SENATE BILL REPORT
SB 6755
This analysis was prepared by non-partisan legislative staff for the use of legislative members in
their deliberations. This analysis is not a part of the legislation nor does it constitute a
statement of legislative intent.
As Reported By Senate Committee On:
Ways & Means, February 07, 2008
Title: An act relating to compensation of state investment board personnel.
Brief Description: Changing state investment board personnel compensation provisions.
Sponsors: Senators Brown, Zarelli, Spanel, Berkey, Parlette, Pridemore, Eide, Hewitt and Shin; by request of State Investment Board.
Brief History:
Committee Activity: Ways & Means: 1/31/08, 2/7/08 [DPS].
SENATE COMMITTEE ON WAYS & MEANS
Majority Report: That Substitute Senate Bill No. 6755 be substituted therefor, and the substitute bill do pass.Signed by Senators Prentice, Chair; Fraser, Vice Chair, Capital Budget Chair; Pridemore, Vice Chair, Operating Budget; Zarelli, Ranking Minority Member; Brandland, Carrell, Fairley, Hatfield, Hewitt, Hobbs, Keiser, Kohl-Welles, Oemig, Parlette, Rasmussen, Regala, Roach, Rockefeller, Schoesler and Tom.
Staff: Steve Jones (786-7440)
Background: The State Investment Board was established by the Legislature in 1981 to oversee
the long-term investment of the state's pension, industrial insurance, and trust funds. These
investments are managed by a staff employed by the board, as well as outside investment advisors
under contract with the board. The administrative and investment expenses of the board are paid
from the State Investment Board Expense Account, which is funded from the investment earnings
of the funds managed by the board, subject to legislative appropriation.
The executive director and investment officers employed by the board are exempt from the state
civil service laws. Their compensation is determined by the board. In 2001, the Legislature
authorized the board to establish a retention pool to grant salary increases to address recruitment
and retention issues. The compensation level for the investment officers cannot exceed the
average paid by state funds of a similar size, based on a biennial salary survey. Each year, the
salary increases granted by the board from the retention pool cannot exceed an average of five
percent.
Summary of Bill: The bill as referred to committee was not considered.
SUMMARY OF BILL (Recommended Substitute): The State Investment Board's retention
pool is made a part of the State Investment Board Expense Account. The retention pool may be
used to reward performance with incentive compensation and to address recruitment and retention
problems pursuant to a performance management and compensation program developed by the
board, based on a biennial compensation survey. The compensation levels cannot exceed the
average total compensation paid by other public funds of a similar size. Disbursements from the
retention pool are made from legislative appropriations on authorization of the executive director
or a designee. The salary increase limitation of five percent is removed.
Appropriation: None.
Fiscal Note: Not requested.
Committee/Commission/Task Force Created: No.
Effective Date: Ninety days after adjournment of session in which bill is passed.
Staff Summary of Public Testimony on Original Bill: PRO: The State Investment Board
manages more than $80 billion in state funds. These investments are made with the goal of
maximum investment return with a prudent level of risk. The Board needs more flexibility for
incentive pay for senior investment officers. This legislation will allow the Board to remain
competitive in a highly specialized labor market. The Board's investment officers are being
recruited by other states, and several vacancies exist. The compensation awarded under the
substitute bill will be subject to appropriation and based on a salary survey. The 5 percent cap
needs to be lifted.
CON: Performance pay systems are never perfect and often undermine employee morale.
Comparisons with other investment funds are imperfect because the job conditions and
responsibilities vary significantly. This bill is not needed because the employee turnover rate of
investment officers at the State Investment Board is relatively low when compared to other state
job classifications. Other state employees have difficult jobs and are required to make difficult
life-and-death decisions, and many of these job classifications are experiencing significant
recruitment and retention problems. The 5 percent cap should not be eliminated without being
replaced by a reasonable limitation on salary increases.
Persons Testifying: PRO: Senator Lisa Brown, prime sponsor; Joe Dear, Pat McElligutt, State
Investment Board.
CON: Greg Devereux, Washington Federation of State Employees.