BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 2348 (Levine) - Department of Finance: infrastructure
investment
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|Version: May 27, 2016 |Policy Vote: G.O. 10 - 3 |
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|Urgency: No |Mandate: No |
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|Hearing Date: August 1, 2016 |Consultant: Debra Cooper |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB 2348 would authorize the Department of Finance
(DOF) to identify infrastructure projects in California in which
DOF will guarantee a rate of return on investments for an
investment made in that infrastructure project by the California
Public Employees' Retirement System (CalPERS).
Fiscal
Impact:
Significant ongoing costs of $1.5 million to $3 million per
year to run the proposed program. DOF does not currently have
the internal expertise to analyze or create such a program,
and as such must recruit and hire investment staff with the
necessary experience and background. (GF)
Potentially significant cost pressure on unidentified special
funds to be deposited into the Reinvesting in California
AB 2348 (Levine) Page 1 of
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Special Fund in order to pay the guaranteed rate of return.
Potential growth to the CalPERS portfolio if investments in
the projects identified by DOF generate a higher rate of
return than current or alternative investments.
Background: CalPERS manages pension and health benefits for California's
public employees, retirees, and their families. CalPERS manages
a portfolio of $300 billion, making it the largest public
pension system in the United States. In its Winter 2016 report,
CalPERS states that in fiscal year 2013-14, CalPERS invested
$107.7 million in seven California-based infrastructure
projects.
CalPERS currently has an infrastructure program to evaluate and
identify projects for investment. According to CalPERS, "the
role of CalPERS' Infrastructure program is to hold ownership of
essential infrastructure assets that provide predictable returns
with moderate long-term inflation protection." The program
currently makes up nearly one percent of the total pension fund.
Proposed Law:
This bill would:
Authorize DOF to identify infrastructure projects in
California in which DOf will guarantee a rate of return on
investments for an investment made in that infrastructure
project by CalPERS.
Establish the Reinvesting in California Special Fund (Fund) in
the State Treasury, and require all money in the Fund to be
continuously appropriated and used to pay the guaranteed rate
of return.
Specify the guaranteed rate of return is subject to
availability of money in the Fund.
Prohibit General Fund moneys from being deposited in the Fund.
State that it is the intent of the Legislature to identify and
deposit special fund moneys, including trust fund moneys, into
the Fund.
AB 2348 (Levine) Page 2 of
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Related
Legislation: SB 955 (Pavley, Chapter 760, Statutes of 2012)
authorizes CalPERS and the California State Teachers' Retirement
System (CalSTRS) to prioritize investment in an in-state
infrastructure project over a comparable out-of-state
infrastructure project.
Staff
Comments: CalPERS already has a dedicated infrastructure
program to identify and evaluate projects for investment. This
bill would create a duplicative program within DOF; however, DOF
currently does not have the resources or in-house expertise to
run a similar program. Additionally, this bill does not require
that CalPERS invest in any of the projects that DOF identify;
therefore, it is unclear if the proposed program will be
effective in meeting its intended purpose.
It is unclear whether the guaranteed rate of return is actually
guaranteed. This bill specifies that the rate of return on
investment is subject to the availability of moneys in the Fund.
Therefore, it is unclear whether the rate of return is
guaranteed in the circumstance that there are not sufficient
moneys in the Fund.
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