BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 1379 (Bradford)
Hearing Date: 8/15/2011 Amended: 8/15/2011
Consultant: Maureen Ortiz Policy Vote: PE&R 3-2
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BILL SUMMARY: AB 1379 requires any state or local pension
system with assets over $4 billion to report annually to the
Controller specified information on emerging domestic market
investments, and authorizes the Controller to compile and
publish the information on its Internet Web site.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
CalPERS reporting ------potentially up to $350
one-time------ Special*
CalSTRS reporting
-----------------------minor---------------------
Special**
Local agency reporting --------unknown, nonreimbursable
costs------ Local
Controller admin ----potentially
$27 annually------ General
*Public Employees Retirement Fund **Teachers Retirement Fund
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense file.
The California Public Employees' Pension System (CalPERS)
indicates that if the system is allowed to use its own
definitions as it relates to "emerging domestic market" for
reporting the data required in the bill, costs will likely be
minor. However, if changes need to be made to the current
definitions and parameters that have been adopted by the CalPERS
AB 1379 (Bradford)
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Board of Administration, one-time costs would be approximately
$350,000. The California State Teachers' Retirement System
(CalSTRS) indicates that the information required in this bill
is already compiled for a similar report, and therefore, costs
would be minimal. AB 1379 authorizes, but does not require, the
State Controller to compile and publish the information reported
by pension systems on its Internet Web site. The Controller's
office indicates the need for PY at costs of about $27,000
annually if it chooses to do so. Staff recommends the bill be
amended to add a five year sunset at which time the Legislature
can review whether the reports required of the pension systems
are being compiled and published, or if they should be
discontinued.
AB 1379 requires the pension systems to report on emerging
domestic market investments 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.
AB 1379 further provides that a state or local public retirement
system may elect to satisfy the reporting requirements by
reporting on its total portfolio rather than only those
investments made after July 1, 2012.
There are at least 15 public pension funds that have assets over
$4 billion which will be required to comply with these reporting
provisions including CalPERS, CalSTRS, University of California,
and several city and county systems in Los Angeles, San
Francisco, San Diego, Orange, San Bernardino, Sacramento,
Alameda, and Contra Costa.
The Boards of CalPERS and CalSTRS will be required 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 an emerging
domestic market.
AB 1379 authorizes the Controller to compile and publish the
information that state and local pension systems provide and
AB 1379 (Bradford)
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make it available on the Internet Web site. If the Controller
chooses to publish the information, it must be published within
12 months of receipt or no later than 18 months after the end of
the fiscal year upon which the information is based.
AB 1379 contains Findings and Declarations that public 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.
CalPERS already engages in numerous efforts to promote
investments in emerging domestic markets. For example, the
Economically Targeted Investment Program established in 2000
assists in stimulating job creation, business creation, and
increases or improvements in affordable housing and the
infrastructure. In addition, the California Emerging Markets
Investment Policy focuses on investment opportunities in
traditionally underserved markets. In 2001, the Board set a
goal of investing two percent of the system's assets in the
emerging markets of the state. Also in 2001, the CalPERS board
established the California Initiative to invest private equity
in traditionally underserved markets whereby over $975 million
has been invested to create jobs and promote economic
opportunity in California. Further, on April 27, 2011 CalPERS
announced that it had committed a total of $400 million with
three emerging managers in the pension fund's Manager
Development Program II for public equity investment.
Existing law requires the Controller to annually compile
information and report to the public the financial condition of
California's public retirement systems. All state and local
public retirement systems are required to submit audited
financial statements to the Controller within six months of the
close of each fiscal year. The data is published in the
"Public Retirement Systems Annual Report."
SB 294 (Price), currently pending in the Assembly Appropriations
Committee, requires CalPERS and CalSTRS to provide a five-year
strategic plan for emerging investment manager participation
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and to report to the Legislature annually on the progress of the
plan.
This bill is similar to AB 2570 (Arambula) which was vetoed in
2006. In part, the veto message indicated "this bill would
impose new administrative costs on city and county pension
systems at a time when those systems are fighting to contain
administrative costs and obtain a reasonable rate of return for
their pensioners."