BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 178|
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THIRD READING
Bill No: AB 178
Author: Gorell (R) and Ma (D)
Amended: 6/19/12 in Senate
Vote: 27 - Urgency
SENATE PUBLIC EMPLOYMENT & RETIRE. COMM : 4-0, 06/25/12
AYES: Negrete McLeod, Walters, Padilla, Vargas
NO VOTE RECORDED: Gaines
SENATE APPROPRIATIONS COMMITTEE : 7-0, 6/28/12
AYES: Kehoe, Walters, Alquist, Dutton, Lieu, Price,
Steinberg
ASSEMBLY FLOOR : Not relevant
SUBJECT : California State Teachers Retirement System
SOURCE : Author
DIGEST : This bill extends a post retirement earnings
limitation exemption for retired members of California
State Teachers Retirement System (CalSTRS) who return to
work under a limited-term appointment, changes how the
earnings limit is calculated, clarifies that the limit does
not apply to third-party employees, and allows retired
members to re-retire within a year of reinstating, as
specified.
ANALYSIS : Existing law establishes a postretirement
earnings limitation which is adjusted annually by the
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Teachers' Retirement Board based on the percentage change
in the average compensation earnable of active members.
The current postretirement earnings limit is $31,020. The
limit is the amount under which a retired member of CalSTRS
may return to work and earn in a fiscal year without having
to reinstate or without losing any of his or her retirement
allowance. A member who returns to work while retired does
not reinstate to active service, or pay additional
retirement contributions (nor does the employer), and that
member does not receive an increase in benefits due to the
increase in service. If a member exceeds the earning
limitation, his or her retirement allowance is reduced by
the amount of the excess compensation.
Existing law also provides numerous exemptions to the
post-retirement earnings limit that were established to
assist the education community in meeting certain classroom
and teaching program requirements. These exemptions allow
a retired member to return to work without the salary
constraint of the post-retirement earnings limit. For
example, any member who has a 12-month break in all
creditable compensation is exempt from the limit.
Additionally, there are several exemptions to address
specific needs within the California public education
system as follows: (1) to provide direct K-12 classroom
instruction, (2) to support and assess new teachers in
certain programs, (3) to support student teachers, the
pre-Internship Teaching Program, and alternative,
certification program, or the school paraprofessional
Teacher Training Program, and (4) to provide instruction
and services to special education students, in English
language learner programs, or in direct remedial education
for grades 2-12.
All of these exemptions will expire on June 30, 2012.
Also set to expire on June 30, 2012, is an exemption for
limited-term appointments by the State Superintendent of
Public Instruction or a county superintendent of schools to
assist schools that are either in specific financial or
academic distress.
Retired members are currently allowed to terminate their
retirement benefit and reinstate to active membership at
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any time after they retire, however, if they do so, those
members must wait one year to re-retire.
This bill contains the following provisions:
Changes the calculation method of the post retirement
earnings limitation from what currently totals $31,020
annually, to one-half of the median final compensation of
all members who retired for service during the previous
fiscal year which would result in an increase in the
limit to just over $40,000.
Eliminates the provision in current law that requires a
member who reinstates to wait one year before
re-retiring, but requires those members to keep the same
option and beneficiary or beneficiaries that were in
effect before reinstatement, or to retain their
unmodified status.
Excludes an employee of a third party that does not
participate in a California public pension system from
the postretirement employment requirements.
Extends an exemption from the post retirement earnings
limitation for any member who has retired for service and
has returned to work as a trustee, administrator, or
fiscal adviser approved by the Superintendent of Public
Instruction, or a county superintendent of schools to
address academic or financial weaknesses in a school
district. The bill also includes members who are
appointed by the Board of Governors of the California
Community Colleges.
In order to use the limited-term appointment exemption, the
employer must submit documentation that includes
certification of all of the following: (1) that the
employer advertised the position to active or inactive
members and was not able to find a qualified person, (2)
that the employer made a good faith effort to hire a
retired member who reinstated, (3) that the salary being
paid does not exceed what was advertised or is currently
paid for that position, and (4) that the appointment
terminates no later than June 30, 2013.
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Related Legislation
AB 758 (Wieckowski) would have extended the sunset dates
for the postretirement earnings limit exemptions to June
30, 2014. That bill was held in the Assembly Public
Employees, Retirement and Social Security Committee in
2011.
According to the Senate Appropriations Committee, it is
anticipated that the Pension Reform Conference Committee
Report will include language similar to that in this bill.
