BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 822
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          ASSEMBLY THIRD READING
          AB 822 (Hall)
          As Amended  April 30, 2013
          Majority vote 

           LOCAL GOVERNMENT           7-1  ELECTIONS                5-2    
           
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          |Ayes:|Achadjian, Levine, Alejo, |Ayes:|Fong, Bocanegra, Bonta,   |
          |     |Bradford,  Gordon,        |     |Hall, Perea               |
          |     |Mullin, Frazier           |     |                          |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Waldron                   |Nays:|Donnelly, Logue           |
          |     |                          |     |                          |
           ----------------------------------------------------------------- 

           APPROPRIATIONS         12-5                                     
           
           ----------------------------------------------------------------- 
          |Ayes:|Gatto, Bocanegra,         |     |                          |
          |     |Bradford,                 |     |                          |
          |     |Ian Calderon, Campos,     |     |                          |
          |     |Eggman, Gomez, Hall,      |     |                          |
          |     |Rendon, Pan, Quirk, Weber |     |                          |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Harkey, Bigelow,          |     |                          |
          |     |Donnelly, Linder, Wagner  |     |                          |
           ----------------------------------------------------------------- 

           SUMMARY  :  Requires local measures that propose a change to  
          municipal employee retirement benefit plans to be submitted to  
          voters only at established statewide general elections, and  
          requires an independent actuarial statement regarding such  
          measures to be prepared and printed in the voter information  
          portion of the sample ballot.  Specifically,  this bill  :  

          1)Requires the governing body of a 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 the 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  
               costs 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 annual costs that will result from the changes  
               to the retirement plan proposed by the measure.

          2)Requires the actuarial statement to be printed in the voter  
            information portion of the sample ballot preceding the  
            arguments for and against the measure, if any.

          3)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."

          4)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 proponents.

          5)Requires measures described in this bill that qualify for the  
            ballot to be submitted to the voters only at an established  
            statewide general election.

          6)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,  








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               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.

          7)Applies this bill's requirements to a charter city, charter  
            city and county, or charter county.

          8)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.

          9)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  








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            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.  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  :  According to the Assembly Appropriations  
          Committee, there are minor state reimbursable costs of thousands  
          of dollars for reimbursing local governments for the cost of  
          obtaining the actuarial statement and minor costs associated  
          with elections.  The costs will depend on the number of local  
          governments with such proposed local measures and the size and  
          complexity of the proposal and the local government's retirement  
          system.  Some costs could be offset by fees collected from  
          proponents.

           COMMENTS  :  This bill has two major provisions:  it requires  
          local measures that propose a change to municipal employee  
          retirement benefit plans to be submitted to voters only at  








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          statewide general elections; and, it requires an independent  
          actuarial statement regarding such measures to be prepared and  
          printed in the voter information portion of the sample ballot.   
          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  
          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.

          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 identified the full  
          amount of post-employment health care and dental benefits for  
          which California governments are liable and which remain  
          unfunded; evaluated and compared various approaches for  
          addressing governments' unfunded retirement health care and  
          pension obligations; and, 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.

          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.   
          This bill extends this requirement to local ballot measures that  








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          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.

          This bill also requires the actuarial statement to be printed in  
          the voter information portion of the sample 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 or in the  
          voter information portion of the sample ballot.  The proponents  
          of such an initiative must pay an additional filing fee of up to  
          $500 to cover the cost of the actuarial statement, which must be  
          refunded if the measure passes.

          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)"









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          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.  This bill requires local measures that  
          propose to alter, replace, or eliminate the retirement benefit  
          plan of local government employees to be submitted to voters  
          only at an established statewide general election.

          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.

          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.

           
          Analysis Prepared by  :    Angela Mapp / L. GOV. / (916) 319-3958 


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