(1)Existing law, the Public Employees Medical and Hospital Care Act (PEMHCA), which is administered by the Board of Administration of the Public Employees Retirement System, authorizes the board to contract for health benefit plans for employees and annuitants, as defined, which may include employees and annuitants of contracting agencies. Under existing law, the employees or annuitants contribution is the total cost per month of coverage less the portion contributed by the employer. Existing law prescribes a minimum level for the employers contribution toward the employees or annuitants health benefits coverage.

This bill would authorize the City of San Gabriel to enter into an agreement applicable to specified employees hired, and elected officials who first served, on or after January 1, 2023, to provide employer contributions for postretirement health care coverage to employees with at least 5 years of credited service with the City of San Gabriel. The bill would provide that its provisions for postretirement health benefits apply to employees who retire on or after the date that a memorandum of understanding that authorizes this benefit becomes effective. The bill would require the City of San Gabriel to provide notice, as prescribed, of the agreement and any additional information necessary to implement these benefits.

(2)Existing law establishes the Judges Retirement System II, which provides retirement and other benefits to its members and is administered by the Board of Administration of the Public Employees Retirement System. Under the Judges Retirement System II, a judge is eligible to retire upon attaining both 65 years of age and 20 or more years of service, or upon attaining 70 years of age with a minimum of 5 years of service.

Existing law, on and after January 1, 2024, and applicable only to judges who retire before January 1, 2029, additionally authorizes a judge who is 60 years of age and has 15 years or more of service or 65 years of age and has 10 years or more of service who is not eligible to retire pursuant to those provisions in lieu of receiving monetary credits, as specified, to elect to retire and defer receipt of a monthly allowance, subject to specified formulations. Existing law requires the retirement allowance to be increased for the cost of living in January of each year after a judge has been retired under those provisions for more than 6 months, as specified.

This bill would instead require the retirement allowance to be increased for the cost of living in January of each year after the judge receives a retirement allowance under those provisions for more than 6 months, as specified.

(3)This bill would make legislative findings and declarations as to the necessity of a special statute for the City of San Gabriel.

(1)Existing law, the Public Employees Medical and Hospital Care Act (PEMHCA), which is administered by the Board of Administration of the Public Employees Retirement System, authorizes the board to contract for health benefit plans for employees and annuitants, as defined, which may include employees and annuitants of contracting agencies. Under existing law, the employees or annuitants contribution is the total cost per month of coverage less the portion contributed by the employer. Existing law prescribes a minimum level for the employers contribution toward the employees or annuitants health benefits coverage.

This bill would authorize the City of San Gabriel to enter into an agreement applicable to specified employees hired, and elected officials who first served, on or after January 1, 2023, to provide employer contributions for postretirement health care coverage to employees with at least 5 years of credited service with the City of San Gabriel. The bill would provide that its provisions for postretirement health benefits apply to employees who retire on or after the date that a memorandum of understanding that authorizes this benefit becomes effective. The bill would require the City of San Gabriel to provide notice, as prescribed, of the agreement and any additional information necessary to implement these benefits.

(2)Existing law establishes the Judges Retirement System II, which provides retirement and other benefits to its members and is administered by the Board of Administration of the Public Employees Retirement System. Under the Judges Retirement System II, a judge is eligible to retire upon attaining both 65 years of age and 20 or more years of service, or upon attaining 70 years of age with a minimum of 5 years of service.

Existing law, on and after January 1, 2024, and applicable only to judges who retire before January 1, 2029, additionally authorizes a judge who is 60 years of age and has 15 years or more of service or 65 years of age and has 10 years or more of service who is not eligible to retire pursuant to those provisions in lieu of receiving monetary credits, as specified, to elect to retire and defer receipt of a monthly allowance, subject to specified formulations. Existing law requires the retirement allowance to be increased for the cost of living in January of each year after a judge has been retired under those provisions for more than 6 months, as specified.

This bill would instead require the retirement allowance to be increased for the cost of living in January of each year after the judge receives a retirement allowance under those provisions for more than 6 months, as specified.

(3)This bill would make legislative findings and declarations as to the necessity of a special statute for the City of San Gabriel.

(1)Existing law, the Public Employees Medical and Hospital Care Act (PEMHCA), which is administered by the Board of Administration of the Public Employees Retirement System, authorizes the board to contract for health benefit plans for employees and annuitants, as defined, which may include employees and annuitants of contracting agencies. Under existing law, the employees or annuitants contribution is the total cost per month of coverage less the portion contributed by the employer. Existing law prescribes a minimum level for the employers contribution toward the employees or annuitants health benefits coverage.

This bill would authorize the City of San Gabriel to enter into an agreement with specified employees hired, and elected officials who first served, on or after January 1, 2023, to provide employer contributions for postretirement health care coverage to employees with at least 5 years of credited service with the City of San Gabriel. The bill would provide that its provisions for postretirement health benefits apply to employees who retire on or after the date that a memorandum of understanding that authorizes this benefit becomes effective. The bill would require the City of San Gabriel to provide notice, as prescribed, of the agreement and any additional information necessary to implement these benefits.

(3)This bill would make legislative findings and declarations as to the necessity of a special statute for the City of San Gabriel.

Existing law, the Public Employees Medical and Hospital Care Act (PEMHCA), which is administered by the Board of Administration of the Public Employees Retirement System, authorizes the board to contract for health benefit plans for employees and annuitants, as defined, which may include employees and annuitants of contracting agencies. Under existing law, the employees or annuitants contribution is the total cost per month of coverage less the portion contributed by the employer. Existing law prescribes a minimum level for the employers contribution toward the employees or annuitants health benefits coverage.

This bill would authorize the City of San Gabriel to enter into an agreement with specified employees hired hired, and elected officials who first served, on or after January 1, 2023, to provide employer contributions for postretirement health care coverage to employees with at least 5 years of credited service with the City of San Gabriel. The bill would provide that its provisions for postretirement health benefits apply to employees who retire on or after the date that a memorandum of understanding that authorizes this benefit becomes effective. The bill also requires would require the City of San Gabriel to provide notice, as prescribed, of the agreement and any additional information necessary to implement these benefits.

This bill would make legislative findings and declarations as to the necessity of a special statute for the City of San Gabriel.

Existing law, the Public Employees Medical and Hospital Care Act (PEMHCA), which is administered by the Board of Administration of the Public Employees Retirement System, authorizes the board to contract for health benefit plans for employees and annuitants, as defined, which may include employees and annuitants of contracting agencies. Under existing law, the employees or annuitants contribution is the total cost per month of coverage less the portion contributed by the employer. Existing law prescribes a minimum level for the employers contribution toward the employees or annuitants health benefits coverage.

