McGeorge School of Law

Proposition 33

Proposition 33: Legislature, Participation in Public Employees' Retirement System

By David Gonzalez

Copyright © 2000 by University of the McGeorge School of Law

JD, McGeorge School of Law, University of the Pacific
to be conferred December 2000
B.A., double-major Economics/Political Science, Indiana University

Table of Contents

I. Executive Summary

II. The Law

III. Drafting Issues

IV. Constitutional Issues

V. Public Policy Considerations

VI. Conclusion

I. Executive Summary

Before passage of Proposition 140, legislators could participate in the federal Social Security system and had the option of participating in the Legislator's Retirement System. Proposition 140 added section 4.5 to article IV of the California Constitution which states in part, "a person elected to or serving in the Legislature on or after November 1, 1990, shall participate in the federal Social Security (Retirement, Disability Health Insurance) Program and the State shall pay only the employer's share of the contribution necessary to such participation. No other pension or retirement benefit shall accrue as a result of service in the Legislature such service not being intended as a career occupation." (Cal. Const. art. IV, §4.5.) Therefore, after enactment of Proposition 140, legislators elected on or after November 1, 1990 who were preparing for retirement were only allowed to participate in the federal Social Security Program during their tenure in office.

The Legislature proposes to amend Proposition 140 with new Proposition 33, on the November 2000 ballot. Proposition 33 would amend the California Constitution so that any legislator elected on or after November 1, 1990 "may elect to participate in the Public Employee's Retirement System in any state retirement plan in which a majority of the employees of the state may participate." (ACA 12, stats. 2000, res. c. 83 to be codified at Cal. Const. art. IV, § 4.5, [subject to rejection of Proposition 33 by voters in November 2000].) If voters pass Proposition 33 in November 2000, legislators elected on or after November 1, 1990 would participate in the federal Social Security System, and have the option of participating in the Public Employees' Retirement System (hereafter, "PERS") in any state retirement plan in which a majority of state employees may participate. The changes proposed by Proposition 33 appear straightforward. A question may arise, however, as to how a legislator's health benefits would vest.

II. The Law

A. Existing Law

1. The Law Before Proposition 140

Before passage of Proposition 140, legislators could participate in the federal Social Security system and had the option of participating in the Legislator's Retirement System. (Limits on Terms of Office, Legislators' Retirement, Legislative Operating Costs. Initiative Constitutional Amendment, California Official Voter Guide, at 69 [1990] [hereinafter Prop. 140 Voter Guide].)

Under this system, legislators could retire at any age after 20 years of service and collect full benefits which could equal up to sixty-seven percent of their highest salary. (Paul Jacobs, California Elections/Proposition 140; Initiative Cuts More than Term of Office, LA Times, Oct. 28, 1990.) These retirement payments would automatically increase each year with the consumer price index. (Id.) Retired legislators would also receive full health benefits for life. (Ray Sotero, The Sweet Deal, California Journal, June 1, 1995.) The Legislator's Retirement System was funded by contributions from participating officials and the state. (Prop. 140 Voter Guide, at 69.) A vast majority of legislators participated in the Legislator's Retirement System just before the passage of Proposition 140. (Id.)

2. Proposition 140

Proposition 140 was placed on the November 1990 ballot as a voter initiative proposing to amend the California Constitution by imposing limits on terms of office, legislator retirement, and legislative operating costs. (Prop. 140 Voter Guide, at 69.) Supporters of Proposition 140 were in part trying to eliminate what they considered extravagant pensions for legislators. (Prop. 140 Voter Guide, at 70.) Supporters of Proposition 140 also claimed that the legislative pension system often paid more than the legislators received while in office. (Id.)

The principal sponsor of Proposition 140 was then-Los Angeles County Supervisor Pete Schabarum. (California Elections/Proposition 140; Initiative Cuts More than Term of Office, LA Times, October 28, 1990, at A3.) In testimony at a legislative hearing, Mr. Schabarum stated that Proposition 140 was, "intended to take away an extraordinarily generous retirement system and, in so doing, eliminate a very dramatic motivation for folks to stick around." (Id.)

