Increases the supplemental purchasing power protection payments from 68.2 percent to 75 percent. The General Fund (GF) will continue to contribute 2.5 percent of prior year STRS member payroll to the Supplemental Benefit Maintenance Account (SBMA) to fund the benefit. Commencing when the SBMA can no longer support funding the benefit at 75 percent (which is estimated to occur in 2014-15), the Board may do any or a combination of the following:

• Increase the employer contribution rate by no more than 0.25 percent per year
• Reduce the benefit to an amount which can be funded by the SBMA
• Use TRF monies if the Board has determined that no unfunded obligation exists based on information provided by the consulting actuary and affirmed by the Director of Finance

The bill provides that the GF contributions to the SBMA required for the 1998-99 fiscal year will be reduced by the total value of the state’s interest in the school lands from the sale of the Elk Hills Naval Petroleum Reserve (approximately $320 million). The bill also requires the Legislature to approve through the Budget Act any increase in the employer contribution rate which may be adopted by the board for the payment of purchasing power benefits.

Unknown state fiscal effect. The 2.5 percent of payroll ($349,140,000 in the current year) GF contribution required under current law for SBMA would continue. The auxiliary SBMA would be funded by the excess from the Teachers' Retirement Fund when that fund is fully funded, or by increased employer contribution. This bill authorizes increased employer contributions, but states legislative intent that no additional GF monies be used to provide supplemental benefit payments.