BILL ANALYSIS Ó SENATE GOVERNANCE & FINANCE COMMITTEE Senator Lois Wolk, Chair BILL NO: AB 822 HEARING: 7/3/13 AUTHOR: Hall FISCAL: Yes VERSION: 6/20/13 TAX LEVY: No CONSULTANT: Ewing LOCAL GOVERNMENT RETIREMENT PLANS Requires ballot measures affecting local agency retirement plans to be submitted to voters at a statewide general election and requires independent actuarial analysis of future costs. Background and Existing Law Article XI of the California Constitution authorizes cities and counties to adopt, amend, or repeal city or county charters with a majority approval of voters. State law determines the process for the review and adoption of charters. Charters can be proposed by the legislative body of a city or county, or through a charter commission established for that purpose, which can be called for through a voter petition. Charters can be amended or repealed directly through a voter petition. Charter measures can be considered at a regularly scheduled municipal election, a statewide primary, or statewide general election (AB 1344, Feuer, 2012). The Constitution specifies that a city or county charter can include provisions relating to employee compensation. For general law cities and counties, and for other local agencies, the Meyers-Milias-Brown Act governs labor-management relations, although its bargaining and representation procedures generally do not apply to executive employees. State law restricts the compensation that local agencies can offer to employees not covered by the Meyers-Milias-Brown Act, including restrictions on compensation when employment contracts are terminated, and the mechanisms local agencies can use to set compensation. The Public Employees' Retirement Law also contains provisions governing postemployment benefits (AB 340, Furutani 2012). AB 822 -- 6/20/13 -- Page 2 State law requires local agencies, including community colleges, before adopting changes to a retirement or postemployment benefit, to secure the services of an actuary to provide a statement on the fiscal impact of those proposed changes, and to make that information public (SB 1123, Wiggins, 2008). Public employee organizations would like ballot measures that affect postemployment benefits to be limited to statewide general elections to ensure the highest level of voter turnout. They also are concerned that proposals to change retirement or postemployment benefits made through a ballot measure may not provide voters an adequate assessment of the fiscal impact of those changes. Proposed Law Assembly Bill 822 requires local agencies to submit ballot proposals affecting a retirement benefits plan of local agency employees to the statewide general election that occurs in November of even-numbered years. Under AB 822, for ballot measures affecting retirement benefit plans, local agencies must: Secure the services of an independent actuary to provide a statement, not to exceed 500 words, of the impact of the proposed measure on future annual costs, including normal costs and any additional accrued liability. Make public, at a public meeting, at least two weeks prior to the election, the future annual costs of the measure. Print the statement on costs from the actuary in the voter information portion of the sample ballot, preceding arguments for and against the measure. If the entire text of the measure is neither on the ballot nor in the voter information portion of the ballot, the local agency must include a statement indicating how to obtain a copy of the ordinance or measure. For measures placed on the ballot through petition, local agencies must establish an additional filing fee to cover the cost of the actuarial statement, not to exceed $500. The fee is refundable for measures that are adopted. AB 822 -- 6/20/13 -- Page 3 AB 822 applies to cities, counties, special districts, school districts, community college districts, charter cities, charter counties, and a charter city and county. State Revenue Impact No estimate. Comments 1. Purpose of the bill . State law requires local agencies to prepare an actuarial analysis, and to hold a public hearing, before adopting a decision to alter a retirement benefit. But there is no comparable requirement if a benefit change is adopted through a ballot measure. The fiscal changes resulting from proposed retirement-related initiatives can have far-reaching effects on workers and their families. Without an independent fiscal analysis, voters could be asked to change compensation policies without full knowledge of the costs. Ensuring that local measures affecting postemployment benefits are on the ballot during the statewide general election will improve opportunities for voter consent on these important issues, because those elections have the greatest turnout. 2. Who is included ? The Meyers-Milias-Brown Act (MMBA) governs compensation practices between local agencies and represented employees. For non-represented employees, local agencies have contracting and compensation authority through the Government Code. The Constitution allows cities and counties to adopt voter-approved charters that can set compensation policies. In matters not governed by charters, local agencies must follow the general, statewide laws, including MMBA. AB 822 establishes regulatory statutes governing compensation policies set through city or county charters, and compensation measures placed on the ballot outside of a charter. It's not clear that the local agencies affected by AB 822, other than cities and counties with charters, have the authority to set compensation through ballot measure, when doing so creates a conflict with MMBA. Further, if AB 822 only applies to ballot measures affecting compensation through a charter, it may AB 822 -- 6/20/13 -- Page 4 conflict with the constitutional authority of cities and counties to establish those charters. AB 822 includes a legislative finding and declaration that the bill's provisions are a matter of statewide concern, thus creating an exemption from the application of a charter, because of the need to ensure the integrity and security of government pension systems and the sufficiency of public safety services are matters of statewide concern. Ultimately, the courts may decide whether AB 822 applies to charter cities and charter counties. 