BILL NUMBER: AB 1379 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 21, 2011
AMENDED IN ASSEMBLY MAY 27, 2011
AMENDED IN ASSEMBLY MARCH 14, 2011
INTRODUCED BY Assembly Member Bradford
(Principal coauthor: Assembly Member V. Manuel Pérez)
FEBRUARY 18, 2011
An act to add Sections 7504.5 and 13997.4 to the Government Code,
relating to economic development.
LEGISLATIVE COUNSEL'S DIGEST
AB 1379, as amended, Bradford. Economic development: public
pension funds.
(1) Existing law creates various public pension systems and
requires that all state and local public retirement systems secure
the services of an enrolled actuary, not less than triennially, to
perform a valuation of those systems. Existing law requires all state
and local public retirement systems to submit audited financial
statements to the Controller who is required to compile and publish a
report annually on the financial condition of the systems.
This bill would permit require a
state or local pension system with assets over $4,000,000,000 to
provide a report to the Controller on California investments, as
defined, and emerging domestic market investments, as defined, that
it obtains on and after July 1, 2012, and holds in its portfolio. The
bill would also permit the report to include an estimate of the
number of jobs created and retained as a result of the system's
investment activity. The bill would also make a statement of
legislative findings and declarations in this regard. Because
the bill would impose additional duties upon local governments, it
would create a state-mandated local program.
(2) Existing law creates the California Economic Development Fund
for the purpose of receiving federal, state, local, and private
economic development funds, and receiving repayment of loans or grant
proceeds and interest on those loans or grants. Existing law
establishes certain definitions in this regard and defines economic
development as including policies and programs expressly directed at
improving the business climate in business finance, marketing,
neighborhood development, small business development, business
retention and expansion, technology transfer, and real estate
redevelopment.
This bill would state the intent of the Legislature that
retirement systems with sufficiently diversified portfolios,
consistent with their plenary authority and their fiduciary
responsibilities, adopt emerging domestic market investment policies,
as defined, that meet their own unique investment objectives.
The bill would permit the Controller, upon his or her
determination, as specified, to develop, in consultation with public
pension systems having funds with assets over $4,000,000,000,
streamlined and cost-effective methods for identifying investments
within their portfolios that meet the definitions of California
investment and emerging domestic market investment. The bill would
permit the identification methods to be made available through the
Controller's Internet Web site. The bill would require
the Board of Administration of the Public Employees' Retirement
System together with the Teacher's Retirement Board of the State
Teachers' Retirement System to share with other public pension
systems streamlined and cost-effective methods for identifying
investments within their portfolios that meet the definitions of
California investment and emerging domestic market investment. The
bill would require the Controller to compile and publish specified
investment information supplied by stat e and local
pension systems on its Internet Web site, as provided. The bill
would also make a statement of legislative findings and declarations
in this regard.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 7504.5 is added to the Government Code, to
read:
7504.5. (a) The Legislature finds and declares that public
pension fund investments represent billions of dollars of financing
for California communities and that the state could adopt and
implement more effective economic development policies with better
information on fund investments in California and in emerging
domestic markets.
(b) In addition to its annual audited financial statement
submitted to the Controller pursuant to subdivision (c) of Section
7504, each state or local public retirement system with assets of
over four billion dollars ($4,000,000,000) may
shall include a report on California investments, as
defined in paragraph (1) of subdivision (c) of Section 13997.4, and
emerging domestic market investments, as defined in paragraph (2) of
subdivision (c) of Section 13997.4, that it obtains on and after July
1, 2012, and holds in its portfolio. Investments by asset class
shall be reported by fair market value and percentage of the total
portfolio. The report may also include an estimate of the number of
jobs created and retained as a result of the system's investment
activity.
(c) A state or local public retirement system may elect to satisfy
the reporting requirements of this section by reporting on its total
portfolio rather than only those investments made after July 1,
2012, if information is provided and identified consistently with the
definitions in subdivision (c) of Section 13997.4.
