BILL ANALYSIS
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: AB 1933
Deborah V. Ortiz, Chair Hearing date: June 26, 2000
AB 1933 (Strom-Martin) as amended 6/15/00 FISCAL: YES
STRS: "RULE OF 85" OPTIONAL TO SCHOOL DISTRICTS AND THE
STATE
HISTORY :
Sponsor: California Teachers Association
Faculty Association of California Community
Colleges
Prior legislation: AB 1213 (Strom-Martin), 2000
Held in Assembly Appropriations Committee
AB 88 (Baca) 1998
Vetoed
AB 449 (Horcher) 1993
Vetoed
AB 276 (Filante) 1991
Vetoed
ASSEMBLY VOTES :
PER & SS 6 - 0 4/12/00
Appropriations 14 - 7 5/24/00
Assembly Floor 55 - 206/01/00
SUMMARY :
Would establish a "Rule of 85" retirement option, improve the
current career bonus incentive for members of the State
Teachers' Retirement System (STRS), and require the STRS
Board of Administration to conduct a study on the feasibility
of moving to a service based retirement formula.
ANALYSIS :
1) Existing STRS law :
a) provides that the retirement allowances for STRS
members shall be calculated based upon an age factor (plus
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a career bonus of .2% if the member has 30 or more years of
service) multiplied by the years of service multiplied by
the member's final compensation,
b) allows STRS members to retire prior to age 60 but the
member's age factor is significantly reduced, and
c) specifies that the maximum age factor a STRS member may
currently receive is 2.4%.
2) This bill :
a) requires the STRS Board to conduct a study on the
feasibility of basing pensions on years of service and
final compensation with no age factor, except for a minimum
retirement age, and to report its findings to the
Legislature on or before July 1, 2001,
b) increases the career bonus for STRS members retiring on
or after January 1, 2001, by applying it to members with 29
years of credited service and increasing the bonus after 30
and 31 years of credited service. At 29 years of service
credit the career bonus would be .1%; at 30 years of
service credit the career bonus would be .3%; and, at 31
years the bonus would be .4%,
c) increases from 2.4% to 2.5% the maximum age factor a
person can receive when combining his or her actual age
factor with the career bonus,
d) permits STRS members who retire on or after January 1,
2001, and who are at least 55 years of age to retire using
a 2.4% age-factor if the sum of the member's age plus years
of credited service equals or exceeds 85 (Rule
of 85) if this provision has been agreed to through
collective bargaining,
e) specifies that the Rule of 85 benefit is available to
all STRS members employed by a school district, community
college district, county superintendent of schools or state
education agency that has agreed to be subject to this
section through a written memorandum of understanding
entered into by the employer and employees, and
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Date: 6/15/00 Page 2
f) allows members who qualify for the Rule of 85 benefit
to also receive the career bonus, if eligible.
FISCAL EFFECT :
1) According to STRS, providing the Rule of 85 benefit could
result in present value costs to the STRS Fund of up to $4
billion and annual costs of $248 million depending on the
number of employers that agree to offer this benefit through
collective bargaining.
2) STRS would incur minor, absorbable cost to conduct the
study required by this bill .
COMMENTS :
1) The committee is advised that similar bills were vetoed
several times by Governor Wilson. His veto message of AB 88
(Baca) 1998 stated:
"This bill would authorize school districts, community
college districts and county superintendents of schools to
elect a new early retirement option for employees who are
members of the State Teachers' Retirement Systems (STRS).
This bill would permit retirement at or over age 55,
without an allowance reduction, if the total of the
member's age and credited service is at least 85 (Rule of
85).
This bill is similar to Assembly Bill 276 (Filante, 1991),
and Assembly Bill 449 (Horcher, 1993), which were both
vetoed. The reasons for those vetoes have not changed.
This measure does not include fiscal safeguards to
determine if the program is truly cost neutral, nor does it
set a time limit for district financing of the enhanced
benefits.
More importantly, by creating an incentive for teachers to
retire, this bill is contrary to current efforts to retain
qualified teachers to implement the Class Size Reduction
Program. Further, the funding of the "Rule of 85" would
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Date: 6/15/00 Page 3
come from existing Proposition 98 allocations, which could
be better spent in the classroom.
Lastly, I continue to question the need for yet another
early retirement option for STRS members. Many options
currently exist such as the standard early retirement, the
"30 and out," the limited term reduction, the two year
golden handshake, and other early retirement incentives."
2) Supporters contend that, "It would benefit career
educators who started teaching soon after college but are too
young under current law to receive a livable pension".
Additionally, supporters state that, "AB 1933 would
acknowledge and encourage years of teaching. It
de-emphasizes retirement age as a component in computing
retirement."
Supporters also believe that, "The current STRS retirement
program acts as a financial disincentive associated with
teaching - for persons considering entering and/or staying
in the teaching profession. Providing a comfortable
retirement will be a significant factor in the state's
ability to attract the estimated 300,000 new teachers needed
over the next decade."
3) SUPPORT :
Association of California School Administrators
California Federation of Teachers
County Superintendents of Schools
Los Angeles Unified School District
Riverside County Schools Advocacy Association
Small School Districts' Association
Los Angeles County Office of Education
Delta Kappa Gamma Society International
4) OPPOSITION :
None to date.
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