BILL ANALYSIS                                                                                                                                                                                                    �






          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