BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 955|
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THIRD READING
Bill No: SB 955
Author: Pavley (D)
Amended: 3/29/12
Vote: 21
SENATE PUBLIC EMPL. & RETIREMENT COMMITTEE : 4-0, 4/9/12
AYES: Negrete McLeod, Walters, Gaines, Vargas
NO VOTE RECORDED: Padilla
SUBJECT : Public employees retirement: pension fund
management
SOURCE : Author
DIGEST : This bill 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, 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.
ANALYSIS :
Existing law and the California Constitution:
1. Establishes the California Public Employees' Retirement
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System (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.
2. Provides 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
the interest of providing benefits to participants,
minimizing employer contributions, and defraying costs
of administering the system.
3. Allows 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.
This bill:
1. Defines infrastructure to include telecommunications,
power, transportation, ports, petrochemicals, and
utilities.
2. 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.
3. Encourages the Board to prioritize investments in
in-state projects over out-of-state investments when
doing so would be consistent with the Goard's fiduciary
duties to minimize the risk of loss and to maximize the
rate of return.
4. Adds findings and declarations about the current
economic recession and the importance of investing in
California infrastructure.
Comments
The CalPERS Infrastructure Investment Program . According
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to CalPERS, in 2007, CalPERS initiated an infrastructure
investment program to invest in businesses 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.
Execute investments in California-based infrastructure
businesses and projects.
CalPERS Investments in California . According to the 2011
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report CalPERS for California, over the past 11 years,
CalPERS invested an average of 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.
According to the author's office, 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 percent of the current fund for
projects within the United States, 20 percent of which will
be in California.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
DLW:do 4/11/12 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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