BILL ANALYSIS Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair 1651 (De La Torre) Hearing Date: 07/15/2010 Amended: 05/28/2010 Consultant: Maureen Ortiz Policy Vote: PE&R 4-2 _________________________________________________________________ ____ BILL SUMMARY: AB 1651 provides that the CalPERS retirement benefit for certain local safety members and classified school employees will be paid as if the employee had not been subject to the mandatory furloughs effective July 1, 2008. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2010-11 2011-12 2012-13 Fund Increase in employer contrib. -----unknown, potentially $150 annually--- Local Admin costs --------potentially less than $75----------- Special* *Public Employees Retirement Fund _________________________________________________________________ ____ STAFF COMMENTS: This bill meets the criteria for referral to the Suspense file. According to CalPERS, administrative costs to revise pension calculations and provide notices of changes will be minor. However, restorations of service credits could result in future increases in employer contributions paid by school districts and contracting agency employers in the amount of several hundred thousands of dollars per year to pay for the increased liability. The exact fiscal impact is unknown because the number of employees affected has not been identified. Additionally, it is possible that some employees may have retired during the last year and will be entitled to a recalculation of their pension benefit upon enactment of this bill. AB 399 (Brownley) Chapter 240, Statutes of 2009, and SB 75 (Committee on Budget and Fiscal Review), Chapter 342, Statutes of 2009 provided that a state employee who is a member of CalPERS and is subject to the mandatory furloughs imposed through Executive Orders during the 2008-09 and 2009-10 fiscal years will receive the same amount of retirement service credit and final compensation he or she would have received had the employee not been subjected to the furloughs. AB 1651 will provide equity to employees of a county office of education, a school district, a community college district, or a local safety member so that the furloughs will not have a negative impact on the retirement allowances of these employees. It will apply to furloughs that are designated by the employer or by a memorandum of understanding entered into on or after July 1, 2008 for purposes of achieving budgetary savings. Page 2 AB 1651 (De La Torre) AB 1651 requires the employers to notify the CalPERS Board of Administration as to the terms and conditions of any mandatory furlough time imposed on employees during a reporting period. The retirement benefit for members of CalPERS is calculated based on age, service credit, and final compensation. Under limited circumstances, service credit and final compensation could be impacted by the furloughs. On December 29, 2008, the Governor issued Executive Order S-16-08 which proclaimed a furlough of two unpaid days per month from February 2009 through June 2010 for represented state employees and supervisors. The Governor's Executive Order S-13-09 then subjected all state employees to a third furlough day per month effective July 1, 2009 through June 30, 2010 which resulted in a total salary reduction of approximately 13.86%.