Two pension bills threaten city budgets

City officials should call into the CalPERS meeting on May 18 at 2 p.m. and urge them to oppose SB 1319

By Johnnie Piña, legislative advocate (labor)

Two bills are moving through the Legislature that would tighten the squeeze on city budgets: SB 1319 (Durazo) and AB 1383 (McKinnor). The combined effect would crowd out funding for core city services, raise employer and employee contributions, and reduce local fiscal flexibility.

Cities can voice their concerns in several ways, including by contacting CalPERS. The agency’s board will consider whether to oppose SB 1319 next week.

What would SB 1319 do?

SB 1319 requires public pension systems to disclose detailed, company-level information on alternative investments, including private equity and real estate. CalPERS has stated that these changes would create a competitive disadvantage and restrict access to top-performing private market opportunities. This would, in turn, reduce returns and potentially force a lower discount rate.

CalPERS uses the discount rate — similar to an assumed rate of return — to determine employer and employee contributions. A lower discount rate increases employer and employee contributions.

The agency estimates that the bill would cut its funded status by roughly 5% and increase annual contributions by $6.1 to $6.8 billion across state and local plans. These costs would be shared by employers and employees. The bill also creates new administrative burdens and legal risks tied to retroactive disclosure requirements.

What would 1383 do?

AB 1383 would roll back key elements of the Public Employees’ Pension Reform Act of 2013 by expanding pensionable compensation and adopting more generous retirement formulas for public safety employees, including lowering the retirement age from 57 to 55. Overall, AB 1383 would raise annual costs for both employers and employees while expanding long-term pension obligations.

The Legislature approved the 2013 act to contain long‑term pension liabilities. According to CalPERS, those reforms have generated $5.8 billion in savings to date, with potentially larger savings in the future. Increased pension obligations would crowd out funding for core services, including police and fire.

What can my city do?

Cal Cities is preparing to mobilize members on both bills. SB 1319 is on the Senate Appropriations Committee’s suspense file and could advance to the floor for a full vote by May 26. AB 1383 is the Senate Labor, Public Employment and Retirement Committee but has not yet been set for hearing.

In the meantime, city officials can contact the CalPERS Board of Administration and urge them to oppose SB 1319. The board will vote on the bill on May 18 at approximately 2 p.m. City officials can provide public comments during the meeting by calling (800) 259-4105.

Cal Cities is also collecting information from city managers on the potential impact of AB 1383 on city budgets, staffing, and services through a short survey. To complete the survey — due May 22 — or to learn how your city can make its voice heard, contact your regional public affairs manager.