BILL ANALYSIS Ó
AB 1042
Page 1
ASSEMBLY THIRD READING
AB 1042 (Allen)
As Amended March 31, 2011
Majority vote
PUBLIC EMPLOYEES 4-0 APPROPRIATIONS 15-0
-----------------------------------------------------------------
|Ayes:|Furutani, Mansoor, Allen, |Ayes:|Fuentes, Blumenfield, |
| |Ma | |Bradford, Charles |
| | | |Calderon, Campos, Davis, |
| | | |Gatto, Hall, Hill, Lara, |
| | | |Mitchell, Nielsen, Norby, |
| | | |Solorio, Wagner |
|-----+--------------------------+-----+--------------------------|
| | | | |
-----------------------------------------------------------------
SUMMARY : Expands the list of positions for which the Board of
Administration of 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).
EXISTING LAW :
1)Requires the CalPERS Board of Administration to establish
compensation for the system's executive officer, a general
counsel, a chief actuary, a chief investment officer, and
other investment officers and portfolio managers whose
positions are designated managerial.
2)States that the compensation level for these positions are to
be comparable to other public retirement systems and financial
services companies and, when these positions are filled
through a general civil service appointment, that the
candidates be selected from an eligible list based on an open
examination.
3)States that except for the executive officers of both systems,
these positions are subject to a modified civil service
selection process, and the boards are able to take action
against these personnel for causes related to their fiduciary
duty, including the failure to meet specified performance
objectives.
AB 1042
Page 2
4)Prohibits individuals employed in these positions for less
than five years from being paid to influence the actions of
the retirement system, or decisions of its governing board for
two years following the end of their employment with the
retirement system.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, 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 : 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, "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 a competitive salary will be
offset by the anticipated savings generated by a higher standard
of organizational financial accountability. It is very likely
that the most highly qualified candidates will come from large
financial institutions in the private sector, endowments or
other large governmental pension funds."
This bill is similar to AB 1317 (Mullin), Chapter 333, Statutes
of 2007, which 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
AB 1042
Page 3
Chief Executive Officer, Chief Actuary, Chief Investment Officer
and other investment and portfolio managers whose positions are
designated managerial.
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN: 0000487