This bill would authorize the City of San Gabriel to enter into an agreement with specified employees hired on or after January 1, 2023, to provide employer contributions for postretirement health care coverage to employees with at least 5 years of credited service with the City of San Gabriel. The bill would provide that its provisions for postretirement health benefits apply to employees who retire on or after the date that a memorandum of understanding that authorizes this benefit becomes effective. The bill also requires the City of San Gabriel to provide notice, as prescribed, of the agreement and any additional information necessary to implement these benefits.

This bill would make legislative findings and declarations as to the necessity of a special statute for the City of San Gabriel.

Existing law, the Public Employees Medical and Hospital Care Act (PEMHCA), which is administered by the Board of Administration of the Public Employees Retirement System, authorizes the board to contract for health benefit plans for employees and annuitants, as defined, which may include employees and annuitants of contracting agencies. The act prescribes requirements for the contributions of contracting agencies and their employees and annuitants. Existing law entitles a contracting agency annuitant to a single employer contribution. Under existing law, the employees or annuitants contribution is the total cost per month of coverage less the portion contributed by the employer. Existing law prescribes a minimum level for the employers contribution toward the employees or annuitants health benefits coverage.

Existing law, the Public Employees Medical and Hospital Care Act (PEMHCA), which is administered by the Board of Administration of the Public Employees Retirement System, authorizes the board to contract for health benefit plans for employees and annuitants, as defined, which may include employees and annuitants of contracting agencies. The act prescribes requirements for the contributions of contracting agencies and their employees and annuitants. Existing law entitles a contracting agency annuitant to a single employer contribution.

This bill would make a nonsubstantive change to the restrictions on the employer contribution for a contracting agency annuitant.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 658

Author:(Mike Fong)

As Amended Ver:September 5, 2023

Majority vote

SUMMARY

Authorizes the City of San Gabriel, pursuant to a memorandum of understanding (MOU), to provide different post-retirement health care employer contributions for California Public Employees' Retirement System (CalPERS health plan coverage to new employees who begin employment after the adoption of the MOU than that offered to current employees, and makes clarifying changes to the Judges' Retirement System II (JRS II), among other provisions.

Senate Amendments

1. Clarify that its provisions apply to an employee first hired, and elected officials who first served as such, on or after January 1, 2023.
2. Clarify that employer contributions established by these provisions must not be less than the adjusted employer contribution rate pursuant to existing law, as provided.
3. Make clarifying changes to provisions recently enacted in Chapter 159, Statutes of 2023 (Senate Bill 885, Committee on Labor, Public Employment and Retirement) relating to the JRS II plan and retirement allowance increases for the cost of living, subject to contingent enactment of both bills.

COMMENTS

1. Background

The City of San Gabriel has a population of 38,670 as of July 2022, and employs about 200 employees. The California State Auditor has expressed significant concerns about the city's financial situation, and has ranked the city as High Risk.

The Auditor recommended that the city develop a financial recovery plan with short- and long-term goals, strategies to build general fund reserves, and an analysis of factors affecting its finances. [The Auditor] also directed the city to strengthen its financial projections by including analyses of key revenue sources and future costs..," and "…highlighted growing employee retirement benefit costs specifically, as one factor that will likely put additional pressure on the city's general fund."

In addition, in the Fall of 2022, city leaders negotiated memorandum of understandings (MOU) with the city's four employee representatives and one unrepresented employee group that outlines a plan to provide higher wages to newly-hired employees in exchange for a reduced level of health benefits upon retirement. CalPERS does not allow a participant to provide differing levels of benefits to their members…," and, "…legislation is needed to implement this agreement.

1. The JRS II Contingent Enactment Provision

SB 885 (Committee on Labor, Public Employment and Retirement) Chapter 159, Statutes of 2023, the annual omnibus public retirement system bill included technical conforming changes to implement last year's AB 2443 (Cooley) Chapter 531, Statutes of 2022 related to the JRS II deferred retirement option. Certain provisions of Senate Bill 885 were intended to clarify that a judge who takes a deferred retirement is still eligible for statutorily provided cost-of-living adjustments (COLAs) provided under the regular retirement option.

Subject to contingent enactment of this bill and Senate Bill 885, this bill clarifies that those COLAs are available after the judge receives the retirement allowance – not during the deferral period.

1. Equity Solutions and Maximizing Benefits for Underserved and Marginalized Communities

Pursuant to House Resolution (HR) 39 (Gipson, 2021), to continue the Assembly's commitment to investing in equity solutions and maximizing benefits for underserved and marginalized communities, legislative analyses of the Assembly must discuss the equity impact that a bill will, or may, have on such communities, if any.

This bill does not present a particular focus towards addressing equity in relation to maximizing benefits for underserved or marginalized communities as articulated in HR 39. However, under a broader context, the author asserts that,"[a]ccording to the United States Census Bureau, in the City of San Gabriel:

• 1. 60.7% of residents are of Asian descent
  2. 25.6% of resident are Hispanic or Latino
  3. 54.2% of residents are foreign born
  4. 12.5% of residents live in poverty

Permitting the city to make this change will allow the city to better serve its residents, including vulnerable communities, who may require more access to government services."

1. Please see the policy committee analysis for a full discussion of this bill.

According to the Author

"[This bill] provides authorization for the City of San Gabriel to make changes to the health benefits provided to their employees upon retirement through CalPERS for new employees hired beginning January 1, 2023. These changes are outlined in a MOU with four bargaining units and one unrepresented employee group. Current employees and retirees will maintain the same level of health benefits in effect on December 31, 2022. Health benefits for retirees hired beginning January 1, 2023, will be based on the Public Employees' Medical and Hospital Care Act. Allowing the city to make changes to the benefits provided to newly-hired employees will help the city achieve financial stability and better serve its residents."

Arguments in Support

The City of San Gabriel, and the Peace Officers Research Association of California, offer statements similar to those of the author.

Arguments in Opposition

None.

FISCAL COMMENTS

This bill was passed by the Senate Appropriations Committee pursuant to Senate Rule 28.8.

