BILL ANALYSIS �
AB 873
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Date of Hearing: May 11, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 873 (Furutani) - As Amended: April 14, 2011
Policy Committee: PERS Vote:6-0
Elections and Reapportionment 7-0
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill strengthens revolving door and lobbying restrictions
for board members and high level staff at the California Public
Employees' Retirement System (CalPERS) and the California State
Teachers' Retirement System (CalSTRS). Specifically, this bill:
1)Extends the current two-year ban on lobbying a former state
employer to four years for board members, senior executives
and investment officers, general counsels and other senior
staff of CalPERS and CalSTRS responsible for large contracts.
Places these provisions into the Political Reform Act where
violations would be subject to Fair Political Practices
Commission enforcement.
2)Prohibits CalPERS and CalSTRS board members, senior executives
and investment officers, general counsels and other senior
staff who manage contracts valued greater than $10 million
from assisting a new employer on any contracts with CalPERS or
CalSTRS if they had substantial contract dealings (valued
above $10 million) with their new employer in the two years
prior to their separation. This prohibition would last for
two years.
3)Prohibits former CalPERS and CalSTRS board members, senior
executives and investment officers and general counsels from
accepting compensation as a placement agent for providing
services in connection with CalPERS or CalSTRS, as specified,
for 10 years after their separation.
AB 873
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4)Declares that it furthers the purposes of the Political Reform
Act of 1974.
FISCAL EFFECT
1)Minor and absorbable costs to CalPERS and CalSTRS to revise
policies and notices.
2)Minor and absorbable costs to The Fair Political Practices
Commission and Secretary of State for handling additional
filings of disclosure statements and for enforcement.
3)Unknown, likely negligible, nonreimbursable local law
enforcement costs.
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COMMENTS
1)Purpose . According to the sponsor, the State Controller's
Office, this proposal addresses a key ethical issue associated
with former CalPERS board members and staff tied to the
placement agent scandal. By enacting stronger revolving door
and lobbying restrictions CalPERS and CalSTRS investments will
be better insulated from undue influence, restoring the
systems' performance and credibility in the public eye, while
reducing the likelihood that investment decisions would be
influenced by job offers and former employees' insider
knowledge. This measure is modeled on current federal
post-employment restrictions and would not prevent separating
employees from working for any employer with whom CalPERS or
CalSTRS does business, as long as their duties did not involve
performing, implementing or executing a contract with CalPERS
or CalSTRS.
2)Federal law. With regard to activities such as lobbying,
federal law sets a one-year ban or cooling-off period for
senior employees, and a two-year ban for very senior
employees, as well as a permanent ban on switching sides for
executive branch employees who worked on a matter involving
contracts, grants or lawsuits while a federal employee. In
addition, a former official of a federal agency may not accept
compensation from a contractor as an employee, officer,
director or consultant of the contractor within a period of
one year after that former official was involved in the
selection or oversight of a contract to that vendor in excess
of $10 million. The official may accept compensation from any
division or affiliate of a contractor that does not produce
the same or similar products or services as the entity of the
contractor with which the official had been involved.
3)PERS investigation. In late 2010, the Board received
recommendations from a special review initiated to investigate
the use of placement agents by outside firms managing the
pension fund's investments. In part, the review stated, "?we
recommend that CalPERS call for legislation going beyond the
minimum requirements of California law and adopt a cooling-off
period for its former Board and staff members similar to that
provided under federal law. Specifically, a CalPERS Board or
staff member should be prohibited from working for any company
or its agents during a two year period after termination of
Board service or employment?"
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4)Political Reform Act of 1974 . California voters passed an
initiative, Proposition 9, in 1974 that created the FPPC and
codified significant restrictions and prohibitions on
candidates, officeholders and lobbyists. That initiative is
commonly known as the PRA. Amendments to the PRA that are not
submitted to the voters, such as those contained in this bill,
must further the purposes of the initiative and require a
two-thirds vote of both houses of the Legislature.
5)Previous Legislation . AB 1743 (Hernandez), Chapter 668,
Statutes of 2010, prohibits a person from acting as a
placement agent in connection with any potential investment
made by a state public retirement system unless that person is
registered as a lobbyist in accordance with the PRA.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081