
extension of their MOUs. This must be weighed carefully, recognizing the
advantages and disadvantages of long term agreements to both labor and
management, and recognizing that those contracts entered after the initiative —
qualified for the ballot may very well be declared invalid because the parties—
entering into the contract were aware that Prop. 61 would limit the power of
local agencies to make such contracts. We cannot say with certainty that such
contracts will be invalid but we believe they may be and that courts will
"lean over backwards" to carry out the will of the voters.
Unrepresented Persons and Groups
There is danger also that one-on-one agreements now being negotiated with
unrepresented persons or groups, in an effort to avoid the intent of the
initiative, will be declared void. The courts will undoubtedly address the
validity of such contracts if Prop. 61 passes because such contracts are being
made with the understanding that no public funds will be paid until a test
case determines the validity of pre-election contracts entered into after the
initiative qualified. -
In some cities, traditionally unrepresented groups have already filed to
establish bargaining units. This will represent a major change in bargaining
for most cities. Other cities are entering into individual
contracts/memoranda of understanding with unrepresented employees pursuant to
the MMBA. Still other cities are choosing not to enter into contracts in
response to Proposition 61 because of both policy and legal uncertainties.
Cities should resist making a policy decision now that would not be considered
sound public policy in the absence of Prop. 61 . These issues must be
carefully weighed in light of the long term employer-employee relationship.
Obviously it is easier to modify or undo an individual contract than an MOU
with a new bargaining unit. New contracts should be based upon a "valid
business reason" without reference to Prop. 61 .
-7-
VOTER REGISTRATION
One of the most important aspects to participatory government is the
opportunity to vote for candidates for public office and on issues of
statewide importance, such as Proposition 61 on the November ballot. The
League of California Cities would like to insure that all city employees are
registered. Please circulate the following information among your employees,
encourage them to become informed about all candidates and ballot issues and
to vote on November 4th:
DEADLINE TO REGISTER TO VOTE IN THE NOVEMBER ELECTIONS: OCTOBER 6
WHERE TO OBTAIN REGISTRATION FORMS: CITY CLERK'S OFFICES
COUNTY REGISTRARS OF VOTERS
U.S. POST OFFICES
OR
CALL: 1-800-345-VOTE*
*Secretary of State's toll free number to obtain a voter registration form.
—9—
Proposition 61 Date: July 22, 1986
Initiative Constitutional Amendment:
and Statute
proponent:. Paul Gann
S K41em dezI ffl2186
lIALLOT TITLE AND 80MMAR? s Q
by }Po SS ✓�w
COMPENSATION OF PUBLIC. OFFICIALS, EMPLOYEES, INDIVIDUAL PUBLIC
CONTRACTORS. INITIATIVE CONSTITUTIONAL AMENDMENT AND STATUTE.
Sets Governor's annual salary at $86,109; other gConstitutionale
officers at 852,550. Limits taximum compensation of elected or
appointed state and local government employees, and individual
public contractors to SBt of Governor's salary. Requires
people's vote to increase salaries of constitutional officers,
members of Board of Equalization, legislators, judiciary, and
specified local elected officers. Prohibits public officials
and employees from accruing -sick 'heave or vacation from one
calendar year to another. Summary of Ijgislative Analyst's
estimate of net state' and local government fiscal impact:
Public official and employee salary and benefit-related
reductions would amount to $125 million in the first year at the
state level and roughly tha' aame amount at the local level.
These reductio s ould not necessarily result in comparable
�---�
savings.. would be 'offset to some extent or could be
Th' �necd outs g e varie�us costs de endin on unknown factors
P° ;r2 tin to ow a measure pre e , ow would
mp emented; 3 �,on overnmental efficiency
resulting frog, m y for officers, employees and Contra Net fiscnknown_
(1) how the measure is :interpreted, _
( w� (2) possible payment of vested sick and vacation
leave at a n cost of about $7 billion,
(3) how implemented, (4) its effect
on governmental efficiency resulting from its
limitation on pay for officers, employees and
contractors. Net fiscal impact is unknown.
BALLOT LABEL
PUBLIC O?FIC1ALr EMPLOYEE CONTRACTOR COMPENSATION. Limits
compensat n of state &nd local pubjjE'off icialFt employees and
individual contractors. Fiscal Impact: Public compensation
reductions would be about $125 million In the first ear at
state level &nd rou hl the same at local level ut resu t ng
mou e o see o sme ez a ou be outweighed
depending on reted and implemented and its
effect on ental effic iency. e s
un
These
savings , however, could be offset and could even be
(tiew) outweighed by the need to pay vested sick and vaca-
tion leave at a one-time cost of about $7 . billion.
h7 oss v Eu 1//Z/
ARGUMENT FOR PROPOSITION 61
W,y are you paying one of your former employees a Even more Calling', the politicians are trying to scare
pension of 3187,830.00 a year? *you with dire predictions about losing qualified teacher@.
But what they fail to tell you is that the salary limit for
That's right. I said YOU. classroom teac eere is $64,000 a yearl
That's how such you're going to be doln ou o just Teachers don't make that kind of money, only the
one of our "retired" California politioiana, s or ng in bureauor■ a o.
T-9'97. Can salaries ever be raised above these limits? Surel
Waitl There's morel
It just requires a two-thirds it-eall vote of the
You're going to be paying former Go rnor Pat Brown Legislature. And elected officials will a mpr Fave to get
$157,693.00 a year, with former Centro or Thomas Euohel voter approval when EFey voto themselves a raise.
drawing $92,136.001
Is that so Dad?
Supreme Court Justice Stacl Hook will be drawing $101,
723.00 a year, (on t� of hie 6 .00 salary). It is clear that what the bureaucrats and politioiana
:r:,really mad about is that; from now on, salaries must be
And former Controller n Cranston (who never made more discuses and voted.upon in the clear light of day.
than $22,050 a year as Co o�lor) will get a yearly state ,
pension of $134,502.00 t add to his Senator's salary of And one thing I've learned, bureaucrats don't like the
375,100.001 light.
AND THE ONLY YOU CAN STOP IT, IS TO VOTE FOR The bureaucrats and politicians have a sweet little deal
PROPOSITION 61, CH REGULATES EXCESSIVE GOVERNMENT going and they don't wand you, or anybody else,_ •rocking the
SALARIES. boat."
How do it work? The courts have ruled that every time Well, I may "rook it" or *dock it•. We're throuffh
the ea1ary of a current state official goes !a, state paying the bills. Vote YES on Proposition 61.
ens ions o up. )
Cs�
at sounds fair enough, except that our legislators I Paul Gann
hav built in excalator olauses that raise the pensions by
m e than the aa�e3l
The only way to stop the from skyrocketing, is
to limit the salaries, which PROPOSITION 61 does.
Your elected officials don't like that and neither do
the public employee union bosses. They want no llaits. They
believe they have a _right to whatever pay raises they wish to
vote themselves. And—you, the taxpayer, should have nothing
to say about itl
overnor Pat Brown actually complained that a
penust" $60,000 a year would force form iZ is
limove to the slums".
brings tears r eyes, doesn't it?
dust have to move. in with his son Jerry,
w ng to some estimates, could draw a pension as i ,000.00 a yearl _
(�4Hp1 v
ARGUMENT AGAINST PROPOSITION 61
DON'T BE MISLEDI
Proposition 61 is NOT ABOUT PENSION REFORM and IT WOULD Under Proposition 61 workers would be mandated to use
NOT SAVE TAXPAYERS DOLL�1[$I their earned siok leave and vacation time each year or lose
It forever. ABSENTEEISM MOULD FLOURISH. Flexibility in
It doesn't contain one word about lowering the times of emergency wou b come mpoaa ble. California
outrageous pensions of former *looted offioialel 'doesn't need more regulations which are harmful to both
management and employees.
In fact, Proposition 61 would DRASTICALLY REDUCE the
QUALITY OF GOVERNMENT SERVICES in California and would-COST / Furthermore, the contradictory and confusing language
TAXPAYERS BILLIONSI Cold ` used throughout Proposition 61 would leave interpretation and
'a control in the hands of the courts, or worse, to the
Proposition 61 IS unfair, arbitrary and unworkable. politicians in Saoramentol
It puts a straightjacket on California's economic Proposition 61 puts unworkable limits on government's
future. ability to contract with the private sector for important
services, like highway construction, emergency services and'""
We no longer would be able to hire and retain the best toxic cleanup.. These services-cost aillions of dollars, '*et
police chiefs, prosecutors, University presidents, Proposition 61 prohibits contracts exceeding $64,000 annually
scientists, toxic experts, .sehool officials and medical without a vote of the Legislature. '
personnel.
As a result, such services would have to be performed
And our state and local governments would find it either by full-time civil service bureaucrats -- at great
difficult, if not impossible, to contract with private coat to the state -- or, orse yet, the Legislature will
,j business, even for such vital functions as highway meddle in every large contract. THESE DECISIONS SHOULD NOT
• construction, flood and fire control and toxic olean-up. BE MADE IN THE BACK ROOMS'OF SACRINEWOT--
-� An exaggeration? NOt Take • look. Mould this initiative save taxpayers money? Not ■
I chancel Government would be far loss efficient ane-•
The mandatory pay limit in Proposition 61 will REDUCE effective, public management mediocre and waste would
I PAYCHECKS of thousands of our best and brightest pubrr increase. AND THE IMMEDIATE COST TO TAXPAYERS COULD BE ..
employees, including: BILLIONS OF�6LMs eon cause aV� oof era wou dneTrUned to
•
Top LAW ENFORCEMENT experts, the very people we compensate em-T yees for leave time they have already earned.
_
depend on toep us�ea re. Herdworkln
g 'and talented people have made California
great; but Proposition 61 restricts our ability to compete
• Top EDUCATORS, including the University of California for and keep the best and the brightest.
president, Nobel aureate professors, and superintendents of
our largest school districts. For the sake of our future, VOTE NO ON PROPOSITION 611
• Renowned DOCTORS AND RESEARCHERS who provide
Californians with-EEe**seen moo s vanced medical care. (Si' Richard P. Simpson
CALIFORNIA MOULD LOSE Its best public California Taxpayers Association
servants to better
paying fobs n 03`NE -STiW"S and private business. We'd be Linda Broder
stuck with mediocre management. President, League of Women Voters of CA
The UNFAIR SALARY LIMIT violates basic principles of our -Bill Honig
American system:__T6aT 's=ed and talented people can earn State Superintendent of Public Instruction
their way up, and that competition determines salaries,nos
senseless regulation.
!/ REBUTTAL TO ARGUMENT DI PROPOSITION 61
CJk�H ✓ c�u �/�z/8�
Paul Gann's argument for Proposition 61, is MISLEA N
and FACTUALLY INCORRECT.
He claims Proposition 61 would reduce rageous
pensions currently received by sixteen ired California
REBUTTAL TO ARGUMENT AGAINST PROPOSITION 61 politicians.
Did they dust say that Paul Cann is going to raise the
That is SIMPLY NOT
coat of government? Propositio would actually increase these pensions
beyond thei rrent levels. In face,anot her measure (Prop.
If you believe that, I've got a little swamp land in 57) wo correct these pension abuses -- but Gann opposes
Florida you might be interested int h ropositionl
For years, I've been sponsoring initiatives to cut Gann claims the pay limitations of Prop. 61 would
wasteful government spending, and I'm not about to sVNch save taxpa dollars.
now.
}hat's NOT TRUEI Actually it would COST
My initiatives have saved California 'taxpayers literally Vat's
BILLIONS.—
tens of billions of dollars, without cutting vital services.
And they've all passed by huge msrgrns for two reasons: Proposition 61's COST TO STATE AND LOCAL TAXPAYERS COULD
1) Each solved a BE ABOUT 7 BILLION DOLLARS, according to the official impact
problem the Legislature refused to
correct. report by Legislative Analyst John L. Vickerman. Staggering
tax increases and municipal bankruptcies could result.
2) Each did it fa- irly, treating both workers and Proposition 61 prohibits public employees from
taxpayers with respect. accumulating earned sick leave and vacation.time. This would
That's what PROPOSITION 61 does. encourage absenteeism. Accumulation of this time 1s good
scab use amploys es could use it in the event of serious
It a roxi or so of the State's
illnesses.
highest em Ling civil service In addition: '
e es.
IL sim 1 ute n reeaonable limit on o rnment eelnries o According to California's chief legal counsel,
men s Prop. 61 is so poorly and ambiguously written it would cause
Zi ars of litigation in the state eourta Just to fi ure out
All PROPOSITION 61 says is the what i�mean.,
y people have the right to
set maximum salary limits for their elected and appointed Honig o State School Superintendent Bill
officials --- that limit is 664,000. p g as s
unreasonable y
Pay limitations would DEVASTATE OUR PROGRESS
That's right, I said $66400000 a year. Does that sound TOWARD EXCELLENCE IN EDUCATION.
like we're turning these public officials out into the
streets? o It would cause s loss of high-tech
jobs In
California as highly qualified and experienced University
I think not. researchers in medicine, agriculture, and computers leave the
state.
Then, why are elected politicians so upset? DON'T BE FOOLEDI
Because if PROPOSITION 61 passes and they went a salary PROPOSITION 61 WON'T CORRECT PENSION ABUSES
Increase, it must be approved by the voters.
And it gives the WON'T SAVE YOU ONE CENT
g people the right, by initiative, to
change a� of these public official's salary, up or down. BUT t(OULD COST YOU A BUNDLEI
Now you can see what all the fuss is really about. VOTE NO ON PROP. 611
l This is why 1 urge you to vote "YES" ON PROPOSITION 611 py��Richard P. Simpson
� 1 California Taxpayers Association
Paul Cann
Joe A. Duardo
President, California School Boards Ac;ioclation
Jack Boling
President, California. Aszoolfition of Niahwav Patrn1man (CRPI
;;m; League of California Cities
■■■W
Calitomia Cities
Work Together
*SPECIAL BULLETIN #4*
September 1, 1986
PROPOSITION 61: GANN PAY LIMITATION INITIATIVE
Information P4cRage Index
Page
Number
I. Impact on Municipal Government
Proposition 61 Survey Results . . . . . . . . . . . . . . . 1
II. Management Issues Paper IV:
Salary and Compensation . . . . . . . . 6
III. Management Issues .Paper V:
Contracting for Services . . . . . . . . . . . . . . . . . . 10
IV. Voter Registration Information . . . . . . . . . . . . . . 12
V. Copy of Letter to all State Employees . . . . . . . . . . . 13
CONFERENCE REGISTRATION OFFICE HEADQUARTERS SOUTHERN CALIFORNIA OFFICE
BOX 7005,LAFAYETTE,CA 94549 1400 K STREET, SACRAMENTO, CA 95814 1052 WEST 6TH STREET,SUITE 410 =
(415)283.2113 LOS ANGELES,CA 90017
(916) 444 5790., (213)482.0828
4
r
AMME
1;o; League of California Cities
®M M- 1400 K STREET • SACRAMENTO,CA 95814 • (916)444-5790
California Cities
Work Together
Sacramento, CA
September 1 , 1986
TO: MAYORS, CITY MANAGERS, CITY ATTORNEYS, CITY CLERKS IN NON-MANAGER
CITIES, POLICE CHIEFS, FIRE CHIEFS, DIRECTORS OF PUBLIC WORKS,
PERSONNEL DIRECTORS & DIRECTORS OF PARKS AND RECREATION
SUBJECT: SPECIAL BULLETINS: PROPOSITION 61
This is the fourth in a series of Special Bulletins on Proposition 61 -- the
Gann Pay Limitation Initiative. The League is distributing these Bulletins in
an effort to inform city officials and employees of the potential impacts of
the measure and how to prepare for them.
Since this ballot measure will affect all municipal officials and employees,
there is a great deal of interest in disseminating the information to as many
of them as possible. For this reason, we would appreciate it if you would
copy and distribute these Bulletins to other city officials, department heads
and employees.
PROPOSITION 61
IMPACT.ON MUNICIPAL GOVERNMENT
Every employee in California's 444 cities will be affected by Proposition 61
-- the Gann Pay Limitation Initiative -- slated for the November 1986 ballot.
City services will also suffer in a myriad of direct and indirect ways.
Municipal government costs will. increase. Our high level of management will
slide. Infrastructure construction and maintenance will suffer. Services
will suffer cutbacks or.'elimination. These are just some of the results
predicted based on the responses to a recent League of California Cities
survey (copy attached).
Survey Results
Number of Cities Reporting to date: 303
Number of Affected Employees: 175,355
Employees with Salaries over $64,000: 2100
Employees with Salaries over $49,000: 7609
Safety Employees with Salaries over $46,500: 3029
Value of Accrued Vacation Time: . $341,038,210
Value of Accrued Sick Leave: $867,308,196
Management
There will undoubtedly be a "flight" of the best minds in city government when
salaries are no longer competitive with those in other states or in private'
industry. Although there have been no formal surveys to determine the extent
this would reach, numerous management employees have expressed their
intentions to either retire or look outside public service employment.
A second and equally important impact will be how to recruit top talent to
fill these positions? The City of Rocklin reported a recruiting effort for an
engineer which "failed to produce one single qualified applicant." The impact
is already being felt. Other implications are suggested. Will we end up as a
training ground for less qualified professionals who will gain experience
managing local government, then leave for higher paying positions in private
industry? Will we have to "divvy up" job responsibilities and hire
additional employees to work for salaries within the limitations?
Keep in mind, the above impacts are based on present salaries only. When
inflation is taken into account, the problems compound as the years pass and
more and more individuals reach the limits. In the City of San Anselmo, for
example, it is projected that all key management people will be at or over the
$49,000 limit within four years. And Sunnyvale reports: At $64,000, the
first two .levels [of publ.ic .safety employees] would be paid the same; at
$49,000, 4 out of 5 levels would be at the same level .
-1-
Rank and File
One of the most obvious effects of the Gann "cloud" is in the area of morale.
The inherent confusion over how Proposition 61 will affect employees and who
it will effect, is already being felt throughout the public sector. Potential
abrogation of sick-leave and vacation benefits may be viewed as a chipping
away of these benefits these employees have come to expect.
The inability to accumulate sick leave and vacation time has obvious negative
ramifications when employees are faced with long-term illness or surgery. The
additional financial cost of loss of wages to employees could be devastating.
A side-effect of this will probably pressure by employee groups for disability
benefits which will make up the difference, at an increased cost to
government.
Another very real impact will be the eventual salary compaction or freezing of
lower level salaries to keep an adequate spread of salary levels. Further,
there will be a diminishing of incentive to work toward raises or promotions,
with the artificial cap imposed by Proposition 61.
The initiative's passage may also lead to abuse of sick leave based upon the
supposition by employees that sick leave is a right to additional time off,
rather than an insurance to be used only if necessary.
