BILL ANALYSIS Ó
SB 104
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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
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|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
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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
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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
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