BILL ANALYSIS                                                                                                                                                                                                    Ó






          SENATE PUBLIC EMPLOYMENT & RETIREMENT    BILL NO:  AB 178
          Gloria Negrete McLeod, Chair HEARING DATE:  June 25, 2012
          AB 178 (Gorell)    as amended   6/19/12      FISCAL:  YES

           STATE TEACHERS' RETIREMENT SYSTEM:  WORKING AFTER RETIREMENT
           

           HISTORY  :

            Sponsor:  Author

            Other legislation:  AB 506 (Furutani),
                         Chapter 306, Statutes of 2009
                              AB 2390 (Karnette),
                         Chapter 494, Statutes of 2008
           
          ASSEMBLY VOTES  : 

           Not relevant - new bill with, May 31, 2012, amendments
           
           SUMMARY  :

          1)AB 178 changes and clarifies rules for retired workers in 
            the California State Teachers' Retirement System (CalSTRS). 
             Specifically, AB 178:

             a)   increases the earnings limitation under which retired 
               members of CalSTRS may work for CalSTRS employers.

             b)   exempts certain appointees to financially endangered 
               school districts from the earnings limitation.

             c)   clarifies that certain employees of third parties are 
               not considered to be retired workers with regard to the 
               earnings limitation.

             d)   is an  URGENCY  bill.
           
          BACKGROUND AND ANALYSIS  :
          
           1)Existing law  :

             a)   establishes CalSTRS, which provides retirement and 
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               death benefits for California's teachers and school 
               administrators.

             b)   limits the amount of compensation that can be earned 
               as a retired member in employment with a CalSTRS-covered 
               employer to approximately $31,020 annually.  The 
               earnings limit may increase each year based on the 
               percentage increase to the average compensation of 
               active members of the system.

             c)   requires that once a retired worker has earned up to 
               the earnings limitation amount, the retired worker will 
               have his or her retirement reduced, dollar for dollar, 
               by the amount of earnings in excess of the earnings 
               limitation that the retired worker earned in that fiscal 
               year.

             d)   defines the types of employment performed by a 
               retired worker that will be subject to the earnings 
               limitation, including work for a CalSTRS-covered 
               employer as an employee, a contractor, or an employee of 
               a third party.

             e)   has exempted, for approximately the past 12 years, 
               certain retired educators and administrators from the 
               earnings limitation until June 30, 2012, allowing them 
               to earn a full salary and  a full retirement allowance 
               without limitation.

             f)   provides that the Superintendent of Public 
               Instruction, Board of Governors of the Community 
               Colleges, or a county superintendent of schools may 
               appoint a trustee, administrator, or fiscal advisor to 
               address academic or financial weaknesses in a school 
               district, pursuant to specified requirements.

             g)   requires that a retiree must wait 12 months before he 
               or she may reinstate to active employment with a 
               CalSTRS-covered employer.

           1)This bill  :

             a)   changes the basis of the earnings limitation to 
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               one-half of the median final compensation earnable in 
               the system, as determined annually.  (That amount is 
               currently slightly over $40,000, according to CalSTRS.)

             b)   specifies that a trustee, administrator, or fiscal 
               advisor appointed to address academic or financial 
               weaknesses in a school district, pursuant to specified 
               requirements, shall be exempt from the earnings 
               limitation under the following conditions:  

                i.     The appointing authority advertised the position 
                 and attempted to fill the position with a non-retired 
                 individual and was unable to do so;

               ii.    The appointing authority next tried to fill the 
                 position with a retired worker who would reinstate 
                 from retirement at the same salary as offered 
                 originally and was unable to do so;

               iii.   The appointing authority, unable to fill the 
                 position with a non-retired or reinstated worker, then 
                 filled the job with the retired worker at a salary no 
                 greater than the salary offered to current active 
                 members for the appointed position;

               iv.    The appointment will end no later than June 30, 
                 2013; and

               v.     The Superintendent of Public Instruction, Board 
                 of Governors of the Community Colleges, or county 
                 superintendent of schools certifies, prior to the 
                 appointment, to CalSTRS that it is in compliance with 
                 these requirements.

