BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 344|
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THIRD READING
Bill No: AB 344
Author: Furutani (D)
Amended: 4/25/11 in Assembly
Vote: 21
SENATE PUBLIC EMPLOYMENT & RETIRE. COMM. : 5-0, 6/27/11
AYES: Negrete McLeod, Walters, Gaines, Padilla, Vargas
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 75-0, 5/26/11 (Consent) - See last page
for vote
SUBJECT : Public employees retirement
SOURCE : Author
DIGEST : This bill (1) prohibits the California Public
Employees Retirement System (CalPERS) from granting
exceptions, for small groups or individuals, to increases
in compensation earnable that are not consistent with
compensation increases reported for all individuals in the
same retirement membership classification, and (2)
eliminates the ability of a CalPERS employer to request
that a retired worker be allowed to work beyond the 960
hour annual limit without being subject to reinstatement
and cessation of the retiree's allowance.
ANALYSIS :
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Existing law :
1. Establishes CalPERS, which provides defined benefits for
state employees, school classified employees, and
employees in over 1,500 public agencies.
2. Provides that a defined benefit is calculated by
multiplying a member's years of service, age factor, and
final compensation, which is the highest average
compensation earnable over either a 12 month or 36 month
period, as specified.
3. Defines "compensation earnable" as including payrate and
special compensation, and specifies which portions of
compensation may be included in compensation earnable
for the purpose of determining final compensation.
4. Requires that increases in compensation earnable for an
individual who is not in a group or class shall be
limited, for the purpose of determining final
compensation, to the average increase in compensation
earnable for all employees of that employer who are in
the same retirement membership classification, but
allows employers to request, and CalPERS to grant,
exceptions to this rule.
5. Allows a retiree of the system to work for a CalPERS
employer following retirement, while receiving a
retirement allowance and not reinstating into active
public service, as long as that employment does not
exceed 960 hours per fiscal year.
6. Allows an employer to request, and CalPERS to grant,
exceptions to the 960 hour limitation.
This bill:
1. Eliminates CalPERS' ability to make exceptions to the
rules requiring increases to compensation earnable for
an individual to be consistent with increases to other
employees in the same retirement class.
2. Eliminates the ability of an employer to request, and
CalPERS to grant, an exception to the 960 hour
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limitation on working after retirement.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/16/11)
California Association of Psychiatric Technicians
California Correctional Supervisors Organization
California Professional Firefighters
California Public Employees' Retirement System
Glendale City Employees Association
Long Beach Area Chamber of Commerce
Organization of SMUD Employees
Retired Public Employees Association
San Bernardino Public Employees Association
San Luis Obispo County Employees Association
Santa Rosa City Employees Association
Service Employees International Union
South Bay Association of Chambers of Commerce
OPPOSITION : (Verified 8/16/11)
California Special Districts Association (oppose unless
amended)
California State Association of Counties (oppose unless
amended)
City of Santa Maria
League of California Cities (oppose unless amended)
Regional Council of Rural Counties (oppose unless amended)
ARGUMENTS IN SUPPORT : 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, an increase 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.
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"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 960 hour limit."
CalPERS, writing in support, states that eliminating the
ability to make exceptions to compensation earnable
restrictions for individuals could "protect the system form
potential pension spiking."
ARGUMENTS IN OPPOSITION : The oppositions states, "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. Currently, the number of
hours a retired annuitant can provide services to a CalPERS
member agency is limited to 960 hours in one fiscal year;
however, with the approval of CalPERS, this limitation can
be extended. 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 many rural agencies. It should benoted that of
the thousands of retired annuitants currently performing
services to the State or a local agency, only a very small
fraction of petitioners are granted the ability to exceed
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the limitation. And, once again, that limitation must be
approved by CalPERS. As such, we encourage you to amend AB
344 to remove the section which eliminates the ability of
CalPERS to grant an extension to the 960 hour/per fiscal
year limitation."
ASSEMBLY FLOOR : 75-0, 5/26/11
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, Bill
Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Carter,
Chesbro, Conway, Cook, Dickinson, Donnelly, Eng, Feuer,
Fletcher, Fong, Fuentes, Furutani, Beth Gaines, Galgiani,
Garrick, Gatto, Gordon, Grove, Hagman, Halderman, Hall,
Harkey, Hayashi, Roger Hernández, Hill, Huber, Hueso,
Huffman, Jeffries, Knight, Lara, Logue, Bonnie Lowenthal,
Ma, Mansoor, Mendoza, Miller, Mitchell, Monning, Morrell,
Nestande, Nielsen, Norby, Olsen, Pan, Perea, V. Manuel
Pérez, Portantino, Silva, Skinner, Smyth, Solorio,
Swanson, Torres, Valadao, Wagner, Wieckowski, Williams,
Yamada, John A. Pérez
NO VOTE RECORDED: Campos, Cedillo, Davis, Gorell, Jones
CPM:do 8/16/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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