The first year of enforcement will undoubtedly raise special problems as those.. _
with accumulated leave benefits scramble to take their time before the year
end, potentially bring some local government agencies to a screeching halt due
to massive absenteeism. Even after the first year, there will be some
problems with year-end attendance due to vacations which had to be postponed,
elective surgeries which had to wait until maximum sick-leave could accumulate
from the beginning of the year, and use of sick-days not previously taken,
rather than facing losing them.
Law Enforcement and Fire Protection
One of the key questions to answer before determining the extent of
Proposition 61's impact on safety employees is the determination of whether
the $64,000 limit reflects salary or compensation. Because of the package of
fringe benefits safety employees enjoy, salary may make up only 50% of their
total compensation. Therefore, using compensation as. a threshold, virtually:_
all safety employees are affected.
As with management, the threat of decreased retirement benefits may lead to
early retirements to insure the highest benefits. One of the most extreme
examples of this exists in the City of Los Angeles, where over between 400 and
500 safety employees may likely retire before the November election because
their benefits are based on their salary on the day they file for retirement.
Fiscal Impacts
One of the most frightening potential fiscal impacts is the possibility of
having to pay off accumulated sick leave and vacation benefits, if the
initiative is interpreted literally and if these benefits are viewed as vested
rights (and there is legal precedent for this) . City projections for pay-outs
range from $1,400 (for Point Arena) to $75 million (Los Angeles) in sick leave
-2-
benefits predicted as of November 1, 1986 and $2,284 (Rolling Hills Estates)
to $400 million (Los Angeles) in vacation time accrued. In most cases; funds
of these magnitudes are not readily available and could, in the most extreme
scenario, bankrupt many of the cities in California.
A second, but equally alarming, impact is the potential rise in costs due to
the constraints placed on contracting out. Examples of services commonly
contracted by local governments are: civil engineering, accounting, auditing
and data processing functions, legal defense, bond counsel , financial
underwriting, insurance adjusters, planning, doctors for psychiatric testing
for police officers, and bus service. The savings can be significant. For
example the City of Duarte (population 19,749) estimates the contract for law
enforcement services saves the City $1 million annually and their landscaping
contract save another $100,000.
Other fiscal impacts include the cost of litigating suits by contractors and
employees if Gann passes and the additional costs for more frequent local
elections necessary to authorize salary increases.
Contracted Services
Outside contractors often provide essential municipal services in cases where
city personnel is not sufficient to perform the services or when it is more
cost effective to contract out. Although Proposition 61 is extremely
ambiguous in this wording (for example, the use of the term "subcontractor"
may or may not apply to those who contract with government) and in its
application to local government. However, if court rulings apply the
liminations to outside contracts at the local level , the impacts would be
devsatating in a number of areas.
Examples of impacts on contracted services:
* The Martinez Police Dept. reports the hourly rate for the cleanup
cost associated with hazardous materials spills or for disposal of
chemicals used in the illegal manufacturing of drugs is vastly in
excss of the $75/hr. limit which would be placed on individuals
providing this service.
* Among the programs in Los Angeles which would be affected are those
for minority youth & adult classes and on the job training, homeless
and displaced worker training, senior citizen health care, battered .:=
women's shelters, and nutrition and social services for older
citizens.
* The City of Montebello would have to break up its trash franchise
contract because the current contract is for $700,000. This would
probably have to be broken up into 12 franchises and would probably
be less efficient.
* If the contract for computer services in Palm Springs is eliminated
due to contract limitation, the city will have to hire four new
employees.
-3-
MANAGEMENT. ISSUES PAPERS
These are the fourth and fifth in a series of management issues papers
addressing the immediate impact, whether approved or not, of Gann's Public
Salary Limitation Initiative (Proposition 61) on the November ballot. The
first management issues paper addressed the sick leave and vacation provisions
of the initiative and was included in the League Special Bulletin dated August
1, 1986. "Effective Date" and "Impact on Collective Bargaining" can be found
in Special Bulletin #3, dated August 15th. (Back issues can be obtained by
contacting the League's Sacramento office.)
Unfortunately, the drafting of the initiative does not permit clean and
concise answers to many of the questions raised. The issue papers attempt to
provide a literal interpretation--a restatement of what the initiative says_
and a reasonable interpretation based upon what the courts may determine to be -
constitutional in carrying out the intent of the initiative should Proposition`
61 be approved.
Future issue papers will deal with retirement, inflation/compaction, and
turnover and recruitment.
-s-
benefits predicted as of November 1, 1986 and $2,284 (Rolling Hills Estates)
to $400 million (Los Angeles) in vacation time accrued. In most cases, funds
of these magnitudes are not readily available and could, in the most extreme
scenario, bankrupt many of the cities in California.
A second, but equally alarming, impact is the potential rise in costs :due to
the constraints placed on contracting out. Examples of services commonly
contracted by local governments are: civil engineering, accounting, auditing
and data processing functions, legal defense, bond counsel , financial
underwriting, insurance adjusters, planning, doctors for psychiatric testing
for police officers, and bus service. The savings can be significant. For
example the City of Duarte (population 19,749) estimates the contract for law
enforcement services saves the City $1 million .annually and their landscaping
contract save another $100,000.
Other fiscal impacts include the cost of litigating suits by contractors and
employees if Gann passes and the additional costs for more frequent local
elections necessary to authorize salary increases.
Contracted Services
Outside contractors often provide essential municipal services in cases where
city personnel is not sufficient to perform the services or when it is more
cost effective to contract out. Although Proposition 61 is extremely
ambiguous in this wording (for example, the use of the term "subcontractor"
may or may not apply to those who contract with government) and in its
application to local government. However, if court rulings apply the
liminations to outside contracts at the local level , the impacts would be
devsatating in a number of areas.
Examples of impacts on contracted services:
* The Martinez Police Dept. reports the hourly rate for the cleanup
cost associated with hazardous materials spills or for disposal of
chemicals used in the illegal manufacturing of drugs is vastly in
excss of the $75/hr. limit which would be placed on individuals
providing this service.
* Among the programs in Los Angeles which would be affected are those
for minority youth & adult classes and on the job training, homeless
and displaced worker training, senior citizen health care, battered = -
women's shelters, and nutrition and social services for older
citizens.
* The City of Montebello would have to break up its trash franchise
contract because the current contract is for $700,000. This would
probably have to be broken up into 12 franchises and would probably
be less efficient.
* If the contract for computer services in Palm Springs is eliminated
due to contract limitation, the city will have to hire four new
employees.
—3—
City:
Survey Completed By:
Name:
Dept: Phone:
1. Estimated total number of city employees, (budgeted positions) , including
all temporary, part-time, etc:
2. Total number of employees with annual salaries in excess of
$64,000: and $49,000:
A. Safety Member Employees
Please attach a list of all safety class titles (classes that
receive safety member retirement benefits) and their respective
number of positions for which annual salaries will exceed $46,500
on January 1, 1987.
B. Miscellaneous Employees
Please attach a list of all class titles (except safety classes)
and number of budgeted positions for which annual salaries will
exceed $49,000 on January 1,1987.
3. What would it cost to provide a cash payment to all employees entitled to
vacation accruals approximated to exist on November 1, 1986?
4. What would it cost to provide cash payments to all employees for sick
leave accruals approximated to exist on November 1, 1986? $
5. Please attach a list describing the following:
A. Individuals Working Under Contract
Please list the titles and number of individuals working under
contract whose annual fees currently exceed $64,000, or whose pay
rate exceeds $75.00 per hour. Also include those individuals that
you have informal contracts or claim service arrangements with,
such as specialized attorneys, architects, or medical experts.
B. Firms Working Under Contract
Please provide a list and all contracts with firms that exceed
$64,000.
-4-
MANAGEMENT ISSUES PAPERS
These are the fourth and fifth in a series of management issues papers
addressing the immediate . impact, whether'. a-p-proved or not, of Gann's Public
Salary Limitation Initiative (Proposition 61) on the November ballot. The
first management issues paper addressed the sick leave and vacation provisions
of the initiative and was included in the League Special Bulletin dated August
1, 1986. "Effective Date" and "Impact on Collective Bargaining" can be found
in Special Bulletin #3, dated August 15th. (Back issues can be obtained by
contacting the League's Sacramento office.)
Unfortunately, the drafting of the initiative does not permit clean and
concise answers to many of the questions raised. The issue papers attempt to
provide a literal interpretation--a restatement of what the initiative says ,
and a reasonable interpretation based upon what the courts may determine.-to be '
constitutional in carrying out the intent of the initiative should Proposition
61 be approved.
Future issue papers will deal with retirement, inflation/compaction, and
turnover and recruitment.
-5-
PROPOSITION 61 - GANN INITIATIVE
MANAGEMENT ISSUES PAPER IV
SALARY AND COMPENSATION
The primary intent of Proposition 61 is to rollback or cap salaries of
employees and officers to $64,000 or 80% of the Governor's salary. One of the
ambiguities in the measure is the use of the terms "salary" and
"compensation." In labor negotiating/personnel management parlance, "salary"
means wages received and "compensation" means salary plus benefits. Although
the Legislature has defined "salary" in the statutes to include only wages and
salaries, there are court interpretations that these terms are
interchangeable. However, the court will —Took first to the language of the
Proposition and to the intent of the proponents.
A literal interpretation suggests comparing the Governor's "salary" and city
employees' "compensation". Assuming for the moment a literal interpretation,
one can argue that the $64,000 cap applies to total compensation including all
supplemental benefits and thus "salary" cap will be significantly lower, and
impact many more public employees who otherwise would only have been affected
by the vacation/sick leave accrual provision and compaction problem of the
measure.
