BILL ANALYSIS �
AB 822
Page 1
Date of Hearing: April 10, 2013
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
AB 822 (Hall) - As Introduced: February 21, 2013
SUBJECT : Local government retirement plans.
SUMMARY : Requires an independent actuarial statement to be
prepared and printed on the ballot for local measures that
propose a change to municipal employee retirement benefit plans,
and requires a charter or charter amendment that proposes to
change a municipal employee retirement benefit plan to appear
only at a statewide general election. Specifically, this bill :
1)Requires a charter or charter amendment that proposes to
alter, replace, or eliminate the retirement benefit plan of
employees of the city or city and county to be submitted to
voters only at an established statewide general election.
2)Specifies that the above provision applies to the following:
a) A charter or charter amendment proposed by a charter
commission, as specified;
b) An amendment or repeal of a charter proposed by the
governing body of a city or a city and county on its own
motion;
c) An amendment or repeal of a city charter proposed by a
petition, as specified;
d) An amendment or repeal of a city and county charter
proposed by a petition, as specified;
e) A recodification of the charter proposed by the
governing body on its own motion; as specified.
3)Requires the governing body of the local government entity to
do all of the following whenever a local measure qualifies for
the ballot that proposes to alter, replace, or eliminate the
retirement benefit plan of employees of a local government
entity, whether by initiative or legislative action:
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a) Secure the services of an independent actuary to provide
a statement, not to exceed 500 words in length, of the
actuarial impact of the proposed measure upon future annual
costs of the retirement benefit plan, including normal cost
and any additional accrued liability; and,
b) Make public at a public meeting, at least two weeks
prior to the election that the measure has qualified for,
the future costs that will result from the changes to the
retirement plan proposed by the measure.
4)Requires the actuarial statement to be printed on the ballot
preceding the arguments for and against the measure, if any.
5)Requires, if the entire text of the measure is not printed on
the ballot, nor in the voter information portion of the sample
ballot, there to be printed immediately below the independent
actuarial analysis, in no less than 10-point bold type, a
legend substantially as follows: "The above statement is an
independent actuarial analysis of Ordinance or Measure ____.
If you desire a copy of the ordinance or measure, please call
the elections official's office at (insert telephone number)
and a copy will be mailed at no cost to you."
6)Requires, if a measure described in this bill qualifies for
the ballot pursuant to an initiative petition described in
current law governing county, city or district petitions, the
proponents of the measure to pay an additional filing fee to
pay for the costs of the actuarial impact statement in an
amount to be established by the local governing body, not to
exceed five hundred dollars ($500). If the measure is adopted
by the voters, the fee shall be refunded to the proponent.
7)Provides the following definitions:
a) "Actuary" means an actuary who is an associate or fellow
of the Society of Actuaries;
b) "Future annual costs" includes, but is not limited to,
annual dollar changes, or the total dollar changes involved
when available, as well as normal cost and any change in
accrued liability; and,
c) "Local government entity" includes a city, county, city
and county, school district, community college district,
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county board of education, and special district.
8)Applies this bill's requirements regarding actuarial
statements to a charter city, charter city and county, or
charter county.
9)Finds and declares that the security of public moneys and the
fiscal integrity of local governmental entities in this state,
including charter cities and charter counties, have a direct
impact on the long-term well-being of all residents of this
state. Further, many local governments experiencing budgetary
crises have difficulty providing sufficient public safety
services and place additional burdens on resources of the
state. Accordingly, ensuring an informed electorate with
respect to the statewide integrity and security of government
pension systems and ensuring the sufficiency of public safety
services are matters of statewide concern and not a municipal
affair, as that term is used in Section 5 of Article XI of the
California Constitution.
10)Provides that, if the Commission on State Mandates determines
that this bill contains costs mandated by the state,
reimbursement to local agencies and school districts for those
costs shall be made pursuant to current law governing state
mandated local costs.
EXISTING LAW :
1)Requires a charter or charter amendment proposed by a charter
commission, whether elected or appointed by a governing body,
for a city or city and county to be submitted to the voters at
an established statewide general, statewide primary, or
regularly scheduled municipal election date, as specified,
provided that there are at least 95 days before the election.
2)Requires the following city or city and county charter
proposals to be submitted to the voters at an established
statewide general, statewide primary, or regularly scheduled
municipal election, as specified, provided that there are at
least 88 days before the election:
a) An amendment or repeal of a charter proposed by the
governing body of a city or a city and county on its own
motion;
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b) An amendment or repeal of a city charter proposed by a
petition signed by 15% of the registered voters of the
city;
c) An amendment or repeal of a city and county charter
proposed by a petition signed by 10% of the registered
voters of the city and county; and,
d) A recodification of the charter proposed by the
governing body on its own motion, provided that the
recodification does not, in any manner, substantially
change the provisions of the charter.
3)Requires the Legislature and local legislative bodies (except
school districts or county offices of education) to secure the
services of an actuary to provide a statement of the actuarial
impact upon future annual costs, including normal cost and any
additional accrued liability, before authorizing changes in
public retirement plan benefits or other postemployment
benefits. Local agencies must make public at a public meeting
the future costs of changes in retirement benefits or other
post-employment benefits at least two weeks before the
adoption of any changes in public retirement plan benefits or
other post-employment benefits, as specified.
FISCAL EFFECT : Unknown
COMMENTS :
1)This bill has two major provisions: it requires an independent
actuarial statement to be prepared and printed on the ballot
for local measures that propose a change to local agency
employee retirement benefit plans, and it requires a charter
or charter amendment that proposes to change a municipal
employee retirement benefit plan to appear only on statewide
general election ballots. According to the author, "State law
requires an independent analysis and public hearing
requirement prior to a state or local government altering a
retirement benefit, but there is no requirement if the benefit
change is adopted by a local initiative.
