BILL ANALYSIS Ó ACA 3 Page 1 Date of Hearing: June 24, 2015 ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT, AND SOCIAL SECURITY Rob Bonta, Chair ACA 3 (Gallagher) - As Introduced February 26, 2015 SUBJECT: Public employees' retirement SUMMARY: Places in the Constitution the current statutory prohibition on applying any enhancement to a benefit formula or retirement benefit to service performed prior to the operative date of the enhancement. Specifically, this constitutional amendment: 1)Specifies that any enhancement to a public employee's retirement formula or retirement benefit only applies to service performed on and after the operative date of the enhancement. 2)Specifies that if a change in retirement membership classification or employment results in an enhancement in the retirement formula or retirement benefit, that enhancement only applies to service performed on and after the operative date of the change. 3)Defines "operative date" for purposes of these provisions. ACA 3 Page 2 4)Provides that a retiree's annual cost-of-living increase, within statutory boundaries, is not considered an enhancement to a retirement benefit. EXISTING LAW: 1)Creates comprehensive public employee pension reform through enactment of the Public Employees' Pension Reform Act of 2013 (PEPRA) that apply to all public employers and public pension plans on and after January 1, 2013, excluding the University of California and charter cities and counties that do not participate in a retirement system governed by state statute. 2)Requires, under PEPRA, that any enhancement to a benefit formula or retirement benefit shall only be applicable to service performed after the operative date of the enhancement. 3)Specifies that if a change in retirement membership classification or employment results in an enhancement in the retirement formula or retirement benefit, that enhancement only applies to service performed on and after the operative date of the change. 4)Clarifies that a retiree's annual cost-of-living increase, ACA 3 Page 3 within statutory boundaries, is not considered to be an enhancement to a retirement benefit. FISCAL EFFECT: Unknown. COMMENTS: According to the author, "ACA 3 would put the current prohibition on retroactive benefit increases for public employee's retirement formulas into the State Constitution. This will help protect taxpayers from undue financial liabilities, as putting this provision in the Constitution will make it more difficult to overturn in the future." The author concludes, "Providing accurate and sufficient benefits to retirees is crucial. Although retroactive benefit enhancements may seem like a good idea in the short-run, the long-term impact on California's economy would be extremely detrimental, eventually harming those it seeks to help. ACA 3 will assure that future generations are protected from such systems by solidifying the prohibition on retroactive benefit increases through a constitutional amendment." Opponents point out that the California Constitution grants a city or county the right to adopt a charter, and said charter supersedes state general laws in relation to the compensation of city or county employees. Opponents state, "ACA 3 will ignore rights granted under the Constitution that have worked for the last 75 or more years and will interject changes in retirement membership classifications or even employment compensation?Amending the Constitution undermines the system's independent tradition and the original rights to supersede the general laws of the state." ACA 3 Page 4 Opponents also state, "ACA 3 also circumvents the collective bargaining process, where employees and employers can negotiate and discuss wages, working conditions, and benefits. The collective bargaining process work because improved labor-management relationship result in employee loyalty that reduces turnover, and creates long term stability to the workforce. This benefits employers as much as employees because they can better reap the return on investments in training and experience spent on the employee." REGISTERED SUPPORT / OPPOSITION: Support California Pension Reform California Republican Taxpayers' Association Howard Jarvis Taxpayers Association Kern Citizens for Sustainable Government Opposition American Federation of State, County and Municipal Employees ACA 3 Page 5 American Federation of State, County and Municipal Employees, Local 685 Association for Los Angeles Deputy Sheriffs Association of Deputy District Attorneys California Federation of Teachers California School Employees Association California Professional Firefighters Glendale City Employees Association Los Angeles County Probation Officers Union Los Angeles Police Protective League Organization of SMUD Employees Association Riverside Sheriffs Association San Bernardino Public Employees Association San Diego County court Employees Association San Luis Obispo County Employees Association ACA 3 Page 6 Analysis Prepared by:Karon Green / P.E.,R., & S.S. / (916) 319-3957