VOTES:

ASM PUBLIC EMPLOYMENT AND RETIREMENT: 7-0-0

YES: McKinnor, Lackey, Addis, Vince Fong, Haney, Stephanie Nguyen, Schiavo

ASM APPROPRIATIONS: 16-0-0

YES: Holden, Megan Dahle, Bryan, Calderon, Wendy Carrillo, Dixon, Mike Fong, Hart, Lowenthal, Mathis, Papan, Pellerin, Robert Rivas, Sanchez, Weber, Wilson

ASSEMBLY FLOOR: 75-0-5

YES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Chen, Connolly, Megan Dahle, Davies, Dixon, Essayli, Mike Fong, Vince Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Ward, Weber, Wilson, Wood, Zbur, Rendon

ABS, ABST OR NV: Flora, McKinnor, Muratsuchi, Wallis, Wicks

SENATE FLOOR: 39-0-1

YES: Allen, Alvarado-Gil, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Min, Newman, Nguyen, Niello, Ochoa Bogh, Padilla, Portantino, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk

ABS, ABST OR NV: Caballero

UPDATED

VERSION: September 5, 2023

CONSULTANT: Michael Bolden / P. E. & R. / (916) 319-3957 FN: 0002371

 THIRD READING  

Bill No: AB 658

Author: Mike Fong (D)

Amended: 9/5/23 in Senate

Vote: 21

SENATE LABOR, PUB. EMP. & RET. COMMITTEE: 5-0, 6/14/23

AYES: Cortese, Wilk, Durazo, Laird, Smallwood-Cuevas

SENATE APPROPRIATIONS: Senate Rule 28.8

ASSEMBLY FLOOR: 75-0, 5/4/23 (Consent) - See last page for vote

SUBJECT: Public employment: retirement: benefits

SOURCE: Author

DIGEST:

This bill permits the City of San Gabriel, pursuant to a memorandum of understanding (MOU), to provide different post-retirement health care employer contributions for the California Public Employees’ Retirement Board (CalPERS) health plan coverage to new employees who begin employment after the adoption of the MOU than that offered to current employees. This bill also makes clarifying amendments to recently enacted Judges’ Retirement System II provisions related to deferred retirement benefits.

Senate Floor Amendments of 9/5/23 clarify that a judge who opts for a deferred retirement is still eligible for COLAs provided under existing law only after they begin receiving their retirement allowance, as specified, not during the deferral period.

ANALYSIS:

Existing law:

1. Establishes the Public Employees’ Medical and Hospital Care Act (PEMHCA) administered by CalPERS for the purposes of promoting increased economy and efficiency in state service; enabling the state to attract and retain qualified employees by providing health benefit plans similar to those commonly provided in private industry; and recognizing and protecting the state’s investment in each permanent employee by promoting and preserving good health among state employees. (Government Code (GC) §§ 22750, 22751, and 22790)
2. Authorizes CalPERS to contract with insurance carriers for health benefit plans that may include hospital and other health care benefits, as specified. (GC § 22850)
3. Authorizes specified public entities, including contracting agencies such as cities and local agencies to obtain a health benefit plan for their employees and retired annuitants through PEMHCA subject to CalPERS’ approval. (GC § 20022 and § 22920)
4. Provides that PEMHCA’s provisions shall be controlling over any MOU, as specified. (GC § 22753)
5. Requires a contracting agency seeking PEMHCA coverage for its employees to submit a resolution by its governing board, as specified. (GC § 22922)
6. Prohibits a contracting agency electing to be subject to PEMHCA from maintaining any other health benefit plan or program offering hospital and medical care for its employees. (GC § 22934)
7. Requires the contracting agency and each employee or annuitant to contribute a portion of the cost of providing the benefit coverage afforded under the health benefit plan approved or maintained by the board in which the employee or annuitant may be enrolled. (GC § 22890)
8. Requires the contracting agency to fix from time to time the amount of its employer contribution by resolution of its governing body. (GC § 22892 (a))
9. Requires the employer contribution to be an equal amount for both employees and annuitants, but may not be less than a specified amount as adjusted annually by CalPERS for health care inflation. (GC § 22892 (b))
10. Permits contracting agencies flexibility to provide lesser monthly contributions for annuitants than employees, notwithstanding the general requirement to provide equal contribution amounts to employees and annuitants, if the employer increases the annuitant rate over time to match the employee rate, as specified. (GC § 22892 (c))
11. Allows a contracting agency to adopt by resolution of its governing body, a vesting schedule that bases its postretirement health benefit employer contribution for annuitants on their completed years of credited service, as specified. (GC § 22893)
12. Provides school employers and a few specified public agencies customized contract options similar to the one proposed in this bill. (GC § 22893.1 et seq.)
13. Establishes the Judges’ Retirement System II (JRS II) to provide a defined benefit retirement plan for judges first elected or appointed to the bench on or after November 9, 1994. JRS II requires that a judge be at least 65 years of age with at least 20 years of service, or 70 years of age with at least five years of service to qualify for a JRS II defined benefit (DB) service retirement allowance equal to 3.75 percent of final compensation, multiplied by the number of years of service, up to a maximum of 75 percent of final compensation. A judge eligible for a DB monthly allowance may opt to receive the alternative lump sum benefit under the Monetary Credit Plan in lieu of the DB monthly allowance. (GC § 75500 et seq.)
14. Authorizes the Monetary Credit Plan, an alternative JRS II benefit for judges who leave office prior to qualifying for a DB retirement allowance but after accruing five or more years of service. Under the plan, a judge receives a lump sum equal to the amount of his or her monetary credits plus an amount credited at the JRS II net earnings rate from the preceding year. Monetary credits are the judge’s accumulation of contributions equal to 18 percent of the judge’s monthly salary. (GC §§ 75520, 75521)
15. Provides that a judge who leaves office before accruing at least five years of service shall receive only a lump sum equal to the amount of his or her contributions to JRS II. (GC § 75521(a)).
16. Authorizes judges, on and after January 1, 2024, who are not eligible to retire under the existing JRS II plan to make an election to retire at an earlier age or with fewer years of service than the plan’s currently required full retirement age and service factors if they are at least 60 years of age and have 15 years or more of service, or 65 years of age with a minimum of 10 years of service and receive their retirement allowance when they reach full retirement age with a reduction to the full retirement benefit factor, as specified. (GC § 75522.5)
17. Provides for continued eligibility for various post-retirement benefits to judges who opt for a deferred retirement, as specified, including post-retirement health benefits, survivor and beneficiary benefits, and pension allowance COLA benefits. (GC §§ 75523, 75570, 75590)

This bill makes the following changes to public employee benefits:

1) Authorizes the City of San Gabriel, its employees’ exclusive representative, and unrepresented employees to agree that the employer contribution for postretirement health coverage shall be subject to the following conditions:

• Credited years of service that the employee worked with the City of San Gabriel.
• A MOU regarding postretirement health coverage mutually agreed upon through collective bargaining, in which the postretirement health contribution shall not be subject to the impasse procedures.
• The employer contribution shall not be less than the adjusted employer contribution required by subdivision (b) of Section 22892, which sets a minimum dollar amount per month, adjusted annually for health care inflation, as specified, by CalPERS.

2)  Prohibits the proposed MOU’s employer health benefit contribution from applying to any employee who retired before the MOU’s effective date. It further provides that if the MOU establishes a retroactive effective date, the provisions on the proposed employer contribution shall apply only prospectively and any employee who retires before the MOU is signed shall not be affected by it.

