BILL ANALYSIS �
AB 1379
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 1379 (Bradford)
As Amended September 1, 2011
Majority vote
-----------------------------------------------------------------
|ASSEMBLY: |51-27|(June 2, 2011) |SENATE: |27-10|(September 7, |
| | | | | |2011) |
-----------------------------------------------------------------
Original Committee Reference: P.E.,R. & S.S.
SUMMARY : Authorizes public retirement systems with assets over
$4 billion to report annually to the State Controller
(Controller) on investments in California and emerging domestic
markets, as specified. Specifically, this bill :
1)Makes various legislative findings and declarations related to
the benefit California could realize by adopting and
implementing more effective economic development policies with
better information on California and its emerging market
investments by the public retirement systems in the state and
encourages retirement systems with sufficiently diversified
portfolios adopt California emerging market investment
policies.
2)Requires a state or local public retirement system with assets
over $4 billion to report to the Controller on California
investments and California emerging market investments, as
specified, obtained and held in its portfolio on and after
July 1, 2012.
3)Permits the report to include an estimate of the number of
jobs created and retained because of the retirement system's
investments.
4)Limits the information reported by the public pension systems
to that which is required by the California Public Records
Act.
5)Clarifies that a state or local public retirement system may
elect to satisfy the reporting requirements by reporting on
its total portfolio, rather than those investments made after
July 1, 2012, if the information is provided and identified
consistently, as specified.
AB 1379
Page 2
6)Specifies that nothing in the bill requires a retirement board
to take any action that is not consistent with its
constitutionally granted plenary authority and fiduciary
responsibilities.
7)Defines "California investment" and "California emerging
market investment" for purposes of these provisions and
authorizes a retirement system to modify the definitions and
parameters of the reporting requirements to ensure consistency
with adopted investment policies and to limit its reporting
costs.
8)Requires for the 2011-12 and 2012-13 fiscal years the boards
of the California Public Employees' Retirement System and the
California State Teachers' Retirement System to share with
other public pension systems streamlined and cost-effective
methods for identifying investments within their portfolios,
as specified.
9)Authorizes the Controller, at his/her discretion, to compile
and publish on its Internet Web site the information provided
by the state and local public retirement systems, as
specified.
10)Requires the Controller, if he or she decides to publish the
information received from the retirement systems to publish
the information on its Web site within 12 months of receipt of
the information, or no later than 18 months after the end of
the fiscal year on which the information is based.
11)Sunsets these provisions on January 1, 2017.
The Senate amendments :
1)Make changes to the legislative findings and declarations
provisions of the bill.
2)Limit the information reported by the public pension systems
to that which is required by the California Public Records
Act.
3)Specify that nothing in the bill requires a retirement board
to take any action that is not consistent with its
constitutionally granted plenary authority and fiduciary
AB 1379
Page 3
responsibilities.
4)Clarify the definitions included in the bill and authorizes a
retirement system to modify the definitions and parameters of
the reporting requirements to ensure consistency with adopted
investment policies and to limit its reporting costs.
5)Require, for the 2011-12 and 2012-13 fiscal years, the boards
of the California Public Employees' Retirement System
(CalPERS) and the California State Teachers' Retirement System
(CalSTRS) to share with other public pension systems
streamlined and cost-effective methods for identifying
investments within their portfolios, as specified.
6)Make other technical and clarifying changes.
7)Sunset the provisions of the bill on January 1, 2017.
EXISTING LAW :
1)Requires public pension funds to annually report to the
Controller on a variety of issues including the fiscal
condition of state and local public retirement systems.
2)Provides, under the state Constitution by Proposition 162, the
California Pension Protection Act of 1992, that the boards of
California's public retirement systems have "plenary authority
and fiduciary responsibility for investment of monies and
administration of the system." Under Proposition 162, the
Legislature also retained its authority to, by statute,
"continue to prohibit certain investments by a retirement
board where it is in the public interest to do so, and
provided that the prohibition satisfies the standards of
fiduciary care and loyalty required of a retirement board
pursuant to this section."
The Constitution also states, "The members of the retirement
board of a public pension or retirement system shall discharge
their duties with respect to the system solely in the interest
of, and for the exclusive purposes of providing benefits to,
participants and their beneficiaries, minimizing employer
contributions thereto, and defraying reasonable expenses of
administering the system."
AS PASSED BY THE ASSEMBLY, this bill was substantially similar
AB 1379
Page 4
to the version approved by the Senate.
FISCAL EFFECT : According to the Senate Appropriations
Committee, CalPERS indicates that if the system is allowed to
use its own definitions as it relates to "emerging domestic
market" for reporting the data required in the bill, costs will
likely be minor. CalSTRS indicates that the information
required in this bill is already compiled for a similar report,
and therefore, costs would be minimal. AB 1379 authorizes, but
does not require, the State Controller to compile and publish
the information reported by pension systems on its Internet Web
site. The Controller's office indicates the need for PY at
costs of about $27,000 annually if it chooses to do so.
COMMENTS : Both CalPERS and CalSTRS have special initiatives on
California investments and investments in emerging domestic
managers.
According to information provided to the Public Employees
Committee by CalPERS, the capital that CalPERS invests in
California is usually not explicitly directed to the state but
is the consequence of a process weighing the financial merits of
particular companies, properties and projects, regardless of
location. The size of CalPERS, and of California's economy, is
the primary driver of the System's significant exposure to local
communities and the related benefits that this brings, like job
creation. At June 30, 2010, CalPERS invested:
1)$6.1 billion in 644 California-headquartered public companies,
which employ over 700,000 people in the state - nearly 5% of
the total workforce.
2)$4.7 billion of fixed income capital in California, $810
million of which is invested in 14 California headquartered
corporate bond issuers employing over 85,000 workers in the
state.
3)$2.9 billion in 1,331 California-headquartered private
companies, which support more than 140,000 local jobs.
4)$3.3 billion in 387 California-based real estate projects.
5)$80 million in six California-based infrastructure projects.
CalPERS invested approximately $17 billion in companies,
AB 1379
Page 5
properties and projects located in California across five key
asset classes - public equities, private equities, fixed income,
real estate, and infrastructure.
According to the author, "Existing law is not sufficiently
specific on the contents of the state economic development
strategy. This has resulted in a lack of concrete
recommendations relating to the use and attraction of private
investment.
"California communities represent a potentially significant
investment opportunity for institutional investors generating
appropriate risk-adjusted returns. The State, however, does not
track investments made by public pension funds and does not
engage private investors on how to make the State a more
attractive place in which to invest. More private investment,
in turn, could result in increased financial opportunities for
the state's historically underserved capital markets, also known
as emerging domestic markets."
The author concludes, "AB 1379 mitigates these limitations by
directly engaging private investors and beginning to track the
large, fully diversified, public pension funds. The bill does
not require investments in either California or historically
underserved areas; rather the bill would permit a state or local
pension system with assets over $4,000,000,000 to provide a
report to the Controller on California's investment in emerging
domestic markets. It also encourages the State to create the
economic environment that encourages California investments.
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN: 0002506