BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1052|
|Office of Senate Floor Analyses | |
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THIRD READING
Bill No: AB 1052
Author: Cooley (D)
Amended: 8/17/15 in Senate
Vote: 21
SENATE PUBLIC EMP. & RET. COMMITTEE: 5-0, 7/13/15
AYES: Pan, Morrell, Beall, Fuller, Hall
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 77-0, 5/7/15 - See last page for vote
SUBJECT: Retirement board authority: investments
SOURCE: California Public Employees' Retirement System
California State Teachers' Retirement System
DIGEST: This bill provides that the California State Teachers'
Retirement System (CalSTRS) and the California Public Employees'
Retirement System (CalPERS) may enter into investment related
contracts, as specified, under terms and conditions established
by their respective boards and consistent with their fiduciary
duties, notwithstanding any other law pertaining to state
contracting.
ANALYSIS:
Existing law:
1)Establishes, under The California Pension Protection Act of
1992 (Proposition 162) which amended Article XVI, Section 17
of the State Constitution, that the retirement board of a
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public pension or retirement system has plenary authority and
fiduciary responsibility for investment of monies and
administration of the system.
2)Provides that, except as otherwise restricted by the State
Constitution and by law, the boards may in their discretion
invest the assets of the respective funds through the
purchase, holding, or sale thereof of any investment,
financial instrument, or financial transaction when the
investment, financial instrument, or financial transaction is
prudent in the informed opinion of the board.
3)Requires, based on provisions in the California Constitution,
that services provided by state agencies generally be
performed by state civil service employees.
4)Restricts under state law, but does not prohibit, private
contracting by public agencies. Public agencies are
authorized to engage in private contracting in various
instances, as specified.
5)Establishes, under the Public Contract Code, a process that
state departments must follow and requirements, as specified,
that must be fulfilled to bid out and enter into service
contracts, including requirements for competitive bidding and
contractor certification of compliance with specified state
policies.
6)Provides limited exceptions to the Public Contract Code, as
specified.
This bill:
1)Provides that, notwithstanding any other law pertaining to
state contracting, CalSTRS, in exercising its constitutional
discretion to invest fund assets, may contract for services
under terms and conditions and utilizing the processes the
boards deem necessary and consistent with its fiduciary
duties.
2)Requires the processes utilized by CalSTRS to be competitive
except as allowed under existing law through specific
exemptions in the Public Contract Code (e.g., for an emergency
contract), as specified.
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3)Provides, for CalSTRS, a new exemption to the requirement that
the contract process be competitive when there is an existing
contractual relationship with an investment manager that had
previously qualified as an emerging investment manager, as
defined by the board. The bill requires that the CalSTRS
board monitor and assess contractors under this exemption in
accordance with all other provisions governing investment
managers generally and consistent with the boards' fiduciary
duties.
4)Specifies that CalPERS, without compliance with any law, rule,
provision, or procedure pertaining to state contracting, may
enter into agreements, contracts, or other arrangements with a
bank or trust company for custodian and custodian related
services under the terms and conditions the CalPERS board
deems necessary and consistent with its fiduciary duties. The
bill requires the process utilized to select a custodian to be
competitive except where a competitive bid or proposal is not
required under the Public Contract Code.
5)Authorizes the CalPERS board, without compliance with any law,
rule, provision, or procedure pertaining to state contracting,
to enter into agreements, contracts, or other arrangements for
the providing of trade order management services under the
terms and conditions the board deems necessary and consistent
with its fiduciary duties. In selecting an individual or
outside firm for trade order management services, the
processes utilized by the board shall be competitive except
where a competitive bid or proposal is not required under the
Public Contract Code.
Background
According to the co-sponsor CalSTRS, "As global markets become
more complex and the assets of California's state retirement
systems grow in size, the CalSTRS and CalPERS boards are
increasingly constrained by the traditional state procurement
requirements when contracting for investment expertise.
Authorizing the boards to set the terms and conditions for
procuring investment management services, thus eliminating the
opportunity costs that result from a diminished universe of
potential managers and from delays in the timely funding of
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asset allocations strategies, would significantly enhance the
boards' ability to successfully fulfil their fiduciary
obligations and secure the best value for our members."
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
SUPPORT: (Verified8/18/15)
California Public Employees' Retirement System (co-source)
California State Teachers' Retirement System (co-source)
OPPOSITION: (Verified8/18/15)
None received
ARGUMENTS IN SUPPORT:
According to the co-sponsor CalPERS, this bill "would allow
CalPERS to streamline these very different contract evaluation
functions into a single integrated investment procurement
process and system. CalPERS anticipates leveraging a
technological platform to gain, efficiencies, reduce
administrative expenditures, and ensure a robust control
environment is in place. Additionally, the proposed contracting
process may allow for increased transparency, the more expedient
deployment of capital, and better alignment with CalPERS'
fiduciary obligations to its plan participants."
ASSEMBLY FLOOR: 77-0, 5/7/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,
Bonilla, Bonta, Brough, Brown, Burke, Calderon, Chang, Chau,
Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly,
Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina
Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,
Gordon, Gray, Grove, Hadley, Harper, Holden, Irwin, Jones,
Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,
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Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin,
Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea,
Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark
Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams,
Wood, Atkins
NO VOTE RECORDED: Campos, Roger Hernández, Steinorth
Prepared by:Glenn Miles / P.E. & R. / (916) 651-1519
8/19/15 20:57:44
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