HomeMy WebLinkAboutAgenda Statement 1982/02/23 Item 8COUNCIL AGENDA STATEMENT
Item g
Meeting Date 2/23/82
ITEM TITL Resolution /D 7~.Z- Supporting a Claim of the City of Anaheim for State
Mandated Costs Associated with Cost of Living Increases for Retirees
Under the Public Employees Retirement System
SUBMITTED BY: City Manager ~~~ ~ (4/5ths Vote: Yes No X )
The C'ty of Anaheim has filed a test SB 90 claim with the State Board of Control for
reimb rsement of costs resulting from the passage of A.B. 2674. This bill provided
for a quarterly 10% cost of living increase for PERS retirees over a two-year period.
Funds for the cost of living increases were taken from PERS contingency reserves
with ut authorization by local contracting agencies. The City of Anaheim is seeking
supp rt from other cities in their claim against the State Board of Control for
reim ursement of these costs. It is my
RECD h1ENDATION: That Council adopt resolution.
BOAR S/COMMISSION RECOP~IMENDATION: N.A.
DISC SSION:
As i dicated, A.B. 2674 was adopted by the State Legislature and the PERS Board in
comp fiance with the statute has provided cost of living increases to PERS retirees
out f a contingency reserve fund never intended to be used for this purpose. These
cont ngency funds were originally created to offset employer unfunded obligations
for enefit payments that could not be met because of lost investment earnings and
fluc uation in actuarial assumptions. Because the PERS Board of Administration
cons stently underestimated investment earnings, the unanticipated investment income
was redited to this reserve account but all employer contributions were periodically
incr ased because of the artificial shortfall that seemed to be occurring.
When A.B. 2674 provided for the cost of living bonua payments through the use of
thes underestimated earnings, it effectively deflected the use of these monies
for etirement plan payments and resulted in higher contributions from each employer.
I be ieve the City of Chula Vista has also been required to effectively pay the
full cost of the cost of living increases (.roughly estimated at $50,000 or more)
in t e future. Since this additional expense is attributable to the passage of
A.B. 2674, I believe we should support the claim of the City of Anaheim since
any success that Anaheim may have in pursuit of their claim would ultimately
ben fit the City.
FIN NCIAL IMPACT:
While no precise figure can be determined as to the amount of S.B. 90 funds Chula
Vis a would be entitled to, it is believed that the amount could be $50,000 or
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THE HONORABLE CITY COUNCIL X
JOHN SEYMOUR, Mayor
DON R. ROTH, Mayor Pro Tem
E. LLEWELLYN OVERHOLT, JR., Councilman
MIRIAM KAYWOOD, Councilwoman
BEN BAY, Councilman
CITY OF ANAHEIM. CALIFORNIA 92803
February 11, 1982
May r Will T. Hyde
Cit of Chula Vista
276 Fourth Ave.
Chu a Vista, CA 92010
Dead Mayor Hyde:
Th City of Anaheim has filed a test SB-90 Claim with the State Board of
Co trol for reimbursement of costs resulting from the passage of AB 2674
(B atT•~right). The bill, chaptered as Section 21231 of the Public Employees`
F.e'irement Law, establishes a quarterly ten percent cost-of-living increase
fo PERS retirees over a two-year period. Funds for payment are taken from
th PERS contingency reserve account without authorization by local agencies.
Th reserve account is intended to offset employer obligations for benefit
pa ments created because of losses in investment earnings and fluctuations
in actuarial ass>>mptions of the system. It is pat intended as a funding
so~rce for increased benefits. The PERS Board of Administration's practice
of underestimating the Retirement Fund earnings has resulted in surplus
ea pings being credited to the contingency reserve account. In 1975 the
contingency reserve was $100 million; by June, 1981, the contingency reserve
ac ount had grown to $540 million.
Th understatement of interest earnings of the Retirement Fund artificially
cr ates a short-fall that requires a higher employer contribution to fund
re irement plans. Financing of each member agency's retirement plan is
i~F_'.'Li'Jed ~rOm t~ilCe uOL'.rCeS; ~.L) 1~",tTii`,1C•_~Tee .:.Ontri bl:tiCnS 8.t 3 f1`<iGC1 i'atC
es ablished by State statute; (2) Interest earnings from invested t~.;nds;
an (3) Employer contributions based upon a specific agency's long-term
fu ding needs, including income frcm employee contributions and interest
ea Wings as determined by the system actuaries. When the system actuaries
un erestimate interest earnings from Retirement Fund investments, the
em layer's contribution, which is the balancing variable, goes up.
Th City of Anaheim believes that use of interest earnings to f>,ind the cost-
of living bonus payment approved throagh the Boatwright bill effectively
de lects the use of the monies from retirement plan payment and results in a
hi her contribution from the employer. ode estimate that the City of Anaheim
~~ ~~~ WRITTEN COMMIINI~ATYC31~
CITY COUNCIL MEETING -v2 ~"
c- e : C'-
D .a
200 South Anaheim Boulevard, P. O. Box 3222, (714) 999-5166
2
ha effectively borne the full cost of the benefit increase at approximately
$1 3,615. We have therefore submitted a claim for SB 90 reimbursement of
th s amount.
I m writing to you to enlist your Council's support in obtaining classifica-
ti n of this kind of benefit adjustment as a State mandated-cost which is
re mbursable to cities. Attached is a sample resolution which we suggest
be adopted and forwarded to Garry McRae, Human Resources Director of the City
of Anaheim. We are preparing a very precise and detailed case to take before
th State Board of Control. Your help will benefit all California cities
wh ch are members of the PERS system.
Si cerely,
y
J N SEY
Ma or
JS CC:bh
At achment
~' I~~>~j
RESOLUTION N0.
A RESOLUTION OF THE CITY COUNCIL
SUPPORTING THE CLAIM OF THE CITY OF ANAHEIM FOR
STATE-MANDATED COSTS ASSOCIATED WITH
CHAPTER 1244, STATUES OF 1980
WHEREAS, the City of Anaheim has filed a claim for reimbursement from
State of California for costs incurred in complying with Chapter 1244,
tatues of 1980, dealing with cost of living increased for retirees of a
ocal agency contract with the Public Employees' Retirement System (PERS);
WHEREAS, said legislation was passed after the effective date of
rticle XIIIB of the California State Constitution, also known as Proposi-
ion 4, which required, among other things, that the State must provide a
ubvention of funds to reimburse local government for costs of any new
rogram or any increased level of service caused by legislation or State
gency action; and
WHEREAS, the City of has, or shortly will, incur costs to
omply with the increased benefit requirements of Chapter 1244, Statues of
980; and
WHEREAS, an option previously available to the City of ,
as in fact been removed by Chapter 1244, Statutes of 1980;
NOW, THEREFORE, BE IT RESOLVED that the
City Council
eby declares its unanimous support for the claim of the City of Anaheim
or reimbursement for costs associated with Chapter 1244, Statues of 1980.
2
igned and approved this day of February, 1982.
Mayor
TTEST:
City Clerk
I HEREBY CERTIFY that the above and foregoing resolution was duly
passed and adopted by the
meeting held on the
to wit:
AYES:
NOES:
ABSENT:
day of February, 1982, by the following vote,
City Council at its regular
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City C.Lerk