             a)   clarifies that a retired worker is not considered to 
               be an employee of a third party, for purposes of the 
               earnings limitation, if the following is true:

               i.     The worker does not fill a position that would 
                 normally be filled by a school or district employee;

               ii.    The worker performs work of a limited duration; 
                 and
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               iii.   The third-party employer does not participate in 
                 a public retirement system.

             a)   allows a retiree to reinstate from retirement after 
               being retired for less than a full year, but specifies 
               that he or she may not select a different option 
               beneficiary upon re-retiring.

             b)   is an  Urgency  statute.
           
          COMMENTS  :

           1)Compliance with the Conference Committee on Public Employee 
            Pensions

           The Conference Committee on Public Employee Pensions, 
          consistent with the Governor's recommendations for pension 
          reform in his 12-point plan, has worked with the author to 
          ensure that provisions of the bill are consistent with 
          recommendations to limit post-retirement employment in public 
          jobs and to not conflict with the Conference Committee 
          report.  This bill forms a bridge until the Conference Report 
          could become effective on January 1, 2013.

           2)Expiration of Earnings Limitation Exemptions

           For approximately 12 years, a number of exemptions from the 
          earnings limitation have allowed many retirees to work 
          fulltime without a reduction in benefits.  AB 178, in 
          eliminating the exemptions, does not prohibit a retiree from 
          working after retirement.  Instead, enforcement of the 
          earnings limitation removes one incentive for active workers 
          to retire early.  It also brings the retired worker program 
          back to a part-time program, as it was originally intended to 
          be.  This bill increases the earnings limitation to be a 
          closer approximation of a half-time salary, consistent with 
          the retired worker program in CalPERS, which limits the 
          amount of time a retiree can work to slightly less than 6 
          months.
           
          3)Arguments in Support

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           As stated by the author:

          "Due to the urgency of the upcoming sunset date, AB 178 will 
          extend the sunset for one year with the expectation that the 
          Pension Conference Committee will address this issue in their 
          report and will go into effect next year.  To be as 
          consistent as possible with the pending conference committee 
          report and the desires of the Governor, AB 178 will narrow 
          the scope of this exemption so that only school districts 
          that are either financially and/or academically distressed 
          will qualify."

          According to the Riverside County Superintendents' 
          Association:

          "Under specific and narrow conditions, AB 178 would extend 
          for an additional year the existing STRS post-retirement 
          earnings limit exemptions.  The need for these exemptions has 
          increased due to the state's fiscal challenges and the fact 
          that many specialized providers are leaving the field.  
          Allowing retired employees to work for school districts 
          experiencing fiscal or academic distress without financial 
          penalty offers a larger pool of qualified educators who can 
          temporarily step in to fill critical needs while the school 
          searches for a long-time hire."

           4)SUPPORT  :

            Association of California School Administrators (ACSA)
            California Association of School Business Officials (CASBO)
            California Charter Schools Association Advocates
            California County Superintendents Educational Services 
            Association (CCSESA)
            California Teachers Association (CTA)
            Los Angeles County Superintendents of Schools
            Riverside County School Superintendents' Association 
            (RCSSA)
             
            Support for March 22, 2012 amended version:
            
             Accrediting Commission for Community and Junior Colleges 
            (ACCJC)
            California Speech-Language Hearing Association (CSHA)
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            City College of San Francisco
            Humboldt County Office of Education
            Inyo County Office of Education
            Lake County Office of Education
            Orange County Department of Education
            San Mateo County Board of Education
            Small School District Association (SSDA)
            Western Association of Schools and Colleges (WASC)

           5)OPPOSITION  :

            None to date




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          Pamela Schneider
          Date:  6/19/12                                          Page 
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