Members of the Senate and Assembly have introduced several bills as a part of a legislative package addressing the public employee compensation controversy stemming from the City of Bell. The following is a summary of the bills as we expect them to be amended. The summaries could change once the final language is made available.

AB 192 (Gatto) – Pending 
Amendments Pending

Assembly Bill AB 192, by Assembly Member Mike Gatto, is an attempt to address the concern that excessive compensation paid to an employee may increase the pension liabilities of former employers, because the employee’s final salary will be based on the highest salary regardless of the salary paid by the previous employer. This occurs as a result of reciprocity between retirement systems and also because within CalPERS the employer rates of the previous employer are set at an amount that includes any unfunded liabilities created by increased salaries provided by the new employer.

AB 192 would make the agency that pays “excessive compensation” solely responsible for the increased retirement costs. The bill defines excessive compensation as anything paid in excess of 15 percent of the salary paid to the member by the previous agency.

AB 192 only applies to unrepresented employees in CalPERS contracting agencies.

AB 194 (Torrico) – Pending
Amendments Pending

Assembly Bill 194, by Assembly Member Alberto Torrico, would establish a cap on the total compensation that may be used to calculate a pension benefit. Currently, there is an IRS cap of $245,000 that applies to anyone who became a member of a public retirement system after June 30, 1996. The new state cap would be 125 percent of the Governor’s salary as of December 7, 2009 and would apply to anyone who becomes a member of a public retirement system on or after January 1, 2011. The Governor’s salary is $173,987, resulting in a new cap of $217,483.

AB 827 (De La Torre) – Pending
As Amended on August 18, 2010

Assembly Bill 827, by Assembly Member Hector De La Torre, would prohibit any employment contract for a local, unrepresented employee from including the following:

• An “evergreen” clause (a clause that provides for an automatic contract renewal and/or compensation increase).
• A severance payment greater than 12 months salary.
• An automatic raise that exceeds a cost-of-living adjustment (COLA).

Prior to providing a raise, in excess of a COLA, to an unrepresented employee that reports to the legislative body of a local agency, that employee must be given a performance review, a summary of the review must be discussed in open session, and the performance review must be made available to the public upon request. Additionally, the vote to implement the raise must be made in open session.

AB 827 is awaiting a vote on the Senate Floor.

CSAC and others have asked that the requirement that the performance review be available to the public be removed from the bill. We are awaiting a response from Assembly Member De La Torre.

AB 1955 (De La Torre) – Watch
As Amended on August 18, 2010

Assembly Bill 1955, by Assembly Member Hector De La Torre, would require cities to provide the Controller with compensation information for the city council members to identify “excess compensation cities”. An “excess compensation city” would, among other things, be restricted in its ability to issue bonds or encumber funds and city council members would be taxed on the “excess income”. Of note to counties, AB 1955 would amend the Brown Act to clarify that individual employment contracts must be approved in open session and would require seven days notice before such a contract can be considered. 

AB 1955 passed the Senate Local Government Committee on August 12 and is awaiting a hearing in the Senate Appropriations Committee.

AB 2064 (Huber) –Pending
Amendments Pending

Assembly Bill 2064, by Assembly Member Alyson Huber, requires public agencies to post the salaries of specified individuals on their official websites and update on an annual basis. The specified individuals are:

• Members of the Assembly, Senators and employees of each house of the legislature.
• Constitutional Officers, their appointed or exempt deputies, and their appointed or exempt employees.
• For cities, counties, any city and county, special districts, school districts, and joint powers agencies: Elected or appointed officials, superintendents, deputy superintendents, assistant superintendents, associate superintendents, general managers, city managers, county administrators, and other similar chief administrative officers or chief executive officers.

SB 501 (Correa) – Pending
Amendments Pending

Senate Bill 501, by Senator Lou Correa, would require an elected or appointed officer of a county, city, city and county, school district, special district, or joint powers agency who is 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. The new form would include disclosure of the following:

• Annual salary or stipend.
• Employer payments to the filer’s deferred compensation or defined benefit plans.
• Automobile and equipment allowances.
• Supplemental incentive and bonus payments.
• Employer payments to the filer that are in excess of the standard benefits that the employer offers for all other employees. 

The specified employees and elected officials include:

State officers, judges, court commissioners, members of various state commissions, members of boards of supervisors, district attorneys, county counsels, county treasurers, chief administrative officers of counties, city officials, members of city councils, other public officials who manage public investments and candidates for any of these offices at any election.

As an alternative to individuals filing the new form, a county that maintains a website may compile the information required for each filer and post that information on the internet. 

It is believed that the Secretary of State would develop the form in 2011, making the form first due in March of 2012.

Public Employee Compensation and Benefits Task Force

The California Public Employees’ Retirement System (CalPERS) last week established the Public Employee Compensation and Benefits Task Force (task force). The task force is comprised of labor and employee organizations, local government associations (including CSAC and the League of California Cities), and CalPERS and legislative staff. Its purpose is to discuss transparency and regulation of public employee compensation and benefits.

Accordingly, the task force has been divided into three sub-groups. The compensation and transparency sub-groups have already met once.

• Compensation. The Compensation sub-group discussed topics including federal IRC (Internal Revenue Code) –based caps placed on compensation and benefits and the CalPERS’ definition of a group or class of public employees.
• Transparency. The Transparency sub-group confers focused on the impacts of recently introduced legislation, what information needs to be made public to prevent the overarching issue of excessive compensation and how to avoid having duplicative reporting requirements.
• Risk Pooling. The Risk Pooling sub-group will meet next week and discuss the impacts experienced by local agencies within the same risk pool when one local agency member of the pool grants excessive compensation and benefits packages to its employees.