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AB-2201 State teachers’ retirement: benefits: retirement board.(1999-2000)

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CALIFORNIA LEGISLATURE— 1999–2000 REGULAR SESSION

Assembly Bill
No. 2201


Introduced  by  Assembly Member Honda
(Coauthor(s): Assembly Member Kuehl)

February 24, 2000


An act to amend Sections 22134, 22136, 22140, 22141, 22200, 22664, 24201, 24202.5, 24203.5, 24411, 24412, 24415, 24416, and 24417 of, and to repeal Section 22135 of, the Education Code, relating to state teachers’ retirement.


LEGISLATIVE COUNSEL'S DIGEST


AB 2201, as introduced, Honda. State teachers’ retirement: benefits: retirement board.
(1) Under the existing State Teachers’ Retirement Law, calculation of service retirement allowances of members, other than classroom teachers, as defined, is based on the highest average annual compensation earnable by the member during any 3-year period.
This bill would provide that the calculation of those allowances shall be based on the highest annual compensation earnable by the member during any 12-month period and make related changes.
(2) The State Teachers’ Retirement Law provides that benefits be annually increased by a 2% improvement factor and that the factor shall not be compounded.
This bill would provide that, effective September 1, 2003, the annual improvement factor shall be compounded.
(3) Under existing law, the State Teachers’ Retirement System is administered by the 12-member Teachers’ Retirement Board. Two of the members of the board must be members or participants who are classroom teachers in kindergarten or grades 1 through 12, another member must be a retired member or participant, and another member must be a community college instructor with specified experience. All 4 of these members are appointed by the Governor from lists submitted by specified officials. One member of the board must be an officer of a life insurance company and one must be an officer of a bank or savings and loan. These members are appointed by the Governor, subject to Senate confirmation.
This bill would increase the number of board members to 13 and require that 4 members be elected by active members and 2 members be elected by retired members. The bill would delete the requirement that 2 members must be, respectively, officers of a life insurance company and a bank or savings and loan and would instead provide that the Governor appoint 2 persons representing the public, subject to Senate confirmation. The bill would authorize the Governor to fill vacancies of the board, as specified; require the board to adopt regulations regarding the elections, as specified; and authorize the board to contract with a private firm to conduct the elections in specified circumstances.
(4) The State Teachers’ Retirement Law prescribes a 2% at age 60 formula for calculating retirement allowances for members who retire for service and for specified nonmember spouses.
This bill would instead prescribe a 2% at age 55 formula for those members and nonmember spouses and make related changes.
(4) Under the State Teachers’ Retirement Law, quarterly supplemental payments are made to retired members, disabled members, and beneficiaries from specified accounts to restore up to 75% of the purchasing power of the initial monthly allowances provided under the Defined Benefit Program, as specified.
This bill would provide that those supplemental payments shall be made to restore up to 80% of the purchasing power of those allowances.
(5) The bill would state that it shall be known and referred to as the “Teachers’ Pension Equity Act” and would make related findings and declarations of legislative intent. The bill’s provisions would be operative January 1, 2003.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 (a) This act shall be known and may be referred to as the “Teachers’ Pension Equity Act.”
(b) The Legislature finds that superior investment returns have resulted in multi-billion dollar surpluses in the Teachers’ Retirement Fund. Those surpluses should be used exclusively for the benefit of members of the Defined Benefit Program of the State Teachers’ Retirement System, whose contributions made the surplus possible.
(c) It is the intent of the Legislature to provide public school and community college educators with pensions that are equal to those now provided other state and school employees, such as school secretaries, bus drivers, custodians, and state employees under the Public Employees’ Retirement System. Those pensions shall be funded exclusively from the Teachers’ Retirement Fund and not from the General Fund.

SEC. 2.

 Section 22134 of the Education Code is amended to read:

22134.
 (a) “Final compensation” means the highest average annual compensation earnable by a member during any period of three 12 consecutive school years months while an active member of the Defined Benefit Program or time during which he or she was not a member but for which the member has received credit under the Defined Benefit Program, except time that was so credited for service performed outside this state prior to July 1, 1944. The last three 12 consecutive years months of employment shall be used by the system in determining final compensation unless designated to the contrary in writing by the member.
(b) For purposes of this section, periods of service separated by breaks in service may be aggregated to constitute a period of three 12 consecutive years months, if the periods of service are consecutive except for the breaks.
(c) The determination of final compensation of a member who has concurrent membership in another retirement system pursuant to Section 22115.2 shall take into consideration the compensation earnable while a member of the other system, provided that all of the following exist:
(1) The member was in state service or in the employment of a local school district or a county superintendent of schools.
(2) Service under the other system was not performed concurrently with service under the Defined Benefit Program.
(3) Retirement under the Defined Benefit Program is concurrent with the member’s retirement under the other system.
(d) The compensation earnable for the first position in which California service was credited shall be used when additional compensation earnable is required to accumulate three 12 consecutive years months for the purpose of determining final compensation under Section 23805.
(e) If a member has received service credit for part-time service performed prior to July 1, 1956, the member’s final compensation shall be adjusted for that service in excess of one year by the ratio that part-time service bears to full-time service.
(f) The board may specify a different final compensation with respect to disability allowances, disability retirement allowances, family allowances, and children’s portions of survivor benefit allowances payable on and after January 1, 1978. The compensation earnable for periods of part-time service shall be adjusted by the ratio that part-time service bears to full-time service.
(g) The amendment of former Section 22127 made by Chapter 782 of the Statutes of 1982 does not constitute a change in, but is declaratory of, the existing law.

SEC. 3.

 Section 22135 of the Education Code is repealed.
22135.(a)Notwithstanding subdivisions (a) and (b) of Section 22134, “final compensation” means the highest annual compensation earnable by an active member who is a classroom teacher who retires, becomes disabled, or dies, after June 30, 1990, during any period of 12 consecutive months during his or her membership in the plan’s Defined Benefit Program. The last 12 consecutive months of employment shall be used by the system in determining final compensation unless designated to the contrary in writing by the member.

(b)Section 22134, except subdivision (a) of that section, shall apply to classroom teachers who retire after June 30, 1990, and any statutory reference to Section 22134 or “final compensation” with respect to a classroom teacher who retires, becomes disabled, or dies, after June 30, 1990, shall be deemed to be a reference to this section.

(c)As used in this section, “classroom teacher” means any of the following:

(1)All teachers and substitute teachers in positions requiring certification qualifications who spend, during the last 10 years of their employment with the same employer which immediately precedes their retirement, 60 percent or more of their contract time each year providing direct instruction. For the purpose of determining continuity of employment within the meaning of this subdivision, an authorized leave of absence for sabbatical or illness or other collectively bargained or employer-approved leaves shall not constitute a break in service.

(2)Other certificated personnel who spend, during the last 10 years of their employment with the same employer that immediately precedes their retirement, 60 percent or more of their contract time each year providing direct services to pupils, including, but not limited to, librarians, counselors, nurses, speech therapists, resource specialists, audiologists, audiometrists, hygienists, optometrists, psychologists, driver safety instructors, and personnel on special assignment to perform school attendance and adjustment services.

(d)As used in this section, “classroom teacher” does not include any of the following:

(1)Certificated employees whose job descriptions require an administrative credential.

(2)Certificated employees whose job descriptions include responsibility for supervision of certificated staff.

(3)Certificated employees who serve as advisers, coordinators, consultants, or developers or planners of curricula, instructional materials, or programs, who spend, during the last 10 years of their employment with the same employer that immediately precedes their retirement, less than 60 percent of their contract time in direct instruction.

(4)Certificated employees whose job descriptions require provision of direct instruction or services, but who are functioning in nonteaching assignments.

(5)Classified employees.

(e)This section shall apply only to teachers employed by an employer that has, pursuant to Chapter 10.7 (commencing with Section 3540) of Division 4 of Title 1 of the Government Code, entered into a written agreement with an exclusive representative, that makes this section applicable to all of its classroom teachers, as defined in subdivision (c).

(f)The written agreement shall include a mechanism to pay for all increases in allowances provided for by this section through employer contributions or employee contributions or both, which shall be collected and retained by the employer in a trust fund to be used solely and exclusively to pay the system for all increases in allowances provided by this section and related administrative costs; and a mechanism for disposition of the employee’s contributions if employment is terminated before retirement, and for the establishment of a trust fund board. The trust fund board shall administer the trust fund and shall be composed of an equal number of members representing classroom teachers chosen by the bargaining agent and the employer. If the employer agrees to pay the total cost of increases in allowances, the establishment of a trust fund and a trust fund board shall be optional to the employer. The employer, within 30 days of receiving an invoice from the system, shall reimburse the retirement fund the amount determined by the Teachers’ Retirement Board to be the actuarial equivalent of the difference between the allowance the member or beneficiary receives pursuant to this section and the allowance the member or beneficiary would have received if the member’s final compensation had been computed under Section 22134 and the proportionate share of the cost to the plan’s Defined Benefit Program, as determined by the Teachers’ Retirement Board, of administering this section. The payment shall include the cost of all increases in allowances provided for by this section for all years of service credited to the member as of the benefit effective date. Interest shall be charged at the regular interest rate for any payment not received within 30 days of receipt of the invoice. Payments not received within 30 days after receipt of the invoice may be collected pursuant to Section 23007.

(g)Upon the execution of the agreement, the employer shall notify all certificated employees of the agreement and any certificated employee of the employer, who is a member of the Public Employees’ Retirement System pursuant to Section 22508, that he or she may, within 60 days following the date of notification, elect to terminate his or her membership in the Public Employees’ Retirement System and become a member of this plan’s Defined Benefit Program. However, only service credited under the Defined Benefit Program subsequent to the date of that election shall be subject to this section.

(h)An employer that agrees to become subject to this section, shall, on a form and within the timeframes prescribed by the system, certify the applicability of this section to a member pursuant to the criteria set forth in this section when a retirement, disability, or family allowance becomes payable.

(i)For a nonmember spouse, final compensation shall be determined pursuant to paragraph (2) of subdivision (c) of Section 22664. The employer, within 30 days of receiving an invoice from the system, shall reimburse the retirement fund pursuant to subdivision (f). Interest shall be charged at the regular interest rate for payments not received within the prescribed timeframe. Payments not received within 30 days of invoicing may be collected pursuant to Section 23007.

SEC. 4.

 Section 22136 of the Education Code is amended to read:

22136.
 (a)“Final compensation” with respect to a member whose salary while an active member was reduced because of a reduction in school funds means the highest average annual compensation earnable by the member during any three years 12 months while employed to perform creditable service subject to coverage by the Defined Benefit Program if the member elects to be subject to this section.

(b)For the purposes of this section, a year shall be considered to be a period of 12 consecutive months.

SEC. 5.

 Section 22140 of the Education Code is amended to read:

22140.
 “Improvement factor” means an increase of 2 percent in benefits for each year commencing on September 1, following the first anniversary of the effective date of retirement, or the date on which the monthly benefits commenced to accrue to any beneficiary other than a retired member or other periods specifically stated in this part. The Effective September 1, 2003, the factor shall not be compounded nor but shall it not be applicable to annuities payable from the accumulated annuity deposit contributions or the accumulated tax-sheltered annuity contributions. The Legislature reserves the right to adjust the amount of the improvement factor up or down as economic conditions dictate. No adjustments of the improvement factor shall reduce the monthly retirement allowance or benefit below that which would be payable to the recipient under this part had this section not been enacted.

SEC. 6.

 Section 22141 of the Education Code is amended to read:

22141.
 Notwithstanding Section 22140, “improvement factor” means an increase of 2 percent in benefits provided under Sections 24408 and 24409 for each year commencing on September 1, 1981. The Effective September 1, 2003, the factor shall not be compounded nor but shall it not be applicable to annuities payable from the accumulated annuity deposit contributions or the accumulated tax-sheltered annuity contributions. The Legislature reserves the right to adjust the amount of the improvement factor up or down as the economic conditions dictate. No adjustments of the improvement factor shall reduce the monthly retirement allowance or benefit below that which would be payable to the recipient under this part had this section not been enacted.

SEC. 7.

 Section 22200 of the Education Code is amended to read:

22200.
 (a) The plan and the system are administered by the Teachers’ Retirement Board. The members of the board are as follows:
(1) The Superintendent of Public Instruction.
(2) The Controller.
(3) The Treasurer.
(4) The Director of Finance.
(5) One person who, at the time of appointment, is a member of the governing board of a school district or a community college district.
(6) Three Four persons who, at the time of election, are either active members of the Defined Benefit Program or active participants in the Cash Balance Benefit Program, as follows:

(A)Two persons who, at the time of appointment, are classroom teachers in kindergarten or grades 1 through 12.

(B)One person who, at the time of appointment, is a community college instructor with expertise in the areas of business or economics or both business and economics and who shall be appointed by the Governor for a term of four years from a list submitted by the Board of Governors of the California Community Colleges. These members shall be elected by the active members and participants of the system for four-year terms, pursuant to regulations adopted by the board.
(7) One person who is either a retired member under this part or a retired participant under Part 14 (commencing with Section 26000) Two persons who are either retired members of the Defined Benefit Program or retired participants receiving an annuity under the Cash Balance Benefit Program. These members shall be elected by the retired members and participants of the system for four-year terms, pursuant to regulations adopted by the board.
(8) One officer of a life insurance company appointed by the Governor for a term of four years, subject to confirmation by the Senate.

(9)One officer of a bank or a savings and loan institution who has had at least five years of broad professional investment experience handling various asset classes such as stocks, bonds, and mortgage investments and who shall be appointed by the Governor for a term of four years, subject to confirmation by the Senate.

(10)One person Two persons representing the public, appointed by the Governor for a term of four years, subject to confirmation by the Senate.
(b) The members of the board described in paragraphs (5) and (7) and subparagraph (A) of paragraph (6) of subdivision (a) shall be appointed by the Governor for four-year terms from a list submitted by the Superintendent of Public Instruction The Governor may fill any vacancy in the member, school board, or public seats due to resignation or death.
(c) The members of the board shall annually elect a chairperson and vice chairperson.
(d) After any elected member of the board has served two consecutive terms, or eight consecutive years, on the board, that member may not be elected for an additional term until at least one year after the expiration of the member’s last term.
(e) If a person serving on the board pursuant to paragraph (5) of subdivision (a) ceases to serve on the governing board of a school district or a community college district and two or more years remain in his or her term on the board, that person shall resign or be removed from the board. If, however, less than two years remain in his or her term, that person may complete his or her term on the board or a new member may be immediately appointed by the Governor.
(f) The regulations adopted by the board pursuant to paragraphs (6) and (7) of subdivision (a) shall authorize candidates for elected positions on the board to submit candidate’s statements expressing their opinions and ideas, and the regulations shall not restrict the reasonable content of those statements.
(g) The board may contract with a private firm to conduct the elections described in paragraphs (6) and (7) of subdivision (a) if the board determines that the contract would result in a cost savings to the board and ensure fairness of the election process.

SEC. 8.

 Section 22664 of the Education Code is amended to read:

22664.
 The nonmember spouse who is awarded a separate account shall have the right to a service retirement allowance under this part.
(a) The nonmember spouse shall be eligible to retire for service under this part if the following conditions are satisfied:
(1) The member had at least five years of credited service during the period of marriage, at least one year of which had been performed subsequent to the most recent refund to the member of accumulated retirement contributions. The credited service may include service credited to the account of the member as of the date of the dissolution or legal separation, previously refunded service, out-of-state service, and permissive service credit that the member is eligible to purchase at the time of the dissolution or legal separation.
(2) The nonmember spouse has at least two and one-half years of credited service in his or her separate account.
(3) The nonmember spouse has attained the age of 55 years or more.
(b) A service retirement allowance of a nonmember spouse under this part shall become effective upon any date designated by the nonmember spouse, provided:
(1) The requirements of subdivision (a) are satisfied.
(2) The nonmember spouse has filed an application for service retirement on a form provided by the system, that is executed no earlier than six months before the effective date of the retirement allowance.
(3) The effective date is no earlier than the first day of the month in which the application is received at the system’s office in Sacramento and the effective date is after the date the judgment or court order pursuant to Section 22652 was entered.
(c) (1) Upon service retirement at normal retirement age under this part, on or after January 1, 2003, the nonmember spouse shall receive a retirement allowance that shall consist of an annual allowance payable in monthly installments equal to 2 percent of final compensation for each year of credited service.

(2)If the nonmember spouse’s retirement is effective at less than normal retirement age and between early retirement age under this part and normal retirement age, the retirement allowance shall be reduced by one-half of 1 percent for each full month, or fraction of a month, that will elapse until the nonmember spouse would have reached normal retirement age.

