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ACA-15 Public employee retirement benefits.(2017-2018)

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ACA15:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Constitutional Amendment
No. 15


Introduced by Assembly Member Brough

May 09, 2017


A resolution to propose to the people of the State of California an amendment to the Constitution of the State, by adding Section 24 to Article XVI thereof, relating to public employee retirement benefits.


LEGISLATIVE COUNSEL'S DIGEST


ACA 15, as introduced, Brough. Public employee retirement benefits.
Existing statutory law establishes various public agency retirement systems, including, among others, the Public Employees’ Retirement System, the State Teachers’ Retirement System, the Judges’ Retirement System II, and various county retirement systems pursuant to the County Employees Retirement Law of 1937, and these systems provide defined pension benefits to public employees based on age, service credit, and amount of final compensation. The California Constitution permits a city or county to adopt a charter for purposes of its governance that supersedes general laws of the state in regard to specified subjects, including compensation of city or county employees. The California Constitution establishes the University of California as a public trust with full powers of organization and government, subject only to specified limitations. Under their respective independent constitutional authority, charter cities and counties and the University of California may and have established retirement systems. The California Public Employees’ Pension Reform Act of 2013 (PEPRA) generally requires the retirement systems to which it applies to modify their provisions to conform with its requirements. PEPRA excepts from its provisions retirement systems established by charter cities and counties and the University of California. PEPRA requires the retirement systems that it regulates and that offer defined benefit plans to provide specified defined benefit formulas and prescribes requirements regarding employer and employee contributions to defined benefit pension plans.
This measure would enact the Protecting Schools and Keeping Pension Promises Act of 2018. The measure would prohibit a government employer from enhancing employee pension benefits, as defined, without approval by the voters of the jurisdiction, and would prohibit a government employer from enrolling a new government employee, as defined, in a defined benefit pension plan without approval by the voters of the jurisdiction. The measure also would prohibit a government employer from paying more than 1/2 of the total cost of retirement benefits, as defined, for new government employees without approval by the voters of the jurisdiction. The measure would prohibit retirement boards from imposing charges or other financial conditions on a government employer that proposes to close a defined benefit pension plan to new members unless the voters or the sponsoring government employer approve those charges or conditions. The measure would require challenges to the legality of actions taken by a government employer or a retirement board to comply with its provisions to be brought in state or federal courts. The measure would prohibit its provisions from being interpreted to modify or limit disability benefits provided for government employees or death benefits for families of government employees, even if provided as part of a retirement benefits system, or from requiring voter approval of disability or death benefits. The measure would prescribe various requirements and prohibitions regarding its interpretation and the effect of any other competing measures, among other things.
Vote: 2/3   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

WHEREAS, Government has an obligation to provide essential services that protect the safety, health, welfare, and quality of life enjoyed by all Californians. State and local governments face elimination or reduction of essential services because of costly, unsustainable retirement benefits granted to government employees; and
WHEREAS, Actuarial analyses conducted by the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS) project that school contributions for employee pensions will more than double from $4.8 billion in the 2015–16 fiscal year to $11.3 billion in the 2022–23 fiscal year. These cost increases are expected to force school districts statewide to divert billions of dollars from helping children in classrooms; and
WHEREAS, California local government contributions to CalPERS are on track to nearly double over the next five years. According to data collected by the California Policy Center, local government contributions will increase by 84 percent, from about $5.3 billion in the 2017–18 fiscal year to $9.8 billion in the 2022–23 fiscal year; and
WHEREAS, City managers, county supervisors, and mayors throughout the state are very concerned that rapidly increasing pension contributions will crowd out resources available for critical public services such as public safety, fire protection, park maintenance, and waste collection and management; and
WHEREAS, CalPERS declared the City of Loyalton and the East San Gabriel Valley Human Services Consortium in default and was forced to cut retirement benefits to 201 retirees from the cities of Loyalton, West Covina, Covina, Azusa, and Glendora. These cuts will be catastrophic for some retirees who worked many years for these communities, but may now be unable to afford rent, pay bills, or put food on their tables; and
WHEREAS, On April 20, 2017, CalPERS adopted new projections that increase contribution rates by an average of 35 percent over the next five years. Growth in mandatory pension contribution increases will crowd out funding for critical programs millions of Californians depend on, including health care, education, transportation, and the social safety net; and
WHEREAS, Without real reform, more than 1.8 million members and beneficiaries of CalPERS and nearly one million members and beneficiaries of CalSTRS will face financial insecurity in their golden years. California’s state and local governments need to protect schools and public services for their residents and keep the pension promises they have already made; and
WHEREAS, Given the negative impacts associated with rapidly escalating pension contributions, voters statewide should have the opportunity to reevaluate their spending priorities, protect public pensions that have already been promised, and maintain critical core public services for their communities; now, therefore, be it
Resolved by the Assembly, the Senate concurring,That the Legislature of the State of California at its 2017–18 Regular Session commencing on the fifth day of December 2016, two-thirds of the membership of each house concurring, hereby proposes to the people of the State of California, that the Constitution of the State be amended to reform retirement benefits granted to new government employees and to require that voters approve or reject increases in defined benefits proposed for any government employees, as follows:

