BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 873|
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CONSENT
Bill No: AB 873
Author: Furutani (D)
Amended: 6/20/11 in Senate
Vote: 27
SENATE PUBLIC EMPLOY. & RETIRE. COMMITTEE : 5-0, 6/27/11
AYES: Negrete McLeod, Walters, Gaines, Padilla, Vargas
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 78-0, 5/19/11 - See last page for vote
SUBJECT : Political Reform Act of 1974: postgovernment
employment restrictions
SOURCE : State Controller John Chiang
DIGEST : This bill strengthens existing restrictions on
post-government employment activities by board members and
high level staff at the California Public Employees
Retirement System and the California State Teachers'
Retirement System.
ANALYSIS :
Existing state law:
1. Pursuant to the Political Reform Act of 1974 (PRA) and
passed by the voters, Proposition 9 created the Fair
Political Practices Commission and codified restrictions
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and prohibitions on candidates, officeholders and
lobbyists.
2. Prohibits a person from acting as a placement agent in
connection with any potential investment made by a state
public retirement system unless that person is
registered as a lobbyist in accordance with the PRA.
Existing federal law:
1. Sets a one year ban or cooling-off period, regarding
such activities as lobbying for "senior employees," a
two year ban for "very senior employees," and a
permanent ban on "switching sides" for executive branch
employees who worked on a matter involving contracts,
grants or lawsuits, while a federal employee; and,
2. Generally prohibits employees from accepting employment
with an entity with which they have had substantial
contract dealings valued above $10 million in the year
following their separation.
This bill:
1. Prohibits individuals serving in senior investment and
key executive positions of California Public Employees'
Retirement System (CalPERS) or California State
Teachers' Retirement System (CalSTRS) from influencing
the actions of their respective retirement boards or
retirement systems on behalf of any person, other than
the state, within two years after leaving that position.
2. Restricts, under the PRA, former employees and Board
members from being paid to appear before or communicate
with their former agency to influence the agency's
actions for a period of one year following the end of
their employment or term.
3. Prohibits, under the PRA, state officials from making,
participating in, or influencing government decisions
directly relating to a prospective employer with whom
they are negotiating employment or after they have
reached an employment arrangement.
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4. Prohibits, under the Public Contract Code, a covered
former state official from entering into a contract for
which he/she engaged in any of the negotiations,
transactions, planning, arrangements, or any part of the
decision-making process while in state service for a
two-year period after separation.
Specifies that for a one-year period after separation, a
covered former State official may not enter into a
contract with the former agency if he/she was in a
policy-making position in that agency in the same
general subject area as the proposed contract.
5. Requires placement agents who wish to do business with
CalPERS or CalSTRS to register as lobbyists and be
subject to all related reporting and compliance
requirements under the PRA applicable to lobbyists.
6. Makes a violation of the PRA subject to administrative,
civil, and criminal penalties.
7. Prohibits, for a period of four years after leaving that
office or position, former members of the CalPERS and
CalSTRS boards, senior executives and investment
officers, and general counsels, or an information
technology or health benefits manager with a career
executive assignment designation from accepting
compensation as an agent, attorney for, or otherwise
represent any person, except the State, by making an
appearance before, or communication to, CalPERS or
CalSTRS if the purpose of the appearance or
communication is to influence an action by the entity.
8. Prohibits, for a period of two years after leaving that
office or position, former members of the CalPERS and
CalSTRS boards, senior executives and investment
officers, and general counsels, or an information
technology or health benefits manager with a career
executive assignment designation from accepting
compensation to aid, advise, consult with, or assist a
business entity in obtaining an award, or in
negotiating, a contract or contract amendment with
CalPERS or CalSTRS.
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9. Prohibits, for a period of 10 years after leaving that
office or position, former members of the CalPERS or
CalSTRS boards, senior executives and investment
officers, and general counsel from accepting
compensation as a placement agent in connection with
investments or other business of CalPERS or CalSTRS.
10.Makes these actions a violation of the PRA, subject to
administrative, civil, and criminal penalties.
11.Declares the intent of the Legislature to further the
purposes of the PRA.
Comments
Need for this bill . According to the author:
"Two years ago a public pension fund scandal involving
the trade of campaign contributions for pension fund
investments broke in New York State. The individuals at
the center of that scandal were investment middlemen,
called placement agents, and some of those involved were
linked to placement agent firms in California.
"The scandal quickly rippled westward, catching former
CalPERS board members, a chief executive, and a senior
investment official, who had received, or arranged
placement agents to receive, tens of millions of dollars
for investment deals that lost hundreds of millions of
dollars.
"In 2010 CalPERS commissioned a study to review their
investment decision making and identify ethical
vulnerabilities.
"The findings of that report, issued in March, included a
recommendation to further limit the 'revolving door' of
employment between state pension fund investment work and
private firms seeking better access to those investments.
"AB 873 implements that recommendation and is modeled on
current federal post-employment restrictions. The
measure would not prevent separating employees from
working for any employer with whom CalPERS or CalSTRS
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does business, as long as their duties did not involve
performing, implementing, or executing a contract with
CalPERS or CalSTRS.
"Additionally, banning former senior staff and board
members from lobbying the funds for 10 years will
permanently sever the link between the funds and
placement agents.
"AB 873 provides a much-needed barrier to protect the
funds from former insiders who may be tempted to trade
their contacts for contracts and risk public employee and
taxpayer-funded investments in the process."
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 8/16/11)
State Controller John Chiang (source)
American Association of Retired Persons
American Federation of State, County and Municipal
Employees, AFL-CIO
California Faculty Association
California Public Employees' Retirement System
California School Employees Association
Fair Political Practices Commission
ARGUMENTS IN SUPPORT : According to the bill's sponsor,
State Controller John Chiang, "Over the last several years,
Ýmany] have become increasingly skeptical of how business
is conducted at CalPERS and CalSTRS. This Ýbill] would
place stronger 'revolving door' restrictions on CalPERS and
CalSTRS board members and employees, reducing the
likelihood that investment decisions would be influenced by
potential job officers and former insiders, will protect
CalPERS and CalSTRS investments from unsound influence, and
aid in restoring public confidence in our State's pension
systems. Importantly, the 'revolving door' protection
would not prevent former employees from working for
employers whose principal market is unrelated to the
individual's prior service."
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ASSEMBLY FLOOR : 78-0, 5/19/11
AYES: Achadjian, Allen, Ammiano, Atkins, Beall, Bill
Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson,
Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani,
Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Grove,
Hagman, Halderman, Hall, Harkey, Hayashi, Roger
Hernández, Hill, Huber, Hueso, Huffman, Jeffries, Jones,
Knight, Lara, Logue, Bonnie Lowenthal, Ma, Mansoor,
Mendoza, Miller, Mitchell, Monning, Morrell, Nestande,
Nielsen, Norby, Olsen, Pan, Perea, V. Manuel Pérez,
Portantino, Silva, Skinner, Smyth, Solorio, Swanson,
Torres, Valadao, Wagner, Wieckowski, Williams, Yamada,
John A. Pérez
NO VOTE RECORDED: Alejo, Gorell
CPM:kc 8/16/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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