Opponents to Proposition 140 claimed the initiative did not address the real abuses of the legislative pension system since it did not eliminate the practice of taking multiple pensions. (Prop. 140 Voter Guide, at 71.) Opponents to Proposition 140 also argued that the initiative would, "hurt qualified, ordinary citizens who are not rich and have to work hard to provide economic security for themselves and their families." (Id.)

On November 6, 1990, Proposition 140 was narrowly approved by fifty-two percent of the California electorate. (A.G. Block and Richard Zeiger, Constitutional Offices and Ballot Propositions, Election 1990, Term Limits, California Journal, December 1, 1990.) Proposition 140 added a section to the California Constitution which states in part, "a person elected to or serving in the Legislature on or after November 1, 1990, shall participate in the Federal Social Security (Retirement, Disability Health Insurance) Program and the State shall pay only the employer's share of the contribution necessary to such participation. No other pension or retirement benefit shall accrue as a result of service in the Legislature such service not being intended as a career occupation." (Cal. Const. art. IV, § 4.5.)

After enactment of Proposition 140 legislators elected on or after November 1, 1990 were only allowed to participate in the federal Social Security Program during their tenure in office.

3. Legislature v. Eu

After enactment of Proposition 140, the California Legislature, individual legislators, and various individuals petitioned the California Supreme Court for a writ of mandate to prevent enforcement of Proposition 140. (Legislature v. Eu, 54 Cal.3d 492 [1991].) In Legislature v. Eu, the California Supreme Court considered several constitutional challenges to the validity of Proposition 140. The Court concluded, "except for the restriction on pensions of incumbent legislators, Proposition 140 is constitutionally valid." (Id. at 535.) In reaching this conclusion the Court found that legislators elected before passage of Proposition 140 had, "a vested right to earn additional pension benefits through continued service." (Id. at 530.) The Court further found that the "pension restriction of Proposition 140 must be deemed an impairment, not a mere 'modification' or 'adjustment,' of the vested pension rights of incumbent legislators." (Id.)

The court then concluded that, "the pension restrictions of Proposition 140 are unconstitutional under the federal contract clause as applied to incumbent legislators because they infringe on the vested pension rights of those persons." (Id. at 534.) States may not pass laws that impair the obligation of contracts. (U.S. Const., art. I, § 10.) Therefore, the pension restrictions of Proposition 140 could not be applied to incumbent legislators that had been elected prior to November 1, 1990.

 

4. Current Retirement Options for California State Legislators

As a result of Proposition 140's enactment and the California Supreme Court's decision in Legislature v. Eu, the current state of law in California regarding retirement options for legislators is that any person elected to the legislature on or after November 1, 1990 is limited to participating in the federal Social Security program. (Cal. Const. art. IV, §4.5; Eu, 54 Cal.3d at 528-534.) Members elected to the Legislature on or after November 1, 1990 are further prohibited from participating in any other pension or retirement plan while in office. (Id.)

B. Changes Proposed by Proposition 33

The Legislature proposes to amend Proposition 140 with new Proposition 33, on the November 2000 ballot. Proposition 33 would amend the California Constitution so that any legislator elected on or after November 1, 1990, "may elect to participate in the Public Employee's Retirement System in any state retirement plan in which a majority of the employees of the state may participate." (ACA 12, stats. 2000, res. c. 83 to be codified at Cal. Const. art. IV, §4.5, [subject to rejection of Proposition 33 by voters in November 2000].) If Proposition 33 is passed by voters in November 2000, Legislators elected on or after November 1, 1990, in addition to participating in the federal Social Security system, would have the option of participating in the Public Employees' Retirement System (hereafter, "PERS") in any state retirement plan in which a majority of state employees may participate.

1. ACA 12

Assembly Constitutional Amendment 12 (hereafter, ACA 12) was introduced by Assembly Member Lou Papan (D-Millbrae) on February 25, 1999. ACA 12 was considered by the Assembly Committee on Elections, Reapportionment and Constitutional Amendments at a hearing on April 5, 1999. (ACA 12, Assembly Committee on Elections, Reapportionment and Constitutional Amendments Analysis, at 1 [April 5, 1999].) According to an analysis prepared by this committee, Assembly Member Papan stated that, "the current inability of a legislator to participate in a retirement plan deprives his or her family of receiving benefits, including death benefits, if the member should pass away unexpectedly. Because many legislators have public service backgrounds, and have demonstrated their commitment to making government work and solving public problems by continuing their careers in the Legislature, they should be able to participate in the same retirement plan that is available to persons employed by state government." (Id.) Assembly Member Papan also stated that the bill would allow, "legislative participation in PERS on the same terms and conditions as the average government employee." (Id.)

