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10/26/2007
NOTE: This is the last Alert until February 2008 when the legislature is back in session.
…GOVERNOR’S FINAL ACTIONS ON RETIREMENT-RELATED BILLS As reported in prior PARS Legislative Alerts relatively few retirement-related bills moved through the legislative process this session. Seventeen bills were held pending the report and recommendations of the Governor’s Public Employee Post-Employment Benefits Commission. Republican legislators were very unhappy that the majority of these bills were authored by their party members and therefore took an oppose stand on most of the retirement bills passed by the legislature. The Governor signed most of the retirement bills that made it to his desk by his mid-October deadline. These bills take effect January 1, 2008. We anticipate a much busier session next year following the report and recommendations of the Governor’s Commission. The following bills were signed by the Governor: Assembly Joint Resolution 5 (Hernandez): Pension Offset/Windfall Elimination Provision This resolution will have the California Legislature make a formal request to the President and the US Congress to enact the Social Security Fairness Act, repealing the Government Pension Offset (GPO) and the Windfall Elimination Provision (WEP) from the Social Security Act. This bill was signed by the Governor on September 10th as Chapter 116 of 2007. AB 221 (Anderson): Divestment from Iran This bill prohibits PERS and STRS from investing public employee retirement funds in a company with business operations in Iran. The bill will also require PERS and STRS to sell or transfer any investments in a company with business operations in Iran. The Governor signed this bill, Chapter 671 of 2007, on October 14th AB 246 (Torrico): County Retirement Board Assets This bill will prohibit a member or employee of a county retirement board or board of investments from selling or providing any investment product that would be considered an asset of the retirement fund. This bill was signed by Governor Schwarzenegger on October 8th as Chapter 315 of the laws of 2007. AB 554 (Hernandez): PERS Pre-funding Retiree Healthcare Benefits This bill will allow PERS to offer its retiree healthcare pre-funding program to all public entities, including those that do not participate in PEMHCA. Although the Governor vetoed a similar bill last year, he approved this one on October 8th as Chapter 318 of 2007. AB 757 (Comm. on Public Emp., Retirement, & Social Security): STRS Housekeeping Bill This bill makes technical changes to the Teachers’ Retirement Law, including clarifying: (1) maternity leave service credit; (2) Option 3 under the Family and Survivor Benefits; (3) ad hoc increases; (4) conversion from disability to service retirement; (5) option beneficiary election; and (6) administration of the Deferred Compensation Fund. This bill was signed by the Governor on October 8th as Chapter 323 of 2007. AB 775 (Niello): County Post-Retirement Employment Prohibitions The County Employees Retirement Law of 1937 authorizes a county to employ a retired member in a position requiring special skills or knowledge without reinstating them from retirement. Under the law, a retired member may not work more than 90 days in any 12-month period. The law authorizes a board of supervisors to extend that re-employment period up to 120 days in any 12-month period. This bill would prohibit the re-employment of a retiree who was employed within the prior 12 months and who received unemployment insurance compensation following the termination of an appointment with the same employer. This bill was chaptered (Chapter 57 of 2007) on July 12. AB 1124 (Karnette): County Post-Employment Benefits This bill fine-tunes ‘37
Act County retirement systems’ ability to establish post-employment
benefits trust accounts, which they were given authority to establish in
2006. The Governor signed this bill on October 8th as Chapter 327 of
2007. AB 1307 (Krekorian): PERS Supplemental Contribution Program This bill allows PERS to expand its supplemental defined contribution program. The bill was amended in early July to remove language allowing employer “pick-up” contributions and any employee pre-tax contributions to the plans. This bill became Chapter 511 of 2007 after the Governor approved it on October 11th. AB 1316 (Bass): State Teachers' Retirement: Disability This bill would allow STRS members who apply for a disability benefit and who are eligible to retire for service, to receive a retirement allowance pending determination of their disability claim. Upon approval of the disability application, the member’s service retirement application will be cancelled, the disability benefit will begin, and any service retirement benefit overpayment will be recovered. This bill (Chapter 332 of 2007) was signed by the Governor on October 8th. AB 1432 (Soto): State Teachers' Retirement: Credit for Teaching Abroad This bill would allow non-retired members of STRS to purchase service credit for time spent teaching in U.S. State Department schools and in foreign public K-12 schools that received a portion of their funding from public revenues. The bill also deletes current prohibitions of domestic partners from rolling over a benefit distribution. Governor Schwarzenegger signed this bill on October 11th as Chapter 513 of 2007. SB 14 (Negrete McLeod): California National Guard Retirement This bill provides "optional" membership rights to members of the California National Guard, who do not qualify for PERS. The bill also creates member classification of "National Guard Member" for such persons, who generally receive the same benefits as state miscellaneous members. National Guard members would pay both the employee and employer share of contributions for membership and previous service and would be excluded from certain provisions under the law to minimize potential costs to the state. This bill was signed by the Governor on October 9th as Chapter 355 of 2007. SB 134 (Cedillo): Mandatory Retirement for Los Angeles County Upon approval by the Board of Supervisors, this bill excludes the County of Los Angeles from the County Employees Retirement Law that permits a county to require sheriffs, under-sheriffs, and marshals who are safety members to be retired at 60 or 70 years of age. This bill (Chapter 290 of 2007) was signed by Governor Schwarzenegger on October 5th. SB 901 (Padilla): STRS Post-retirement Earnings This bill extends the STRS post-retirement earnings requirements and exemptions that were scheduled to sunset at the end of the year. The Governor signed this bill on October 8th as Chapter 353 of 2007.
