BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 1584|
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THIRD READING
Bill No: AB 1584
Author: Hernandez (D), et al
Amended: 9/1/09 in Senate
Vote: 27 - Urgency
SENATE PUBLIC EMP. & RET. COMMITTEE : 7-0, 8/24/09
AYES: Correa, Ashburn, Benoit, Ducheny, Liu, Padilla,
Wiggins
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 72-0, 7/16/09 - See last page for vote
SUBJECT : Public employees retirement
SOURCE : California State Controller John Chiang
California State Treasurer Bill Lockyer
DIGEST : This bill makes numerous changes aimed at
increasing disclosure and accountability of investment
placement agents, board members, and others associated with
public pension funds in California.
ANALYSIS : Existing law prohibits designated officers and
employees of the Board of Administration of the Public
Employees' Retirement System (PERS) and the Teachers'
Retirement Board of the State Teachers' Retirement System
(STRS), who served in those positions for less than five
years, from taking any specified action on behalf of any
person, other than the state, to influence certain actions
CONTINUED
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by the retirement boards or systems within two years after
leaving that position.
The County Employees Retirement Law of 1937 prohibits a
member or employee of a retirement board from becoming an
endorser, surety, or obligor on, or from having any
personal interest in the making of an investment for the
Board, or in the gains or profits that accrue from those
investments, except as specified. That law also prohibits
a member or employee of a retirement board or board of
investments from selling or providing any investment
product that is considered an asset of the retirement fund
to a retirement system established under that law.
This bill:
1. Requires all public pension systems to adopt a policy
requiring the disclosure of fees paid to investment
placement agents, and specifies that placement agents
disclose campaign contributions and gifts made by the
agents to public retirement board members, as specified.
2. Prohibit public retirement board members from selling
investment products to other public retirement systems.
3. Lengthen post-employment restrictions on influencing
retirement board actions for former system executives
and board members that currently apply to PERS and to
STRS.
4. Extends those expanded provisions to apply to all public
retirement systems in California.
Background
The Political Reform Act (PRA) and Pension System employees
and Boards of Administration . The Senate Public Employment
and Retirement Committee was advised that the PRA restricts
former pension system employees and Board members from
being paid to appear before or communicate with their
former agency to influence the agency's actions for a
period of one year following the end of their employment or
term. The PRA also prohibits state officials from making,
participating in, or influencing government decisions
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directly relating to a prospective employer with whom they
are negotiating employment or after they have reached an
employment arrangement. A knowing or willful violation of
these PRA provisions constitutes a misdemeanor, subject to
civil liability and administrative fines, up to $5,000 per
occurrence.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 9/1/09)
California State Controller John Chiang (co-source)
California State Treasurer Bill Lockyer (co-source)
American Federation of State, County and Municipal
Employees
Association for Los Angeles Deputy Sheriffs
California Public Employees Retirement System
California School Employees Association
Los Angeles County Employees Retirement Association
Los Angeles police Protective League
Riverside Sheriffs' Association
Service Employees International Union
State Association of County retirement Systems (if amended)
OPPOSITION : (Verified 9/1/09)
Orange County Employees Retirement System
ARGUMENTS IN SUPPORT : According to the author's office,
"This proposal is intended to ensure that public pension
board members, employees and consultants conduct business
to the highest ethical standard, comply with all fiduciary
responsibilities and actively work to eliminate actual or
perceived conflicts of interest."
According to one of the co-sponsors, the California State
Controller, "This bill would shed sunlight into the role
played by placement agents in state investment decisions
and prohibit activities that may expose CalPERS, CalSTRS,
and local retirement systems to undue influence by those
agents.
With the recent scandal involving placement agents and the
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New York Pension Fund, it is important to ensure that such
activity cannot happen in California. The public also
needs to be assured that California's public pension funds
operate under the highest ethical standards. By
strengthening current revolving door laws and requiring
full transparency of any dealings with placement agents,
this bill provides that public assurance."
ARGUMENTS IN OPPOSITION : In their letter of opposition
to this bill, the Orange County Employees Retirement System
(OCERS) states, "OCERS is opposed to this measure for three
primary reasons: First, OCERS does not directly hire
placement agents; they are hired, if at all, through the
investment managers with whom we conduct business.
Mandating that OCERS adopt a placement agent disclosure
policy will not ensure that fraudulent conduct, which this
bill is aimed at avoiding, will be discovered and
disclosed. Second, in our experience, the investment
professionals who serve on our Board bring a specific
expertise to our deliberations that enhance the management
of our retirement system assets, and losing those Board
members would diminish our ability to obtain the level of
investment returns needed to avoid placing an undue burden
on the taxpayers of Orange County. Finally, the language
added to our governing law (the County Employees'
Retirement Law of 1937, or "CERL") by last year's AB 246
has created confusion among CERL retirement systems, and
has resulted in wholesale board member resignations across
the state."
ASSEMBLY FLOOR
AYES: Adams, Ammiano, Arambula, Beall, Bill Berryhill, Tom
Berryhill, Blakeslee, Block, Blumenfield, Brownley,
Buchanan, Caballero, Charles Calderon, Carter, Chesbro,
Cook, Coto, Davis, De La Torre, De Leon, DeVore, Duvall,
Emmerson, Evans, Feuer, Fletcher, Fong, Fuentes, Fuller,
Furutani, Gaines, Galgiani, Garrick, Gilmore, Hagman,
Hall, Harkey, Hayashi, Hernandez, Hill, Huber, Huffman,
Jeffries, Jones, Knight, Logue, Bonnie Lowenthal, Ma,
Mendoza, Miller, Monning, Nava, Nestande, Niello,
Nielsen, John A. Perez, V. Manuel Perez, Portantino,
Ruskin, Salas, Silva, Skinner, Smyth, Solorio, Audra
Strickland, Swanson, Torlakson, Torres, Torrico, Tran,
Yamada, Bass
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NO VOTE RECORDED: Anderson, Conway, Eng, Krekorian, Lieu,
Saldana, Villines, Vacancy
DLW:do 9/1/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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