BILL ANALYSIS �
AB 738
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Date of Hearing: May 4, 2011
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Warren T. Furutani, Chair
AB 738 (Hagman) - As Introduced: February 17, 2011
SUBJECT : Public employees' retirement: elected officials.
SUMMARY : Prohibits a person who is publicly elected to any
office, on and after January 1, 2012, from becoming a member of
a California public retirement system as a result of that
service. This prohibition also applies to anyone who is
appointed to fill the term of a person so elected.
EXISTING LAW :
1)Proposition 140, which was passed by the voters in 1990,
prohibited legislators elected or serving after November 7,
1990 from accruing pension or retirement benefits other than
through the federal Social Security program. Based on vested
rights, a later court ruling allowed existing legislators that
participate in the Legislators' Retirement System to continue
membership in the system.
2)Under current Public Employees' Retirement Law, "optional"
membership is provided to some officials elected or appointed
to a fixed term of office with a city or county (this may
include city attorneys and elected/appointed officials of
schools and contracting agencies; eligibility is determined by
the dates of your term of office).
The following employees of contracting agencies are optional
members who, if they are compensated for their service, may
elect membership by completing a specified California Public
Employees' Retirement System (CalPERS) form:
a) Elective Officers: Persons elected by the vote of the
people (e.g., Mayor, City Council, County Supervisors,
Sheriff, District Attorney, City Clerk, etc.)
b) City Attorney, Deputy/Assistant City Attorney if hired,
elected or appointed to office prior to July l, 1994 (with
no break in service while serving in the office held on
June 30, 1994).
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Since July 1, 1994, a large number of persons who formerly had
"optional" membership rights have been excluded from
membership entirely. Thus, not only are they no longer
"optional" members, they are no longer eligible for CalPERS
membership at all. The excluded positions are:
a) School Board Members first elected/appointed to their
position July 1, 1994 or later (unless they have been
continuously in the same position since before July 1,
1994).
b) Members of commissions, boards, councils or similar
legislative or administrative bodies (e.g., water
districts, sanitation districts, redevelopment agencies,
transportation districts, etc.) of any contracting agency,
if they are first elected/appointed to their position
January 1, 1997 or later (unless they have been
continuously in the same position since before January 1,
1997).
3)Under current Teachers' Retirement Law, a person who is an
employee of the California public school system,
prekindergarten through community college, is a member of the
Defined Benefit (DB) Program. However, existing law excludes
from mandatory DB membership a person employed less than 50%
of full-time, a person employed as a substitute teacher, or a
person employed on a part-time basis, and who performs less
than 60 hours of creditable service in a pay period if
employed on an hourly basis or less than 10 days of creditable
service if employed on a daily basis.
According to California State Teachers' Retirement System
(CalSTRS), this bill would apply to the 53 county
superintendents of schools who are elected by voters, rather
than appointed by the county board of education.
4)The County Employees' Retirement Law of 1937 specifically
excludes from membership all elected officials who do not
declare their intentions to become members of the retirement
system, judges of the Superior Court, and judges of the
Municipal Court.
FISCAL EFFECT : Unknown.
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COMMENTS : According to the author, "The underfunding of
government pension systems is a large and serious issue. Not
only is the CalPERS and CalSTRS facing drastic funding deficits,
but so are the local county and city retirement systems?Pension
underfunding carries large consequences not only for the systems
and their administrators, but the systems' members and
California's taxpayers who are ultimately called upon to foot
the bill.
"Due to such pressing issues, elected and appointed officers of
school boards, districts, and councils were excluded from
membership in government pension systems in 1994, as state
legislators were excluded in 1990. Meanwhile, many cities and
counties are currently looking for a way to exclude local
elected officials from their retirement systems."
The author concludes, "With such a severe budget situation, in
addition to a lack of public faith in government, AB 738 will
provide monetary relief to all while showing a legislative
commitment to getting our great state back on track."
Supporters state, "This bill removes an inherit conflict of
interest. Local government officials should act in the best
interests of their constituents and not be put in a position
where they have to cut benefits that allow them to personally
profit. Of course, the bill will also result in fiscal savings,
important when cities from Vallejo to Costa Mesa are facing
increasingly large unfunded pension liabilities."
CalSTRS is asking that the bill be amended to exclude county
representatives. CalSTRS states, "Under AB 738, a CalSTRS
member elected as county superintendent would not be able to
earn service credit for his or her work as superintendent.
While the member would have membership based on prior creditable
service, he or she would not be able to earn service credit for
his or her service as superintendent under CalSTRS or any other
retirement system. Presumably, the person would instead make
contributions to Social Security. However, he or she would be
subject to the Windfall Elimination Provision, which would
reduce his or her Social Security benefit. A CalSTRS member
might be discouraged from seeking election to a county
superintendent position because he or she would not be able to
earn service credit for the work he or she performs in that
position. In addition, this measure would create an inequity
because a person elected to the position of superintendent would
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not be able to receive creditable service for his or her work,
but a person appointed to an identical position would have that
work credited toward retirement."
The Judicial Council points out that judges are constitutionally
entitled to retirement benefits. Article VI, Section 20 of the
Constitution requires that judges be provided with retirement
"with reasonable allowance." The Judicial Council is asking
that the bill be amended to expressly provide that none of its
provisions would apply to judges.
Opponents state, "AB 738 would discourage deputies and other
employees within departments and offices headed by elected
officials from ever running to serve as the elected heads of
those organizations. This policy will undoubtedly shrink the
candidate pool in future elections. AB 738 will have a residual
effect on Sheriffs' departments for years to come. Departments
will suffer from a decline in institutional knowledge and
experience at the top of their agency because of the explicit
deterrent against current members of the organizations seeking
election to lead such an office."
REGISTERED SUPPORT / OPPOSITION :
Support
Howard Jarvis Taxpayers Association
Orange County Taxpayers Association
Opposition
Association of Orange County Deputy Sheriffs
Calaveras County Sheriff
California County Superintendents Educational Services
Association
California District Attorneys Association
California Fraternal Order of Police
California School Boards Association (unless amended)
California School Employees Association
California State Sheriffs' Association
California State Teachers' Retirement System (unless amended)
County of Santa Cruz Sheriff-Coroner
City of Chino
Judicial Council of California
Kern County Sheriff
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Lassen County Sheriff
Long Beach Police Officers Association
Los Angeles County Professional Peace Officers Association
Professional Engineers in California Government
Sacramento County Deputy Sheriffs Association
San Bernardino County Sheriff
Santa Ana Police Officers Association
Service Employees International Union
Siskiyou County Sheriff
Small School Districts' Association
Yolo County Sheriff
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957