HOUSE Amended 2nd Reading January 14, 2004Second Regular Session Sixty-fourth General Assembly STATE OF COLORADO ENGROSSED This Version Includes All Amendments Adopted on Second Reading in the House of Introduction LLS NO. 04-0265.02 Julie Pelegrin HOUSE BILL 04-1011 HOUSE SPONSORSHIP King SENATE SPONSORSHIP Anderson, and Andrews House Committees Senate Committees Education A BILL FOR AN ACT Concerning the employment status of persons employed within the state system of higher education. Bill Summary (Note: This summary applies to this bill as introduced and does not necessarily reflect any amendments that may be subsequently adopted.) Interim Committee on State Government Expenditures. Authorizes a governing board of a state institution of higher education to withdraw the employees of the governing board and of the state institution of higher education that are under the supervision and control of the governing board from the state personnel system and adopt an alternative personnel system. Specifies the minimum requirements of an alternative personnel system. Allows state personnel system employees who are employed, prior to the effective date of the withdrawal, by the governing board or by a state institution of higher education under the control and supervision of the governing board and who continue to be employed after that date, to elect to remain state personnel system employees or to become employees within the governing board's alternative personnel system. Prohibits employees who elect to leave the state personnel system from returning to the state personnel system while they remain in the same employment. Protects the employment rights, including participation in the public employees' retirement association ("PERA"), of state personnel system employees who elect to remain within the state personnel system. Allows employees who elect to become employees within the governing board's alternative personnel system to elect to join the governing board's optional retirement plan, if any, or to continue to participate in PERA. Makes conforming amendments. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. Article 5 of title 23, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW SECTION to read: 23-5-116.5. Governing boards - personnel - withdrawal from state personnel system - alternative personnel system - election. (1) The general assembly hereby finds and declares that: (a) Pursuant to section 5 of article VIII of the state constitution, the governing boards of the state institutions of higher education shall have the general supervision of their respective institutions and the exclusive control and direction of all funds of and appropriations to their respective institutions, unless otherwise provided by law. (b) Section 13 of article XII of the state constitution provides that the personnel system of the state shall comprise all employees of the state, with stated exceptions, and establishes and authorizes statewide rules and procedures to govern the personnel system. (c) As a specific statement of the constitutional powers of the governing boards of the state institutions of higher education to supervise their institutions and, especially, to control and direct their funds, the provisions of section 5 of article VIII of the state constitution take precedence over the general provisions of section 13 of article XII of the state constitution, and the employees within the state system of higher education are subject to the state personnel system only as may be required by statute. (d) Prior to the enactment of this section, the general assembly, through the exercise of its plenary authority and pursuant to section 5 of article VIII of the state constitution, has chosen to limit the authority of the governing boards of the state institutions of higher education with regard to the supervision of their respective institutions of higher education by statutorily including the employees of the state institutions of higher education in the personnel system of the state, with the exception of faculty members and administrators, who are exempt from the personnel system pursuant to section 13 of article XII of the state constitution. (e) The current economic circumstances within the state have required substantial reductions in the funding appropriated for state institutions of higher education, causing these institutions to enact severe budget cuts and seriously straining the institutions' ability to adequately serve the people of the state of Colorado within the institutions' available resources. (f) Each state institution's lack of control over the high costs associated with employing persons through the state personnel system, because of the necessary statewide, standardized rules and procedures attendant with the state personnel system, has significantly hindered each governing board's ability to reconfigure its budget and flexibly adjust its spending and costs to provide the highest possible level of service for Colorado's citizens. (g) In March of 2003, the governor established the commission on civil service reform to review Colorado's civil service system and to identify and recommend reforms to better serve the needs of state government, public employees, and taxpayers. In the commission's final report, it recommends that the general assembly enact legislation authorizing each governing board to determine whether it will participate in the state personnel system or establish its own personnel system to meet its specific and unique needs. (h) Based on its review of the operations of the state personnel system with regard to state institutions of higher education and extensive testimony taken from state institution administrators, the commission on civil service reform found that most state institutions of higher education maintain at least two, and in some cases many more, personnel systems to accommodate the employees who are within the state personnel system and the different classes of employees who are exempt from the state personnel system. The commission concluded that allowing the governing boards