SENATE BILL REPORT

SHB 1436

BYHouse Committee on Trade & Economic Development (originally sponsored by Representatives Vekich, Wineberry, Schoon, Cantwell, Winsley, Kremen, Rasmussen, Heavey, Grant, Hargrove, Spanel, Bristow, Crane, Anderson, Meyers, Valle, Sanders, Rayburn, K. Wilson, Basich, Moyer and Cooper)

Requiring investigation of state investment by the state investment board.

House Committe on Trade & Economic Development

Senate Committee on Economic Development & Labor

Senate Hearing Date(s):February 18, 1988; February 25, 1988

Majority Report:  Do pass.

      Signed by Senators Lee, Chairman; Anderson, Vice Chairman; Conner, Deccio, McMullen, Smitherman, Warnke, Williams.

Minority Report:  Do not pass.

      Signed by Senator West.

Senate Staff:Jack Brummel (786-7428)

                  February 25, 1988

AS REPORTED BY COMMITTEE ON ECONOMIC DEVELOPMENT & LABOR, FEBRUARY 25, 1988

BACKGROUND:

The increased involvement of the state economy in the international economy, the dramatic shifts in financial markets, and the deregulation of the banking system have impacted the capacity of the state's capital markets to adequately meet the diverse financing needs of the communities and enterprises in the state.  Other states have utilized the depository authority of their state, state pension funds, regulatory guidelines, tax incentives, and the direct investment of state funds to increase investment in certain types of enterprises or geographic areas, or to increase the availability of capital of a particular type, such as seed capital or venture capital.

The financial characteristics of the trusts and capital funds managed by the State Investment Board include the requirements for long-term investment, investments which are low-risk, and the maintenance of diverse portfolios to ensure adequate return while ensuring the security of the funds managed by the board.  These characteristics may permit the State Investment Board to encourage additional in-state investment in the pursuit of its legislatively mandated purpose.  The purpose of the State Investment Board is to provide professional investment management of trusts, operating funds and capital funds established by law.

SUMMARY:

The Business Assistance Center (BAC) is directed to investigate and plan for profitable in-state investment opportunities which would match the characteristics and meet the statutory purposes of the funds managed by the State Investment Board.

The BAC plan is to include a report describing the types of investment in businesses in this state which will have the greatest likelihood of benefiting the economy.  That report examines the potential for the Investment Board to act as a developmental investor.

In addition, the plan will include proposed nonbinding management objectives for each fiscal year for in-state investments and recommended actions to help the board meet its management objectives.

The Business Assistance Center and the State Investment Board are directed to report the results to the Legislature by January 1, 1989.  The board is directed to submit a plan for making investments in the state by January 1 of each odd- numbered year, beginning in 1991.  The plan is to be developed in conjunction with the Business Assistance Center.  The plan should focus on developmental investments that would increase net investment in the state without replacing existing in-state investments.

Appropriation:    none

Revenue:    none

Fiscal Note:      requested January 18, 1988

Senate Committee - Testified: John A. Hitchman, State Investment Board (against); David Dougherty, DTED (for)