BILL ANALYSIS Ó
AB 2348
Page 1
ASSEMBLY THIRD READING
AB
2348 (Levine)
As Amended May 27, 2016
Majority vote
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Public |7-0 |Bonta, Waldron, | |
|Employees | |Cooley, Cooper, | |
| | |Cristina Garcia, | |
| | |O'Donnell, Wagner | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Appropriations |20-0 |Gonzalez, Bigelow, | |
| | |Bloom, Bonilla, | |
| | |Bonta, Calderon, | |
| | |Chang, Daly, Eggman, | |
| | |Gallagher, Eduardo | |
| | |Garcia, Roger | |
| | |Hernández, Holden, | |
| | |Jones, Obernolte, | |
| | |Quirk, Santiago, | |
| | |Wagner, Weber, Wood | |
| | | | |
| | | | |
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AB 2348
Page 2
SUMMARY: Authorizes the Department of Finance (DOF) to identify
infrastructure projects in California where DOF can guarantee a
rate of return on investments made by the California Public
Employees' Retirement System (CalPERS), the California State
Teachers' Retirement System (CalSTRS) or a 1937 Act County
Retirement System ('37 Act Retirement System) in that
infrastructure project, as specified. Specifically, this bill:
1)Authorizes DOF to evaluate and identify California
infrastructure projects for which they can guarantee a rate of
return on investments made in the project by CalPERS, CalSTRS,
or a '37 Act Retirement System.
2)Establishes the Reinvesting in California Special Fund (Fund)
in the State Treasury to be used to pay the rate of return
guaranteed by DOF.
3)Specifies that the guaranteed rate of return is subject to the
availability of money in the Fund.
4)Prohibits General Fund moneys from being deposited in the
Fund.
5)States that it is the intent of the Legislature to identify
special fund moneys, including trust fund moneys, that can be
used for these purposes.
FISCAL EFFECT: According to the Assembly Appropriations
Committee:
AB 2348
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1)Significant ongoing costs to DOF in the range of $1.0 million
annually to run the proposed program, as specified. DOF does
not currently have the in-house expertise required to identify
infrastructure projects that would be generate sizable returns
for CalPERS, and the hiring and retention of investment staff
would be a major cost driver.
2)Cost pressures on unidentified special funds. The bill
specifies that, through the annual Budget Act, special fund
dollars would be deposited into the Fund to pay the guaranteed
rate of return if infrastructure investments themselves do not
produce them.
3)Potential growth to the CalPERS portfolio if CalPERS chooses
to invest in the projects identified by DOF and that these
investments generate a higher rate of return than alternative
investments.
COMMENTS: According to the author, "California has a large
infrastructure funding gap that is growing every day.
California Forward estimates that the state will need to spend
$835 billion over the next decade to meet our water,
transportation, and K-12 infrastructure needs alone. The
[United States] U.S Environmental Protection Agency has put
California at the top of the list for water system needs.
"CalPERS and CalSTRS are the two largest public pension funds in
the United States. CalPERS manages a $300 billion pension fund
that has a diverse portfolio of investments. Only 1/3 of 1/10
of 1% of CalPERS holdings are in California Infrastructure.
CalPERS states in their Winter, 2016 Perspective report that
CalPERS invested $107.7 million in seven California-based
infrastructure projects, which support 1,300 California jobs.
If CalPERS were to increase its investment in California-based
infrastructure projects to just 1/10 of 1%, this would produce
an additional 2,600 California jobs.
AB 2348
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"CalSTRS manages a nearly $180 billion pension fund. CalSTRS
established an infrastructure investment portfolio in 2010 that
is intended to control risk and maximize returns. The current
policy on CalSTRS infrastructure investment specifies the amount
of infrastructure investments that are to occur around the globe
including in the United States and Canada, but does not specify
how much investment should occur in California.
"Private pension funds have already established policies to make
substantial investments in infrastructure. These investments
allow these funds to meet their financial responsibilities while
investing in jobs for their members. This bill encourages
similar investments by public employee pension funds."
Analysis Prepared by:
Karon Green / P.E.,R., & S.S. / (916) 319-3957
FN:
0003118