BILL ANALYSIS Ó
AB 399
Page 1
Date of Hearing: April 29, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
399 (Ridley-Thomas) - As Amended April 14, 2015
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill allows classified, non-certificated public school
employees to collect unemployment insurance (UI) benefits
between school years. Beginning July 1, 2016 with two weeks of
benefits, the bill phases in the level of benefits by two-week
AB 399
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increments over four years, up to a total of eight weeks per
year by July 1, 2019.
FISCAL EFFECT:
1)There are approximately 250,000 classified, non-certificated
employees throughout the state. If 60% of those employees
received the maximum allotment of weeks of UI during summer
vacation each year, it would cost an additional $90 million
per year, each year for four years, until the cost reached
approximately $360 million in fiscal year in 2019-20 (School
Employees Fund). Costs to the School Employees Fund are
funded by school districts, county offices of education,
community college districts, and some charter schools, whose
employees receive UI benefits through this fund instead of
through the UI Trust Fund.
2)The increased costs in UI for these workers would likely
increase the quarterly Local Experience Charges (LECs) paid by
school districts. It is unknown how much those costs would
increase, but increased costs could easily exceed millions of
dollars throughout all the school districts across the state.
LECs would depend on how many employees sought UI benefits in
the particular district.
3)There could be a direct cost impact to the UI Trust Fund,
potentially of millions to tens of millions of dollars, if
some charter school employees receive benefits through this
fund instead of the SEF. EDD does not track which charters
rely on UI Trust Fund versus those that use a different
reimbursement method, but reports that only a quarter of
charters participate in SEF, meaning benefits paid to
employees of the remaining three-quarters would potentially
impact the UI Trust Fund (though it is unclear how many
schools participate in the tax-rated methodology that impacts
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the UI Trust Fund). The remainder of charters reimburse the
UI Trust Fund directly for costs incurred to provide benefits
to their employees.
Furthermore, the Employment Development Department (EDD) has
raised a concern about whether increased expenditures from the
UI Trust Fund could trigger an increase in federal UI taxes.
Since the UI Trust Fund is insolvent and owes funds to the
federal government, federal law requires a tax credit received
by employers for their federal UI tax liability is reduced
incrementally each year until the loan is repaid. There are
also additional credit reductions, from which the state
currently has a waiver. A condition of the waiver is that
California does not take any action to reduce solvency from
the UI Trust Fund. Increasing expenditures without
corresponding revenue increases would reduce solvency,
potentially threatening the waiver.
4)Finally, since this bill will result in such a large overall
increase in UI benefits being paid out to school employees,
there may be an indirect effect on UI Trust Fund solvency.
Schools that currently do not use a tax-rated UI Trust Fund
methodology may be financially better off to move to such a
methodology, as the maximum tax rates for UI are capped at
6.2% of the first $7,000 of wages, a total of $434 per
employee. That rate could be less than what they would end up
paying through the SEF, though the large SEF fund balance
could mitigate this for a year or so. The more schools that
choose to move to a tax-rated methodology under this level of
benefit expenditure, the greater the impact on UI Trust Fund
solvency.
5)EDD also warns this bill may not conform to federal law, as it
treats public school employees different than employees of
nonprofits. Sanctions for non-conformity include withholding
of a state's grant for administration of the UI program, and
the loss of a federal tax credit for a state's employers.
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COMMENTS:
1)Purpose. According to the author, thousands of school
employees find the months between academic years to be a
stressful period financially. Existing law prohibits certain
education employees, those who are not teachers, researchers,
or administrators, from receiving benefits during months in
which school is not in session, unless they meet very specific
criteria. Many school employees rely on summer school to
maintain a reliable income source. Since 2007, however, budget
cuts have led to the elimination of summer school in many
districts, leaving tens of thousands of education employees
without a steady income or access to unemployment insurance
benefits. This bill would allow those employees to receive
unemployment insurance during the summer break between school
years.
2)Federal Law. Federal law generally requires equal treatment
for the payment of UI benefits to certain nonprofit
organizations, Indian tribes, and state and local government
workers in the same amount, on the same terms, and subject to
the same conditions, as other workers subject to state law. An
exception to the equal treatment requirement pertains to the
denial of UI for professional and nonprofessional employees of
educational institutions during a period between or within
academic years or terms when there is a contract or reasonable
assurance that the employee will go back to work in the same
or similar capacity in the ensuing academic year or term.
States must deny UI benefits to professional school employees
between and within the academic years or terms when a contract
or reasonable assurance exists. However, states have the
option of providing UI benefits to nonprofessional school
employees between and within the academic years or terms when
a contract or reasonable assurance exists.
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3)School Employees Fund (SEF). Public school employers, K-12 and
community colleges may elect to participate in the SEF, which
is a pooled-risk fund administered by the EDD, which collects
quarterly contributions based upon a percentage of total wages
paid by public schools and community college districts.
Employers who participate in the SEF may also have to pay an
additional quarterly Local Experience charge if they have
higher UI costs charged to their individual accounts.
Contributions deposited in the School Employees Fund are used
to reimburse the UI Trust Fund for the cost of UI benefits
paid to former employees. The SEF had a projected reserve of
$485 million at the end of the 2014-15 fiscal year.
4)Previous Legislation. AB 1638 (Bocanegra) of 2014 and AB 615
(Bocanegra) of 2013 were similar to this bill, and were both
held on the Suspense File of this committee.
Analysis Prepared by:Lisa Murawski / APPR. / (916)
319-2081