BILL ANALYSIS                                                                                                                                                                                                    Ó






          SENATE PUBLIC EMPLOYMENT & RETIREMENT   BILL NO:  AB 1042
          Gloria Negrete McLeod, Chair Hearing date:  June 13, 2011
          AB 1042 (Allen)    as amended  3/31/11       FISCAL:  YES

           CALPERS:  CHIEF FINANCIAL OFFICER  
          
           HISTORY  :

              Sponsor:  California Public Employees' Retirement System 
          (CalPERS)

              Prior legislation:  AB 1317 (Mullin)
                        Chapter 333, Statutes of 2007
                        SB 269 (Soto)
                        Chapter 856, Statutes of 2003


           ASSEMBLY VOTES  :

              PER & SS             4-0       4/13/11
              Appropriations       15-0      5/04/11
              Assembly Floor       72-0      5/12/11
           

          SUMMARY  :

           This bill  would require the California Public Employees' 
          Retirement System (CalPERS) Board of Administration to 
          appoint and set the compensation of a chief financial officer 
          (CFO).


           BACKGROUND AND ANALYSIS  :
          
           1)Existing law  :

             a)  requires the CalPERS Board of Administration to 
              appoint and establish compensation for the system's chief 
              executive officer, a general counsel, a chief actuary, a 
              chief investment officer, and other investment officers 
              and portfolio managers whose positions are designated 
              managerial;

          Michael Bolden
          Date:  6/08/11                                         Page 1 










             b)  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;

             c)  states that except for the executive officers of both 
               CalPERS and the California State Teachers' Retirement 
               System (CalSTRS), 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, and

             d)  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.

           2)This bill  :

             a)  maintains existing provisions and requirements 
              regarding the Board's authority to appoint and set the 
              compensation of specified employees, and

            b)  requires the CalPERS Board to appoint and set the 
            compensation of a CFO.


           FISCAL  :

          According to the Assembly Appropriations Committee,  this bill  
          would have a 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)Arguments in Support  

          Michael Bolden
          Date:  6/08/11                                         Page 2 










          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 the sponsor:

               "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."
             




           2)   SUPPORT  :

               California Public Employees' Retirement System 
          (CalPERS), Sponsor

          3)   OPPOSITION  :

               None to date




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          Michael Bolden
          Date:  6/08/11                                         Page 3 



















































          Michael Bolden
          Date:  6/08/11                                         Page 4