As originally introduced, ACA 12 also proposed to provide, "Any retirement credit earned by a person through service in any other state or local government agency may qualify for credit in the state retirement plan." (ACA 12, 1999-2000 Leg. Sess. [as introduced February 25, 1999].)

A draft bill analysis prepared by the Department of California Public Employees' Retirement System (hereafter, "CalPERS") recommended striking out of ACA 12 the language regarding retirement credit earned by a person through service in any other state or local government agency. (ACA 12, California Public Employees Retirement System Draft Analysis, at 3). According to Casey L. Young, Chief of Governmental Affairs at CalPERS, this amendment was intended to clarify that legislators would not be allowed accrue time twice under differing systems. On June 28, 1999, ACA 12 was amended and the language regarding retirement credit earned by a person through service in any other state or local government agency was removed. (ACA 12, 1999-2000 Leg. Sess. at 2, [as amended June 28, 1999].)

Organizations in support of ACA 12 included CalPERS, the California School Employees Association, and Peoples Advocate, Inc. (ACA 12, Senate Floor Analysis at 2, [June 13, 2000].) CalPERS advised the Committee that ACA 12 would, "eliminate the inequity created by Proposition 140 in 1990. Asking elected officials to forego any retirement plan while serving up to 14 of their highest earning-potential years in the California Legislature is asking too much. (Letter from Casey L. Young, Chief, Governmental Affairs, CalPERS, to the Honorable Cathie Wright, Chair, Senate Constitutional Amendments Committee [Aug. 25, 1999] [available at California Initiative Review, McGeorge School of Law, Sacramento, Cal.].) This letter also stated, "Many already have CalPERS service from careers in local government, and are penalized by moving up to serve in the Legislature. Potential legislative candidates in the private sector, who may be entitled to a variety of retirement savings programs, must weigh the cost of losing the opportunity for any retirement savings for the years they spend in public service. These disincentives to service in the California Legislature are unfortunate and unnecessary." (Id.)

The draft bill analysis of ACA 12 prepared by CalPERS also stated, "The California School Employees Association has expressed support for this measure, arguing that this is a question of equity. This measure will eliminate a disincentive to service in elected office; specifically, existing law now requires an interruption in participation in any retirement plan besides Social Security." (ACA 12, California Public Employees Retirement System Draft Analysis, at 2.)

Another supporter of ACA 12 stated, "It is vital, in the interest of fair play, and also bringing to public service, quality individuals and allowing them to be able to take several years from the prime of their lives to serve the public in this esteemed body, without undue personal sacrifice for them and their families. (Letter from Edward J. Costa, CEO, People's Advocate, Inc., to the Honorable Lou Papan of the California State Assembly [Sept. 3, 1999] [available at California Initiative Review, McGeorge School of Law, Sacramento, Cal.].) Mr. Costa further stated that ACA 12 was a, "responsible, reasonable and positive measure and it should be embraced by sound government proponents of all political shades." (Id.)

Ultimately, the Department of Finance opposed ACA 12. (ACA 12, Senate Floor Analysis, at 2, [June 13, 2000].) Initially, however, the Department of Finance had no position on ACA 12 and only noted concerns. (ACA 12, Department of Finance analysis [Apr. 15, 1999].) "At current salary levels, the annual cost to transfer all Members of the Legislature to Tier 1 would be approximately $1.0 million General Fund . . . . The provisions of this bill allowing the conversion of other public service to CalPERS could result in an additional liability of an unknown amount to the State. (Id.)

The Department of Finance later changed its position and opposed the passage of ACA 12. (ACA 12, Department of Finance Analysis, [June 5, 2000].) The Department of Finance stated, "This bill would result in an ongoing intermediate General Fund cost to provide retiree health benefits for Legislators . . . . This bill is inequitable since, under the provisions of this bill, Legislators would become eligible for full retiree health benefits upon vesting in the Miscellaneous Tier 1 retirement category (Tier 1) in five years, while state employees could be required to work 20 years to earn the same benefit." (Id.)

ACA 12 was passed by the Assembly with fifty-seven ayes, and twelve noes. Two of the more prominent opponents to ACA 12 were Assembly Members Patricia Bates (R-Laguna Niguel), and Tony Strickland (R-Camarillo). According to the California Journal, Assembly Members Bates and Strickland have characterized ACA 12 as a "a scheme to undermine the spirit of Proposition 140 and restore legislative perks and benefits." (A.G. Block, November 2000 Ballot Initiatives: Once More with Feeling?, California Journal, Sept., 2000, at 34.) They said, "[T]he measure creates a special retirement perk available only to legislators by allowing them to receive lifetime health benefits after only five years on the job, a benefit that other state employees must work longer to attain." (Id.)

ACA 12 was unanimously passed by the Senate on June 15, 2000. ACA 12 was filed with the Secretary of State on June 20, 2000 as Resolution Chapter 83. Since Resolution Chapter 83 is a proposed amendment to the constitution, it will be submitted to the voters for approval during the November 2000 election as Proposition 33.

2. Court Challenge to the Arguments Against Proposition 33 Contained in the Ballot Pamphlet

Bill Hauck, former Chairman of the California Constitution Revision Commission and a proponent of Proposition 33, petitioned the county of Sacramento Superior Court for a writ of mandate seeking to remove and amend arguments against Proposition 33 that were to be included in the November 2000 General Election ballot.

The law provides, "Not less than 20 days before he or she submits the copy for the ballot pamphlet to the State Printer, the Secretary of State shall make the copy available for public examination. Any elector may seek a writ of mandate requiring any copy to be amended or deleted from the ballot pamphlet." (Cal. Elec. Code § 9092 [Deering 2000].)

On July 25, 2000, the Secretary of State made available for public inspection the proposed November 2000 ballot pamphlet. (Petitioner's Memorandum of Points & Authorities in Support of Petition for Writ of Mandate at 1, [available at California Initiative Review, McGeorge School of Law, Sacramento, Cal.].) During the proposed ballot pamphlet's 20 day period for public review, Mr. Hauck petitioned the Superior Court to change statements made against the passage of Proposition 33 in the proposed ballot pamphlet. (Id.) In a memorandum to the Superior Court, Mr. Hauck claimed, "Opponents of Proposition 33 falsely characterize the language and effect of the Proposition as creating 'special benefits' for Legislators when the text clearly does not so provide, and they buttress their arguments with false and misleading statements about current legislative salaries and benefits." (Id.)

Mr. Hauck petitioned the Superior Court to delete from the proposed ballot pamphlet the statement, "Slowly but surely, the politicians have tried to restore their perks and benefits. Proposition 33 is their latest scheme." (Id. at 5.) Mr. Hauck claimed that since Article III, section 8 of the California Constitution prohibits legislators from being involved in the process of setting salaries and benefits, stating that politicians have been trying to restore perks and benefits was false and misleading. (Id.) Mr. Hauck also claimed that labeling Proposition 33 as the "latest scheme" was also false and misleading because Proposition 33 was the first and only initiative since 1990 seeking to amend Article IV, section 4.5 of the California Constitution. (Id.)

The proposed ballot pamphlet also stated "Proposition 33 changes the Constitution to give legislators special taxpayer-financed retirement benefits . . ." (Id.) Mr. Hauck petitioned the court to amend this statement to read, "Proposition 33 changes the Constitution to allow state legislators to participate in the Public Employees' Retirement System (PERS)." (Id.) Mr. Hauck argued that since Proposition 33 seeks only to allow legislators to participate in PERS in the same manner as other public employees, stating that Proposition 33 conferred special benefits was false and misleading. (Id at 6.)

The proposed ballot pamphlet stated, "In addition to the $100,000, they take over $24,000 in extra pay to cover expenses. But for some $124,000 is not enough." (Id.) Mr. Hauck petitioned the court to change this statement to read. "In addition to their salary legislators are entitled to reimbursement for living expenses, which depend upon the number of days they are required to be in Sacramento." (Id.) The proposed ballot pamphlet also stated, "Legislators already make over $125,000 a year." (Id. at 7.) Mr. Hauck sought to change this statement to, "Legislators' salaries are currently set at $99,000. In addition, they are entitled to some reimbursement for living expenses." (Id.)