3) Makes invalid any agreement that would provide a postretirement health employer contribution for employees with less than five years of credited service with the City of San Gabriel.

4)  Requires the City of San Gabriel to provide, in the manner prescribed by the board, notice of the agreement authorized by this bill and any additional information necessary to implement this section.

5)  Makes provisions in this bill applicable only to the City of San Gabriel and only with regard to employees who are first hired on or after January 1, 2023, and elected officials who first served as elected officials on or after January 1, 2023.

6) Finds and declares that a special statute is necessary and that a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the unique circumstances of postretirement health coverage with regard to employees of the City of San Gabriel.

7) Clarifies language recently enacted in SB 885, Chapter 159, Statutes of 2023, which clarified that judges who elect a deferred retirement pursuant to AB 2443 (Chapter 531, Statutes of 2022) remain eligible for COLAs provided under existing law. This bill clarifies that the COLA provisions apply after the judge begins receiving the retirement allowance, as specified, not during the deferral period.

Comments

Need for this bill? According to the author,

“As a city on the State Auditor’s list of high risk cities, the Auditor has recommended that the city develop a financial recovery plan with short- and long-term goals, strategies to build general fund reserves, and an analysis of factors affecting its finances. As part of its long-term recovery plan, the city adopted memorandum of understandings with four employee representatives and one unrepresented employee group to provide a different level of retiree health benefits to employees hired beginning January 1, 2023, while providing higher salaries. Current employees and retirees will maintain the same level of retiree health benefits. AB 658 authorizes the City of San Gabriel to implement these changes through CalPERS. Allowing the city to make these changes will help in the city’s long-term financial stability plan and better serve its residents.”

According to the Senate Labor, Public Employment and Retirement Committee,

“This bill is necessary to clarify recently enacted technical language that made confirming changes to statute to ensure that judges who take a deferred retirement are still eligible for COLAs provided under existing law. This bill clarifies that while judges who take the deferred retirement option are still eligible for COLAs, those COLAs apply only after a judge begins receiving the retirement allowance, not during the deferral period. This bill is necessary to prevent a judge from mistakenly opting for a deferred retirement believing that any COLAs would accrue during the deferral period.”

Related/Prior Legislation

SB 885(Committee on Labor, Public Employment and Retirement, Chapter 159, Statutes of 2023), made noncontroversial, technical, conforming, and minor changes to the Education and Government codes necessary for the efficient administration of retirement laws by public employee retirement systems, including clarifying that judges who elect deferred retirement pursuant to

AB 2443 (Cooley, Chapter 531, Statutes of 2022) authorized Judges’ Retirement System II members to elect to retire at an earlier age or with fewer years of service than the plan’s “full retirement age” factors if they defer receipt of their retirement allowance, as specifed.

AB 2582 (Bonta, Chapter 216, Statutes of 2014) authorized BART to establish a vesting requirement for post-retirement health benefits coverage that is different than what is allowed under current law for contracting agencies.

AB 1144 (Hall, Chapter 244, Statutes of 2013) established, for the City of Carson, a specific vesting schedule and employer contribution amount for annuitant health care premiums under PEMHCA.

SB 1294 (Berryhill, Chapter 836, Statutes of 2012) authorized the County of Mariposa and their employees' exclusive representative to enter into an agreement providing that the employer's health benefit coverage contribution is subject to an MOU if agreed upon through collective bargaining, or by a resolution adopted by a majority of the board of supervisors for employees not represented by a bargaining unit.

AB 2510 (Fletcher, Chapter 600, Statutes of 2010) authorized the City of San Diego to establish a vesting requirement for post-retirement health benefits coverage that is different than what is allowed under current law for contracting agencies.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 9/6/23)

City of San Gabriel

Peace Officers Research Association of California

OPPOSITION: (Verified 9/6/23)

None received

ASSEMBLY FLOOR: 75-0, 5/4/23

AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Chen, Connolly, Megan Dahle, Davies, Dixon, Essayli, Mike Fong, Vince Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Ward, Weber, Wilson, Wood, Zbur, Rendon

NO VOTE RECORDED: Flora, McKinnor, Muratsuchi, Wallis, Wicks

Prepared by: Glenn Miles / L., P.E. & R. / (916) 651-1556

9/6/23 13:17:08

**** END ****

 THIRD READING  

Bill No: AB 658

Author: Mike Fong (D)

Amended: 6/5/23 in Senate

Vote: 21

SENATE LABOR, PUB. EMP. & RET. COMMITTEE: 5-0, 6/14/23

AYES: Cortese, Wilk, Durazo, Laird, Smallwood-Cuevas

SENATE APPROPRIATIONS: Senate Rule 28.8

ASSEMBLY FLOOR: 75-0, 5/4/23 (Consent) - See last page for vote

SUBJECT: Public Employees’ Medical and Hospital Care Act: postemployment health benefits: the City of San Gabriel

SOURCE: Author

DIGEST:

This bill permits the City of San Gabriel, pursuant to a memorandum of understanding (MOU), to provide different post-retirement health care employer contributions for CalPERS health plan coverage to new employees who begin employment after the adoption of the MOU than that offered to current employees.

ANALYSIS:

Existing law:

1. Establishes the Public Employees’ Medical and Hospital Care Act (PEMHCA) administered by the California Public Employees’ Retirement Board (CalPERS) for the purposes of promoting increased economy and efficiency in state service; enabling the state to attract and retain qualified employees by providing health benefit plans similar to those commonly provided in private industry; and recognizing and protecting the state’s investment in each permanent employee by promoting and preserving good health among state employees. (Government Code (GC) §§ 22750, 22751, and 22790)
2. Authorizes CalPERS to contract with insurance carriers for health benefit plans that may include hospital and other health care benefits, as specified. (GC§ 22850)
3. Authorizes specified public entities, including contracting agencies such as cities and local agencies to obtain a health benefit plan for their employees and retired annuitants through PEMHCA subject to CalPERS’ approval. (GC § 20022 and § 22920)
4. Provides that PEMHCA’s provisions shall be controlling over any MOU, as specified. (GC § 22753)
5. Requires a contracting agency seeking PEMHCA coverage for its employees to submit a resolution by its governing board, as specified. (GC § 22922)
6. Prohibits a contracting agency electing to be subject to PEMHCA from maintaining any other health benefit plan or program offering hospital and medical care for its employees. (GC § 22934)
7. Requires the contracting agency and each employee or annuitant to contribute a portion of the cost of providing the benefit coverage afforded under the health benefit plan approved or maintained by the board in which the employee or annuitant may be enrolled. (GC § 22890)
8. Requires the contracting agency to fix from time to time the amount of its employer contribution by resolution of its governing body. (GC § 22892 (a))
9. Requires the employer contribution to be an equal amount for both employees and annuitants, but may not be less than a specified amount as adjusted annually by CalPERS for health care inflation. (GC § 22892 (b))
10. Permits contracting agencies flexibility to provide lesser monthly contributions for annuitants than employees, notwithstanding the general requirement to provide equal contribution amounts to employees and annuitants, if the employer increases the annuitant rate over time to match the employee rate, as specified. (GC § 22892 (c))
11. Allows a contracting agency to adopt by resolution of its governing body, a vesting schedule that bases its postretirement health benefit employer contribution for annuitants on their completed years of credited service, as specified. (GC § 22893)
12. Provides school employers and a few specified public agencies customized contract options similar to the one proposed in this bill. (GC §§ 22893.1 et seq.)

