BILL ANALYSIS                                                                                                                                                                                                    �



                                                                  AB 17
                                                                  Page  1

          Date of Hearing:   January 19, 2012

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                    AB 17 (Davis) - As Amended:  January 13, 2012 

          Policy Committee:                              PERS Vote:4-2

          Urgency:     No                   State Mandated Local Program: 
          No     Reimbursable:              

           SUMMARY  

          This bill requires the California State Teachers' Retirement 
          System (CalSTRS) to report annually to the Legislature on the 
          ethnicity and gender of investment firms and managers who 
          participate in managing its portfolio.  Specifically, this bill: 


          1)Requires CalSTRS report annually to the Legislature on both 
            the ethnicity and gender of investment managers, as specified, 
            who are employed by entities that participate in managing the 
            system's investment portfolios and the ownership breakdown of 
            investment and brokerage firms with which the systems' 
            contract.  

          2)Mandates the report include the fees paid for trading by 
            product to each brokerage firm utilized by the fund.

          3)States that nothing in this bill shall require action unless 
            CalSTRS determines that the action is consistent with their 
            fiduciary responsibilities.

          4)Requires CalSTRS to report by August 1, 2013 and annually 
            thereafter to the Legislature.

           FISCAL EFFECT 

          Annual costs to collect data and prepare reports of about 
          $70,000 for CalSTRS.

           COMMENTS  

           1)Rationale.   Supporters of the bill contend women and 








                                                                  AB 17
                                                                  Page  2

            minority-owned businesses are under- represented among pension 
            fund managers relative to the at-large population.  
            Participation by these groups in California pension fund asset 
            management continues to be disproportionately low, based on 
            available state-level data.

           2)Background  .  Pension funds have recently been pursuing 
            strategies to increase the diversity of their investing 
            managers recognizing the economic value from a variety of 
            investment approaches and methods.  According to information 
            provided to the committee by CalPERS and CalSTRS, they both 
            actively encourage participation by minority-owned, 
            women-owned, and emerging investment management firms, and use 
            the services of specialist consultants in diversity 
            investments to further their outreach.  


           3)Suggested amendment.    

            The bill requires CalSTRS to, "? report and testify at 
            hearings before the Legislature."  The Legislature already has 
            the right and authority to compel CalSTRS to testify.  Placing 
            a requirement to testify in statute sets a precedent that 
            suggests that a statute may be necessary to require testimony.

           4)Previous legislation  .  This bill is similar to AB 1913 (Davis) 
            and AB 1919 (Davis) both from 2010.  These bills applied to 
            both CalSTRS and CalPERS and were held in the Senate Rules 
            Committee.


           Analysis Prepared by  :    Roger Dunstan / APPR. / (916) 319-2081