Bill Text: CA SB864 | 2013-2014 | Regular Session | Amended

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Bill Title: State teachers' retirement: Defined Benefit Program: funding.

Spectrum: Partisan Bill (Democrat 2-0)

Status: (Engrossed - Dead) 2014-06-12 - From committee with author's amendments. Read second time and amended. Re-referred to Com. on BUDGET. [SB864 Detail]

Download: California-2013-SB864-Amended.html

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BILL NUMBER: SB 864	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  JUNE 12, 2014

INTRODUCED BY    Committee on Budget and Fiscal Review
  Senator   Torres 
    (   Principal coauthor:   Assembly Member
  Bonta   ) 

                        JANUARY 9, 2014

    An act relating to the Budget Act of 2014.  
An act to amend Sections 22140, 22141, 22905, 22955, and 22955.5 of,
to add Sections 22002.5, 22901.7, 22957, and 22958 to, and to add
and repeal Sections 22311.9, 22950.5, and 22955.1 of, the Education
Code, relating to state teachers' retirement, and making an
appropriation therefor, to take effect immediately, bill related to
the budget. 



	LEGISLATIVE COUNSEL'S DIGEST


   SB 864, as amended,  Committee on Budget and Fiscal Review
  Torres  . Budget Act of 2014. 
 State teachers' retirement: Defined Benefit Program: funding.
 
   The State Teacher's Retirement Law (STRL) creates the Defined
Benefit Program of the State Teachers' Retirement Plan for the
provision of benefits to members of the plan, which is administered
by the Teachers' Retirement Board (board). The Defined Benefit
Program is funded by employer and employee contributions as well as
investment returns and state appropriations. Employee and employer
contributions are deposited in the Teachers' Retirement Fund, which
is continuously appropriated. The Defined Benefit Program provides
for an improvement factor, as defined, to be applied to monthly
allowances or benefits of retired members of the system, as
specified. STRL specifies that the Legislature reserves the right to
adjust the amount of the improvement factor as economic conditions
dictate, provided that an adjustment is prohibited from reducing the
retirement allowance, annuity, or benefit below that which would have
been payable to the recipient. Existing case law holds that the
right to a pension is a contractually protected vested right and that
the specific provisions of a pension system that a member earns
through employment may be modified to the detriment of the member
only if a comparable new advantage is provided.  
   This bill, beginning July 1, 2014, would vest the improvement
factor, as described above, as a benefit for an active member in any
calendar year in which active members paid increased member
contributions, pursuant to specified provisions. The bill would
condition this vesting on the increased member contributions and if
those contributions cease to be required, the Legislature would
reserve the right to adjust the improvement factor, as specified. The
bill would state that the vesting of the improvement factor is a
comparable new advantage provided in exchange for the contribution
increases and is contractually enforceable.  
   The bill would also increase employer and state contributions to
the Defined Benefit Program according to prescribed schedules, to be
operative until July 1, 2046, or until the Director of Finance makes
a certain determination of the status of these increases in
connection with constitutionally required funding for schools or
reimbursable mandates for local entities and provides notice of that
determination, as specified. By increasing amounts deposited in a
continuously appropriated fund, this bill would make an
appropriation.  
   This bill would prescribe requirements for any action or
proceeding challenging the validity of any matter authorized by its
provisions, including that any challenge be filed within 60 days. The
bill would require, until July 1, 2046, that the Teachers'
Retirement Board report to the Legislature on or before July 1, 2019,
and every 5 years thereafter, on the fiscal health of the Defined
Benefit Program and the unfunded actuarial obligation with respect to
the service of certain members and funding adjustments needed to
eliminate by June 30, 2046, those obligations, among other things.
The bill would prescribe how excess contributions to the Defined
Benefit Supplement account are to be returned. The bill make certain
findings and declarations and conforming changes. The bill would
provide that its provisions are not severable.  
   This bill would declare that it is to take effect immediately as a
bill providing for appropriations related to the Budget Bill. 

   This bill would express the intent of the Legislature to enact
statutory changes relating to the Budget Act of 2014. 
   Vote: majority. Appropriation:  no   yes
 . Fiscal committee:  no   yes  .
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

   SECTION 1.    Section 22002.5 is added to the 
 Education Code   , to read:  
   22002.5.  The Legislature finds and declares all of the following:

   (a) The current and projected assets of the State Teachers'
Retirement Plan administered by the State Teachers' Retirement System
with respect to the Defined Benefit Program are insufficient to meet
the obligations of that program already accrued or projected to be
accrued in the future with respect to service credited to members of
that program before July 1, 2014.
   (b) Various legal rulings have determined that vested contractual
rights of existing members generally cannot be changed without
providing a comparable new advantage.
   (c) The improvement factor currently provided under the Defined
Benefit Program pursuant to Sections 22140 and 22141, as those
sections read before July 1, 2014, is not a contractually enforceable
promise.
   (d) The Legislature hereby increases the contributions of active
members by an amount not to exceed the normal cost of the improvement
factor, providing a comparable new advantage by removing the
statutory right to adjust the improvement factor, and thereby
establishing the improvement factor as a contractually enforceable
promise.
   (e) The statutory changes adopted by the act that added this
section address the long-term funding needs of the Defined Benefit
Program in a manner that allocates increased contributions among
members of the system and school employers, consistent with the
contractual rights of existing members.
   (f) The provisions of the act that added this section were based
on various legal understandings and would not have been adopted
without those understandings. The new obligations and benefits
provided in Sections 7 and 9 of the act adding this section are
contingent on those legal understandings being accurate. Thus if
there is a final unappealable judicial decision that holds that the
increased contributions in Section 22950.5 constitute a new
functional responsibility for schools and community colleges pursuant
to subdivision (c) of Section 41204, and correspondingly require an
adjustment pursuant to subdivision (b) of Section 8 of Article XVI of
the California Constitution, or a final unappealable administrative
or judicial decision that holds that the increased contributions in
Section 22950.5 constitutes a reimbursable mandate pursuant to
Article XIII B of the California Constitution, then it is the intent
of the Legislature that the provisions added by the act adding this
section shall cease to be effective.
   (g) It is in the public interest and a matter of urgency to
authorize, and to implement as soon as possible, a remedy to the
funding problem of the system. This remedy is necessary to ensure
that funds will be available to support a pension system upon which
hundreds of thousands of teachers rely and for which the current
funding structure raises significant fiscal policy concerns.
   (h) It is of great importance to the state, the system, and school
districts that there not be long term doubt about the feasibility of
the solutions provided in the act that added this section. In order
to fulfill the important objective of facilitating the system's and
school districts' financial transactions the legality of the act that
added this section must be quickly affirmed. The system, school
districts, and teachers need to settle promptly all questions about
the validity of each other's duties and obligations under this
statute.
   (i) It is well-established that the terms and conditions of public
retirement plans generally are established by statute or other
comparable enactment rather than by contract. Statutes governing the
terms of compensation and deferred compensation of public employees
are thus significant financial obligations contemplated and covered
by Chapter 9 (commencing with Section 860) of Title 10 of Part 2 of
the Code of Civil Procedure. 
   SEC. 2.    Section 22140 of the   Education
Code   is amended to read: 
   22140.  (a) "Improvement factor," with respect to the Defined
Benefit Program, means an increase of 2 percent in monthly
allowances. The improvement factor shall be added to a monthly
allowance each year on September 1, commencing on September 1
following the first anniversary of the effective date of retirement,
or the date on which the monthly allowance commenced to accrue to any
beneficiary, or other periods specifically stated in this part.
   (b) The improvement factor may not be compounded nor shall it be
applicable to annuities payable from the accumulated annuity deposit
contributions or the accumulated tax-sheltered annuity contributions.
 The  
   (c) Beginning July 1, 2014, the improvement factor shall vest for
an active member in any calendar year in which active members paid
increased member contributions pursuant to Section 22901.7. 

