BILL ANALYSIS Ó
AB 1247
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Date of Hearing: May 4, 2011
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Warren T. Furutani, Chair
AB 1247 (Fletcher) - As Amended: April 25, 2011
SUBJECT : Public retirement systems: reporting.
SUMMARY : Modifies the pension reform transparency reporting
requirements that were enacted last year as part of the 2010-11
budget package that required the California Public Employees'
Retirement System (CalPERS) to report its investment returns,
amortization period, and discount rate using specific analytical
guidelines every time contribution rates are adopted.
Specifically, this bill :
1)Requires CalPERS to report annually rather than every time
they adopt contribution rates.
2)Limits the scope of the report to only apply to state employee
retirement plans.
3)Revises the adjustments of the investment return assumptions
and discount rates CalPERS is required to use in the report.
4)Deletes the requirement that CalPERS report to the
Legislature, utilizing a specified investment rate assumption,
any time it forecasts contribution rates.
5)Deletes the requirement that the Treasurer express his or her
opinion of the reasonableness of CalPERS' calculation of the
contribution rates when reporting on the CalPERS report to the
Legislature.
EXISTING LAW :
1)Requires, pursuant to SB 867 (Hollingsworth) Chapter 733,
Statutes of 2010, the California Public Employees Retirement
System (CalPERS) to report its investment returns,
amortization period, and discount rates using specific
analytical guidelines every time it adopts contribution rates.
The Treasurer, within 30 days following receipt of the
report, is required to report during a publicly noticed floor
session of each house of the Legislature on the role
AB 1247
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investment return assumptions and amortization periods have on
contribution rates, the consequences for future state budgets
if the investment return assumptions are not realized, to
report whether the amortization period exceeds the estimated
remaining service periods of employees covered by the
contributions, and to express his or her opinion of the
reasonableness of CalPERS' calculation of the contributions
rates.
2)Provides under the State Constitution, pursuant to Proposition
162, The California Pension Protection Act of 1992, that the
retirement board of a public retirement system has the sole
and exclusive power to provide for actuarial services in order
to assure the competency of the assets of the retirement
system.
FISCAL EFFECT : Unknown.
COMMENTS : As part of their findings and recommendations on the
2011-12 budget the Legislative Analyst Office's (LAO)
recommended that amendments be made to the pension reporting
bill that was passed as part of the 2010 budget package, SB 867
(Hollingsworth), to make the pension reporting requirements more
useful and workable. The LAO recommended requiring the
reporting to be based on more reasonable alternate investment
return rates, focusing the reporting requirements on state plans
instead of the hundreds of CalPERS local plans, requiring one
report per year by CalPERS, and requiring an official other than
the Treasurer to provide the independent analysis to the
Legislature. The LAO suggested this independent entity could be
one or more members of the California Actuarial Advisory Panel
(CAAP). The LAO also recommended the Legislature consider
requiring the report to be presented to the Legislature every
two years and that instead of being presented to the full
Legislature, the report be presented in a public, joint meeting
of the two houses' budget and/or public employment committees.
According to the author, "AB 1247 improves the ability of
decision makers and the public to evaluate the future funding
status of state employee pension plans while controlling costs.
This bill would provide more insight into how the state's
contributions will change if the rate of return is better or
worse than expected by requiring that estimates of future
liabilities and contributions based on 3 possible rates of
return (the assumed rate ? 2%) be included in the pension
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system's annual report.
"AB 1247 also adopts several LAO recommendations for
streamlining the reporting requirements currently in law, which
will prevent precious pension plan dollars from being wasted on
excessive bureaucracy. Namely, the frequency and scope of the
report are adjusted to rein in actuarial costs while maintaining
transparency."
While the author has addressed some of the LAO recommendations
in his bill, the bill still requires the Treasurer to present
the report during a publicly noticed floor session of each house
of the Legislature. The Committee, therefore, recommends the
following amendments:
1)Replace the state Treasurer with the Chair of the CAAP; and,
2)Require the report to be presented every two years to a joint
hearing of the Assembly and Senate public employment and
retirement committees.
The CAAP was established by SB 1123 (Wiggins), Chapter 371,
Statutes of 2008, to provide impartial and independent
information on pensions, other post-employment benefits (OPEB),
and best practices to public agencies and the Legislature.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
California Teachers Association
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957