BP BHEAD INT S [atlas:bill]

AN ACT Relating to prohibiting investment of public pension and retirement funds in business firms manufacturing tobacco products; amending RCW 43.33A.110, 43.33A.130, 43.33A.140, and 43.84.150; adding a new section to chapter 43.33A RCW; and creating a new section.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature has committed substantial state resources to maintaining and improving the health of the residents of the state of Washington. The surgeon general of the United States has concluded that the use of tobacco is harmful to our health and the environmental protection agency has found that secondhand tobacco smoke causes cancer and respiratory disease. Recently the attorney general of the state of Washington has been involved in extensive litigation against tobacco companies.

In Washington, nearly eight hundred fifty thousand adults smoke cigarettes, and another seventy-five thousand use smokeless tobacco. Each year eight thousand Washington residents die prematurely from smoking-related diseases, including heart disease, stroke, cancer, emphysema, asthma, and bronchitis. Every person who dies from tobacco products loses an average of eleven and one-half years of life. The medical costs related to tobacco use more than doubled between 1987 and 1993. The direct medical costs related to smoking in Washington are estimated at seven hundred six million dollars annually. Between 1980 and 1993, Washington's medicaid expenses attributable to smoking totaled more than one billion one hundred million dollars.

The legislature finds that direct or indirect investment of public pension and retirement funds in business firms that manufacture tobacco is inconsistent with its goals of maintaining and improving the health of Washington residents while making health care affordable. Accordingly, the legislature intends to prohibit the investment of public pension and retirement funds in business firms that manufacture tobacco.

NEW SECTION. Sec. 2. A new section is added to chapter 43.33A RCW to read as follows:

(1)(a) On or after January 1, 1999, the state investment board shall not make additional or new investments of public pension and retirement funds in the stocks, bonds, securities, or other evidence of indebtedness or ownership of business firms manufacturing tobacco products.

(b) Beginning January 1, 1999, the state investment board shall liquidate all investments of public pension and retirement funds in stocks, bonds, securities, or other evidence of indebtedness or ownership of business firms manufacturing tobacco products.

(2) The definitions in this section apply throughout this chapter and RCW 43.84.061 and 43.84.150.

(a) "Business firm" means any corporation operating as a for-profit entity and organized under the laws of a state of the United States and includes its subsidiaries or affiliates if involved in the manufacture of tobacco products.

(b) "Manufacture tobacco" means maintaining facilities, including plant and equipment, for growing tobacco and manufacturing tobacco products.

Sec. 3. RCW 43.33A.110 and 1994 c 154 s 310 are each amended to read as follows:

The state investment board may make appropriate rules and regulations for the performance of its duties. Subject to the prohibition contained in section 2 of this act, the board shall establish investment policies and procedures designed exclusively to maximize return at a prudent level of risk. However, in the case of the department of labor and industries' accident, medical aid, and reserve funds, the board shall establish investment policies and procedures designed to attempt to limit fluctuations in industrial insurance premiums and, subject to this purpose, to maximize return at a prudent level of risk. The board shall adopt rules to ensure that its members perform their functions in compliance with chapter 42.52 RCW. Rules adopted by the board shall be adopted pursuant to chapter 34.05 RCW.

Sec. 4. RCW 43.33A.130 and 1981 c 3 s 13 are each amended to read as follows:

The state treasurer may cause any securities in which the state investment board deals to be registered in the name of a nominee without mention of any fiduciary relationship, except that adequate records shall be maintained to identify the actual owner of the security so registered. The securities so registered shall be held in the physical custody of the state treasurer, the federal reserve system, the designee of the state treasurer, or, at the election of the designee and upon approval of the state treasurer, the Depository Trust Company of New York City or its designees.

With respect to the securities, the nominee shall act only upon the order of the state treasurer who shall act only on the direction of the state investment board. All rights to the dividends, interest, and sale proceeds from the securities and all voting rights of the securities are vested in the actual owners of the securities, and not in the nominee. The voting rights of the securities shall be publicly exercised by the board in compliance with section 2 of this act.

Sec. 5. RCW 43.33A.140 and 1981 c 3 s 14 are each amended to read as follows:

Subject to the prohibition contained in section 2 of this act, any investments made by the state investment board shall be made with the exercise of that degree of judgment and care, under circumstances then prevailing, which persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not for speculation but for investment, considering the probable safety of their capital as well as the probable income to be derived.

Sec. 6. RCW 43.84.150 and 1981 c 98 s 1 are each amended to read as follows:

Except where otherwise specifically provided by law, including section 2 of this act, the state investment board shall have full power to invest, reinvest, manage, contract, or sell or exchange investments acquired. Investments shall be made in accordance with RCW 43.33A.140 and investment policy duly established and published by the state investment board. All funds shall be sufficiently diversified and no corporate fixed income issue or common stock holding may exceed three percent of the cost or six percent of the market value of the assets of any fund.