BILL ANALYSIS                                                                                                                                                                                                    




          Appropriations Committee Fiscal Summary

                                AB 429  (Correa)

Hearing Date:8/16/99            Amended:5/20/99        
Consultant: Maureen Brooks          Policy Vote:P. E. & R.   
 3-0                     
____________________________________________________________ 

BILL SUMMARY:  AB 429 authorizes the State Teachers'  
Retirement Board to allocate gain-sharing revenue in the  
following priorities:
 An amount necessary to eliminate any unfunded actuarial  
  accrued liability associated with benefits in effect July  
  1, 1990,
 An amount as determined by actuary that adequately  
  protects the fund in the event future earnings fall below  
  expected earnings shall be allocated to reserves,
 An amount as determined by actuary that will provide  
  additional revenue for allocations in fiscal years in  
  which no additional gain-sharing revenue is generated,
 The remaining gain-sharing revenue will be allocated to  
  active and retired members' funds to provide improvements  
  to benefits or credits for contributions pursuant to  
  future legislation.  This money will be allocated  
  proportionately to active and retired members' funds  
  based on the percentage of the actuarial accrued  
  liability of the retirement fund that is attributable to  
  each group.
                         Fiscal Impact (in thousands)
  
Major Provisions             1999-2000       2000-01       2001-02    Fund  

Admin costs         ---------------less than $150------STRF

STAFF COMMENTS:
AB 429 does not authorize spending but only creates a  
structure for future allocations.  Any benefit increases  
will require special legislation.

Gain sharing revenue is defined as the amount by which the  
actuarial value of investment returns, interest and other  
earnings with respect to the Defined Benefit Program  
received by the retirement fund exceeds the expected  
earnings for the same period.











The June 30, 1998 valuation of CalSTRS determined that the  
defined benefit program has a surplus in excess of $3  
billion, primarily because investment earnings were $3.5  
billion more than anticipated.  The valuation measures the  
liabilities for the program and determines the extent to  
which those liabilities are covered by current assets.

AB 429 establishes a gainsharing program within STRS in  
which any excess earnings identified in a valuation, net of  
the amount needed to maintain and protect a fully funded  
status, will be distributed to active members and retired  
members in percentages that correspond to the percentage of  
liabilities applied to each group.