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HomeMy WebLinkAboutMINUTES - 09231986 - 2.4 TO."�, BOARD OF SUPERVISORS FROM: Phil Batchelor Contra County Administrator Cost„ DATE: September 23, 1986 lourty SUBJECT: Proposition 61--Gann Fair Pay Initiative SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION RECOMMENDATIONS: 1 . Adopt a position of opposition to Proposition 61. 2. Direct the County Administrator to identify the policy decisions which the Board of Supervisors needs to make in advance of the election in order to prepare on a contingency basis for the passage of Proposition 61 and report his recommendations to the Board. 3 . Authorize the County Administrator to take prudent . contingent administrative steps to implement Proposition 61 if it is passed. SUMMARY OF IMPACTS: Although Proposition 61 is poorly worded and it is very difficult to tell what the effect of some sections is, we believe that the following summarizes probable impacts on Contra Costa County and its citizens if Proposition 61 is passed. Each of these points is explained below. 1 . The County will have a potential unfunded $43 . 5 million liability for employees' vacation and sick leave accruals. 2 . Absenteeism among County employees will increase resulting in increased overtime costs. 3 . The County will. be unable to adequately defend itself against the Sun Valley Mall airplane crash claims, and other tort litigation, if it is unable to contract with expert tort liability attorneys. 4. The District Attorney will have difficulty hiring qualified expert witnesses in order to prosecute serious felonies. J CONTINUED ON ATTACHMENT: YES SIGNATURE: Z A& 5�t� XRECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE X APPROVE OTHER SIGNATURE(S): �'L{ u,,� l.0 A� //&,( �U� ACTION OF BOARD ON September 23, 1986 APPROVED AS RECOMMENDED X OTHER VOTE OF SUPERVISORS 1 HEREBY CERTIFY THAT THIS IS A TRUE X UNANIMOUS (ABSENT _ AND CORRECT COPY OF AN ACTION TAKEN AYES: NOES: AND ENTERED ON THE MINUTES OF THE BOARD ABSENT: ABSTAIN: OF SUPERVISORS ON THE DATE SHOWN. CC: County Administrator ATTESTED PHIL BATCHELOR. CLERK OF THE BOARD OF SUPERVISORS AND COUNTY ADMINISTRATOR BY ,DEPUTY M382/7-83 Page 2 5. Attorneys with inadequate knowledge and experience will be prosecuting serious felonies like homicide, rape, armed robbery and selling drugs. 6. Medical malpractice claims against the County will probably increase because the County will be unable to hire fully trained and experienced physicians. 7 . Merrithew Memorial Hospital will probably have to close if the County is unable to hire enough qualified physicians. 8 . The cost of major County construction projects will increase if construction contracts have to be renegotiated after two years. 9. Private physicians may have to reduce services to Medi-Cal patients in order to stay within the compensation limitations. 10. By 1996, 884 County employees, or 14. 5% of all employees, currently making $39,500 or more will be making the salary imposed by the initiative' s limits. BACKGROUND: I . Introduction The Board of Supervisors has asked the County . Administrator' s Office for a report on the impact of Proposition 61 (the "Gann" initiative) on Contra Costa County. The Senate Office of Research has done a thorough analysis of the text of the Proposition. They have identified 43 major drafting problems which make the Proposition difficult to analyze. Most of these 43 drafting problems will eventually have to be interpreted by the courts. We can, therefore, only make reasoned assumptions and point out some of the situations which are likely to occur if Proposition 61 is passed. The following analysis deals with the major elements of Proposition 61 and points out some of the likely consequences of its passage. We have also commented on the problems created by salary compaction and on some of the probable long-term consequences of the Proposition. II . Contracting Provisions A. Assumptions: We expect that the Courts will eventually interpret the initiative as meaning that no one individual, whether contracting with the County directly, or through a partnership or corporation, may receive more than 800 of the Governor' s salary annually from all public agencies nor more than $75/hour for contract services. B. What Will Occur: It appears that the County may be prohibited from entering into any contract which: 1) Provides for any individual to receive more than the cap provided for in the initiative, or 2) Provides for compensation in excess of $75 per hour, or Page 3 3) Is for more than two years in duration. Contracts which provide for cancellation by the county with, for instance, 30 days' advance notice, will probably have to be canceled and renegotiated. C. Impact The language on contracts in Proposition 61 is the most unclear and troubling in the entire initiative. The following probable impacts are based on County Counsel' s best judgment of how courts may interpret the language. Health Care The County contracts with a number of specialist physicians who perform major surgery, radiology, and similar medical services for the county. A number of these physicians receive from the County more than the maximum provided for in the initiative during a year. The county will have to restrict the number of services these physicians perform for the county. In order to maintain the level of services which are required, it will be necessary to try to locate additional physicians in these specialities to cover the services for which the existing contract physicians will be unable to be paid. Each of these physicians is, of course, providing his or her own medical malpractice insurance, a factor which is not taken into account by the initiative. To provide for two surgeons to each receive $64,000 from the county for the same amount of work now done by one physician will be administratively cumbersome and extremely difficult, if not impossible, to implement, given the shortage of skilled medical specialists. It should be noted that specialty physicians will be limited to $64,000 in public funds per year no matter how many public agencies they contract with. Under these circumstances, we expect that critical medical specialities may become unobtainable. Furthermore, most of our contract physicians are in private practice and see Medi-Cal patients. The initiative appears to restrict the physician' s "total compensation" from public funds to the maximum provided for in the initiative. Thus, the initiative could significantly reduce the level of medical care which is available to Medi-Cal recipients from private physicians. Whether this interpretation also includes Medicare payments is unknown, but there is nothing in the initative which specifically excludes compensation from the federal government. Legal The County contracts for a number of specialized legal services in such areas as condemnation law, anti-trust law, tort liability, and bond counsel. Currently, the county has nearly $1 billion in claims outstanding from the Sun Valley Mall crash alone. The best outside legal counsel charge far in excess of $75 per hour. The initiative presents a real risk that well-qualified representation in these legal specialty areas will become unavailable to the County. Page 4 The measure would also jeopardize the ability of the District Attorney to prosecute many criminal cases. In serious felony cases it' is frequently necessary to bring in expert witnesses to testify at the trial. Expert witnesses can cost up to $500 or more for a four-hour half day. Under the $75 per hour limit, the District Attorney will be unable to retain competent expert witnesses to testify for the prosecution. Private defense attorneys will be under no such limitation. Placing the prosecution at such a disadvantage can result in serious felons being set free when they should have been convicted. Engineering Services The engineering field is another one where the $75 per hour contract limit, and the $64,000 maximum contract compensation limit will present problems. The county is undertaking the construction of a new jail. This project will stretch over several years. Proposition 61 limits all contracts for services to no more than two years. The county will be contracting for the construction of a $48 million jail, but may be unable to pay its construction manager more than $64,000 per year. No architect on the project will be able to receive more than $64; 000, or $75 per hour. At the end of two years, the county may be required to renegotiate the construction contract. Costs almost certainly will increase after two years compared with contracting for the term of the project. The county also has contracts for transportation, geotechnical engineering, structural engineering, mechanical engineering services and Environmental Impact Reports which exceed the Proposition 61 limits. III . Vacation and Sick Leave Accruals A. Introduction The most troubling portion of the initiative for most employees is the rule prohibiting the accrual of vacation and sick leave. The initiative prohibits the use of vacation and sick leave except in the calendar year in which it is earned. At the end of the calendar year, all unused accruals are lost. B. Assumption County Counsel believes that even a State Constitutional Amendment cannot eliminate the vested right to vacation and sick leave accruals to which the employee is entitled as of November 4, 1986 . However, what happens to these accruals on December 31, 1986 is much less clear. Some legal opinions conclude that these accruals cannot be carried over to 1987, and that since the employee is vested with the accruals, they must be paid for by the County. The Auditor-Controller has estimated the value of these accruals as of November 4, 1986 at $43 . 5 million. Clearly, the County cannot pay these accruals during the current fiscal year. County Counsel has indicated that it may be Page 5 possible to pay off these accruals over a period of years, at loo interest per year on the unpaid balance. Doing so over a period of 10 years would cost a total of $67,390,000. Alternatively, it will be necessary to identify each employee' s accruals as of November 4, 1986 and track these balances separately until they are exhausted, assuming contrary to the language of Proposition 61, that they could be used after December 31, 1986 . A separate accounting will, in any event, be needed for the accruals earned between November 5, 1986 and December 31, 1986. These accruals will be lost on December 31, 1986, if the initiative passes. C. Impact One can reasonably expect employees to make serious efforts to avoid losing vacation or sick leave accruals. Thus, under Gann we expect that many employees will request vacation time and find some means of using their sick leave toward the end of every calendar year in order to avoid losing it. Currently, the County Retirement System encourages employees not to use all their sick leave. When an employee retires, sick leave accruals are partially credited to the employee' s length of service and age in determining the employee' s retirement pay. Under the initiative, since sick leave cannot be carried forward from year to year, there will be no point in trying to save sick leave accruals. In many departments, the absence of an employee due to sick leave means that other employees must be paid overtime, or temporary employees must be brought in and paid to cover for the employee using sick leave. In departments such as Health Services, Probation, the Sheriff ' s Office, and the Fire Districts, this can become very expensive. Under current policy, county employees can accrue two years of vacation time, at which point they lose further accruals above two years' worth. Reducing this to the same year in which vacation is accrued will encourage employees to take vacation time as it is accrued rather than saving it. This is disruptive administratively and will undoubtedly create morale problems. Employees also tend to save sick leave and vacation time for times they know they will have to be off for a period of time, such as elective surgery, maternity leave, etc. The ability to conserve accruals for these and emergency illnesses will, of course, be practically destroyed under the initiative. IV. Cap on Salaries A. Assumption For purposes of this analysis, "compensation" as used in the initiative is assumed to mean "salary" . Based on this assumption, the following will happen on November 5, 1986 : B. What Will Occur: o The salary of many permanent full-time County employees will be reduced to the cap provided for in the initiative. Most of these positions are Department Heads, physicians, dentists, lawyers, or judges. In addition, a number of law enforcement and fire district personnel are included. An additional 110 physicians and dentists who are permanent-intermittent or part-time will be affected. Page 