BILL ANALYSIS                                                                                                                                                                                                    



                                                                  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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