However, given Gann's response to the Supreme Court litigation to remove the
measure from the November ballot (Block v. Eu) and an analysis of how and
where the terms compensation and salary are used in the text, a less literal
interpretation suggests that "compensation" means "salary" or "wage" in its
usual sense. While the courts will ultimately have to resolve the issue,
should Proposition 61 be approved by the voters, Gann in his Answer to the
petition in Block v. Eu indicates:
a) The title of Sec. 26 which would be added to Art. XX is "Public Salary
Limitations. "
b) Sec. 26(a) uses only the term "salary" and does so twice in reference
to salary of the Governor, other constitutional officers and members of
the,State Board of Equalization.
c) Sec. 26(b) , while using "compensation", does so because it also refers
to "individuals working under contract" as well as independent
contractors where there is no employer-employee relationship. The last
sentence of Sec. 26(b) preempts local control of "salaries" otherwise
subject to the control of local governing bodies (counties and cities
under Art. XI, Secs. 3-5) .
d) "Salary" is the term used in Sec. 26(c) to require a statewide vote to
approve an increase in salary for state elected officers and judges.
e) "Salary" is used twice in Sec. 26(d) freezing salaries of local elected
officers until an increase is approved by local majority vote.
-6-
f) "Salary" is used twice in Sec. 26(e), a key subsection, that on the
effective date of Proposition 61, November 5, 1986, provides that the
annual "salary" of employees and officials referred to in (c) and (d)
above shall not exceed 80% of the Governor's "salary" paid on that date
(November 5, 1986) .
g) Sec. 26(f) , the most ambiguous section, uses the term "total aggregate
compensation, including pension payments derived in whole or in part
from public funds" when placing the 80% cap on employees who serve in
two or more paid public positions in California. Probably intended to
stop double-dipping (and falling far short thereof) , the use of
"compensation" here does include pensions and, so, in this instance,
more is intended than basic salary.
h) Sec. 26(g) authorizes the electorate-to adjust the "salary" of elected
or appointed officials by initiative. The same section also prohibits
a legislative body from restricting the right of the electorate to use
the initiative process to increase or decrease the "compensation or the
conditions of any future accruals of employee benefits" of such elected
or appointed officials. It may be that the latter use of compensation
means something more than salary. It is not clear but neither does it
change our view on the overall intent to cap "salary" and not
compensation including fringe benefits.
i) Sec. 26(h) restricts the right of the Legislature to authorize payment... _
to subcontractors where the "compensation" of an individual exceeds $75_
per hour or the total more than 80% of the Governor's salary. - Here, as
in (c) above, Proposition 61 appears to refer to private individuals,
not employees, or to independent contractors where there is no
employer-employee relationship and "compensation" rather than salary is
the appropriate term.
j) The Block v. Eu Answer, in footnote 3, p. 12, states: "Petitioners
contend that this section (Sec. 26(b)) , by utilizing the term
'compensation' means not just salary, but salary plus all other
benefits associated with such employment. Real Party in Interest
(Gann) seriously doubts that if this were a post-election challenge to
the Initiative that Petitioners would make such a contrived argument.
Real Party would instead refer the Court to the title of Section 26
(Public Salary Limitations) , and the fact that the term 'salary' is
referred to in subsections (c) , (d) , (e) , and (g) , and the clear thrust
of the Initiative is aimed at placing a maximum on 'salaries' as a
percentage of the Governor's salary."
In the more recent Gann litigation, Gann v. Eu and Ross v. Eu, all references
to "pensions" were struck from the ballot argument because it is a "salary"
limitation Proposition.
We recognize this conclusion leaves a very large "benefit in lieu of salary"
loophole that the proponents may address with another initiative.
-7=
Elected Officials
For elected city officials, the initiative Section 26(e) freezes salaries on
the effective date of the measure. If such salaries exceed $64,000 they would
be rolled back to that level . Any subsequent . increase in an elected
official 's salary, even when it is below the 80% limit, must be approved by
the voters. Gann has indicated that local electors can increase the $64,000
without reference to the Governor's salary and without a statewide election
increasing the Governor's salary. This is another debatable issue for the
courts to decide.
FLSA
It also has been pointed out that Proposition 61 may be in conflict with the
Fair Labor Standards Act (FLSA) . If it. .is, then the Garcia decision makes it
clear that FLSA would control and public agencies would have to conform. It
is apparent that the drafters of the initiative have failed to consider this
potential conflict with the FLSA. Since public employers must comply with
federal overtime requirements, the result may be that public employers will be
forced to hire additional employees in order to prevent high-paid non-exempt
employees who earn a substantial amount of overtime from exceeding the $64,000
limit. In addition, this suggests that employers may not require overtime if
a person would then exceed the $64,000 cap. On the other hand, unanticipated
overtime will have to be paid according to FLSA and the fact that it would
bring the salary of an individual above $64,000 would be controlled by federal
law rather than Prop. 61.
Overtime Pay Other Than FLSA
The proposed initiative is silent regarding overtime pay. It is reasonable to
assume, given the failure to specify otherwise, that the initiative's authors
intend overtime to be included in the salary cap. Given the unusual demands
on public safety officials and other key employees, this could create serious
hardship not only for the local jurisdiction but would place employees
otherwise not covered by the pay provisions under the cap. To illustrate, an
FLSA exempt fire captain puts in significant overtime during the brush season.
Because of the overtime pay, the captain reaches the initiative salary limit
in mid-November. Is the captain then placed on unpaid leave for the remainder
of the year or required to work without pay? Given the extraordinary demands
on safety agencies during the holiday season, the initiative's restrictions
could pose extensive conflicts between the law and responsibilities of
agencies to provide public safety services.
Work period
Nothing in the measure ties salary to a work period. Thus, the initiative
caps only the annual salary rate, allowing existing hourly, biweekly, or
monthly pay rates to be maintained by reducing hours. One possible outcome of
this may be a new proliferation of job sharing, which may have both positive
and negative effects in provision of services and would be a subject to be
negotiated with employee organizations and city management. Another
possibility is shorter work periods for salaries at the $64,000 level and an
increase in budgets to maintain the same service.
-8-
Subcontracting
The Gann Answer to the Block v. Eu Petition states flatly as to Sec. 26(h),
"This section does not provide a limitation on compensation for local
subcontracting services." We should not rely on that statement even though
public agencies do not. . generally "subcontract." They contract and the
contractors subcontract. Like the loophole for fringe benefits instead of
salary increases, or employment for shorter work periods for $64,000, this
permits alternatives that will be explored both before and after the election
and will be treated further in the discussion of contracts.
Other Pay
Any public employee, elected or appoi nted,__who serves in more than one paid
public position (part-time teacher, state national guard, state, regional or
county commission for which a stipend is received, or another position within
the city) may not receive a total aggregate compensation including pension
payments derived in whole or part of public funds in excess of the $64,000 cap
(Section 26(f)) . The number of individuals who serve in more than one public
position and receive total compensation (salary and pension payments) in
excess of $64,000 is unknown, but is assumed to be relatively small . On its
face, the intention of this provision would appear to -be to eliminate
so-called "pension double dipping." However, the initiative does not prohibit
an employee who serves in only one public position and receives a pension,
from earning $64,000 on top of the pension. It is possible the proponents
intended to close an initiative loophole -- the employment ' of highly-
compensated individuals in more than one position -- with each position
subject to a pay cap of 80% of the Governor's salary. The proposal appears to
say that a public employee cannot serve two or, more jurisdictions for
aggregate compensation of more than $64,000 including pension payments. This
would prevent attempts to avoid the impact of Prop. 61 by two or more agencies
sharing the time of a top executive and each one paying the executive $64,000.
In those cities where an employee may serve in two positions (i .e. , public
works director and city engineer, or finance director and treasurer, or city
manager and redevelopment director) or in the instance where an employee
serves in many positions, the total aggregate salary for all positions will
determine the total for purposes for establishing the $64,000 cap.
Additionally, unlike subsection (b) , individuals working under contract may-
not include public employees. Thus, it appears that individual -.independent
contractors may contract with different public agencies so long as the 80%
limit is not exceeded on a "per agency" basis.
Overtime, merit and cost-of-living adjustments will inevitably result in
salary compaction -- the subject of a future management issue paper.
Prop6l.pub
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�I
PROPOSITION 61 - GANN INITIATIVE
MANAGEMENT ISSUES PAPER V
CONTRACTING FOR SERVICES
Section 26(h) of Proposition 61 prohibits the Legislature from enacting a law
that authorizes any public official covered by the initiative to engage the
services of private subcontractors if the compensation exceeds $75.00 per hour
or the contract is longer than two years. Additionally, the contract cannot
exceed $64,000 in compensation per year .per individual .
On its face, this section provides that only the State Legislature is
prohibited from enacting a law authorizing any public official to subcontract
for services in excess of the above-mentioned limitations (i .e. the
prohibition by its terms is not directed to local legislative bodies).. This
could possibly provide a loophole for cities, counties, and districts. Gann
and his lawyers have stated flatly that it does not apply to local agencies,
but this is no guarantee that courts will rule in this manner. However,
Section 26(b) arguably limits the local agency's right to contract with
"individuals" in excess of $64,000 per year.
Under a literal interpretation, this provision would have little effect,_.as a__.
"subcontractor" is normally one who takes part of the contract from a
principal contractor or another subcontractor and rarely contracts directly
with a city. This provision would not appear to apply by its terms to an
independent or prime contractor. Proponents of the initiative are likely to
argue, however, that the term is applicable to anyone who contracts with a
governmental agency.
