BILL NUMBER: AB 1379 AMENDED
BILL TEXT
AMENDED IN SENATE AUGUST 30, 2011
AMENDED IN SENATE AUGUST 15, 2011
AMENDED IN SENATE JUNE 23, 2011
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 and repeal Sections 7504.3 and 13997.4
to of 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 , until January 1, 2017, would 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 California emerging domestic
market investments, as defined, that it obtains on and
after July 1, 2012, and holds in its portfolio , and would permit
a system to modify the definition to ensure consistency with adopted
investment policies and limit reporting costs . 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 boards of public pension or 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 require ,
for the 2011-12 and 2012-13 fiscal years, that 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
California emerging domestic market
investment. The bill , until January 1, 2017, would
authorize the Controller to compile and publish specified investment
information supplied by state and local pension systems on the
Controller's Internet Web site, as provided. The bill would
also make a statement of legislative findings and declarations in
this regard.
(3) This bill would also make a statement of legislative findings
and would declare the intent of the Legislature that retirement
boards with sufficiently diversified portfolios, consistent with
their plenary authority and their fiduciary responsibilities, adopt
specified investment policies that meet their own unique investment
objectives.
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. (a) The Legislature finds and declares the following:
(1) Public pension fund investments represent billions of dollars
of financing for California communities, and the state could adopt
and implement more effective economic development policies with
better information on fund investments in California and in its
emerging domestic markets.
(2) 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.
(3) 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 through 2011.
Without specific intervention to support job creation and business
expansion, many regions of California will be very slow to recover.
(4) 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.
(5) 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.
(6) Increasing investments in minority-owned businesses and
within minority communities is vital to the future economic health of
the nation and its business community. Investment in historically
disadvantaged communities by public pension systems adds value for
the members of those systems and increases access to financial
capital for historically underserved markets and groups of people.
(7) 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. economically targeted investments.
These investments are intended to create value for the members of
those retirement systems while facilitating improved access to
financial capital in historically underserved markets.
(b) It is the intent of the Legislature, consistent with the
plenary authority and fiduciary responsibilities of the retirement
boards of public pension or retirement systems under Section 17 of
Article XVI of the California Constitution, that those retirement
boards that have sufficiently diversified portfolios adopt
California emerging domestic market
investment policies that meet their own unique investment objectives.
SECTION 1. SEC. 2. Section 7504.3 is
added to the Government Code, to read:
7504.3. (a) 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) shall include a report on
California investments, as defined in paragraph (1) of subdivision
(c) of Section 13997.4, and emerging domestic
California emerging market investments, as defined in
paragraph (2) of subdivision (a) 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. The information reported by the public pension
systems shall not exceed the scope of information allowed
required by the California Public Records Act.
(b) 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 (a) of Section 13997.4.
(c) Nothing in this section shall require a retirement board to
take action that is not consistent with its plenary authority and
fiduciary responsibilities as described in Section 17 of Article XVI
of the California Constitution.
(d) This section shall remain in effect only until January 1,
2017, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2017, deletes or extends
that date.
SEC. 2. SEC. 3. Section 13997.4 is
added to the Government Code, to read:
13997.4. (a) 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 assists in the improvement of state and regional
economies. 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 "California
emerging 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. while facilitating the improvement of
traditionally underserved markets, including urban and rural areas
undergoing, or in need of, revitalization where assets conducive to
business development are located.
(b) A retirement board is permitted to modify the definitions
and parameters established in this section for the reporting
purposes required by Section 7504.3, in order to ensure consistency
with its adopted investment policies and to limit its reporting
costs. These definitions and parameters, along with the methodologies
used to formulate the report, shall be described in its report.
(b) The
(c) For the 2011-12 and
2012-23 fiscal years, 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 California
emerging domestic market investment.
(c)
(d) The Controller may compile and publish the
information that state and local pension systems are required to
provide pursuant to Section 7504.3 within, or linked to, the report
issued pursuant to Section 7504 and made available on the Controller'
s Internet Web site. If the Controller decides to compile and publish
the information provided by the pension systems, 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.
(e) This section shall remain in effect only until January 1,
2017, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2017, deletes or extends
that date.