BILL NUMBER: AB 2804 AMENDED
BILL TEXT
AMENDED IN SENATE AUGUST 24, 1998
AMENDED IN ASSEMBLY MAY 13, 1998
AMENDED IN ASSEMBLY MAY 4, 1998
AMENDED IN ASSEMBLY APRIL 28, 1998
INTRODUCED BY Committee on Public Employees, Retirement and Social
Security (Honda (Chair), Migden, Scott, Shelley, and Wildman)
(Coauthors: Assembly Members Bustamante and Knox)
MARCH 12, 1998
An act to amend Section 22955 of Sections
22951 and 22955 of, and to repeal Section 22952 of, the
Education Code, relating to the State Teachers' Retirement System,
making an appropriation therefor, and declaring the urgency thereof,
to take effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
AB 2804, as amended, Committee on Public Employees, Retirement and
Social Security. State Teachers' Retirement System: benefits.
(1) Existing law provides a continuous appropriation from the
General Fund to the Teachers' Retirement Fund of a specified
an amount equal to 4.3% of the annual
total creditable compensation for purposes of meeting certain
obligations and benefit costs.
This bill would provide that when the Teachers'
Retirement Fund has achieved full-funding status, notwithstanding
that appropriation, an amount equal to 4.3% of the total of the
creditable compensation of the immediately preceding calendar year
upon which members' contributions are based shall be continuously
appropriated from the General Fund to the Controller for transfer to
the Teachers' Retirement Fund for the payment of any benefit
increases and other educational objectives that have been approved by
the Legislature. The funds for other educational objectives would
only be available until January 1, 2004 , change that
appropriation on January 1, 1999, to 3.102% of the annual total
creditable compensation. The bill would require another additional
specified continuous annual appropriation to be made from the General
Fund to the Teachers' Retirement Fund commencing on October 1, 1998,
and require those funds to be first transferred to eliminate
unfunded actuarial liabilities on or before June 30, 2027. The bill
would require specified additional employer contributions to be paid
on account of liabilities for sick leave credit benefits and would
repeal provisions requiring additional employer contributions for
specified retirement allowance increases . The bill would make
legislative findings and declarations regarding the provisions.
Section 8 of Article XVI of the California Constitution prescribes
the states's minimum funding obligation to school and community
college districts. Existing law provides that appropriations to the
Teachers' Retirement Fund are not included within that funding
obligation.
This bill would provide that the funds appropriated by the bill
for benefit improvements shall be included within the prescribed
minimum funding obligation.
(2) The bill would become operative only if AB 1102 and SB
1528 are both enacted and become operative.
(3) The bill would declare that it is to take effect
immediately as an urgency statute.
Vote: 2/3. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. (a) The Legislature finds and declares that:
(1) There have been many recent research studies which indicate
that in future years California will face a significant shortage of
qualified teachers.
(2) It is in the best public policy interest of the people of
California that the Legislature act aggressively to insure that the
conditions of employment for teachers are conducive to the growth of
the work force.
(3) A substantive and sound retirement plan is a critical aspect
of creating a stable and secure employment environment for the
teaching profession.
(4) Since its inception the State Teachers' Retirement System has
been in an underfunded status. While the State Teachers' Retirement
System has been underfunded, there have been no significant increases
in retirement benefits for teachers. Instead, teachers and other
interested parties have worked in a collaborative effort with the
Legislature to ensure that the system become fully funded.
(5) Pursuant to Section 22955 of the Education Code, the
Legislature has required the General Fund to contribute 4.3 percent
of prior year teacher payroll to be deposited in the Teachers'
Retirement Fund for the purpose of accomplishing full funding of the
State Teachers' Retirement System.
(6) A recent study by the State Teachers' Retirement System
revealed that retirement benefits for California teachers lag behind
those of other states.
(7) The most recent valuation by the State Teachers' Retirement
System has indicated that the system is approaching full-funding and
should reach that goal within the next three years.
(8) It is therefore appropriate that the Legislature continue to
provide the funding designated by Section 22955 of the Education Code
to improve benefits for the past, present, and future members of the
State Teachers' Retirement System to ensure the proper growth and
stability of the teaching work force in the State of California.
(b) In enacting this act, it is the intent of the Legislature to:
(1) Provide California teachers with retirement benefits which are
competitive with other states.
(2) Provide a final compensation benefit which best reflects the
highest earnings of State Teachers' Retirement System members and is
commensurate with the benefit which is predominantly applicable to
other public employees in the State of California.
(3) Provide a cost-of-living adjustment that is compounded
annually.
(4) Provide appropriate early retirement incentives which allow
workforce flexibility for school districts and options for teachers
who desire to leave the profession early.
(5) Ensure that teachers who have devoted their lives to the
education of the children of California receive health benefits upon
retirement.
(6) Provide retirement options which encourage mature and
experienced teaching professionals to continue their careers after
normal retirement age.
SEC. 2. Section 22955 of the Education Code is amended to read:
22955. (a) Notwithstanding Section 13340 of the Government Code,
commencing October 1, 1991, a continuous appropriation is hereby made
from the General Fund to the Controller, pursuant to this section,
for transfer to the Teachers' Retirement Fund. The total amount of
the appropriation for each year shall be equal to 4.3 percent of the
total of the creditable compensation of the immediately preceding
calendar year upon which members' contributions are based, to be
calculated annually on October 1, and shall be divided into four
equal quarterly payments. The percentage shall be adjusted to
reflect the contribution required to fund the normal cost deficit
when the unfunded obligation has been deemed to be eliminated by the
board based upon a recommendation from its actuary. If a rate
increase or decrease is required, the adjustment may be for no more
than 0.25 percent per year and in no case may the transfer exceed 4.3
percent of the total of the creditable compensation of the
immediately preceding calendar year upon which members' contributions
are based.
(b) The funds transferred pursuant to subdivision (a) shall first
be applied to meeting the normal cost deficit, if any, for that
fiscal year.
(c) The transfers made pursuant to this section are in lieu of the
state contributions formerly made pursuant to Sections 23401 and
23402.
(d) For the purposes of this section, the term "normal cost
deficit" means the difference between the normal cost rate as
determined in the actuarial valuation required by Section 22226 and
the total of the member contribution rate required under Section
22804 and the employer contribution rate required under Section
23400, and shall exclude (1) the portion for unused sick leave
service granted pursuant to Section 22719, and (2) the cost of
benefit increases which occur after July 1, 1990. The contribution
rates prescribed in Section 22804 and Section 23400 on July 1, 1990,
shall be utilized to make the calculations. The normal cost deficit
shall then be multiplied by the total of the creditable compensation
upon which member contributions are based to determine the dollar
amount of the normal cost deficit for the year.
(e) Pursuant to Section 22001 and the applicable case law, the
members are entitled to a financially sound retirement system. The
Legislature recognizes that the system shall, pursuant to this
section, receive less funds in the short term than it would have
received under former Sections 23401 and 23402 (Chapter 282 of the
Statutes of 1979). However, it is the intent of the Legislature that
this section shall provide the retirement fund stable and full
funding over the long term.
(f) This section continues in effect but in a somewhat different
form, fully performs, and does not in any way unreasonably impair,
the contractual obligations determined by the court in California
Teachers' Association v. Cory, 155 Cal. App. 3d 494.
(g) This section shall not be construed to be applicable to any
unfunded liability resulting from any benefit increase or change in
contribution rate that occurs after July 1, 1990.
(h) The amendments to this section during the 1991-92 Regular
Session shall be construed and implemented to be in conformity with
the judicial intent expressed by the court in California Teachers'
Association v. Cory, 155 Cal. App. 3d 494.
(i) Notwithstanding subdivision (a), when the Teachers' Retirement
Fund has achieved full-funding status, as indicated by the board's
actuary, an amount equal to 4.3 percent of the total of the
creditable compensation of the immediately preceding calendar year
upon which members' contributions are based shall, notwithstanding
Section 13340 of the Government Code, be continuously appropriated
from the General Fund to the Controller for transfer to the Teachers'
Retirement Fund each fiscal year, for the payment of any benefit
increases and for other educational objectives that have been
approved by the Legislature. Those benefit improvements shall be
consistent with the intent language contained in the act that added
this subdivision enacted at the 1997-98 Regular Session of the
Legislature. The funds for other educational objectives shall only
be available until January 1, 2004. Notwithstanding paragraph (2) of
subdivision (f) of Section 41202, the funds appropriated for the
purposes of this subdivision shall be included within the General
Fund revenues appropriated for school districts and community
colleges, respectively.
SEC. 2. Section 22951 of the Education Code is amended to read:
22951. In addition to any other contributions required by this
part, employers shall , on account of liability for benefits
pursuant to Section 22717, contribute monthly to the Teachers'
Retirement Fund 0.25 percent of the creditable compensation upon
which members' contributions are based.
SEC. 3. Section 22952 of the Education Code is repealed.