Mr. Hauck reasoned that since 1) legislative salaries are $99,000 per year, and 2) living expenses are subject to the amount of days spent in Sacramento, and 3) not all legislators take their full salary or accept the full amount of living expenses, the proposed ballot statements were false and misleading. (Id. at 6-7.)

Mr. Hauck also sought to delete entirely from the proposed ballot pamphlet the statement,

In analyzing this constitutional amendment, the Department of Finance concluded: 'This bill is inequitable since, under the provisions of the bill, legislators would become eligible for full retiree health benefits . . . in five years, while state employees could be required to work 20 years to earn the same benefit. (Id. at 8.)

Mr. Hauck reasoned that this statement was false and misleading since the Department of Finance had revised its analysis as of July 26, 2000 to state that legislators could become eligible for full retirement health benefits after meeting a ten-year vesting requirement. (Id.)

Assembly members Bates and Strickland were assigned by Assembly Speaker Robert M. Hertzberberg to author the arguments against the adoption of Proposition 33. After Mr. Hauck filed his petition, Assembly Members Bates and Strickland stipulated they "agree that the language in those ballot materials challenged by petitioner should be stricken and replaced by the language proposed by petitioner, or deleted where appropriate." (Stipulation of Petitioner and Real Parties in Interest Patricia C. Bates and Tony Strickland at 1, [available at California Initiative Review, McGeorge School of Law, Sacramento, Cal.].) They stipulated they "no longer wish to be identified in the ballot pamphlet as authors of the Argument Against Proposition 33, Summary of Argument Proposition 33 or Rebuttal To Argument in Favor of Proposition 33 and request that the Secretary of State be directed to amend those materials to delete their names." (Id. at 2.)

3. Other Attempts to add Legislators to CalPERS

ACA 1 (1995)

On December 5, 1994 then Assembly Member John Burton (D-San Francisco) introduced ACA 1 of 1995. ACA 1 proposed to amend the California Constitution so that any legislator elected to or serving in the Legislature on or after November 1, 1990 shall participate in the Federal Social Security System and, "may elect to participate in the Public Employees' Retirement System." (ACA 1, 1995-96 Leg. Sess. [Cal.].)

ACA 1 was considered by the Assembly Committee on Public Employees, Retirement & Social Security at a hearing dated May 10, 1995. (ACA 1, Assembly Committee on Elections, Reapportionment and Constitutional Amendments Analysis, at 1 [May 10, 1995].) According to committee analysis, "The central argument for the passage of this provision of Proposition 140 was a strong voter reaction to what was perceived as an outrageously generous benefit for legislators at taxpayers expense. . . . This measure is a Constitutional Amendment and as such must go before the voters for adoption. But considering the overwhelming vote to prohibit pensions just 53 months ago, is it a wise expenditure of public funds to resubmit an amendment just to ask the public if they really mean it?" (Id. at 1-2.) ACA 1 did not proceed any further and died in committee.

ACA 1 of 1995 is similar to current ACA 12 of 2000 in that both bills seek to amend the California Constitution to grant legislators the option to participate in the Public Employees' Retirement System. Current ACA 12 of 2000, however, would only grant this option for state retirement plans in which a majority of the employees of the state may participate.

ACA 20 (1997)

On May 7, 1997, Assembly Member Sheila James Kuehl (D-Santa Monica) introduced ACA 20 of 1997. ACA 20 of 1997 was one of the stronger challenges to the provisions contained in Proposition 140. ACA 20 of 1997 proposed to make the same changes to the California Constitution that were proposed earlier by ACA 1 of 1995. (ACA 20, 1997-98 Leg. Sess.[Cal.].) In addition, ACA 20 of 1997 proposed to change Constitutional provisions imposing lifetime term limitations. (Id.) ACA 20 would have allowed legislators the option of participating in the Public Employees' Retirement System and also would have provided that no Senator may serve more than 3 consecutive 4-year terms and no Member of the Assembly may serve more than 6 consecutive 2-year terms." (Id. at 1.) ACA 20 of 1997 only made it to print.

