Regular Session 2015-2016 House Bill 1149 P.N. 1705

PRINTER'S NO. 1705

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

1149

Session of

2015

INTRODUCED BY FRANKEL, DERMODY, HANNA, GOODMAN, YOUNGBLOOD,

STURLA, MARKOSEK, FABRIZIO, SCHREIBER, COHEN, BROWNLEE,

PASHINSKI, KINSEY, DEAN, M. DALEY, WATERS, McNEILL, DeLISSIO,

DAVIDSON, C. PARKER, THOMAS, O'BRIEN AND ROEBUCK,

JUNE 5, 2015

REFERRED TO COMMITTEE ON STATE GOVERNMENT, JUNE 5, 2015

AN ACT

Providing for the Public School Employees' Retirement System

Reform Act, for payment of the Commonwealth's public school

employees' retirement code contributions; establishing the

Public School Employees' Retirement Contribution Restricted

Account; imposing duties on the Public School Employees'

Retirement Board; imposing duties on the Secretary of the

Budget; imposing duties on the Department of Revenue; making

an appropriation; providing for bond issuance, for criteria

for bond issuance, for issuance of bond and security, for

sale of bonds, for use of bond proceeds, for payment of bond-

related obligations, for Commonwealth not to impair bond-

related obligations, for no personal liability and for

expiration of authority to issue bonds; establishing the

Public School Employees' Retirement Debt Service and Sinking

Account; imposing a duty on the Pennsylvania Liquor Control

Board; providing for a certification of amounts payable from

account and for school district assistance for fiscal year

2016-2017; and making a repeal.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

CHAPTER 1

GENERAL PROVISIONS

Section 101. Short title.

This act shall be known and may be cited as the Public School

Employees' Retirement System Reform Act.

CHAPTER 3

PAYMENT OF THE COMMONWEALTH'S PUBLIC

SCHOOL EMPLOYEES' RETIREMENT CODE CONTRIBUTIONS

Section 301. Establishment and dedication of restricted

account.

(a) Establishment.--There is established in the General Fund

a restricted account known as the Public School Employees'

Retirement Contribution Restricted Account.

(b) Funds.--Funds in the restricted account established

under subsection (a), including interest earned on funds

deposited in the account are dedicated and appropriated under

section 303 for the payment of the Commonwealth's share of

retirement contributions due each fiscal year under 24 Pa.C.S.

Pt. IV (relating to retirement for school employees).

Section 302. Certification of amounts payable from the account.

(a) Detailed estimate.--The following shall apply:

(1) When the Public School Employees' Retirement Board

submits its annual appropriation request to the Governor and

the Office of the Budget under 24 Pa.C.S. § 8502 (relating to

administrative duties of board) and Article VI of the act of

April 9, 1929 (P.L.177, No.175), known as The Administrative

Code of 1929, the Public School Employees' Retirement Board

shall include, for the same fiscal year for which it makes

its appropriation request, a detailed estimate of the amount

that will be required to pay the Commonwealth's share of

retirement contributions due under 24 Pa.C.S. Pt. IV

(relating to retirement for school employees).

(2) The board shall submit a detailed update of its

estimate to the Governor and the Secretary of the Budget by

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each December 1, and at other times as the Governor and the

secretary may request.

(b) Final detailed estimate.--By each May 15, the Public

School Employees' Retirement Board shall submit to the Governor

and the Secretary of the Budget a final detailed estimate of the

amount that will be required in the immediately succeeding

fiscal year to pay the Commonwealth's share of retirement

contributions due under 24 Pa.C.S. Pt. IV. If the amount

certified by the Secretary of the Budget for the fiscal year in

which the estimate is delivered or for a prior year was not

sufficient to fully pay the Commonwealth's share of retirement

contributions under 24 Pa.C.S. Pt. IV, the Pennsylvania Public

School Employees' Retirement System's final detailed estimate

must include sufficient amounts to fully pay the contributions.

