BILL ANALYSIS �
AB 822
Page 1
Date of Hearing: April 23, 2013
ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING
Paul Fong, Chair
AB 822 (Hall) - As Introduced: February 21, 2013
AS PROPOSED TO BE AMENDED
SUBJECT : Local government retirement plans.
SUMMARY : Requires an independent actuarial statement to be
prepared and printed in the voter information portion of the
sample ballot for local ballot measures that propose a change to
employee retirement benefit plans. Requires a local ballot
measure that proposes to change an employee retirement benefit
plan to appear on the ballot only at a statewide general
election. Specifically, this bill :
1)Requires a ballot measure that proposes to alter, replace, or
eliminate the retirement benefit plan of employees of a local
governmental entity to be submitted to voters only at an
established statewide general election.
2)Specifies that the above provision applies to charter cities,
charter cities and counties, and charter counties.
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:
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 in the voter
information portion of the sample ballot preceding the
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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, the following statement to be printed immediately
below the independent actuarial analysis, in no less than
10-point bold type:
"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). Provides that if the
measure is adopted by the voters, the fee shall be refunded to
the proponents.
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,
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)Makes findings and declarations that the security of public
moneys and the fiscal integrity of local governmental entities
in this state are matters of statewide concern and not a
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municipal affair.
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;
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. Requires local agencies to 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.
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FISCAL EFFECT : Unknown. State-mandated local program; contains
reimbursement direction.
COMMENTS :
1)Author's Amendments : As currently drafted, the provisions of
this bill that require a measure that proposes to change a
municipal employee retirement benefit plan to appear on the
ballot only at a statewide general election applies only to
charter amendments and to the adoption or repeal of city or
city and county charters. However, it is the author's intent
that this requirement apply to all local ballot measures
dealing with employee retirement benefit plans, not just
measures involving city or city and county charters. In order
to correctly reflect that intent, the author is proposing
amendments to make this requirement applicable to all local
ballot measures dealing with employee retirement benefit
plans.
Additionally, this bill currently requires an actuarial
statement of up to 500 words in length to be printed on the
ballot when a measure appears on the ballot to alter, replace,
or eliminate the retirement benefit plan of employees of a
local government. These types of statements typically are not
printed on the ballot itself, due in part to concerns about
the amount of space that they would take up on the ballot.
Instead, lengthier analyses of ballot measures and arguments
for and against those measures typically appear in the voter
information portion of the sample ballot instead. In light of
this fact, the author is proposing amendments to require the
actuarial statement to appear in the voter information portion
of the sample ballot, instead of on the ballot itself.
This analysis reflects these proposed author's amendments.
2)Purpose of the Bill : According to the author:
Across California, there have been increased efforts
to make changes to city employee compensation packages
relative to pension benefits. The fiscal changes
resulting from these initiatives can have far-reaching
impact on the retirement security of workers and their
families as well as dramatic and often unexpected
impact on local budgets.
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By enlisting the services of an actuary in this regard
and providing public notice of an initiative's fiscal
impact, voters can be confident in the information
provided and accordingly, make informed decisions at
the ballot box.
3)Actuarial Analyses of Proposed Pension Changes and Previous
Legislation : 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 contained 34 recommendations for improving
the functioning of public retirement systems and the delivery
of other post-employment benefits, and for controlling the
costs of public employee benefits.
SB 1123 (Wiggins), Chapter 371, Statutes of 2008, enacted
several of the Commission's recommendations, including a
requirement for local agencies to secure an actuary to provide
an actuarial impact statement of future annual costs before
authorizing changes in public retirement plan benefits or
other post-employment benefits. 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.
4)Can This Bill Be Made Applicable to Charter Cities ? The
California Constitution generally give charter cities the
right to adopt ordinances that conflict with general state
laws, provided that the subject of the regulation is a
municipal affair, rather than an issue of statewide concern.
In fact, Section 5 of Article XI of the California
Constitution expressly grants charter cities plenary authority
to provide for the compensation of city employees. In light
of this fact, and notwithstanding the findings and
declarations in this bill that "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, it is not clear whether the provisions of
this bill can be made applicable to charter cities.
