BILL ANALYSIS Ó SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: SB 807 Gloria Negrete McLeod, Chair Hearing date: June 27, 2011 SB 807 (Correa and Lieu) 6/13/11 FISCAL: YES STATE EMPLOYEES: COMPENSATION EARNABLE HISTORY : Sponsor: Author Prior legislation: SB 27 (Simitian), 2011 in Assembly PER&SS Committee SUMMARY : SB 807 specifies that any travel expense or housing allowance paid to a state employee may not be included in compensation earnable for the purpose of calculating a pension. This is an URGENCY BILL . BACKGROUND AND ANALYSIS : 1) Existing law : a) establishes the California Public Employees' Retirement System (CalPERS), which provides retirement benefits for state employees based on employees' years of service, age at retirement, and final compensation (highest paid "compensation earnable" during a consecutive 12 or 36 month period of employment). b) defines "compensation earnable" as consisting of payrate and special compensation, and specifies which items of compensation paid by an employer may be included in either payrate or special compensation for the purpose of determining a pension, and likewise prohibits certain compensation items from being pensionable. c) allows the state employer, through laws and collective bargaining agreements, to pay differentials, bonuses, overtime, leave pay, and other forms of compensation in Pamela Schneider Date: 6/20/11 Page 1 addition to base pay and requires that the state identify which items of special compensation may be included in compensation earnable for the purposes of determining a pension. d) gives CalPERS the authority to exclude from compensation earnable any pay differential or form of special compensation that does not meet specified criteria for being pensionable, even if formerly approved by the state employer. e) grants CalPERS the authority to correct any incorrect pay reporting if discovered and to adjust a pension to reflect an accurate compensation earnable calculation. 2) This bill : a) amends the law specifying which forms of pay for a state employee may be pensionable to specifically exclude any travel expenses or housing allowances. b) this is an URGENCY BILL . COMMENTS : 1) Argument in Support According to the author, The Senate Veterans Affairs Committee has uncovered several dishonest pay practices in regard to Military Department employees, and some of these practices may be being used to pad pensions. Specifically, there is currently some confusion as to whether or not the Department of Personnel Administration (DPA) or CalPERS has jurisdiction over determining which forms of pay are pensionable with regard to Military Department employees, who are sometimes dually employed by both the State and the US Army, and may have confusing pay records. Pamela Schneider Date: 6/20/11 Page 2 There is a concern that employees of the Military Department are claiming homes in San Diego, Nevada, and Texas for Sacramento-based jobs, and collecting travel and housing allowances, which are being included in compensation earnable and are thus pensionable. One such individual purportedly gained approximately $10,000 in annual compensation due to such an arrangement. Both CalPERS and DPA state that they are currently auditing their programs to determine the extent to which any abuse or incorrect reporting has occurred. 2) OPPOSITION : None to date ##### Pamela Schneider Date: 6/20/11 Page 3