"The fiscal changes resulting from proposed retirement related
initiatives can have far-reaching impact(s) on the retirement
security of workers and their families as well as dramatic and
often unexpected impact(s) on local budgets. Without an
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independent fiscal analysis, voters could be asked to make
dramatic changes to a vital program without full knowledge of
the costs to taxpayers." This bill is sponsored by the
California Professional Firefighters.
2)The Public Employee Post-Employment Benefits Commission
(Commission) was established by Executive Order S-25-06 to
propose ways for addressing unfunded post-employment benefits.
In early January 2008, the Commission delivered its final
report to the Governor and the Legislature, which:
a) Identified the full amount of post-employment health
care and dental benefits for which California governments
are liable and which remain unfunded.
b) Evaluated and compared various approaches for addressing
governments' unfunded retirement health care and pension
obligations.
c) Proposed a plan to address governments' unfunded
retirement health care and pension obligations.
The report contained 34 recommendations for improving the
functioning of public retirement systems and the delivery of
other post-employment benefits (OPEB), and for controlling the
costs of public employee benefits. Approximately 78% of
public-sector employees work for counties, cities, school
districts and special districts.
3)SB 1123 (Wiggins), Chapter 371, Statutes of 2008, enacted
several of the Commission's recommendations, including a
requirement on local agencies to secure an actuary to provide
an actuarial impact statement upon future annual costs before
authorizing changes in public retirement plan benefits or
OPEB. AB 822 extends this requirement to local ballot
measures that propose changes to local agency employee
retirement benefits. This provision applies to cities and
counties (including charter cities and charter counties),
school districts, community college districts, county boards
of education, and special districts.
AB 822 also requires the actuarial statement to be printed on
the ballot, along with a notice to voters explaining that they
can obtain the entire text of the measure if it is not printed
on the ballot. The proponents of such an initiative must pay
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an additional filing fee of up to $500 to cover the cost of
the actuarial statement, which must be refunded if the measure
passes.
4)According to the sponsor, 13 municipal employee
pension-related measures appeared on local ballots in November
2010, including measures in Pacific Grove, San Jose, Menlo
Park, Carlsbad, Bakersfield and Riverside County. Five
surfaced in November 2011 (three in Modesto and two in San
Francisco), and two such measures were on the ballot in June
2012 in San Jose and San Diego.
The sponsor contends that "the increasing trend in local
ballot measures and ordinances seeking to modify municipal
employee pension plans raises a public interest concern,
specifically with respect to the accuracy of such a proposal's
fiscal analysis, particularly if the analysis isn't conducted
by a qualified actuarial expert. For example, the City of San
Diego estimated the cost for implementing Proposition B would
be $54 million over the first three years. However, based on
the first year cost it is likely that the three-year cost may
be three times what was projected during the election.
According to the San Diego Union-Tribune:
"The city's budget continues to get squeezed with news that
the voter-mandated switch from pensions to 401(k)s has
pushed San Diego's annual pension payment to $275 million
for the coming fiscal year, an increase of $44 million from
a year ago?Proposition B, which replaced guaranteed
pensions with 401(k)-style plans for all new hires except
police officers, is the main driver of the cost increase.
(SDUT, Pension Costs Squeeze SD Budget - 1.11.13)"
The sponsor also notes that fewer voters participate in the
local direct democracy process because many initiatives appear
in primary elections when voter participation is lower than in
general elections.
5)This bill also requires a charter or charter amendment that
proposes to alter, replace, or eliminate the retirement
benefit plan of employees of the city or city and county to be
submitted to voters only at an established statewide general
election. This provision leaves out general law cities and
counties. Of California's 478 cities, 108 of them are charter
cities - the rest are general law cities. Materials submitted
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by the sponsor indicate that this provision is intended to
apply to all cities and counties statewide. The Committee may
wish to consider whether this provision should be expanded to
encompass all cities and counties.
6)This bill is keyed a state mandate, which means the state
could be required to reimburse local agencies and school
districts for implementing the bill's provisions if the
Commission on State Mandates determines that the bill contains
costs mandated by the state.
7)Support arguments : Supporters state, "AB 822 recognizes that
voters weighing changes to retirement benefits have the right
to impartial fiscal analysis just as state and local
legislators do. AB 822 also strengthen(s) the local direct
democracy process by requiring initiatives that seek to alter,
replace or eliminate a local government employee's retirement
benefit plan to be placed on November General Elections. In
doing so, AB 822 brings the local initiative process back to
its original intent and will aid in greater voter
participation."
Opposition arguments : Opponents could argue that this bill
places an unfair burden on proponents of initiatives that
propose to change local employee benefit plans by requiring
them to pay the costs of the actuarial analysis.
8)This bill is double-referred to the Elections and
Redistricting Committee.
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REGISTERED SUPPORT / OPPOSITION :
Support
California Professional Firefighters [SPONSOR]
American Federation of State, County and Municipal Employees,
AFL-CIO
Association for Los Angeles Deputy Sheriffs
California Labor Federation
California Nurses Association
California State Association of Electrical Workers
California State Pipe Trades Council
Coalition of California Utility Employees
Glendale City Employees Association
Orange County Employees Association
Organization of SMUD Employees
Peace Officers Research Association of California
San Bernardino Public Employees Association
San Luis Obispo County Employees Association
Santa Rosa City Employees Association
SEIU
Western States Council of Sheet Metal Workers
Opposition
None on file
Analysis Prepared by : Angela Mapp / L. GOV. / (916) 319-3958