   (d) If, for any reason, the increased employee contribution
referenced in subdivision (c), and as required by subdivisions (a)
and (b) of Section 22901.7, ceases to be legally required to be made
pursuant to the act that added this subdivision, then the Legislature
reserves the right to adjust the amount of the improvement factor up
or down as the economic conditions dictate for all members who
retire on or after January 1, 2014. No adjustments of the improvement
factor shall reduce the monthly retirement allowance or benefit
below that which would be payable to the recipient under this part
had this section not been enacted. 
    (e)     For members who retired before the
calendar year in which Section 22901.7 was added  the 
Legislature reserves the right to adjust the amount of the
improvement factor up or down as economic conditions dictate. Any
adjustment of the improvement factor may not reduce the monthly
retirement allowance or annuity below that which would be payable to
the recipient under this part had this section not been enacted.
   SEC. 3.    Section 22141 of the   Education
Code   is amended to read: 
   22141.   (a)    Notwithstanding Section 22140,
"improvement factor" means an increase of 2 percent in benefits
provided under Sections 24408 and 24409 for each year commencing on
September 1, 1981, and under Section 24410.5 for each year commencing
September 1, 2001, and under Sections 24410.6 and 24110.7 for each
year commencing September 1, 2002. The factor shall not be compounded
nor shall it be applicable to annuities payable from the accumulated
annuity deposit contributions or the accumulated tax-sheltered
annuity contributions. The Legislature reserves the right to adjust
the amount of the improvement factor up or down as the economic
conditions dictate. No adjustments of the improvement factor shall
reduce the monthly retirement allowance or benefit below that which
would be payable to the recipient under this part had this section
not been enacted. 
   (b) Beginning July 1, 2014, the improvement factor shall vest for
an active member in any calendar year in which active members paid
increased member contributions pursuant to Section 22901.7. 

   (c) If, for any reason, the increased employee contribution
referenced in subdivision (b), and as required by subdivisions (a)
and (b) of Section 22901.7, ceases to be legally required to be made
pursuant to the act that added this subdivision, then the Legislature
reserves the right to adjust the amount of the improvement factor up
or down as the economic conditions dictate for all members who
retire on or after January 1, 2014. No adjustments of the improvement
factor shall reduce the monthly retirement allowance or benefit
below that which would be payable to the recipient under this part
had this section not been enacted.  
   (d) For members who retired before the calendar year in which
Section 22901.7 was added, the Legislature reserves the right to
adjust the amount of the improvement factor up or down as the
economic conditions dictate. No adjustments of the improvement factor
shall reduce the monthly retirement allowance or benefit below that
which would be payable to the recipient under this part had this
section not been enacted. 
   SEC. 4.    Section 22311.9 is added to the  
Education Code   , to read:  
   22311.9.  (a) The board shall report to the Legislature on or
before July 1, 2019, and every five years thereafter, on the fiscal
health of the Defined Benefit Program and the unfunded actuarial
obligation with respect to service credited to members of that
program before July 1, 2014. The first report shall include the
unfunded actuarial obligation and funded ratio as of the date of
enactment of this section and compare that with the unfunded
actuarial obligation and funded ratio as of June 30, 2018, and the
projected unfunded actuarial obligation and funded ratio as of June
30, 2046, based on contributions, and economic and demographic
assumptions identified in the June 30, 2018, actuarial valuation. The
report shall also identify adjustments required in contribution
rates in order to eliminate by June 30, 2046, the unfunded actuarial
obligation of the Defined Benefit Program with respect to service
credited to members of that program before July 1, 2014. Subsequent
reports shall include the unfunded actuarial obligation and the
funded ratio of the Defined Benefit Program based on the actuarial
valuation of the preceding year, and shall identify adjustments
required in contribution rates in order to eliminate by June 30,
2046, the unfunded actuarial obligation of the Defined Benefit
Program with respect to service credited to members of that program
before July 1, 2014. These reports shall be provided consistent with
the requirements of Section 9795 of the Government Code.
   (b) This section shall become inoperative on July 1, 2046, and as
of January 1, 2047, is repealed. 
   SEC. 5.    Section 22901.7 is added to the  
Education Code   , to read:  
   22901.7.  (a) Commencing July 1, 2014, the amount of contributions
required under subdivision (a) of Section 22901 and Section 22901.3
as it applies to a member who is not subject to the Public Employees'
Pension Reform Act of 2013 shall increase by the percentage of the
member's compensation that is creditable to the Defined Benefit
Program as follows:
   (1) On July 1, 2014, by 0.15 percent.
   (2) On July 1, 2015, by 1.20 percent.
   (3) On July 1, 2016, by 2.25 percent.
   (b) Commencing July 1, 2014, the amount of contributions required
under subdivision (b) of  Section 22901 and Section 22901.3 as it
applies to members who are subject to the Public Employees' Pension
Reform Act of 2013 shall increase by the following percentages of the
member's compensation that is creditable to the Defined Benefit
Program as follows:
   (1) On July 1, 2014, by 0.15 percent.
   (2) On July 1, 2015, by 0.56 percent.
   (3) On July 1, 2016, by 1.205 percent.
   (c) The act adding this section establishes the improvement factor
provided pursuant to Sections 22140 and 22141 as a vested benefit
pursuant to a contractually enforceable promise and a comparable new
advantage in exchange for the contribution increases made pursuant to
this section. 
   SEC. 6.    Section 22905 of the   Education
Code   is amended to read: 
   22905.  (a) Member contributions pursuant to  Section
  Sections  22901,  22901.3, and 22901.7, 
employer contributions pursuant to Section 22903 or 22904, and
member contributions made by an employer pursuant to Section 22909
shall be credited to the member's individual account under the
Defined Benefit Program or the Defined Benefit Supplement Program,
whichever is applicable pursuant to the provisions of this part.
   (b) Except as provided in subdivision  (f),  
(g),  member and employer contributions, exclusive of
contributions pursuant to  Section   Sections
22901.7, 22950.5, and 22951, on a member's compensation under
the following circumstances shall be credited to the member's Defined
Benefit Supplement account:
   (1) Compensation for creditable service that exceeds one year in a
school year.
   (2) Compensation that is consistent with subdivision (b) of
Section 22119.2.
   (3) Compensation that is paid for a limited number of times as
specified by law, a collective bargaining agreement, or an employment
agreement.
   (c) A member may not make voluntary pretax or posttax
contributions under the Defined Benefit Supplement Program, except as
provided in subdivision (d), nor may a member redeposit amounts
previously distributed based on the balance in the member's Defined
Benefit Supplement account.
   (d) Member and employer contributions pursuant to paragraph (1) of
subdivision (b) under the Defined Benefit Supplement Program shall
be credited to the accounts of members as of July 1 each year
following a determination by the system under the provisions of this
part that those contributions should be credited to the Defined
Benefit Supplement Program. Any other contributions under the Defined
Benefit Supplement Program pursuant to paragraph (2) or (3) of
subdivision (b), shall be credited to the individual account of the
member upon receipt by the system. Contributions to a member's
Defined Benefit Supplement account shall be identified separately
from the member's contributions credited under the Defined Benefit
Program. 
   (e) Any contributions on compensation that is creditable to the
Defined Benefit Supplement account shall be limited to the
contributions made pursuant to Sections 22901, 22901.3, 22950, and
22951. Any excess member contributions, as determined by the system,
shall be returned to the member through the employer and any excess
employer contributions shall be returned to the employer. 

   (e) 
    (f)  The provisions of this section shall become
operative on July 1, 2002, if the revenue limit cost-of-living
adjustment computed by the Superintendent of Public Instruction for
the 2001-02 fiscal year is equal to or greater than 3.5 percent.
Otherwise this section shall become operative on July 1, 2003.

   (f) 
    (g)  Paragraphs (2) and (3) of subdivision (b) shall not
apply to a member subject to the California Public Employees'
Pension Reform Act of 2013.
   SEC. 7.    Section 22950.5 is added to the  
Education Code   , to read:  
   22950.5.  (a) Commencing July 1, 2014, the amount of contributions
required under subdivision (a) of Section 22950 shall increase by
the following percentages of the creditable compensation upon which
members' contributions under the Defined Benefit Program are based:
   (1) On July 1, 2014, by 0.63 percent.
   (2) On July 1, 2015, by 2.48 percent.
   (3) On July 1, 2016, by 4.33 percent.
   (4) On July 1, 2017, by 6.18 percent.
   (5) On July 1, 2018, by 8.03 percent.
   (6) On July 1, 2019, by 9.88 percent.
   (7) On July 1, 2020, by 10.85 percent.
   (b) (1) For fiscal year 2021-22 and each fiscal year thereafter,
the board shall increase or decrease the percentages paid specified
in this section from the percentage paid during the prior fiscal year
to reflect the contribution required to eliminate by June 30, 2046,
the remaining unfunded actuarial obligation with respect to service
credited to members before July 1, 2014, as determined by the board
based upon a recommendation from its actuary.
   (2) If a rate adjustment is required, the percentages authorized
in paragraph (1) shall not change in any single fiscal year by more
than 1.00 percent of the creditable compensation upon which members'
contributions to the Defined Benefit Program are based. The
percentages described in subdivision (a) and as may be adjusted
pursuant to this subdivision shall not exceed 12.00 percent of the
creditable compensation upon which members' contributions to the
Defined Benefit Program are based, inclusive of the percentages
identified in subdivision (a).
   (3) The board shall not increase the rates in order to supplant
the state's obligation pursuant to Section 22955.1.
   (c) (1) Except as described in paragraph (2), this section shall
become inoperative on July 1, 2046, and as of January 1, 2047, is
repealed.
   (2) Notwithstanding paragraph (1), on July 1 of the first fiscal
year after a 30-day notice has been sent to the Joint Legislative
Budget Committee and the Controller in compliance with subdivision
(d) of Section 22957, this section shall become inoperative and, as
of the following January 1, is repealed. 
   SEC. 8.    Section 22955 of the   Education
Code   is amended to read: 
   22955.  (a) Notwithstanding Section 13340 of the Government Code,
commencing July 1, 2003, a continuous appropriation is hereby
annually made from the General Fund to the Controller, pursuant to
this section, for transfer to the Teachers' Retirement Fund. The
total amount of the appropriation for each year shall be equal to
2.017 percent of the total of the creditable compensation of the
fiscal year ending in the immediately preceding calendar year upon
which members' contributions are based, as reported annually to the
Director of Finance, the Chairperson of the Joint Legislative Budget
Committee, and the Legislative Analyst pursuant to Section 22955.5,
and shall be divided into four equal payments. The payments shall be
made on, or the following business day after, July 1, October 1,
December 15, and April 15 of each fiscal year.
   (b) Notwithstanding Section 13340 of the Government Code,
commencing October 1, 2003, a continuous appropriation, in addition
to the appropriation made by subdivision (a), is hereby annually made
from the General Fund to the Controller for transfer to the Teachers'
Retirement Fund. The total amount of the appropriation for each year
shall be equal to 0.524 percent of the total of the creditable
compensation of the fiscal year ending in the immediately preceding
calendar year upon which members' contributions are based, as
reported annually to the Director of Finance, the Chairperson of the
Joint Legislative Budget Committee, and the Legislative Analyst
pursuant to Section 22955.5, and shall be divided into four equal
quarterly payments. The percentage shall be adjusted to reflect the
contribution required to fund the normal cost deficit or the unfunded
obligation as determined by the board based upon a recommendation
from its actuary. If a rate increase is required, the adjustment may
be for no more than 0.25 percent per year and in no case may the
transfer made pursuant to this subdivision exceed 1.505 percent of
the total of the creditable compensation of the fiscal year ending in
the immediately preceding calendar year upon which members'
contributions are based. At any time when there is neither an
unfunded obligation nor a normal cost deficit, the percentage shall
be reduced to zero. The funds transferred pursuant to this
subdivision shall first be applied to eliminating on or before June
30, 2027, the unfunded actuarial liability of the fund identified in
the actuarial valuation as of June 30, 1997.
   (c) For the purposes of this section, the term "normal cost
deficit" means the difference between the normal cost rate as
determined in the actuarial valuation required by Section 22311 and
