BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 439|
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CONSENT
Bill No: SB 439
Author: Negrete McLeod (D)
Amended: 3/23/11
Vote: 27
SEN. PUBLIC EMPLOYMENT & RETIREMENT COMM. : 5-0, 3/21/11
AYES: Negrete McLeod, Walters, Gaines, Padilla, Vargas
SEN. ELECTIONS & CONSTITUTIONAL AMEND. COMM. : 5-0, 5/3/11
AYES: Correa, La Malfa, De Le�n, Gaines, Lieu
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Political Reform Act of 1974: PERS: STRS:
gift limits
SOURCE : Author
DIGEST : This bill lowers (from $420 to $50) the amount
of allowable gifts made annually to board members and
specified staff of the California Public Employees
Retirement system and the California State Teachers'
Retirement System from entities with business before the
retirement system.
ANALYSIS : 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, as specified (current
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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 program and compensation for certain essential
employees, including the Chief Executive Officer, the Chief
Counsel, the Chief Investment Officer and other
managerial-level investment staff.
This bill:
1.Prohibits all board members and designated 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 person who has
secured a contract, or submitted a contract proposal to
CalPERS or CalSTRS within the previous five years.
2.Specifies that a gift will not be deemed to have been
accepted if the gift or its equivalent dollar value is
returned to the donor of the gift within 30 days after
receipt of the gift.
3.Specifies that any vendor or contractor that makes gifts
in violation of this limit two separate times, more than
60 days apart in a five year period shall be disqualified
from bidding on, on 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 respected 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.
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Current and Prior Legislation
AB 873 (Furutani), 2011-12 Session, prohibits an
individual, who was a member of the board of CalPERS or
CalSTRS, or an administrator, executive officer, investment
officer, or general counsel of the system, from accepting
employment, within two years after separation from the
system, with any employer with which the individual
participated personally and substantially with contracts or
investment valued greater than $10 million any time in the
previous five years while the individual was employed by,
or served on the board of, the system, as specified. (On
Assembly Third Reading File)
AB 1584 (Assembly Public Employees, Retirement and Social
Security Committee), Chapter 301, Statutes of 2009, makes
numerous changes aimed at increasing disclosure and
accountability of investment placement agents, board
members, and others associated with public pension funds in
California. Passed the Senate on 9/3/09 with a vote of
38-2.
AB 1743 (Hernandez), Chapter 668, Statutes of 2010,
prohibits a person from acting as a placement agent in
connection with any potential investment made by a state
public retirement system unless that person is registered
as a lobbyist in accordance with, and is in full compliance
with, the requirements of the California Political Reform
Act (PRA), and requires placement agents connected with
investments made by local public retirement systems to
comply with any applicable requirements imposed by a local
government agency on lobbyists pursuant to the PRA. Passed
the Senate on 8/30/10 with a vote of 29-7.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 5/16/11)
Office of the State Controller, John Chiang (source)
American Association of Retired Persons
California Retired Teachers Association
CalPERS Board of Administration
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CalSTRS Board of Administration
Service Employee International Union, Local 1000
ARGUMENTS IN SUPPORT : According to the sponsor, "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."
With regard to the new $50 limit, the sponsor states, "$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."
CPM:cm 5/16/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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