(1) By each June 1, the Secretary of the Budget shall

certify to the Department of Revenue the total amount that

will be required to pay the Commonwealth's share of

retirement contributions due under 24 Pa.C.S. Pt. IV for the

fiscal year beginning on the July 1 immediately following the

date of the secretary's certification.

(2) If any money that is attributable to a previous

fiscal year's certification remains in the account

established under section 301, the Secretary of the Budget

shall take the remaining money into consideration when making

the certification for the next succeeding fiscal year.

(d) Department of Revenue.--The Department of Revenue shall

divide the amount certified by the Secretary of the Budget in

subsection (c) as follows:

(1) Thirty percent or other percentage determined by the

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Secretary of Budget and the Pennsylvania Public School

Employees' Retirement System shall be transferred in equal

installments from the General Fund to the restricted account

established under section 301 not later than September 5 of

each year.

(2) Seventy percent or the remaining amount shall be

transferred to the restricted account in equal installments

through the end of the fiscal year to which the certification

applies.

The Department of Revenue shall begin making the transfers under

this subsection by each July 15, and then not later than the

fifth day of each succeeding month of each fiscal year from

moneys received in the General Fund from the tax imposed under

section 202 of the act of March 4, 1971 (P.L.6, No.2), known as

the Tax Reform Code of 1971.

Section 303. Payments from restricted account.

Funds deposited by the Department of Revenue into the

restricted account established under section 301 are hereby

appropriated to the Department of Education for payment of the

Commonwealth's required contribution for public school

employees' retirement due under 24 Pa.C.S. Pt. IV (relating to

retirement for school employees) for each fiscal year as

certified by the Secretary of the Budget.

CHAPTER 5

ISSUANCE OF BONDS

Section 501. Findings and declarations.

The General Assembly finds and declares as follows:

(1) Financing the prepayment of all or a portion of the

Commonwealth's share of the system's unfunded accrued

actuarial liability, including interest and the costs of

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issuance by means of the sale of bonds by and through the

authority is in the best interest of the Commonwealth,

Pennsylvania's school districts and the citizens of this

Commonwealth.

(2) The public school districts of this Commonwealth

have been subject to increasing contribution rates required

of employers in the system with the effect that school

districts' funds have had less money available for the

construction, rehabilitation, refurbishment and maintenance

of the public school districts' educational facilities.

(3) The system will apply the principal amount of the

bond proceeds as additional contributions for the prepayment

of a portion of the system's unfunded accrued actuarial

liability in accordance with 24 Pa.C.S. § 8328 (relating to

actuarial cost method).

(4) A decrease in public school districts' contribution

rates will aid the public school districts' annual budgets

and make money available in their budgets for educational

facilities.

Section 502. Definitions.

The following words and phrases when used in this chapter

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Account." The Public School Employees' Retirement Debt

Service and Sinking Account established under section 512.

"Authority." The Pennsylvania Economic Development Financing

Authority.

"Bond." Any type of revenue obligation, including a bond or

series of bonds, note, certificate or other instrument issued by

the Pennsylvania Economic Development Financing Authority for

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the benefit of the Pennsylvania Public School Employees'

Retirement System under this act.

"Bond administrative expenses." Expenses incurred to

administer bonds as provided under the act of August 23, 1967

(P.L.251, No.102), known as the Economic Development Financing

Law, or as otherwise necessary to comply with applicable Federal

or State law.

"Bond obligations." The principal of a bond and the premium

and interest payable on a bond, together with the amount owed

under a related credit agreement or a related resolution of the

financing authority authorizing a bond.

"Financing law." The act of August 23, 1967 (P.L.251,

No.102), known as the Economic Development Financing Law.

"Fund." The Public School Employees' Retirement Fund

established under 24 Pa.C.S. § 8522 (relating to Public School

Employees' Retirement Fund).

"System." The Pennsylvania Public School Employees'

Retirement System.

