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Gut-and-Amend Bill May Significantly Impact City Budgets

AB 1250 Set for April 19 Hearing, Cities Urged to Oppose

April 14, 2017
A recent gut-and-amend bill targeting cities and counties that contract for city services will be heard in the Assembly Public Employees Retirement and Social Security Committee on Wednesday April, 19. 
 
As amended, AB 1250 (Jones-Sawyer) a multifaceted attack on local discretion and places substantial burdens on local agencies by adding onerous, over prescriptive and unnecessary requirements that have significant impacts on local governance. Cities are urged to review this bill and take immediate action to oppose and members in Sacramento on April 19 for Legislative Action Day can testify directly in committee in opposition.

Among other things AB 1250 eliminates local agency hiring authority by limiting local agencies’ ability to utilize a contract for the sole purpose of cost savings through salaries and benefits. This creates a significant hurdle as agencies are at a near breaking point on their unfunded actuarial liability (UAL) and normal pension costs.
 
CalPERS last December lowered its assumed rate of return from 7.5 percent to 7 percent. This action alone is projected to increase total pension obligations in some cities to 65–70 percent or higher of total payroll by FY 2022-23. The full impact will hit in FY 2024-25. Temporarily contracting out for services until the pension fund becomes cash positive again thereby resulting in reduced short-term employer liability may be the only option cities have to provide services to the public. For more on CalPERS action, please see “CalPERS Board Approves Lowering of Discount Rate,” CA Cities Advocate, Dec. 21, 2016.
 
While disregarding the need for cost savings for cities AB 1250 significantly increases cost through substantial increased workload. Under this measure, if a city choses to renew any of its existing contracts or award new contract they will be required to conduct a full economic analysis of the potential impacts of outsourcing, a full environmental impact analysis caused by contracting for the services — and the city must go through the expense of conducting an annual audit of each contract which must then be considered by the city council before work can begin. 
 
AB 1250 also applies joint and several liabilities for employment law violations arising from performance of the contractor as well as torts committed by the contractor or any of its subcontractors in the course of providing services under the contract. This would place overly restrictive requirements on cities and potentially open that agency up to costly and protracted litigation.
 
Local governments have a long history of addressing service delivery challenges with efficient creativity, self-reliance and innovation. Unique local challenges and limited budgets continue to fuel innovative efforts to obtain expertise and provide high quality services. City employees provide many services, while others such as refuse collection, waste water treatment, traffic signal maintenance and other specialized services are provided on a contract basis. Law enforcement services may also be provided via contract with the sheriff and fire and park services by a special district.  
 
The League remains steadfast in its advocacy for policies that promote and support local governments in their work to maintain sustainable and healthy finances — as good stewards of taxpayer dollars. However all cities should oppose AB 1250 as many local agencies have not achieved the same level of economic prosperity compared to pre-2008 recession levels.
 
Take Action
 
With Legislative Action Day in Sacramento on April 19, cities attending the event have an additional opportunity to testify in opposition to AB 1250 in Assembly Public Employees Retirement and Social Security Committee. If you are attending and can testify, please contact League Legislative Representative Dane Hutchings at (916) 658-8210.
 
Cities can submit opposition letters AB 1250 through the League’s online action center.
 
In addition, cities can also find the full bill text, the League’s opposition letter and a sample letter on the League’s website through the bill search function. These materials are available at www.cacities.org/billsearch by plugging SB 1250 into the search function.  
 


 
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