AB 382, as amended, Mullin. State and local government: alternative investments: public access.
Existing law, the California Public Records Act, requires state agencies and local agencies to make public records available for inspection, subject to specified criteria, and with specified exceptions. Existing law excludes from disclosure records of public investment funds regarding alternative investments, as defined, unless the information has already been publicly released by the keeper of the information. Existing law defines an alternative investment to mean an investment in a private equity fund, venture fund, hedge fund, or absolute return fund.
Existing law, the Ralph M. Brown Act, requires the meetings of the legislative body of a local agency to be conducted openly and publicly, with specified exceptions. Existing law authorizes the legislative body of a local agency that invests pension funds to hold a meeting in closed session to consider the purchase or sale of particular, specific pension fund investments.
This bill would further authorize the legislative body of a local agency that invests pension funds to hold a meeting in closed session to consider information related to alternative investments and alternative investment vehicles, as specified.
Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.
This bill would make legislative findings to that effect.
Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.
The people of the State of California do enact as follows:
Section 54956.81 of the Government Code is
2amended to read:
Notwithstanding any other provision of this chapter,
4a legislative body of a local agency that invests pension funds may
5hold a closed session to consider the purchase or sale of particular,
6specific pension fund investments or the information set forth in
7subdivision (a) of Section 6254.26. All investment transaction
8decisions made during the closed session shall be made by rollcall
9vote entered into the minutes of the closed session as provided in
10subdivision (a) of Section 54957.2.
Section 54957.5 of the Government Code is amended
12to read:
(a) Notwithstanding Section 6255 or any other law,
14agendas of public meetings and any other writings, when
15distributed to all, or a majority of all, of the members of a
16legislative body of a local agency by any person in connection
17with a matter subject to discussion or consideration at an open
18meeting of the body, are disclosable public records under the
19California Public Records Act (Chapter 3.5 (commencing with
20Section 6250) of Division 7 of Title 1), and shall be made available
21upon request without delay. However, this section shall not include
22any writing exempt from public disclosure under Section 6253.5,
236254, 6254.3, 6254.7, 6254.15, 6254.16, 6254.22, or 6254.26.
24(b) (1) If a writing that is a public record under subdivision (a),
25and that relates to an agenda item for an open session of a regular
P3 1meeting of the legislative body of a local agency, is distributed
2less than 72 hours prior to that meeting, the writing shall be made
3available for public inspection pursuant to paragraph (2) at the
4time the writing is distributed to all, or a majority of all, of the
5members of the body.
6(2) A local agency shall make any writing described in
7paragraph (1) available for public inspection at a public office or
8location that the agency shall designate for this purpose. Each local
9agency shall list the address of this office or location on the agendas
10for all meetings of the legislative body of that agency. The local
11agency also may
post the writing on the local agency’s Internet
12Web site in a position and manner that makes it clear that the
13writing relates to an agenda item for an upcoming meeting.
14(3) This subdivision shall become operative on July 1, 2008.
15(c) Writings that are public records under subdivision (a) and
16that are distributed during a public meeting shall be made available
17for public inspection at the meeting if prepared by the local agency
18or a member of its legislative body, or after the meeting if prepared
19by some other person. These writings shall be made available in
20appropriate alternative formats upon request by a person with a
21disability, as required by Section 202 of the Americans with
22Disabilities Act of 1990 (42 U.S.C. Sec. 12132), and the federal
23rules and regulations adopted in
implementation thereof.
24(d) This chapter shall not be construed to prevent the legislative
25body of a local agency from charging a fee or deposit for a copy
26of a public record pursuant to Section 6253, except that a surcharge
27shall not be imposed on persons with disabilities in violation of
28Section 202 of the Americans with Disabilities Act of 1990 (42
29U.S.C. Sec. 12132), and the federal rules and regulations adopted
30in implementation thereof.
31(e) This section shall not be construed to limit or delay the
32public’s right to inspect or obtain a copy of any record required to
33be disclosed under the requirements of the California Public
34Records Act (Chapter 3.5 (commencing with Section 6250) of
35Division 7 of Title 1).This chapter shall not be construed to require
36a legislative
body of a local agency to place any paid advertisement
37or any other paid notice in any publication.
The Legislature finds and declares that Sections 1 and
392 of this act, which amend Sections 54956.81 and 54957.5 of the
40Government Code, impose a limitation on the public’s right of
P4 1access to the meetings of public bodies or the writings of public
2officials and agencies within the meaning of Section 3 of Article
3I of the California Constitution. Pursuant to that constitutional
4provision, the Legislature makes the following findings to
5demonstrate the interest protected by this limitation and the need
6for protecting that interest:
7The public interest in nondisclosure pursuant to this act
8outweighs the public interest in disclosure, since disclosure of the
9information under the act puts public pension funds at a competitive
10
disadvantage in the marketplace, likely reducing a pension fund’s
11return on investment and thereby necessitating greater contribution
12from the public for the support of public pensions.
13It is in the public interest to ensure that disclosure requirements
14in the Ralph M. Brown Act are consistent with those in the Public
15Records Act. When Section 6254.26 was added to the Government
16Code, the following findings were made, which are applicable
17with equal force to this measure:
18(a) Access to information concerning the conduct of the people’s
19business is a fundamental and necessary right of every person in
20this state pursuant to subdivision (b) of Section 3 of Article I of
21the California Constitution and Section 6250 of the Government
22Code. The public has a
paramount interest in knowing how public
23money is spent and invested.
24(b) Public pension and retirement systems and public
25endowments and foundations have a fiduciary duty to invest the
26assets of these funds with care, skill, prudence, and diligence. This
27fiduciary duty includes diversifying the investment of assets in a
28manner so as to minimize the risk of loss and maximize the rate
29of return. Investment in high performing alternative investments
30is a component of diversifying the pension assets and maximizing
31the rate of return.
32(c) At the same time, a certain narrow class of public
33investments, alternative investments, involves some information
34that historically has been kept confidential because confidentiality
35is essential to their success. The disclosure of certain information
36pertaining to alternative investments could be harmful to
37generating sustainable and profitable
rates of return for the
38investments of the pension or retirement system and of the public
39endowment or foundation. Public pension systems desire to invest
P5 1a portion of their portfolio in alternative investments to boost
2return.
3(d) Following recent litigation seeking to require public pension
4funds and retirement systems and public endowments or
5foundations to disclose certain information about alternative
6investments, the funds risk being excluded from participation in
7certain alternative investments. Exclusion from investing pension
8or retirement system assets in alternative investments may impose
9substantial costs on state public pension funds and the public
10employees who are their beneficiaries.
11(e) It is the intent of this legislation to balance the public’s right
12of access to information and the ability of public pension funds to
13continue to invest in alternative investment
funds. It is also the
14intent of this legislation to allow the public to monitor the
15performance of public investments; for public bodies to avoid
16payment of excessive fees to private individuals or companies; and
17for the public to be able to know the principals involved in
18management of alternative investment funds in which public
19investment funds have invested so that conflicts of interest on the
20part of public officials can be avoided. This legislation is not
21intended to reverse the general presumption of access and openness
22of the California Public Records Act and subdivision (b) of Section
233 of Article I of the California Constitution.
24(f) It is not the intent of this legislation to overrule or invalidate
25any court orders in or stipulated resolutions of prior litigation
26relating to any public entity’s obligation to disclose information
27about its alternative investments to narrow the information
28disclosed as a result of those decisions, or
in any other way to
29apply retroactively. It is, rather, the intent of this legislation to
30establish predictability about what should and should not be
31disclosed regarding private equity funds so that public pension
32funds will be able to continue to invest in private equity funds.
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