BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Kevin de León, Chair AB 822 (Hall) - Local Government Retirement Plans Amended: July 10, 2013 Policy Vote: E&CA 4-0, G&F 5-2 Urgency: No Mandate: Yes Hearing Date: August 12, 2013 Consultant: Maureen Ortiz This bill meets the criteria for referral to the Suspense File. Bill Summary: AB 822 requires an actuarial summary statement to be included in the sample ballot for any local ordinance or measure that alters the retirement benefit plan of employees of a local government entity. Fiscal Impact: Unknown, likely minor, reimbursable mandate costs to local governments for procuring actuarial statements, depending on the frequency of qualified measures (General) Potentially $100,000 in reimbursable state mandate costs to include the statement in the sample ballot (General) The sample ballot cost estimate would apply to each measure that was placed on the ballot for each county. Background: Existing law 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 the future costs of changes in retirement benefits or other post-employment benefits available at a public meeting at least two weeks before the adoption of any changes in public retirement plan benefits or other post-employment benefits, as specified. Proposed Law: AB 822 requires the governing body of a local government entity to do the following whenever a local measure qualifies for the ballot that proposes to alter, replace, or AB 822 (Hall) Page 1 eliminate the retirement benefit plan of employees of the 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 costs and any additional accrued liability; and, b) Make public the future annual costs that will result from the changes to the retirement plan proposed by the measure at a public meeting held at least two weeks prior to the election. AB 822 requires the county elections official to print the actuary statement in the voter information portions of the sample ballot preceding the arguments for and against the measure. AB 822 additionally provides that if the entire text of the measure is not printed in the ballot, nor in the voter information portion of the sample ballot, there must 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." These requirements apply to any city, county (including charter cities and counties), community college district, and special districts. Staff Comments: The county elections officials estimate that providing a 500 word summary in the sample ballot, including the required translations and proofing expenses, would cost approximately $100,000. These costs could be less if the local government opted to provide a separate summary statement which the elections officials would include in the mailing. 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 AB 822 (Hall) Page 2 initiatives can have far-reaching impacts on the retirement security of workers and their families as well as dramatic and often unexpected impact on local budgets. The availability of an actuarial impact report, prepared by an expert actuary, provides public notice of an initiative's fiscal impact and empowers voters to make informed decisions at the ballot box. The Public Employee Post-Employment Benefits 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.