BILL NUMBER: AB 2804 CHAPTERED
BILL TEXT
CHAPTER 967
FILED WITH SECRETARY OF STATE SEPTEMBER 29, 1998
APPROVED BY GOVERNOR SEPTEMBER 29, 1998
PASSED THE ASSEMBLY AUGUST 31, 1998
PASSED THE SENATE AUGUST 30, 1998
AMENDED IN SENATE AUGUST 28, 1998
AMENDED IN SENATE AUGUST 28, 1998
AMENDED IN SENATE AUGUST 26, 1998
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)
(Principal coauthor: Senator Solis)
(Coauthors: Assembly Members Baca, Bowler, Bustamante, Campbell,
Cedillo, Cunneen, Ducheny, Knox, Ortiz, Prenter, Strom-Martin, and
Villaraigosa)
(Coauthors: Senators Burton, Hughes, Johnston, Karnette, and O'
Connell)
MARCH 12, 1998
An act to amend Sections 22951 and 22955 of, and to repeal Section
22952 of, the Education Code, relating to public retirement systems,
making an appropriation therefor, and declaring the urgency thereof,
to take effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
AB 2804, Committee on Public Employees, Retirement and Social
Security. Public retirement systems: benefits.
(1) Existing law provides a continuous appropriation from the
General Fund to the Teachers' Retirement Fund of an amount equal to
4.3% of the annual total creditable compensation for purposes of
meeting certain obligations and benefit costs.
This bill would change that appropriation on July 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.
(2) The bill would become operative only if AB 1102, AB 1150, and
SB 1528 are all enacted and become operative.
(3) The bill would declare that it is to take effect immediately
as an urgency statute.
Appropriation: yes.
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
work force 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 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.
SEC. 4. Section 22955 of the Education Code is amended to read:
22955. (a) Notwithstanding Section 13340 of the Government Code,
commencing July 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
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 0.524 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 or the unfunded obligation as
determined by the board based upon a recommendation from its actuary.
If a rate increase 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 1.505 percent of the total of the
creditable compensation of the immediately preceding calendar year
upon which members' contributions are based. At any time when there
is neither an unfunded obligation nor a normal cost deficit, the
percentage shall be reduced to zero.
The funds transferred pursuant to this subdivision shall first be
applied to 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) 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.
(d) Pursuant to Section 22001 and the case law, the members are
entitled to a financially sound retirement system. It is the intent
of the Legislature that this section shall provide the retirement
fund stable and full funding over the long term.
(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.
(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.
(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, Assembly Bill 1150, and Senate Bill 1528 of the 1997-98 Regular
Session of the Legislature are all enacted and become operative.
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.