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CalPERS Finance and Administration Committee Postpones Taking a Position on League-Opposed AB 1912

City Officials Testimony at May 15 Hearing Stressed Need for All Stakeholders to Come to Table to Find Solution that Protects Local Agencies and Employees and Retirees

May 16, 2018
City voices were heard loud and clear when the CalPERS Finance and Administration Committee on May 15 moved to hold over a decision on taking a support position on AB 1912 (Rodriguez) until its next meeting in June.
 
The League opposes AB 1912 because if it becomes law, JPAs in California would cease to be a viable way for local governments and the state to collaboratively address service needs that cannot be achieved by each agency on its own JPAs are formed to accomplish a wide range of services such as regional improvements, local and statewide infrastructure, emergency communications, law enforcement, fire protection, emergency medical response and public financing.
 
Dozens of city, county and other public employer representatives attended the May 15 hearing urging CalPERS to defer action so that stakeholders can work collaboratively on a solution that ensures that retirees of Joint Powers Authorities (JPAs) are secure and enables government agencies to continue using this tool to provide local, regional and statewide services. The stakeholders include the League and other employer groups, Assembly Member Freddie Rodriguez (D-Pomona), the author, and the measure’s sponsor, Service Employees International Union (SEIU) California.  
 
The League was joined by six city officials who came to testify before the committee. Each speaker testified about the ways in which their city participates in JPAs to deliver services and how this proposal, even as currently amended, would cause the elimination of services public sector job reduction and even the eventual demise of JPAs.
 
The city officials who testified included:
  • Lori Sassoon, deputy city manager, Rancho Cucamonga;
  • Ann E. Ritzman, HR director, Foster City;
  • Dan Schwartz, city manager, Larkspur;
  • Todd Cusimano, town manager, Corte Madera;
  • Donna Colson, vice mayor, Burlingame;
  • Isaac Moreno, interim finance director, Selma; and
  • John Healy, fire chief, City of San Mateo. 
CalPERS board members also expressed concerns, specifically to applying to the provisions related to retroactive apportioned liability. However, some board members made it clear that if stakeholders cannot come to an alternative solution that they would have to support the troubling provision to ensure retirees are not in jeopardy of their benefits being reduced.
 
Next Steps
 
The Assembly Appropriations Committee heard AB 1912 on May 16. Assembly Member Rodriguez waived his presentation, allowing the bill to go to what is known as the Suspense File.
 
CalPERS will next meet June 18–20 with the Administration and Finance Committee meeting on June 19. It is expected that action on AB 1912 will occur that day.
 
Background on AB 1912
 
AB 1912 includes new unworkable requirements that would retroactively and prospectively apply joint and several liability for all retirement related obligations to any current or former member of a JPA throughout its existence. The obligations are extensive and include active employee normal pension costs, retiree unfunded accrued liabilities, as well as both active and retiree healthcare and other post-employment retirement benefits (OPEB). According to the most recent data available from the State Controller’s Office, the unfunded liability of California’s 130 state and local government pension plans stand amounts to $241.3 billion and $125 billon for retiree healthcare costs.
 
These costs and their impact on local governments cannot be overstated.  By applying retroactive apportioned liability as well as prospective joint and several liability, cities debts would dramatically rise and in many cases will exceed a cities’ annual revenue without being approved by local voters. This is unconstitutional. California’s constitutional debt limit prohibits a local government from incurring indebtedness beyond its ability to repay the debt with revenues from the same fiscal year without two-thirds voter approval. AB 1912 has significant implications for cities unfunded pension and OPEB liabilities. CalPERS contribution rates are increasing and are already straining city budgets. AB 1912 would make already high contributions even more staggering, threatening cities’ ability to deliver services and retain employees.


 
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