BILL ANALYSIS
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: AB 194
Lou Correa, Chair Hearing date: August 30, 2010
AB 194 (Torrico) as amended 8/27/10 FISCAL: YES
HISTORY :
Sponsor: Author
Prior legislation: SB 53 (Russell),
Chapter 1297, Statutes of 1993
SB 791 (Hughes),
Chapter 829, Statutes of 1995
ASSEMBLY VOTES :
Not relevant; this is a new bill.
SUMMARY :
AB 194 will limit the amount a member of a public retirement
system may include in salary or payrate for the purpose of
receiving a retirement benefit. URGENCY BILL .
BACKGROUND AND ANALYSIS :
1. Existing federal and state laws limit the amount of
compensation that can be taken into account for the purpose
of computing a retirement benefit, which amount is adjusted
annually, and was set at $245,000 in 2010.
2. The California Constitution creates the California
Citizens Compensation Commission, which sets the salaries of
elected officers of the State, including the Governor.
3. Existing state law :
a) governing the California Public Employees Retirement
System (CalPERS) defines "compensation earnable" for the
purpose of computing a retirement benefit as the payrate
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and special compensation of the member, as specified.
b) governing the California State Teachers Retirement
System (CalSTRS) defines "creditable compensation" for the
purpose of computing a retirement benefit as salary and
remuneration that is paid in addition to salary, as
specified.
c) governing the 1937 Act County Retirement System ('37
Act) defines "compensation" as the remuneration paid in
cash out of county or district funds, plus amounts deducted
from a member's wages for participation in a tax-deferred
compensation plan. These laws also create separate rules
for the county of Los Angeles.
2. This bill :
a) limits the amount a member of any California public
retirement system may include in salary or payrate for the
purpose of receiving a retirement benefit to 125% of the
Governor's salary as set by the California Citizen's
Commission on December 7, 2009 ($173,987).
b) requires the limit to be adjusted annually consistent
with changes to the All Urban California Consumer Price
Index.
c) specifies that this limit applies to any person who
first becomes a member of a public retirement system on or
after January 1, 2011.
FISCAL :
The current salary of the Governor, $173,987, when multiplied
by 125% would equal $217,484.
1) COMMENTS :
Federal Compensation Limit
Federal law limits the amount of compensation a public
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employee can include for the purpose of calculating a
retirement benefit (currently $245,000). The limit has
increased annually since its inception on July 1, 1996. This
limit applies to public employees who became members of
public retirement systems after July 1, 1996. Members prior
to that year are not limited in the amount that can be
included in compensation for the purpose of computing
retirement benefits.
This bill, therefore, would create a compensation cap lower
than that currently imposed by federal law.
2) Arguments in Support :
According to the author:
We have all seen the escalating costs of public pensions
put increased pressure on the budgets and well-being of
state and local government. The malfeasance and abuse
uncovered in the City of Bell only serves to further
highlight the potential abuse of public pensions.
For the first time in California, we will put a cap,
equal to 125% of the governor's salary, on the amount of
salary that can be counted towards pension for all
public employees in California, including management and
rank and file members. This is real and meaningful
reform, which will have bi-partisan support and we hope
will be signed by the Governor.
3) Arguments in Opposition :
According to the California State University (CSU):
The CSU understands the need to provide transparency and
reasonable retirement benefits. Federal law already
provides limits on the amount of funds that may be
applied towards final compensation. Creating a
different state standard merely creates confusion for
little added benefit.
Conformity with the federal law is the most appropriate
way to address the issue of final compensation for new
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members of public retirement systems. This ensures
proper administration and that all compensation remains
open to public review.
4) OPPOSITION :
California State University, (CSU), Oppose Unless
Amended
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