CITY OF SAN PABLO
City Council
1000 Gateway Avenue ● San Pablo, CA 94806
Main: 510-215-3000 ● Fax: 510-215-3011
www.SanPabloCA.gov
September 10, 2026
PERSONAL COURIER & US REGULAR MAIL
The Honorable Gavin Newsom, Governor
State of California
1021 O Street, Suite 9000
Sacramento, CA 95814
RE: AB 1383 (MCKINNOR) PUBLIC EMPLOYEES’ RETIREMENT BENEFITS
VETO REQUEST- CITY OF SAN PABLO
Dear Governor Newsom:
On behalf of the City of San Pablo City Council, I respectfully request your veto of the AB 1383 legislation which would significantly expa nd long-term pension liabilities for local governments by increasing pensionable co mpensation limits, authorizing enhanced retirement formulas for safety employees, and weakening key structural reforms established under the Public Employees’ Pension Reform Act of 2013 (PEPRA).
While the City recognizes the importance of re cruiting and retaining qualified public safety personnel and maintaining competitive compensa tion structures for public employees, AB 1383 creates substantial long-term fiscal exposure for local agencies at a time of continued economic uncertainty, elevated pension costs, and growing structural budget pressure facing local cities and counties throughout California.
PEPRA was enacted following years of escalating pension liabilities caused by prior benefit expansions, market downturns, optimistic investment assumptions, and rapidly increasing unfunded actuarial liabilities. The reforms adopted in 2013 represented a deliberate effort by the Legislature to improve long-term sustainability within California’s public retirement systems by slowing liability growth, increasing employee cost sharing, limiting pensionable compensation growth, and estab lishing more sustainable retirement formulas for future employees. AB 1383 substantially undermines those reforms.
The bill would authorize expanded retirement formulas for safety employees, including potential movement toward a 3% @ 55 struct ure, while also increasing pensionable compensation limits for PEPRA members. These changes materially increase long-term normal costs and future accrued and unfunded liabilities for participating public employers. Critically, these costs are not one-time expenditures; they become permanent actuarial obligations that Honorable Governor Gavin Newsom
RE: AB 1383 (MCKINNOR) PUBLIC EMPLOYEES’ RETIREMENT BENEFITS VETO REQUEST- CITY OF SAN PABLO September 10, 2026
compound over decades and remain highly sensitive to future investment performance and economic conditions.
The City is particularly concerned that AB 1383 creates a significant intergenerational cost shift onto younger public employ ees and future taxpayers. Under existing PEPRA structures, employee contribution rates are tied to normal cost calculations. Expanding benefit formulas and pensionable compensation limits increases future normal costs systemwide, which in turn increases contribution obligations for newer empl oyees entering the workforce. In practice, this creates a structure in which younger and often lower-paid employees bear a growing share of the financing burden associated wi th expanded retirement benefits that disproportionately benefit higher-income and later-career employees.
At a time when many public agencies are al ready struggling with workforce recruitment, housing affordability, and rising employee cost burdens, the City is concerned that increasing long-term contribution obligations on future employees may create additional workforce instability rather than improve long-term retention.
The City is also concerned that AB 1383 relies heavily on recent actuarial projections that remain highly dependent on continued market performance and achievement of long-term investment return assumptions. Recent CalPERS projections showing contribution stabilization assume continued investment gain s and do not account for future economic downturns, market corrections, inflationary pressure, or prolon ged underperformance relative to assumed rates of return.
Additionally, and most significantly, AB 1383 was not re-analyzed after August 27, 2026. The Assembly floor analysis prepared for the conc urrence vote three days later carried the pre- amendment CalPERS estimates unchanged, and we understand no updated statewide actuarial estimate is expected before th e September 30 deadline. The $282 million, $233 million and $4.8 billion figures in general circulation, and the $241 million and $4.2 billion cap- provision figures in the August 10, 2026 Senate Appropriations analysis, all describe a version of this bill that no longer exists.
We do not suggest concealment; the amendment was made in th e open. We say that a bill which changed materially three days before fi nal passage, and was never rescored, is a poor candidate for a Governor’s signature that cannot be revisited. As you know, pension benefit enhancements are constitutionally protecte d once granted. There is no correcting amendment next session.
Recent history demonstrates how quickly pe nsion system funded status can deteriorate during periods of market volatility. Even foll owing recent investment gains, CalPERS plans continue to carry substantial unfunded actuaria l liabilities, and loca l governments remain responsible for absorbing increases in empl oyer contribution rates when investment assumptions are not achieved. AB 1383 increases long-term liabilities precisely at a time when Honorable Governor Gavin Newsom
RE: AB 1383 (MCKINNOR) PUBLIC EMPLOYEES’ RETIREMENT BENEFITS VETO REQUEST- CITY OF SAN PABLO September 10, 2026
pension systems remain highly exposed to future market repricing risk and broader economic uncertainty.
For local governments, these costs have direct operational consequences. Pension obligations are already among the fastest-growing expenditures within many municipal general fund budgets. Additional long-term pension liab ilities reduce local flexibility to fund core community priorities, including public safety staffing, home lessness response programs, street and infrastructure maintenance, parks and recreation services, libraries, emergency preparedness efforts, and other essential local services.
The City is particularly concerned that AB 1383 creates substantial new unfunded liabilities without identifying any sustainable long-term funding mechanism to offset those obligations.
If investment returns fail to meet actuarial as sumptions, local agencies will ultimately be responsible for backfilling those costs through increased employer contributions, reductions in service levels, delayed capita l improvements, staffing constrai nts, or future local revenue increases.
San Pablo remains concerned that reopening PEPRA in this manner risks reversing years of fiscal stabilization efforts undertaken by local governments across California. While workforce recruitment and retention chal lenges are real and deserve thoughtful policy discussion, permanent expansion of pension liabilities is not the only available solution and creates significant long-term fiscal consequences that will persist long after current labor market conditions change.
For these reasons, the City of San Pablo respectfully requests your veto of AB 1383.
In the alternative, we ask that any successor legislative measure include:
(1) Require that the bill be re-scored on the enro lled text before enactment, so that the Administration and the Legislature act on an analysis of the measure actually before them; and
(2) Require a CalPERS contract-amendment cost es timate, disclosed to the governing body in open session, before an agency may ad opt the optional formula — including the unfunded liability the amendment creates and the portion of that liability member cost- sharing can and cannot offset; and
(3) Make the conversion from age 57 to age 55 permissive rather than mandatory, so that agencies in pooled plans are not billed for a benefit change no local governing body approved; and
(4) Allow any resulting accrued liability to be phased in, rather than recognized in full in a single valuation
Honorable Governor Gavin Newsom
RE: AB 1383 (MCKINNOR) PUBLIC EMPLOYEES’ RETIREMENT BENEFITS VETO REQUEST- CITY OF SAN PABLO September 10, 2026
Thank you in advance for your consideration.
Sincerely,
Elizabeth Pabon-Alvarado, Mayor
City of San Pablo
cc: Assemblymember Buffy Wicks (D-14)
State Senator Jesse Arreguin (D-7)
San Pablo City Council
City Manager
City Attorney