BILL NUMBER: SB 1753	CHAPTERED
	BILL TEXT

	CHAPTER   923
	FILED WITH SECRETARY OF STATE   SEPTEMBER 28, 1998
	APPROVED BY GOVERNOR   SEPTEMBER 28, 1998
	PASSED THE SENATE   AUGUST 28, 1998
	PASSED THE ASSEMBLY   AUGUST 26, 1998
	AMENDED IN ASSEMBLY   AUGUST 13, 1998
	AMENDED IN ASSEMBLY   JULY 23, 1998
	AMENDED IN ASSEMBLY   JUNE 29, 1998
	AMENDED IN SENATE   MAY 27, 1998
	AMENDED IN SENATE   APRIL 27, 1998

INTRODUCED BY   Senators Schiff and Hayden

                        FEBRUARY 18, 1998

   An act to add Sections 22203.5, 22363, and 22364 to the Education
Code, and to amend Sections 20153, 82023, 82024, and 90001 of, and to
add Sections 20096.5, 20152.5, 20191.5, and 84225 to, the Government
Code, relating to public retirement system governing boards.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 1753, Schiff.  Public retirement system governing boards:
conflicts of interest.
   (1) The Public Employees' Retirement Law and the State Teachers'
Retirement Law prohibit specified conflicts of interest by the
members of the retirement boards and their officers and employees.
   This bill would prohibit any matter involving any vendor or
contractor from being considered during a closed session on any
transaction involving the retirement system unless, prior to the
closed session, a written disclosure has been submitted of any
campaign contributions aggregating $250 or more and any gifts
aggregating $50 that the vendor or contractor has made during the
preceding calendar year to any board member or officer or employee of
the system.  Failure to disclose would be a basis for
disqualification of the contractor or the vendor.
   (2) Existing law authorizes state boards that invest retirement
funds to hold closed sessions when considering investment decisions.

