SENATE BILL REPORT

SJR 8216

BYSenators Hayner, Smitherman, Bluechel, Rasmussen, Newhouse, Cantu, Moore, Benitz, Stratton, McCaslin and Lee

Modifying investment requirements of trust funds.

Senate Committee on Ways & Means

Senate Hearing Date(s):February 27, 1989; February 28, 1989

Majority Report:     Do pass.

     Signed by Senators McDonald, Chairman; Craswell, Vice Chairman; Amondson, Bailey, Bluechel, Cantu, Hayner, Johnson, Lee, Matson, Newhouse, Saling.

Senate Staff:Bill Freund (786-7441)

                March 3, 1989

AS REPORTED BY COMMITTEE ON WAYS & MEANS, FEBRUARY 28, 1989

BACKGROUND:

The State Constitution authorizes the investment of pension and industrial insurance funds as authorized by law.  Under current law, the State Investment Board has responsibility for investment of such funds and is required to establish investment policies designed exclusively to maximize return at a prudent level of risk.  In addition, for industrial insurance funds, the board is also required to invest in ways which limit fluctuations in industrial insurance premiums. 

In the past, legislation has been introduced which would have modified the exclusive purpose rule by requiring the state board to pursue social investment policies.  Examples are bills which would have required targeted in-state investments to promote economic development, and mortgage financing at below market rates.  Concerns have been expressed that such measures could result in lower investment returns and increased investment costs.

SUMMARY:

The State Constitution is amended, requiring the investment of trust fund assets to maximize returns at a prudent level of risk.  An exception is that the state may establish investment policies to limit fluctuations in industrial insurance premiums.

Appropriation:  none

Revenue:   none

Fiscal Note:    available

Senate Committee - Testified:   Dr. David Weig, Executive Director, State Investment Board