BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     AB 736


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          Date of Hearing:  April 8, 2015 


           ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT, AND SOCIAL  
                                      SECURITY


                                  Rob Bonta, Chair


          AB 736  
          (Cooley) - As Introduced February 25, 2015


          SUBJECT:  State teachers' retirement:  executive positions


          SUMMARY:  Expands the list of positions for which the Teachers'  
          Retirement Board (TRB) has the authority to set the compensation  
          and terms and conditions of employment to include the chief  
          operating officer (COO) and chief financial officer (CFO), as  
          specified.  Specifically,  this bill  :





          1)Adds the COO and CFO to the list of positions for which the  
            TRB has the authority to set the compensation and terms and  
            conditions of employment.



          2)Makes technical changes to the list of key employees who are  
            prohibited for two years from working for private interests to  
            influence the TRB after leaving employment with the California  
            State Teachers' Retirement System (CalSTRS).










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          EXISTING LAW:  





          1)Requires the TRB to establish compensation for the system's  
            executive officer, chief actuary, general counsel, chief  
            investment officer, and other investment officers and  
            portfolio managers whose positions are designated managerial.



          2)States that the compensation level for these positions is to  
            be comparable to other public retirement systems and financial  
            services companies and, when these positions are filled  
            through a general civil service appointment, that the  
            candidates be selected from an eligible list based on an open  
            examination.



          3)States that except for the executive officers of both systems,  
            these positions are subject to a modified civil service  
            selection process, and the boards are able to take action  
            against these personnel for causes related to their fiduciary  
            duty, including the failure to meet specified performance  
            objectives.



          4)Prohibits individuals employed in these positions from being  
            paid to influence the actions of the retirement system, or  
            decisions of its governing board for two years following the  
            end of their employment with the retirement system.











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          FISCAL EFFECT:  Unknown.


          COMMENTS:  According to the sponsor, CalSTRS, "This bill seeks  
          to improve CalSTRS ability to attract and retain a COO and CFO,  
          key positions that require specialized expertise to manage the  
          increasingly complex financial and operational components of the  
          largest teacher pension fund in the world.  Although CalSTRS has  
          been fortunate to develop a strong executive management team, to  
          proactively plan for the succession of these vulnerable  
          top-level executive positions, prudent business practices and  
          fiduciary obligations dictate that the board positions the  
          organization to attract and recruit from among the best and the  
          brightest in the industry.  The most qualified candidates are  
          likely to be found outside civil service in similarly large  
          financial institutions in the private sector, endowments or  
          other large public pension systems."  





          This bill is similar to the introduced version of AB 125  
          (Wieckowski) of last year, which would have expanded the list of  
          positions for which the TRB has the authority to set the  
          compensation and terms and conditions of employment to include  
          the COO and CFO and would have prohibited the salary for the COO  
          and CFO from exceeding 110% of the maximum salary payable to an  
          investment director of the retirement system.  The bill was  
          amended in the Senate to delete these provisions and to change  
          the author.





          This bill is also similar to AB 1735 (Wieckowski) of 2012, which  
          would have expanded the list of positions for which TRB has the  
          authority to set the compensation and terms and conditions of  








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          employment to include the COO and the CFO and would have  
          prohibited the salary for the COO and CFO from exceeding 150% of  
          the Governor's salary.  AB 1735 was held in the Senate  
          Appropriations Committee.





          AB 1042 (Allen), Chapter 688, Statutes of 2011, authorized the  
          CalPERS Board of Administration to appoint and set the  
          compensation of a chief financial officer.





          SB 269 (Soto), Chapter 856, Statutes of 2003, allowed the  
          CalPERS Board of Administration and the TRB to set compensation  
          and terms and conditions of employment of certain key positions.



          AB 1317 (Mullin), Chapter 333, Statutes of 2007, expanded the  
          list of positions to include the general counsel.





          REGISTERED SUPPORT / OPPOSITION:




          Support


          California State Teachers' Retirement System (Sponsor)








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          Opposition


          None on file




          Analysis Prepared by:Karon Green / P.E.,R., & S.S. / (916)  
          319-3957