BILL ANALYSIS Ó AB 2348 Page 1 Date of Hearing: April 20, 2016 ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT, AND SOCIAL SECURITY Rob Bonta, Chair AB 2348 (Levine) - As Introduced February 18, 2016 SUBJECT: Department of Finance: infrastructure investment SUMMARY: Authorizes the Department of Finance (DOF) to identify infrastructure projects in California where DOF can guarantee a rate of return on investments made by the California Public Employees' Retirement System (CalPERS), the California State Teachers' Retirement System (CalSTRS) or a 1937 Act County Retirement System ('37 Act Retirement System) in that infrastructure project, as specified. Specifically, this bill: 1)Authorizes DOF to evaluate and identify California infrastructure projects for which they can guarantee a rate of return on investments made in the project by CalPERS, CalSTRS, or a '37 Act Retirement System. 2)Establishes the Reinvesting in California Special Fund (Fund) in the State Treasury to be used to pay the rate of return guaranteed by DOF. 3)Specifies that the guaranteed rate of return is subject to the AB 2348 Page 2 availability of money in the Fund. 4)Prohibits General Fund moneys from being deposited in the Fund. 5)States that it is the intent of the Legislature to identify special fund moneys, including trust fund moneys, that can be used for these purposes. FISCAL EFFECT: Unknown. COMMENTS: According to the author, "California has a large infrastructure funding gap that is growing every day. California Forward estimates that the state will need to spend $835 billion over the next decade to meet our water, transportation, and K-12 infrastructure needs alone. The U.S Environmental Protection Agency has put California at the top of the list for water system needs. "CalPERS and CalSTRS are the two largest public pension funds in the United States. CalPERS manages a $300 billion pension fund that has a diverse portfolio of investments. Only 1/3 of 1/10 of 1 percent of CalPERS holdings are in California Infrastructure. CalPERS states in their Winter, 2016 Perspective report that CalPERS invested $107.7 million in seven California-based infrastructure projects, which support 1,300 California jobs. If CalPERS were to increase its investment in California-based infrastructure projects to just 1/10 of 1 percent, this would produce an additional 2,600 California jobs. AB 2348 Page 3 "CalSTRS manages a nearly $180 billion pension fund. CalSTRS established an infrastructure investment portfolio in 2010 that is intended to control risk and maximize returns. The current policy on CalSTRS infrastructure investment specifies the amount of infrastructure investments that are to occur around the globe including in the United States and Canada, but does not specify how much investment should occur in California. "Private pension funds have already established policies to make substantial investments in infrastructure. These investments allow these funds to meet their financial responsibilities while investing in jobs for their members. This bill encourages similar investments by public employee pension funds." REGISTERED SUPPORT / OPPOSITION: Support Pacific Merchant Shipping Association State Building and Construction Trades Council of California, AFL-CIO AB 2348 Page 4 Opposition None on file Analysis Prepared by:Karon Green / P.E.,R., & S.S. / (916) 319-3957