BILL ANALYSIS �
SENATE COMMITTEE ON ELECTIONS
AND CONSTITUTIONAL AMENDMENTS
Senator Lou Correa, Chair
BILL NO: SB 439 HEARING DATE:5/3/11
AUTHOR: NEGRETE McLEOD ANALYSIS BY:Frances Tibon
Estoista
AMENDED: 3/23/11
FISCAL: YES
SUBJECT
Political Reform Act of 1974: PERS: STRS: gift limits
DESCRIPTION
Existing law , the Political Reform Act (PRA), requires
specified public officials to annually report the receipt
of gifts and prohibits the receipt of gifts exceeding $250
in value, adjusted biannually for inflation since 1993,
from any single source, (current inflation adjusted limit
is $420).
Existing law establishes the governing boards of the
California Public Employees Retirement System (CalPERS) and
the California State Teachers Retirement System (CalSTRS)
and defines their duties and responsibilities, which
include oversight of the retirement systems' investment
programs and compensation for certain essential employees,
including the Chief Executive Officer, the Chief Actuary,
the Chief Counsel, the Chief Investment Officer and other
managerial-level investment staff.
This bill would prohibit all board members and employees of
CalPERS and CalSTRS who are subject to gift reporting under
the PRA from receiving, in any calendar year, gifts
exceeding $50 in value from any single entity that
contracts with CalPERS or CalSTRS.
This bill would keep the gift limit for CalPERS and CalSTRS
board members and employees at $50 into perpetuity, unless,
or until a new statute replaces it.
This bill would specify that any vendor or contractor that
makes gifts in violation of this limit two or more times,
occurring more than 2 months apart, in a five year period
shall be disqualified from bidding on, and being awarded,
any contract with the retirement system for the period of
two years from the date of the conviction for receipt of
the second gift.
BACKGROUND
In 2010, following charges of unethical conduct against
former CalPERS staff and board members relative to the
influence of placement agents, CalPERS commissioned a study
by the Washington D.C. law firm, Steptoe and Johnson, to
review CalPERS' investment decision making practices and to
identify ethical vulnerabilities. The initial findings of
that report were released in November 2010 and included a
recommendation to prohibit gifts to CalPERS board members
and staff.
COMMENTS
1. According to the author , Similar to the placement
agent legislation that preceded it last year, SB 439 is
designed to restore public confidence in CalPERS and
CalSTRS' decision-making process by limiting
opportunities for influence-peddling or to gain an
unfair advantage in consideration for investment. If
enacted, this measure will assure PERS/STRS members and
taxpayers that the decisions are being made in the best
interest of the funds, and set an enduring ethical
precedent for other states, localities, and private
investors to follow. Regarding the new $50 limit:
"$50 is a reasonable gift limit to make sure that an
occasional cup of coffee or a Danish at a business
meeting does not lead to unintentional violations."
2. Prior and related legislation : AB 873 (Furutani) was
recently passed out of the Assembly PER&SS Committee
and would prohibit members of the Board of
Administration of CalPERS, board members of CalSTRS,
and specified officers and employees from engaging in
certain employment activities for ten years after
leaving service with CalPERS or CalSTRS.
AB 1743 (Hernandez) Chapter 668, Statutes of 2010
prohibits a person from acting as a placement agent in
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connection with any potential investment made by a
state public retirement system unless that person is
registered as a lobbyist pursuant to the PRA.
AB 1584 (Assembly PER&SS Committee) Chapter 301, Statutes
of 2009 made numerous changes aimed at increasing
disclosure and accountability of investment placement
agents, board members, and others associated with
public pension funds in California.
PRIOR ACTION
Senate Public Employment & Retirement Committee:5-0
POSITIONS
Sponsor: State Controller
Support: AARP
California Retired Teachers Association (CalRTA)
CalPERS Board of Administration
CalSTRS
Service Employees International Union (SEIU)
Local 1000
Oppose: None received
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