the total of the member contribution rate required under Section
22901 and the employer contribution rate required under Section
22950, and shall exclude (1) the portion for unused sick leave
service credit granted pursuant to Section 22717, and (2) the cost of
benefit increases that occur after July 1, 1990. The contribution
rates prescribed in Section 22901 and Section 22950 on July 1, 1990,
shall be utilized to make the calculations. The normal cost deficit
shall then be multiplied by the total of the creditable compensation
upon which member contributions under this part are based to
determine the dollar amount of the normal cost deficit for the year.
   (d) Pursuant to Section 22001 and case law, members are entitled
to a financially sound retirement system. It is the intent of the
Legislature that this section shall provide the retirement fund
stable and full funding over the long term.
   (e) This section continues in effect but in a somewhat different
form, fully performs, and does not in any way unreasonably impair,
the contractual obligations determined by the court in California
Teachers' Association v. Cory, 155 Cal.App.3d 494.
   (f) Subdivision (b) shall not be construed to be applicable to any
unfunded liability resulting from any benefit increase or change in
contribution rate under this part that occurs after July 1, 1990.
   (g) The provisions of this section shall be construed and
implemented to be in conformity with the judicial intent expressed by
the court in California Teachers' Association v. Cory, 155
Cal.App.3d 494.
   (h)  This section   Subdivisions (a) through
(g), inclusive,  shall  become operative  
be inoperative  on  and after  July 1,  2003,
if the revenue limit cost-of-living adjustment computed by the
Superintendent of Public Instruction for the 2001-02 fiscal year is
equal to or greater than 3.5 percent. Otherwise this section shall
become operative on July 1, 2004.   2014, and shall
become operative beginning the earlier of July 1, 2046, or July 1 of
the first fiscal year after a 30-day notice has been sent to the
Joint Legislative Budget Committee and the Controller in compliance
with subdivision (d) of Section 22957. 
   SEC. 9.    Section 22955.1 is added to the  
Education Code   , to read:  
   22955.1.  (a) Notwithstanding Section 13340 of the Government
Code, commencing July 1, 2003, a continuous appropriation is hereby
annually made from the General Fund to the Controller, pursuant to
this section, for transfer to the Teachers' Retirement Fund. The
total amount of the appropriation for each year shall be equal to
2.017 percent of the total of the creditable compensation of the
fiscal year ending in the immediately preceding calendar year upon
which members' contributions are based, as reported annually to the
Director of Finance, the Chairperson of the Joint Legislative Budget
Committee, and the Legislative Analyst pursuant to Section 22955.5,
and shall be divided into four equal payments. The payments shall be
made on, or the following business day after, July 1, October 1,
December 15, and April 15 of each fiscal year.
   (b) (1) Commencing July 1, 2014, the amount of the appropriation
required under subdivision (a) shall increase by the following
percentages of the creditable compensation upon which that
appropriation is based:
   (A) On July 1, 2014, by 1.437 percent.
   (B) On July 1, 2015, by 2.874 percent.
   (C) On July 1, 2016, by 4.311 percent.
   (2) For fiscal year 2017-18 and each fiscal year thereafter, the
board shall increase or decrease the percentage specified in this
subdivision from the percentage paid during the prior fiscal year to
reflect the contribution required to eliminate the remaining unfunded
actuarial obligation, as determined by the board based upon a
recommendation from its actuary. If a rate increase is required, the
adjustment may be for no more than 0.50 percent per year of the total
of the creditable compensation of the fiscal year ending in the
immediately preceding calendar year upon which members' contributions
are based. At any time when there is not an unfunded actuarial
obligation as determined by the board, the percentage specified in
this subdivision shall be reduced to zero.
   (c) Pursuant to Section 22001 and case law, members are entitled
to a financially sound retirement system. It is the intent of the
Legislature that this section shall provide the retirement fund
stable and full funding over the long term.
   (d) This section continues in effect but in a somewhat different
form, fully performs, and does not in any way unreasonably impair,
the contractual obligations determined by the court in California
Teachers' Association v. Cory, 155 Cal.App.3d 494.
   (e) Subdivision (b) shall not be construed to be applicable to any
unfunded actuarial obligation resulting from any benefit increase or
change in member or employer contribution rate under this part that
occurs after July 1, 1990.
   (f) The provisions of this section shall be construed and
implemented to be in conformity with the judicial intent expressed by
the court in California Teachers' Association v. Cory, 155
Cal.App.3d 494.