(3)If the nonmember spouse’s service retirement is effective at an age greater than normal retirement age and is effective on or after January 1, 1999, the percentage of final compensation for each year of credited service shall be determined pursuant to set forth opposite the nonmember spouse’s age at retirement in the following table multiplied by each year of credited service:
Age at Retirement
Percentage
55 ........................
2.00
55 1/4  ........................
2.016
55 1/2  ........................
2.032
55 3/4  ........................
2.048
56 ........................
2.064
56 1/4  ........................
2.080
56 1/2  ........................
2.096
56 3/4  ........................
2.11
57 ........................
2.126
57 1/4  ........................
2.142
57 1/2  ........................
2.158
57 3/4  ........................
2.172
58 ........................
2.188
58 1/4  ........................
2.204
58 1/2  ........................
2.220
58 3/4  ........................
2.236
59 ........................
2.250
59 1/4  ........................
2.268
59 1/2  ........................
2.282
59 3/4  ........................
2.298
60 ........................
2.314
60 1/4  ........................
2.033 2.33
60 1/2  ........................
2.067 2.346
60 3/4 ........................
2.10 2.36
61 ........................
2.133 2.376
61 1/4 ........................
2.167 2.392
61 1/2 ........................
2.20 2.406
61 3/4 ........................
2.233 2.422
62 ........................
2.267 2.438
62 1/4 ........................
2.30 2.454
62 1/2 ........................
2.333 2.47
62 3/4 ........................
2.367 2.486
63 and over ........................
2.40 2.50

(4)

(2) In computing the retirement allowance of the nonmember spouse, the age of the nonmember spouse on the last day of the month in which the retirement allowance begins to accrue shall be used.

(5)

(3) Final compensation, for purposes of calculating the service retirement allowance of the nonmember spouse under this subdivision, shall be calculated according to the definition of final compensation in Section 22134, 22135, or 22136, whichever is applicable, and shall be based on the compensation earnable of the member up to the date the parties separated, as established in the judgment or court order pursuant to Section 22652.
(4) The nonmember spouse shall not be entitled to use any other calculation of final compensation.
(d) (1) If the member is or was receiving a disability allowance under this part with an effective date before or on the date the parties separated as established in the judgment or court order pursuant to Section 22652, or at any time applies for and receives a disability allowance with an effective date that is before or coincides with the date the parties separated as established in the judgment or court order pursuant to Section 22652, the nonmember spouse shall not be eligible to retire until after the disability allowance of the member terminates.
(2) If the member who is or was receiving a disability allowance returns to employment to perform creditable service subject to coverage under the Defined Benefit Program or has his or her allowance terminated under Section 24015, the nonmember spouse may not be paid a retirement allowance until at least six months after termination of the disability allowance and the return of the member to employment to perform creditable service subject to coverage under the Defined Benefit Program, or the termination of the disability allowance and the employment or self-employment of the member in any capacity, notwithstanding Section 22132. If at the end of the six-month period, the member has not had a recurrence of the original disability or has not had his or her earnings fall below the amounts described in Section 24015, the nonmember spouse may be paid a retirement allowance if all other eligibility requirements are met.

(1)

(3) The retirement allowance of the nonmember spouse under this subdivision shall be calculated as follows: the disability allowance the member was receiving, exclusive of the benefits for dependent children, shall be divided between the share of the member and the share of the nonmember spouse. The share of the nonmember spouse shall be the amount obtained by multiplying the disability allowance, exclusive of the benefits for dependent children, by the years of service credited to the separate account of the nonmember spouse, including service projected to the date of separation, and dividing by the projected service of the member. The nonmember spouse’s retirement allowance shall be the lesser of the share of the nonmember spouse under this subdivision or the retirement allowance under subdivision (c).

(2)

(4) The share of the member shall be the total disability allowance reduced by the share of the nonmember spouse. The share of the member shall be considered the disability allowance of the member for purposes of Section 24213.
(e) The nonmember spouse who receives a retirement allowance is not a retired member under this part. However, the allowance of the nonmember spouse shall be increased by application of the improvement factor and shall be eligible for the application of supplemental increases and other benefit maintenance provisions under this part, including, but not limited to, Sections 24411, 24412, and 24415 based on the same criteria used for the application of these benefit maintenance increases to the service retirement allowances of members.

SEC. 9.

 Section 24201 of the Education Code is amended to read:

24201.
 (a) A member may retire for service under this part upon written application for retirement to the board, under paragraph (1) or (2) as follows:
(1) The member has attained the age of 55 years or more and has at least five years of credited service, at least one year of which has been performed subsequent to the most recent refund of accumulated retirement contributions. The five years of credited service may include out-of-state service purchased pursuant to Section 22820. The number of years of credited service performed in California shall not be less than the number of years necessary to determine final compensation pursuant to Section 22134 or 22135, whichever is applicable to the member.
(2) The member is credited with service that is not used as a basis for benefits under any other public retirement system, excluding the federal social security system, if the member has attained the age of 55 years or older and retires concurrently under one or more of the retirement systems with which the member has concurrent membership as defined in Section 22115.2.
(b) Application for retirement under paragraph (2) of subdivision (a) may be made even if the member has not earned five years of service.

