BILL ANALYSIS
AB 2745
Page 1
Date of Hearing: May 3, 2000
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Lou Correa, Chair
AB 2745 (Kaloogian) - As Amended: May 1, 2000
SUBJECT : Public retirement fund investments: national
security.
SUMMARY : Enacts the California State Investment Transparency
and Disclosure Act which would encourage the Boards of the
Public Employees' Retirement System (CalPERS) and the State
Teachers' Retirement System (CalSTRS), not to invest in foreign
companies that pose threats to national security. Specifically,
this bill :
1)States that the Legislature is concerned about foreign
companies that pose threats to national security through
terrorism or the proliferation of weapons of mass destruction
and encourages CalPERS and CalSTRS not to invest in those
companies.
2)Requires CalPERS and CalSTRS to investigate and report to the
Legislature by January 15th of each year, the extent to which
international companies in which the assets of the retirement
systems are invested, or were invested in the prior 12 months,
are doing business in countries which are terrorist-sponsoring
nations.
EXISTING LAW gives CalPERS and CalSTRS general guidelines for
the investment of their funds, primarily as directed by the
"prudent person" rule. Additionally, the California
Constitution (Section 17 of Article XVI) gives the retirement
board of a public pension or retirement system plenary authority
and fiduciary responsibility over their respective investment
and administrative decisions. The Constitution further states
that "The Legislature may by statute continue to prohibit
certain investments by a retirement board where it is in the
public interest to do so, and provided that the prohibition
satisfies the standards of fiduciary care and loyalty required
of a retirement board pursuant to this section."
FISCAL EFFECT : Unknown
AB 2745
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COMMENTS : According to an agenda item prepared by CalPERS
staff for their Board meeting on April 17, 2000, "Lawmakers at
both the Federal and State levels have expressed concern about
investment by U.S. investors in companies that may threaten
national security. In May 1999, the U.S. House of
Representatives Select Committee on U.S. National Security and
Military/Commercial Concerns with the Peoples' Republic of China
issued a report (the Cox Report) which includes in its findings
that capital from companies traded in the U.S. markets is
flowing to the Peoples' Republic of China and ultimately
represents funding for that government's military operations and
commercial development."
In the agenda item CalPERS staff goes on to point out that in
"June 1999, Congress introduced legislation to establish an
Office of National Security within the Securities and Exchange
Commission to monitor U.S. securities offerings by foreign
governments or by an entity that is believed to be an agent for,
or controlled by, a foreign government. This bill is currently
pending in several House subcommittees."
The agenda item also states that "This is a national issue that
affects all U.S. investors, and is not limited to California's
statewide pension funds." Additionally, CalPERS indicates that
"The formulation and enforcement of U.S. foreign policy is a
function of the Federal government."
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
American Federation of State, County and Municipal Employees
California Faculty Association
Analysis Prepared by : Karon Green / P.E., R. & S.S. /
(916)319-3957