Other ambiguities in this section exist: whether an individual contractor is
subject to the $75.00 per hour limit; and whether subcontractors are subject
to the $64,000 limit per "individual ."
Currently, general law cities have statutory authority to contract out for
services at the rate of compensation they deem to be proper (Gov't Code Sec.
37103) . Charter cities have the broad authority implicit in their charters.. .
However, it may be that proponents of the initiative or taxpayers-.will argue
that the limitation is to apply to all contracts, including those between a
local governmental entity and prime contractors regardless of the
Legislature's enactment of any laws.
If the second interpretation is in fact the one given to this subsection, the
results could be severe. Even if the $75 per hour was limited to wages and
did not include costs such as equipment rental or reimbursable expenses, there
are numerous services for which a city contracts which run in excess. of $75 an
hour. Architects, engineers, doctors and attorneys all generally charge more
than this rate for their services. Limiting a local entity to this amount
could lead to the hiring of persons who are not able to provide quality
services, if anyone could be hired at all . Additionally, if the $75 is to
include overhead as well , it would be impossible to have such things as
—10—
construction work done because heavy equipment rental costs in excess of $75
per hour; emergency services would similarly be impaired.
The limitation in 26(b) refers to "employee services" whereas 26(h) refers to
"services of private subcontractors". It is not clear that the limit applies
only to personal services or services that include very expensive equipment,
e.g. airplanes to drop fire retardants or bulldozers to clear away mud slides.
There are also serious practical ramifications to this provision. First, it
limits a public agency's prerogative to contract for services where such
contracts would be cost-effective even though they might exceed the $64,000
limitation. Second, if a public entity has an emergency and needs to contract
out for services or equipment which exceed the limits, it is prohibited from
doing so. In addition, the section does not provide for cost of living
increases of the $75.00 per hour or $64,0.00 limits. Third, this provision
most likely limits a public entity's right to contract for legal , actuarial ,
medical , technical and other specialized services costing more than $75.00 per
hour or $64,000 per year per individual . Contracting out for such services is
frequently a cost-effective way for the entity to handle special service
needs.
gann4.pub
—11—
VOTER REGISTRATION
One of the most important aspects to participatory government is the
opportunity to vote for candidates for public office and on issues of
statewide importance, such as Proposition 61 on the November ballot. The
League of California Cities would like to insure that all city employees are
registered. Please circulate the following information among your employees,
encourage them to become informed about all candidates and ballot issues and
to vote on November 4th:
DEADLINE TO REGISTER TO VOTE IN THE NOVEMBER ELECTIONS: OCTOBER 6
WHERE TO OBTAIN REGISTRATION FORMS: CITY CLERK'S OFFICES
COUNTY REGISTRARS OF VOTERS`
U.S. POST OFFICES
OR
CALL: 1-800-345-VOTE*
*Secretary of State's toll free number to obtain a voter registration form.
-12- -
T-
KENNETH CORY AUG - I 198b
C11trntrallPr of t4P �Statp . of Calif or
SACRAMENTO. CA 53805
August 1, 1986
TO: All State Employees
FROM: Kenneth Cory, State Controller
RE: Proposition 61
Paul Gann has qualified an Initiative Measure for the
November 4th, General Election which could significantly effect
your salary, your vacation rights , and your sick leave benefits.
As State Controller , I administer the State Personnel and .
Payroll System which records your work attendance and generates
your paycheck. If Proposition 61 passes , I will be compelled to
implement its provisions.
Proposition 61 provides for a salary ceiling which will
require the immediate reduction of the salaries of about 18 ,000
state employees and will place limits on promotions and salary
increases for most other state employees.
In addition, sick leave and vacation benefits earned in one
year will have to be used in that same year or be lost. They Can
not be carried over to be used in succeeding years .
I urge you to learn about Proposition 61 and consider its
effect on your employment with the State of California.
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MANAGEMENT ISSUES PAPERS
This is the sixth in a series of management issues papers addressing the `
immediate impact, whether approved or not, of Gann's Public Salary Limitation
Initiative (Proposition 61) on the November ballot. The first management
issues paper addressed the sick leave and vacation provisions of the
initiative and was included in the League Special Bulletin dated August 1,
1986; "Effective Date" and "Impact on Collective Bargaining" can be found in
Special Bulletin #3, dated August 15th; and "Salary and Compensation" and
"Contracting for Services" were in Bulletin #4, dated September 1. (Back
issues can be obtained by contacting the League's Sacramento office.)
Unfortunately, the drafting of the initiative does not permit clean and -
concise answers to many of the questions raised. The issue papers attempt to
provide a literal interpretation--a restatement of what the initiative says
and a reasonable interpretation based upon what the courts may determ.ine to be . ,
constitutional in carrying out the intent of the initiative should .Proposition._
61 be approved.
Future issue papers will deal with inflation/compaction, turnover and
recruitment.
-1-
PROPOSITION 61 - GANN INITIATIVE
MANAGEMENT ISSUE PAPER VI
RETIREMENT
The campaign literature used in the signature gathering effort sighted
"obscene retirement benefits" paid to 16 retired state officials. It is
ironic, however, that Proposition 61 does not address the basic problem -
i .e. , the linking of constitutional officer pensions to incumbent salaries.
Proposition 57 on the November ballot does directly address this issue and is
being supported by the League and most other organizations.
However, Proposition 61 certainly has many near retirement giving serious
consideration to early retirement based upon the adverse impact the $64,000
cap and the loss of sick leave credit will have on future retirement benefits.
The initiative affects pension in two ways--first, by limiting salaries and
sick leave credit thus limiting the final compensation used to calculate
retirement benefits. Second, section .26 (f) restricting the total amount paid
including pension. benefits for those persons holding more than one paid public
position. .
Section 26 (f)
Section 26 (f) reads as follows:
"Any public employee on the state or local level who serves in more
than one paid public position in this state may not receive a total
aggregate compensation, including pension payments derived in whole
or in part from public funds, in excess of eighty percent of the
Governor's salary." .
Few employees who serve in more than one paid public position, pension
payments derived in whole or part from public funds (i .e. , military retirement
pension or other public service pension) are likely to be considered part of
the total aggregate compensation for that employee in determining the $64,000
cap. Some are concerned that including pension payments in determining the
$64,000 limit could be interpreted to apply to all personnel , although the
literal interpretation suggests this provision applies only to employees and
officers serving in more than one paid public position.
Salary Restriction
Of the 380 cities in PERS, 165 cities have purchased the option of determining
the pension benefit based upon the last year's salary for one or more classes
of employees rather than the average of the last 3 years. For those whose
retirement benefit is determined by the last year's salary, early retirement
may look particularly enticing and, of course, timing is also a consideration.
It is likely that your personnel office will receive many requests for copies
of the PERS Application for Retirement (PERS-BEN 369) . These employees are
likely to submit this form with the members' effective retirement date just
_ 2 _
prior toy the 'November. 4 election. . However, many of these same employees will
likely wait -until, immediately following the election before submitting the
Election. oU.-.0ptional 'Settlement and Beneficiary Designation (PERS-BEN 898) .
which must..be .notarized and returned to PERS before the retirement process is
complete and the employee receives payments.
While a literal interpretation means loss of sick leave benefit credit and, .
for those immediately affected by the $64,000 pay cap, a reduction in "final"
salary and thus .conceivably lower retirement benefits in future years, a more
reasonable interpretation would suggest. DON'T PANIC. Employees. should be
reminded that a decision as important as retirement need not be irrevocably
made before November 4--Election Day.
Employees considering -retirement because of Proposition 61 should be given
copies of this paper and Management Issues -Rapers III - Effective Date and IV
- Salary-and Compensation. In addition, those employees in PERS should
contact their PERS Area Office for counseling assistance and receive an
estimate of retirement benefits under alternative options depending upon all
the factors that affect their final retirement benefit, (i .e. , years of
service, birthdate,. and final pay) .
Final Compensation
Generally, .the final compensation period (1 or 3 years) is the continuous
period of employment immediately prior to retirement or any other period of 1
or 3 years. as designated by the member on his/her application for retirement.
Since the final .compensation (also, see Government Code Sec. 20022 for
definition of'final compensation) period .can. be specified by the member at
retirement, a member whose payrate was reduced because .of Gann would be
negatively impacted only to the extent that any post-Gann payrates in excess
of the .salary cap which would have been included in the final compensation
period, ;could..riot now be included.
Effective Date of- Retirement
Generally, .the. effective date of retirement cannot be earlier than the first
of the month in-which PERS receives the application and cannot be earlier than
the day following the last day on the payroll . In other words, although the
employee has until the end of the month to apply for a November 1 effective
retirement date, he/she must be separated from employment at the close of
business on November 4. A member whose application is received in November
can retire on any date in November. Since the final compensation period can
be specified, there would be no negative impacts to November retirements other
than that identified under final compensation.
Another consideration for these employees will be the PERS provision
permitting unused sick leave to be credited to years of service in determining
the retirement allowance. Since this is a vested retirement benefit, it is
assumed that all sick leave accumulated as. of December 31, 1986 would continue
to be credited toward retirement.
Because many employees are likely to seriously consider the option of
retirement, it is important that both the personnel office andithe employee
have a clear understanding of the procedures for retirement under PERS. For .
this reason we encourage each personnel office to acquire from your PERS Area
Office ample copies of PERS informational brochures (PERS-TPS-DO-2 and
PERS-TPS-DO-7) and the Application for Retirement (PERS-BEN-369) .
Employee considerations
- at least age 50 and five years of PERS - credited service
- if under 63, the benefit factor goes up for each completed quarter
from the time of the birthday of the employee. (This factor is
important_ in the determination of final compensation)..
- an employee can receive from the PERS-Area Office estimates of
his/her retirement benefit under different time frames (this can be
done by telephone)
- for employees with the sick leave benefit, unused sick leave is
calculated at .004 per year for every 1 day of unused sick leave when
determining years of service.
- an employee may submit PERS-BEN-369 form after November 5 (but before
November 30, 1986) with an effective date of retirement of November 4
if the employee is off payroll by the close of business on November 4
(the Personnel office could hold the separation papers until after
the election and the employee could take a day unpaid leave .and then
reassess the situation after the election) .
In summary, a more reasonable approach based upon the court decisions
mentioned in previous issues papers and the impairment of contracts and vested
right doctrines is for an employee to consider retirement after November 4 but
before December 31 without putting in jeopardy his/her unused sick leave or
salary in determining final compensation. Depending upon when °salary
adjustments are normally made, this may not be terribly reassuring to a long
term dedicated employee who sees the Gann initiative jab away at his/her hard
earned retirement benefits. Finally, cities with private retirement systems
are encouraged to review their retirement plans with their carriers to clarify
both provisions for and timing of early and regular retirements as they might
be effected by Proposition 61.
cg715p5.pub
Ilefin
Research" BO
0
Cal-Tax
4-
March 1986
The Gann Public Pa Limit:
v.
An Analysis
Introduction increase from$47,480 to$52,500 per year. Code Sections 11550 through 11569,relating
Government is a labor-intensive business. • The salaries of members of the State to salaries of various state officials.
If costs of government are to be controlled, Board of Equalization would decrease from Section II adds Section 26 to the Califor-
salaries and benefits must be controlled $78,207 to$52,500 per year. nia Constitution,which sets"Public Salary
Paul Gann, no stranger to initiative of The salaries of at least 6,000 state,city, Limitations."It could limit more than salary.
forts,is currently circulating a petition titled county,city and county,and special district Depending on interpretation, it could also
the "California Fair Pay Amendment"We employees, elected, appointed or employed limit some,and possibly all,fringe benefits.
have given this proposal a careful reading, under contract, would decrease from what- It would limit state and local government
and we have concerns serious enough to be ever their current salaries are to no more than ability to contract for services.
made a matter ofpublic discussion at this ear- 80% of the Governor's salary,or$64,000. New Constitutional
ly stage. We believe the amendment could do
serious, lasting damage to the management Thereafter,there would be no increase in Salary Limits
of California state and local government salaries of constitutional officers,Board of
Equalization members,legislators,or judges Section 26(a)provides that on the effective
Campaign literature used in the signature- without approval by a statewide majority date of the amendment the salary Sf the
gathering effort cites examples of 16 vote. Also, there would be no increase in Governor shall be$80,000 per year,and the
outrageously excessive former constitutional salaries of local elected officials without ap- salaries of all other constitutional officers and
O officer retirement benefits,and as a solution proval by a majority of voters in affected members of the State Board of Equalization
would roll back the present salaries of all local jurisdictions. shall be set at$52,500 per year, subject to
public employees receiving more than 80%of Any increases in state or local elected of- adjustment as set forth in Section 26(c).
a new amount proposed for the Governor. ficial salaries would have to be within the Section 26(b)states that no elected or ap-
This would require a salary cut on Novem- limit of$64,000.The$64,000 limit presum- pointed state or local employee, including
ber 5,1986,for at least 5,000 management and ably would apply to all income from public contract employees,may receive"compensa- .
technical staff in state and local government, sources(including pensions)received by an tion" in excess of 80% of the Governor's
for judges, and some elected officials. There- employee who holds more than one paid salary. Under "special circumstances" the
after, it could have some impact on salaries public position. Legislature "may appropriate funds for
of all public employees. Ironically, Gann's employee services"contracted by state agen-
The initiative also limits contracts for ser-
initiative would actually increase the already cies that are in excess of 80%of the Gover-
excessive retirement benefits ices. In one section of the initiative, the nor's
h ts p aid the 16 Legislature would be prohibited from enact- salary,Provided the contracts do not
retired officials and their survivors.But that exceed four years in length and are approved
of .
is only one small problem with the proposal laws authorizing contracts for"services by a two-thirds legislative vote
of private subcontractors"that exceed$75 `
The"California Fair Pay Amendment"is per hour, and that exceed two years. In Comment
decidedly not what its title suggests.It is un- another section, the Legislature, by two- Is it sound public policy to establish the =
workable,poorly drafted,counterproductive thirds vote,could appropriate funds for state salary of the Governor as the top public salary
to good public management,and could poten- employee services contracts in excess of in tially cost California taxpayers much more $64,000,so long as the contracts do not ex- the state?Should all other public salaries
than it ever might save in cutting and freez- ceed four years. be in some direct or indirect relationship to the
ing salaries. Governor's salary? Unless a constitutional
State agencies would be prohibited from salary of the Governor is set initially at a very
Description hiring outside counsel without a formal high level—one that is unnecessarily high for
declaration of conflict by the agency and the the office in itself— very serious problems
If a constitutional initiative sponsored by Attorney General's office. The initiative could occur with respect to many other public
Paul Gann qualifies for the November 4,1986 would also prohibit employees from ac- positions in direct and indirect relationship to
ballot,and if the voters approve it,the follow- cumulating sick leave and vacation time ac- it.A top salary of$64,000(the 80%of$80,000
ing would happen on Wednesday,November cruals from one calendar year to the next. limit applicable to most state and local
5: employees,in Section 26(b))would immediate-
• The Governor's salary would increase Section by ,. ly put California out of market competition for
O from $49,100 to$80,000 per year. Section Analysis top medical and legal professionals,for tox-
ics experts,for a variety of other top technical
• The salaries of state constitutional officers Repeal.of Specified skills,and for the major public managers and
would increase from$42,500(except the At- administrators for which California is in na-
torney General) to$52,500 per year. State Salaries':,:. " _ tional competition.
• The salary of the Attorney General would Section I repeals California Government California is a world-class state.If Califor-
Cal-Tax News 2
nia were an independent nation,it would have compensation limits for all other state and under which contract work may be per-
the eighth largest economy in the world.One local public employees,and sets these limits formed,and on whether the limit applies to
of the factors that fosters and sustains at 80%of the Governor's salary.In ordinary individual or group contracts,this could be
California's economic,scientific and cultural usage,the two words can have distinctly dif- an area for substantial litigation.
position in the nation and the world is its ferent meanings."Salary"usually refers to public employee unions are typically the
system of higher education.Three of the top the paycheck dollars received by the incum- strongest opponents of contracting out public
five graduate schools in the United States are bent of a position."Compensation"is usually services.It is therefore ironic to find such a
in California. Two of those three graduate a more inclusive term,embracing a position's
schools are public: U.C. Berkeley and salary,employer contributions to retirement, contracting out limitation is a measure osten-
U.C.L.A.The salary of the current President health and disability benefits, sick leave, amendment,intended to cut public costs.Under this
of the University of California is more than vacations,holidays and any other employee amendment,if the state found it could save
money by contracting for certain state
$80,000 proposed for the Governor in the benefits. If the intent is to limit compensa-
Gann initiative. tion,then the limit on salaries is less than vices, rather than stand the higher cost of
80% of the Governor's salary. The salary permanent civil service employees, atwo-
Is it sound public policy to expect Califor thirds vote of the Legislature would be re-
limit for each public employee could depend
nia to run aworld-class university with a on the amount of compensation that is quired if the cost of the contract exceeds the
President who earns less than many college represented by their non-salary fringe constitutional limit. This provides a very
football coaches? Proponents of the Gann useful tool to those who oppose contracting
initiative might counter with the response benefits. out in general, or may happen to oppose a
that the state is now being run with a$49,000 If,on the other hand,the drafters intend specific contract proposal.
Governor.While that is true,there has not that "compensation" and "salary" are the In extending its$64,000 salary limitation
been a dearth of candidates for a $49,000 same thing, then all off-salary employer to contract employees,would the initiative
governorship. California does not recruit abrogate existing contracts?It does not ap-
nationally for its governors. It does for its to validate contracts existing at the time
university presidents,and thousands of other Is it sound public policy g
public managers and technicians. to expect California to run of adoption of the amendment.This could lead
to immediate litigation and possibly to dis-
Also, Section 26(a and b) would create a world-class university ruption of some important contract services.
havoc with respect to maintaining rational with a President who earns Presumably,the Legislature could act on
salary relationships among the hundreds of less than many college "special circumstance"contracts as a first
job classes in existing state and local civil ser f OOtbal I coaches? order of business in January 1987.
vice and merit systems. The immediate
rollback of top salaries would produce a
clustering of top management and technical benefits are outside the limits of this amend- Statewide Votes on
public salaries around the $64,000 level, ment—except for"sick leave"and"vacation Salary Increases
regardless of relative skills and respon- time"carryovers,limited under Section 26(e).
sibilities.Salary compaction problems would This exclusion from the limit could become a Section 26(c)provides that no salary in-
extend far below the $64,000 level as massive loophole, generating employee crease for any constitutional officer,member
legitimate pressures for salary increases grow of the State Board of Equalization,member
pressure for substantially increased fringe
over time. benefits.Public sector fringe benefit costs now of the Legislature, Supreme Court Justice,
"Salary">> generally constitute from 40% to 60% of Appellate Court Judge,or judge of a court
A Limit on Salary of record"shall become operative"unless ap-
payroll.Some of these benefits,like retirement,
"Compensation?"7 proved by a majority of voters at a statewide
or Compensation . represent huge cost obligations for future
Is this proposed amendment a"salary"
generations of taxpayers. general election.
Comment
limit, or a "compensation" limit? Is it a
salary limit as far as constitutional officers State Contract The voters at any time could adjust the
and Board of Equalization members are con- Service Limits Governor's salary by passing another amend-
cemed and a compensation limit with respect ment,regardless of the intent of this amend-
to all other state and local public employees? Under what"special circumstances"may ment.Meanwhile,for future years,specified
No definitions are provided within the the Legislature "appropriate funds for state officers and judges are locked in at
amendment. employee services that are contracted"that designated constitutional salary levels until
Section 26(a) sets salary limits for the exceed 80% of the Governor's salary? The there is a statewide vote on the matter.
amendment does not specify,nor does it of- Unless the Governor's salary limit is
Governor,constitutional officers and Board fer,any guidelines as to such circumstances. simultaneously lifted,any increases must be
of Equalization members.Section 26(b)sets What is the actual limit on state contract within the$64,000 required by the Constitu-
services proposed by Section 26(b)?Employee tion. If the Governor's salary cannot be in-
services contracts with state agencies are creased during a current term of office,then
Cal-Tax Research limited to 80% of the Governor's salary, any increase above$64,000 for a position or
unless the Legislature by two-thirds vote per- group of positions in a salary relationship to
Cal-Tax is a nonpartisan, nonprofit corporation mits that limit to be exceeded.Such contracts the Governor must await expiration of the
founded in 1926 to advance economy and efficiency are limited to four years. When must the current Governor's term of office.
in government through research, advocacy and Legislature act?When the cost of services It should be noted that while the proposed
public communications. Cal-Tax is supported by
membership contributions from business and in- from a group of employees under a single con- amendment mandates specific increases from
dividual taxpayers, 921 11th Street, Suite 800, tract exceeds$64,000,or when an individual current salary levels for the Governor and
Sacramento, California 95814. (916)441-0490. employee contract exceeds an annual cost of constitutional officers and would require
C.S.Reenders .....................President $64,000?The distinction is important, and decreases in salaries of hundreds of other of-
Richard P.Simpson ..Executive Vice President the amendment is unclear. Because of the ficials to new maximums of$52,500(in the
Larry McCarthy............Research Director lack of clarity on the"special circumstances" case of the Board of Equalization)or$64,000,
3
the salaries of all other state positions and could not be added to or used in conjunction whole or in part from public funds,in excess
judges listed in Section 26(c) are frozen at with the next calendar year's accumulated of 80% of the Governor's salary.
their current level until there is a statewide credit.This has been verified in a call to the Comment
vote.These positions primarily include state proponents.
legislators and some judges. The effect of this provision appears to be It is difficult to discover the intent of this
that on January 1 of each calendar year,each Provision unless,in some obscure way,it is
Local Votes on meant to eliminate pension double-dipping.
California public employee regardless of years
Salary Increases of service will have zero sick leave and vaca-
On its face,it could not apply to very many
tion credit.The time to have an extended ill- individuals. How many people have more
Section 26(d)requires that no increase in than one paid public position? Clearly, it
the salary of "an elected officer of a city, ness,sustain serious injury,or seek elective would not apply to an individual in only one
county, city and county, or special district surgery would appear to be December, and public position who happened to also receive
which establishes the salary payable to its not January. one or more pensions from other public
members"shall be effective unless approval Vacations,in private and public sectors, systems which brought him or her a"total
of the increase has been secured by majority are taken at management's convenience,or aggregate compensation" (?) in excess of
vote of the voters of the jurisdiction. are at least related in some way to the re- $64,000. Should the drafters have used the
Comment quirements of the job setting. For a great past rather than present tense in referring to
variety of reasons,it is not always possible the public employee (i.e., "any public
This requirement for local popular majori- for employees to use all of their vacation employee...who has served in more that one
ty votes on salary increases of local elected paid public position ...")?
officials is the counterpart of the statewide
The effect of this Section 26(g)allows the electorate of any
vote requirement on salaries of state officials.
Any such increases,however,would have to provision appears to be local government to override the limitation
in Section government
It also prohibits the enact-
be within the$64,000 limitation. that on January 1 of each ment of any law restricting use of the in-
Rollback of Salaries calendar year, each itiative to change future accruals of employee
California public employee benefits of elected or appointed officials.
Section 261e) effectively states that on Comment
November 5, 1986,the annual salary for all regardless of years of 1
elected and appointed state and local public service will have zero sick An override of the limit in Section 26(g)
employee in California shall be no more than leave and vacation credit. as it relates to those scant few individuals to
80%of the annual salary paid to the Gover- which it would ever apply under 26(f)simply
nor as of that date.Thus,all salaries that ex- produces more constitutional clutter. The
ceed $64,000 on November 5, 1986, would credit.Staff may be short,seasonal demands provisions with respect to use of the initiative
have to be reduced to that level. may be present, emergencies or heavy to adjust future accruals of employee benefits
workload may prevent the use of all of an are the germ of an important concept. It is
Prohibition of Vacation employee's vacation credit. Is it fair to unfortunate that it is contained in this other-
and Sick Leave withdraw vacation from employees who have wise seriously flawed proposal.
been prevented from taking a vacation due
Accumulation to requirements of the job? Added Contract Limits
Section 26(e) states: No elected or ap- Sick leave accumulations from year to Section 26(h) prohibits the Legislature
pointed official or any employee subject to year have been allowed as insurance against gr
the provisions of this section shall be permit- long-term illness incurred by long-time from enacting laws authorizing any public of-
ted to accumulate sick leave or vacation time employees.The employees who abuse the sick ficial to engage the services of private sub-
from one calendar year to another. leave privilege never have sick leave to ac- contractors wherein the contractual amount
Comment cumulate from year to year. It is the Geed two 5 an hour
In r event could the con-
employees with large sick leave accumula-
Perhaps the first key question is: What tions who rarely abuse it and, if they are tract exceed$64,000 per year.
is the disposition of all accumulations of vaca- lucky,leave public employment with large ac- Section 26(h)also prohibits state agencies
tion and sick leave for California public cumulations on the records. It is precisely from hiring outside counsel without a formal
employees as of the end of calendar year these employees whom this initiative would declaration of conflict by the agency and the
1986? Are they completely eliminated? If punish. Ironically,it would have no impact Attorney General's Office.
salaries that exceed$64,000 are rolled back upon excessive absenteeism and those who Comment
on November 5, why wouldn't all existing abuse the privilege and never have any sick
vacation and sick leave credit be removed leave in reserve. Review of these additional contract limits
from the books on December 31?If so,literal with the proponents does not disclose their
ly hundreds of law suits will be filed con- In another irony,limitation of sick leave .intent The
in the way proposed in this initiative could Y appear ppe to conflict with the earlier
testing validity of cutting of sick leave and limits in Section 26(b)which limit contracts
leave allowances, making vacation rights. also lead to pressures k ing still more leave increase annual sick to four years.While Section 26(h)limits may
"...From one calendar year to another," available to those who abuse it. be designed to apply to all governments,they
are worded in such a way as to not state a
to gather, means just that; i.e., from would specific limit.The Legislature is simply pro-
be 1987,anatedf from to 1988.o December A Dropped Double-Dip? hibited from enacting a law that permits
be accumulated from January to December
in one year could not be carried over to the Section 26(f)states any public employee private subcontracting above$75 an hour or
next calendar year.As we read tho.provision, on the state or local level who serves in more for two years.
any sick leave or vacation time credited to than one paid public position in this state Read one way,Section 26(h)as it applies
an employee on December 31 would be ex- may not receive a total aggregate compensa- to contracts does not appear to repeal any ex-
punged from the employee's records and tion,including pension payments derived in isting laws or charter authority.Further,it
Cal-Tax News 14
applies to subcontractors,rather than prime indirect impact on thousands more.Are all of tional officer.(Maximum 60%with 24 years)
contractors,which could open new areas of these employees examples of excessive public * To this is added cost-of-living(COLA)in-
litigation as to what and who is"sub" and pay? Not even the proponents say that. creases back to 1954. In 1985 this so-called
"prime."Viewed in this context,it could be In the literature used in their campaign super-escalator provision increased the basic
said that,at most,this provision does not ex- to promote petition signatures, the pro- retirement benefit by 286.5%.
pand the ability for cost-effective contracting ponents cite obviously outrageous pension
out and it could cut back on local government The individual most identified with the
consequences which exclusively relate to a windfall retirement benefits is Bert Betts,
flexibility to choose the most cost-effective group of 16 former constitutional officers and
way to provide services. their survivors.In the literature,they speak who served as state treasurer from 1959 to
1967.His identification with this issue stems
If, on the other hand, Section 26(h) is of future pension payments to certain of these from his successful law suit,initiated in 1974,
found by the courts to be a legally effective individuals that will amount to as much as to force the state to base his benefit on the
limit on state and local contracting,it could $150,000 to $180,000. Such public pension incumbent's salary.
pose serious problems for the conduct of payments are,indeed,an outrage,and are in
necessary contract work.For one thing,the the process of being curbed, by another Betts' highest salary as treasurer was
contract limit in Section 26(h)does not ap- $21,499.Winning the lawsuit meant his bene-
pear to be limited just to salary of the private fit would be based on the incumbent's salary,
contractor.It speaks of limiting"the contrac Does a levee district tell which in 1985 was$42,500.The formula is:
tual amount of compensation"of private sub- flood victims it cannot base pension:
contractors to$75 an hour.This could apply contract with heavy 8 X 5% = 40% X$42,500 = $17,000
to compensation for the rental of equipment equipment operators to super-escalator adjustment:
used in heavy construction of major public $17,000 X 286.5% _ $48,705
projects or in emergencies.$75 an hour does close a levee break that is total:
not rent much heavy equipment in today's flooding them out of their $17,000 + $48.705 = $65,705
market. Does a levee district tell flood vic- homes because the cost is
tims it cannot contract with heavy equipment This is the maximum retirement benefit
operators to close a levee break that is over $75 an hour? Betts qualified for in 1985.The actual retire-
flooding them out of their homes because the ment payment was less because of optional j
cost is over$75 an hour?Does the State Divi survivor benefits the former treasurer had
sion of Forestry refuse to call for a borate constitutional amendment under considers- selected.
tion for the November 1986 election. It is
drop in a forest fire because the airplane costs perhaps the supreme irony of this total salary Legislator's Retirement
more than $75 an hour? limitation effort that the Gann proposal
Assuming that the$75 applies only to per- would actually increase these constitutional The A provision that set up the lied to
services,what does$75 an hour purchase officer pensions, beyond what would be tot COLA provision originally applied to s. In
in the way of some of the more specialized received under another proposal to be laid lators as well as constitutional officers. In
medical skills such as heart surgeons and before the voters next November.To describe 1966,the COLA adjustment back to 1954 was
neurologists who are routinely needed to how this would happen requires a brief repealed.However,lawmakers who served be-
operate on accident victims who may be a historical excursion. tween 1964 and 1967 are eligible for the special
public charge?Does the emergency room at inflation adjustment,which results in a 24.9%
the public hospital,to which most accident vic- Windfall Benefits — 1963 increase in retirement benefits.
tims come,simply tell the victim's family that Retirement Amendments
the price of treating the patient exceeds aeon- In 1963,over objections of the chief execu-
he ionl contract price limit? tive officer of the Public Employees' Retire- In 1974 the formula for determining
went System, Governor Edmund G. (Pat) retirement benefits for constitutional officers
The failure of the drafters to specify clearly Brown signed legislation that provides certain was changed.All new constitutional officers
whether the 26(h)contract limit applies to sala- California constitutional officers — now in- elected for the term beginning January,1975
ry or total compensation of private contractors clung Pat Brown—retirement benefits that have retirement benefits based on their own
could be a serious flaw.The failure of drafters far exceed salaries the officials received. salaries,and cost-of-living adjustments based
to make provision for contract payment of on the CPI.
emergency services is an oversight that could The bill,consisting of seven paragraphs,
lead to multiple tragic consequences,depend- went through the Legislature without hear- The repeal of the super-escalator beginning
ing on interpretation of this section. ings in the waning days of the 1963 session. 1968 and the 1974 change in retirement base
It provided a new cost-of-living adjustment means that any new constitutional officer
The Section 26(h)prohibition against hiring dating back to 1954, without replacing the elected in the sole statewide election during
of outside counsel by state agencies unless existing inflation mechanism,which had been this period—1970—has benefits calculated
there is a formal declaration of conflict by the tied to an incumbent's pay raise. on the incumbent's salary,but is ineligible for
agency and the Attorney General would not the COLA adjustment back to 1954.
normally be considered a matter serious Constitutional
enough for constitutional treatment.We have Former governor Jerry Brown is in this
been advised that it relates, in part, to ex- Officer Formula category.His retirement benefits will thus be
periences of proponents in court matters stem- As a result of the two-pronged formula, less than those of his father,Edmund G.(Pat)
ming from past initiative propositions. Brown,for whom the 1954 COLA adjustment
benefits for the affected group of state con- increases the basic benefit almost threefold.
What is the Problem? following officers are calculated in the All constitutional officers elected before 1970
following way: continue to be eligible for the windfall cost-
The Gann salary limit initiative is clearly a years of service,to a maximum of eight of-living adjustments and receive benefits
major public policy proposal with serious,ex- years, are credited at 5% per year. calculated on the incumbent's salary.
tensive consequences.It will have a direct im-
pact on at least 5,000 elected and appointed • This amount(maximum 40%) times the According to the Public Employees'Retire-
California public employees,and it will have current salary of the incumbent constitu- meat System(PERS),which administers these
5
retirement benefits,12 former constitutional Gann s Fair
4) The initiative destroys rational salary
officers and four survivors of former constitu- setting due to the arbitrary limits it
tional officers receive retirement benefits Pay Amendment establishes and the compaction problems it
figured in the same way as Betts'benefits. creates with respect to salary structures.
The Gann initiative would impact on
AB 2187 retirement benefits for Betts and the other 5) The management of California's public
15 former constitutional officers and sur- business could suffer serious, perhaps ir-
Legislation approved in 1983 (AB 2187 vivors because it sets pay for constitutional reparable damage as a result of the im-
Papan)increased salaries of 300 elected and positions at$52,500. mediate "brain drain" the initiative would
appointed state officials,including constitu If enacted,the Gann initiative would in
-
such ffi cause.
u officers.For the latter,it was the first crease Betts'benefits in 1987,not nearly so 6) Existing contracts with public
such increase in 16 years. employees and private contractors may be in
The bill provided the following increases Gann COUId have validated by the initiative.
for constitutional officers,beginning with the 7) Over time,the limits proposed in the
new term of office in January 1987: achieved the result he initiative will not work;they will be difficult
suggests he is seeking in to change,and will have to await state and
Salary his campaign literature local elections.A$64,000 limit today sounds
simply by unlinking generous.If the next 10 years sees inflation
1985 1987 like the last 10 years,$64,000 will be worth
constitutional officer $30,000 in 1995.To lift the$64,000 limit will
Governor $49,100 $85,000 pensions from incumbent require an increase in the Governor's salary.
Attorney General 47,500 77,500 salaries. How many times are the voters likely to in-
Controller 42,500 72,500 crease the Governor's salary over the next
Treasurer 42,500 72,500 decade?
Board of Equalization 73,780 81,000' much as scheduled in AB 2187,but more than
is possible under SCA 32. The formula: 8) The initiative could increase, rather
'Board of Equalization members receive annual cost- p than reduce government costs.
of-living adjustments. Salary for all other constitu-
tional officer positions may be changed only with the a) It would increase costs by severely ,
beginning of a new term. 8 X 5% = 40% X$52,500 = $21,000 limiting the ability to.contract out state
super-escalator adjustment:
The 16 recipients of special Betts benefits $21,000 X 296.5%1 = $62,265 government services by requiring two-thirds
total: votes on service contracts that exceed
are slated for big jumps in their retirement
checks because their benefits will be $21,000 + $62,265 = $83,265 2 specified limits.Higher-cost,permanent civil
servants would have to be used rather than
recalculated,based on the new salary for in- lower-cost contract services;
cumbents.Betts'benefit will increase by 75%
as a result of AB 2187. The formula: Recap: Potential b) It would lead to a breakup of technical,
1987 Constitutional management, and supervisory jobs into
base pension: smaller-paying jobs in order to evade the new
8 X 5% = 40% X$72,500 = $29,000 Officer Pensions limits. This would simply mean more
$29,0 escalator adjustment: employees with salaries below the limits and
$29,000 X 296.5%1= $85,985 Example: Betts fringe benefits outside the limits;
total: AB 2187 $114,985
$29,000 + $85,985 = $114,9852 Gann 83,265 c) It would require frequent state and
SCA 32 SCA 32 76,405 local elections to consult voters on overrides
of the limit;
Citing outrage at such potential windfall Gann could have achieved the result he d) By reducing the quality of pub-
retirement benefits,Senator Wadie Deddeh suggests he is seeking in his campaign lic management it would reduce the quality
introduced SCA 32 to preclude Betts-class literature simply by unlinking constitutional of public management functions. Cali-
recipients from benefitting from salary in- officer pensions from incumbent salaries.The fornia would get, literally, what it pays
creases authorized by AB 2187. critical flaw in his initiative is that he failed for.
The constitutional amendment unties the to do this. 9) The initiative is poorly drafted. It is
link between constitutional officer retirement unclear, contradictory, and occasionally
benefits and salary increases for incumbents. Problems With the Gann obscure in its intent.The potential for litiga-
If adopted by the Legislature,it will appear Fair Pay Amendment: tion,particularly with respect to existing and
on the ballot next November. future contracts,is considerable.
If approved b voters, SCA 32 would 1) The concept of establishing the Gover
pp y 10) The limits on contract services could
nor's salary as a single salary standard and
mean a$39,000 cut in benefits Betts would lead to tragic consequences due to the failure
top public salary in the state is inappropriate
otherwise receive.The formula: and unworkable. of proponents to consider their impact on
base pension: 2) The arbitrary limits set by the �_ emergency services.
8 X 5% = 40% X $42,500 = $17,000 itiative are in conflict with the marketplace 11) The initiative represents overkill
super-escalator adjustment: in which California must compete for m terms of the problem it purports to re
$17,000 X 296.5%1 = $50,405 technical and managerial skills. solve.Outrageous pensions for 16 retired con-
total: stitutional officers and their survivors can
$17,000 + $50,405 = $76,4052 3) The initiative severely damages and will be controlled without the massive,
California's competitive position in retaining counter-productive and ill-advised con-
assumes 5% per annum inflation and attracting top talent to public service stitutional changes that the proponents
zunmodified by survivor options positions. present.