SEC. 10.

 Section 24202.5 of the Education Code is amended to read:

24202.5.
 (a) A member who retires for service on or after January 1, 1999 2003, shall receive a retirement allowance consisting of all of the following:
(1) An annual allowance payable in monthly installments, upon retirement equal to the percentage of the final compensation set forth opposite the member’s age at retirement in the following table multiplied by each year of credited service:
Age at Retirement
Percentage
55 ........................
2.00
55 1/4  ........................
2.016
55 1/2  ........................
2.032
55 3/4  ........................
2.048
56 ........................
2.064
56 1/4  ........................
2.080
56 1/2  ........................
2.096
56 3/4  ........................
2.11
57 ........................
2.126
57 1/4  ........................
2.142
57 1/2  ........................
2.158
57 3/4  ........................
2.172
58 ........................
2.188
58 1/4  ........................
2.204
58 1/2  ........................
2.220
58 3/4  ........................
2.236
59 ........................
2.250
59 1/4  ........................
2.268
59 1/2  ........................
2.282
59 3/4  ........................
2.298
60 ........................
2.00 2.314
60 1/4  ........................
2.033 2.33
60 1/2  ........................
2.067 2.346
60 3/4 ........................
2.10 2.36
61 ........................
2.133 2.376
61 1/4 ........................
2.167 2.392
61 1/2 ........................
2.20 2.406
61 3/4 ........................
2.233 2.422
62 ........................
2.267 2.438
62 1/4 ........................
2.30 2.454
62 1/2 ........................
2.333 2.47
62 3/4 ........................
2.367 2.486
63 and over ........................
2.40 2.50
(2) If the member’s retirement is effective at less than normal retirement age and between early retirement age and normal retirement age, the member’s allowance shall be reduced by one-half of 1 percent for each full month, or fraction of a month that will elapse until the member will attain normal retirement age.
(3)An annuity that shall be the actuarial equivalent of the accumulated annuity deposit contributions standing to the credit of the member’s account at the time of retirement.
(b) In computing the amounts described in subdivision (a), the age of the member on the last day of the month in which the retirement allowance begins to accrue or the later date as provided in Section 24204 shall be used.

SEC. 11.

 Section 24203.5 of the Education Code is amended to read:

24203.5.
 (a) The percentage of final compensation used to compute the allowance pursuant to Section 24202.5, 24203, or 24205 of a member retiring on or after January 1, 1999 2003, who has 30 or more years of credited service, excluding service credited pursuant to Section 22714, 22715, or 22717, shall be increased by two-tenths of 1 percentage point, provided that the sum of the percentage of final compensation used to compute the allowance in Section 24202.5, 24203, or 24205, including any adjustments for retiring before the normal retirement age, and the additional percentage provided by this section does not exceed 2.40 2.50 percent. For purposes of establishing eligibility for the increased allowance pursuant to this section only, credited service shall include credited service that a court has ordered be awarded to a nonmember spouse pursuant to Section 22652. A nonmember spouse shall also be eligible for the increased allowance pursuant to this section if the member had 30 or more years of credited service on the date the parties separated, as established in the judgment or court order pursuant to Section 22652.
(b) Nonqualified service credit for which contributions pursuant to Section 22826 were made in a lump sum on or after January 1, 2000, or for which the first installment was made on or after January 1, 2000, shall not be included in determining the eligibility for an increased allowance pursuant to this section.
(c) The amendments made to subdivision (a) in the first year of the 1999–2000 Regular Session are declaratory of existing law.

SEC. 12.

 Section 24411 of the Education Code is amended to read:

24411.
 (a) (1) Annual cost-of-living adjustments for retired members, disabled members, and beneficiaries in excess of the 2-percent adjustment authorized by Section 22140 may be included as a General Fund appropriation in the annual Budget Act. In the annual budget submitted to the Legislature, the Governor shall include a budget item equal to 5 percent of the average annualized statewide increase in payroll for certificated personnel over the three previous school years among school districts, county offices of education, and community college districts.
(2) The amount submitted in the annual Budget Act pursuant to this section shall be considered as part of the overall budget allocations to the public schools and community colleges.
(b) The annual appropriation shall be made to the system on July 1, and shall be placed in a segregated account called the Retirees’ Purchasing Power Protection Account. The proceeds of that account are continuously appropriated and shall be distributed annually in quarterly payments commencing on September 1 to retired members, disabled members, and beneficiaries as follows:
(1) The proceeds shall be allocated among those retired members, disabled members, and beneficiaries whose allowances, after applying the 2-percent adjustment authorized by Section 22140, have the lowest purchasing power percentage, based on the amount that would be paid had the original allowance been increased by the increases in the index then being used by the Department of Finance to measure changes in the cost of living, increasing those allowances to a common minimum purchasing power level. In any year in which the purchasing power of the allowances of all retired members, disabled members, and beneficiaries equals not less than 75 80 percent and additional funds remain from the allocation authorized by this section, those funds shall be allocated by the board to general accounts to reduce the unfunded actuarial liability of the fund.
(2) The board may deduct from the annual appropriation an amount necessary for administrative expenses to implement this section.
(c) The board shall inform each recipient of benefits under subdivision (b) that the increases are not cumulative, are not part of the base allowance, and shall be available only as appropriated annually in the Budget Act.
(d) The adjustments authorized by this section shall not be included in the base allowance for purposes of calculating the 2-percent adjustment authorized by Section 22140.
(e) It is the ultimate intent and purpose of the Legislature in amending this section by Chapters 323 and 780 of the Statutes of 1983, to achieve a common minimum purchasing power level equal to 75 percent of the purchasing power of the original allowance. It is the present intent of the Legislature that until adequate funds are available to fulfill the ultimate intent, those persons whose allowances have been most impacted by inflation shall be accorded first priority in receiving, pursuant to this section, supplemental cost-of-living adjustments from the Retirees’ Purchasing Power Protection Account.
(f)This section shall not be operative in any fiscal year during which, as determined by the board, distributions provided for by Section 24415 are being made.

SEC. 13.

 Section 24412 of the Education Code is amended to read:

24412.
 (a) The annual revenues deposited to the Teachers’ Retirement Fund pursuant to Section 6217.5 of the Public Resources Code are continuously appropriated without regard to fiscal year for the purposes of this section and shall be distributed annually in quarterly supplemental payments commencing on September 1 of each year to retired members, disabled members, and beneficiaries. The amount available for distribution in any year shall be the income for that year from the sale or use of school lands and lieu lands, as estimated by the State Lands Commission prior to the beginning of the fiscal year, adjusted by the difference between the estimated and actual income for the preceding fiscal year. The board shall deduct from the revenues an amount necessary for administrative expenses to implement this section.
(b) The net revenues to be distributed shall be allocated among those retired members, disabled members, and beneficiaries whose allowances, after sequentially applying the annual improvement factor as defined in Section 22140 and the annual supplemental payment as defined in Section 24411, if any, are below 75 80 percent of original purchasing power. The purchasing power calculation for each individual allowance shall be based on the change in the All Urban California Consumer Price Index between June of the calendar year of retirement and June of the fiscal year preceding the fiscal year of the distribution. The allocation shall provide a pro rata share of the amount needed to restore the allowance payable, after sequential application of the current year annual improvement factor and the supplemental payment under Section 24411, to 75 80 percent of original purchasing power.
(c) The allowance increase shall not be applicable to annuities payable from the accumulated annuity deposit contributions or the accumulated tax-sheltered annuity contributions.
(d) In any year that the net revenues from school lands and lieu lands is greater than that needed to adjust the allowances of all retired members, disabled members, and beneficiaries to 75 80 percent of original purchasing power, the net revenues in excess of that needed for distribution shall be used by the board to reduce the unfunded actuarial obligation of the fund, if any.
(e) The board shall inform each recipient of supplemental payments under this section that the increases are not cumulative and are not part of the base allowance.

SEC. 14.

 Section 24415 of the Education Code is amended to read:

24415.
 (a) The proceeds of the Supplemental Benefit Maintenance Account shall be distributed annually in quarterly supplemental payments commencing on September 1, 1990, to retired members, disabled members, and beneficiaries. The amount available for distribution in any fiscal year shall not exceed the amount necessary to restore purchasing power up to 75 80 percent of the purchasing power of the initial monthly allowance after the application of all allowance increases authorized by this part, including those specified in Section 24412.
(b) The net revenues to be distributed shall be allocated among those retired members, disabled members, and beneficiaries whose allowances, after sequentially applying the annual improvement factor as defined in Sections 22140 and 22141, and the annual supplemental payment as defined in Section 24412, have the lowest purchasing power percentage. The purchasing power calculation for each individual shall be based on the change in the All Urban California Consumer Price Index between June of the calendar year of retirement and June of the fiscal year preceding the fiscal year of distribution. In any year in which the purchasing power of the allowances of all retired members, disabled members, and beneficiaries equals not less than 75 80 percent and additional funds remain from the allocation authorized by this section, those funds shall remain in the Supplemental Benefit Maintenance Account for allocation in future years.
(c) The allowance increase shall not be applicable to annuities payable from the accumulated annuity deposit contributions or the accumulated tax-sheltered annuity contributions.
(d) The benefits provided by subdivision (b) are not cumulative, not part of the base allowance, and will be payable only to the extent that funds are available from the Supplemental Benefit Maintenance Account. The board shall inform each recipient of the contents of this subdivision.
(e) The adjustments authorized by this section are vested only up to the amount payable as a result of the annual appropriation made pursuant to Section 22954 and shall not be included in the base allowance for purposes of calculating the annual improvement defined by Sections 22140 and 22141.

SEC. 15.

 Section 24416 of the Education Code is amended to read:

24416.
 (a) Beginning in the 1997–98 fiscal year, if the board determines by June 30 of the then current fiscal year that the Supplemental Benefit Maintenance Account will not have sufficient funds to provide purchasing power of up to 75 80 percent for the subsequent fiscal year, the board, for that year, may do either, or a combination of the following:
(1) Increase the employer contribution rate commencing in the next fiscal year by an amount that would provide sufficient funds for no more than the estimated difference between the funds in the Supplemental Benefit Maintenance Account and the amount needed to pay the benefit level specified by the board, provided the benefit level is no more than 75 80 percent. Notwithstanding any other provision of this part, the increase in the employer contribution rate shall only become operative if the increase is approved or authorized in the Budget Act.
(2) Reduce the supplemental benefit payment for the subsequent fiscal year to the amount which can be funded by the available funds in the Supplemental Benefit Maintenance Account.
(b) If the board finds that there is no unfunded obligation, as determined by the board’s professional consulting actuary and affirmed by the Director of Finance, then in addition to the authority pursuant to subdivision (a), the board may transfer to an auxiliary Supplemental Benefit Maintenance Account, from any funds that are in excess of the amount needed to fund fully the benefits for which the Teachers’ Retirement Fund is liable, an amount that would provide sufficient funds for no more than the estimated difference between the funds in the Supplemental Benefit Maintenance Account and the amount needed to pay the benefit level specified by the board, provided the benefit level is no more than 75 80 percent.
(c) If the board increases the employer contribution rate pursuant to paragraph (1) of subdivision (a), the increase between the current fiscal year contribution rate and the contribution rate in the next fiscal year, shall not exceed one-quarter of 1 percent of the creditable compensation upon which contributions are based.

SEC. 16.

 Section 24417 of the Education Code is amended to read:

24417.
 (a) The proceeds of an auxiliary Supplemental Benefit Maintenance Account shall be distributed annually in quarterly supplemental payments, commencing when funds in the Supplemental Benefit Maintenance Account are insufficient to support 75 80 percent, to retired members, disabled members, and beneficiaries. The amount available for distribution in any fiscal year shall not exceed the amount necessary to restore purchasing power up to 75 80 percent of the purchasing power of the initial monthly allowance after the application of all allowance increases authorized by this part, including those specified in Section 24412 and Section 24415.
(b) The net revenues to be distributed shall be allocated among those retired members, disabled members, and beneficiaries whose allowances, after sequentially applying the annual improvement factor as defined in Sections 22140 and 22141, and the annual supplemental payment as defined in Section 24412 and Section 24415, have the lowest purchasing power percentage. The purchasing power calculation for each individual shall be based on the change in the All Urban California Consumer Price Index between June of the calendar year of benefit effective date and June of the fiscal year preceding the fiscal year of distribution.
(c) The allowance increase shall not be applicable to annuities payable from the accumulated annuity deposit contributions or the accumulated tax-sheltered annuity contributions.
(d) The benefits provided by subdivision (b) are not cumulative, nor part of the base allowance, and will be payable only to the extent that funds are available from the Supplemental Benefit Maintenance Account and the auxiliary Supplemental Benefit Maintenance Account. The board shall inform each recipient of the contents of this subdivision.
(e) The distributions authorized by this section are vested only up to the amount payable as a result of the annual appropriation made pursuant to Section 22954 and shall not be included in the base allowance for purposes of calculating the annual improvement defined by Section 22140 and 22141.

SEC. 17.

 This act shall be operative January 1, 2003.