BILL ANALYSIS Ó
AB 344
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Date of Hearing: May 4, 2011
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Warren T. Furutani, Chair
AB 344 (Furutani) - As Amended: April 25, 2011
SUBJECT : Public employees' retirement.
SUMMARY : Prohibits the California Public Employees' Retirement
System (CalPERS) from granting exceptions for members not in a
group or class that allow recognition of increases in
compensation earnable beyond increases reported for all
employees in the same membership classification and eliminates
the ability of a CalPERS employer to request that a retired
annuitant serve without reinstatement beyond the 960 hour limit
in any fiscal year.
EXISTING LAW :
1)Limits increases in compensation earnable granted to an
employee, who is not in a group or class, to the average
increase in compensation earnable for all employees who are in
the same membership classification. However, existing law
also allows CalPERS to recognize increases in compensation
earnable during the final compensation period of public agency
and school members who are not part of a class and may not
have a related group that is close enough to provide a
reasonable proxy in determining allowable final compensation,
if the employee or contracting agency on behalf of the
employee formally requests and exemption.
2)Allows CalPERS employers to hire retired annuitants without
returning to active service under specified conditions. For
example, a retired annuitant must possess specialized skills
that are needed for a limited time or during an emergency to
prevent a stoppage of public services. These appointments may
not exceed 960 hours per fiscal year and the total
compensation for these appointments may not exceed the maximum
pay scale for the vacant position.
Existing law permits the governing body of a public agency to
request an extension to the 960 hour limit by submitting a
resolution to CalPERS for approval. The process to request
approval is as follows:
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a) The employer presents a resolution passed by its
governing body to CalPERS requesting an employment
extension to a specified date, accompanied by a separate
request for the extension which provides the justification
for the employment extension.
b) CalPERS has 60 days to approve or disallow the
extension.
c) If CalPERS fails to respond within 60 days of receipt of
the request, the extension is automatically approved.
d) An employment appointment, including all extensions, may
not exceed a total of one year (12 months).
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, "The recent City of Bell
scandal brought to light an area of the Public Employees'
Retirement Law that needs to be changed. Under current law,
increases in compensation earnable granted to an employee who is
not in a group or class is limited to the average increase in
compensation earnable for all employees who are in the same
membership classification. This prohibition was added to the law
to eliminate the ability of high level managers to
inappropriately 'spike' their retirement allowances during their
final years of employment. Unfortunately, existing law also
allows CalPERS to grant exceptions to this rule.
"When CalPERS initially learned of the 47% pay hike given to the
city manager during an audit of the City of Bell, they informed
city officials that an exemption could be needed in order for
CalPERS to recognize increase for retirement purposes. When
CalPERS officials learned that several of the city's
administrators were getting similar pay hikes, they decided that
an exemption was not needed. Based upon those representations,
CalPERS granted a one-time approval of the city manager's 2005
salary increase.
"Even though an exception to the 'group or class' rule was never
granted in the City of Bell case, removing this provision from
current law, this bill will make sure that option never exists
in the future. This bill would also eliminate CalPERS' ability
to extend employment of retired annuitants beyond the current
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960 hour limit."
Supporters state, "Because AB 344 strives to strengthen
retirement stability and predictability for both employers and
employees, we are pleased to support this bill."
Opponents have raised concerns with the provisions of the bill
that eliminate the ability of a retired annuitant to continue
providing services to a public agency beyond the 960 hour limit.
Opponents state, "Like the State of California, local agencies
utilize retired annuitants to lower the costs of the service
(retirement and health care expenses are not paid) and ensure
the service is fulfilled while a replacement candidate is being
selected. As such, CalPERS currently has restrictions and
parameters on this practice?While it may seem difficult to
justify the on-going employment of a retired annuitant, in many
ways it is beneficial to the state or local agency, the employee
and the taxpayer. We believe that eliminating this option would
impede our agencies' ability to immediately fill highly
technical positions - expertise that may be in short supply in
rural agencies."
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Psychiatric Technicians
California Correctional Supervisors Organization
California Professional Firefighters
California Public Employees' Retirement System
Retired Public Employees Association
Service Employees International Union
AB 344
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Opposition
California Special Districts Association (unless amended)
California State Association of Counties (unless amended)
League of California Cities (unless amended)
Regional Council of Rural Counties (unless amended)
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957