Lawmakers send AB 1383 to the Governor's desk

Cal Cities is urging Gov. Gavin Newsom to veto the measure

By Brian Hendershot, Cal Cities Advocate managing editor, and Johnnie Pina, legislative advocate (governance)

Lawmakers in both houses passed AB 1383 (McKinnor) by overwhelming majorities in the evening hours of Aug. 30 despite sustained criticism that expanding pension benefits could harm cities already struggling to deliver essential services. Cal Cities and a broad coalition of local government associations are now urging Gov. Gavin Newsom to veto the measure.

AB 1383 rolls back crucial provisions of the Public Employees’ Pension Reform Act (PEPRA) and will substantially raise costs for cities. The measure allows public safety employees to retire earlier with full benefits and public safety unions to bargain for more generous pension formulas. Some of the bill's provisions — including an automatic increase to the pensionable compensation cap — would apply to all PEPRA employees.

Proponents of the bill have framed AB 1383 as a way to increase retention and recruitment for police and firefighters. However, Cal Cities and others have noted that there is little evidence to support that expanding pension benefits for everyone is the most effective solution for a narrow recruitment challenge. In fact, the bill’s bargainable safety tier may exacerbate recruitment and retention issues, as cities spend more on pension benefits for existing workers.

Although some of the provisions are framed as optional, in practice it will be anything but. "Once one city adopts richer pension benefits, neighboring jurisdictions must match them to remain competitive," wrote La Verne Mayor Tim Hepburn and Napa Mayor Scott Sedgley in Capitol Weekly. "What begins as a local decision can quickly become a regional expectation, driving costs higher for all taxpayers."

Legislators amended the bill on Aug. 27 to reduce the proposed pensionable compensation cap limits for those not in Social Security. This change will reduce the cost of the bill by an unknown amount. However, the amendment did not change the Cal Cities’ opposition, as the bill still carries a massive price tag.

Prior to the changes, the California Department of Finance released its analysis of the bill, urging lawmakers to reject the proposal due to its costs. Similarly, CalPERS estimated that the measure would create at least $4.8 billion in new costs, and potentially as much as $8.2 billion. The estimate does not include costs to county retirement systems or independent public pension systems.

The Governor has until Sept. 30 to sign or veto the bill.