BILL ANALYSIS Ó AB 205 Page 1 ASSEMBLY THIRD READING AB 205 (Pan) As Introduced January 30, 2013 Majority vote PUBLIC EMPLOYEES 5-2 ----------------------------------------------------------------- |Ayes:|Bonta, Jones-Sawyer, | | | | |Mullin, Rendon, | | | | |Wieckowski | | | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Allen, Harkey | | | | | | | | ----------------------------------------------------------------- SUMMARY : Adds the board of retirement or board of investments of a retirement system established under the County Employees' Retirement Law of 1937 ('37 Act) to the list of public retirement system boards that are authorized to prioritize investment in in-state infrastructure projects over alternative out-of-state projects if the investments are consistent with its fiduciary responsibility. EXISTING LAW : 1)Provides, under the state Constitution by Proposition 162, the California Pension Protection Act of 1992, that the boards of California's public retirement systems have "plenary authority and fiduciary responsibility for investment of monies and administration of the system." Under Proposition 162, the Legislature also retained its authority by statute, to prohibit certain investments by a retirement board where it is in the public interest to do so, and provided that the prohibition satisfies the standards of fiduciary care and loyalty required of a retirement board pursuant to this section. The Constitution also states, "The members of the retirement board of a public pension or retirement system shall discharge their duties with respect to the system solely in the interest of, and for the exclusive purposes of providing benefits to, participants and their beneficiaries, minimizing employer contributions thereto, and defraying reasonable expenses of AB 205 Page 2 administering the system." 2)As enacted by SB 955 (Pavley and Rubio), Chapter 760, Statutes of 2012: a) 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 alternative out-of-state projects if the investments are consistent with its fiduciary responsibility. b) 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. c) Defines infrastructure to include telecommunications, power, transportation, ports, petrochemicals, and utilities. d) 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. e) Specifies that nothing in the bill requires CalPERS or CalSTRS to take action that is inconsistent with its plenary authority and fiduciary responsibilities. FISCAL EFFECT : None. This bill is keyed non-fiscal by the Legislative Counsel. COMMENTS : According to the sponsor, the Service Employees International Union (SEIU), "AB 205 would authorize the '37 Act retirement systems to give preference to infrastructure investments in California when determining which investments to participate in. At the urging of SEIU and other public employee organizations, CalPERS and CalSTRS have both dedicated investment resources toward investment in California infrastructure, CalPERS has set aside $800 million to be directly invested in projects that create California jobs in our communities." AB 205 Page 3 Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916) 319-3957 FN: 0000424