BILL ANALYSIS                                                                                                                                                                                                    



                                                                    AB 2745
                                                                    Page  1

          Date of Hearing:   May 24, 2000

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS 
                              Carole Migden, Chairwoman

                   AB 2745 (Kaloogian) - As Amended: May 9, 2000 

          Policy Committee:                               
          P.E.R.&S.S.Vote:6-0

          Urgency:     No                   State Mandated Local  
          Program:NoReimbursable:           

           SUMMARY  :

          This bill 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 publicly available  
            information and report to the Legislature, by January 15th of  
            each year, on the extent to which they are invested in  
            international corporations doing business in countries on the  
            U.S. State Department's list of terrorist-sponsoring nations  
            or the Department of Treasury's list of Foreign Asset  
            Controls.

           FISCAL EFFECT  :

          1)CalSTRS would incur administrative costs of at least $200,000  
            annually to conduct the study required by this bill.

          2)CalPERS would incur administrative costs of at least $200,000  
            annually to conduct the study required by this bill.

           COMMENTS  :








                                                                    AB 2745
                                                                    Page  2


           1)Background  .  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."

           2)A Difficult Task  .  CalPERS and CalSTRS represent two of the  
            largest pension funds in the world, with combined assets in  
            excess of $200 billion.  The two pension funds are invested in  
            nearly every large multinational corporation in the world.   
            Both pension funds report that it would be exceedingly  
            difficult to develop a complete accounting of the investments  
            and business relationships of any one large multinational  
            corporation, let alone all of them.  

           Analysis Prepared by  :    Stephen Shea / APPR. / (916) 319-2081