6 C. Impact Health Care The most immediate impact will probably be felt in the Health Services Department. It is unlikely that top-quality physicians will work for the County for the maximum salary provided for in the initiative with no prospect for increases, when they could make more money in private practice. As physicians leave, it will be very difficult, if not impossible, to replace them with top-quality replacements. If it is possible to find physicians willing to work for the maximum provided in the initiative, they will probably be inexperienced. The most skilled physicians will leave the public sector. Local government will be left with those unable to work in the private sector. This holds the probability that in the future there will be more medical malpractice suits brought against the County. It is possible that the Health Services Department will no longer be able to staff Merrithew Memorial Hospital and the County' s outpatient clinics. If people who are entitled to receive County medical care are refused such care by the County and receive it from private physicians and hospitals, those private providers will have a claim against the County for the cost of that care. These claims will be for more than it would have cost the County and taxpayer costs for County medical care may actually rise because of the passage of Proposition 61. Legal The legal profession, like the health care profession, is one in which public agencies compete directly with the private sector for the best available talent. Currently, many attorneys come to work for the District Attorney' s Office, to gain valuable trial experience, have a reasonable career ladder, and choose to stay, making public prosecution their career. This is very important because the District Attorney is frequently pitted against the best private legal resources available. The most difficult cases, including homicides and the prosecution of major drug dealers, are assigned to the more experienced senior deputy district attorneys. The newer and less experienced attorneys typically are assigned to misdemeanor cases in Municipal Court until they have gained the trial experience and expertise to handle serious felony cases in Superior Court. We expect that with the passage of Proposition 61, the most experienced and most highly qualified attorneys will leave the District Attorney for the private sector, joining private law firms that are able and willing to compensate the talents they have sharpened with the District Attorney. It will also be more difficult to recruit and retain new, young attorneys when they realize there are limited career opportunities. With the departure of the most seasoned and experienced attorneys, less experienced district attorneys who are now prosecuting misdemeanor cases in Municipal Court Page 7 will have to be assigned to prosecute serious felony cases, such as murder, rape, armed robbery, and drug dealing. This will put the District Attorney at" a disadvantage and the result could well be fewer convictions of these serious felonies. In the County Counsel' s Office we are likely to see similar consequences. Again, the most promising attorneys can be expected to leave for the private sector. Public sector law is a highly specialized field in itself. The County Counsel' s Office tries to develop specialized knowledge of this complex field in individuals. If those key individuals leave for the private sector, it probably will not be possible to bring in new attorneys who possess that specialized knowledge. In addition, the increasingly complex area of administrative law and regulations at the State and Federal level demand attorneys willing and able to specialize in these areas. The loss of these individuals can be expected to cost the County more money in Court judgments. D. Compaction of Salaries The fact that there is a cap on the salaries of top management and specialized professionals in the County may be dismissed by some as of no major consequence to anyone other than the affected individuals. However, there will be some strange results short-term and some dramatic consequences longer term. Immediately, the District Attorney and the three top management levels in his office will all be reduced to the same salary. The same will be true in the Public Defender' s Office. The County Counsel and Assistant County Counsels will be making the same salary as will the Sheriff and Assistant Sheriff. In the Health Services Department, the Director, all of his top management staff, and all of the medical staff will be making the same salary. The compaction problems will quickly magnify. Assuming 5% annual salary increases for most County employees, in ten years, all employees now making $39, 500 will be at the cap. V. Long-Term Implications While some of the following comments are speculative, they reflect our best assessment of the long-term implications of Proposition 61 . If Proposition 61 passes, the County can probably anticipate a number of early retirements and resignations to take place within the first few months. This will probably occur first with Department Heads and their chief deputies who are most immediately impacted by the Initiative. Several Judges are likely to retire rather than accept a cut in pay. Less experienced staff will be asked to head departments. The brightest and best middle-level managers will begin looking for jobs in the private sector, or out-of-state. Well-qualified young people considering careers in the public sector will think twice about the reduced career opportunities and many can be expected to look for work in the private sector or out-of-state. It will become more and more difficult to recruit qualified candidates for the judiciary in California. A number of contract experts will Page 8 no longer be available to the public sector. Construction projects may be delayed and become more expensive to complete. Once the lawsuits and administrative problems of implementation have been resolved, we are likely to see public service in California become a second choice for many individuals--something to do while one is waiting for the job he or she really wants--rather than a professional career in which one can take pride. That will be a tragedy because for all its problems, California has a large body of professional, dedicated employees who are trying very hard to assist in running a government larger and more complex than many nations.