A proposed initiative that would require the state's public sector pension systems to maintain at least 85 percent of their investments in California-based businesses would weaken returns and fail to spur significant economic activity in the state, according to the Legislative Analyst's Office.
In a report released last week, Legislative Analyst Mac Taylor and state finance director Ana Matosantos wrote that the proposal "most likely" would cause investment returns to fall "because the measure would require a huge concentration of investments in one economic market--California--that is responsible for only about 3 percent of world economic output."
They added, "While this measure is intended to increase economic activity in California, it seems uncertain that it would result in such an increase over the long term."
Michael Lee Madsen, Sr. submitted the initiative at the end of June. The attorney general's office is expected to release a title and summary of the proposal, including the legislative analyst's fiscal commentary, in mid-August. Shortly after that, Madsen could begin the expensive process of collecting signatures to get his idea on the November 2012 ballot.
Madsen defines a "California-based business" as one with at least 70 percent of its workforce in California. The 85 percent investment requirement would kick in Jan. 1, 2016.
As of March 31, CalPERS invested about 9 percent of its $234 billion in assets in California-based companies. Companies elsewhere in the United States accounted for another 31 percent.
PHOTO CREDIT: CalPERS building in downtown Sacramento. (Sacramento Bee/ Jay Mather).
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