This bill:

1) Authorizes the City of San Gabriel, its employees’ exclusive representative, and unrepresented employees to agree that the employer contribution for postretirement health coverage shall be subject to the following conditions:

• Credited years of service that the employee worked with the City of San Gabriel.
• A memorandum of understanding regarding postretirement health coverage mutually agreed upon through collective bargaining, in which the postretirement health contribution shall not be subject to the impasse procedures.
• The employer contribution shall not be less than the adjusted employer contribution required by subdivision (b) of Section 22892, which sets a minimum dollar amount per month, adjusted annually for health care inflation, as specified, by CalPERS.

2)  Prohibits the proposed MOU’s employer health benefit contribution from applying to any employee who retired before the MOU’s effective date. It further provides that if the MOU establishes a retroactive effective date, the provisions on the proposed employer contribution shall apply only prospectively and any employee who retires before the MOU is signed shall not be affected by it.

3) Makes invalid any agreement that would provide a postretirement health employer contribution for employees with less than five years of credited service with the City of San Gabriel.

4)  Requires the City of San Gabriel to provide, in the manner prescribed by the board, notice of the agreement authorized by this bill and any additional information necessary to implement this section.

5)  Makes the bill’s provisions applicable only to the City of San Gabriel and only with regard to employees who are first hired on or after January 1, 2023, and elected officials who first served as elected officials on or after January 1, 2023.

6) Finds and declares that a special statute is necessary and that a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the unique circumstances of postretirement health coverage with regard to employees of the City of San Gabriel.

Comments

Need for this bill? According to the author,

“As a city on the State Auditor’s list of high risk cities, the Auditor has recommended that the city develop a financial recovery plan with short- and long-term goals, strategies to build general fund reserves, and an analysis of factors affecting its finances. As part of its long-term recovery plan, the city adopted memorandum of understandings with four employee representatives and one unrepresented employee group to provide a different level of retiree health benefits to employees hired beginning January 1, 2023, while providing higher salaries. Current employees and retirees will maintain the same level of retiree health benefits. AB 658 authorizes the City of San Gabriel to implement these changes through CalPERS. Allowing the city to make these changes will help in the city’s long-term financial stability plan and better serve its residents.”

Related/Prior Legislation

AB 2582 (Bonta, Chapter 216, Statutes of 2014) authorized BART to establish a vesting requirement for post-retirement health benefits coverage that is different than what is allowed under current law for contracting agencies.

AB 1144 (Hall, Chapter 244, Statutes of 2013) established, for the City of Carson, a specific vesting schedule and employer contribution amount for annuitant health care premiums under PEMHCA.

SB 1294 (Berryhill, Chapter 836, Statutes of 2012) authorized the County of Mariposa and their employees' exclusive representative to enter into an agreement providing that the employer's health benefit coverage contribution is subject to an MOU if agreed upon through collective bargaining, or by a resolution adopted by a majority of the board of supervisors for employees not represented by a bargaining unit.

AB 2510 (Fletcher, Chapter 600, Statutes of 2010) authorized the City of San Diego to establish a vesting requirement for post-retirement health benefits coverage that is different than what is allowed under current law for contracting agencies.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 6/26/23)

City of San Gabriel

Peace Officers Research Association of California

OPPOSITION: (Verified 06/26/23)

None received

ARGUMENTS IN SUPPORT: According to the author,

“As a city on the State Auditor’s list of high risk cities, the Auditor has recommended that the city develop a financial recovery plan with short- and long-term goals, strategies to build general fund reserves, and an analysis of factors affecting its finances. As part of its long-term recovery plan, the city adopted memorandum of understandings with four employee representatives and one unrepresented employee group to provide a different level of retiree health benefits to employees hired beginning January 1, 2023, while providing higher salaries. Current employees and retirees will maintain the same level of retiree health benefits. AB 658 authorizes the City of San Gabriel to implement these changes through CalPERS. Allowing the city to make these changes will help in the city’s long-term financial stability plan and better serve its residents.”

ASSEMBLY FLOOR: 75-0, 5/4/23

AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Chen, Connolly, Megan Dahle, Davies, Dixon, Essayli, Mike Fong, Vince Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Ward, Weber, Wilson, Wood, Zbur, Rendon

NO VOTE RECORDED: Flora, McKinnor, Muratsuchi, Wallis, Wicks

Prepared by: Glenn Miles / L., P.E. & R. / (916) 651-1556

6/28/23 11:08:35

**** END ****

SENATE COMMITTEE ON LABOR, PUBLIC EMPLOYMENT AND RETIREMENT

Senator Dave Cortese, Chair

2023 - 2024 Regular

Bill No: AB 658 Hearing Date: June 14, 2023

SUBJECT: Public Employees’ Medical and Hospital Care Act: postemployment health benefits: the City of San Gabriel

KEY ISSUE

Should the state permit the City of San Gabriel, pursuant to a memorandum of understanding (MOU), to provide different post-retirement health care employer contributions for CalPERS health plan coverage to new employees who begin employment after the adoption of the MOU than that offered to current employees?

