Q&A: Bill To Increase Counties’ Pension Costs Awaits Governor’s Decision

Gov. Gavin Newsom has until the end of the month to act on AB 1383, which would raise pension costs by billions of dollars for all public agencies, including the state, counties, cities, schools and special districts.

CSAC opposes this bill and is encouraging counties to ask the Governor to veto it. 

For more on the bill’s costs and history, we sat down with CSAC Senior Legislative Advocate Eric Lawyer. 

What would this bill do?

AB 1383 would make several changes to California pension laws. 

First, it would reduce the minimum retirement age for police and firefighters from age 57 to age 55. 

Second, it would create a new bargainable tier of 3% at age 55 — that’s a new pension benefit structure that a public employer and its employee unions could negotiate through collective bargaining. 

And third, it would increase what’s called the creditable compensation cap — how much of a public employee’s salary gets factored into their pension formula. This change applies to any employee making more than the existing cap, not just public safety employees. 

How much would it cost counties based on the estimates that we have? 

CalPERS estimates the bill would cost the state and its member counties and cities $4 billion to pay down these higher pension costs over the next few decades, assuming current benefits remain static. If all CalPERS member agencies agree to the newly bargainable 3% at age 55 pension tier, the price tag would rise to $7.4 billion. 

These estimates could increase significantly as years pass and wages grow. The biggest cost-driver in the bill is the change to the compensation cap increase. So, as wages increase, so will the costs of the bill. The CalPERS estimate likely underestimates these costs, as they’re based on data from two years ago. 

These estimates also exclude the county-run retirement systems (known as “1937 Act Systems”). 

Why does CSAC oppose this bill? 

Any major expenditure — especially a permanent one — should meet a very high bar. We’re not seeing significant recruitment and retention challenges for public safety employees or the other highly employees who would benefit from the bill. 

In addition, counties are facing deep fiscal uncertainty. We’re already seeing a lot of layoffs happening already, and we have yet to see the most severe impacts from H.R. 1. AB 1383 would impose significant new cost commitments at a time when counties are being asked to do more with less funding.  

There’s a lot of history wrapped up in this bill. How does it affect the Public Employees’ Pension Reform Act signed by Gov. Jerry Brown in 2012? 

This bill would chip away at PEPRA, which raised retirement ages, reduced pension formulas for new employees, capped pensionable compensation, and required employees to pay a greater share of their pension costs. CalPERS estimated the bill has already saved its member agencies $5.8 billion and will save an additional $26.5 billion over the next decade. 

Because of PEPRA, pension systems have grown more sustainable and counties’ costs have become more predictable — all while maintaining robust and meaningful retirement benefits for public employees. 

How can counties get involved? 

By reaching out to the Governor’s office and letting them know what this would mean for your county. CSAC sent out a template veto request letter last week. Counties can use that template or write their own letter. We recommend submitting letters as soon as possible so the Governor can consider them before his Sept. 30 bill signing deadline