Bill Text: CA AB761 | 2013-2014 | Regular Session | Amended
Bill Title: Public retirement systems: investments.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2014-02-03 - From committee: Filed with the Chief Clerk pursuant to Joint Rule 56. [AB761 Detail]
Download: California-2013-AB761-Amended.html
BILL NUMBER: AB 761 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MARCH 19, 2013
INTRODUCED BY Assembly Member Dickinson
FEBRUARY 21, 2013
An act to add Section 7513.4 to the Government Code, relating to
public retirement systems.
LEGISLATIVE COUNSEL'S DIGEST
AB 761, as amended, Dickinson. Public retirement systems:
investments.
The California Constitution provides that the Legislature may by
statute prohibit retirement board investments if it is in the public
interest to do so, and providing that the prohibition satisfies
specified fiduciary standards.
Existing law prohibits the boards of the Public Employees'
Retirement System and the State Teachers' Retirement System from
investing public employee retirement funds in a company with active
business operations in Sudan and Iran, as specified.
This bill would additionally prohibit the Public Employees'
Retirement System and the California State Teachers' Retirement
System from investing public employee retirement funds in a company
with business operations that are described as the
manufacture, sale, marketing, or distribution
manufacture of firearms or ammunition, as specified. The bill
would require the Board of Administration of the Public Employees'
Retirement System and the Teachers' Retirement Board of the State
Teachers' Retirement System to sell or transfer any investments in a
company with these business operations.
This bill would require these boards to report to the Legislature
any investments in a company with these business operations and the
sale or transfer of those investments, subject to the fiduciary duty
of these boards, by January 1, 2015, and every year thereafter.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) According to the Office of the Attorney General, approximately
2,900 persons were hospitalized in 2011 due to injuries from a
firearm, and approximately 2,800 persons were killed by firearms
either by homicide, suicide, or accident.
(b) Statistics compiled by the Federal Bureau of Investigation
(FBI) demonstrate that firearms are overwhelmingly the most common
weapon used in California homicides.
(c) According to the FBI, while California ranks 30th in gun
deaths per capita, California had the highest number of total gun
deaths out of any state last year, accounting for 68 percent of all
gun murders in the United States.
(d) Approximately 600,000 guns are sold by dealers every year in
California, a sharp increase over time compared to 200,000 per year
in 2002.
(e) Comprehensive surveys of gun violence from 2011 have shown
that firearms play a major role in violent crime in California.
(f) Notwithstanding the fact that California has made significant
strides to reduce gun violence, guns continue to be a major threat to
public health and safety.
(g) Numerous gun violence prevention groups, including The Brady
Campaign to End Gun Violence and The Law Center to Prevent Gun
Violence have praised California's record of developing innovative
solutions to gun violence which serve as models for other states and
for the federal government.
(h) The Legislature therefore finds that the divestment of public
employee retirement funds from companies that manufacture,
sell, market, or distribute manufacture guns and
ammunition for a recipient other than the United
States military is in the public interest of the state, for the
preservation of the public peace, health, or safety.
SEC. 2. Section 7513.4 is added to the Government Code, to read:
7513.4. (a) As used in this section, the following definitions
shall apply:
(1) "Board" means the Board of Administration of the Public
Employees' Retirement System or the Teachers' Retirement Board of the
State Teachers' Retirement System, as applicable.
(2) "Business operations" means manufacturing, selling,
marketing, or distributing manufactur ing
firearms or ammunition for a recipient other than the
United States military .
(3) "Company" means a sole proprietorship, organization,
association, corporation, partnership, venture, or other entity, its
subsidiary or affiliate that exists for profitmaking purposes or to
otherwise secure economic advantage.
(4) "Invest" or "investment" means the purchase, ownership, or
control of stock of a company, association, or corporation or
corporate bonds issued by a company which manufactures, sells,
markets, or distributes firearms or ammunition.
(5) "Public employee retirement funds" means the Public Employees'
Retirement Fund described in Section 20062, and the Teachers'
Retirement Fund described in Section 22167 of the Education Code.
(6) "Substantial action" means selling assets, equipment, or real
and personal property of a company that manufactures, sells, markets,
or distributes firearms or ammunition.
(b) The board shall not invest public employee retirement funds in
a company that has business operations as described in paragraph (2)
of subdivision (a) as identified by the board through any source of
public information, as the board deems appropriate, including, but
not limited to, information provided by nonprofit and other
organizations and government entities.
(c) Annually, on or before June 30, the board shall review its
investment portfolio and determine which companies are subject to
divestment.
(d) (1) If the board's investment in a company described in
subdivision (b) is limited to an investment via an externally and
actively managed commingled fund, the board shall contact that fund
manager in writing and request that the fund manager remove that
company from the fund as described in subdivision (f). On or before
June 30, if the fund or account manager creates a fund or account
devoid of companies described in subdivision (b), the transfer of
board investments from the prior fund or account to the fund or
account devoid of companies with business operations as described in
paragraph (2) of subdivision (a) shall be deemed to satisfy
subdivision (f).
