Cal Cities remains opposed to bill that would force cities to pay out illegal compensation from their General Fund
Mar 10, 2021
On March 8, the League of California Cities, California Association of Joint Powers Authorities, California Special Districts Association, and California State Association of Counties testified in opposition to SB 278 (Leyva) in the Senate Labor, Public Employment, and Retirement Committee.
The bill was passed out of the committee on a 5-0 vote and will next be heard in the Senate Judiciary Committee. As this measure moves through the legislative process, cities are encouraged to demonstrate opposition to this measure.
SB 278 (Leyva) is a reintroduction of SB 266 (Leyva, 2019), which would require public agencies to directly pay retirees and/or their beneficiaries disallowed retirement benefits using General Fund dollars. SB 278 places 100 percent of the total liability for such overpayments on public agencies — abdicating all responsibility previously held by the California Public Employees' Retirement System (CalPERS) to ensure that retirement benefits are calculated and administered correctly. As such, SB 278 is a de facto and retroactive benefit enhancement measure, which will further strain local agency budgets at a time when retirement obligations are crowding out funding for critical services to the public. Cal Cities’ objections to this measure are rooted in policy, operational, cost, and legal concerns that every local government agency will face if this bill is signed into law.
This proposal also raises serious legal issues for local government and compounds the pension-related issues cities face. The perceived “giveaways” of public funds will further undermine the public’s perception and trust of local governments.
In a veto message of a similar proposal, Gov. Jerry Brown, said, “… I'm concerned that this bill's broad provisions could be easily abused to circumvent limitations in law intended to protect the government-and ultimately taxpayers-from pension spiking. Indeed, in the case of an error, this bill would effectively perpetuate that error for the rest of a member's life, at substantial taxpayer expense. Before changing the law in the way that this bill does, I encourage the Legislature to develop policies to prevent such errors in the first place. Such policies might include requiring CalPERS to review and approve any proposals for pensionable compensation in a memorandum of understanding before the memorandum is finalized. Then, if errors still occurred after CalPERS's review, the penalties and ongoing costs in this bill might be warranted.”
Gov. Brown’s advice was not heeded and SB 278 (Leyva) does not implement policies that would prevent such errors from occurring in the first place. Cal Cities will continue to provide updates to members on future actions requested to oppose this bill.
SB 278 (Leyva) is a reintroduction of SB 266 (Leyva, 2019), which would require public agencies to directly pay retirees and/or their beneficiaries disallowed retirement benefits using General Fund dollars. SB 278 places 100 percent of the total liability for such overpayments on public agencies — abdicating all responsibility previously held by the California Public Employees' Retirement System (CalPERS) to ensure that retirement benefits are calculated and administered correctly. As such, SB 278 is a de facto and retroactive benefit enhancement measure, which will further strain local agency budgets at a time when retirement obligations are crowding out funding for critical services to the public. Cal Cities’ objections to this measure are rooted in policy, operational, cost, and legal concerns that every local government agency will face if this bill is signed into law.
This proposal also raises serious legal issues for local government and compounds the pension-related issues cities face. The perceived “giveaways” of public funds will further undermine the public’s perception and trust of local governments.
In a veto message of a similar proposal, Gov. Jerry Brown, said, “… I'm concerned that this bill's broad provisions could be easily abused to circumvent limitations in law intended to protect the government-and ultimately taxpayers-from pension spiking. Indeed, in the case of an error, this bill would effectively perpetuate that error for the rest of a member's life, at substantial taxpayer expense. Before changing the law in the way that this bill does, I encourage the Legislature to develop policies to prevent such errors in the first place. Such policies might include requiring CalPERS to review and approve any proposals for pensionable compensation in a memorandum of understanding before the memorandum is finalized. Then, if errors still occurred after CalPERS's review, the penalties and ongoing costs in this bill might be warranted.”
Gov. Brown’s advice was not heeded and SB 278 (Leyva) does not implement policies that would prevent such errors from occurring in the first place. Cal Cities will continue to provide updates to members on future actions requested to oppose this bill.