HomeMy WebLinkAboutSB 266 (Leyva)_20192307_LtrOpposition 23 July 2019
The Honorable Lorena Gonzalez
Chair, Assembly Appropriations Committee
State Capitol Building, Room 2114
Sacramento, CA 95814
RE: SB 266 (Leyva) Public Employees’ Retirement System: Disallowed Compensation:
Benefit Adjustments.
Notice of Opposition
Dear Assembly Member Gonzalez,
The City of San Luis Obispo must respectfully oppose SB 266, which would require public
agencies to directly pay retirees, and/or their beneficiaries, disallowed retirement benefits
using general fund dollars. Our objections to this measure ar e rooted in policy, operational
cost, and legal concerns that will inevitably face virtually every local government agency
should this measure be signed into law.
Double Payment:
Under current law, once a benefit is determined to be disallowed, both the employer and the
employee cease making future payments on that benefit, past contributions from the employee
are returned to the employee, while past contributions from the employer are applied towards
future payment. The City, as the employer, has already made our contributions; we should not be
double paying for the benefit.
As Amended CalPERS has no Incentive to Properly Calculate Benefit Payments:
Recent amendments to the measure remove all responsibility by CalPERS to ensure benefits are
reviewed, calculated and administered correctly. Instead, SB 266 places sole responsibility on
the employer—even if the employer exercises their right to have CalPERS review their
compensation proposal. While we understand that CalPERS has asserted that they face IRS plan
qualification concerns for paying out an unlawful benefit, the fact that there is zero
accountability, assurances or protection from significant and unanticipated liability afforded to
the state or local agency when CalPERS reviews a compensation agreement is irrational.
Requirements under SB 266 will Create Compliance and Implementation Issues:
Under SB 266, the City would be issuing direct General Fund payments to retirees, which would
trigger GASB 68 reporting requirements. Given the unique circumstances surrounding these
overpayments, we would have to track and report these liabilities. Such additional
responsibilities will require us to hire costly outside actuarial and legal experts to ensure that
they follow federal reporting laws. SB 266 is a de facto and retroactive benefit enhancement bill
that would further strain our budget at a time where retirement obligations ar e making it
financially difficult to provide critical services for the public.
This measure also fails to consider the common practice of employees moving from jurisdiction
to jurisdiction throughout their careers. Under normal circumstances, CalPERS pays out the
benefit if an employee works for multiple agencies who enjoy reciprocity. However, under SB
266 the payment obligation under that circumstance is unclear. Such confusion will lead to
compliance, legal and implementation challenges.
This measure would also require the City of San Luis Obispo to track and maintain current
records of all retirees and their beneficiaries in order to deliver the direct payment. SB 266 would
present the City with a costly logistical challenge and seems destined to create more problems
than it solves.
Gift of Public Funds is a Violation of the California Constitution:
Under SB 266, the City of San Luis Obispo would be issuing monthly, unlawful, payments to
former employees and/ or their beneficiaries in perpetuity. Continued payment of a disallowed
benefit to a retiree would constitute a gift of public funds, in violation of Section 6, Article 16 of
the California Constitution. Such violation would leave a public agency in the untenable position
of having to defend itself from costly litigation that may be filed by members of the public
challenging payments on the one hand and retirees or their beneficiaries seeking to compel
payments on the other. There simply are no clear winners with this litigation, but it is clear that
our local taxpayers and the communities we represent would be the losers.
For these reasons, the City of San Luis Obispo opposes SB 266 (Leyva).
Sincerely,
Heidi Harmon
Mayor
City of San Luis Obispo
cc: The Honorable Connie Leyva
State Senator Bill Monning, fax (916) 651-4917
State Assembly Member Jordan Cunningham, fax (916) 319-2135
Che Salinas, Chief Deputy Legislative Secretary for Operations, Office of Governor
Newsom (Send to: Leg.unit@gov.ca.gov)
Dave Mullinax, League of California Cities, dmullinax@cacities.org
League of California Cities, cityletters@cacities.org