Local Agency Employee Organizations, Impasse Procedures II

Constitution Requires the State to Reimburse Local Governments for Mandated Activities. State law tasks the Commission on State Mandates (the Commission) with determining whether new state laws or regulations affecting local governments create state-reimbursable mandates. Typically, the process for determining whether a law or regulation is a state-reimbursable mandate takes several years. State law further requires our office to analyze any new mandates identified by the Commission as a part of our annual analysis of the state budget. In particular, state law directs our office to report on the annual state costs for new mandates and make recommendations to the Legislature as to whether the new mandates should be repealed, funded, suspended, or modified. Below, we discuss the Local Agency Employee Organizations, Impasse Procedures II mandate, which is one of two newly identified state mandates in the 2020‑21 budget.

Background

Public Employment Relations Board (PERB) Administers State Law Authorizing Collective Bargaining for Local Governments. PERB is a quasi-judicial state agency that administers eight statutes authorizing collective bargaining for public employees in California, including the Meyers-Milias-Brown Act (MMBA). The MMBA establishes collective bargaining between California’s municipal, county, and local special district employers and their employees. Through the collective bargaining process, employer and employee representatives negotiate wages, hours, and other terms and conditions of employment.

State Law Establishes Fact-Finding Process Under MMBA. Occasionally, employers and employee representatives cannot reach agreement at the bargaining table. In these cases, the MMBA establishes the procedures that the parties follow. Section 3505.4 of the Government Code—as amended by Chapter 314 of 2012 (AB 1606, Perea)—establishes a fact-finding process when the parties cannot reach an agreement. The law requires employee representatives and employers to do specific activities within specific time frames to set up the fact-finding panel and to aid the panel in its work. The fact-finding panel makes findings of fact and recommends advisory terms of settlement to the parties. The purpose of a fact-finding panel is to provide a mechanism for employers and employees to overcome their disagreements at the table and reach an agreement.

Commission Determined Legislation Created a State-Reimbursable Mandate. In Local Agency Employee Organizations: Impasse Procedures II, the Commission found that Government Code section 3505.4—as amended by Chapter 314—imposes new state-mandated activities and costs on local governments by requiring local governmental employers to participate in the fact-finding process when an employee organization requests fact-finding. (In a prior decision, Local Agency Employee Organization: Impasse Procedures I, the commission determined that the fact-finding process established in law before Chapter 314—a process established by Chapter 680 of 2011 [AB 646, Atkins]—did not require local governmental employers to participate in a fact-finding process.) The Commission’s Impasse Procedures II decision makes reimbursable by the state various costs incurred by a local government to participate throughout the fact-finding process. The Commission estimates that the initial claims from local governments for costs incurred by the mandate could be $1 million. Additionally, the Commission estimates annual costs to the state to pay this reimbursable state mandate could range between $336,000 and $1.8 million.

Governor’s Budget

Governor Funds Mandate. The Governor’s 2020‑21 budget proposes $1 million General Fund to reimburse local agencies for the costs they incurred complying with the Local Agency Employee Organizations, Impasse Procedures II statute while it was under review by the Commission. Funding the mandate would make local compliance with the above requirements mandatory in 2020‑21 and the state responsible for the costs incurred by local governments.

LAO Comments

Fiscal Effects Difficult to Estimate. The Commission’s estimated range of annual costs is based on the average number of impasse procedures and reimbursement claims between 2015‑16 and 2017‑18. While the Commission’s estimate seems reasonable, it is difficult to estimate what the state’s costs likely will be in the future. The primary factor that affects the potential annual cost to the state is the number of impasses resulting in fact-finding.

Number of Fact-Finding Cases Likely Varies Significantly Year to Year. In the three years used by the Commission to determine the cost of the mandate, the number of fact-finding projects in a fiscal year ranged from 37 to 44—averaging to about 40 cases each year. PERB provided us data on the number of fact-finding projects opened in the eight fiscal years between 2011‑12 and 2018‑19. Like the three years used by the Commission, the average number of opened fact-finding cases across these eight fiscal years also averaged to about 40 cases each year; however, the range was much more wide with only 15 cases in 2011‑12 and 59 cases in 2012‑13. With such variability year to year in the number of fact-finding cases, the state’s annual costs to reimburse local governments for these costs likely will vary year to year.

Impasse Could Be More Likely During Recessions. We were not able to acquire data on the number of impasses before 2011‑12. This means that the data we have only reflect years when the economy was growing—a period of the economic cycle when government tends to have growing revenues. Impasse could be more likely in years when governmental employers are facing declining revenues—for example, during periods of economic downturns—and are less willing to agree to increases in employee compensation.

Recommendation

Fund Mandate. The intent of Chapter 314 was to permit employee representatives to request fact-finding. The Commission has found that a local government’s activities related to participating in the fact-finding process constitute a reimbursable mandate. Given it was the intent of the Legislature to allow employee representatives to request fact-finding and for local governmental employers to participate in the fact-finding process, we recommend that the Legislature fund the mandate in 2020‑21. Going forward, the annual budget process gives the Legislature the opportunity to assess whether the costs to the state are reasonable and consider the extent to which the law has improved local government labor relations.