BILL ANALYSIS Ó AB 1042 Page 1 Date of Hearing: May 4, 2011 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair AB 1042 (Allen) - As Amended: March 31, 2011 Policy Committee: PERS Vote:4-0 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill expands the list of positions for which the California Public Employees' Retirement System (CalPERS) has the authority to set the compensation and terms and conditions of employment to include the chief financial officer (CFO). FISCAL EFFECT Minor increased costs to CalPERS, likely to be less than $50,000 annually, which would depend on compensation packages developed and approved by the board. COMMENTS 1)Purpose. According to the author, "CalPERS recently undertook a comprehensive evaluation of its organizational structure and identified a need for a new CFO position that reports to the Chief Executive Officer. Giving CalPERS the authority to set the salary of the new CFO will enable hiring of an individual with the necessary investment finance experience needed to coordinate with the Chief Actuary and the Chief Investment Officer." According to CalPERS, the sponsor of the bill, "As recently proposed under the new CalPERS organization structure, the CFO will oversee corporate finance and coordinate other finance functions throughout the organization to create a single point of financial accountability. Establishing such a position and hiring a high caliber, experienced individual is a critical step in achieving a higher level of transparency and tighter internal controls in our financial operations. It is anticipated that the cost of establishing such a position with AB 1042 Page 2 a competitive salary will be offset by the anticipated savings generated by a higher standard of organizational financial accountability." 2)Previous legislation. AB 1317 (Mullin), Chapter 333, Statutes of 2007, expanded the list of positions under which the CalPERS and the California State Teachers' Retirement System (CalSTRS) boards have authority to set compensation and terms and conditions of employment to include the general counsel. SB 269 (Soto), Chapter 856, Statutes of 2003, allowed the CalPERS and CalSTRS boards to determine the compensation of the Chief Executive Officer, Chief Actuary, Chief Investment Officer and other investment and portfolio managers whose positions are designated managerial Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081