Assembly Bill 569: A New Challenge to California’s Pension Reform
Recently introduced in the California Legislature, Assembly Bill 569, spearheaded by Assemblymember Catherine Stefani (D-San Francisco), seeks to amend the California Public Employees’ Pension Reform Act (PEPRA) of 2013. This legislation originally aimed to address escalating pension costs and fiscal sustainability issues within the state.
Background on PEPRA
PEPRA was enacted to tackle the mounting financial pressures associated with pensions in California. This law specifically aimed to:
- End practices such as “pension spiking,” which led to inflated retirement benefits.
- Raise the retirement age for new hires.
- Prohibit retroactive pension increases.
Despite these reforms, PEPRA only applies to new hires and has only partially mitigated the state’s pension liabilities. As per the latest report from June 30, 2024, the California Public Employees’ Retirement System (CalPERS)—the largest public pension fund in the U.S.—is 75% funded, with an unfunded liability amounting to $164 billion.
Provisions of Assembly Bill 569
AB 569 introduces provisions that would allow public employers to negotiate supplemental retirement benefits, overriding certain existing bans established by PEPRA. The language in the bill states, “Notwithstanding” the previous limitations, which has raised concerns about potentially undermining the original intentions of the 2013 reform.
During a committee hearing on April 23, Assemblymember Stefani articulated that the bill would provide local governments with enhanced options “to improve retirement benefits, increase retirement security, and recruit and retain a quality workforce.” This assertion has drawn mixed reactions, particularly as major cities continue to experience layoffs.
Concerns and Criticism
Critics of AB 569, including former state Senator John Moorlach, emphasize that the bill highlights the influence of public-employee unions in state legislation. Moorlach pointed out, “It shows who’s really running the Legislature. It’s the unions and the public employees who want to pad their retirements.”
The committee’s analysis of AB 569 also flagged potential issues with its wording. It noted that the bill might circumvent PEPRA restrictions in a manner inconsistent with the original law’s objectives, although proposed amendments could address these issues.
Political Implications
Despite concerns, the Assembly Committee on Public Employment and Retirement voted unanimously to advance the bill, with support from Republican members. This illustrates the complex dynamics at play, as party lines blur when public employee interests are involved.
The backing of AB 569 by organizations like the California Teamsters Public Affairs Council and the California Federation of Labor Unions further underscores the strong ties between labor groups and lawmakers, particularly within the Democratic Party.
Looking Ahead
The implications of AB 569 are significant. If it were to pass, there is a pressing need for Governor Gavin Newsom to seriously consider a veto to ensure the financial sustainability established by PEPRA remains intact. The erosion of these vital reforms could lead to unintended fiscal consequences for the state and its taxpayers in the long run.
