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 ----------------------------------------------------------------- |Author: |Committee on Budget | |----------+------------------------------------------------------| |Version: |August 25, 2015 Amended | ----------------------------------------------------------------- ---------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ---------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Anita Lee | |: | | ----------------------------------------------------------------- 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 of ? 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. -- END --