BILL ANALYSIS �
AB 1735
Page 1
ASSEMBLY THIRD READING
AB 1735 (Wieckowski)
As Amended March 19, 2012
Majority vote
PUBLIC EMPLOYEES 5-0 APPROPRIATIONS 17-0
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|Ayes:|Furutani, Mansoor, Allen, |Ayes:|Fuentes, Harkey, |
| |Ma, Wieckowski | |Blumenfield, Bradford, |
| | | |Charles Calderon, Campos, |
| | | |Davis, Donnelly, Gatto, |
| | | |Ammiano, Hill, Lara, |
| | | |Mitchell, Nielsen, Norby, |
| | | |Solorio, Wagner |
| | | | |
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SUMMARY : Expands the list of positions for which the Teachers'
Retirement Board (TRB) has the authority to set the compensation
and terms and conditions of employment to include the chief
operating officer (COO) and chief financial officer (CFO) and
prohibits the salary for the COO and CFO from exceeding 150% of
the Governor's salary.
EXISTING LAW :
1)Requires the TRB to establish compensation for the system's
executive officer, chief actuary, general counsel, chief
investment officer, and other investment officers and
portfolio managers whose positions are designated managerial.
2)States that the compensation level for these positions is to
be comparable to other public retirement systems and financial
services companies and, when these positions are filled
through a general civil service appointment, that the
candidates be selected from an eligible list based on an open
examination.
3)States that except for the executive officers of both systems,
these positions are subject to a modified civil service
selection process, and the boards are able to take action
against these personnel for causes related to their fiduciary
duty, including the failure to meet specified performance
objectives.
AB 1735
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4)Prohibits individuals employed in these positions for less
than five years from being paid to influence the actions of
the retirement system, or decisions of its governing board for
two years following the end of their employment with the
retirement system.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, increased special fund costs to the California State
Teachers' Retirement System (CalSTRS) of approximately $200,000,
when the salaries are adjusted using the flexibility in this
bill. Given the new ceiling of $260,000 per annum, this bill
allows CalSTRS to double the existing salaries currently
allowed. The actual costs will depend on the compensation
packages developed by the Teachers' Retirement Board. Any
increase in CalSTRS costs could create General Fund pressure
either directly through state support or state payments to
school districts.
COMMENTS : According to the author, "Current law requires that
the hiring of the Chief Operating Officer (COO) and Chief
Financial Officer (CFO) is limited to the state civil service
pool. This limitation constrains the California State Teachers'
Retirement System's (CalSTRS) ability to recruit highly
qualified candidates that possess essential specialized
knowledge, skills, abilities and competencies that are required
for positions that are associated with investment financial
management in a large public pension fund. The type of
experience needed to manage the risks associated with a large
pension fund is not likely to be found within the state civil
service but from other pension funds or private sector financial
institutions. Currently, there is only one other state agency
outside of CalSTRS that manages pension funds - the California
Public Employees' Retirement System (CalPERS) - while there are
many such funds elsewhere in California that would be suitable
sources of executive management."
Supporters state, "This bill enhances CalSTRS' ability to
preemptively plan for the succession of vulnerable top level
executive positions, particularly those responsible for managing
the increasingly complex financial and operation components of
the largest teacher pension fund in the nation. This bill also
improves CalSTRS' ability to attract and retain employees for
key executive positions that require specialized and critical
AB 1735
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expertise and competencies and allows the board to recruit from
broader sources."
This bill is similar to AB 1042 (Allen), Chapter 688, Statutes
of 2011, which authorized the CalPERS Board of Administration to
appoint and set the compensation of a chief financial officer.
SB 269 (Soto), Chapter 856, Statutes of 2003, allowed the
CalPERS Board of Administration and the Teachers' Retirement
Board to set compensation and terms and conditions of employment
of certain key positions. AB 1317 (Mullin), Chapter 333,
Statutes of 2007, expanded the list of positions to include the
general counsel.
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN: 0003832