ACA 7 (1999)

ACA 7 was introduced by Assembly members Brett Granlund (R-Yucaipa) and Papan on February 18, 1999. (ACA 7, 1999-2000 Leg. Sess.[Cal.].) ACA 7 of 1999 proposed to add a subsection to the California Constitution which would state, "Notwithstanding subdivision (a), a person elected to serve a term in the Legislature that commences on or after December 2, 2002, is eligible for participation in any state retirement plan that is available to a majority of the employees of the state. (Id. at 7.)

The legislative retirement provisions proposed by ACA 7 were similar to those contained in ACA 12 of 2000 except that ACA 7 would only allow those legislators elected to serve a term that begins on or after December 2, 2002 to participate in a state retirement plan available to a majority of the employees of the state. ACA 12 by comparison would allow any legislator elected on or after November 1, 1990 to participate in a state retirement plan available to a majority of the employees of the state. (Id.) ACA 7 also proposed to increase the number of years that legislators may serve commencing with the November 2002 election. (Id. at 2.) ACA 7 was heard by the Assembly Committee on Elections, Reapportionment and Constitutional Amendments on April 5, 1999, but the bill never made it to the Senate and subsequently died.

ACA 18 (1999)

ACA 18 was introduced by Assembly Member Papan on April 22, 1999. (ACA 18, 1999-2000 Leg. Sess.[Cal.].) ACA 18 of 1999 proposed to make the same changes to the California Constitution that were proposed by the introduced version of ACA 12 of 2000. (Id.)

ACA 18 also proposed to change the law regarding term limits. ACA 18 provided for submission to the electors in each Senate and Assembly district at specified successive general elections, a question as to whether the term limitations contained in the California Constitution would apply. If the question was not approved by a majority of the voters for that district then the term limitations would not apply for the succeeding two terms for senators or the succeeding three terms for assembly members. (Id.)

On September 7, 1999 Assembly Member Papan placed ACA 18 in the inactive file and it received no further legislative action.

ACA 7 and ACA 18, introduced by Assembly Member Papan, were strong challenges to Proposition 140 in that they attempted to change both the legislative retirement system and the legislators' term limits. ACA 12 by Assembly Member Papan, on the November 2000 ballot as Proposition 33, does not attempt to make any changes to the law regarding term limits for legislators.

III. Drafting Issues

The changes proposed by Proposition 33 appear straightforward. Legislators elected to, or serving in, the Legislature on or after November 1, 1990 participate in the federal Social Security System. Proposition 33 would grant these legislators the option of also participating in PERS in any state retirement plan in which a majority of state employees may participate. A question will likely arise as to how a legislator's health benefits would vest.

Health benefits received under PERS are subject to State vesting requirements. According to CalPERS, "vesting is the amount of time in State employment needed to be eligible to receive employer contributions toward the cost of the monthly premium during retirement." (California Public Employees' Retirement System, Health Program Handbook Rules and Regulations of the CalPERS Health Program California Public Employees' Retirement System at 5, [Sept. 2000] [hereinafter Handbook].)

Under Proposition 33 there is a question as to whether legislators will need ten or twenty years of service credit in order to qualify for all of the State's contribution.

A. Government Code section 22825.3

Under Government Code section 22825.3 employees first hired by the State after January 1, 1989 must have twenty years of service credit in order to qualify for all of the State's contribution towards their health coverage. (Cal. Gov't Code § 22825.3 [Deering 2000].) Those employees who have served less then twenty years will have the State's contribution reduced depending on the amount of service credit earned. (Handbook at 6.) No State contribution will be given for employees earning less than ten years of service credit. (Id.)

Subsection (a) of section 22825.3 applies to "members in state bargaining units". (Cal. Gov't Code § 22825.3 (a) [Deering 2000].) Since legislators do not participate in these state bargaining units, subsection (a) would not apply to legislators.

