BILL ANALYSIS Ó
AB 736
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Date of Hearing: April 15, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
736 (Cooley) - As Introduced February 25, 2015
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill (i) 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) and (ii) amends the list of key employees who are
prohibited from working for private interests to influence the
TRB for two years after leaving the California State Teachers'
Retirement System (CalSTRS) to include any career executive
position that reports to the chief executive officer or COO.
FISCAL EFFECT:
AB 736
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Annual increased salary costs to CalSTRS in the range of
$125,000 to $250,000, depending on the market for COO and CFO
pay and terms of employment.
COMMENTS:
1)Purpose. According to CalSTRS, this bill will improve its
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 fund.
Prudent fund management practices and fiduciary obligations
require the CalSTRS board to recruit from among the best and
brightest in the financial industry, however current law
limits these roles to current and former state employees. The
board contends the most qualified candidates are likely to be
found outside civil service in large financial institutions in
the private sector, endowments, or other public pension
systems, and it must be able to offer market compensation and
terms in order to attract this talent.
2)Competitive Global Market. According to the 2013 year-end
report by Towers Watson, the CalSTRS fund is the 13th largest
pension and investment fund in the world. CalSTRS competes
with other public and private pension funds, sovereign wealth
funds, and corporate funds for talent, and must be competitive
in this market in order to recruit key executives. The
California Public Employees' Retirement System, 6th on the
Towers Watson list, has the same executive compensation
flexibility CalSTRS seeks in this bill.
AB 736
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With increasing pressure on California's public pensions to
deliver greater investment returns, recruiting the best
management will become increasingly important for CalSTRS. As
at February 28, 2015, CalSTRS had approximately $191 billion
in total investment assets. Even a very modest improvement in
fund performance would yield a significant gain, more than
offsetting any increase in executive compensation costs to the
fund.
Analysis Prepared by:Joel Tashjian / APPR. / (916)
319-2081