BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON BUDGET AND FISCAL REVIEW
                              Senator Mark Leno, Chair
                                2015 - 2016  Regular 

          Bill No:            AB 130          Hearing Date:    August 27,  
          2015
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          |Author:   |Committee on Budget                                   |
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          |Version:  |August 25, 2015    Amended                            |
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          |Urgency:  |No                     |Fiscal:    |Yes              |
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          |Consultant|Anita Lee                                             |
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              Subject:  California State University: fees: investments.


          Summary:  This bill provides statutory changes to amend the California  
          State University's existing investment authority.
          
          Background:Existing law limits the California State University  
          (CSU) to only invest student tuition fees; enterprise funds,  
          such as housing revenues, parking revenues, health center fees,  
          and other self-supporting programs; and other revenues only in  
          low-risk, fixed-income securities, such as bonds or  
          interest-bearing notes on obligations that are guaranteed as to  
          principle and interest by a federal agency of the United States;  
          or bonds, notes, and warrants of this state. These same  
          investment restrictions apply to all other state agencies except  
          the University of California. 
          Proposed Law:  This bill makes statutory changes to laws  
          governing the investment authority of the CSU. Specifically,  
          this bill:

          1.Allows to CSU to invest up to 30 percent of specified funds,  
            upon approval by the CSU Trustees, the treasurer or by the  
            chief fiscal officer of a campus of the CSU, in a broader  
            array of investment options than current law allows. This bill  
            allows CSU to invest in mutual funds subject to registration  
            by, and under the regulatory authority of, the United States  
            Securities and Exchange Commission; or, in real estate  
            investment trusts.








          AB 130 (Committee on Budget)                            Page 2  
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          2.Requires all monies earned with this expanded investment  
            authority to be used on deferred maintenance or capital outlay  
            projects. However, if there are investment losses, CSU shall  
            not request funding from the Legislature or the Department of  
            Finance to compensate for investment losses or raise student  
            tuition fees as a result.  

          3.Establishes procedures for the CSU to follow regarding this  
            change, specifically this bill requires the CSU Board of  
            Trustees to establish a committee of advisors, including the  
            state treasurer or a deputy state treasurer, and independent  
            investment experts to help determine the appropriate  
            investment opportunities.

          4.Requires CSU to submit an annual investment performance report  
            to the Legislature and Department of Finance describing  
            investment returns, comparisons to benchmarks, holdings,  
            market values, and fees. 

          5.Requires the trustees to receive an investment performance  
            report quarterly describing investment returns, comparisons to  
            benchmarks, holdings, market values, and fees.

          6.Includes a ramp-up period through 2020 in which CSU is limited  
            to specified amounts of funding it can use to invest: $200  
            million in the first year, $400 million in the second year,  
            and $600 million in the third year.  After July 1, 2020, it  
            will be allowed to use up to 30 percent of specified funds for  
            these purposes, which currently could amount to about $1  
            billion.


          Support:   None on file.
          
          Opposed:  None on file.
          
          
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