There is some question as to whether legislators who become members of PERS after January 1, 1990 would be subject to the twenty year requirement of section 22825.3 through subsection (b), which applies to state employees who are, "excepted from the definition of state employee in subdivision (c) of Section 3513." (Cal. Gov't Code § 22825.3 (b) [Deering 2000].) "Supervisory employees" are excepted from the definition of state employee. (Cal. Gov't Code § 3513 (c) [Deering 2000].) A "supervisory employee" is,

any individual, regardless of the job description or title, having authority, in the interest of the employer, to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or responsibility to direct them, or to adjust their grievances, or effectively to recommend this action, if, in connection with the foregoing, the exercise of this authority is not of a merely routine or clerical nature, but requires the use of independent judgment. (Cal. Gov't Code § 3513 (g) [Deering 2000].)

Legislators exercise over their legislative staff much of the authority listed in the definition of "supervisory employee." Therefore legislators may qualify as "supervisory employees".

Since legislators may qualify as "supervisory employees", they could be considered excepted from the definition of "state employee". As a result, legislators who become members of PERS after January 1, 1990 could be subject to the twenty-year requirement.

However, there is some difficulty with applying the twenty year requirement of section 22825.3 to legislators. Section 3513 applies to chapter 10.3 of the Government Code entitled, "State Employer-Employee Relations." The express purpose of this chapter is to, "promote the improvement of personnel management and employer-employee relations within the State of California by providing a uniform basis for recognizing the right of state employees to join organizations of their own choosing and be represented by those organizations in their employment relations with the state." (Cal. Gov't Code § 3512 [Deering 2000].) Therefore, this chapter of the Government Code was created to allow state employees to join organizations that would represent their employment relations with the State.

It appears that the definitions contained in section 3513 were never meant to apply to legislators and, therefore, the twenty-year requirement probably should not apply to legislators.

B. Government Code Section 22825.2

Government Code section 22825.2 provides that employees first hired by the State between January 1, 1985 and January 1, 1989 must have ten years of service to qualify for all of the State's contribution. (Cal. Gov't Code § 22825.2 [Deering 2000].) Those employees who have served less than ten years will have the State's contribution reduced by ten percent for each year of service under ten years. (Handbook at 5)

"This section does not apply to employees of the California State University or of the Legislature." (Cal. Gov't Code § 22825.2 [Deering 2000].) However, legislators would probably not be considered employees of the legislature since they are the Legislature. Therefore, legislators who become members of PERS between January 1, 1985 and January 1, 1989 would probably be subject to the ten year vesting requirement of section 22825.2.

Since Government Code section 22825.3 appears inapplicable to legislators, and section 22825.2 would only apply to those legislators who became members of PERS between January 1, 1985 and January 1, 1989, a big question remains as to how the health benefits of a legislator who became a member of PERS either before January 1, 1985 or after January 1, 1989 would vest.

IV. Constitutional Issues

Proposition 33 does not appear to raise significant constitutional issues. Under the California Constitution, legislators' compensation, including benefits, is set by the California Citizens Compensation Commission. (Cal. Const. art III, §8.) This commission is responsible for establishing and adjusting the "annual salary and medical, dental, insurance, and other similar benefits of state officers." (Id.) If Proposition 33 is adopted, the Commission could adjust the salary and benefits received by legislators to reflect the new option of participating in PERS.

V. Public Policy Considerations

Proposition 33 raises two general policy considerations. First, does Proposition 33 confer special benefits to legislators, or would it merely treat legislators in the same manner as other state workers? Second, would Proposition 33 encourage everyone, not just the wealthy, to serve in the legislature?

Proposition 33 is supported by Peter Szego, Chair State Legislative Committee American Association of Retired Person; Allan Zaremberg, President California Chamber of Commerce; Dan Terry, President California Professional Firefighters; Dr. William Crist, President Board of Administration, California Public Employees' Retirement System; Bill Hauck Former Chairman California Constitution Revision Commission; and Mark Muscardini, President California Association of Highway Patrolmen. (Legislature Participation in Public Employees' Retirement System. Legislative Constitutional Amendment, California Official Voter Guide, at 10-11 [2000].)

Proposition 33 is opposed by Randy Thomasson, Executive Director Campaign for California Families; Rick Gann, Director of Legal Affairs, Paul Gann's Spirit of 13 Committee; Peter F. Schabarum, Co-Author Proposition 140; Ernest F. Dydna, President United Organization of Taxpayers; and Lewis K. Uhler, President National Tax Limitation Committee. (Id.)

