BILL ANALYSIS Ó
AB 736
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CONCURRENCE IN SENATE AMENDMENTS
AB
736 (Cooley)
As Amended August 19, 2016
Majority vote
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|ASSEMBLY: |80-0 |(June 1, 2015) |SENATE: |39-0 |(August 24, |
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Original Committee Reference: P.E.,R., & S.S.
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 a chief
operating officer (COO) and a chief financial officer (CFO), as
specified. Specifically, this bill:
1)Adds a COO and a CFO to the list of positions for which the
TRB has the authority to set the compensation and terms and
conditions of employment and clarify that the TRB's authority
to set the compensation and terms and conditions of employment
for specified executive and managerial positions applies to a
single position in the various job categories.
2)Limits the annual percentage increase in salary authorized by
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this bill to 10% for the 2017-18 fiscal year and 5% for any
fiscal year thereafter for a person who served as COO or CFO
on January 1, 2016, and who does not separate from service in
that position prior to the date on which the increase is
applied.
3)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).
The Senate amendments:
1)Impose limits on annual salary increases paid to a person who
served as COO or CFO on January 1, 2016, and who does not
separate from service prior to the increase.
2)Clarify that the authority to set the compensation and terms
and conditions of employment for specified executive and
managerial positions applies to a single position in the
various job categories.
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.
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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.
FISCAL EFFECT: According to the Senate Appropriations
Committee, this bill would result in increased annual salary
costs to CalSTRS of up to $189,300, excluding cost of living
adjustments. The actual amount of the increase would depend on
future hiring decisions by TRB.
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
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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
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:
0004777
AB 736
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