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Contracting Challenges in a Shifting Regulatory Environment

RGS began serving public agencies in 2002 and has supported approximately 300 agencies since then.  As long as public agencies need help with projects, workloads, expertise and training, the RGS mission of public service through supporting local governments remains our top priority.  RGS didn’t start with a big staff or offering dozens of services.  We started small and grew as agencies told us what they needed.  We worked together to figure out services and methods to meet those needs.  We hired great people with the skills and initiative to help our partner agencies achieve their objectives without needing to tell RGS staff what to do and how to do it—and through our partnership together, outstanding public services, at a great value, were delivered throughout California. 

Over the past 17 years, the regulatory environment in California has changed. CalPERS has a major impact in the public sector and changes in their rules and enforcement practices affect all public agencies throughout the state.  However, changes in CalPERS’ rules are not always published and communicated in a way that is easily verified by those trying to deliver contracted services to agencies who provide CalPERS retirement benefits. 

RGS has first-hand experience with the changes in CalPERS’ regulations.  In early July 2019, CalPERS sent a letter to a small percentage of our agency’s current and former employees who were also CalPERS retirees, telling them CalPERS had preliminarily determined them to be common law employees of the agencies RGS had assigned them to.  No guidance was given to RGS employees as to what might constitute an appropriate or effective response to dispute this determination.  

If the preliminary determinations are confirmed by CalPERS, then these lifelong public servants could lose retirement benefits for the period during which they worked for RGS and would be forcibly re-enrolled into the CalPERS retirement system.  Many of these employees worked well under 960 hours in a year, some were assigned by RGS to several different agencies at the same time, and all were experienced and independent professionals.

CalPERS also began sending emails to the agencies alleged to have been common law employers, giving them six days to provide PERS the facts regarding these RGS employees, such as timesheets, invoices, and personnel files covering periods back to 2012. Because RGS was the employer, such documentation was never in the possession of the agencies and was always held by RGS.  It is concerning that CalPERS made preliminary determinations on the status of these employees without even being in possession of these facts.

It is discouraging that a State Agency would use its unique position as guardians of the largest public pension system in the U.S., to cause individuals and local government agencies to spend thousands of dollars in defending themselves.  These few retirees are not a threat to the system, either financially or precedentially.  This use of public funds to challenge their status, seems to be more about sending a message than fixing a problem.

RGS could put the funds we have spent to better use by expanding the services to meet the needs of other public agencies. Couldn’t the resources CalPERS is expending be used to fix the problems it faces: an underfunded pension system; annual benefits to over 1,200 retirees of $220,000 to $402,000; changing demographics that further challenge the funded status; rising employer and employee contributions; projected investment underperformance for the next decade? Shouldn’t PERS public funding resources be used to strengthen the retirement plan for long-term sustainability?

Public agencies need a first-rate retirement system benefit for their employees and clear direction (and assistance) from that system to comply with necessary pension system protections.  Local agencies also need flexibility and a range of resources and options to meet local needs.  It has never been within CalPERS purview or statutory authority to dictate how public agencies are to deliver cost effective and efficient public services.

At RGS, our service model has changed and adapted.  Other public agencies and other service providers have also adapted.  The vast majority of the costs of adaptation have been borne by local governments and employees.  It’s time for CalPERS to adapt to meet the needs of their customers. 

RGS will support our employees – past and present, retired, mid-career, and early-career.  And we will continue to share our experiences with these issues, so that our entire community can benefit.

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