(2) If the board's investment in a company described in
subdivision (b) is limited to an alternative fund or account, the
alternative fund or account manager creates an actively managed
commingled fund that excludes companies described in subdivision (b),
and the new fund or account is deemed to be financially equivalent
to the existing fund or account, the transfer of board investments
from the existing fund or account to the new fund or account shall be
deemed to satisfy subdivision (f). If the board determines that the
new fund or account is not financially equivalent to the existing
fund, the board shall include the reasons for that determination in
the report described in subdivision (g).
(3) The board shall make a good faith effort to identify any
private equity investments that involve companies described in
subdivision (b). If the board determines that a private equity
investment clearly involves a company described in subdivision (b),
the board shall consider, at its discretion, if those private equity
investments shall be subject to subdivision (f). If the board
determines that a private equity investment clearly involves a
company described in subdivision (b), and the board does not take
action as described in subdivision (f), the board shall include the
reasons for its decision in the report described in subdivision (g).
(e) The board, in the board's capacity of shareholder or investor,
shall notify any company described in subdivision (d) that the
company is subject to subdivision (f) and permit that company to
respond to the board. The board shall request that the company take
substantial action no later than 90 days from the date the board
notified the company pursuant to this subdivision. If the board
determines based on credible information available to the public that
a company has taken substantial action or has made sufficient
progress toward substantial action before the expiration of that
90-day period, that company shall not be subject to an action
described in subdivision (f). The board shall, at intervals not to
exceed 90 days, continue to monitor and review the progress of the
company until that company has taken substantial action. Any
determination made at each 90-day interval that a company has taken
substantial action shall be supported by findings adopted by a
roll-call vote of the board following a presentation and discussion
of the findings in open session, during a properly noticed public
hearing of the full board. All proposed findings of the board shall
be made public 72 hours before they are considered by the board, and
the board shall maintain a list of interested parties who shall be
notified of the proposed findings 72 hours before the board's
consideration. The findings and any public comments regarding the
adopted findings and determinations made pursuant to this subdivision
shall be included in the report to the Legislature required by
subdivision (g). A company that fails to complete substantial action
within one year from the date of the initial notice by the board
shall be subject to the actions described in subdivision (f).
(f) If a company described in subdivision (d) fails to complete
substantial action by the time described in subdivision (e), the
board shall take the following actions:
(1) The board shall not make additional or new investments or
renew existing investments in that company.
(2) The board shall liquidate the investments of the board in that
company no later than 18 months after this subdivision applies to
that company. The board shall liquidate those investments in a manner
consistent with the board's fiduciary responsibilities as described
in Section 17 of Article XVI of the California Constitution.
(g) On or before January 1, 2015, and every year thereafter, the
board shall file a report with the Legislature. The report shall
describe the following:
(1) A list of investments the board has in companies with business
operations that satisfy the criteria in subdivision (b), including,
but not limited to, the issuer, by name, of the stock, bonds,
securities, and other evidence of indebtedness.
(2) A detailed summary of the business operations of each company
identified in paragraph (1).
(3) Whether the board has reduced its investments in a company
with business operations that satisfy the criteria in subdivision
(b).
(4) If the board has not completely reduced its investments in a
company with business operations that satisfy the criteria in
subdivision (b), a timeline for when the board anticipates that the
board will reduce all investments in that company or adopt the
findings in support of a determination made pursuant to subdivision
(h) pertaining to why a sale or transfer of investments is
inconsistent with the fiduciary responsibilities of the board as
described in Section 17 of Article XVI of the California
Constitution.
(5) A detailed summary of investments that were transferred to
funds or accounts devoid of companies with business operations as
described in subdivision (b).
(6) An annual calculation of any costs or investment losses or
other financial results incurred in compliance with this section.
(h) Nothing in this section shall require the board to take action
as described in this section if the board determines, and adopts
findings, in good faith and based on credible information available
to the public, that the action described in this section would fail
to satisfy the fiduciary responsibilities of the board as described
in Section 17 of Article XVI of the California Constitution. Any
adopted findings shall demonstrate how divestment disadvantages the
fund and that any feasible investment alternatives would yield a
lower rate of return with commensurate degrees of risk, or create a
higher degree of risk with commensurate rates of return.
Notwithstanding any other law, any determination that an action would
fail to satisfy the fiduciary responsibilities of the board as
described in Section 17 of Article XVI of the California Constitution
shall require a recorded roll-call vote of the full board, following
a presentation and discussion of the findings in open session,
during a properly noticed public hearing of the full board. All
proposed findings of the board shall be made public 72 hours before
they are considered by the board, and the board shall maintain a list
of interested parties who shall be notified of the proposed findings
72 hours before board consideration. The findings and any public
comments regarding the adopted findings and determinations made
pursuant to this subdivision shall be included in the report to the
Legislature required by subdivision (g).
(i) The report shall be submitted in compliance with Section 9795.
