BILL ANALYSIS                                                                                                                                                                                                    




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair

                                           2510 (Fletcher)
          
          Hearing Date:  08/02/2010           Amended: 04/27/2010
          Consultant:  Maureen Ortiz      Policy Vote: PE&R 5-0
          _________________________________________________________________ 
          ____
          BILL SUMMARY:   AB 2510 allows the City of San Diego to contract  
          with CalPERS in order to provide postemployment health care  
          benefits to certain employees, subject to a collective  
          bargaining agreement.
          _________________________________________________________________ 
          ____
                            Fiscal Impact (in thousands)

           Major Provisions         2010-11      2011-12       2012-13     Fund
           
          Health care benefits                 --------unknown, potential  
          savings------            Local
                                                                  
          Admin expenses                         ------------minor,  
          absorbable-----------             Special*

          *Public Employees Retirement Fund
          _________________________________________________________________ 
          ____

          STAFF COMMENTS: 
          
          AB 2510 could result in substantial savings to the City of San  
          Diego if the negotiated rates with providers and the  
          administrative costs are lower than those now paid, which could  
          also result in a significant reduction in the city's unfunded  
          liabilities.  It is estimated that the current unfunded  
          liability for annuitant healthcare would decrease from $157  
          million to approximately $121 million, and that the annual  
          expenses would drop from $28.5 million to $21.5 million.  Those  
          numbers apply to the entire City of San Diego.

          The City of San Diego currently provides healthcare to its  
          employees and retired annuitants through its own local system.   
          The city pays for the cost of employees and their dependents,  
          but covers only the healthcare cost of retired annuitants (not  
          the annuitants' dependents).











          The CalPERS' Board of Administration administers the Public  
          Employees' Medical and Hospital Care Act (PEMHCA).  Under  
          PEMHCA, eligible agencies may contract with CalPERS to provide  
          health care benefits for their employees and annuitants.   
          Contracting agencies must offer health care to both active and  
          retired employees, and must also contribute toward the  
          employees' cost of health care.  Current law provides three  
          different options for employer contributions that allow for full  
          vesting for annuitants.  It also allows school employers to use  
          collective bargaining to establish an employer contribution  
          amount for annuitants with at least 5 years of credited service.

          AB 2510 applies to employees of the City of San Diego who are  
          members of the San Diego Police Officers Association, and  
          unclassified or unrepresented employees under the following  
          conditions:


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          AB 2510 (Fletcher)


          a)The benefit will be applied on a prospective basis only.   
          b)The employer contribution for postretirement health coverage  
            shall be subject to credited years of service that the  
            employee worked with the City of San Diego, and a memorandum  
            of understanding.  
          c)If the MOU establishes a retroactive date, the health care  
            benefit will be applied only on a prospective basis.
          d)Any employee who retires before the MOU is signed may not  
            participate.
          e)An employee must have at least 10 years of credited service  
            with the City of San Diego.

          There are approximately 2,000 employees within the San Diego  
          Police Officers Association.

          The Governmental Accounting Standards Board (GASB) Statement 45  
          requires governmental entities to account for, on their  
          financial statements, the estimated costs and liabilities  
          associated with post-employment health benefits for current and  
          future retirees.  Agencies must now schedule investment activity  
          to meet this liability, establish a current budget liability, or  
          otherwise mitigate the impact of these future evaluations.