Analysis by the Legislative Analyst

BACKGROUND

The California Legislature has 120 members—80 in the Assembly and 40 in the Senate. The State Constitution currently provides that:

– Salaries and benefits (other than retirement) of legislators are set annually by an independent commission.

– Retirement benefits for service in the Legislature are limited to participation in the federal Social Security system.

Prior to November 1990, legislators also participated in the state-run Legislators' Retirement System. Proposition 140, passed by the voters in November 1990, prohibited legislators from that time forward from earning any new retirement benefits (other than Social Security). Proposition 140 also established an annual "cap" on spending in support of the Legislature (for expenses such as legislator and staff salaries and other operating costs). The cap increases annually based on growth in the state's economy and population.

PROPOSAL

This proposition amends the State Constitution to allow legislators to participate in the state Public Employees' Retirement System (PERS). This system provides retirement benefits to a majority of state government workers. A legislator choosing to participate in the plan would pay almost 5 percent of his or her salary to the system. In addition, the state would pay into the system in the same way it pays for its other employees. The state's contribution is determined each year by PERS and is paid as a percent of the employee's salary. These rates can vary significantly from year to year. For instance, the current PERS employer rate is zero (due to recent performance of PERS investments), but this rate is projected to increase to around 4.5 percent in 2001–02.

FISCAL EFFECT

The state cost to provide PERS retirement benefits to legislators would depend on (1) how many legislators choose to participate in PERS and (2) the annual employer PERS contribution rate. These costs, however, would be under $1 million each year.

This expense would have to be paid out of the annual amount provided for support of the Legislature. As such, this proposition would not result in additional state costs, but would instead replace other types of spending in support of the Legislature.