BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                       AB 736


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          ASSEMBLY THIRD READING


          AB  
          736 (Cooley)


          As Introduced  February 25, 2015


          Majority vote


           --------------------------------------------------------------------- 
          |Committee       |Votes |Ayes                  |Noes                  |
          |----------------+------+----------------------+----------------------|
          |Public          |6-0   |Bonta, Waldron,       |                      |
          |Employees       |      |Cooley, Jones-Sawyer, |                      |
          |                |      |O'Donnell, Rendon     |                      |
          |                |      |                      |                      |
          |----------------+------+----------------------+----------------------|
          |Appropriations  |17-0  |Gomez, Bigelow,       |                      |
          |                |      |Bonta, Calderon,      |                      |
          |                |      |Chang, Daly, Eggman,  |                      |
          |                |      |Gallagher,            |                      |
          |                |      |Eduardo Garcia,       |                      |
          |                |      |Gordon, Holden,       |                      |
          |                |      |Jones, Quirk, Rendon, |                      |
          |                |      |Wagner, Weber, Wood   |                      |
           --------------------------------------------------------------------- 


          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:










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          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).


          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:  According to the Assembly Appropriations  
          Committee, 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:  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 the 2013-14 Regular Session, 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.  AB 125 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  
          employment to include the COO and the CFO and would have  








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          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.




          Analysis Prepared by:                                               
                          Karon Green / P.E.,R., & S.S. / (916) 319-3957   
          FN: 0000589