BILL ANALYSIS Ó
AB 822
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 822 (Hall)
As Amended July 10, 2013
Majority vote
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|ASSEMBLY: |52-19|(May 23, 2013) |SENATE: |27-11|(September 9, |
| | | | | |2013) |
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Original Committee Reference: L. GOV.
SUMMARY : Requires local agencies to procure and make public an
independent actuarial statement of the impact on future annual
costs of local ordinances or measures that propose a change to
municipal employee retirement benefit plans, and requires the
statement or a summary of the statement to be printed in the
voter information portion of the sample ballot preceding
arguments for and against such measures, if any.
The Senate amendments :
1)Add local ordinances to the bill's requirements.
2)Remove a requirement that, if a measure described in this bill
qualifies for the ballot pursuant to an initiative petition,
the proponents of the measure pay an additional filing fee to
cover the costs of the actuarial impact statement.
3)Remove a requirement that local measures that propose a change
to municipal employee retirement benefit plans be submitted to
voters only at established statewide general elections.
4)Clarify that the bill's provisions apply to a city, including
a charter city; a county, including a charter county; a city
and county, including a charter city and county; a community
college district; or a special district.
5)Require a notice to voters explaining that they can obtain the
entire text of the actuarial statement if it is not printed on
the ballot or in the voter information portion of the sample
ballot.
6)Make technical, clarifying and conforming changes.
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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 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.
AS PASSED BY THE ASSEMBLY , this bill:
1)Required 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:
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)Required 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)Required, 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."
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4)Required, 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 $500. If the measure is adopted by the voters, the fee
shall be refunded to the proponents.
5)Required measures described in this bill that qualify for the
ballot to be submitted to the voters only at an established
statewide general election.
6)Provided 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.
7)Applied this bill's requirements to a charter city, charter
city and county, or charter county.
8)Found and declared 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)Provided that, if the Commission on State Mandates determines
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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.
FISCAL EFFECT : According to the Senate Appropriations
Committee:
1)Unknown, likely minor, reimbursable mandate costs to local
governments for procuring actuarial statements, depending on
the frequency of qualified measures (General).
2)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.
COMMENTS : This bill requires local agencies to procure and make
public an independent actuarial statement of the impact on
future annual costs of local ordinances or measures that propose
a change to municipal employee retirement benefit plans, and
requires the statement or a summary of the statement to be
printed in the voter information portion of the sample ballot
preceding arguments for and against such measures, if any.
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
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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 ordinances or ballot
measures that propose changes to local agency employee
retirement benefits. This provision applies to cities and
counties (including charter cities and charter counties),
community college districts, and special districts.
This bill also requires the actuarial statement or a summary of
the 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 or the actuarial
statement if it is not printed on the ballot or in the voter
information portion of the sample ballot.
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
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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)"
This bill is keyed a state mandate, which means the state could
be required to reimburse local agencies 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."
Opposition arguments: None
Analysis Prepared by : Angela Mapp / L. GOV. / (916) 319-3958
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