1. Does Proposition 33 confer special benefits to Legislators, or would it merely treat legislators in the same manner as other state workers?

Supporters of Proposition 33 argue, "Proposition 33 only allows members of the Legislature to participate in the same pension plan as every other state employee. No additional perks." (Id. at 11) Supporters of Proposition 33 also state, "Proposition 33 will require legislators to contribute to the pension plan from their own salaries, just like every other state employee. (Id.)

Proposition 33 would allow legislators to participate only in a state retirement plan in which a majority of the employees of the state may participate. Since Proposition 33 would amend the Constitution, the requirement that legislators only participate in a state retirement plan available to a majority of state employees would be constitutional. Therefore, Proposition 33 would treat legislators in the same manner as other state employees. Proposition 33 may even put legislators in a less favorable position as other state workers by permitting legislators to participate only in a state retirement plan available to a majority of state employees.

Opponents of Proposition 33 argue that legislators want, "special treatment-yet another perk that is not available to any citizen working in the private sector." (Id.) Since Proposition 33 would only allow legislators to participate in a state retirement plan in which a majority of the employees of the state may participate, it appears unfair to characterize this option as being "special treatment" or a "perk". While this option may not be available to those in the private sector, PERS was created as a retirement plan for state employees.

Opponents also argue, "Proposition 33 does not treat state lawmakers 'like all other public employees', as claimed by the proponent's argument." (Id. at 10.) Opponents of Proposition 33 quote the Department of Finance as saying the, "bill is inequitable since... legislators could become eligible for full retiree health benefits upon meeting a 10 year vesting requirement, while state employees could be required to work 20 years to earn the same benefit." (Id.)

It would appear unfair to state that because some state employees would have different health benefit vesting requirements, legislators would not be treated like all other state employees. Since there are different levels of vesting requirements for retiree health benefits within PERS, under current law it would be unavoidable that some state workers would fall within vesting categories different from the one applicable to legislators. Proposition 33 would only allow legislators to participate in a state retirement plan available to a majority of state employees.

2. Would Proposition 33 encourage everyone, not just the wealthy, to serve in the Legislature?

Supporters of Proposition 33 argue, "Nurses, Teachers, Firefighters, Farmers-people from these jobs can't retire on their investments, they need pension plans. And if we don't treat lawmakers like every other public employee, then soon we'll only have candidates rich enough not to need pensions." (Id. at 10.) Supporters of Proposition 33 also state, "Thus, your neighbors and friends, school teachers, factory and high-tech workers, middle-income citizens of all types are effectively discouraged from running for office. That means we all forfeit our Legislature to rich or well-to-do Californians with substantial and secure financial means." (Id. at 11.)

It is questionable as to whether the majority of the people specifically mentioned would be discouraged from running for office without the benefits of Proposition 33. Since legislators currently receive a salary of $99,000 per year many nurses, teachers, firefighters and others would receive an increase over their current salaries. This increase in salary may offset any disincentive to serve in the California Legislature caused by Proposition 140.

Opponents to Proposition 33 argue, "State Legislators are eligible for a $99,000 salary and some reimbursement for living expenses. They should use some of that to invest for their own retirement, rather than asking taxpayers to foot the bill." (Id. at 10.) Opponents to Proposition 33 also state, " Serving in the Legislature is a privilege and an honor. We do not need to entice people to run for office with promises of a taxpayer-paid luxury retirement." (Id.)

Proposition 33 would only allow legislators to participate in a system available to the majority of the employees of the state. Therefore, the characterization of this option as being a "taxpayer-paid luxury retirement" appears extreme. However, it is likely that civic-minded people from all walks of life will continue to serve in the legislature with or without Proposition 33.

VI. Conclusion

In November, California voters will decide whether members of the state legislature deserve the same retirement benefits that state employees currently enjoy. Supporters of Proposition 33 contend that without this measure, members of the legislature and their families will continue to be denied benefits that other state employees are allowed. However, opponents argue that Proposition 33 is yet another attempt to confer special benefits upon politicians who already earn high salaries -- at taxpayers' expense.

While the language of the initiative seems clear, application problems may arise in the area of vesting. If the voters approve Proposition 33, a court may have to decide how long members of the Legislature must serve before their benefits fully vest.