BILL ANALYSIS Ó
AB 1052
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Date of Hearing: April 29, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
1052 (Cooley) - As Introduced February 26, 2015
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|Policy |Public Employees, |Vote:|7 - 0 |
|Committee: |Retirement/Soc Sec | | |
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill allows the California Public Employees' Retirement
System (CalPERS) and the California State Teachers' Retirement
System (CalSTRS) to enter into agreements, contracts, and other
arrangements for investment-related services under the terms,
conditions, and processes established by their respective boards
and not under any other state contracting requirements.
FISCAL EFFECT:
1)Potentially significant administrative cost savings as a
AB 1052
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result of reduced staff work and other efficiency gains in
contracting for investment-related services.
2)Unknown, but potentially significant reductions in costs
and/or gains in performance for each fund as a result of
reductions in opportunity costs associated with current
contracting processes and enhanced ability to capitalize on
favorable market dynamics.
COMMENTS:
1)Purpose. According to the author, the contract authority in
AB 1052 will enhance the boards' ability to strategically
allocate assets, increasing value for beneficiaries and the
state. The author believes this contract authority is
consistent with existing authority in the state Constitution
and will improve the boards' ability to meet their fiduciary
obligations.
2)Competitive Bidding. Most state agencies, including CalPERS
and CalSTRS, must abide by state contracting rules, including
competitive bidding requirements. Competitive bidding is
widely considered sound fiscal practice for public entities,
and generally helps protect taxpayers from misuse of public
funds. Certain agencies, such as the Housing Finance Agency
and Health Benefit Exchange Board, are fully exempt from state
contracting rules. CalPERS is also exempt from competitive
bidding requirements with respect to contracting health plans
and long-term care insurance plans. Particular types of
contracts are also exempt across all state agencies, such as
legal services and proficiency testing services.
3)Competitive Markets. As fiduciaries, CalPERS and CalSTRS are
bound by standards in the state Constitution and federal law
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to invest plan assets in the sole interest of members and
beneficiaries. These fiduciary obligations are sometimes
inconsistent with the goals of competitive bidding, leading to
unnecessary delays and disincentives for certain financial
firms, thereby diminishing fund performance. With increasing
pressure on California's public pensions to deliver greater
investment returns, accessing the best products, markets, and
managers will become increasingly important for CalPERS and
CalSTRS.
Analysis Prepared by:Joel Tashjian / APPR. / (916)
319-2081