to establish their own personnel systems for all of their employees would reduce the actual costs and reduce the administrative difficulties and human resource costs of maintaining multiple personnel systems. (i) The alternative personnel systems developed by state institutions of higher education in recent years for employees who are exempt from the state personnel system provide at least a comparable, and in some cases better, level of service and benefits compared to those provided by the state personnel system, and it is in the best interests of all of the employees of the governing boards and the state institutions of higher education to provide an increased level of responsiveness, service, and employee benefits to all employees within the state system of higher education. (j) It is necessary to ensure the greatest possible access to higher education by the people of Colorado by providing the greatest possible degree of flexibility to the governing boards to control costs, expenditures, and resource allocation. (k) It is necessary for the protection of the best interests of the people of Colorado to allow the governing boards to decide whether to participate in the state personnel system or to establish their own alternative personnel systems for employees within the state system of higher education with regard to future employees and to allow persons employed within the state system of higher education as of the date the employing governing board chooses to withdraw from the state personnel system to choose whether to transfer their employment out of the state personnel system. (l) In the same manner that the general assembly, through the exercise of its plenary authority and the provisions of section 5 of article VIII of the state constitution, had authority to enact legislation to include employees of the state institutions of higher education in the personnel system of the state, the general assembly has authority to enact legislation to allow the withdrawal of those employees from the personnel system of the state. (2) As used in this section, unless the context otherwise requires: (a) "PERA" means the public employees' retirement association created in part 2 of article 51 of title 24, C.R.S. (b) "State institution of higher education" means an institution of higher education that is under the direction and control of the university of Colorado board of regents, the board of governors of the Colorado state university system, the board of trustees for the university of northern Colorado, the board of trustees of the Colorado school of mines, the board of trustees for Adams state college, the board of trustees for Fort Lewis college, the board of trustees for Mesa state college, the board of trustees for Metropolitan state college of Denver, the board of trustees for Western state college of Colorado, or the state board for community colleges and occupational education, or an institution of higher education that is a local junior college organized pursuant to part 1 of article 71 of this title. (c) "Withdrawal date" means the effective date upon which a governing board withdraws from the state personnel system, as stated in the resolution adopted pursuant to subsection (3) of this section. (3) (a) On or after July 1, 2004, a governing board may, by resolution, choose to withdraw the employees of the governing board and of the state institutions of higher education that are under the supervision and control of the governing board from the state personnel system. The resolution shall include establishment or identification of an alternative personnel system for the governing board's and state institution of higher education's employees. The resolution shall also specify the time period during which the persons employed by the governing board and its state institutions of higher education on the effective date of the withdrawal may elect whether to remain as employees within the state personnel system or become employees of the governing board or the state institution of higher education within the alternative personnel system established by the governing board, as provided in subsection (6) of this section. (b) In determining whether to withdraw employees from the state personnel system, each governing board shall provide opportunity for the existing state personnel system employees of the governing board and the institutions of higher education that are under the supervision and control of the governing board to have input during the development of an alternative personnel system and prior to adoption of the resolution to withdraw adopted pursuant to paragraph (a) of this subsection (3). (4) A governing board that chooses to withdraw from the state personnel system shall ensure that the alternative personnel system established for its employees and the employees of the state institutions of higher education that are under the supervision and control of the governing board complies with the intent of section 15 of article XII of the state constitution. (5) If a governing board chooses to withdraw from the state personnel system, all employees of the governing board and of the state institutions of higher education that are under the supervision and control of the governing board who are hired on or after the withdrawal date shall be employees of the governing board or state institution of higher education and shall not be employees within the state personnel system. As employees of the governing board or state institution of higher education, they shall be included in and subject to the alternative personnel system adopted by the governing board and they shall not be subject to the state personnel system laws. If the governing board or state institution of higher education establishes an optional retirement plan pursuant to the provisions of article 54.5 of title 24, C.R.S., an employee of the governing board or state institution of higher education who is hired on or after the withdrawal date shall either participate in the optional retirement plan or, if allowed by the governing board or otherwise allowed