BILL ANALYSIS �
AB 125
Page 1
ASSEMBLY THIRD READING
AB 125 (Wieckowski)
As Amended May 24, 2013
Majority vote
PUBLIC EMPLOYEES 7-0 APPROPRIATIONS 17-0
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|Ayes:|Bonta, Allen, Harkey, |Ayes:|Gatto, Harkey, Bigelow, |
| |Jones-Sawyer, Mullin, | |Bocanegra, Bradford, Ian |
| |Rendon, Wieckowski | |Calderon, Campos, |
| | | |Donnelly, Eggman, Gomez, |
| | | |Hall, Ammiano, Linder, |
| | | |Pan, Quirk, Wagner, Weber |
| | | | |
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SUMMARY : Expands the list of positions for which the Teachers'
Retirement Board (TRB) 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), as specified.
Specifically, this bill :
1)Adds the COO and CFO to the list of positions for which the TRB
has the authority to set the compensation and terms and conditions
of employment.
2)Prohibits the salary for the COO and CFO from exceeding 110% of
the maximum salary payable to an investment director of the
retirement system.
3)Makes technical changes to the list of key employees who are
prohibited for two years from working for private interests to
influence the TRB after leaving employment with the California
State Teachers' Retirement System (CalSTRS).
4)Requires CalSTRS to report to the appropriate policy and fiscal
committees of the Legislature, 12 months after filling the COO or
CFO positions and annually thereafter, on the improvements and
cost savings realized because of these new positions, as
specified.
EXISTING LAW :
1)Requires the TRB to establish compensation for the system's
AB 125
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executive officer, chief actuary, general counsel, chief
investment officer, and other investment officers and portfolio
managers whose positions are designated managerial.
2)States that the compensation level for these positions is to be
comparable to other public retirement systems and financial
services companies and, when these positions are filled through a
general civil service appointment, that the candidates be selected
from an eligible list based on an open examination.
3)States that except for the executive officers of both systems,
these positions are subject to a modified civil service selection
process, and the boards are able to take action against these
personnel for causes related to their fiduciary duty, including
the failure to meet specified performance objectives.
4)Prohibits individuals employed in these positions for less than
five years from being paid to influence the actions of the
retirement system, or decisions of its governing board for two
years following the end of their employment with the retirement
system.
FISCAL EFFECT : According to the Assembly Appropriations Committee,
Increased special fund costs to CalSTRS of approximately $200,000,
if the salaries are adjusted using the flexibility in this bill.
The ceiling in the bill currently allows an annual salary of
$264,000. The actual costs will depend on the compensation packages
developed by the TRB. Any increase in CalSTRS costs could create
commensurate General Fund pressure either directly through state
support or indirectly through state payments to school districts.
COMMENTS : According to the author, "Current law requires that the
hiring of the Chief Operating Officer (COO) and Chief Financial
Officer (CFO) is limited to the state civil service pool. 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.
They type of experience needed to manage the risks associated with
a large pension fund is not likely to be found within the state
civil service but from other pension funds or private sector
financial institutions. Currently, there is only one other state
agency outside of CalSTRS that manages pension funds - the
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California Public Employees' Retirement System (CalPERS) - while
there are many such funds elsewhere in California that would be
suitable sources of executive management."
Supporters state, "This bill enhances CalSTRS' ability to
proactively 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 peer financial
institutions in the private sector, endowments and other large
public pension systems."
This bill is similar to AB 1735 (Wieckowski) of 2012, which would
have expanded the list of positions for which TRB has the authority
to set the compensation and terms and conditions of employment to
include the COO and the CFO and would have prohibited the salary for
the COO and CFO from exceeding 150% of the Governor's salary. AB
1735 was held in the Senate Appropriation Committee.
This bill is also similar to AB 1042 (Allen), Chapter 688, Statutes
of 2011, which authorized the CalPERS Board of Administration to
appoint and set the compensation of a CFO.
SB 269 (Soto), Chapter 856, Statutes of 2003, allowed the CalPERS
Board of Administration and the TRB 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
positions to include the general counsel.
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN: 0000918