BILL ANALYSIS �
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: AB 1735
Gloria Negrete McLeod, Chair Hearing date: June 11, 2012
AB 1735 (Wieckowski) as amended 3/19/12 FISCAL: YES
HIRING FLEXIBILITY FOR KEY CALSTRS POSITIONS
HISTORY :
Sponsor: California State Teachers' Retirement System
Other legislation: AB 1042 (Allen),
Chapter 688, Statutes of 2011
AB 1317 (Mullin),
Chapter 333, Statutes of 2007
SB 269 (Soto),
Chapter 856, Statutes of 2003
ASSEMBLY VOTES :
PER & SS 5-0 3/28/12
Appropriations 17-0 5/25/12
Assembly Floor 75-0 5/29/12
SUMMARY :
AB 1735 adds two positions - the Chief Operating Officer
(also designated as Chief of Staff) (COO) and the Chief
Financial Officer (CFO) - to the list of key positions for
which the CalSTRS Board can set compensation independent of
the civil service classification system. The bill also
restricts salary for the two positions to no greater than 150
percent of the Governor's salary.
BACKGROUND AND ANALYSIS :
1)Existing law :
a) requires the Boards of CalSTRS and CalPERS to
establish compensation for their respective key
positions including, executive officer, chief actuary,
general counsel, chief investment officer, and other
investment officers and portfolio managers whose
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positions are designated managerial.
b) states that the compensation level for these
positions is to be comparable to other public retirement
systems and financial services companies and that the
candidates be selected from an eligible list based on an
open examination when these positions are filled through
a general civil service appointment.
c) provides that these positions are subject to a
modified civil service selection process and that 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.
d) prohibits key employees from representing for
compensation any other person, except the state, to
influence the retirement system's actions for two years
following the end of their employment with the system.
1)This bill :
a) expands the list of key positions for which the
CalSTRS Board can establish compensation outside the
regular civil service system to include the COO and CFO.
b) limits the salary for the COO and the CFO to no
greater than 150 percent of the prevailing salary for
the Governor, as established by the California Citizens
Compensation Committee.
c) makes technical changes to the list of key employees
who are prohibited for 2 years from working for private
interests to influence CalSTRS after leaving CalSTRS
employment.
FISCAL :
According to the Assembly Committee on Appropriations this
bill:
could result in increased special fund costs to
CalSTRS of approximately $200,000 by allowing CalSTRS to
double existing salaries for the two positions to the
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new limit of 150 percent of the Governor's salary.
Costs could be less depending on the actual compensation
package offered by CalSTRS to the COO and CFO;
could increase General Fund pressure either directly
through state support or state payments to school
districts.
COMMENTS :
1)Arguments in Support
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."
The sponsor states, "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 expertise and competencies and
allows the board to recruit from broader sources."
2)SUPPORT :
California State Teachers' Retirement System (CalSTRS),
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Sponsor
3)OPPOSITION :
None to date
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