Section 503. Bond issuance.

(a) System.--Notwithstanding any other law, the following

shall apply:

(1) The system may be a project applicant under the

financing law and may apply to the authority for the

prepayment of all or a portion of the system's unfunded

accrued actuarial liability subject to the limitations

contained in section 504(b)(2).

(2) The prepayment of all or a portion of the system's

unfunded accrued actuarial liability shall constitute a

project for purposes of the financing law.

(3) The authority may issue bonds under the financing

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law, consistent with this act, to finance the prepayment of

all or a portion of the system's unfunded accrued actuarial

liability or the refunding or redeeming of prior bonds.

(4) Participation of an industrial and commercial

development authority is not required to finance the

prepayment of all or a portion of the system's unfunded

accrued actuarial liability.

(b) Debt or liability.--The following shall apply:

(1) Bonds issued under this act shall not be a debt or

liability of the Commonwealth and shall not create or

constitute an indebtedness, liability or obligation of the

Commonwealth.

(2) Bond obligations and bond administrative expenses

shall be payable solely from revenues or funds pledged or

available for their repayment as authorized in this act that

shall include the proceeds of any issuance of bonds.

(3) A bond must contain on its face a statement that:

(i) the authority is obligated to pay the principal

of the bond or the interest on the bond only from funds

made available under this act;

(ii) the Commonwealth, the system, a political

subdivision or any school district are not obligated to

pay the principal or interest; and

(iii) the full faith and credit of the Commonwealth

is not pledged to the payment of the principal of or the

interest on the bonds.

application, the bonds authorized by this chapter may only be

issued during fiscal year 2015-2016.

(d) Prohibition.--The first bond obligation payment or bond

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administrative expense payment or both may not be made before

fiscal year 2016-2017.

Section 504. Criteria for bond issuance.

(a) Determination.--If the system reasonably expects that

the issuance of bonds to fund the prepayment of all or a portion

of the system's unfunded accrued actuarial liability, including

interest and the costs of issuance, via the sale of a bond or

bonds by and through the authority, would result in a savings to

the school districts of this Commonwealth, then the system, with

the prior approval of the Office of the Budget, may apply to the

authority to issue bonds for its benefit under section 503.

(b) Terms.--The following shall apply:

(1) With the approval of the Office of the Budget, the

system shall specify in its application to the authority the

maximum principal amount of the bonds for each separate bond

issue.

(2) The total principal amount of bonds issued under

this act may not exceed $3,000,000,000, excluding refinancing

of bonds.

Section 505. Issuance of bond and security.

(a) Issuance.--The authority shall consider issuance of

bonds upon application by the system. Bonds issued under this

chapter shall be subject to the financing law, unless otherwise

specified by this chapter.

(b) Agreements.--The authority and the system may enter into

loan agreements, credit agreements, bond purchase agreements or

other agreements, contracts or instruments in connection with

the issuance of bonds in order to effectuate the purposes of the

financing law and this chapter.

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expenses are secured, for the benefit of the holders of the

bonds and the obligees under agreements in subsection (b), by

pledge of, security interest in and first lien on, money

deposited in the account, including the investment income on

those moneys. The security provided in this subsection does not

apply to moneys in any fund or other account related to

arbitrage rebate obligations.

Section 506. Sale of bonds.

The bonds shall be sold by means of the methods authorized

under the financing law and in accordance with this act.

Section 507. Use of bond proceeds.

(a) Use.--Upon issuance of a bond, the proceeds may be used

to:

(1) Pay the cost of issuance of the bond.

(2) Fund bond reserves.

(3) Refund outstanding bonds.

(4) Make other deposits required under an instrument or

agreement pertaining to the bonds.

(5) Pay capitalized interest, if any.

