BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 1123| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ UNFINISHED BUSINESS Bill No: SB 1123 Author: Wiggins (D), et al Amended: 8/8/08 Vote: 21 SENATE PUBLIC EMP. & RET. COMMITTEE : 5-0, 4/14/08 AYES: Wiggins, Ashburn, McClintock, Migden, Negrete McLeod SENATE APPROPRIATIONS COMMITTEE : 9-2, 5/22/08 AYES: Torlakson, Ashburn, Cedillo, Corbett, Florez, Kuehl, Oropeza, Simitian, Yee NOES: Cox, Aanestad NO VOTE RECORDED: Dutton, Ridley-Thomas, Runner, Wyland SENATE FLOOR : 24-5, 5/29/08 AYES: Alquist, Calderon, Cedillo, Corbett, Correa, Ducheny, Florez, Kehoe, Kuehl, Lowenthal, Machado, Maldonado, Migden, Negrete McLeod, Oropeza, Padilla, Ridley-Thomas, Romero, Simitian, Steinberg, Torlakson, Vincent, Wiggins, Yee NOES: Ackerman, Ashburn, Battin, Denham, Hollingsworth NO VOTE RECORDED: Aanestad, Cogdill, Cox, Dutton, Harman, Margett, McClintock, Perata, Runner, Scott, Wyland ASSEMBLY FLOOR : 48-29, 8/13/08 - See last page for vote SUBJECT : Public employee benefits SOURCE : Governors Public Employee Post-Employment Benefits Commission CONTINUED SB 1123 Page 2 DIGEST : This bill revises sunshine provisions in California pension law and creates the California Actuarial Advisory Panel to provide impartial and independent information to pensions, other post employment benefits, and best practices to public agencies. Assembly Amendments clarify the definition of "actuary," specify that members of the California Actuary Advisory Panel (Panel) will only be reimbursed for expenses which are to be paid by the authority that appointed the member, and revise the membership of the Panel by adding two additional members, one of which is appointed by the Governor and one by the Senate Rules Committee. ANALYSIS : Existing law requires a state or local retirement system to secure, not less than triennially, the services of an enrolled actuary, who is to perform a valuation of the system. Existing law requires the Legislature and local legislative bodies to secure the services of an enrolled actuary to provide a statement of the actuarial impact upon future annual costs before authorizing increases in public retirement plan benefits. Existing law requires the future annual costs of the public retirement plan benefits, as determined by the actuary, to be made public at a public meeting at least two weeks prior to the adoption of any increases in the benefits. This bill: 1.Deletes existing law that requires the Legislature and local legislative bodies to secure the services of an enrolled actuary to provide a statement of the actuarial impact upon future annual costs before authorizing increases in public retirement plan benefits. 2.Deletes the existing requirement that an actuary be "enrolled," and would instead require that an actuary be a member of the Society of Actuaries, or an actuary qualified under the standards and practice of the CONTINUED SB 1123 Page 3 American Academy of Actuaries. 3.Expands definition of the term "future annual costs" to include "normal cost and any change in accrued liability." 4.Applies the required use of an actuary and the new definition of "future annual costs" to any proposed change in other post employment benefits (OPEB). 5.Requires the Legislature, and local legislative bodies (including community college district governing boards) secure the services of an actuary (as defined) to provide a statement of the actuarial impact upon future annual costs, including normal cost and any additional accrued liability, before authorizing changes in public retirement plan benefits or other postemployment benefits. This requirement does not apply to annual increase in a premium that does not exceed three percent under a contract of insurance, or a change in postemployment benefits, other than pension benefits, mandated by the sate or federal government or made by an insurance carrier in connection with the renewal of a contract of insurance. 6.Requires, for local legislative bodies: A. A two-week public notice requirement to the proposed adoption of any change in OPEB benefits. B. That an actuary, if the future costs of the changes exceeds one-half of one percent of the future annual cost, be present at the public meeting to provide information when the adoption of a benefit change is being considered. C. That the adoption of any retirement or OPEB not be placed on the consent calendar. 7.Requires for the Legislature: A. That the future costs of a proposed change in retirement or OPEB benefits as determined by an actuary shall be made public by the State Legislature CONTINUED SB 1123 Page 4 at the policy and fiscal committee hearings. B. That the Legislature not place a proposed change in a pension or OPEB benefit on the consent calendar. 