However, since any pension reform provisions will not
become effective until January 1, 2013, AB 178 is intended
to provide a bridge in the post retirement earnings
limitation between the date of its enactment and January 1,
2013.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee analysis:
Unknown, potentially in excess of $150,000 (Special).
Administrative expenses to CalSTRS are unknown at this
time, but will involve one-time costs for information
technology system changes, as well as updating staff
training and communications materials. Additional
ongoing costs will result from processing potential
increases in reinstatement and re-retirement
applications, and for the determination of third party
activities.
Continuing the limited-term appointment exemption will
have no actuarial impact on the system because the
valuation of the Defined Benefit Program currently does
not assume that any member will work in excess of the
limit.
SUPPORT : (Verified 6/28/12)
Accrediting Commission for Community and Junior Colleges
Association of California School Administrators
California Association of School Business Officials
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California Charter School Schools Association Advocates
California County Superintendent Educational Services
Association
California School Boards Association
California Speech-Language Hearing Association
California Teachers Association
Cerritos Community College District
City College of San Francisco
College of Marin
Fillmore Unified School District
Humboldt County Office of Education
Inyo County Office of Education
Lake County Office of Education
Los Angeles County Office of Education
Orange County Department of Education
Riverside County School Superintendents Association
San Bernardino Area Chamber of Commerce
San Bernardino Community College School District
San Mateo County Office of Education
Small School Districts Association
Shasta-Tehama-Trinity Joint Community College District
OPPOSITION : (Verified 6/28/12)
Lake County Office of Education (unless amended)
ARGUMENTS IN SUPPORT : According to the author, "Due to
the urgency of the upcoming sunset date, AB 178 will extend
the sunset for one year with the expectation that the
Pension Conference Committee will address this issue in
their report and will go into effect next year. To be as
consistent as possible with the pending conference
committee report and the desires of the Governor, AB 178
will narrow the scope of this exemption so that only school
districts that are either financially and/or academically
distressed will qualify."
According to the Riverside County Superintendents'
Association, "Under specific and narrow conditions, AB 178
would extend for an additional year the existing STRS
post-retirement earnings limit exemptions. The need for
these exemptions has increased due to the state's fiscal
challenges and the fact that many specialized providers are
leaving the field. Allowing retired employees to work for
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school districts experiencing fiscal or academic distress
without financial penalty offers a larger pool of qualified
educators who can temporarily step in to fill critical
needs while the school searches for a long-time hire."
ARGUMENTS IN OPPOSITION : The Lake County Office of
Education is requesting an amendment that would grandfather
in until June 30, 2013, those currently employed under the
provisions that if a retiree sits out one year they can
work in the school system without terminating their pension
benefit. They state there are many working under this
provision who don't realize that in five days they may be
out work. With no lead time to get another job, or being
unable to find another job in this troubled economy, they
could find themselves in financial trouble through no fault
of their own. This amendment provides them with a year to
make any necessary adjustments. The current exemptions
have been in effect since January 2001 with no adverse
consequences. Having been actively involved in AB 1733
(Wildman) in 2000, they can attest that there was a
significant need expressed by school districts for the
exemptions and that need was recognized by the Legislature.
The need has not gone away, in fact it has increased as
schools face budget cutbacks and many specialized providers
are leaving the field. For smaller school districts,
especially those in rural areas, the negative effect on
students and community would be great. The pool of
qualified, certificated specialists is scarce in rural
areas making it difficult for districts to find and hire
highly qualified educators. By allowing retired employees
to work for school districts without a financial penalty,
this bill provides districts with a larger pool of
qualified educators who can temporarily step in to fill
critical needs while the school searches for a long-term
hire. Without the requested amendment, many students in
small, rural schools may return to school in September and
not have some of the specialized services they have today.
ASSEMBLY FLOOR : 75-0, 6/1/11
AYES: Achadjian, Allen, Ammiano, Atkins, Beall, Bill
Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson,
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Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani,
Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Grove,
Hagman, Halderman, Hall, Harkey, Hayashi, Roger
Hern�ndez, Hill, Huber, Hueso, Huffman, Jeffries, Jones,
Knight, Lara, Logue, Bonnie Lowenthal, Ma, Mansoor,
Mendoza, Miller, Morrell, Nestande, Nielsen, Norby,
Olsen, Pan, Perea, Portantino, Silva, Skinner, Smyth,
Solorio, Swanson, Torres, Valadao, Wagner, Wieckowski,
Williams, Yamada, John A. P�rez
NO VOTE RECORDED: Alejo, Gorell, Mitchell, Monning, V.
Manuel P�rez
DLW:n 6/28/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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