BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 955|
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UNFINISHED BUSINESS
Bill No: SB 955
Author: Pavley (D), et al.
Amended: 6/12/12
Vote: 21
SENATE PUBLIC EMPL. & RETIREMENT COMMITTEE : 4-0, 4/9/12
AYES: Negrete McLeod, Walters, Gaines, Vargas
NO VOTE RECORDED: Padilla
SENATE FLOOR : 38-0, 4/19/12
AYES: Alquist, Anderson, Berryhill, Blakeslee, Calderon,
Cannella, Corbett, Correa, De León, DeSaulnier, Emmerson,
Evans, Fuller, Gaines, Hancock, Harman, Hernandez, Huff,
Kehoe, La Malfa, Leno, Lieu, Liu, Lowenthal, Negrete
McLeod, Padilla, Pavley, Price, Rubio, Simitian,
Steinberg, Strickland, Vargas, Walters, Wolk, Wright,
Wyland, Yee
NO VOTE RECORDED: Dutton, Runner
ASSEMBLY FLOOR : 51-23, 8/20/12 - See last page for vote
SUBJECT : Public employees retirement: pension fund
management
SOURCE : Author
DIGEST : This bill authorizes the California Public
Employees Retirement System (CalPERS) and the California
State Teachers' Retirement System (CalSTRS) to prioritize
investment in in-state infrastructure projects over
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alternative out-of-state projects if the investments are
consistent with its fiduciary responsibility.
Assembly Amendments make clarifying changes to the
legislative findings, clarifies the definition of "Board"
and state that nothing in the bill requires CalPERS and
CalSTRS to take action that is inconsistent with its
plenary authority and fiduciary responsibilities.
ANALYSIS :
Existing law and the California Constitution:
1. Establishes the California Public Employees' Retirement
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. Makes various legislative declarations and findings
including:
A. Due to the current economic recession,
infrastructure investment represents a significant
opportunity to spur job growth while improving
California's infrastructure;
B. Over $2 million Californians are unemployed;
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C. Infrastructure investment can provide employment
opportunities to Californians looking for work;
D. CalPERS plans to invest up to $800 million in
infrastructure projects; and
E. CalSTRS plans to invest up to $650 million in
infrastructure projects.
2. Authorizes CalPERS and CalSTRS, consistent with their
fiduciary duties and the standard for prudent
investment, to prioritize investment in in-state
infrastructure projects over a comparable out-of-state
infrastructure project.
3. Defines infrastructure to include telecommunications,
power, transportation, ports, petrochemicals, and
utilities.
4. States the Legislature's intent to encourage the board
to prioritize investment in in-state infrastructure
projects over a comparable out-of-state infrastructure
project.
5. Specifies that nothing in the bill requires CalPERS or
CalSTRS to take action that is inconsistent with its
plenary authority and fiduciary responsibilities.
Comments
CalPERS Infrastructure Investment Program . According 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
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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.
This bill authorizes the CalPERS and CalSTRS to prioritize
investment in in-state infrastructure projects over
alternative out-of-state projects if the investments are
consistent with its fiduciary responsibility.
CalPERS Investments in California . According to the 2011
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
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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
ASSEMBLY FLOOR : 51-23, 8/20/12
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Block, Blumenfield, Bonilla, Bradford, Brownley,
Buchanan, Butler, Charles Calderon, Campos, Carter,
Cedillo, Chesbro, Davis, Dickinson, Eng, Feuer, Fletcher,
Fong, Fuentes, Galgiani, Gatto, Gordon, Hayashi, Hill,
Huber, Hueso, Huffman, Lara, Bonnie Lowenthal, Ma,
Mendoza, Mitchell, Monning, Pan, Perea, V. Manuel Pérez,
Portantino, Skinner, Solorio, Swanson, Torres,
Wieckowski, Williams, Yamada, John A. Pérez
NOES: Bill Berryhill, Conway, Donnelly, Beth Gaines,
Garrick, Grove, Hagman, Halderman, Harkey, Jeffries,
Jones, Knight, Logue, Mansoor, Miller, Morrell, Nestande,
Nielsen, Norby, Olsen, Smyth, Valadao, Wagner
NO VOTE RECORDED: Cook, Furutani, Gorell, Hall, Roger
Hernández, Silva
DLW:d 8/21/12 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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