BILL ANALYSIS �
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 125|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
THIRD READING
Bill No: AB 125
Author: Wieckowski (D)
Amended: 5/24/13 in Assembly
Vote: 21
SENATE PUBLIC EMPLOYMENT & RETIREMENT COMM. : 5-0, 6/24/13
AYES: Beall, Walters, Block, Gaines, Yee
SENATE APPROPRIATIONS COMMITTEE : 7-0, 8/30/13
AYES: De Le�n, Walters, Gaines, Hill, Lara, Padilla, Steinberg
ASSEMBLY FLOOR : 75-1, 5/29/13 - See last page for vote
AYES: De Le�n, Walters, Gaines, Hill, Lara, Padilla, Steinberg
SUBJECT : State teachers retirement: executive and managerial
positions
SOURCE : California State Teachers Retirement System
DIGEST : This bill amends the State Teachers Retirement Law to
include the positions of chief operating officer (COO) and chief
financial officer (CFO) in the list of positions for which the
Teachers' Retirement Board (TRB) has the authority to set the
compensation and terms and conditions of employment, and limits
the compensation for these individuals to 110% of the maximum
salary payable to an investment director of the retirement
system. In addition, this bill requires the TRB to report on
improvements and cost savings relative to the new positions, as
specified, and makes technical changes to certain prohibitions
on working for a subsequent employer after separation from
CONTINUED
AB 125
Page
2
employment with the California State Teachers' Retirement System
(CalSTRS).
ANALYSIS :
Existing law:
1. Requires the TRB to establish compensation for CalSTRS'
executive officer, chief actuary, general counsel, chief
investment officer, and other investment officers and
portfolio managers whose positions are designated managerial.
2. Requires that the compensation level for these positions 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 officer, these
positions are subject to a modified civil service selection
process, and the board may 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, upon
separation from employment, from being paid by a subsequent
employer to influence the actions of the retirement system or
decisions of its governing board for two years following the
end of employment with the retirement system.
This bill:
1. Expands the list of positions for which the TRB has the
authority to set the compensation and terms and conditions of
employment to include the COO and CFO.
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
CONTINUED
AB 125
Page
3
to influence the TRB after leaving employment with CalSTRS.
4. Requires the TRB, within 12 months of filling the positions
of the COO and CFO and annually thereafter, to report to the
fiscal committees of the Legislature on the improvements and
cost savings realized as a result of the new positions, as
specified.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Potentially up to $250,000 for increased salaries dependent on
the compensation packages developed (Special Fund)
Minor costs to compile savings information for the annual
report (Special Fund)
The total cost of the salary increases will be approximately
$148,000 annually if the individuals were paid a mid-salary
range.
SUPPORT : (Verified 8/30/13)
California State Teachers' Retirement System (source)
California Federation of Teachers
OPPOSITION : (Verified 8/30/13)
Department of Finance
ARGUMENTS IN SUPPORT : 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. The 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
CONTINUED
AB 125
Page
4
institutions. Currently, there is only one other state agency
outside of CalSTRS that manages pension funds - the California
Public Employees' Retirement System (CalPERS) - while there are
many such funds elsewhere in California that would be suitable
sources of executive management."
CalSTRS states, "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."
ARGUMENTS IN OPPOSITION : The Department of Finance (DOF)
opposes this bill because it circumvents the salary setting
authority of the Department of Human Resources and due to the
fact that both positions are currently filled-without the
increased compensation authorized by the bill. DOF states that
the bill would increase operational costs by up to $300,000 at a
time when the system is underfunded.
ASSEMBLY FLOOR : 75-1, 5/29/13
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown,
Buchanan, Ian Calderon, Campos, Chau, Ch�vez, Chesbro, Conway,
Cooley, Dahle, Daly, Dickinson, Eggman, Fong, Fox, Frazier,
Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell,
Gray, Grove, Hagman, Hall, Harkey, Roger Hern�ndez, Jones,
Jones-Sawyer, Levine, Logue, Lowenthal, Maienschein, Mansoor,
Medina, Melendez, Mitchell, Morrell, Mullin, Muratsuchi,
Nazarian, Nestande, Olsen, Pan, Perea, V. Manuel P�rez, Quirk,
Quirk-Silva, Rendon, Salas, Skinner, Stone, Ting, Wagner,
Waldron, Weber, Wieckowski, Wilk, Williams, Yamada, John A.
P�rez
NOES: Donnelly
NO VOTE RECORDED: Holden, Linder, Patterson, Vacancy
JL:d 8/31/13 Senate Floor Analyses
CONTINUED
AB 125
Page
5
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED