SENATE BILL REPORT

                                    SB 5590

        AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE,

                               FEBRUARY 26, 1991

Brief Description:  Affecting administration of the state investment board.

SPONSORS:Senators von Reichbauer and Pelz; by request of State Investment Board.

SENATE COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE

Majority Report:  That Substitute Senate Bill No. 5590 be substituted therefor, and the substitute bill do pass.

      Signed by Senators von Reichbauer, Chairman; Johnson, Vice Chairman; McCaslin, Moore, Owen, Pelz, Rasmussen, and West. 

Staff:  Benson Porter (786‑7470)

Hearing Dates:February 14, 1991; February 26, 1991

BACKGROUND:

The State Investment Board was established in 1981 and is responsible for the investment decisions for certain state retirement system funds.  The board is comprised of 14 members, which includes five non-voting members.  The nine voting members of the board are the trustees of the funds overseen by the board, and the board may only delegate its powers and duties to its executive director.

The compensation levels for the investment officers employed by the board are currently established by the State Personnel Board.  The State Investment Board currently employs six of the seven authorized investment officers and has requested authorization for an additional four investment officers in this year's budget request.  Concern has been expressed that the state's personnel system does not provide sufficient compensation to attract and maintain persons with investment expertise.

SUMMARY:

The Investment Board is authorized to delegate its powers and duties to its chairperson as well as its executive director.  In addition, the compensation level for the board's executive director and investment officers is to be established by the Investment Board.

EFFECT OF PROPOSED SUBSTITUTE:

The Investment Board is not authorized to delegate its power and duties to its chairperson.  In addition, no statewide elected board member can serve as the board's chairperson.

The board is increased from 14 to 18 members by adding the State Actuary, a member of the State Patrol retirement system, and two additional legislators to represent all four caucuses.  All voting board members are required to take and sign an oath of office.  This oath must be filed with the Secretary of the Senate's office.  The executive director of the State Investment Board must be confirmed by the Senate.

The State Investment Board must prepare an annual report detailing the board's operations, investments, and administrative costs.  The board is authorized to set the salaries of staff investment officers.  The meeting quorum requirement is changed to two-thirds of the voting members (i.e., 9 of 13), and the board can take action with the affirmative vote of five members.

Each voting board member that misses three consecutive regularly scheduled meetings without a valid excuse is considered to have resigned.  Any member with a direct or indirect conflict of interest must disclose such interest to the other board members and the disclosure must be included in the written minutes.

Appropriation:  none

Revenue:  none

Fiscal Note:  requested February 13, 1991

TESTIMONY FOR:

The ability of the board to delegate its powers and duties to the chairperson would facilitate operations of the board.  Allowing the board to establish investment officer salaries will allow the board to offer more competitive salaries (original bill).

TESTIMONY AGAINST:

Authorizing the board to delegate its authority to the executive director and chairperson could create administrative problems (original bill).  The chairperson of the board should not be a statewide elected official similar to the prohibition against legislative members serving as chairperson.

TESTIFIED:  Joe Dear (pro); Robert Hollister (con part of original bill, pro parts of sub)