BILL ANALYSIS Ó
AB 1469
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( Without Reference to File )
CONCURRENCE IN SENATE AMENDMENTS
AB 1469 (Bonta)
As Amended June 12, 2014
Majority vote. Budget Bill Appropriation Takes Effect
Immediately
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|ASSEMBLY: | |(May 23, 2014) |SENATE: |37-0 |(June 15, |
| | | | | |2014) |
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(vote not relevant)
Original Committee Reference: BUDGET
SUMMARY : Makes necessary statutory and technical changes to
implement changes to the Budget Act of 2014 related to the
California State Teachers' Retirement System (CalSTRS).
Specifically, this bill :
1)Makes finding and declarations related to the CalSTRS Defined
Benefit Program, including:
a) Stating that new obligations and benefits provided in
Sections 7 and 9 are contingent on those legal
understandings being accurate, and if there is a final
unappealable judicial decision that holds that the
increased contributions constitute either a new functional
responsibility for schools and community colleges, or a
reimbursable mandate pursuant to California Constitution
Article XII Section B, then the provisions added by the act
shall cease to be effective.
2)Provides that beginning July 1, 2014, the improvement factor
shall vest for an active member in any calendar year in which
active members paid increased member contributions pursuant to
Education Code Section 22901.7.
3)Provides that the Legislature's right to adjust the
improvement factor shall be reinstated for all members if the
increased contributions are eliminated in the future.
4)Retains the Legislature's right to adjust the improvement
factor for members who retire prior to January 1, 2014.
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5)Requires the CalSTRS Board to report to the Legislature on or
before July 1, 2019, and every five years thereafter, on the
fiscal health of the Defined Benefit Program and the unfunded
actuarial obligation and sunsets the report on July 1, 2046.
6)Increases member contributions for those members who are not
subject to the Public Employees' Pension Reform Act of 2013
(PEPRA), currently at 8% of creditable compensation, over
three years beginning in fiscal year (FY) 2014-15 as follows:
a) On July 1, 2014, by 0.15%;
b) On July 1, 2015, by 1.20%; and
c) On July 1, 2016, by 2.25%.
7)Increases member contributions for those members who are
subject to PEPRA, currently at 8% of creditable compensation,
over three years beginning in FY 2014-15 as follows:
a) On July 1, 2014, by 0.15%;
b) On July 1, 2015, by 0.56%; and
c) On July 1, 2016, by 1.205%.
8)Establishes that any excess member contributions shall be
returned to the member, as specified.
9)Increases the employer contribution rate, currently at 8.25%
of creditable compensation, over seven years beginning in FY
2014-15 as follows:
a) On July 1, 2014, by 0.63%;
b) On July 1, 2015, by 2.48%;
c) On July 1, 2016, by 4.33%;
d) On July 1, 2017, by 6.18%;
e) On July 1, 2018, by 8.03%;
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f) On July 1, 2019, by 9.88%; and
g) On July 1, 2020, by 10.85%.
10)Requires the CalSTRS Board to adjust the employer
contribution rate within certain parameters beginning in FY
2021-22, to reflect the contribution required to eliminate the
unfunded actuarial obligation by June 30, 2046, including:
a) Providing that the contribution percentage does not
change in any single fiscal year by more than 1%;
b) Establishing that the increased contribution percentage
included in this bill does not exceed 12%; and
c) Prohibiting the board from increasing the rate in order
to supplant the state's obligation, as specified.
11)Increases the state's contribution rate, over three years
beginning in FY 2014-15 as follows:
a) On July 1, 2014, by 1.437%;
b) On July 1, 2015, by 2.874%; and
c) On July 1, 2016, by 4.311%.
12)Requires the CalSTRS Board to adjust the state contribution
within certain parameters beginning in FY 2017-18 to reflect
the contribution required to eliminate the unfunded actuarial
obligation attributed to benefits in effect prior to July 1,
1990, including:
a) Adjusting for no more than 0.50% per year of the total
of the creditable compensation of the previous year; and
b) Reducing the contribution percentage to zero, at any
time when there is not an unfunded actuarial obligation.
13) Finds and declares that the increase in employer
contributions neither requires an adjustment in Proposition 98
of 1988 funding nor constitutes a reimbursable state mandate.
14)Requires that any challenge to these findings be filed within
60 days of the effective date and to be consolidated with any
other challenge to the validity of the act.
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15)Establishes that, on or after June 1, of each year the
Director of Finance must determine if an adjustment to the
constitutional minimum guarantee of funding for schools must
be made, or an adjustment in funding provided to schools and
community colleges, pursuant to a final, unappealable judicial
decision, as specified. If the Director of Finance estimates
that an adjustment will require increase in General Fund
expenditures of more than $10 million, then the increase
contributions for members, employers, and the state, required
by the act will become inoperable.
16)Specifies that any action or proceeding challenging the
validity of any matter authorized by the act adding this
section by any person or entity shall be brought in accordance
with, and within the time specified in Chapter 9 (commencing
with Section 860) of the Title 10 of Part 2 of the Code of
Civil Procedures, and shall be brought in the Superior Court
of the County of Sacramento.
17)Provides that none of the provisions are severable. If any
provision of this act or application of any section of this
act is held by a court to be invalid, unenforceable, or not
binding, the finding shall invalidate the other provisions and
applications of this act in its entirety.
FISCAL EFFECT : Statutory changes contained in this bill related
to state costs are consistent with the 2014 budget. Significant
increased costs for employers; reaching billions of dollars
annually through the 2045-46 fiscal year.
COMMENTS : This bill provides the necessary statutory references
to enact the 2014-15 budget related to the CalSTRS
contributions.
Analysis Prepared by : Genevieve Morelos / BUDGET / (916)
319-2099
FN: 0003978
AB 1469
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