BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 1735 (Wieckowski) - CalSTRS: Compensation
Amended: March 19, 2012 Policy Vote: PE&R 5-0
Urgency: No Mandate: No
Hearing Date: June 25, 2012
Consultant: Maureen Ortiz
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 1735 authorizes CalSTRS to fix the
compensation, terms, and conditions of employment for two
positions: Chief Operating Officer, and Chief Financial Officer.
The bill limits the salary for each of these positions to 150
percent of the prevailing salary for the Governor as established
by the California Citizens Compensation Commission.
Fiscal Impact: Potentially over $200,000 annually (Special Fund)
for increases in existing salaries for the two positions,
dependent upon the compensation packages developed by the
Teachers' Retirement Board.
Background: Existing law restricts the salary and benefit
packages that can be provided to the Chief Operating Officer and
to the Chief Financial Officer at CalSTRS to existing
classification levels within the state civil service system.
The current salary cap for a CEA V position is approximately
$130,000. This limitation constrains the ability of CalSTRS to
recruit highly qualified candidates with financial expertise
relating to risks and investments. These individuals are not
readily available in state service but very likely exist in the
private sector within other pension funds or at private sector
financial institutions. These high level positions require
essential depth and breadth of specialized knowledge, skills,
abilities and competencies since these positions are responsible
for overseeing and leading vital operational, administrative and
financial activities of the pension system.
Existing law authorizes CalSTRS and CalPERS to set compensation
packages independent of the civil service classification system
for other key positions including Chief Executive Officer,
Actuary, Chief Investment Officer, and General Counsel.
AB 1735 (Wieckowski)
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Financial and investment transactions of public pension plans
have extremely complicated regulatory requirements, and the
ongoing debate over public and private retirement security has
intensified with the volatility of financial markets. This
demands a greater understanding of the political and social
environment in which public pension plans operate.
AB 1735 is intended to improve the ability of CalSTRS to attract
and retain employees for key positions that manage risks
associated with the large pension fund.
Proposed Law: AB 1735 will add the positions of Chief Operating
Officer and Chief Financial Officer to those positions for which
the Teachers' Retirement Board is required to fix the
compensation, however, the bill limits the new compensation to
150% of the Governor's salary. Additionally, AB 1735 provides
that these two positions will be subject to existing conflict of
interest provisions, including the two year revolving door
prohibition.
The Governor's current salary is set by the California Citizens
Compensation Commission at $173,987 annually, although there
will be a 5% reduction effective December 2012. This bill will
authorize CalSTRS to pay its Chief Operating Officer and Chief
Financial Officer a salary of up to $260,980 (or approximately
$248,000 after the Governor's salary is decreased pursuant to a
recent vote of the Commission).
Related Legislation: Last year, the Legislature enacted AB 1042
(Allen), Chapter 688/2011 which authorized CalPERS to set the
salary for the position of Chief Financial Officer. That
legislation imposed no salary cap.