Staff Report
City Council
Item No. 3.H
Meeting Date: March 25, 2026
From: Anne V. Ambrose, Assistant City Manager
Title: To Oppose AB 1383 (McKinnor) Public Employees' Retirement Benefits RECOMMENDATION:
To oppose AB 1383 (McKinnor) Public Employees Retirement Benefits and authorize the City Manager to sign a letter of opposition on behalf of the City of Cathedral City.
BACKGROUND:
Assembly Bill 1383 (AB 1383), introduced by Assembly Member Tina McKinnor, proposes significant changes to California’s public employee pension framework, particularly for public safety employees. The bill modifies provisions of the California Public Employees’ Pension Reform Act of 2013 (PEPRA), which established limits on pensionable compensation and retirement formulas for new employees. PEPRA was designed to address a wide range of issues involving public employee pensions and was a major step in helping local agencies better manage future pension costs and prevent the California Public Employees Retirement System from sliding into insolvency. AB 1383 would upend many of the reforms put in place in 2013 by PEPRA.
Specifically, this bill would:
Increase the pensionable compensation cap;
Reduce the retirement age for public safety from 57 to 55 prospectively; Add a 4th safety tier that is 3% @ 55, prospective and subject to bargaining; Allow local agencies to adjust their local formula in a prospective manner; and Permit authorized employee representatives to bargain with the employer over the employee share of payment for the normal cost.
DISCUSSION:
PEPRA has been in place since 2013, and we have had the opportunity to see its impact on pension funds and local agencies. For the state, schools, and public agencies in CalPERS, PEPRA has already led to $5.8 billion in savings. As years go by and the public sector force skews towards more new members, those savings will increase dramatically. Over the next ten years, PEPRA is expected to result in $26.5 billion in cost savings for CalPERS members1. This data does not include the public agencies that maintain their own pension system. PEPRA helps support budgetary stability which supports operational and workforce stability.
AB 1383 increases mandated costs without a way for public agencies to absorb them. The potential cost of this bill comes at a time of fiscal uncertainty. Much like the state, local agencies are facing budget challenges, as revenues are not keeping pace with the costs of delivering services. AB 1383 would cause increased benefit costs and new cost pressures over the provisions that can be bargained, leading to serious cost increases for local government.
According to CalPERS, given the current discount rate of 6.8%, AB 1383 is expected to increase the required contributions of employers and PEPRA members and increase the present value of future benefits (PVB) by $5.3 billion for all State, Schools, and Local Agency plans. In addition to the change in PVB, CalPERS estimates that the change to the accrued liability to be $370 million for all State, Schools, and Local Agency plans. However, if the discount rate is reduced this year by the CalPERS Board, the impacts could be even more significant for local agencies. Additionally, CalPERS’ analysis does not include any estimated costs for the provisions in AB 1383 that can be bargained, including a 3% at 55 benefit tier and adjustments to the share of normal costs between employers and employees—nor does it include an estimate of costs for the twenty county-operated pension systems.
As of June 30, 2025, the Public Employees Retirement Fund (PERF) was approximately 79% funded. If CalPERS misses its investment return mark of 6.8% on June 30th, local agencies in CalPERS and the State must pay the difference. Again, this bill would compound costs for local governments, including Cathedral City, and the State and do nothing to offset the costs.
FISCAL IMPACT:
While the precise fiscal impact on the City is unknown, AB 1383 is expected to increase employer pension contributions, create long-term cost escalation, and reduce budgetary flexibility.
FIVE-YEAR STRATEGIC PLAN:
Goal C – Fiscal Stability and Sustainability
ATTACHMENTS:
Opposition Letter
1 https://www.calpers.ca.gov/documents/202411-finance-admin-agenda-item06a-01-a/download?inline