BILL ANALYSIS Ó SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: AB 205 Jim Beall, Chair HEARING DATE: June 10, 2013 AB 205 (Pan) as introduced 1/30/13 FISCAL: NO PUBLIC PENSION FUNDS: INVESTMENTS IN CALIF. INFRASTRUCTURE HISTORY : Sponsor: Service Employees International Union (SEIU) Other legislation: SB 955 (Pavley), Chapter 760, Statutes of 2012 ASSEMBLY VOTES : PER & SS 5-2 5/08/13 Assembly Floor 55-20 5/13/13 SUMMARY : AB 205 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 the board's fiduciary responsibility. BACKGROUND AND ANALYSIS : 1) Existing law : a) under the state Constitution by Proposition 162, the California Pension Protection Act of 1992, provides 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 retained its authority to, by statute, 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. Pamela Schneider Date: May 29, 2013 Page 1 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 administering the system." b) as enacted by SB 955 (Pavley and Rubio), Chapter 760, Statutes of 2012: i. states that the California Public Employees' Retirement System (CalPERS) and the California State Teachers' Retirement System (CalSTRS) may prioritize investments in in-state infrastructure projects over alternative out-of-state projects if the investments are consistent with each system's fiduciary responsibility. ii. defines infrastructure to include telecommunications, power, transportation, ports, petrochemicals, and utilities. iii. states that the Legislature's encourages each board to prioritize investment in in-state infrastructure projects over a comparable out-of-state infrastructure project, consistent with fiduciary duties. iv. specifies that nothing in the bill requires CalPERS or CalSTRS to take action that is inconsistent with its plenary authority and fiduciary responsibilities. a) establishes the County Employees' Retirement Law of 1937, which governs 20 independent county retirement systems. 2) This bill adds the '37 Act retirement systems to the statute encouraging public retirement systems to prioritize investments in California infrastructure. FISCAL : Pamela Schneider Date: May 29, 2013 Page 2 This bill has been keyed non-fiscal by Legislative Counsel. COMMENTS : 1) Argument in Support : 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." 2) SUPPORT : Service Employees International Union (SEIU), Sponsor American Federation of State, County and Municipal Employees (AFSCME), AFL-CIO Glendale City Employees' Association (GCEA) Organization of SMUD Employees (OSE) San Bernardino Public Employees Association (SBPEA) San Luis Obispo County Employees Association (SLOCEA) Santa Rosa City Employees Association (SRCEA) 3) OPPOSITION : None to date ##### Pamela Schneider Date: May 29, 2013 Page 3