BILL ANALYSIS Ó
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: SB 955
Gloria Negrete McLeod, Chair Hearing date: April 9, 2012
SB 955 (Pavley) as amended 3/29/12 FISCAL: NO
CALPERS: INVESTMENTS IN CALIFORNIA INFRASTRUCTURE
HISTORY :
Sponsor: Author
Prior legislation: AB 1151 (Feuer), 2011
Chapter 441, Statutes of 2011
AB 1379 (Bradford), 2011
Vetoed
SUMMARY :
SB 955 makes findings and declarations regarding the economic
recession, unemployment in California, and investing in
infrastructure; states that board of the California Public
Employees' Retirement System (CalPERS), consistent with its
fiduciary duty and constitutional autonomy, may prioritize
investments in California infrastructure projects over
investments in out-of-state infrastructure projects; and
encourages the board to do so when it is consistent with the
Board's fiduciary duty.
BACKGROUND AND ANALYSIS :
1) Existing law and the California Constitution :
a) establish CalPERS, which provides health, retirement,
disability, and death benefits for members and their
survivors and beneficiaries, and gives exclusive control
of administration and investment of the California Public
Employees' Retirement Fund to the CalPERS board.
b) provide the retirement board with sole and exclusive
authority over investing the pension trust fund so as to
minimize the risk of loss and maximize returns solely in
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the interest of providing benefits to participants,
minimizing employer contributions, and defraying costs of
administering the system.
c) allow the Legislature, by statute, to prohibit certain
investments where it is in the public interest to do so,
and provided that the prohibition does not conflict with
the board's duties and standards of fiduciary care and
loyalty to members and participating employers.
2) This bill :
a) defines infrastructure to include telecommunications,
power, transportation, ports, petrochemicals, and
utilities.
b) states that the CalPERS board may prioritize an
investment in a California infrastructure project over a
comparable out-of-state infrastructure project if the
in-state investment is consistent with the board's
fiduciary duty.
c) encourages the board to prioritize investments in
in-state projects over out-of-state investments when
doing so would be consistent with the board's fiduciary
duties to minimize the risk of loss and to maximize the
rate of return.
d) adds findings and declarations about the current
economic recession and the importance of investing in
California infrastructure.
COMMENTS :
1) Does CalPERS currently invest in California
infrastructure and business ?
a) The CalPERS Infrastructure Investment Program
According to CalPERS, in 2007, CalPERS initiated an
infrastructure investment program to invest in businesses
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and projects involving physical structures, networks and
facilities in key infrastructure sectors including
transportation, ports, energy, power, water, and
communications.
The Infrastructure Investment Program target size is
approximately two percent of the total CalPERS fund, or
about $5 billion, with a performance benchmark of CPI + 4
percent, to reflect its focus on low-risk investments and
its strategic role in CalPERS' overall asset allocation
strategies. The target for US investments is 40-80
percent of that amount, or up to $4 billion, with
California investments comprising up to 20 percent of the
US target. In 2011, the CalPERS Board allocated up to
$800 million for investments in California infrastructure
over the next three years as part of the Program.
Under the Board's direction, CalPERS staff has developed
a plan for outreach to state and local governments to:
Explore what role CalPERS and other U.S.
pension systems can play to facilitate
infrastructure investment in California;
Discuss opportunities for CalPERS and other
pension systems with whom CalPERS partners to
increase investment in California infrastructure;
Provide opportunities for stakeholders to
share information regarding project delivery and
service goals, and perspectives on opportunities and
challenges;
Increase mutual awareness between CalPERS and
government agencies of mandates, goals, initiatives
and projects, and strengthen the investment staff's
network of contacts;
Expand the current infrastructure investment
pipeline; and
Execute investments in California-based
infrastructure businesses and projects.
a) CalPERS Investments in California
According to the 2011 report CalPERS for California,
over the past 11 years, CalPERS invested an average of
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10 percent of its Total Fund in California. As of June
30, 2010, CalPERS had $17 billion invested in
California; 8.5 percent of its total portfolio and 13
percent of its domestic portfolio.
CalPERS currently has private investments in California
infrastructure totaling $203 million in net asset value.
These investments are comprised of $67 million in
Infrastructure Program assets, as well as $136 million
in private equity investments. In addition, CalPERS has
provided credit enhancement for approximately $326
million in California infrastructure bonds.
2)Argument in Support :
According to the author:
The California Public Employees Retirement System
(CalPERS) recently announced $800 million in dedicated
funds to invest in infrastructure projects that will
provide a steady return for members of the fund, as well
as help to finance much needed updates to our nation's
aging infrastructure. CalPERS has slated 80% of the
current fund for projects within the United States, 20%
of which will be in California.
3) OPPOSITION :
None to date
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