BILL ANALYSIS Ó
SB 104
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Date of Hearing: August 27, 2015
ASSEMBLY COMMITTEE ON BUDGET
Shirley Weber, Chair
SB
104 (Committee on Budget and Fiscal Review) - As Introduced
January 9, 2015
SENATE VOTE: Vote not relevant
SUBJECT: Budget Act of 2015.
SUMMARY: Specifically, this bill: Provides the California
State University with greater flexibility to invest funds under
its control.
1) The bill would allow CSU to invest up to 30% of
specified funds, including money from publications,
contracts and tuition, in a broader array of investment
options than current statute allows. CSU would be allowed
to invest in mutual funds subject to registration by, and
under the regulatory authority of, the United States
Securities and Exchange Commission; or, in real estate
investment trusts. Additional monies earned through these
investments would be used for capital outlay or deferred
maintenance projects.
2) The bill also establishes procedures for the CSU to
follow regarding this change, including requiring the CSU
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Board of Trustees to establish a committee of advisors,
including the state Treasurer and independent investment
experts, to help determine appropriate investment
opportunities. CSU also would be required to submit an
annual report to the Legislature and Department of Finance
describing its investment performance. The bill includes a
ramp-up period through 2019 in which CSU is limited to
specified amounts of funding it can use to invest: $200
million in the first year, $400 million in the second year,
and $600 million in the third year. After June 30, 2019,
it will be allowed to use up to 30% of specified funds for
these purposes, which currently could amount to about $1
billion.
3) The bill includes language stating that CSU will not
seek additional funding from the state or students should
it incur losses related to these investments.
EXISTING LAW: CSU's authority to invest funds under its control
is governed by Education Code 89724(a) and 89725, and Government
Code 16430. These statutes limit CSU's investment authority to
fixed income securities that generate relatively low returns
COMMENTS: CSU notes that its current investment pool, with
investment assets totaling $3.2 billion, has recorded returns of
.71%, .66%, and 1.38%, for the trailing 12 months, 5 years and 8
years (when the pool was created.) CSU also notes that the
University of California, which does not have the same statutory
limitations as it faces, has created an investment pool with
much higher returns.
CSU is seeking somewhat similar investment authority to UC. The
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bill would allow CSU to invest in a broader array of funds,
allowing CSU to earn more revenue, which it would then use for
capital outlay and deferred maintenance projects. CSU is
seeking these changes as a way to generate more revenue for
badly-needed infrastructure issues.
REGISTERED SUPPORT / OPPOSITION:
Support
None on file
Opposition
None on file
Analysis Prepared by:Mark Martin / BUDGET
/916-319-2099
SB 104
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