ANALYSIS

Existing law:

1. Establishes the Public Employees’ Medical and Hospital Care Act (PEMHCA) administered by the California Public Employees’ Retirement Board (CalPERS) for the purposes of promoting increased economy and efficiency in state service; enabling the state to attract and retain qualified employees by providing health benefit plans similar to those commonly provided in private industry; and recognizing and protecting the state’s investment in each permanent employee by promoting and preserving good health among state employees. (Government Code (GC) §§ 22750, 22751, and 22790)
2. Authorizes CalPERS to contract with insurance carriers for health benefit plans that may include hospital and other health care benefits, as specified. (GC§ 22850)
3. Authorizes specified public entities, including contracting agencies such as cities and local agencies to obtain a health benefit plan for their employees and retired annuitants through PEMHCA subject to CalPERS’ approval. (GC § 20022 and § 22920)
4. Provides that PEMHCA’s provisions shall be controlling over any MOU, as specified. (GC § 22753)
5. Requires a contracting agency seeking PEMHCA coverage for its employees to submit a resolution by its governing board, as specified. (GC § 22922)
6. Prohibits a contracting agency electing to be subject to PEMHCA from maintaining any other health benefit plan or program offering hospital and medical care for its employees. (GC § 22934)
7. Requires the contracting agency and each employee or annuitant to contribute a portion of the cost of providing the benefit coverage afforded under the health benefit plan approved or maintained by the board in which the employee or annuitant may be enrolled. (GC § 22890)
8. Requires the contracting agency to fix from time to time the amount of its employer contribution by resolution of its governing body. (GC § 22892 (a))
9. Requires the employer contribution to be an equal amount for both employees and annuitants, but may not be less than a specified amount as adjusted annually by CalPERS for health care inflation. (GC § 22892 (b))
10. Permits contracting agencies flexibility to provide lesser monthly contributions for annuitants than employees, notwithstanding the general requirement to provide equal contribution amounts to employees and annuitants, if the employer increases the annuitant rate over time to match the employee rate, as specified. (GC § 22892 (c))
11. Allows a contracting agency to adopt by resolution of its governing body, a vesting schedule that bases its postretirement health benefit employer contribution for annuitants on their completed years of credited service, as specified. (GC § 22893)
12. Provides school employers and a few specified public agencies customized contract options similar to the one proposed in this bill. (GC §§ 22893.1 et seq.)

This bill:

1) Authorizes the City of San Gabriel, its employees’ exclusive representative, and unrepresented employees to agree that the employer contribution for postretirement health coverage shall be subject to the following conditions:

• Credited years of service that the employee worked with the City of San Gabriel.
• A memorandum of understanding regarding postretirement health coverage mutually agreed upon through collective bargaining, in which the postretirement health contribution shall not be subject to the impasse procedures.
• The employer contribution shall not be less than the adjusted employer contribution required by subdivision (b) of Section 22892, which sets a minimum dollar amount per month, adjusted annually for health care inflation, as specified, by CalPERS.

2)  Prohibits the proposed MOU’s employer health benefit contribution from applying to any employee who retired before the MOU’s effective date. It further provides that if the MOU establishes a retroactive effective date, the provisions on the proposed employer contribution shall apply only prospectively and any employee who retires before the MOU is signed shall not be affected by it.

3) Makes invalid any agreement that would provide a postretirement health employer contribution for employees with less than five years of credited service with the City of San Gabriel.

4)  Requires the City of San Gabriel to provide, in the manner prescribed by the board, notice of the agreement authorized by this bill and any additional information necessary to implement this section.

5)  Makes the bill’s provisions applicable only to the City of San Gabriel and only with regard to employees who are first hired on or after January 1, 2023, and elected officials who first served as elected officials on or after January 1, 2023.

6) Finds and declares that a special statute is necessary and that a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the unique circumstances of postretirement health coverage with regard to employees of the City of San Gabriel.

COMMENTS

1. Need for this bill?

According to the author,

“As a city on the State Auditor’s list of high risk cities, the Auditor has recommended that the city develop a financial recovery plan with short- and long-term goals, strategies to build general fund reserves, and an analysis of factors affecting its finances. As part of its long-term recovery plan, the city adopted memorandum of understandings with four employee representatives and one unrepresented employee group to provide a different level of retiree health benefits to employees hired beginning January 1, 2023, while providing higher salaries. Current employees and retirees will maintain the same level of retiree health benefits. AB 658 authorizes the City of San Gabriel to implement these changes through CalPERS. Allowing the city to make these changes will help in the city’s long-term financial stability plan and better serve its residents.”

2. Proponent Arguments

According to the author,

“AB 658 provides authorization for the City of San Gabriel to make changes to the health benefits provided to their employees upon retirement through CalPERS for new employees hired beginning January 1, 2023. These changes are outlined in memorandum of understandings with four bargaining units and one unrepresented employee group. Current employees and retirees will maintain the same level of health benefits in effect on December 31, 2022. Health benefits for retirees hired beginning January 1, 2023 will be based on the Public Employees’ Medical and Hospital Care Act (PEMHCA). CalPERS has indicated that legislation is necessary for the city to implement these changes.”

“Allowing the city to make changes to the benefits provided to newly-hired employees will help the city achieve financial stability and better serve its residents.”

According to Peace Officers Research Association of California,

“AB 658 would authorize the City of San Gabriel to enter into an agreement with specified employees hired on or after January 1, 2023, to provide employer contributions for postretirement health care coverage to employees with at least 5 years of credited service with the City of San Gabriel. The bill would provide that its provisions for postretirement health benefits apply to employees who retire on or after the date that a memorandum of understanding that authorizes this benefit becomes effective. The bill also requires the City of San Gabriel to provide notice of the agreement and any additional information necessary to implement these benefits.”

3. Opponent Arguments:

None received.

4. Prior Legislation:

AB 2582 (Bonta), Chapter 216, Statutes of 2014, authorized BART to establish a vesting requirement for post-retirement health benefits coverage that is different than what is allowed under current law for contracting agencies.

AB 1144 (Hall), Chapter 244, Statutes of 2013, established, for the City of Carson, a specific vesting schedule and employer contribution amount for annuitant health care premiums under PEMHCA.

SB 1294 (Berryhill), Chapter 836, Statutes of 2012, authorized the County of Mariposa and their employees' exclusive representative to enter into an agreement providing that the employer's health benefit coverage contribution is subject to an MOU if agreed upon through collective bargaining, or by a resolution adopted by a majority of the board of supervisors for employees not represented by a bargaining unit.

AB 2510 (Fletcher), Chapter 600, Statutes of 2010, authorized the City of San Diego to establish a vesting requirement for post-retirement health benefits coverage that is different than what is allowed under current law for contracting agencies.

SUPPORT

City of San Gabriel

Peace Officers Research Association of California

OPPOSITION

None received

-- END --

Date of Hearing: April 26, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

ABPCA Bill Id:AB 658

Author:(Mike Fong) – As Amended Ver:April 13, 2023

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill authorizes the City of San Gabriel to implement a two-tiered retiree health benefit agreement for city employees.

Specifically, this bill:

1. Authorizes the City of San Gabriel to enter into an agreement with certain employees hired on or after January 1, 2023, to provide employer contributions for retiree health benefits to employees with at least five years of credited service with the City of San Gabriel.
2. Requires the City of San Gabriel to provide notice of an agreement established pursuant to this bill and other information to the California Public Employees’ Retirement System (CalPERS).

