AB 1151

Bill Subjects

Abstract

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. The California Public Divest from Iran Act prohibits the Public Employees' Retirement System (PERS) and the State Teachers' Retirement System (STRS) from investing public employee retirement funds in a company with business operations in Iran that is invested in or engaged in business operations with entities in the defense or nuclear sectors of Iran, or the company is invested or engaged in business operations with entities involved in the development of petroleum or natural gas resources of Iran, and that company is subject to sanctions under federal law, as specified, or the company is engaged in business operations with an Iranian organization that has been labeled as a terrorist organization by the United States government. Existing law requires the Board of Administration of PERS and the Teachers' Retirement Board of STRS to sell or transfer any investments in a company with business operations in Iran, until Iran is removed from the United States Department of State's list of countries that have been determined to repeatedly provide support for acts of international terrorism and the President of the United States determines and certifies that Iran has ceased its efforts to design, develop, manufacture, or acquire a nuclear explosive device or related materials and technology, as specified. Existing law requires the boards of PERS and STRS, on or before June 30, 2008, to determine the companies that are subject to divestment and to notify those companies and request that those companies take substantial action to curtail or end business operations, as described above, in Iran. Existing law provides that the board is not required to divest if the board determines that the company has taken substantial action in a 90-day period to curtail or end those operations. Existing law excepts certain investments from these requirements, including those in companies providing humanitarian relief and promoting health, education, journalistic, religious, or welfare activities. Existing law provides that nothing in those provisions requires the Board of Administration of PERS or the Teachers' Retirement Board of STRS to take action as described in those provisions unless the board determines, in good faith and based on specified information, that the action is consistent with the fiduciary responsibilities of the board as described in a specified provision of the California Constitution. This bill would prohibit the boards from investing in a company that has an investment of $20,000,000 or more in the energy sector of Iran, as defined, including in a company that provides oil or liquefied natural gas tankers, or products used to construct or maintain pipelines used to transport oil or liquefied natural gas. The bill would require the boards to review their investments annually and would require that the boards' determinations that a company is taking substantial actions to end or curtail its operations, as described above, be supported by findings adopted by a rollcall vote of the boards following a presentation and discussion of the findings in open session, during a properly noticed public hearing of the full board. The bill would require all proposed findings to be made public 72 hours before they are considered by the board, and that the board maintain a list of interested parties to be notified of proposed findings 72 hours before the board's consideration. The bill would require the findings and any public comments regarding the adopted findings and determinations to be included in a report to the Legislature. The bill would make the same notice, rollcall vote, and public hearing requirements for adopted findings and determinations of the boards regarding divestments that are found to disadvantage the retirement funds. The bill would eliminate the exception provided for investments in certain companies providing humanitarian relief and promoting health, education, journalistic, religious, or welfare activities. The bill would revise the circumstances under which these provisions would cease to be operative to conform with current federal law. The bill would make findings regarding the California Public Divest from Iran Act and would provide that its provisions are severable.