BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 215| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 215 Author: Alejo (D) Amended: 6/2/15 in Assembly Vote: 21 SENATE EDUCATION COMMITTEE: 8-0, 7/8/15 AYES: Liu, Runner, Block, Hancock, Leyva, Monning, Pan, Vidak NO VOTE RECORDED: Mendoza ASSEMBLY FLOOR: 78-2, 6/4/15 - See last page for vote SUBJECT: Local agency employment contracts: maximum cash settlement SOURCE: Author DIGEST: This bill reduces the maximum cash settlement that may be paid to a school district superintendent upon termination from 18 times of that employee's monthly salary to 12 times of that employee's monthly salary. This bill also prohibits a cash settlement in the case of a termination in which the school district believes and subsequently confirms that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices. ANALYSIS: Existing law: 1)Permits, if the contract with a school district superintendent is terminated, a cash settlement equal to the monthly salary of the superintendent multiplied by the number of months left AB 215 Page 2 on the unexpired term of the contract up to a maximum of 18 months. 2)Permits a cash settlement of up to six months times the monthly salary in the case of a superintendent who is terminated because the school district believes and subsequently confirms through an independent audit that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices. This bill: 1)Reduces the maximum cash settlement that a local agency employer can provide to a district superintendent upon termination from 18 months of that employee's monthly salary to 12 months of that employee's salary. 2)Prohibits a local agency employer from providing a cash or noncash settlement to a superintendent upon termination if the local agency believes, and subsequently confirms, pursuant to an independent audit, that the superintendent has engaged in fraud, misappropriation of funds, or other illegal fiscal practices. This provision applies only to a contract for employment executed on or after January 1, 2016. Comments According to the California Department of Education, the average annual salaries for unified school district superintendents, by district size, in 2012-13, is as follows: 1)$116,606 for districts with less than 1,500 average daily attendance (ADA); 2)$151,912 for districts with 1,500 to 4,999 ADA; 3)$183,557 for districts with 5,000 to 9,999 ADA; 4)$206,292 for districts with 10,000 to 19,999 ADA; and 5)$227,183 for districts with more than 20,000 ADA. The author's office indicates that the highest salaries range from $265,773 to $322,159, which would translate to a range in AB 215 Page 3 cash settlements from $398,660 to $483,239 under existing law. Some settlements have generated public scrutiny. In one instance, a school district put its superintendent on a paid leave of absence for six months and then provided an 18-month cash settlement, essentially providing a 24 month "buy-out" at a cost of approximately $325,000. Unintended consequences. While the purpose of this bill is to save money for students by placing a cap on school district superintendents' severance pay, it could have several unintended consequences. First, by reducing and/or eliminating some of the "protections" in place for superintendents in existing law, this bill could provide potential disincentives for highly-qualified candidates to become a superintendent. This could also affect the school district's recruitment efforts and its ability to hire a quality superintendent. Further, this bill could increase superintendent turnover by reducing the penalty districts pay for terminations prior to the fulfillment of a contract. While this bill reduces the cost of a cash settlement in which there is more than 12 months remaining on a contract, it is not clear that it will necessarily reduce the cost of cash settlements overall. For example, to the extent that the relatively high cost of a settlement serves as a disincentive to terminate a contract, reducing the cost of a settlement could have the opposite effect and increase terminations. This would then increase the cost of such settlements. FISCAL EFFECT: Appropriation: No Fiscal Com.:NoLocal: No SUPPORT: (Verified7/9/15) None received OPPOSITION: (Verified7/9/15) AB 215 Page 4 Association of California School Administrators California School Boards Association Small School Districts' Association ARGUMENTS IN SUPPORT: According to the author's office, "the combination of high paying salaries and high superintendent turnover is a costly issue. By placing a cap on district superintendent's severance pay, we can save money for students, begin to improve our school administrative processes, and demonstrate fiscal discipline in the administration of taxpayer dollars." ARGUMENTS IN OPPOSITION: The Association of California School Administrators (ASCA) indicates that this bill "unfairly singles out school superintendents (arguably the most visible local official) and reduces the Early Termination Clause for a breach of contract to up to 12 months. Claiming that Early Termination Clauses occur more frequently with school superintendents can in part be attributed to the number of school districts (1,000) nearly twice the total number of cities (482) and counties (58) combined." ACSA further argues that superintendents are at-will employees, who have no due process rights and can be terminated any time with cause. When a superintendent is released from his or her duties, it can be difficult to find another superintendent's job and the release is often career ending. "Early Termination Clauses are not considered extra pay nor are they a gift of public funds." Rather, cash settlements are "damages paid to an employee who is released by breach of contract." ASSEMBLY FLOOR: 78-2, 6/4/15 AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins AB 215 Page 5 NOES: Chávez, Levine Prepared by:Lenin Del Castillo / ED. / (916) 651-4105 7/10/15 14:06:10 **** END ****