FISCAL EFFECT:

1. Unknown, significant ongoing savings, likely in the millions of dollars annually, to the City of San Gabriel resulting from the implementation of a two-tiered retiree health benefit agreement. Savings will be realized over time as current employees are replaced by new employees. Savings to the city will be somewhat offset by the higher wages the city has agreed to pay employees in exchange for this agreement.

According to the City of San Gabriel, it currently pays about $1.5 million annually to cover ongoing retiree health costs and the city is not able to fund any investments for future benefits due to these liabilities.

1. Minor and absorbable costs to CalPERS to oversee this change.

COMMENTS:

Background. The City of San Gabriel is a city with a population of about 40,000 in the San Gabriel Valley in Los Angeles County. The City of San Gabriel employs about 200 people.

In 2021, the California State Auditor placed the City of San Gabriel on its high risk watch list and ranked it as the second most financially at-risk city in the state. The auditor highlighted growing employee retirement benefit costs under CalPERS as the key factor contributing to the city’s precarious fiscal condition. The auditor recommended the city develop a financial recovery plan. In fall 2022, city leaders negotiated a memorandum of understanding (MOU) with the city’s four employee representatives and one unrepresented employee group that outlines a plan to provide higher wages to newly-hired employees in exchange for a reduced level of health benefits upon retirement for those employees. Currently, CalPERS does not allow a participant, such as a city government, to provide differing levels of benefits to its members.

This bill allows the City of San Gabriel to provide differing levels of benefit to its members, as agreed upon in its recent MOU. The City of San Gabriel is the sponsor of this bill.

Analysis Prepared by: Natasha Collins / APPR. / (916) 319-2081

Date of Hearing: April 12, 2023

ASSEMBLY COMMITTEE ON PUBLIC EMPLOYMENT AND RETIREMENT

Tina S. McKinnor, Chair

ABPCA Bill Id:AB 658 (

Author:Mike Fong) – As Amended Ver:March 23, 2023

SUBJECT: Public Employees’ Medical and Hospital Care Act: postemployment health benefits: the City of San Gabriel

SUMMARY: Authorizes the City of San Gabriel to enter into an agreement with specified employees hired on or after January 1, 2023, to provide employer contributions for postretirement health care coverage to employees with at least 5 years of credited service with the City of San Gabriel, among other provisions. Specifically, this bill:

1. Authorizes the city of San Gabriel, employees’ exclusive representatives, and unrepresented employees to agree that the employer contribution for postretirement health coverage must be subject to all of the following:
2. Credit years of service that the employee worked for the City of San Gabriel;
3. A memorandum of understanding (MOU) regarding postretirement health coverage mutually agreed upon through collective bargaining, which must not be subject to impasse procedures pursuant to the Educational Employment Relations Act (EERA), as provided; and,
4. The employer contribution complies with the requirements of existing law relating to employer contributions for CalPERS contracting agencies, as specified.
5. Maintains certain vested rights with respect to employees who retired prior to the effective date of the MOU from these requirements, and establishes that if the MOU has a retroactive effective date, then these provisions only apply prospectively.
6. Establishes that a MOU reached, as specified, is not valid if it provides an employer contribution with less than five years of credit service with the city.
7. Requires the City of San Gabriel to provide to, and in any manner prescribed by the, California Public Employees’ Retirement System (CalPERS) Board of Administration, notice of an agreement established pursuant to these provisions and any additional information necessary to implement these provisions.
8. Expressly provides that these provisions only apply to the City of San Gabriel and only with regard to an employee of the city who is first hired on or after January 1, 2023.
9. Includes an uncodified legislative finding and declaration for these purposes.

EXISTING LAW:

1. Establishes the Public Employees’ Medical and Hospital Care Act (PEMHCA) for the purposes of promoting increased economy and efficiency in state service; enabling the state to attract and retain qualified employees by providing health benefit plans similar to those commonly provided in private industry, and recognizing and protecting the state’s investment in each permanent employee by promoting and preserving good health among state employees.^[1]
2. Establishes that the employer contribution of a CalPERS contracting agency must begin on the effective date of enrollment and be of an amount fixed from time to time by resolution of the governing body of the agency. Among other things, the employer contribution must be an equal amount for both employees and annuitants, but not less than a certain specified amount.^[2]
3. Establishes a vesting schedule in which the percentage of employer contributions payable for postretirement health benefits for an employee of a CalPERS contracting agency, except as otherwise provided, is 50 percent for 10 years of credited service; 75 percent for 15 years of credited service; and, 100 percent for 20 or more years of credited service, and as provided.^[3]
4. Provides the City of Carson with a specific vesting schedule such that, for an employee hired on or after January 1, 2014, the employer contribution for post-retirement health benefit coverage for an employee of the City of Carson must be based on specified percentages associated with the employee’s credited years of service, which would reach 100 percent when the employee attains 10 years of credited service, among other provisions, including provisions relating to mutual agreement through collective bargaining.^[4]
5. Authorizes the City of San Diego to contract under the PEMHCA for a retiree health care vesting schedule that is subject to, and dependent upon, a MOU between the City of San Diego and the affected San Diego employees’ exclusive representative.^[5]
6. Authorizes the County of Mariposa and the employees' exclusive representative to enter into an agreement providing that the employer's health benefit coverage contribution is subject to a MOU if agreed upon through collective bargaining, or by a resolution adopted by a majority of the board of supervisors for employees not represented by a bargaining unit, and that the employer contribution under an MOU or resolution could be higher than that required by statute, among other provisions.^[6]
7. Provides, among other things under the California Constitution that, "the members of the retirement board of a public pension or retirement system shall discharge their duties with respect to the system solely in the interest of, and for the exclusive purposes of providing benefits to, participants and their beneficiaries, minimizing employer contributions thereto, and defraying reasonable expenses of administrating the system.”^[7]
8. Establishes the Public Employees’ Retirement Law (PERL), administered by CalPERS, in which its purpose is to effect economy and efficiency in the public service by providing a means whereby employees who become superannuated or otherwise incapacitated may, without hardship or prejudice, be replaced by more capable employees, and to that end provide a retirement system consisting of retirement compensation and death benefits.^[8]
9. Establishes the Public Employees’ Pension Reform Act (PEPRA) of 2013 – a comprehensive reform of public employee retirement that, among other things, increased contributions towards retirement, decreased benefit formulas, and increased the age of retirement that apply to new members of the system first hired on or after January 1, 2013, and made changes that apply to all members towards resolving unfunded liabilities, manipulation of compensation for purposes of calculating a retirement allowance (i.e., pensions spiking), double-dipping, and other prescribed best practice measures.^[9]
10. Provides several statutory frameworks under California law to provide public employees collective bargaining rights, govern public employer-employee relations, and limit labor strife and economic disruption in the public sector through a reasonable method of resolving disputes regarding wages, hours and other terms and conditions of employment between public employers and recognized public employee organizations or their exclusive representatives. These include the Educational Employment Relations Act (EERA) governing public employer-employee relations for public schools (K-12) and community colleges, and the Meyers-Milias-Brown Act (MMBA) governing public employer-employee relations.^[10]
11. Establishes the Public Employment Relations Board (PERB), a quasi-judicial administrative agency charged with administering certain statutory frameworks governing employer-employee relations, resolving disputes, and enforcing the statutory duties and rights of public agency employers and employee organizations, but provides the City and County of Los Angeles a local alternative to PERB oversight. ^[11]

FISCAL EFFECT: Unknown. This bill is flagged as fiscal by Legislative Counsel.