pursuant to the provisions of section 24-54.5-105 (2) (b), C.R.S, choose whether to participate in the optional retirement plan or PERA. If the governing board or state institution of higher education does not establish an optional retirement plan, an employee of the governing board or state institution of higher education who is hired on or after the withdrawal date shall participate in PERA. (6) (a) If a governing board chooses to withdraw from the state personnel system, a person who, prior to the withdrawal date, is an employee of the governing board or of a state institution of higher education under the supervision and control of the governing board and who is included in the state personnel system and who continues to be an employee of the governing board or state institution of higher education on and after the withdrawal date shall continue to be an employee within the state personnel system, unless he or she elects to become an employee of the governing board or state institution of higher education within the alternative personnel system adopted by the governing board. An employee of the governing board or the state institution of higher education shall make the election to remain within the state personnel system or to become an employee within the alternative personnel system within the time period established for election by the governing board in the resolution adopted pursuant to subsection (3) of this section. (b) A person who elects to continue as an employee in the state personnel system shall retain all rights and privileges of the state employment status which is applicable to the employee's position, including but not limited to participation in PERA. The employee shall not be discriminated against in training, promotion, retention, assignment of duties, granting of rights and benefits, or any other personnel action. (c) In the case of a dispute involving a person who elects to continue as an employee in the state personnel system, the governing board and state institution of higher education shall agree to accept resolution of all disciplinary appeals or other employment disputes governed by the statutes of the state personnel system or the rules of the state personnel department according to the rules and procedures applicable to members of the state personnel system; except that, if the dispute involves an employee in the state personnel system and an employee of the governing board or state institution of higher education, resolution of the dispute shall be governed by the rules and procedures of the alternative personnel system adopted by the governing board. (d) An employee who elects to become an employee in the governing board's alternative personnel system shall not thereafter return to state employment status while employed by the governing board or state institution of higher education. An employee who elects to become an employee in the governing board's alternative personnel system shall receive full credit for sick leave and annual leave accrued while employed as a state employee. (e) An employee who elects to become an employee in the governing board's alternative personnel system shall, at the time of election, make an irrevocable choice whether to continue to participate in PERA or to participate in an optional retirement plan if the governing board has adopted one. If the employee elects to continue to participate in PERA or if the governing board does not adopt an optional retirement plan, the employee shall continue to participate in PERA, even though the employee is no longer within the state personnel system. SECTION 2. 24-50-101 (1), (3) (c), and (3) (d), Colorado Revised Statutes, are amended, and the said 24-50-101 is further amended BY THE ADDITION OF A NEW SUBSECTION, to read: 24-50-101. Short title - legislative declaration - terminology. (1) This article shall be known and may be cited as the "State Personnel System Act". It is the purpose of this article and the personnel rules adopted pursuant to this article to provide a sound, comprehensive, and uniform system of personnel management and administration for the employees within the state personnel system as defined by the constitution of the state of Colorado and laws enacted pursuant thereto, including all employees of the state colleges and universities not otherwise exempted by law who were hired prior to the date on which the employing governing board or state institution of higher education withdrew the employees of the governing board and of the state institutions of higher education that are under the supervision and control of the governing board from the state personnel system pursuant to section 23-5-116.5, C.R.S., and who elect to continue as employees within the state personnel system. (3) (c) It is the duty of the state personnel director to establish the general criteria for adherence to the merit principles and for fair treatment of individuals within the state personnel system. It is the responsibility of the state personnel director to provide leadership in the areas of policy and operation of the state personnel system as well as to provide consultant services to executive branch agencies and to such institutions of higher education as continue to employ state personnel system employees to further their professional management of human resources in state government. The state personnel director, pursuant to the "State Administrative Procedure Act", article 4 of this title, shall provide necessary directives and oversight for the management of the state personnel system and in the discharge of his or her constitutional duty to administer the state personnel system. (d) The heads of principal departments and presidents of colleges and universities shall be responsible and accountable for the actual operation and management of the state personnel system for their respective departments. The presidents of colleges and universities that continue to employ state personnel system employees shall be responsible and accountable for the actual operation and management of the state personnel system for their