BILL ANALYSIS Ó AB 822 Page 1 GOVERNOR'S VETO AB 822 (Hall) As Amended July 10, 2013 2/3 vote ----------------------------------------------------------------- |ASSEMBLY: |52-19|(May 23, 2013) |SENATE: |27-11|(September 9, | | | | | | |2013) | ----------------------------------------------------------------- ----------------------------------------------------------------- |ASSEMBLY: |57-19|(September 10, | | | | | | |2013) | | | | ----------------------------------------------------------------- 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 AB 822 Page 2 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. 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. AB 822 Page 3 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." 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. AB 822 Page 4 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 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 AB 822 Page 5 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 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 AB 822 Page 6 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 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 AB 822 Page 7 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 GOVERNOR'S VETO MESSAGE : "By requiring that a governing body provide an actuarial analysis and hold a public hearing for every pension-related measure that qualifies for the ballot, this bill imposes another mandate on local governments. "If a local governing body believes that an in depth fiscal analysis of a measure is needed, they can provide one - without the state telling them to do so." Analysis Prepared by : Angela Mapp / L. GOV. / (916) 319-3958 FN: 0002912