BILL ANALYSIS
Appropriations Committee Fiscal Summary
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| |AB 1933 (Strom-Martin) |
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|Hearing Date: 8/23/2000 |Amended: 8/18/2000 |
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|Consultant: Maureen Brooks |Policy Vote: P. E. & R. 3-1 |
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BILL SUMMARY: AB 1933 establishes a "Rule of 85"
retirement option and increases the career bonus for
members of the State Teachers Retirement System (STRS).
Additionally, the bill requires the Teachers' Retirement
Board to conduct a study on the feasibility of a service
based retirement formula and report to the Legislature
before July 1, 2001.
Fiscal Impact (in thousands)
Major Provisions 2000-01 2001-02
2002-03 Fund
Career bonus $248 mill $258 mill $269
mill STRF
Rule of 85 $244 mill $255 mill $266
millSTRF
Study $25
STRF
STAFF COMMENTS: SUSPENSE FILE. The present value of the
total long-term costs for the career bonus enhancement is
$4 billion. The total cost for the Rule of 85 retirement
option is $3.989 billion assuming all employers elected to
provide the benefit.
Existing law provides a career bonus of .2% for members of
STRS with 30 or more years of credited service. This bill
will change the career bonus to a formula of a bonus of .1%
for members with 29 years of service, a .3% bonus for 30
years and .4% bonus for members with 31 or more years of
service. The bills increases the cap on the percentage of
final compensation from 2.4% to 2.5%.
The "Rule of 85" retirement option provides that a member
whose age and service credit add up to at least 85 will
receive a benefit equal up to 2.5% of final compensation
for each year of credited service. Therefore, a teacher
age 55 with 30 years of service would retire with 75% of
final compensation. The minimum retirement age is 55.
Employees of a school district, community college district,
county superintendent of schools will be eligible for the
"Rule of 85" but it must first be agreed to in collective
bargaining.
A service based retirement formula bases the allowance on
years of service and final compensation without using an
age factor, except for a minimum retirement age. CalSTRS
will conduct a study on the feasibility of that formula.
Staff notes that this bill is similar to AB 1213
(Strom-Martin) which was held on the Assembly
Appropriations Committee Suspense file earlier this year.