BILL ANALYSIS                                                                                                                                                                                                    



                                                          AB 429
                                                          Page  1

Date of Hearing:   May 12, 1999

  ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL  
                            SECURITY 
                        Lou Correa, Chair
          AB 429 (Correa) - As Amended:  April 29, 1999
  
SUBJECT  :   State Teachers' Retirement System: gain-sharing  
revenue.

  SUMMARY  :   Authorizes the Teachers' Retirement Board to allocate  
excess investment earnings to provide ad hoc benefits to active  
and retired members of the State Teachers' Retirement System  
(CalSTRS) defined benefit program, after setting aside funds to  
provide for the maintenance of a reasonable reserve.   
Specifically,  this bill  :  

1)Defines "gain-sharing revenue" for purposes of this bill as  
  the amount by which the actual return on investments,  
  interest, and other earnings exceeds the expected earnings for  
  the same period.

2)Authorizes the Teachers' Retirement Board to allocate  
  gain-sharing revenue in the following priority order:

   a)   An amount necessary to eliminate any unfunded actuarial  
     accrued liability in association with benefits in effect  
     prior to July 1, 1980.

   b)   An amount necessary to protect the fund from investment  
     returns below the actuarially assumed rate.

   c)   Any remaining gain-sharing revenue will be used to  
     provide improvements in benefits or credits for  
     contributions pursuant to future legislation.

3)Specifies that the gain-sharing revenue would be allocated  
  proportionately to active members and retired members in  
  percentages that correspond to the percentage of liabilities  
  applied to each group in the valuation of the plan.

  FISCAL EFFECT  :   No cost to the state.  Any gain-sharing  
revenues allocated to retired or active members of CalSTRS would  
not exceed the amount of the actual surplus.









                                                          AB 429
                                                          Page  2

  COMMENTS  :   CalSTRS generally has an actuarial valuation  
performed every other year to determine the funding status of  
the plan.  The last valuation of CalSTRS was performed using  
June 30, 1998 data.  This valuation verified that the Teachers'  
Retirement Fund had reached fully funded status and, in fact,  
had a surplus in excess of $3 billion.

This bill will allow for a portion of the surplus to be used to  
provide benefit increases to active and retired CalSTRS members.

Supporters state that CalSTRS research concluded that the  
pre-1999 retirement program did not provide an adequate  
retirement allowance and, therefore, the allowances of current  
retirees are inadequate.  Additionally, supporters point out  
that AB 429 would allow the Legislature and CalSTRS to "consider  
benefit improvements for these retirees with the least benefits.  
 The bill does not guarantee a benefit increase and does not  
commit the state taxpayers to funding contractually guaranteed  
benefits."  The bill simply allows ad hoc benefit adjustments to  
be made if funding is available. 

  REGISTERED SUPPORT / OPPOSITION  :   

  Support  

Association of California School Administrators
California Retired Teachers Association
Small School Districts Association

  Opposition  

None on file.
  
Analysis Prepared by  :    Karon Green / P.E., R. & S.S. /  
(916)319-3957