Larry Klein
Mayor
Richard Mehlinger
Vice Mayor
Alysa Cisneros
Councilmember
Murali Srinivasan
Councilmember
Linda Sell
Councilmember
Charlsie Chang
Councilmember
Eileen Le
Councilmember
August 25, 2026
T
he Honorable Gavin Newsom
Governor, State of California
1021 O Street, Suite 9000
Sacramento, CA 95814
R
E: Assembly Bill 1383 (McKinnor) Public Employees' Retirement Benefits:
Safety Members – REQUEST FOR VETO
D
ear Governor Newsom:
O
n behalf of the City of Sunnyvale, we respectfully urge you to veto AB 1383 (McKinnor), which would make significant changes to public employees' retirement benefits and substantially increase pension liabilities for state and local governments.
T
he Public Employees' Pension Reform Act (PEPRA) was enacted to address longstanding challenges facing public pension systems and has played an important role in helping local governments manage their long- term pension obligations. AB 1383 would roll back key elements of these reforms and undermine the progress California has made since 2013 toward greater fiscal sustainability.
T
he City's concerns are reinforced by the Department of Finance's fiscal analysis, which concludes that AB 1383 would significantly increase pension costs for public agencies.
According to the analysis, even without considering the bill's proposed fourth-t ier retirement formula, CalPERS estimates the bill would increase the present value of future benefits by $4.8 billion, increase annual normal-cost contributions by $282 million, and increase accrued liability by $233 million across the CalPERS system. If the fourth- tier formula is implemented, it would add another $353 million in annual normal -cost contributions and $3.4 billion in present value of future benefits.
T
hese costs would not be limited to the state. They would also affect local governments that participate in CalPERS and county retirement systems. The Department of Finance notes that a single medium-sized county could see more than $700 million in additional present value of benefits over 30 years, or approximately $20 million in additional Attachment 2
The Honorable Gavin Newsom, Governor
August 25, 2026
employer contributions each year. Several counties have indicated that they would be unable to absorb the additional costs if AB 1383 is enacted.
The City recognizes and appreciates the intent of AB 1383 to support the recruitment and retention of public safety professionals. However, increasing pension benefits without providing a corresponding funding source would place significant additional financial pressure on cities and other public agencies. Local governments are already facing rising service demands, increasing operational costs, and financial uncertainty. Adding new long-term pension obligations would further limit their ability to maintain essential services and respond to changing community needs.
The fiscal concerns are particularly significant because pension obligations are long-term commitments. The Department of Finance notes that pension benefits are difficult to reduce once accrued, meaning that if costs are underestimated, the financial burden is ultimately borne by employers, employees, service recipients, and taxpayers. Finance also warns that the bill's increased accrued liability could expose retirement plans to greater investment risk and contribution-rate volatility, particularly if investment returns fall below expectations or members retire earlier than anticipated.
For Sunnyvale, every additional dollar directed toward pension obligations is a dollar that cannot be used for other important community priorities. Increased retirement costs could affect public safety staffing, transportation, parks, housing initiatives, infrastructure, and other essential services. Over time, these costs could force cities to make difficult budget decisions and reduce their flexibility to address the needs of their communities.
AB 1383 also represents an unfunded mandate on local governments. Cities would be responsible for absorbing the increased costs associated with the bill without corresponding state funding to offset those expenses. While providing competitive benefits to public safety employees is important, those benefits must be balanced with the responsibility to maintain the long -term fiscal health of the public agencies that employ them.
The Department of Finance has also raised concerns that AB 1383 could create equity issues between safety and non- safety employees and could lead to additional demands for benefit enhancements from other employee classifications. Finance further notes that Attachment 2
The Honorable Gavin Newsom, Governor
August 25, 2026
the increased compensation cap and normal costs could result in lower -compensated employees within the same bargaining unit effectively subsidizing enhanced benefits accruing to higher-compensated employees.
California's local governments need predictable and sustainable finances to continue providing the services their residents depend on. Increasing pension obligations without a dedicated funding source places that stability at risk and ultimately leaves loc al taxpayers responsible for costs imposed by the state. Sustainable pension policy should ensure that benefits remain fair and competitive while also protecting the financial health of public agencies and their communities.
For these reasons, and consistent with the City's longstanding interest in protecting predictable and sustainable local government finances [Long-term Advocacy Positions – Planning and Management 7.B(5)], the City of Sunnyvale respectfully requests that you veto AB 1383. We appreciate your consideration of the City's concerns and your commitment to protecting the long -term fiscal stability of California's cities and the essential services they provide. Please do not hesitate to contact me or Matt Paulin, Finance Director, at [email protected] if you have any questions.
Sincerely,
Larry Klein
Mayor
cc: Senator Dr. Aisha Wahab
Assembly Member Patrick Ahrens
City Council
Tim Kirby, City Manager
Sarah Johnson-Rios, Assistant City Manager
Matthew Paulin, Finance Director
Attachment 2