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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