BILL ANALYSIS Ó SB 1353 Page 1 Date of Hearing: June 29, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair SB 1353 (Pan) - As Amended June 8, 2016 ----------------------------------------------------------------- |Policy |Public Employees, |Vote:|6 - 0 | |Committee: |Retirement/Soc Sec | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill clarifies that the state contribution that the Teachers' Retirement Board (TRB) has the authority to adjust beginning in 2017-18 for funding the California State Teachers' Retirement System (CalSTRS) will be applied to retire the unfunded liability associated with the 1990 benefit structure. FISCAL EFFECT: No additional state costs. SB 1353 Page 2 COMMENTS: Purpose and Background. AB 1469 (Bonta), Chapter 47, Statutes of 2014, established a "Full Funding Plan" to address the CalSTRS pension unfunded liability by increasing contribution rates of teachers, employers, and the state. The Full Funding Plan increases the state contribution rate through the 2016-17 school year and then requires the TRB to adjust the state contribution rate to eliminate any remaining unfunded actuarial obligation (UAO) applicable to the 1990 benefit structure. According to the author, SB 1353 is needed to avoid confusion in the future about how to adjust the state's contribution rate to CalSTRS. When the Full Funding Plan was being developed in 2014, the intent was always to utilize these increased state contributions to reduce the UAO resulting from the benefits and contribution rates in effect as of July 1, 1990. However, a technical reading of the relevant portions of the Education Code could lead to a different interpretation. The author and the sponsor of the bill, CalSTRS, argue that it is necessary to amend the provisions to clarify that the state contributions will be allocated to reduce the UAO resulting from the benefits and contribution rates in effect as of July 1, 1990. Analysis Prepared by:Luke Reidenbach / APPR. / (916) 319-2081 SB 1353 Page 3