8.Requires that the person at a local agency with the duties of a chief executive officer must acknowledge in writing that they understand the current and future cost of the retirement or OPEB benefit, as determined by the actuary. For the adoption of retirement or OPEB benefit changes by the State, that person will be the Director of the Department of Personnel Administration (DPA). 9.Establishes the Panel, which consists of eight members. Each member will be an actuary, as defined, with public sector clients. Two members of the Panel will be named by the Governor. One member of the panel will be named by each of the following: A. The State Teachers' Retirement Board. B. The Board of Administration of the Public Employees' Retirement System. C. The State Association of County Retirement Systems. D. The Board of Regents of the University of California. E. The Speaker of the Assembly F. The Senate Rules Committee. Each member of the Panel will serve a three-year term, except in the initial appointments only the panelists named by the University of California, the Legislature, and the Governor shall serve two-year terms. 10.Provides that the responsibilities of the Panel shall include, but are not limited to: A. Defining actuarial model practices and best practices. B. Developing pricing and disclosure standards. C. Developing quality control standards. D. Gathering model funding policies and practices. E. Replying to policy questions from public retirement systems. CONTINUED SB 1123 Page 5 F. Providing comment upon request of public agencies. 11.Provides that opinions of the Panel are nonbinding and advisory only and shall not be used as the basis for litigation. 12.Specifies that member will not receive per diem. 13.Requires the Panel to report to the Legislature on or before February 1 of each year. Comments Governor Schwarzenegger issued a proclamation in December 2006, creating the Public Employee Post-Employment Benefits Commission. The Commission had 12 members, with six, including the Chair, named by the Governor, three by the Senate, and three by the Assembly. The Commission was charged with the following tasks: 1.Identify the size of the public sector's unfunded OPEB liability. 2.Compare various approaches for addressing that unfunded liability. 3.Consider the advantages to the State of providing post-employment benefits. 4.Propose a plan or plans for addressing unfunded OPEB liabilities. After conducting more than a dozen public hearings around the state during 2007, the Commission produced its final report in January, 2008. The report contains 34 recommendations for improving the functioning of public retirement systems, the delivery of OPEB benefits, and for controlling public employer benefits costs. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes According to the Senate Appropriations Committee: Fiscal Impact (in thousands) CONTINUED SB 1123 Page 6 Major Provisions 2008-09 2009-10 2010-11 Fund Advisory Panel $58 $116 $116 General Local mandate -- likely minor -- General SUPPORT : (Verified 6/25/08) (Unable to verify at time of writing) Public Employee Post-Employment Benefits Commission (source) Amalgamated Transit Union American Federation of State, County and Municipal Employees Association of California Health Care Districts Association of California Water Agencies California Association of Joint Powers Authorities California Conference of Machinists California Faculty Association California Public Employees Retirement System California School Employees Association California Special Districts Association California State Association of Counties California State Employees Association California Teamsters Department of Personnel Administration Desert Water Agency El Dorado Irrigation District Engineers and Scientists of California Glendale City Employees Association IFPTE Local 21 Organization of SMUD Employees Peace Officers Research Association of California Regional Council of Rural Counties San Bernardino Public Employees Association San Diego County Court Employees Association San Luis Obispo County Employees Association Santa Rosa City Employees Association Service Employees International Union, Local 1000 Strategic Committee of Public Employees CONTINUED SB 1123 Page 7 ASSEMBLY FLOOR : AYES: Aghazarian, Arambula, Beall, Berg, Brownley, Caballero, Charles Calderon, Carter, Coto, Davis, De La Torre, De Leon, DeSaulnier, Dymally, Eng, Evans, Feuer, Fuentes, Furutani, Galgiani, Hancock, Hayashi, Hernandez, Huffman, Jones, Karnette, Krekorian, Laird, Leno, Levine, Lieber, Lieu, Ma, Mendoza, Mullin, Nava, Nunez, Parra, Portantino, Price, Ruskin, Salas, Saldana, Solorio, Swanson, Torrico, Wolk, Bass NOES: Adams, Anderson, Benoit, Blakeslee, Cook, DeVore, Duvall, Emmerson, Fuller, Gaines, Garcia, Garrick, Horton, Houston, Huff, Jeffries, Keene, La Malfa, Maze, Nakanishi, Niello, Plescia, Silva, Smyth, Spitzer, Strickland, Tran, Villines, Walters NO VOTE RECORDED: Berryhill, Sharon Runner, Soto JJA:cm 8/16/08 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED