BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                  SB 1123|
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                              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
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           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  

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             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  

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                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.

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             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)


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           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


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          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

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