AgdaPkt 2005-09-26 - Laserfiche WebLink

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9� - 3 Next year is also the first year that the Proposition 58 provisions go into effect. Previously, the state constitution required the govemor to propose in January a budget that was balanced -- but the Legislature was not required to pass a balanced budget. Prop 58 changed this, by requiring the Legislature to enact a balanced budget. Prop 58 additionally requires the Legislature, beginning in the 2006-07 budget year, to annually transfer an increasing amount of the state's general fund into a reserve account until the reserve reaches $8 billion or 5 percent of the general fund revenues, whichever is greater. Given the state's ongoing deficit of approximately $6 billion, this requirement is expected to add pressure on legislators in the budget debate ne� year. In sum, it was a year where the Legislature and the administration took up some big, important issues, but ones where agreement and/or solutions could not be found, or were subsumed by positioning for the Special Election. Key Policy Issues for Cities: What Happened? The following summarizes legistative action on key issues of concem to cities. Pension reform. In January, the governor called a special session on pension reform, and proposed a constitutional amendment that would have dramatically altered the current state and local government defined benefit pension programs, by requiring that new employees be enrolled instead in defined contribution programs (e.g. 401 k's). The League formed a Pension Reform Task Force, which spent weeks working with city fiscal experts and an actuary to analyze the issues and concems with the current defined benefit pension programs and identify altemative approaches. The League and the Califomia State Association of Counties (CSAC) both presented altemative reform ideas to the administration and to legislators. Facing extensive criticism from unions and others about drafting problems, the govemor withdrew his proposal in April. He instead committed to a series of discussions with all stakeholders, including local government organizations such as the League and CSAC, employee unions and others. The governor said that he wanted to work on a compromise proposal that could be taken to the voters as soon as June of 2006. Progress on this issue bogged down, however, as issues on the November 2005 special election ballot consumed more attention. While there was some discussion toward the end of the session about working on the pension bills and moving one or more to the govemor's desk, in the final hours of the session these plans fell by the wayside. Assemblymember Keith Richman, the author of SCA 5, did contact the League and other local government organizations several weeks ago to provide an update on his latest proposal for pension reform: a hybrid plan that combines a defined benefit plan with a defined contribution plan. (The League's Pension Reform Task Force is currentty reviewing this package.) He assured the participants that he intends to continue his efforts to secure a reform package in the Legislature, but if those efforts fail, he said that he intends to go to the ballot with a plan. The bottom line: No real progress on pension reform, but watch for movement in 2006. 3