BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair AB 1042 (Allen) Hearing Date: 8/25/2011 Amended: 3/31/2011 Consultant: Maureen Ortiz Policy Vote: PE&R: 5-0 _________________________________________________________________ ____ BILL SUMMARY: AB 1042 authorizes the California Public Employees' Retirement System (CalPERS) Board of Administration to appoint and set the salary of a Chief Financial Officer. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2011-12 2012-13 2013-14 Fund Salary/benefits ---------unknown, likely over $150----------- Special* *Public Employees Retirement Fund _________________________________________________________________ ____ STAFF COMMENTS: SUSPENSE FILE. Exact costs will be dependent on the compensation package that is developed and offered for the new position. It is anticipated that before determining the level of the compensation package, CalPERS will do a salary survey to identify comparable salaries for similar positions. Without independent salary setting authority for this new position, the board would be limited to hiring a financial officer at a CEA Level 4, which salary maximum is $119,268 or a CEA Level 5 which would be paid no more than $126,240. Existing law authorizes the CalPERS board to appoint and fix the compensation of an executive officer, a general counsel, a chief actuary, a chief investment officer and several other investment officers and portfolio managers. AB 1042 is intended to enable CalPERS to hire an individual with private-sector investment finance experience in order to achieve a higher level of transparency and tighter internal controls of its financial operations. The new Chief Financial Officer (CFO) > (>) Page 1 will oversee corporate finance and coordinate other finance functions throughout the system to create a single point of financial accountability. Ultimately, the intent is that the CFO will make decisions that will result in positive financial effects on the pension fund. CalPERS has recently undergone a new organizational restructuring which includes a new Financial Office, and has identified the CFO with responsibilities to oversee the corporate finance activities and coordinate other finance functions to create a single point of accountability. The CFO will be responsible for the current functions of budgeting, accounting, cash management, financial planning and analysis, and enterprise risk management. Hiring a high caliber, experienced individual is a critical step to achieving greater transparency and tighter internal controls with CalPERS' financial operations.