    (g) (1)  Except as described in paragraph (2), this section shall
become inoperative on July 1, 2046, and as of January 1, 2047, is
repealed.
   (2) Notwithstanding paragraph (1), on July 1 of the first fiscal
year after a 30-day notice has been sent to the Joint Legislative
Budget Committee and the Controller in compliance with subdivision
(d) of Section 22957, this section shall become inoperative and, as
of the following January 1, is repealed. 
   SEC. 10.    Section 22955.5 of the  
Education Code   is amended to read: 
   22955.5.  (a) For purposes of Sections  22954 
 22954, 22955,  and  22955,   22955.1,
 "creditable compensation" shall include only creditable
compensation for which member contributions are credited under the
Defined Benefit Program.
   (b) On or after October 1 and on or before October 25 of each
year, beginning in 2008, the board shall calculate the total amount
of creditable compensation for the fiscal year that ended on the
immediately preceding June 30. For the purpose of informing the
Department of Finance and the Legislature of the amount of the state'
s appropriations pursuant to Sections  22954  
22954, 22955,  and  22955   22955.1 
in the next fiscal year, the system shall immediately submit a report
that includes this calculation to the Director of Finance, the
Chairperson of the Joint Legislative Budget Committee, and the
Legislative Analyst.
   (c) After submission of the report described in subdivision (b),
on or before the April 15 after submission of the report described in
subdivision (b), the system shall notify the Director of Finance,
the Chairperson of the Joint Legislative Budget Committee, and the
Legislative Analyst of any revisions in its calculation of the total
amount of creditable compensation for the fiscal year that ended on
the immediately preceding June 30.
   (d) The last revised calculation submitted pursuant to subdivision
(c) on or before April 15 of each year or, if no such revised
calculation is submitted, the calculation in the report submitted
pursuant to subdivision (b) shall be the calculation of creditable
compensation upon which the state's appropriations pursuant to
Sections  22954   22954, 22955,  and
 22955   22955.1  will be based in the next
fiscal year. On or after April 15 and on or before May 1 of each
year, the system shall submit to the Controller a copy of this
calculation, along with a requested schedule of transfers to be made
pursuant to the appropriations in Sections  22954 
 22954, 22955,  and  22955   22955.1
 in the next fiscal year beginning on the next July 1. The
system shall also provide a copy of this schedule to the Director of
Finance and the Legislative Analyst.
   SEC. 11.    Section 22957 is added to the  
Education Code   , to read:  
   22957.  (a) The Legislature hereby finds and declares that the
provisions of Section 22950.5 do not constitute a new functional
responsibility for schools and community colleges pursuant to
subdivision (c) of Section 41204, and do not require an adjustment
pursuant to subdivision (b) of Section 8 of Article XVI of the
California Constitution. The Legislature further finds and declares
that the provisions of Section 22950.5 do not constitute a
reimbursable mandate for school districts pursuant to Article XIII B
of the California Constitution. Any challenge to these findings shall
be filed in Sacramento Superior Court within 60 days of the
effective date of the act adding this section. Any action so filed
shall be consolidated with any action filed pursuant to Section
22958.
   (b) On or before June 1 of each year, the Director of Finance
shall determine if an adjustment to the constitutional minimum
guarantee of funding for schools shall be made pursuant to a final,
unappealable judicial decision holding that the increased
contributions in Section 22950.5 constitute a new functional
responsibility for schools and community colleges, pursuant to
subdivision (c) of Section 41204, or any other final, unappealable,
judicial decision holding that the increased contributions in Section
22950.5 require an adjustment in funding provided to schools and
community colleges pursuant to subdivision (b) of Section 8 of
Article XVI of the California Constitution. If the Director of
Finance estimates that an adjustment will require increased General
Fund expenditures of more than ten million dollars ($10,000,000),
then the determination described in this subdivision shall be
considered to have been met. This estimate shall be calculated solely
within the discretion of the Director of Finance.
   (c) On or before June 1 of each year, the Director of Finance
shall determine if any amounts are needed to fund school districts or
other local governments due to a final unappealable administrative
or judicial decision holding that the increased contributions in
Section 22950.5 constitute a reimbursable mandate pursuant to Article
XIII B of the California Constitution. If the Director of Finance
estimates that the cost of the mandate is more than ten million
dollars ($10,000,000), then the determination described in this
subdivision shall be considered to have been met. This estimate shall
be solely within the discretion of the Director of Finance, and the
director need not wait for a final cost estimate, nor any other
administrative determination, from the Commission of State Mandates
prior to making this determination.
   (d) If, before June 1 of each year, the Director of Finance
determines that the determinations described in subdivisions (b) or
(c) have been met, then the Director of Finance shall immediately
notify, in writing, the Joint Legislative Budget Committee and the
Controller of this determination. 
   SEC. 12.    Section 22958 is added to the  
Education Code   , to read:  
   22958.  (a) Any action or proceeding challenging the validity of
any matter authorized by the act adding this section by any person or
entity shall be brought in accordance with, and within the time
specified in, Chapter 9 (commencing with Section 860) of Title 10 of
Part 2 of the Code of Civil Procedure.
   (b) This section provides the authorization for all entities
referenced in the act adding this section as required by Section 860
of the Code of Civil Procedure.
   (c) Any action initiated pursuant to this section shall be brought
in the Superior Court of the County of Sacramento. 
   SEC. 13.    (a) None of the provisions of this act
are severable. All of the sections together are the complete
operative expression of legislative intent. The Legislature
inextricably connects the policies and goals of these sections
together and would not enact the provisions separately.  
   (b) If any provision of this act or application of any section of
this act to a person or circumstances is held by a court of competent
jurisdiction to be invalid, unenforceable, or not binding on any
person then this finding shall invalidate the other provisions and
applications of this act in its entirety.  
   (c) The provisions of this act were based on various legal
understandings and would not have been adopted without those
understandings. Thus, if a final unappealable judicial decision holds
that the increased contributions set out in Section 22950.5
constitute a new functional responsibility for schools and community
colleges pursuant to subdivision (c) of Section 41204, and
correspondingly require an adjustment pursuant to subdivision (b) of
Section 8 of Article XVI of the California Constitution, then
Sections 5, 7, and 9 of this act shall be inoperable.  
   (d) The provisions of this act were based on various legal
understandings and would not have been adopted without those
understandings. Thus, if a final unappealable administrative or
judicial decision holds that the increased contributions set out in
Section 22950.5 constitutes a reimbursable mandate pursuant to
Article XIII B of the California Constitution, then Sections 5, 7,
and 9 of this act shall be inoperable. 
   SEC. 14.    This act is a bill providing for
appropriations related to the Budget Bill within the meaning of
subdivision (e) of Section 12 of Article IV of the California
Constitution, has been identified as related to the budget in the
Budget Bill, and shall take effect immediately.  
  SECTION 1.    It is the intent of the Legislature
to enact statutory changes relating to the Budget Act of 2014.