respective colleges or universities. Such operation and management shall be in accordance with directives promulgated by the state personnel director, who shall provide postaudit review of such operation and management. Presidents of colleges and universities that continue to employ state personnel system employees shall be the appointing authorities for employees of their respective institutions. (5) Pursuant to the provisions of section 23-5-116.5, C.R.S., a governing board of a state institution of higher education may choose to withdraw the employees of the governing board and of the state institutions of higher education that are under the supervision and control of the governing board from the state personnel system. A person hired by a governing board that so chooses, or by a state institution of higher education that is under the supervision and control of the governing board, on or after the effective date of the withdrawal shall be an employee of the governing board or state institution of higher education and shall not be an employee within the state personnel system, as provided in section 23-5-116.5, C.R.S. State personnel system employees who are employed by the governing board or state institution of higher education prior to the effective date of the withdrawal, and who are state personnel system employees and continue as employees after said date shall elect whether to continue as employees within the state personnel system or to become employees within the alternative personnel system adopted by the governing board, as provided in section 23-5-116.5, C.R.S. Following the withdrawal of employees from the state personnel system, pursuant to section 23-5-116.5, C.R.S., the provisions of this article and all other state personnel system laws and rules shall apply to the governing board and to the state institutions of higher education under the supervision and control of the governing board only with respect to employees who were hired prior to the effective date of the withdrawal and who elect to continue as state personnel system employees after said date. SECTION 3. 24-50-104 (1) (c) (II) (E), (1) (c) (IV), and (1) (c.5) (III), Colorado Revised Statutes, are amended to read: 24-50-104. Job evaluation and compensation - repeal. (1) Total compensation philosophy. (c) (II) The department of personnel shall develop guidelines and coordinate a performance system pursuant to the provisions of subparagraph (I) of this paragraph (c) that: (E) Includes uniform and consistent guidelines for all state departments and institutions of higher education that continue to employ state personnel system employees; (IV) The state personnel director may authorize state departments and such institutions of higher education as continue to employ state personnel system employees to establish a program for the particular state department or institution to implement the performance system prepared by the department of personnel in accordance with the provisions of this paragraph (c). The state personnel director shall encourage state departments and such institutions of higher education as continue to employ state personnel system employees to implement performance evaluations of employees that are as objective as possible and that, as soon as possible and wherever feasible, include an assessment from multiple sources of each employee's performance. Such sources shall include, where applicable, the employee's self-assessment, the employee's superiors, subordinates, peers, and any other applicable sources of an employee's performance. The state personnel director shall adopt procedures to establish a process to resolve employee disputes related to performance evaluations that do not result in corrective or disciplinary action against the employee. Each program established by a state department or institution of higher education pursuant to this subparagraph (IV) shall be subject to the director's approval. Except as provided in paragraph (d) of subsection (5) of this section, salaries may be increased or left unchanged subject to available appropriations for the performance system; except that no annual increase shall be guaranteed. (c.5) (III) The head of each principal department and of each state-supported institution of higher education that continues to employ state personnel system employees, respectively, shall determine annually on May 1 whether each supervisor in the department or institution has completed the mandatory performance evaluation required for each employee in the state personnel system during the preceding twelve months. If any evaluations have still not been completed by July 1, the supervisor may be subject to demotion. If a supervisor has not timely completed annual performance evaluations for two consecutive years, the supervisor shall be demoted to a nonsupervisory position. SECTION 4. 24-50-109.5 (2) and (3), Colorado Revised Statutes, are amended to read: 24-50-109.5. Fiscal emergencies - emergency orders. (2) With the advice and assistance of the state personnel director, the governor shall take such actions as necessary to be utilized by each principal department and by each institution of higher education that continues to employ state personnel system employees to reduce state personnel expenditures in the event of a fiscal emergency. Such actions shall include, but need not be limited to, separations, voluntary furloughs, mandatory furloughs, suspension of increases in salary and state contributions for group benefit plans, suspension of performance awards, job-sharing, hiring freezes, forced reallocation of vacant positions, or a combination thereof. Any suspension of salary increases, increases in state contributions for group benefit plans, or performance awards shall apply statewide to all employees in the state personnel system. If mandatory furloughs are utilized in any principal department or any institution of higher education that continues to employ state personnel system employees, such furloughs shall be implemented by each appointing authority so that all state personnel system