BILL REQ. #:  S-1793.1 

READ FIRST TIME 02/24/03.   

     AN ACT Relating to Washington investments; amending RCW 43.33A.020; adding new sections to chapter 43.33A RCW; creating a new section; and declaring an emergency.

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

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 emphasis on investment expertise and accountability for investment decisions.
     The legislature has determined that particular roles and responsibilities are appropriate for various members of the investment board. In delineating these roles and responsibilities, a system of accountability for performance is an essential element.
     The legislature also finds that an examination of Washington investment opportunities that match or exceed investment returns elsewhere is an appropriate role of the state investment board and that additional resources may be necessary to fully consider those investments.

NEW SECTION.  Sec. 2   (1) The state investment board shall maintain a portion of the board's investment portfolio in the technology investment account, an account that shall be maintained separately and apart from other moneys invested by the board. Investments from the account may be made in technology businesses. These investments may be made directly by the board or through the board's investment advisors, including venture capital firms. The earnings on the technology investment account must be accounted for separately from other investments made by the board.
     (2) Investments under this section must be made in a manner consistent with investment or management criteria established by the board or its executive director. In making investments of moneys in the technology investment account, the primary investment objective is to maximize return at a prudent level of risk, as required by RCW 43.33A.110. In choosing among equal investment opportunities that satisfy this primary investment objective, the board shall give priority to those investments from the account that help attract or assist technology businesses in the state, including investments in technology businesses seeking to locate or expand in this state.
     (3) The state investment board shall hire or designate from its current staff, at least one experienced full-time staff person to research, investigate, and recommend to the state investment board, if appropriate, and subject to the standards of investment and management under RCW 43.33A.110 and this section, investment opportunities in technology businesses that are located in, have a substantial employment base in, make a significant economic contribution to, or are seeking to locate or expand in, Washington state. The department of community, trade, and economic development is responsible for actively marketing the technology investment account to businesses seeking to locate or expand in Washington and shall work in conjunction with appropriate staff of the state investment board to coordinate information on technology businesses interested in locating or expanding in Washington.
     (4) As used in this section "technology business" means a company that has as its principal function the providing of services including computer, information transfer, communication, distribution, processing, administrative, laboratory, experimental, developmental, technical, testing services, manufacture of goods or materials, the processing of goods or materials by physical or chemical change, computer-related activities, robotics, energy, biological or pharmaceutical industrial activity, or technology-oriented or emerging industrial activity.

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)) chapter.
     (((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.))

NEW SECTION.  Sec. 4   There is hereby created an audit and accountability committee of the state investment board consisting of not more than five voting members of the investment board. The audit and accountability committee members are appointed by the state investment board chairperson.
     The audit and accountability committee is responsible for reviewing the efficacy of all investment decisions. Beginning July 1, 2003, and continuing each quarter thereafter, the committee shall issue a report to the full committee on the performance of the state investment board investments. The report will be distributed to the chair and ranking minority members of the house of representatives appropriations and senate ways and means committees. The report will also include an assessment and review of investments made within or benefiting the economy of this state.

NEW SECTION.  Sec. 5   The state treasurer is a member of the state investment board. The state treasurer shall serve as a member of the audit and accountability committee, unless the state treasurer is chairperson of the state investment board. The state treasurer will use his or her expertise in financial markets to assist the accountability review process for the state investment board. The state treasurer will also assist in identifying in-state investment opportunities that meet or exceed out-of-state investment returns.

NEW SECTION.  Sec. 6   There are five members of the state investment board representing the retirement systems supported by state investment board earnings. These members are appointed as follows:
     (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 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.
     (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 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.
     (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 is appointed by the superintendent of public instruction subject to confirmation by the senate.
     (4) One member who 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.
     (5) One member who is a retired member of a state retirement system is appointed by the governor, subject to confirmation by the senate.

NEW SECTION.  Sec. 7   The director of labor and industries and the director of retirement systems are members of the state investment board and represent agencies responsible for the administration of programs supported by state investment board earnings.

NEW SECTION.  Sec. 8   Three members of the state investment board are appointed to represent the interests of the people of the state. These members are appointed as follows:
     (1) A member of the state house of representatives. This member is appointed by the speaker of the house of representatives.
     (2) A member of the state senate. This member is appointed by the president of the senate.
     (3) The governor or governor's designee.

NEW SECTION.  Sec. 9   Expertise in investment decisions is sought by the inclusion of five nonvoting members appointed by the state investment board after nomination by the audit and accountability committee, who are considered experienced and qualified in the field of investments. At least one of the nonvoting members must have experience in investing in companies, funds, or other investments that are located in, have a substantial employment base in, or make a significant economic contribution to, Washington state.

NEW SECTION.  Sec. 10   (1) All members of the state investment board, except nonvoting members and legislative members, serve terms of three years and hold office until successors are appointed. Members' terms, except for nonvoting members, commence on January 1st of the year in which the appointments are made.
     (2) Members may be reappointed for additional terms. Appointments for vacancies are made for the unexpired terms in the same manner as the original appointments. Any voting member may be removed from the state investment board for cause by the member's respective appointing authority. The five nonvoting members serve for a term determined by the audit and accountability committee, which may not exceed two years. Nonvoting members may be removed from the board by the audit and accountability committee at any time with or without cause.
     (3) The legislative members serve terms of two years. The position of a legislative member on the state investment board becomes vacant at the end of that member's term on the state investment board or whenever the member ceases to be a member of the senate or house of representatives from which the member was appointed.

NEW SECTION.  Sec. 11   Sections 2 and 4 through 10 of this act are each added to chapter 43.33A RCW.

NEW SECTION.  Sec. 12   This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately.