Tag Archive for California Budget 2012-13 (Assembly Bill 1464)

Jack Up Those University of California Fees Some More! Looks Like the UC Contracting Guidelines Slipped in the California Budget Will Hinder “Maximizing Efficiency”

The California State Legislature’s Democrat majority has approved a budget (Assembly Bill 1464) and sent it to Governor Jerry Brown. Presumably it still includes the language (including the typographical error) added at the last minute providing funding to the University of California with the condition that it operate under extensive guidelines meant to suppress the contracting out of services to private companies. (Apparently this language could even apply to contracts with non-profit organizations and volunteers in certain circumstances.)

How will this budget section affect basic operations of the University of California, such as custodial and janitorial services, hospital staff at UC medical centers, library staff, clerical workers, food service and cafeteria workers, pest control services, and landscaping? A January 12, 2012 report (required by law) entitled 2011 Contracting Out for Services at Newly Developed Facilities from the University of California’s Office of the President to the California State Legislature states that “campuses and medical centers view contracting out for services as an important supplement to existing resources.” The report mentions concepts foreign to state legislative leaders such as “maximizing efficiency,” “new methods,” and “best practices.”

Democrat leaders whipped that budget proposal through so fast in the past few days that it was hard for legislators, the news media, and interest groups to digest the contents. I don’t see many signs that people are picking up on my report from yesterday (June 14, 2012) revealing the new language in the budget about UC contracting. My report was linked on www.FlashReport.com today at the top of the “Golden Pen” column, but I haven’t found any news reports or press releases on the web mentioning it.

As I reported yesterday (see my post “The delay…would frustration their very purpose” – Hasty Last-Minute Add-On to California Budget Clamps Down on University of California’s Contracting Out), the insertion even includes a typographical error – see lines 38-43 on page 580: “The services are of such an urgent, temporary, or occasional nature that the delay incumbent in their implementation under the UC’s regular or ordinary hiring process would frustration their very purpose.”

This language in the budget for the University of California already applies to K-12 school districts and community college districts in Education Code sections 45103.1 and 88003.1, which became law in 2002 through Senate Bill 1419. I couldn’t find any studies on the web that focused on the actual effects of Education Code sections 45103.1 and 88003.1, but I was able to find scattered documents showing that the laws indeed discourage educational districts from contracting out services, and unions do cite these laws to fend off contracting proposals.

Evidence to Suggest This Budget Provision Will Hinder the University of California’s Efforts to Control Costs and Maximize Efficiency for the Benefit of Students 

1. This May 26, 2010 letter (see page 13 of the PDF) from the Berkeley Council of Classified Employees, American Federation of Teachers Local 6192 states bluntly that Section 45103.1 “significantly restricts the ability of the Berkeley Unified School District to contract out for services normally and customarily performed by classified employees.” (And that is the perspective from supporters of the law.)

2. This June 29, 2011 report from the California School Information Services Fiscal Crisis and Management Assistance Team (FCMAT) to the Mono County and Inyo County Offices of Education explains on page 13 that “the most significant impediment to the formation of school transportation JPA will likely be Education Code 45103.1.” Here’s an excerpt:

Known as the California School Employees Association (CSEA) signature anti-contracting bill, this section is the codification of SB 1419 passed by the California Legislature and signed by Governor Gray Davis years ago. The bill does not specifically outlaw contracting, but places strict accountability on a district to prove that contracting is less expensive than using the previous classified employees. Although the formation of a JPA is not technically contracting for work, the CSEA perceives it that way, and has challenged the formation of JPAs using this regulation in some areas of the state. The threat of potential lawsuit has dissuaded some school districts from forming a JPA. The CSEA has closely monitored school transportation in some areas of the state, but not in other areas or services such as food service. The California Association of School Transportation Officials (CASTO) and the School Transportation Coalition are working with the CSEA towards an amendment of E.C. 45103.1 that allows school districts to cooperatively provide services for each other or use a JPA. Support for this amendment is moderate.

3. A July 16, 2010 opinion letter from Jerry Brown when he was Attorney General to Assemblyman Sandre Swanson points out how this law potentially restricts contracting out:

Or, to take another example, if a school district’s contract with a private nonprofit organization involved contracting for services in non-academic positions, such as clerical, maintenance, transportation, and cafeteria services, the contract might be inconsistent with or limited by Education Code section 45103.1, which prescribes the conditions under which a school district may enter into a new contract after January 1, 2003 for personal services ordinarily performed by classified employees of the school district.

4. Here’s “Inter-Office Correspondence” in the Los Angeles Unified School District dated August 20, 2008 from Omar Del Cueto, Executive Director of iDesign Schools, concerning MLA Partner Schools (a program previously called Mentor Los Angeles):

Does MLA reserve the right to subcontract any and all services specified in the MOU to any District, public or private subcontractor permitted by law? How about Food Services?

MLA and the schools are subject to subtracting limitations to the extent that they exist in collective bargaining agreements, Personnel Commission Rules, or the law. Particularly important is Education Code section 45103.1. Section 45103.1 places significant limitations on the ability to subcontract for services that are performed by classified employees. That section applies to food service employees.

5. In a December 8, 2003 decision, the Public Employment Relations Board noted that the Long Beach Community College District Police Officers Association “argues that Education Code section 88003.1 prohibits the District’s contracting out of police services.”

6. I recalled the heady early days of the Schwarzenegger Administration when I found a January 7, 2004 press release from the now-defunct “Coalition for Local Control of School Spending” praising new Governor Arnold Schwarzenegger for calling for the repeal of Senate Bill 1419 in his first State of the State address:

My proposal gets more money into the classroom and thus increases per pupil funding. First, we must give local schools the power to meet the specific needs of their own communities. This will give schools the freedom to spend the money as they — not Sacramento — best see fit to serve the children. Second, school districts are forced to spend an average of 10 to 40 percent more than necessary on non-classroom services. We must give local schools the freedom to be more cost efficient. One way to do this is to repeal SB 1419, the law that prevents schools from contracting out services such as busing and maintenance. This will free up more money for textbooks and other vital classroom needs.

7. Governor Schwarzenegger’s ill-fated California Performance Review identified Education Code Sections Sections 45103.1 and 88003.1 as impediments to reducing non-instructional costs in schools. Here are some claims from the ultimately ignored recommendation:

SB 1419 can effectively prevent school districts from obtaining needed services at all. For instance, one Bakersfield school in the desert did not have functional drinking fountains for students during hot weather because the custodian was busy and the school could not hire a plumber, pursuant to current law. At Santa Ana Unified School District, new computers are still in boxes because, “even though the computer firm said it would install the computers as part of its service without extra charge, even a free service violates SB 1419.” Theoretically, exceptions are available in the law for “work of an urgent, temporary, or occasional nature.” However, because of the difficulties in surmounting the legal hurdles under the new law, school districts may not even contract for services in these cases. The main obstacle to successfully implementing competitive sourcing of necessary services is opposition from labor unions who represent the district employees. At Reed Elementary School District in Marin County, community groups offered to hire additional groundskeepers for field maintenance (the fields are also used by community groups), but this type of partnership is prohibited by SB 1419. Community members reported that, “…even the district groundskeeper supported the partnership” that would have resulted in an additional groundskeeper being hired.

8. When the legislature approved Senate Bill 1419 in 2002, it was opposed by the American Institute of Architects – California Council, the Association of California School Administrators, the California School Boards Association, the California School Bus Contractor’s Association, Cardinal Transportation Group, Inc., the Community College League of California, Durham School Services, First Student, Laidlaw Education Services, Los Angeles Unified School District, Orinda Union School District, and San Francisco Unified School District.

9. When Senator Bob Huff’s Senate Bill x8 61 to repeal SB 1419 was considered and rejected in 2010, the repeal was supported by the California Association of School Transportation Officials, the California School Transportation Association, the California Taxpayers’ Association, the Southwest Transportation Agency, and West County Transportation.

Yes, this section of the budget matters.

“The delay…would frustration their very purpose” – Hasty Last-Minute Add-On to California Budget Clamps Down on University of California’s Contracting Out

Looks like there’s some sort of union effort to impose great administrative burdens on the University of California to prevent it from contracting out for services that could be done by UC employees. Look at the italicized (new) language on pages 577-581 of the newly-amended budget bill, Assembly Bill 1464, Section 17(a) of 6440-001-0001 “For Support of University of California.” The complete language is below.

My favorite line is 17(a)(2)(F), lines 38-43 on page 580: “The services are of such an urgent, temporary, or occasional nature that the delay incumbent in their implementation under the UC’s regular or ordinary hiring process would frustration their very purpose.”

Is this typo a subconscious expression of frustration with the budget process?


UPDATE: This language – newly added to the proposed FY 2012-13 California budget – is cribbed from California Education Code Sections 45103.1 and 88003.1, enacted through Senate Bill 1419, approved on a party-line vote in the legislature (Democrats in support, Republicans opposed) and signed into law by Governor Gray Davis in 2002.

The bill was sponsored by the California School Employees Assocation, supported by the American Federation of State, County and Municipal Employees (AFSCME) California, and authored by former Senator Richard Alarcon (D-Los Angeles). It is meant to restrict the ability of schools and community colleges from contracting out for services.

Opponents of Senate Bill 1419 argued at the time that the bill imposed “significant costs and administrative burdens by creating added state mandates that include the cost for the process of bidding and the requirement to hire someone if unable to contract out for services.”

Two Republicans have introduced bills to repeal the law since its enactment: (1) former legislator John Benoit (R-Riverside) introduced Assembly Bill 49 in the 2005-06 session (the bill was never considered in its original form and eventually became a vehicle for another proposal), and (2) Senator Bob Huff (R-Diamond Bar) introduced Senate Bill x8 61 in 2010, which was rejected by the Senate Education Committee on a 6-2 party-line vote (Democrats opposed, Republicans in support).


6440-001-0001—For Support of University of California

17.

(a) Notwithstanding any other law, the University of California shall not expend moneys appropriated from the General Fund in the annual Budget Act to contract out for services currently or customarily performed by nonacademic employees to achieve cost savings in instances other than the following:

(1) If all the following conditions are met:

(A) The University of California (UC) or the contracting agency clearly demonstrates that the proposed contract will result in actual overall cost savings to the UC, provided that:

(i) In comparing costs, there shall be included the UC’s additional cost of providing the same service as proposed by the contractor. These additional costs shall include the salaries and benefits of additional staff that would be needed and the cost of additional space, equipment, and materials needed to perform the function.

(ii) In comparing costs, there shall not be included the UC’s indirect overhead costs unless these costs can be attributed solely to the function in question and would not exist if that function was not performed by the UC. Indirect overhead costs shall mean the pro rata share of existing administrative salaries and benefits, rent, equipment costs, utilities, and materials.

(iii) In comparing costs, there shall be included in the cost of a contractor providing a service any UC costs that would be directly associated with the contracted function. These continuing UC costs shall include, but not be limited to, those for inspection, supervision, and monitoring.

(B) Proposals to contract out work shall not be approved solely on the basis that savings will result from lower contractor pay rates or benefits. Proposals to contract out work shall be eligible for approval if the contractor’s wages are at the industry’s level and do not undercut UC pay rates.

(C) The contract does not cause the displacement of UC employees. The term “displacement” includes layoff, demotion, involuntary transfer to a new classification, involuntary transfer to a new location requiring a change of residence, and time-base reductions. Displacement does not include changes in shifts or days off, nor does it include reassignment to other positions within the same classification and general location or employment with the contractor, so long as wages and benefits are comparable to those paid by the UC.

(D) The savings shall be large enough to ensure that they will not be eliminated by private sector and UC cost fluctuations that could normally be expected during the contracting period.

(E) The amount of savings clearly justify the size and duration of the contracting agreement.

(F) The contract is awarded through a publicized, competitive bidding process.

(G) The contract includes specific provisions pertaining to the qualifications of the staff that will perform the work under the contract, as well as assurance that the contractor’s hiring practices meet applicable nondiscrimination standards.

(H) The potential for future economic risk to the UC from potential contractor rate increases is minimal.

(I) The contract is with a firm. A “firm” means a corporation, limited liability company, partnership, nonprofit organization, or sole proprietorship.

(J) The potential economic advantage of contracting is not outweighed by the public’s interest in having a particular function performed directly by the UC.

(2) If any of the following conditions are met:

(A) The services contracted are not available within the UC cannot be performed satisfactorily by UC employees, or are of such highly specialized or technical nature that the necessary expert knowledge, experience, and ability are not available through the UC.

(B) The services are incidental to a contract for purchase or lease or real or personal property. Contracts under this criterion, known as “service agreements,” shall included, but not be limited to, agreements to service or maintain office equipment or computers that are leased or rented.

(C) The policy, administrative, or legal goals and purposes of the UC cannot be accomplished through the utilization of persons selected pursuant to the regular or ordinary hiring process. Contracts are permissible under this criterion to protect against a conflict of interest or to ensure independent and unbiased findings in cases where there is a clear need for a different, outside perspective. These contracts shall include, but not be limited to, obtaining expert witnesses in litigation.

(D) The nature of the work is such that the criteria for emergency appointments apply. “Emergency appointment” means an appointment made for a period not to exceed 60 working days either during an actual emergency to prevent the stoppage of public business or because of the limited duration of the work. The method of selection and the qualification standards for an emergency employee shall be determined by the UC. The frequency of appointment, length of appointment, and the circumstances appropriate shall be restricted so as to prevent the use of emergency appointments to circumvent the regular or ordinary hiring process.

(E) The contractor will provide equipment, materials, facilities, or support services that could not feasibly be provided by the UC in the location where the services are to be performed.

(F) The services are of such an urgent, temporary, or occasional nature that the delay incumbent in their implementation under the UC’s regular or ordinary hiring process would frustration their very purpose.

(b) This section shall apply to personal service contracts entered into after January 1, 2013. This section shall not apply to the renewal of a personal services contract subsequent to January 1, 2013, if the contract was entered into before January 1, 2013, irrespective of whether the contract is renewed or rebid with the existing contractor or with a new contractor unless it has been significantly expanded.

(c) The University of California shall annually post both of the following on its Internet Web site:

(1) The number of, and contract amounts for, contracts entered into during the prior fiscal year, for services currently or customarily performed by nonacademic employees, to achieve cost savings.

(2) If compliance with (a) was required for the prior fiscal year, findings regarding how the University of California complied with that provision.