COMMENTS: According to the information provided, and as stated, by the author, “[t]he City of San Gabriel is a small city with a population of 38,670 as of July 2022, and employs about 200 employees located in the San Gabriel Valley in Los Angeles County. The California State Auditor has expressed significant concerns about the city’s financial situation, and has ranked the city as High Risk.^[12]

The Auditor recommended that the city develop a financial recovery plan with short- and long-term goals, strategies to build general fund reserves, and an analysis of factors affecting its finances. [The Auditor] also directed the city to strengthen its financial projections by including analyses of key revenue sources and future costs..,” and “…highlighted growing employee retirement benefit costs, specifically, as one factor that will likely put additional pressure on the city’s general fund.”

In addition, “[i]n the Fall of 2022, city leaders negotiated memorandum of understandings (MOU) with the city’s four employee representatives and one unrepresented employee group that outlines a plan to provide higher wages to newly-hired employees in exchange for a reduced level of health benefits upon retirement. CalPERS does not allow a participant to provide differing levels of benefits to their members…,” and, “…legislation is needed to implement this agreement.

“[This bill] provides authorization for the City of San Gabriel to make changes to the health benefits provided to their employees upon retirement through CalPERS for new employees hired beginning January 1, 2023. These changes are outlined in a MOU with four bargaining units and one unrepresented employee group. Current employees and retirees will maintain the same level of health benefits in effect on December 31, 2022. Health benefits for retirees hired beginning January 1, 2023, will be based on the Public Employees’ Medical and Hospital Care Act (PEMHCA). Allowing the city to make changes to the benefits provided to newly-hired employees will help the city achieve financial stability and better serve its residents.”

1. Proposed Committee Amendments

Although the provisions of this bill are specific to the City of San Gabriel, they reference a MOU adopted pursuant to the EERA, as specified.

To the extent that this bill is intended to affect a MOU between the specified employees and the City of San Gabriel as an educational employer in which its educational employer-employee relations are government by that act, the reference to the EERA would be appropriate. If, however, said MOU covers local public employees whom are not subject to the EERA, but are subject to the MMBA governing local public employer-employee relations, the bill instead, must appropriately apply the MMBA.

Therefore, paragraph (2) of subdivision (a) of Section 22904 of this bill should be amended to read:

“A memorandum of understanding regarding postretirement health coverage mutually agreed upon through collective bargaining. This issue shall not be subject to the impasse procedures set forth in Article 9 (commencing with Section 3548) of Chapter 10.7 of Division 4 of Title 1. Chapter 10 (commencing with Section 3500) of Division 4 of Title 1.”

1. Equity Solutions and Maximizing Benefits for Underserved and Marginalized Communities

Pursuant to House Resolution (HR) 39 (Gipson, 2021), to continue the Assembly’s commitment to investing in equity solutions and maximizing benefits for underserved and marginalized communities, legislative analyses of the Assembly must discuss the equity impact that a bill will, or may, have on such communities, if any.

This bill does not present a particular focus towards addressing equity in relation to maximizing benefits for underserved or marginalized communities as articulated in HR 39. However, under a broader context, the author asserts that,”[a]ccording to the United States Census Bureau, in the City of San Gabriel:^[13]

• 60.7 percent of residents are of Asian descent
• 25.6 percent of resident are Hispanic or Latino
• 54.2 percent of residents are foreign born
• 12.5 percent of residents live in poverty

“Permitting the city to make this change will allow the city to better serve its residents, including vulnerable communities, who may require more access to government services.”

1. Comments by Supporters

The City of San Gabriel states that, “[i]n May 2022, the City began regularly meeting with its four (4) bargaining units to formally negotiate successor memoranda of understanding (MOUs) with each unit. Around November 2022, the City and its four (4) bargaining units mutually agreed upon and ratified successor MOUs for the July 1, 2022 through June 30, 2025 period. With each successor MOU, the parties agreed to amend the City’s retiree medical benefit as prescribed in [this bill].

“During negotiations, the City proposed amending its retiree medical benefit to help address its growing Other Post-Employment Benefit (OPEB) liabilities and improve its overall financial condition. In 2021, the State Auditor placed the City of San Gabriel on its high-risk watchlist and ranked it as the second most financially at-risk city in the state. The State Auditor cites the City’s growing OPEB liabilities, which are nearly 100 percent attributable to its current retiree medical benefit, as one of the main reasons for its high-risk financial condition and recommends that the City remediate its OPEB liabilities. The City agrees that its OPEB liabilities are unsustainable long-term and require immediate remediation.

“[This bill] will help the City of San Gabriel address its OPEB liabilities, stabilize its financial condition, increase employee salaries, and maintain post-employment benefits for all employees.”

REGISTERED SUPPORT / OPPOSITION:

Support

City of San Gabriel (Sponsor)

Opposition

None on file.

Analysis Prepared by: Michael Bolden / P. E. & R. / (916) 319-3957

1. Sections 22750 and 22751 of the Government (Gov.) Code. ↑

2. Section 22892 of the Gov. Code. ↑

3. Section 222893, of the Gov. Code. ↑

4. Section 22893.1, ibid. ↑

5. Section 22894, of the Gov. Code. ↑

6. Section 22900 of the Gov. Code. ↑

7. Section 17, art. XVI, California Constitution ↑

8. Sections 20000 et seq. of the Gov. Code. ↑

9. Sections 7522.02 et seq. of the Gov. Code. ↑

10. Sections 3540 et seq. (relating to the EERA), and 3500 et seq. (relating to the MMBA) of the Gov. Code, respectively. ↑

11. Sections 3541 et seq., ibid. ↑

12. “City of San Gabriel. Its Ongoing Deficit is Inhibiting Its Financial Recovery.” California State Auditor,

    April 27, 2021. ↑

13. “U.S. Census Bureau Quickfacts: San Gabriel City, California.” Retrieved March 30, 2023. ↑