First—

 That Section 24 is added to Article XVI thereof, to read:

SEC. 24.
 (a) A government employer shall not provide a benefit enhancement to a new government employee in a defined benefit pension plan unless the voters of that jurisdiction approve that enhancement.
(b) A government employer may enroll a new government employee in a defined benefit pension plan only if the voters of the applicable jurisdiction approve enrollment in such a plan.
(c) A government employer shall not pay more than one-half of the total cost of retirement benefits for a new government employee unless the voters of the applicable jurisdiction have approved paying a higher proportion.
(d) A retirement board shall not impose termination fees, accelerate payments on existing debt, or impose other financial conditions upon a government employer that proposes to close a defined benefit pension plan to new members, unless voters of the applicable jurisdiction or the sponsoring government employer approve the fees, accelerated payment, or financial conditions.
(e) A challenge to the action taken by a government employer or a retirement board to comply with requirements of this section shall only be brought in a California court exercising judicial power as provided in Article VI or in a federal court.
(f) This section does not alter any provisions of a labor agreement in effect as of the effective date of this act, but this section shall apply to any successor labor agreement, renewal, or extension entered into after the effective date of this section. This section shall not be interpreted to amend or modify Section 9 of Article I.
(g) This section shall not be interpreted to modify or limit any disability benefits provided for government employees or death benefits for beneficiaries of government employees, even if those benefits are provided as part of a retirement benefits system. This section shall not be interpreted to require voter approval for death or disability benefits.
(h) For purposes of this section:
(1) “Benefit enhancement” means any change in a defined benefit pension plan that increases the value of an employee’s benefit including, but not limited to, reducing an employee’s share of cost, increasing a benefit formula, increasing the rate of cost-of-living adjustments, expanding the categories of pay included in pension calculations, reducing a vesting period, lowering the eligible retirement age, or otherwise providing an economic advantage for government employees in a defined benefit plan, except for the disability component of a defined benefit plan.
(2) “Defined benefit pension plan” means a plan that provides lifetime payments to retirees and beneficiaries based upon a formula using factors such as age, length of service, and final compensation.
(3) “Government employer” means the State, or a political subdivision of the State, including, but not limited to, counties, cities, charter counties, charter cities, a charter city and county, school districts, special districts, boards, commissions, the Regents of the University of California, the Trustees of the California State University, and agencies thereof.
(4) “New government employee” means any of the following:
(A) An individual who becomes a member of any public retirement system for the first time on or after January 1, 2021, and who was not a member of any other public retirement system prior to that date.
(B) An individual who becomes a member of a public retirement system for the first time on or after January 1, 2021, and who was a member of another public retirement system prior to that date, but who was not subject to reciprocity under subdivision (c) of Section 7522.02 of the Government Code, as it existed on the date that this measure is enacted.
(C) An individual who was an active member in a retirement system and who, after a break in service of more than six months, returned to active membership in that system with a new employer. For purposes of this subparagraph, a change in employment between state entities or from one school employer to another shall not be considered as service with a new employer.
(5) “Retirement benefit” means any postemployment benefits including, but not limited to, benefits provided through defined benefit pension plans, defined contribution plans, retiree health care plans, or any form of deferred compensation offered by government employers.
(i) In the event the measure adding this section and one or more other measures relating to the same subject shall appear on the same statewide election ballot, the provisions of the other measure or measures shall be deemed to be in conflict with the measure adding this section. In the event that the measure adding this section receives a greater number of affirmative votes, the provisions of that measure shall prevail in their entirety, and all provisions of the other measure or measures shall be null and void.
(j) If any provision of this section, or part thereof, or the applicability of any provision or part to any person or circumstances, is for any reason held to be invalid or unconstitutional, the remaining provisions and parts shall not be affected, but shall remain in full force and effect, and to this end the provisions and parts of this section are severable. The voters hereby declare that this section, and each portion and part, would have been adopted irrespective of whether any one or more provisions or parts are found to be invalid or unconstitutional.
(k) This section shall be liberally construed to effectuate its purposes.
(l) Notwithstanding any other law, if the State, a government agency, or any of its officials fail to defend the constitutionality of this section following its adoption by the voters, any other government employer or any citizen of this State shall have the authority to intervene in any court action challenging the constitutionality of this section for the purpose of defending its constitutionality, whether the action is in trial court, on appeal, or on discretionary review by the Supreme Court of California or the Supreme Court of the United States. The fees and costs of defending the action shall be a charge on funds appropriated to the Attorney General, which shall be satisfied promptly.

Second—

 This measure shall be known and may be cited as “The Protecting Schools and Keeping Pension Promises Act of 2018.”