22952. (a) Effective January 1, 1980, in addition to all other
contributions required by this part, on account of liability for
benefits pursuant to Section 24407, employers shall contribute
monthly to the Teachers' Retirement Fund 0.307 percent of the
creditable compensation upon which members' contributions are based.
(b) The Controller shall adjust the contributions required by this
section within 10 days of notification by the board of the actual
creditable compensation on which the contributions are based. A copy
of the notification shall be transmitted to the Legislature, the
Director of Finance, the Office of the Legislative Analyst, and the
Commission on State Mandates. The payroll data shall be subject to
audit by the Controller pursuant to Section 17558.5 of the Government
Code.
SEC. 4. Section 22955 of the Education Code is amended to read:
22955. (a) Notwithstanding Section 13340 of the Government Code,
commencing October 1, 1991 January 1, 1999
, a continuous appropriation is hereby annually made
from the General Fund to the Controller, pursuant to this section,
for transfer to the Teachers' Retirement Fund. The total amount of
the appropriation for each year shall be equal to 4.3
3.102 percent of the total of the creditable
compensation of the immediately preceding calendar year upon which
members' contributions are based, to be calculated annually on
October 1, and shall be divided into four equal quarterly payments.
(b) Notwithstanding Section 13340 of the Government Code,
commencing October 1, 1998, a continuous appropriation, in addition
to the appropriation made by subdivision (a), is hereby annually made
from the General Fund to the Controller for transfer to the Teachers'
Retirement Fund. The total amount of the appropriation for each
year shall be equal to .524 percent of the total of the creditable
compensation of the immediately preceding calendar year upon which
members' contributions are based, to be calculated annually on
October 1, and shall be divided into four equal quarterly payments.
The percentage shall be adjusted to reflect the contribution
required to fund the normal cost deficit when the unfunded obligation
has been deemed to be eliminated by the board based upon a
recommendation from its actuary. If a rate increase or decrease is
required, the adjustment may be for no more than 0.25 percent per
year and in no case may the transfer made pursuant to this
subdivision exceed 4.3 1.505
percent of the total of the creditable compensation of the
immediately preceding calendar year upon which members' contributions
are based.
(b)
The funds transferred pursuant to this subdivision
(a) shall first be applied to meeting the
normal cost deficit, if any, for that fiscal year
eliminating on or before June 30, 2027, the unfunded actuarial
liability in the fund identified in the actuarial valuation as of
June 30, 1997 .
(c) The transfers made pursuant to this section are in
lieu of the state contributions formerly made pursuant to Sections
23401 and 23402.
(d) For the purposes of this section, the term "normal
cost deficit" means the difference between the normal cost rate as
determined in the actuarial valuation required by Section 22226 and
the total of the member contribution rate required under Section
22804 and the employer contribution rate required under Section
23400, and shall exclude (1) the portion for unused sick leave
service granted pursuant to Section 22719, and (2) the cost of
benefit increases which occur after July 1, 1990. The contribution
rates prescribed in Section 22804 and Section 23400 on July 1, 1990,
shall be utilized to make the calculations. The normal cost deficit
shall then be multiplied by the total of the creditable compensation
upon which member contributions are based to determine the dollar
amount of the normal cost deficit for the year.
(e)
(d) Pursuant to Section 22001 and the case law, the members
are entitled to a financially sound retirement system. The
Legislature recognizes that the system shall, pursuant to this act,
receive less funds in the short term than it would have received
under former Sections 23401 and 23402 (Chapter 282 of the Statutes of
1979). However, it It is the intent of the
Legislature that this section shall provide the retirement fund
stable and full funding over the long term.
(f)
(e) This section continues in effect but in a somewhat
different form, fully performs, and does not in any way unreasonably
impair, the contractual obligations determined by the court in
California Teachers' Association v. Cory, 155 Cal. App. 3d 494.
(g) This section
(f) Subdivision (b) shall not be construed to be applicable
to any unfunded liability resulting from any benefit increase or
change in contribution rate that occurs after July 1, 1990.
(h)
(g) The amendments to this section during the 1991-92
Regular Session shall be construed and implemented to be in
conformity with the judicial intent expressed by the court in
California Teachers' Association v. Cory, 155 Cal. App. 3d 494.
SEC. 5. This act shall become operative only if Assembly Bill 1102
and Senate Bill 1528 of the 1997-98 Regular Session of the
Legislature are both enacted and become operative.
SEC. 3.
SEC. 6. This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the Constitution and shall go into
immediate effect. The facts constituting the necessity are:
In order for enhanced retirement benefits to be available to
members of the State Teachers' Retirement System at the commencement
of the school year, this act must take effect immediately.