BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
194 (Torrico)
Hearing Date: 08/30/2010 Amended: 08/27/2010
Consultant: Maureen Ortiz Policy Vote: PE&R 4-1
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BILL SUMMARY: AB 194, an urgency measure, limits the salary
that retirement benefits are based on for individuals who become
members of a public retirement system on or after January 1,
2011 to 125% of the Governor's salary as recommended by the
California Citizens Compensation Commission on December 7, 2009.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Retirement benefits ---------unknown future
savings----------- Special*/Local
*Public Employees Retirement Fund *State Teachers Retirement
Fund
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STAFF COMMENTS: By limiting the compensation used to calculate
retirement benefits, this bill could result in unknown future
savings in pension costs to state and local retirement systems.
AB 194 does not limit the compensation that can be paid to
individuals during employment.
The salary that the California Citizens Compensation Commission
recommended as the maximum salary to be paid to the Governor on
December 7, 2009 was $173,987. Consequently, the final
compensation used to calculate retirement benefits for future
employees of any public retirement system will initially be
$217,483. However, AB 194 allows for an annual adjustment based
on changes in the All Urban California Consumer Price Index.
This is the same cap that currently exists for certain exempt
state employees. AB 194 will extend that cap to represented
state employees and to all local employees.
Current federal law limits the amount of compensation a public
employee can receive for purposes of calculating a retirement
benefit to $245,000 for employees who first became members of a
public retirement system on or after July 1, 1996. This bill
will reduce that salary cap to a base amount of $217,483. Under
existing law, individuals who become members of a public
retirement system prior to July 1, 1996 are not limited in the
amount that can be included in compensation for the purpose of
computing retirement benefits.
AB 194 is one of a number of bills that address the controversy
surrounding compensation paid to officials in the City of Bell,
a small city with 38,867 residents, after voters approved a city
charter in 2005. Through public records requests, the Los
Angeles Times reported that Bell's City Manager received total
annual compensation of over $1.5 million, and some city council
members were being paid close to $100,000 per year for a
part-time office. More recent reports revealed that Bell
officials illegally raised property taxes in 2007 to cover
rising pension costs for its employees.