Editor’s Note: The following letter was written by Bill Chiat, Executive Director of the California Association of Local Agency Formation Commissions. The letter was sent to CALAFCO members and was published with the permission of Chiat, who does not claim to be an expert in compensation or pensions. As editor, I believe it’s an informative analysis.

Dear LAFCo Staff and CALAFCO Board Members:

As you no doubt know, the City of Bell salary scandal is having wide implications for local agencies. Most cities and counties (and probably some LAFCos) have been deluged with public information requests for specific compensation and pension details for elected officials and senior staff.

The Attorney General, Treasurer and Controller have all launched investigations not only in Bell, but more broadly at local agency compensation. Already it have become an issue in the gubernatorial race and in many local races. And of course not to be outdone, the Legislature is considering four bills that deal with the salaries and pensions of local agencies. And I feel rather certain this is not the end.

I wanted to give you a heads-up on the four bills as they may affect you or your LAFCo. They have been added to the CALAFCO Legislative Report. There are two compensation bills and two pension bills. While neither of the compensation bills currently affect LAFCo, they may as they wind through the legislative process. The pension bills will affect any LAFCo employee in PERS or 1937 Act retirement plans. At its meeting last Friday, the CALAFCO Board of Directors did not take a position on any of these bills but urged us to alert you to them.

SB 501 (Correa) is a ‘gut and amend’ of a debt limit allocation bill.  It requires the annual disclosure of all compensation by each elected official, employee, contractor and anyone else required to file a Statement of Economic Interest (Form 700). In its current 13 August 2010 version, the bill only applies to cities, counties, special districts, school districts and JPAs. However – much like our experience with the ethics law (AB1234) – many LAFCos may choose to abide by its requirements should it become law. The bill requires the disclosures be posted on the agency web site and available for public inspection and reproduction during business hours. It covers all compensation including salaries, stipends, expense reimbursements, employer-paid benefits and any other monetary or nonmonetary perquisites provided. The bill previously had passed the Senate and was on its Third Reading in the Assembly. After it was amended on the floor on August 12 and 13 it was referred to the Assembly Local Government Committee which is expected to hear it on 16 August.

AB 1955 (De La Torre) is a ‘gut and amend’ of a incompatible office bill. It establishes “excess compensation cities” where the total compensation for city council members exceeds the amounts specified in State Law, regardless of whether they are a general law of charter city. It adds significant authority to the Attorney General to investigate and take action against such cities. It also imposes significant sanctions on the city including reduction or withholding of sales tax revenues and redevelopment funds, prohibits the city redevelopment agency from adopting new plans or issuing bonds, imposes a 50% personal income tax on the council members on that portion of their income, and a few other restrictions. It passed Senate Local Government last Thursday, although there were concerns expressed about the new authority given to the AG. It is scheduled to be heard in Senate Appropriations next week before going back to the Assembly for concurrence. Peter Detwiler’s staff analysis is an interesting read.

SB 1425 (Simitian) establishes limits to what can be considered in determining final pay for any state or local member of the Public Employees’ Retirement System (PERS) and requires the final year pay and the proceeding two years be considered in determining final compensation. It also prohibits employees from retiring and then working for the agency under contract for a certain period of time. It passed Assembly Appropriations last Thursday on a 12-0 vote. It is currently in the suspense file awaiting action.

AB 1987 (Ma) establishes similar limits and restrictions as SB 1425 on all members of a County Employees Retirement Law of 1937 (1937 Act County) as SB 1425. It also passed Senate Appropriations, 11-0, on Thursday and is in the suspense file.

While there may be opposition from local agencies on these bills, I’m not expecting there to be much sympathy in the legislature. We’ll keep an eye on these and let you know what happens. 

Bill Chiat