Little Hoover Commission Releases Report on Public Pensions

The Little Hoover Commission (Commission), an independent state oversight agency, today released its report, Public Pensions for Retirement Security, calling on the Governor and Legislature to provide the state and local governments with the legal authority to freeze pension benefits for current employees and reset pension formulas for those and future employees.

The Commission’s report follows its study of California pension systems that began in April 2010. Finding that most government agencies will be unable to fund promised pensions without severe cuts to local services, the Commission proposes a new “hybrid” model for public retirement that combines a lower defined benefit pension with an employer-matched 401 (k)-style plan. Additionally, the Commission recommends that the state set uniform standards for public retirement systems, including:

• banning retroactive benefit increases.
• placing a cap on the salary that can be used to determine pension benefits.
• clearly defining “final compensation” and,
• taking steps to improve transparency and accountability.

Compensation Transparency Legislation, Round Two

Last Friday was the deadline to introduce legislation for the 2011-12 fiscal year and several bills have been brought forward to increase transparency in public employee compensation.

AB 89 (Hill) – Watch
As Introduced on January 6, 2011

AB 89, by Assembly Member Jerry Hill, would place a limit on the amount of annual salary, compensation or payrate used to determine the retirement benefits for members of public retirement systems. The limit may not exceed the amount prescribed in Internal Revenue Service Code 401(a) 17, which places an annual maximum on total compensation used to determine retirement benefits for public retirement plan members hired after 1996. This amount is currently $245,000.

AB 89 has been referred to the Assembly Public Employees, Retirement and Social Security.

AB 148 (Smyth) – Pending
As introduced on January 18, 2011

AB 148, by Assembly Member Cameron Smyth, would require any local agency that adopts a written attendance compensation policy to post it on their website and submit a copy to the State Controller. Failure to meet this requirement would result in the Controller witholding any funds to which the local agency is entitled. Additionally, AB 148 requires local agencies to include “compensation setting guidelines” in the required AB 1234 ethics training for local officials. 

It is unclear to which “compensation setting guidelines” AB 148 refers. CSAC is working with the author of the bill to clarify this requirement.

AB 148 has been referred to the Assembly Local Government Committee.

SB 27 (Simitian) - Oppose Unless Amended
As introduced on December 6, 2010

Senate Bill 27, by Senator Joe Simitian, amends the Public Employees Retirement Law and the State Teachers Retirement System law to limit those items that can be included in the calculation of final compensation for the purpose of prohibiting pension spiking; the bill also prohibits retirees within public pension systems from providing services to an employer covered by a state or local retirement system until the retiree has had a bona fide separation from service for at least six months.

This bill is a reintroduction of last year’s SB 1425.

SB 27 has been referred to the Senate Public Employment and Retirement Committee.

SB 46 (Correa) – Pending
As introduced on December 9, 2010

SB 46, by Senator Lou Correa, would require specified elected or appointed officials who are also required to file a Statement of Economic Interest (Form 700) as published by Fair Political Practices Commission to also complete a new form developed by the Secretary of State which would provide for the disclosure of, among other things, salaries and stipends,
automobile and equipment allowances, and incentive and bonus
payments. This bill would also require a county, city, city and county, school district, special district, or joint powers agency to post the information on their website.

SB 46 is a reintroduction of last year’s SB 501, also authored by Senator Correa and will be heard in the Senate Governance and Finance Committee on March 16.

Several more bills related to compensation transparency have been introduced in “spot bill” form (simply being used as a placeholder until more substantive language is inserted). We will update you with summaries of those bills when they are amended.