SEC. 2. Section 13997.4 is added to the Government Code, to read:
13997.4. (a) The Legislature finds and declares that:
(1) Historically, economic growth in California has outpaced the
economic growth rate of the nation as a whole, and the state has led
the nation in export-related jobs, business startups, and innovation.
However, since the subprime home mortgage crisis in 2007, California
communities have struggled. With the increasing rates of home
foreclosure and the tightening of the credit markets, many businesses
have found their existing lines of credit inaccessible. Significant
drops in consumer spending have led to workforce reductions and
business bankruptcies.
(2) For much of 2009, the number of unemployed workers rose by
40,000 to 60,000 per month, and the year ended with 2.25 million
unemployed California workers. While California may be emerging from
the recession, unemployment is expected to remain high throughout
2010 and 2011. Without specific intervention to support job creation
and business expansion, many regions of California will be very slow
to recover.
(3) As California moves forward from this recession, it is
important that the state support the recovery and expansion of
industries that provide quality jobs, enhance regional and global
supply chains, and strengthen the state's competitiveness.
(4) Modern investment theory includes a set of concepts aimed at
building a most efficient portfolio of different types of assets that
yields the highest return for a given level of investor risk.
Diversification is one of the key elements in building a portfolio,
including diversification by asset class and by geography. Given that
the United States is the largest economy in the world and that
California is the largest economy in the United States, a certain
portion of any fully diversified investment portfolio includes
investments in California. Therefore, there is a clear alignment of
interest between medium to large institutional investors and the
economic recovery of California.
(5) Investments in emerging domestic markets can provide
appropriate risk-adjusted returns to institutional investors
including public pension funds. In 2000, the boards of administration
for the Public Employees' Retirement System and the State Teachers'
Retirement System each adopted a 2-percent goal for investments in
emerging domestic markets. These investments, first, have created
value for the members of those retirement systems, and second, have
increased access to financial capital in historically underserved
markets and historically disadvantaged groups of people.
(b) It is the intent of the Legislature, consistent with their
plenary authority and fiduciary responsibilities under Section 17 of
Article XVI of the California Constitution, that retirement systems
with sufficiently diversified portfolios adopt emerging domestic
market investment policies that meet their own unique investment
objectives.
(c) For the purposes of this section:
(1) "California investment" means an investment that produces
competitive risk-adjusted rates of return while still promoting
economic and community development opportunities. In the case of
fund-to-fund investments or opportunistic investments, "California
investment" may include moneys that are directed under an agreement
with the asset manager to be primarily invested in California.
"California investment" includes, but is not limited to:
(A) A publicly held company with a headquarters or significant
operations in California.
(B) A privately held company that is headquartered in California.
(C) Real estate in California or loans on real estate located in
California.
(2) "Emerging domestic market investment" means an investment that
produces competitive risk-adjusted rates of return while still
promoting economic and community development opportunities to areas
of the state that historically have had limited access to capital
markets. "Emerging domestic market investment" also means an
investment that produces competitive risk-adjusted rates of return
while still promoting economic and community development
opportunities and that targets groups of people who are historically
underserved.
(d) If the Controller determines, based upon a review of the
reports submitted pursuant to Section 7504.4, that the effort is
justified, the Controller may develop, in consultation with public
pension systems having funds with assets over four billion dollars
($4,000,000,000), streamlined and cost-effective methods for
identifying investments within their portfolios that meet the
definitions of California investment and emerging domestic market
investment. The identification methods may be made available through
the Controller's Internet Web site.
(d) The Board of Administration of the Public Employees'
Retirement System together with the Teacher's Retirement Board of the
State Teachers' Retirement System shall share with other public
pension systems streamlined and cost-effective methods for
identifying investments within their portfolios that meet the
definitions of California investment and emerging domestic market
investment.
(e) The Controller shall compile and publish the information that
state and local pension systems are required to provide pursuant to
Section 7504.5 within, or linked to, the report issued pursuant to
Section 7504 and made available on the Controller's Internet Web
site. The information shall be published on the Controller's Internet
Web site within 12 months of the receipt of the information, and in
no case later than 18 months after the end of the fiscal year upon
which the information is based.