BILL ANALYSIS
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: SB 1693
Deborah V. Ortiz, Chair Hearing date: April 24, 2000
SB 1693 (Ortiz) as introduced 2/22/00 FISCAL: YES
STRS: SBMA: PURCHASING POWER BENEFIT INCREASED FROM 75% TO
80% OF WHAT THE INITIAL CHECK COULD BUY AT THE TIME OF
RETIREMENT
HISTORY :
Sponsor: California Retired Teachers Association (CRTA)
Association of Retired Teachers (ART)
California Teachers' Association (CTA)
California Federation of Teachers (CFT)
Prior legislation: see below
SUMMARY :
Would increase the supplemental payments made from the STRS
Supplemental Benefit Maintenance Account (SBMA) to restore
purchasing power of initial allowances from the current 75%
to 80% of the purchasing power of the member's initial STRS
monthly allowance.
BACKGROUND
1) The committee is advised that SBMA payments are made from
the combination of:
a) an annual General Fund contribution to the SBMA of 2.5%
of annual statewide teacher payroll, and
b) payments from the sale or use of federal school land
grants.
2) SB 1026 (Schiff-Chapter 939, Statutes of 1997) increased
the SBMA purchasing power protection from 68.2% to 75% of
the benefit recipient's original purchasing power. The STRS
purchasing power benefit had been at the 68.2% level since
the mid-1980's.
David Felderstein SB 1693
Date: 4/17/00 Page 1
3) AB 1102 (Knox-Chapter 1006, Statutes of 1998) vested
( guaranteed ) the annual 2.5% General Fund contribution to the
SBMA and the purchasing power payments to retirees from SBMA
to meet the 75% purchasing power goal and limit, to the
extent possible with the funds available.
ANALYSIS :
1) Existing STRS law provides that:
a) all STRS members and beneficiaries receive monthly
allowances that are annually increased by 2% of the
original allowance (an automatic 2% non-compounded COLA),
and
b) when the purchasing power of the STRS benefit,
including the 2% COLA, is determined to be less than 75% of
the purchasing power of the initial STRS allowance, the
member or beneficiary receives a quarterly SBMA payment to
bring their allowance up to the 75% level.
2) This bill would increase the SBMA payments from 75% to
80% of the purchasing power of the member's initial STRS
monthly allowance .
FISCAL IMPACT :
According to preliminary estimates by the STRS actuary,
increasing the level of purchasing power protection from 75%
to 80% would increase purchasing power payments as follows
(in millions of dollars):
------------------------------------------------------------------
| |2001-02|2002-03|2003-04|
| | | | |
| | | | |
| | | | |
| | | | |
David Felderstein SB 1693
Date: 4/17/00 Page 2
|------------------------------------------+-------+-------+-------|
|Total benefit payment increase |$62.8 |$69.4 |$76.2 |
------------------------------------------------------------------
STRS states that given the System's current actuarial
assumptions, the available SBMA funds are sufficient to pay
the increased cost of the 80% allowance for at least 30
years.
COMMENTS :
1) According to STRS :
"Currently, members and beneficiaries whose benefit
effective date was 1981 or earlier receive the quarterly
(SBMA) supplemental payment; about 40,000 members and
beneficiaries receive this quarterly payment. This bill
(SB 1693) would increase the number of supplemental (SBMA)
benefit recipients by 16,340 and would include all members
and beneficiaries whose benefit effective date was 1984 or
earlier."
2) SUPPORT :
Association of California School Administrators (ACSA)
3) OPPOSITION :
None to date
# # # # #
David Felderstein SB 1693
Date: 4/17/00 Page 3