…SPECIAL SESSION ON HEALTHCARE UNDER WAY It is looking less and less likely that any significant healthcare reform legislation will be coming out of the special session that Governor Schwarzenegger ordered following the close of the regular session. In the past few weeks we have seen Schwarzenegger veto AB 8, the Democrat-proposed healthcare reform bill that passed both houses of the legislature, only to realize how little support his own proposal has. Although the Governor has softened his stance on some of the provisions in his proposal that were troublesome to labor leaders, active union protests of the proposed legislation have already begun. By vetoing the Democrats' main proposal, the Governor hoped that the legislature would return to the negotiating table to find some middle ground and pass comprehensive reforms. Schwarzenegger had already vowed to veto the bill, claiming the measure would not reduce healthcare costs and would place too much of the financial burden on employers. Democrats, meanwhile, have signaled that Schwarzenegger's healthcare plan will meet a similar fate in the Legislature. Assembly Speaker Fabian Núñez, the Democrats' main healthcare negotiator and co-author of AB 8, refuses to yield on the basic principles in the bill. More than a month into a special legislative session on healthcare, the two sides remain divided on how to pay for healthcare expansion, as well as other important issues. Since vetoing AB 8, the Governor, responding to complaints from small businesses, has lowered the minimum contributions that employers that do not provide coverage for their workers would pay from 4 percent of payroll to somewhere on a revenue-based sliding scale between zero and 4 percent. Democrats, who have insisted that employers pay a minimum of 7.5 percent, are unhappy with the move. Additionally, the governor's plan also would require that individuals purchase health insurance, with the state providing subsidies for the working poor. Democrats oppose the individual mandate, saying the subsidies would be insufficient for low- and middle-income workers. Further dashing the hopes of healthcare reform proponents, labor unions have begun to campaign against the Schwarzenegger proposal. Following the Governor’s veto of AB 8, labor unions began holding 48-hour vigils around the state to oppose Schwarzenegger’s proposal. The vigils, including prayer and fasting outside the Capitol and the governor's district offices, are an effort by labor to influence the debate over healthcare reform. The campaign is being directed by Democratic political consultant Chris Lehane, who was hired by the California Labor Federation, AFL-CIO. The effort also includes the Service Employees International Union, as well as consumer and faith-based groups. The Union campaign contends that Schwarzenegger's plan doesn’t share responsibility as the governor intends. Instead, the Unions claim the proposal actually ‘gouges’ the middle class. Schwarzenegger's plan would require individuals to purchase healthcare insurance, with the state providing subsidies for the poor. But union leaders contend that many low- and middle-income families would still not be able to afford coverage, forcing them to choose between financial security and breaking the law. The governor said he expected to strike a deal with Democrats by the end of October and plans to begin working on placing a financing proposal before voters on the November 2008 ballot. Meanwhile, the Assembly Health Committee has not scheduled a hearing on the Governor's plan until Oct. 31, and Democrats have hinted that the Legislature may not be ready to act until it reconvenes for the regular session in January.
In the short time since Governor Schwarzenegger signed the delayed 2007-08 state budget, there is already evidence that deep cracks are developing as revenues flatten, expenditures rise, and optimistic assumptions face reality. With this realization, the state Department of Finance began work on the 2008-09 budget in August under the assumption that there will be a $6.1 billion operating deficit as the gap between spending and revenue forecasts widens. But, based on major tax receipts collected in the first two months of the new fiscal year, California could now be facing an $8.6 billion operating deficit or more if the state's economy and housing market continue at the current pace. In the fiscal year that closed June 30, the state fell $821 million below what it had anticipated collecting from its three major taxes (personal income, sales, and corporate) that it had projected just six weeks earlier. That trend appears to be continuing while during July and August the state fell $308 million below forecast in those three taxes. Some other obvious problems with the budget include:
The Alert will be published again in February, once the legislature is back in session. In the meantime, feel free to contact PARS with any question or requests for further information. Additional news and an archive of past Legislative Alerts are available on the PARS website at www.pars.org. Feel free to contact PARS with any question or requests for further information. Additional news and an archive of past Legislative Alerts are available on the PARS website at www.pars.org. Thank you, Maureen Toal (800) 540-6369 ext. 135 PARS HAS ESTABLISHED TWO INNOVATIVE MULTIPLE-EMPLOYER TRUSTS TO ASSIST PUBLIC AGENCIES WITH PRE-FUNDING THEIR OPEB (POST-RETIREMENT HEALTHCARE) OBLIGATIONS UNDER GASB 45. FOR MORE INFORMATION, CONTACT: Maureen Toal The contents of this
publication reflect PARS’ understanding of the facts. |
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