   This bill would require the governing boards of the State Teachers'
Retirement System and the Public Employees' Retirement System to
make those decisions by rollcall vote entered into the minutes of
those closed meetings.  The bill would require investments to be
disclosed and reported at public meetings within 12 months of the
close of an investment transaction or the transfer of system assets,
whichever occurs first.
   (3) The Public Employees' Retirement Law provides for the election
of 6 members to the board of administration at elections conducted
by the board.
   This bill would require elected members and candidates for those
offices to file specified campaign statements on forms prescribed by
the Fair Political Practices Commission.  The statements would be
filed with the Secretary of State and a copy would be retained by the
executive officer and would be public records.  The statements would
have to be signed and verified by the filer and any violation of
these requirements would be subject to civil or administrative action
by the Fair Political Practices Commission.
   (4) The Public Employees' Retirement Law prohibits specified board
member communications during the request for proposal or selection
process with any vendor or contractor of investment products.
   This bill would, instead, prescribe procedures and prohibitions
applicable to communications during any award of contract and a
separate set of procedures and prohibitions applicable to prospective
investment transaction evaluations.  The procedures and prohibitions
would not apply to specified incidental, social, and unrelated
communications.  The bill would also impose those procedures and
prohibitions on the State Teachers' Retirement System.
   (5) Existing provisions of the Political Reform Act of 1974 (act)
define the terms "elective office" and "state elective office."
   This bill would, for specified purposes of the act, include within
those definitions the Board of Administration of the Public
Employees' Retirement System.
   (6) Existing provisions of the Political Reform Act of 1974
regulate, among other things, the disclosure of contributions
received and expenditures made by candidates and committees engaged
in elections, conflicts of interest of public officials, and the
conduct of lobbyists, lobbying firms, and lobbyist employers, and
provides for audits of those disclosures by the Fair Political
Practices Commission.
   This bill would require the commission to promulgate regulations
regarding audits of disclosures filed by candidates for the Board of
Administration of the Public Employees' Retirement System, and would
require the Public Employees' Retirement System to reimburse the
commission for reasonable expenses thus incurred.
   (7) Existing provisions of the Political Reform Act of 1974 make a
violation of the act subject to administrative, civil, and criminal
penalties.
   This bill would impose a state-mandated local program by imposing
those penalties on certain persons who are required to make certain
disclosures under the act pursuant to this bill.
  (8) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state.  Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   (9) The Political Reform Act of 1974, an initiative measure,
provides that the Legislature may amend the act to further the act's
purposes with a 2/3 vote of each house and compliance with specified
procedural requirements.
   This bill, which would declare that it furthers the purposes of
the act, would therefore require a 2/3 vote.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 22203.5 is added to the Education Code, to
read:
   22203.5.  (a) All investment transaction decisions made during a
closed session pursuant to paragraph (16) of subdivision (c) of
Section 11126 of the Government Code shall be by rollcall vote
entered into the minutes of that meeting.
   (b) The board, within 12 months of the close of an investment
transaction or the transfer of system assets for an investment
transaction, whichever occurs first, shall disclose and report the
investment at a public meeting.
  SEC. 2.  Section 22363 is added to the Education Code, to read:
   22363.  No matter involving any vendor or contractor, in their
individual or any other capacity, shall be considered during a closed
session on any transaction involving the system unless, prior to the
closed session, a written disclosure has been submitted by the
vendor or contractor of any campaign contributions aggregating two
hundred fifty dollars ($250) or more and any gifts aggregating fifty
dollars ($50) or more in value that the vendor or contractor has made
during the preceding calendar year to any member of the board or any
officer or employee of the system.  Failure to disclose the campaign
contributions and gifts shall provide the basis for disqualification
of the contractor or the vendor.
  SEC. 3.  Section 22364 is added to the Education Code, to read:
   22364.  (a) During the process leading to an award of any contract
by the system, no member of the board or its staff shall knowingly
communicate concerning any matter relating to the contract or
selection process with any party financially interested in the
contract, or an officer or employee of that party, unless the
communication is (1) part of the process expressly described in the
request for proposal or other solicitation invitation, or (2) part of
a noticed board meeting, or (3) as provided in subdivision (c).  Any
applicant or bidder who knowingly participates in a communication
that is prohibited by this paragraph shall be disqualified from the
contract award.
   (b) During the evaluation of any prospective investment
transaction, no party who is financially interested in the
transaction, or an officer or employee of that party, may knowingly
communicate with any board member concerning any matter relating to
the transaction or its evaluation, unless the financially interested
party discloses the content of the communication in a writing
addressed and submitted to the executive officer and the board prior
to the board's action on the prospective transaction.  This
subdivision shall not apply to communications that are part of a
noticed board meeting, or as provided in subdivision (c).
   (1) The writing shall disclose the date and location of the
communication, and the substance of the matters discussed.  The board
shall prescribe other procedures concerning this disclosure.
   (2) Any board member who participates in a communication subject
to this subdivision shall also have the obligation to disclose the
communication to the executive officer and board, prior to the board'
s action on the prospective transaction.  The board shall prescribe
procedures for this disclosure, including procedures to apply to
board members who fail to disclose communications as required by this
subdivision.
   (3) Consistent with its fiduciary duties, the board shall
determine the appropriate remedy for any knowing failure of a
financially interested party to comply with this subdivision
including, but not limited to, outright rejection of the prospective
investment transaction, reduction in fee income, or any other
sanction.
   (4) The communications disclosed under this subdivision shall be
made public, either at the open meeting of the board in which the
transaction is considered, or if in closed session, upon public
disclosure of any closed session votes concerning the investment
transaction.
   (c) The procedures and prohibitions prescribed by this section
shall not apply to:
   (1) Communications that are incidental, exclusively social, and do
not involve the system or its business, or the board or staff member'
s role as a system official.
   (2) Communications that do not involve the system or its business
and that are within the scope of the board or staff member's private
business or public office wholly unrelated to the system.
  SEC. 4.  Section 20096.5 is added to the Government Code, to read:

   20096.5.  (a) Candidates for board seats described in subdivision
(g) of Section 20090, including incumbent board members running for
reelection, shall file campaign statements with the Secretary of
State no later than two days before the beginning of the ballot
period, as determined by the board for the period ending five days
before the beginning of the ballot period, and no later than January
10, for the period ending December 31.
   (b) The campaign statements shall contain an itemized report that
is prepared on a form prescribed by the Fair Political Practices
Commission, with the assistance of the board, that provides the
information contained in campaign statements filed under Section
84211 to the extent that that information is applicable to a board
election.
   (c) The original of a campaign statement shall be filed with the
Secretary of State and a copy shall be retained by the executive
officer at the board's office in Sacramento and is a public record.
   (d) All campaign statements filed under this section shall be
signed and verified by the filer.  The verification shall state that
the filer has used reasonable diligence in its preparation, and that
to the best of his or her knowledge it is true and complete.  Any
person who violates the requirements of this section shall be subject
to a civil or administrative action brought by the Fair Political
Practices Commission or other agency of concurrent jurisdiction
pursuant to Title 9 (commencing with Section 81000).
  SEC. 5.  Section 20152.5 is added to the Government Code, to read:

