BILL ANALYSIS �
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: SB 439
Gloria Negrete McLeod, Chair
Hearing date: March 21, 2011
SB 439 (Negrete McLeod) to be amended in committee
FISCAL: YES
CALPERS AND CALSTRS: GIFT LIMITATIONS AND PENALTIES
HISTORY :
Sponsor: Office of the State Controller
Prior legislation: AB 1584 (Assembly PER&SS Committee)
Chapter 301, Statutes of 2009
AB 1743 (Hernandez)
Chapter 668, Statutes of 2010
AB 873 (Furutani)
Currently in Assembly PER&SS Committee
SUMMARY :
SB 439 would lower (from $420 to $50) the amount of allowable
gifts made annually to board members and specified staff of
the California Public Employees' Retirement System (CalPERS)
and the California State Teachers' Retirement System
(CalSTRS) from entities with business before either
retirement system.
BACKGROUND AND ANALYSIS :
1) Existing law , the Political Reform Act (PRA), requires
specified public officials to annually report the receipt of
gifts and prohibits the receipt of gifts exceeding $250 in
value, adjusted biannually for inflation since 1993, from any
single source, as specified (current inflation adjusted limit
is $420).
2) Existing law establishes the governing boards of CalPERS
and CalSTRS and defines their duties and responsibilities,
which include oversight of the retirement systems' investment
programs and compensation for certain essential employees,
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including the Chief Executive Officer, the Chief Actuary, the
Chief Counsel, the Chief Investment Officer and other
managerial-level investment staff.
3) This bill :
a) would prohibit all board members and employees of
CalPERS and CalSTRS who are subject to gift reporting under
the PRA from receiving, in any calendar year, gifts
exceeding $50 in value from any single entity that
contracts with CalPERS or CalSTRS.
b) would specify that any vendor or contractor that makes
gifts in violation of this limit two or more times,
occurring more than 2 months apart, in a five year period
shall be disqualified from bidding on, and being awarded,
any contract with the retirement system for the period of
two years from the date of the conviction for receipt of
the second gift.
4) Why is this bell necessary ?
In 2010, following charges of unethical conduct against
former CalPERS staff and board members relative to the
influence of placement agents, CalPERS commissioned a study
by the respected Washington DC law firm, Steptoe and Johnson,
to review CalPERS' investment decision making practices and
to identify ethical vulnerabilities. The initial findings of
that report were released in November 2010 and included a
recommendation to prohibit gifts to CalPERS board members and
staff.
COMMENTS :
1) Argument in support
According to the sponsor:
Similar to the placement agent legislation that preceded it
last year, SB 439 is designed to restore public confidence
in CalPERS and CalSTRS' decision-making process by limiting
opportunities for influence-peddling or to gain an unfair
advantage in consideration for investment. If enacted,
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this measure will assure PERS/STRS members and taxpayers
that the decisions are being made in the best interest of
the funds, and set an enduring ethical precedent for other
states, localities, and private investors to follow.
Regarding the new $50 limit: "$50 is a reasonable gift limit
to make sure that an occasional cut of coffee or a Danish at
a business meeting does not lead to unintentional
violations."
2) SUPPORT :
Office of the State Controller, John Chiang, sponsor
CalPERS Board of Administration (CalPERS)
California Retired Teachers Association (CalRTA)
Service Employees International Union, Local 1000 (SEIU)
3) OPPOSITION :
None to date
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