employees under such authority, regardless of status, position, or level of employment, are furloughed for the same length of time, consistent with section 24-2-103 (2). Employees of the following agencies and employees with duties as described shall not be subject to mandatory furlough: The Colorado state patrol, correctional officers, police officers, employees of the department of human services providing hands-on care, and employees providing hands-on nursing care. (3) Promptly after the adoption of a joint resolution declaring a fiscal emergency, the head of each principal department and the governing board of each institution of higher education that continues to employ state personnel system employees shall order into effect, on an emergency basis and in accordance with the actions taken by the governor pursuant to subsection (2) of this section, those measures they find necessary and appropriate to reduce the personnel expenditures of their departments or institutions to enable them to operate within available revenues. No such order shall have an effect beyond the time period specified in the joint resolution declaring the fiscal emergency. SECTION 5. 24-50-114 (2), Colorado Revised Statutes, is amended to read: 24-50-114. Temporary appointments - term - tenure. (2) The state personnel director may, by rule, authorize principal department heads and the presidents of colleges and universities that have not withdrawn from the state personnel system to employ persons from outside the state personnel system on a temporary basis while an eligible list is being provided or in emergency or seasonable situations nonpermanent in nature, but in each case the period of employment shall not exceed six months except for personal services contracts as permitted by part 5 of this article. SECTION 6. 24-50-135, Colorado Revised Statutes, is amended to read: 24-50-135. Exemptions from personnel system. (1) Administrators employed in educational institutions and departments not charitable or reformatory in character shall include the following, who shall be exempt from the state personnel system: (a) Officers of an educational institution and their professional staff assistants; (b) Heads of administrative units directly responsible to officers of an educational institution; (c) Heads of administrative units and their professional staff assistants who relate directly to the educational function of an educational institution and whose qualifications include training and experience comparable to that required for a faculty member; (d) Heads of those functions of an educational institution which are supported primarily by student fees and charges, including heads of residence halls; (e) Heads of and professional staff members of departments of intercollegiate athletics; (f) Professional officers and professional staff of the department of higher education, including the professional staff members of any governing board of an institution of higher education; and (g) Professional officers and professional staff of the department of education. (2) The state personnel director, in consultation with the officers of such educational institutions or departments, shall determine which administrative positions, under the definitions enumerated above, are exempt from the state personnel system, subject to an appeal to the board. (3) Notwithstanding any provision of this section to the contrary, if a governing board of a state institution of higher education chooses to withdraw the employees of the governing board and of the state institutions of higher education that are under the supervision and control of the governing board from the state personnel system pursuant to the provisions of section 23-5-116.5, C.R.S., all persons hired by the governing board, or by a state institution of higher education under the supervision and control of the governing board, on or after the effective date of the withdrawal shall be employees within the alternative personnel system adopted by the governing board and shall not be employees within the state personnel system, as provided in section 23-5-116.5, C.R.S., regardless of whether they are identified as exempt pursuant to this section. SECTION 7. 24-50-145 (2), Colorado Revised Statutes, is amended to read: 24-50-145. Agency-based human resource innovation and management processes - legislative declaration - definitions - guidelines and goals. (2) As used in this section, unless the context otherwise requires, "agency" means any department, board, bureau, commission, division, institution, or other agency of the state, including institutions an institution of higher education that continues to employ state personnel system employees. SECTION 8. 24-50-208, Colorado Revised Statutes, is amended to read: 24-50-208. Voluntary separation incentive program. The state personnel director may adopt procedures establishing a program for voluntary separation incentives available to all state employees in lieu of layoffs based on a determination by the head of a principal department or of an institution of higher education that continues to employ state personnel system employees that the program is necessitated by a shortage of work, shortage of funds, or a reorganization. Any program established pursuant to this section shall not conflict with laws, rules, or procedures governing the state personnel system or the public employees' retirement association. A voluntary separation incentive shall not be considered a perquisite for purposes of section 24-30-202 (22). SECTION 9. 24-50-510, Colorado Revised Statutes, is amended to read: 24-50-510. Annual report of contracts. Using forms supplied by the state personnel director, every state agency shall submit to the state personnel director a report no later than September 30 of each year setting forth the types and dollar values of contracts for services approved during the preceding fiscal year. Such report shall include information on any changes to the types or number of classified positions in the state agency as a direct result of contracts entered into by the agency. As used in this section, "state agency" means every board, bureau, commission, department, institution, division, or section of state government, including those institutions of higher education that continue to employ state personnel system employees. SECTION 10. 