HOUSE BILL REPORT

HB 1733

BYRepresentatives Grimm, Ballard, Wang and Locke; by request of Department of Labor and Industries

Revising investment policies for funds of the department of labor and industries.

House Committe on Commerce & Labor

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (9)

      Signed by Representatives Wang, Chair; Cole, Vice Chair; Fisher, Jones, O'Brien, Patrick, Sanders, Sayan and Walker.

House Staff:Chris Cordes (786-7117)

Rereferred House Committee on Ways & Means/Appropriations

Majority Report:  The second substitute bill be substituted therefor and the second substitute bill do pass.  (16)

      Signed by Representatives Locke, Chair; Brekke, Brough, Butterfield, Fuhrman, Grant, Grimm, Hine, Holland, Nealey, Peery, Sayan, Silver, H. Sommers, Spanel and Sprenkle.

House Staff:      David Knutson (786-7136)

AS REPORTED BY COMMITTEE ON WAYS & MEANS/APPROPRIATIONS

FEBRUARY 5, 1988

BACKGROUND:

Since 1985, the State Investment Board has been authorized to invest industrial insurance trust funds in equity investments.  The board is charged with investing state funds to maximize return at a prudent level of risk.  Under present industrial insurance law and practice, large changes in the value of the trust fund assets can create significant fluctuations in the industrial insurance premiums that must be charged to employers.  Therefore, to avoid causing premium fluctuations, the funds have not been extensively invested in equity.

SUMMARY:

SUBSTITUTE BILL:  The state investment board is directed to report to the legislature on a plan to implement investment of the state industrial insurance funds in both equity and fixed investments.  The plan must review the impact of equity investment on industrial insurance ratesetting, investment policies and accounting practices for the state fund.  The plan must also recommend any needed changes in the policies, the accounting practices or ratemaking processes.  The plan will be implemented by July 1, 1989, unless otherwise provided by law.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  The original bill authorized the board to establish investments policies for the industrial insurance funds that would be designed to limit fluctuations in industrial insurance premiums and, subject to this limitation, to maximize return at a prudent level of risk.

CHANGES PROPOSED BY COMMITTEE ON WAYS & MEANS/APPROPRIATIONS:  The State Investment Board is required to establish investment procedures designed to limit fluctuations in industrial insurance premiums until July 1, 1989.  The board will prepare a report recommending changes in current investment policies.  The report will be presented to appropriate legislative committees at the start of the 1989 legislative session.  An appropriation of $100,000 to the State Investment Board for the preparation of the report if provided.

Appropriation:    $100,000 to the State Investment Board.

Fiscal Note:      Requested January 24, 1988.

House Committee ‑ Testified For:    (Commerce & Labor)  Joe Dear, Department of Labor and Industries;  John Hitchman, State Investment Board.

(Ways & Means/Appropriations)  Joe Dear, Labor & Industries; David Weig, State Investment Board.

House Committee - Testified Against:      (Commerce & Labor)  None Presented.

(Ways & Means/Appropriations)  None Presented.

House Committee - Testimony For:    (Commerce & Labor)  The bill is needed to reconcile a conflict between the statutes that regulate the state investment board and the industrial insurance trust funds.  The state investment board needs the authority to consider the impact on industrial insurance premiums when determining industrial insurance fund investment policy.

(Ways & Means/Appropriations)  Same as testimony given in Committee on Commerce & Labor.

House Committee - Testimony Against:      (Commerce & Labor)  None Presented.

(Ways & Means/Appropriations)  None Presented.