BILL ANALYSIS Ó SB 104 Page 1 SENATE THIRD READING SB 104 (Committee on Budget and Fiscal Review) As Amended August 26, 2015 Majority vote. Budget Bill Appropriation Takes Effect Immediately SENATE VOTE: 23-13 ------------------------------------------------------------------ |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+----------------------+--------------------| |Budget |27-0 |Weber, Melendez, | | | | |Travis Allen, | | | | |Bigelow, Bloom, | | | | |Bonta, Campos, | | | | |Chávez, Chiu, Cooper, | | | | |Gordon, Grove, Jones, | | | | | | | | | | | | | | | | | | | |Jones-Sawyer, Kim, | | | | |Lackey, McCarty, | | | | |Mullin, Nazarian, | | | | |Obernolte, O'Donnell, | | | | |Patterson, Rodriguez, | | | | |Thurmond, Ting, Wilk, | | | | |Williams | | SB 104 Page 2 | | | | | | | | | | ------------------------------------------------------------------ SUMMARY: Specifically, this bill provides the California State University (CSU) with greater flexibility to invest funds under its control. 1)Allows 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)Establishes procedures for the CSU to follow regarding this change, including requiring the CSU 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 2020 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, 2020, it will be allowed to use up to 30% of specified funds for these purposes, which currently could amount to about $1 billion. 3)Includes language stating that CSU will not seek additional funding from the state or students should it incur losses SB 104 Page 3 related to these investments. EXISTING LAW: CSU's authority to invest funds under its control is governed by Education Code Sections 89724(a) and 89725, and Government Code Section 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 0.71%, 0.66%, and 1.38%, for the trailing 12 months, five years and eight years (when the pool was created.) CSU also notes that the University of California (UC), 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. This 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. Analysis Prepared by: Mark Martin / BUDGET /916-319-2099 FN: 0001776 SB 104 Page 4