(b) Application of balance.--After payment of the items

under subsection (a), the remaining balance of the proceeds

shall be paid to the system. The system shall apply the proceeds

as additional contributions for the prepayment of a portion of

the system's unfunded accrued actuarial liability in accordance

with 24 Pa.C.S. § 8328 (relating to actuarial method).

Section 508. Payment of bond-related obligations.

Moneys in the account that are needed to pay bond obligations

and bond administrative expenses or to replenish bond reserves

shall be transferred to the authority to ensure timely payment

of bond obligations and bond administrative expenses and timely

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replenishment of bond reserves under an instrument or agreement

related to the bonds.

Section 509. Commonwealth not to impair bond-related

obligations.

The Commonwealth pledges that it shall not do any of the

following:

(1) Limit or alter the rights and responsibilities of

the authority or the system under this chapter, including the

responsibility to:

(i) pay bond obligations and bond administrative

expenses; and

(ii) comply with any other instrument or agreement

pertaining to bonds.

(2) Alter or limit the security interest granted in

section 505.

(3) Impair the rights and remedies of the bondholders

until all bonds, at any time issued, together with the

interest thereon, are fully met and discharged.

Section 510. No personal liability.

The members, directors, officers and employees of the system

and the authority are not personally liable as a result of good

faith exercise of the rights and responsibilities granted under

this chapter.

Section 511. Expiration of authority to issue bonds.

Except for the refinancing and refunding of bonds under

sections 503 and 505, the authorization to issue bonds under

this chapter shall expire December 31, 2016.

Section 512. Account.

(a) Establishment and dedication.--

(1) The Public School Employees' Retirement Debt Service

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and Sinking Account is established in the General Fund as a

restricted account.

(2) Money in the account, including interest earned on

the money deposited in the account, is dedicated and pledged

under section 505(c) to the payment of bond obligations and

bond administrative expenses for bonds issued under this

chapter. The money in the account, including money not

necessary to pay bond obligations or bond administrative

expenses shall be invested by the State Treasurer in

securities as are provided by law for the investment of the

sinking funds of the Commonwealth.

(b) Transfers into account by Liquor Control Board.--

Beginning in fiscal Year 2017-2018 and every fiscal year

thereafter, the Pennsylvania Liquor Control Board shall transfer

when directed by the Secretary of the Budget the total amount of

$185,000,000 from profits deposited in The State Stores Fund to

the restricted account established under subsection (a) until

the bond obligations and bond administration expenses and other

obligations, fees and expenses of bonds issued under this act

have been fully paid or provisions have been made for the

payments, whichever is later.

Section 513. Certification of amounts payable from the account.

(a) Computation.--When the authority directs, the Office of

the Budget shall compute the amount needed to pay the bond

obligations, bond administrative expenses and the other expenses

in connection with the bonds, including, but not limited to,

replenishment of bond reserves, and shall submit the computation

to the authority.

(b) Certification.--After examining the balance of moneys

available in the restricted account established under section

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512, if the Secretary of the Budget finds that the balance in

the restricted account is not sufficient to pay the bond

obligations and bond administrative expenses next due on the

bonds, the Secretary of the Budget shall certify to the

Department of Revenue the additional amount of moneys that must

be transferred from the General Fund to the restricted account

established under section 512 to pay the bond obligations and

bond administrative expenses. If the Secretary of the Budget

makes the certification, the Department of Revenue shall

transfer the amount certified by the Secretary of the Budget to

the restricted account established under section 512 from moneys

received in the General Fund from the tax imposed under section

202 of the act of March 4, 1971 (P.L.6, No.2), known as the Tax

Reform Code of 1971.

CHAPTER 7

SCHOOL DISTRICT ASSISTANCE FOR FISCAL YEAR 2016-2017

Section 701. School district assistance for fiscal year 2016-

2017.

(a) Transfer.--In fiscal year 2016-2017, the Pennsylvania

Liquor Control Board shall transfer when directed by the

Secretary of the Budget the total amount of $80,000,000 from

profits deposited in The State Stores Fund to the restricted

account established under section 301.

