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          repealed directly through a voter petition.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).  




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          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  





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          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  





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          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  





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          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  





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          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.