24-54.5-102 (2), Colorado Revised Statutes, is amended to read: 24-54.5-102. Definitions. As used in this article, unless the context otherwise requires: (2) "Eligible employee" means any employee of a state college or university who is: (a) Exempt from the state personnel system under section 13 (2) of article XII of the state constitution as a faculty member of an educational institution or department not reformatory or charitable in character; or (b) Exempt from the state personnel system pursuant to the provisions of section 24-50-135; or (c) Exempt from the state personnel system as a result of being hired by a governing board or a state college or university on or after the effective date upon which the governing board withdrew the employees of the governing board and of the state colleges or universities under the supervision and control of the governing board from the state personnel system pursuant to the provisions of section 23-5-116.5, C.R.S.; or (d) Exempt from the state personnel system as a result of electing to become an employee within the alternative personnel system established by a governing board pursuant to the provisions of section 23-5-116.5, C.R.S. SECTION 11. 24-54.5-105 (2) (a) and (2) (d), Colorado Revised Statutes, are amended, and the said 24-54.5-105 is further amended BY THE ADDITION OF THE FOLLOWING NEW SUBSECTIONS, to read: 24-54.5-105. Participation. (2) (a) Except as otherwise provided in subsection (3.5) of this section, any eligible employee who is not a member or inactive member of the association and who is initially appointed to an eligible position on or after the effective date of the establishment of one or more optional retirement plans at such eligible employee's employing institution shall participate in an optional retirement plan established by the eligible employee's employing institution pursuant to the provisions of this article. (d) Except as otherwise provided in subsection (3.5) of this section, any eligible employee who is a member or inactive member of the association with less than one year of service credit and who is initially appointed to an eligible position on or after the effective date of the establishment of one or more optional retirement plans at such eligible employee's employing institution shall participate in an optional retirement plan established by the eligible employee's employing institution pursuant to the provisions of this article. Within ninety days after such appointment, the association shall pay to the employing institution's retirement plan on behalf of such eligible employee an amount equal to such eligible employee's member contributions, if any, plus interest on such contributions from the date of contribution to the date of payment at the rate specified for members in section 24-51-101 (28) (a) through June 30, 1991, and at the rate specified in section 24-51-101 (28) (c) after June 30, 1991. (3.5) (a) With regard to an eligible employee, as defined in section 24-54.5-102 (2) (c), who is not a member or inactive member of the association or who is a member or inactive member of the association with less than one year of service credit, the governing board of the employing institution, in setting the terms and conditions of the optional retirement plan that is available to said eligible employee, shall specify whether said eligible employee is required to participate in the optional retirement plan or whether said eligible employee shall elect either: (I) To join the association in accordance with the provisions of the laws applicable thereto; or (II) To participate in the optional retirement plan established by the employing institution pursuant to the provisions of this article. (b) If said eligible employee, as described in paragraph (a) of this subsection (3.5), is a member or an inactive member of the association with less than one year of service credit, and is required or elects to participate in the optional retirement plan, within ninety days after said eligible employee's appointment, the association shall pay to the employing institution's retirement plan on behalf of said eligible employee an amount equal to said eligible employee's member contributions, if any, plus interest on the contributions from the date of contribution to the date of payment at the rate specified for members in section 24-51-101 (28) (c). (3.7) If an eligible employee, as defined in section 24-54.5-102 (2) (c) or (2) (d), elects to participate in an optional retirement plan established by the eligible employee's employing institution pursuant to the provisions of this article and the eligible employee is a member or an inactive member of the association with at least one year of service credit, said eligible employee shall specify one of the following options: (a) To terminate future association contributions beginning on the date of election while maintaining rights as provided by the laws applicable to the association relative to any contributions or benefits accrued prior to such election; (b) To terminate membership in the association and to require payment by the association of all employee contributions and any accrued interest on such contributions. Such election shall constitute a waiver of all rights and benefits provided by the association except as otherwise provided by the provisions of this article. Within ninety days after receipt of notice of an election to terminate membership pursuant to the provisions of this paragraph (b), the association shall pay to the employing institution's retirement plan on behalf of the eligible employee an amount equal to the employee's member contributions plus accrued interest on such contributions at the rate specified in section 24-51-101 (28) (c). SECTION 12. Safety clause. The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.