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5)Timing of Votes on Measures Dealing with Retirement Benefit
Plans : As noted above, existing law already requires city and
city and county charter proposals to be submitted to the
voters only at a statewide primary or general election, or at
a regularly scheduled municipal election. These requirements
were enacted in 2011, as a response (in part) to a situation
where the City of Bell adopted a charter in 2005 at an
election scheduled just five days after Thanksgiving. That
charter proposal was the only item on the ballot, and was
promoted by city officials as a change that would give the
city more local control. The ballot language included no
mention of the fact, however, that the change also gave the
city council the ability to set council members' salaries.
Fewer than 400 voters turned out to vote on the charter
proposal in the city of over 36,000 residents.
The rationale for requiring charter proposals to be submitted to
voters only at statewide primary or general elections, or at
regularly scheduled municipal elections, was that a city
charter is akin to a Constitution for charter cities-a
foundational set of rules that govern the essential operations
of the city that adopts it. In light of that fact, requiring
charter proposals to be voted on at regularly scheduled
elections helps ensure broader voter participation in
establishing those foundational rules, and helps prevent
situations like the one in the City of Bell where votes on
charter proposals are deliberately scheduled at a time when
few voters will participate.
This bill proposes an even more restrictive standard for when
local ballot measures that propose to alter, replace, or
eliminate the retirement benefit plan of local government
employees may appear on the ballot, requiring such measures to
be considered by voters only at the statewide general
election. The stated rationale for this proposed policy
change is that local retirement-related proposals can have
dramatic impacts on local budgets, as well as far-reaching
impacts on the retirement security of California workers and
their families. However, it is unclear whether local
retirement-related proposals differ in this respect from other
local ballot measures that voters may be asked to consider.
For instance, local ballot measures dealing with taxes or with
the issuance of bonds could have very significant impacts on
local budgets, yet they would not be required to appear only
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at statewide general elections under this bill. The committee
may wish to consider whether retirement-related proposals are
materially different from other local government ballot
measures that voters are asked to consider, and if so, whether
such differences warrant a requirement that retirement-related
proposals be considered only at statewide general election
ballots while local measures not dealing with retirement
benefits continue to appear on the ballot at other times.
6)Arguments in Support : According to the sponsor of this bill,
California Professional Firefighters:
A review of the last few election cycles reveals the
popular emergence of local ordinances and ballot
measures seeking to alter, replace or eliminate
retirement benefit plans applicable to the employees
of a local government entity.
Frequently, these retirement-related proposals are
promulgated by the local governing body for placement
before voters on their respective local ballot?
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?.
Additionally, fewer voters actually participate in the
local direct democracy process because many
initiatives appear in primary elections when voter
participation is historically and consistently much
lower than in general elections. Just as the
Legislature and Governor recognized last year with the
approval of SB 202, there is a need to bring the local
initiative process back to its original intent and
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invite greater voter participation at the ballot box,
especially when considering that local municipal
retirement-related proposals, like their statewide
counterparts, can have far-reaching impacts on the
retirement security of California workers and their
families as well as dramatic and often unexpected
impacts on local budgets.
7)Related Legislation : SB 311 (Padilla), which is pending on
the Senate Floor, would require a city charter or amendments
to a city charter to be submitted to the voters only at a
statewide general election.
8)Previous Legislation : AB 1344 (Feuer & Alejo), Chapter 692,
Statutes of 2011, required a city charter or amendments to a
city charter to be submitted to the voters at an established
statewide general, statewide primary, or regularly scheduled
municipal election, among other provisions.
SB 202 (Hancock), Chapter 558, Statutes of 2011, provided that
state initiative and referendum measures that qualify for the
ballot on or after July 1, 2011, shall appear on the ballot
only at the November statewide general election or at a
statewide special election, among other provisions.
9)Double Referral : On April 10, 2013, the Assembly Committee on
Local Government approved this bill by a vote of 7-1.
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 State Association of Electrical Workers
California State Pipe Trades Council
Coalition of California Utility Employees
Glendale City Employees Association
Laborers' International Union of North America Local 777
Laborers' International Union of North America Local 792
Organization of SMUD Employees
San Bernardino Public Employees Association
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San Luis Obispo County Employees Association
Santa Rosa City Employees Association
Western States Council of Sheet Metal Workers
Opposition
None on file.
Analysis Prepared by : Ethan Jones / E. & R. / (916) 319-2094