BILL ANALYSIS                                                                                                                                                                                                    




                    Appropriations Committee Fiscal Summary
          
                                          AB2700  (Lempert)
          
          Hearing Date:8/30/2000          Amended:6/20/2000
                                                                       
                   & as proposed to be amended                   
          Consultant: Maureen Brooks          Policy Vote:P. E. & R.   
          5-0                      
          ____________________________________________________________ 
          ___
          BILL SUMMARY:   AB 2700 makes all compensation received by  
          a member of the State Teachers' Retirement System (STRS)  
          creditable and makes technical changes to the Defined  
          Benefit Supplement Program in which contributions for  
          service performed by a member in excess of one year of  
          service credit per school year shall be placed.  This  
          provision will become effective July 1, 2002 if the revenue  
          limit cost-of-living adjustment computed by the  
          Superintendent of Public Instruction for the 2001-02 fiscal  
          year is equal to or greater than 3.5 percent.   If it is  
          not, the operative date will be July 1, 2003.

          In addition, AB 2700 reduces the General Fund contribution  
          to the Defined Benefit Plan from 3.102% to 1.975% effective  
          January 1, 2001.  This bill also appropriates $600,000 for  
          the first year administrative costs resulting from  
          enactment of AB 1509 (Machado) earlier this year.
                              Fiscal Impact (in thousands)
           Major Provisions            2000-01             2001-02              
           2002-03            Fund  
          Employer contribution       --------------------- $175 million  
          annually--                 Local
               (for creditable service)
          Increase in benefits           ---------------------$11 million  
          annually-----              STRF
                (for creditable service)
          GF contribution                  ----------------------$15 million  
          annually*--                General
                (for creditable service)
          Reduction in GF contribution --------- $200 million  
          annually---------          General
                                                 savings
          STAFF COMMENTS:  SUSPENSE FILE.   Employer costs for the  
          creditable compensation provision begin 2002-03, and an  
          increase of $15 million in the contribution from the  










          General Fund will begin 2003-04.   That increase, however,  
          will be more than offset from the savings resulting in the  
          reduction in the General Fund contribution to the Defined  
          Benefit Plan of  $3.474 billion, or $200 million annually.

          Under existing law, "creditable service" excludes service  
          performed in excess of the full-time equivalent and money  
          paid for overtime and summer school service.  Under AB  
          2700, all compensation will be creditable and all  
          contributions for service in excess of one year of service  
          credit shall be placed into the Defined Benefit Supplement  
          Program.  The member will be able to access the balance in  
          the supplemental account upon retirement or separation.

          The General Fund contribution, based on the amount of  
          creditable service, is currently equal to 3.102% for the  
          Defined Benefit Plan and 2.5% for the Purchasing Power.  AB  
          2700 reduces the DB contribution to 1.975% of payroll.