3. Priorities . State and local agencies, generally, have the flexibility to place measures on the ballot based on circumstances, as in the case of special elections, or efficiency and convenience, with the use of consolidated elections, or timing, with the use of municipal elections or primaries. By repealing local agencies' authority to use elections other than the statewide general election for measures affecting retirement benefits, AB 822 establishes a higher standard for these measures than is in place for electing a Governor, other state officials or local officials, voting on statewide ballot measures, raising taxes or other issues, all of which can be done through an election other than the statewide general. It is unclear whether this prioritization is warranted. 4. Petition measures too ? City charter measures can be placed on the ballot through petition, either by a petition calling for a charter commission or a petition to amend or repeal a charter. AB 822 prohibits measures authorized by petition, if they would affect retirement benefits, from being considered at a regularly scheduled municipal election, or a statewide primary. Recognizing the value of voter-led initiatives, the Committee may wish to consider amending AB 822 to preserve the use of a regularly scheduled municipal election or a statewide primary for measures placed on the ballot by petition. 5. Voter fatigue . SB 202 (Hancock, Chapter 558, Statutes of 2011) required initiative and referenda measures to be considered during the statewide general election held in November of even-numbered years. The statewide general election also includes federal, state and local races and other ballot measures. By requiring measures that affect retirement benefits to be placed only on the statewide general election ballot, AB 822 would ensure these measures AB 822 -- 6/20/13 -- Page 5 are considered during the election with greatest turnout, but also would ensure greatest competition for the time and attention of voters. Because of voter fatigue, AB 822 could result in retirement-related measures receiving limited scrutiny on a ballot crowded with presidential, gubernatorial, Senate, Assembly, and other races. 6. Room for exceptions ? It is unclear how AB 822 may impact local agencies going through bankruptcy, reorganizations, mergers or consolidations or other changes that could impact retirement benefit plans. Changes in state and federal laws, or judicial rulings, can create conflicts with local measures that at times need to be addressed through charter amendments. However, AB 822 allows local governments to make necessary changes only once every two years. The Committee may wish to consider amending AB 822 to permit a local agency to place a measure on the regularly scheduled municipal election or statewide primary in response to a court order, an action of the federal government or state government that creates a conflict with a charter or other measure that can only be amend with the vote of the people. 7. Room for exceptions II ? State law allows for consolidated of elections to reduce costs and avoid confusion among voters. A county board of supervisors must approve a request for a consolidated election unless the ballot style, voting equipment, or computer capability cannot accommodate the request. The County of Los Angeles, for instance, conducts elections for more than 250 local agencies, including cities, school districts, and special districts, as well as the County. The county reports that it cannot respond to all current requests to conduct consolidated elections because of technology constraints. Requiring all ballot measures dealing with retirement benefits to be conducted during the statewide general election, could result in greater burdens on the county's voting processes. If the county cannot conduct an election for a local agency during the statewide general election because of capacity constraints, a local agency would be required to conduct their own election or contract for services from another entity. Under that scenario, some residents may need to participate in two separate elections on the same day. The Committee may wish to consider amending AB 822to allow ballot measures to be heard during a regularly scheduled municipal election or a statewide AB 822 -- 6/20/13 -- Page 6 primary if a board of supervisors demonstrates that limitations due to ballot style, voting equipment, or computer capability prevent the measure from appearing on the statewide general election ballot. 8. Double referral . The Senate Rules Committee has ordered a double-referral of AB 822, first to the Senate Election and Constitutional Amendments Committee, which has policy jurisdiction over the statutes governing elections, and then to the Senate Governance and Finance Committee, which has jurisdiction over statutes relating the local agencies. On June 18, 2013, AB 822 passed out of Senate Elections and Constitutional Amendments with a vote of 4-0. 9. Related bills . AB 822 is not the only bill intended to limit when measures can be placed on the ballot. SB 311 (Padilla) would restrict the adoption or amendment of a charter to the statewide general election. SB 311 passed out of the Senate Governance & Finance Committee with a vote of 5-1. Assembly Actions Assembly Local Government Committee 7-1 Assembly Elections and Redistricting Committee5-2 Assembly Appropriations Committee 12-5 Assembly Floor 52-19 Support and Opposition (6/27/13) Support : American Federation of State, County and Municipal Employees, AFL-CIO; Association for Los Angeles Deputy Sheriffs; California Labor Federation; California Nurses Association; California Professional Firefighters; California School Employees Association, AFL-CIO; 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 Locals 777 and 792; Los Angeles County Probation Officers Union; Los Angeles Police Protective League; Orange County Employees Association; Organization of SMUD Employees; Peace Officers Research Association of California; Public AB 822 -- 6/20/13 -- Page 7 Employees Union, Local #1; Riverside Sheriffs' Association; San Bernardino Public Employees Association; San Luis Obispo County Employees Association; Santa Rosa City Employees Association; Western States Council of Sheet Metal Workers. Opposition : Association of California Cities - Orange County; City and County of San Francisco.