BILL ANALYSIS Ó AB 1735 Page 1 Date of Hearing: April 18, 2012 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair AB 1735 (Wieckowski) - As Amended: March 19, 2012 Policy Committee: PERSSVote:5-0 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill expands the list of positions for which the Teachers' Retirement Board has the authority to set the compensation and terms and conditions of employment to include the chief operating officer (COO) and chief financial officer (CFO) and prohibits the salary for the COO and CFO from exceeding 150% of the Governor's salary, currently $173,987 per annum. FISCAL EFFECT Increased special fund costs to CalSTRS of approximately $200,000, when the salaries are adjusted using the flexibility in this bill. Given the new ceiling of $260,000 per annum, this bill allows CalSTRS to double the existing salaries. The actual costs will depend on the compensation packages developed by the Teachers' Retirement Board. Any increase in CalSTRS costs could create General Fund pressure either directly through state support or state payments to school districts. COMMENTS 1)Rationale . According to the author, current law requires that the hiring of the COO and CFO be limited to the state civil service pool. The author argues this limitation constrains the California State Teachers' Retirement System's (CalSTRS) ability to recruit highly qualified candidates that possess essential specialized knowledge, skills, abilities and competencies that are required for positions that are associated with investment financial management in a large public pension fund. The author notes that the type of experience needed to manage the risks associated with a large pension fund is not likely to be found within the state civil AB 1735 Page 2 service but from other pension funds or private sector financial institutions. 2)CalSTRS . The sponsor of the bill is CalSTRS, which states that the bill enhances their ability to preemptively plan for the succession of vulnerable top level executive positions, particularly those responsible for managing the increasingly complex financial and operation components of the largest teacher pension fund in the nation. This bill also improves CalSTRS' ability to attract and retain employees for key executive positions that require specialized and critical expertise and competencies and allows the board to recruit from broader sources. They also argue that the bill will result in unknown savings based on an improved ability to avoid future financial and operational risk due to the board's increased ability to recruit and retain the most highly qualified employees. 3)Previous legislation . SB 269 (Soto), Chapter 856, Statutes of 2003, allowed the CalPERS Board of Administration and the Teachers' Retirement Board to set compensation and terms and conditions of employment of certain key positions. AB 1317 (Mullin), Chapter 333, Statutes of 2007, expanded the list of key positions to include the general counsel. Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081