   20152.5.  No matter involving any vendor or contractor in their
individual or any other capacity shall be considered during a closed
session on any transaction involving the system unless, prior to the
closed session, a written disclosure has been submitted by the vendor
or contractor of any campaign contributions aggregating two hundred
fifty dollars ($250) or more and any gifts aggregating fifty dollars
($50) or more in value that the vendor or contractor has made during
the preceding calendar year to any member of the board or any officer
or employee of the system.  Failure to disclose the campaign
contributions and gifts shall provide the basis for disqualification
of the contractor or the vendor.
  SEC. 6.  Section 20153 of the Government Code is amended to read:
   20153.  (a) During the process leading to an award of any contract
by the system, no member of the board or its staff shall knowingly
communicate concerning any matter relating to the contract or
selection process with any party financially interested in the
contract or an officer or employee of that party, unless the
communication is (1) part of the process expressly described in the
request for proposal or other solicitation invitation, or (2) part of
a noticed board meeting, or (3) as provided in subdivision (c).  Any
applicant or bidder who knowingly participates in a communication
that is prohibited by this subdivision shall be disqualified from the
contract award.
   (b) During the evaluation of any prospective investment
transaction, no party who is financially interested in the
transaction, or an officer or employee of that party, may knowingly
communicate with any board member concerning any matter relating to
the transaction or its evaluation, unless the financially interested
party discloses the content of the communication in a writing
addressed and submitted to the executive officer and the board prior
to the board's action on the prospective transaction.  This
subdivision shall not apply to communications that are part of a
noticed board meeting, or as provided in subdivision (c).
   (1) The writing shall disclose the date and location of the
communication, and the substance of the matters discussed.  The board
shall prescribe other procedures concerning this disclosure.
   (2) Any board member who participates in a communication subject
to this subdivision shall also have the obligation to disclose the
communication to the executive officer and board, prior to the board'
s action on the prospective transaction.  The board shall prescribe
procedures for this disclosure, including procedures to apply to
board members who fail to disclose communications as required by the
subdivision.
   (3) Consistent with its fiduciary duties, the board shall
determine the appropriate remedy for any knowing failure of a
financially interested party to comply with this subdivision
including, but not limited to, outright rejection of the prospective
investment transaction, reduction in fee received, or any other
sanction.
   (4) The communications disclosed under this subdivision shall be
made public, either at the open meeting of the board in which the
transaction is considered, or if in closed session, upon public
disclosure of any closed session votes concerning the investment
transaction.
   (c) The procedures and prohibitions prescribed by this section
shall not apply to:
   (1) Communications that are incidental, exclusively social, and do
not involve the system or its business, or the board or staff member'
s role as a system official.
   (2) Communications that do not involve the system or its business
and that are within the scope of the board or staff member's private
business or public office wholly unrelated to the system.
  SEC. 7.  Section 20191.5 is added to the Government Code, to read:

   20191.5.  (a) All investment transaction decisions made during a
closed session pursuant to paragraph (16) of subdivision (c) of
Section 11126 shall be by rollcall vote entered into the minutes of
that meeting.
   (b) The board, within 12 months of the close of an investment
transaction or the transfer of system assets for an investment
transaction, whichever occurs first, shall disclose and report the
investment at a public meeting.
  SEC. 8.  Section 82023 of the Government Code is amended to read:
   82023.  "Elective office" means any state, regional, county,
municipal, district or judicial office which is filled at an
election.  "Elective office" also includes membership on a county
central committee of a qualified political party, and members elected
to the Board of Administration of the Public Employees' Retirement
System.
  SEC. 9.  Section 82024 of the Government Code is amended to read:
   82024.  "Elective state office" means the office of Governor,
Lieutenant Governor, Attorney General, Insurance Commissioner,
Controller, Secretary of State, Treasurer, Superintendent of Public
Instruction, Member of the Legislature, member elected to the Board
of Administration of the Public Employees' Retirement System,  and
member of the State Board of Equalization.
  SEC. 10.  Section 84225 is added to the Government Code, to read:
   84225.  (a) For the purposes of this section only, "board" means
the Board of Administration of the Public Employees' Retirement
System, as established under Article 1 (commencing with Section
20090) of Chapter 2 of Part 3 of Division 5 of Title 2 of the
Government Code.
   (b) Except as provided in this section, the provisions of this
article do not apply to candidates for the board, including incumbent
board members running for reelection, as such candidates are
described in subdivision (g) of Section 20090.
   (c) Candidates for board seats described in subdivision (g) of
Section 20090, including incumbent board members running for
reelection, shall file campaign statements with the Secretary of
State no later than two days before the beginning of the ballot
period, as determined by the board, for the period ending five days
before the beginning of the ballot period, and no later than January
10, for the period ending December 31.
   (1) The campaign statements shall contain an itemized report that
is prepared on a form prescribed by the commission, with the
assistance of the board, that provides the information contained in
campaign statements required under Section 84211 to the extent that
the information is applicable to a board election.
   (2) The original of a campaign statement shall be filed with the
Secretary of State and a copy shall be retained at the board's office
in Sacramento and is a public record.
  SEC. 11.  Section 90001 of the Government Code is amended to read:

   90001.  Audits and investigations shall be made pursuant to
Section 90000 with respect to the reports and statements of:
   (a) Each lobbying firm and each lobbyist employer who employs one
or more lobbyists shall be subject to an audit on a random basis with
these lobbying firms or lobbyist employers having a 25-percent
chance of being audited.  When a lobbying firm or lobbyist employer
is audited, the individual lobbyists who are employed by the lobbying
firm or the lobbyist employer shall also be audited.
   (b) Each statewide, Supreme Court, court of appeal, or Board of
Equalization candidate in a direct primary or general election for
whom it is determined that twenty-five thousand dollars ($25,000) or
more in contributions have been raised or twenty-five thousand
dollars ($25,000) or more in expenditures have been made, whether by
the candidate or by a committee or committees controlled by the
candidate or whose participation in the direct primary or general
election is primarily in support of his or her candidacy.  Each
statewide candidate whose contributions and expenditures are less
than twenty-five thousand dollars ($25,000) shall be subject to an
audit on a random basis of 10 percent of the number of such
candidates.
   (c) Each candidate for the Legislature or superior court judge in
a direct primary or general election shall be subject to audit by
random selection if it is determined that fifteen thousand dollars
($15,000) or more in contributions have been received or fifteen
thousand dollars ($15,000) or more in expenditures have been made,
whether by the candidate or by a committee or committees controlled
by the candidate or primarily supporting his or her candidacy.
Random selection shall be made of 25 percent of the Senate districts,
25 percent of the Assembly districts and 25 percent of the judicial
offices contested in an election year.
   (d) Each candidate for the Legislature in a special primary or
special runoff election for whom it is determined that fifteen
thousand dollars ($15,000) or more in contributions have been raised
or fifteen thousand dollars ($15,000) or more in expenditures have
been made, whether by the candidate or by a committee or committees
controlled by the candidate or primarily supporting his or her
candidacy.
   (e) Each controlled committee of any candidate who is being
audited pursuant to subdivision (b), (c), or (d).
   (f) Each committee, other than a committee specified in
subdivision (c) of Section 82013, primarily supporting or opposing a
candidate who is being audited pursuant to subdivision (b), (c), or
(d) if it is determined that the committee has expended more than ten
thousand dollars ($10,000).
   (g) Each committee, other than a committee specified in
subdivision (c) of Section 82013, whose participation is primarily in
support of or in opposition to a state measure or state measures if
it is determined that the committee has expended more than ten
thousand dollars ($10,000) on such measure or measures.
   (h) Each committee, other than a committee defined in subdivision
(c) of Section 82013, a controlled committee or a committee primarily
supporting or opposing a state candidate or measure, if it is
determined that the committee has raised or expended more than ten
thousand dollars ($10,000) supporting or opposing state candidates or
state measures during any calendar year, except that if the
commission determines from an audit report that a committee is in
substantial compliance with the provisions of the act, the committee
thereafter shall be subject to an audit on a random basis with each
such committee having a 25-percent chance of being audited.
   (i) (1) With respect to local candidates and their controlled
committees, the commission shall promulgate regulations which provide
a method of selection for these audits.
   (2) With respect to candidates for the Board of Administration of
the Public Employees' Retirement System, the commission shall
promulgate regulations that provide a method for selection of these
audits.  The Public Employees' Retirement System shall reimburse the
commission for all reasonable expenses incurred pursuant to this
section.
   (j) In accordance with subdivisions (a), (b), (c), and (h), the
Fair Political Practices Commission shall select by lot the persons
or districts to be audited on a random basis.  For campaign audits
the selection shall be made in public after the last date for filing
the first report or statement following the general or special
election for which the candidate ran, or following the election at
which the measure was adopted or defeated.  For lobbying firm and
lobbyist employer audits, the selection shall be made in public in
February of odd-numbered years.
  SEC. 12.  No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB of the California Constitution because the
only costs that may be incurred by a local agency or school district
will be incurred because this act creates a new crime or infraction,
eliminates a crime or infraction, or changes the penalty for a crime
or infraction, within the meaning of Section 17556 of the Government
Code, or changes the definition of a crime within the meaning of
Section 6 of Article XIIIB of the California Constitution.
   Notwithstanding Section 17580 of the Government Code, unless
otherwise specified, the provisions of this act shall become
operative on the same date that the act takes effect pursuant to the
California Constitution.
  SEC. 13.  The Legislature finds and declares that the provisions of
this act further the purposes of the Political Reform Act of 1974
within the meaning of subdivision (a) of Section 81012 of the
Government Code.