BILL ANALYSIS �
SB 439
Page 1
Date of Hearing: June 22, 2011
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Warren T. Furutani, Chair
SB 439 (Negrete McLeod) - As Amended: June 16, 2011
SENATE VOTE : 39-0
SUBJECT : Political Reform Act of 1974: PERS: STRS: gift
limits.
SUMMARY : Prohibits California Public Employees' Retirement
System (CalPERS) and California State Teachers' Retirement
System (CalSTRS) board members and specified employees from
accepting gifts of more than $50 from a single person who has
secured a contract with or submitted a contract proposal to the
retirement system within the previous five years. Specifically,
this bill :
1)Prohibits CalPERS and CalSTRS board members and employees who
are required to file annual Statements of Economic Interest
(also known as Form 700) from accepting gifts in excess of $50
from any single person or entity who has secured a contract
with, or submitted a contract proposal to, CalPERS or CalSTRS
within the previous 5 years in any given calendar year.
2)Allows a gift recipient to return the gift or its equivalent
dollar value to the donor within 30 days of receipt in order
to comply with this limit.
3)Disqualifies any vendor or contractor found to be violating
this gift policy twice in a 5-year period from bidding on, and
being awarded, any contract for a period of 2 years from the
date of the second penalty assessment made by the Fair
Political Practices Commission for commission of the
violation.
4)Specifies that violations will be deemed separate if they
occur more than 60 days apart.
EXISTING LAW :
1)Requires, pursuant to the Political Reform Act (PRA),
specified public officials to annually report the receipt of
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gifts and prohibits the receipt of gifts from any single
source in any calendar year exceeding $250 in value, adjusted
biannually for inflation since 1993, from any single source,
(current inflation adjusted limit is $420).
2)Establishes the governing boards of CalPERS and 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.
FISCAL EFFECT : According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS : 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.
According to the sponsor, State Controller John Chiang, "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 investments. If enacted, this measure will
assure CalPERS/CalSTRS members and taxpayers' that investment
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."
CalPERS adopted a No Gift Policy for Staff (Policy) in November
2009, that prohibits employees that are required to file a Form
700 under its Conflict of Interest Code (including, among
others, system executives, divisions chiefs and investment
professionals) from accepting anything of value including,
without limitation, money, gifts, services, loans,
entertainment, tickets, transportation, food or beverages from
any person or entity doing business with CalPERS; seeking to do
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business with CalPERS; or who is the type of entity that does
business with CalPERS.
At its October 20, 2010 meeting, the CalPERS board adopted a new
Form 700 and Travel Transparency Policy that requires all Form
700s and certain Board and staff travel information to be posted
on the CalPERS internet web site.
In addition to the Gift Policy, the CalPERS Statement of
Incompatible Activities prohibits all CalPERS board members and
employees from receiving or accepting any gifts from "anyone who
is doing or is seeking to do business of any kind with the
Public Employees' Retirement System or whose activities are
regulated or controlled by CalPERS under circumstances from
which it reasonably could be substantiated that the gift was
intended to influence the officer or employee in his or her
official duties or was intended as a reward for any official
actions performed by the officer or employee."
CalSTRS has developed and complies with its own conflict of
interest regulations, which details disclosure categories and
what each one is required to report. The conflict of interest
code applies to those officials and employees who file statement
of economic interests (Form 700) and are required to comply with
the limit and to report income and gifts as outlined by the
regulations.
In addition, CalSTRS has adopted a Statement of Incompatible
Activities which provides, in pertinent part: All staff members
in CalSTRS shall, during hours of duty as State employees,
devote full time, attention, and efforts to their State office
or employment. No employment, activity, or enterprise shall be
engaged in by any officer or employee of CalSTRS that might
result in or create the appearance of any of the following:
Receiving or accepting, directly or indirectly, any gift,
including money, any service, gratuity, favor, entertainment,
hospitality, loan, or any other thing of value, from anyone who
is doing or is seeking to do business of any kind with the State
or whose activities are regulated or controlled in any way by
the State, under circumstances from which it reasonably could be
inferred that the gift was intended to influence him/her in
his/her official duties or was intended as a reward for any
official action on his/her part.
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Furthermore, the Teachers' Retirement Board has a policy related
to the disclosure of campaign contributions, charitable
contributions, and gifts; recusal requirement; and ban on
specified gifts, which prohibits any party who engages in
business with CalSTRS for gain from providing gifts to board
members, or CalSTRS officers or employees exceeding the gift
limit, as outlined by the Political Reform Act. The policy
further allows for the disqualification from future business
with CalSTRS for a period of two years following a determination
by the board that a violation of this policy has occurred. This
policy and Form 600H are attached to CalSTRS contracts. CalSTRS
requires each contracting entity and each of its authorized/key
personnel to complete and file separate Form 600H with CalSTRS.
The committee recommends the bill be amended to delete "twice"
in Section 1 and Section 2 of the bill and replace it with "on
two separate occasions" in order to clarify that violations will
be deemed separate if they occur more than 60 days apart.
REGISTERED SUPPORT / OPPOSITION :
Support
Office of State Controller John Chiang (Sponsor)
California Public Employees' Retirement System
California Retired Teacher Association
Opposition
None on file
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957