5192-S.E AMH FII OSBO 2

ESSB 5192 - H COMM AMD

By Committee on Financial Institutions & Insurance

   Strike everything after the enacting clause and insert the following:

        "NEW SECTION. Sec. 1. The outlook for the state's pension system is dramatically affected by the performance of the state investment board. The recent performance of all pension funds throughout the country has resulted in a greater attention to investment decisions.

   The legislature has determined that additional fiduciary roles and responsibilities are appropriate for members of the investment board who are, solely in their board capacity, fiduciary trustees for fund beneficiaries.

   The legislature also finds that an examination of in-state investment opportunities within the context of the state investment board's overall investment strategy for diversification and maximizing returns is an appropriate role of the state investment board.

   NEW SECTION. Sec. 2. (1) Members of the state investment board, solely when acting in their board capacity, shall discharge their fiduciary duty to invest and to manage public and retirement funds with the highest standard of professional conduct for the exclusive benefit of fund beneficiaries. Consistent with this responsibility the board's investments are made in accordance with RCW 43.33A.110 mandating investment aimed at maximizing return at a prudent level of risk, and RCW 43.33A.140 establishing duties of diversification and care. Subject to these standards, the board shall examine economically targeted investments in Washington as potential investments for funds managed by the board. Economically targeted investments shall be made in accordance with the board's asset allocation policies and included within existing asset categories while conforming to all of the laws, policies, and procedures governing the state investment board.

   (2) Subject to available resources, the board will establish a program to facilitate exchange of information between its private equity general partners and appropriate parties with knowledge of quality, economically targeted investment opportunities. This program will also include a clearinghouse function aimed at receiving information on potential economically targeted investments.

   (3) The state investment board will provide a report on activity relating to economically targeted investments at least annually. This report will be distributed to the members of the state investment board, organizations representing board beneficiaries, the legislature, and the governor and may be included in the report provided for in RCW 43.33A.150.

   (4) As used in this section, "economically targeted investments" means investments having the primary objective of investment return to funds managed by the board and the collateral objective of assisting the regional economy and the economic well-being of the state of Washington, its localities, and residents.

   Sec. 3. RCW 43.33A.020 and 2002 c 303 s 1 are each amended to read as follows:

   There is hereby created the state investment board to consist of fifteen members to be appointed as provided in this section.

   (((1) One member who is an active member of the public employees' retirement system and has been an active member for at least five years. This member shall be appointed by the governor, subject to confirmation by the senate, from a list of nominations submitted by organizations representing active members of the system. The initial term of appointment shall be one year.

   (2) One member who is an active member of the law enforcement officers' and fire fighters' retirement system and has been an active member for at least five years. This member shall be appointed by the governor, subject to confirmation by the senate, from a list of nominations submitted by organizations representing active members of the system. The initial term of appointment shall be two years.

   (3) One member who is an active member of the teachers' retirement system and has been an active member for at least five years. This member shall be appointed by the superintendent of public instruction subject to confirmation by the senate. The initial term of appointment shall be three years.

   (4) The state treasurer or the assistant state treasurer if designated by the state treasurer.

   (5) A member of the state house of representatives. This member shall be appointed by the speaker of the house of representatives.

   (6) A member of the state senate. This member shall be appointed by the president of the senate.

   (7) One member who is a retired member of a state retirement system shall be appointed by the governor, subject to confirmation by the senate. The initial term of appointment shall be three years.

   (8) The director of the department of labor and industries.

   (9) The director of the department of retirement systems.

   (10) One member who is an active member of the school employees' retirement system and has at least five years of service credit. This member shall be appointed by the superintendent of public instruction subject to confirmation by the senate. The initial term of appointment shall be three years.

   (11) Five nonvoting members appointed by the state investment board who are considered experienced and qualified in the field of investments.

   The legislative members shall serve terms of two years. The initial legislative members appointed to the board shall be appointed no sooner than January 10, 1983. The position of a legislative member on the board shall become vacant at the end of that member's term on the board or whenever the member ceases to be a member of the senate or house of representatives from which the member was appointed.

   After the initial term of appointment, all other members of the state investment board, except ex officio members, shall serve terms of three years and shall hold office until successors are appointed. Members' terms, except for ex officio members, shall commence on January 1 of the year in which the appointments are made.

   Members may be reappointed for additional terms. Appointments for vacancies shall be made for the unexpired terms in the same manner as the original appointments. Any member may be removed from the board for cause by the member's respective appointing authority.))

   (1) The state treasurer or his or her designee is a member of the state investment board and serves as a fiduciary trustee. As a board member, the state treasurer serves as one of the five members of the audit committee. As a fiduciary trustee, this member will use his or her expertise in financial markets to assist the investment review process for the state investment board and will also assist in identifying economically targeted investment opportunities that conform to the requirements of section 2 of this act.

   (2) One member of the state investment board is an active member of the public employees' retirement system and has been an active member for at least five years. This member is appointed by the governor, subject to confirmation by the senate, from a list of nominations submitted by organizations representing active members of the system and serves as a fiduciary trustee. As a fiduciary trustee, this member will use his or her position as a representative of pension fund beneficiaries to work with state investment board staff to participate in an outreach program to the public employees' retirement system beneficiaries. This member will also assist in identifying issues relevant to public employees for which the state investment board is accountable, and will report to the board on such issues as necessary.

   (3) One member of the state investment board is an active member of the law enforcement officers' and fire fighters' retirement system and has been an active member for at least five years. This member is appointed by the governor, subject to confirmation by the senate, from a list of nominations submitted by organizations representing active members of the system and serves as a fiduciary trustee. As a fiduciary trustee, this member will use his or her position as a representative of pension fund beneficiaries to work with state investment board staff to participate in an outreach program to the law enforcement officers' and fire fighters' retirement system beneficiaries. This member will also assist in identifying issues relevant to public employees for which the state investment board is accountable, and will report to the board on such issues as necessary.

   (4) One member of the state investment board is an active member of the teachers' retirement system and has been an active member for at least five years. This member is appointed by the superintendent of public instruction subject to confirmation by the senate and serves as a fiduciary trustee. As a fiduciary trustee, this member will use his or her position as a representative of pension fund beneficiaries to work with state investment board staff to participate in an outreach program to the teachers' retirement system beneficiaries. This member will also assist in identifying issues relevant to public employees for which the state investment board is accountable, and will report to the board on such issues as necessary.

   (5) One member of the state investment board is an active member of the school employees' retirement system and has at least five years of service credit. This member is appointed by the superintendent of public instruction subject to confirmation by the senate and serves as a fiduciary trustee. As a fiduciary trustee, this member will use his or her position as a representative of pension fund beneficiaries to work with state investment board staff to participate in an outreach program to the school employees' retirement system beneficiaries. This member will also assist in identifying issues relevant to public employees for which the state investment board is accountable, and will report to the board on such issues as necessary.