BILL ANALYSIS �
AB 1247
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Date of Hearing: May 18, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1247 (Fletcher) - As Amended: May 9, 2011
Policy Committee: PERS Vote:6-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill modifies the pension reform transparency reporting
requirements enacted last year as part of the 2010-11 budget
package that required the California Public Employees'
Retirement System (CalPERS) to report its investment returns,
amortization period, and discount rate using specific analytical
guidelines every time contribution rates are adopted.
Specifically, this bill:
1)Requires CalPERS to report annually rather than every time
they adopt contribution rates.
2)Limits the scope of the report to only apply to state employee
retirement plans.
3)Revises the adjustments of the investment return assumptions
and discount rates CalPERS is required to use in the report.
4)Deletes the requirement that CalPERS report to the
Legislature, utilizing a specified investment rate assumption,
any time it forecasts contribution rates.
5)Deletes the requirement that the Treasurer express his or her
opinion of the reasonableness of CalPERS' calculation of the
contribution rates when reporting on the CalPERS report to the
Legislature.
FISCAL EFFECT
CalPERS estimates minor savings in the range of $50,000 from
these reduced requirements.
AB 1247
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COMMENTS
1)Purpose . According to the author, "AB 1247 improves the
ability of decision makers and the public to evaluate the
future funding status of state employee pension plans while
controlling costs. This bill would provide more insight into
how the state's contributions will change if the rate of
return is better or worse than expected by requiring that
estimates of future liabilities and contributions based on
three possible rates of return (the assumed rate ? 2%) be
included in the pension system's annual report.
"AB 1247 also adopts several Legislative Analyst Office's
(LAO) recommendations for streamlining the reporting
requirements currently in law, which will prevent precious
pension plan dollars from being wasted on excessive
bureaucracy. Namely, the frequency and scope of the report are
adjusted to rein in actuarial costs while maintaining
transparency."
2)LAO view. The LAO recommended that amendments be made to SB
867 (Hollingsworth), to make the pension reporting
requirements more useful and workable. The LAO recommended
requiring the reporting to be based on more reasonable
alternate investment return rates, focusing the reporting
requirements on state plans instead of the hundreds of CalPERS
local plans, requiring one report per year by CalPERS, and
requiring an official other than the Treasurer to provide the
independent analysis to the Legislature.
The LAO suggested this independent entity could be one or more
members of the California Actuarial Advisory Panel (CAAP).
The LAO also recommended the Legislature consider requiring
the report to be presented to the Legislature every two years
and that instead of being presented to the full Legislature,
the report be presented in a public, joint meeting of the two
houses' budget and/or public employment committees.
3)Background . Current law requires, pursuant to SB 867
(Hollingsworth) Chapter 733, Statutes of 2010, the California
Public Employees Retirement System (CalPERS) to report its
investment returns, amortization period, and discount rates
using specific analytical guidelines every time it adopts
contribution rates.
AB 1247
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The CAAP was established by SB 1123 (Wiggins), Chapter 371,
Statutes of 2008, to provide impartial and independent
information on pensions, other post-employment benefits
(OPEB), and best practices to public agencies and the
Legislature.
4)This bill has no registered opposition.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081