(b) Appropriation.--Upon being transferred to the account,

the moneys are appropriated to the Department of Education for

fiscal year 2016-2017 for payment to the same entities to which

the department makes payment of the Commonwealth's required

contribution for public school employees' retirement due under

24 Pa.C.S. Pt. IV (relating to retirement for school employees).

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compute the amount payable to each entity as provided under 24

Pa.C.S. § 8535 (relating to payments to school entities by

Commonwealth).

(d) Payments.--The payments made by the department under

this section are in addition to the Commonwealth's required

contribution for public school employees' retirement due under

24 Pa.C.S. Pt. IV.

(e) Requirement.--An entity that receives a payment under

this section shall use the moneys received to fund the entity's

required contribution for public school employees' retirement

due under 24 Pa.C.S. Pt. IV.

CHAPTER 9

MISCELLANEOUS PROVISIONS

Section 901. Repeal.

(a) Declaration.--The General Assembly declares that the

repeal under subsection (b) is necessary to effectuate this act:

(b) Repeal.--Section 13(1)(i) of the act of November 23,

2010 (P.L.1269, No.120), entitled "An act amending Titles 24

(Education) and 71 (State Government) of the Pennsylvania

Consolidated Statutes, in Title 24, further providing for

definitions, for mandatory and optional membership, for

contributions by the Commonwealth, for payments by employers,

for actuarial cost method, for additional supplemental

annuities, for further additional supplemental annuities, for

supplemental annuities commencing 1994, for supplemental

annuities commencing 1998, for supplemental annuities commencing

2002, for supplemental annuities commencing 2003, for

administrative duties of board, for payments to school entities

by Commonwealth, for eligibility points for retention and

reinstatement of service credits and for creditable nonschool

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service; providing for election to become a Class T-F member;

further providing for classes of service, for eligibility for

annuities, for eligibility for vesting, for regular member

contributions, for member contributions for creditable school

service, for contributions for purchase of credit for creditable

nonschool service, for maximum single life annuity, for

disability annuities, for member's options, for duties of board

regarding applications and elections of members and for rights

and duties of school employees and members; providing for

Independent Fiscal Office study; in Title 71, establishing an

independent fiscal office and making a related repeal; further

providing for definitions, for credited State service, for

retention and reinstatement of service credits, for creditable

nonstate service and for classes of service; providing for

election to become a Class A-4 member; further providing for

eligibility for annuities and for eligibility for vesting;

providing for shared-risk member contributions for Class A-3 and

Class A-4 service; further providing for waiver of regular

member contributions and Social Security integration member

contributions, for member contributions for purchase of credit

for previous State service or to become a full coverage member,

for contributions for the purchase of credit for creditable

nonstate service, for contributions by the Commonwealth and

other employers, for actuarial cost method, for maximum single

life annuity, for disability annuities and for member's options;

providing for payment of accumulated deductions resulting from

Class A-3 service; further providing for additional supplemental

annuities, for further additional supplemental annuities, for

supplemental annuities commencing 1994, for supplemental

annuities commencing 1998, for supplemental annuities commencing

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2002, for supplemental annuities commencing 2003, for special

supplemental postretirement adjustment of 2002, for

administrative duties of the board, for duties of board to

advise and report to heads of departments and members, for

duties of board regarding applications and elections of members,

for installment payments of accumulated deductions, for rights

and duties of State employees and members, for members' savings

account, for State accumulation account, for State Police

Benefit Account, for Enforcement Officers' Benefit Account, for

supplemental annuity account and for construction of part; and

providing for Independent Fiscal Office study, for retirement

eligibility of Pennsylvania State Police officers or members,

for a prohibition on the issuance of pension obligation bonds,

for holding certain public officials harmless, for construction

of calculation or actuarial method, for applicability and for

certain operational provisions," is repealed.

Section 902. Effective date.

This act shall take effect immediately.

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