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F I S C A L I M P A C T R E P O R T

SPONSOR Smith

ORIGINAL DATE

LAST UPDATED

1-23-07

3-15-07 HB

SHORT TITLE Investments & Pensions Oversight Committee

SB 319

ANALYST Aubel

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

$150.0

Non-Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

No longer duplicates HB 315/aHAFC

SOURCES OF INFORMATION

LFC Files

Response Received From

State Investment Council (SIC)

SUMMARY

Synopsis of Bill

Senate Bill 319 creates the “state investment and retirement systems oversight committee" as a

joint interim legislative committee and appropriates $150.0 thousand from the general fund for

expenditure in FY07 and FY08 for technical, legal, and actuarial assistance as well as operational

expenses.

FISCAL IMPLICATIONS

The appropriation of $150.0 thousand contained in this bill is a non-recurring expense to the

general fund for FY07 and FY08. Any unexpended or unencumbered balance remaining at the

end of FY08 shall revert to the general fund.

SIC noted that the committee, through input and monitoring, should assist New Mexico’s in-

vestment agencies pass legislation that could have a positive impact on fund returns.

SIGNIFICANT ISSUES

SB 319 will provide for a permanent interim committee to oversee approximately $35 billion in-

Senate Bill 319 – Page

2

vested by the state endowment funds, state pension funds, and State Treasurer. It will replace the

State Permanent Fund Task Force that met during the interim in 2004 and 2005, and replace the

Investments and Pension Committee that met during the interim in 2006.

The State Investment and Retirement Systems Oversight Committee will have five voting mem-

bers from the House and five voting members from the Senate. There will be five non-voting

members (or their designee): state investment officer, secretary of finance and administration,

Educational Retirement Board chief investment officer, Public Employees Retirement Board in-

vestment director, and the state treasurer.

The State Investment and Retirement Systems Oversight Committee will have the following

functions:

1.

Monitor and oversee the investment and financial management practices used by state invest-

ing agencies;

2.

Undertake a continuing analysis of the financial and actuarial status of the retirement sys-

tems, including benefit structures;

3.

Develop recommendations to improve state investment practices and to ensure the financial

and actuarial soundness of the retirement funds;

4.

Make referrals of matters needing further attention to appropriate authorities;

5.

Review and analyze proposed legislation received in the interim;

6.

Report to the legislature prior to the start of each regular session any recommendations that

the committee may have for legislative action.

ADMINISTRATIVE IMPLICATIONS

Staff for the State Investment and Retirement Systems Oversight Committee shall be provided

by the legislative council service. In addition, SB 319 will have a minor impact on the related

investment and pension agencies to generate additional data, reports and presentations for com-

mittee hearings.

TECHNICAL ISSUES

SIC stated some concern that the bill would be interpreted beyond its intention of monitoring to

include advising, supervising, or directing the SIC in the performance of its duties, and that over-

sight in this context might infer a fiduciary responsibility. However, SB 319 does not include

language other than overseeing, or monitoring, the activities of the various investment and pen-

sion agencies to perform the essential public service of being informed of these agencies’ poli-

cies, investment performance, fund solvency and related issues.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

SB 319 duplicates House Bill 315.

OTHER SUBSTANTIVE ISSUES

SB 319 contains an emergency clause to cover expenses in FY07.

The prior legislative interim task force has examined the investments and policies currently be-

Senate Bill 319 – Page

3

ing implemented by the SIC, Public Employee Retirement Association, Educational Retirement

Board, and the State Treasurer and has helped educate the legislature at large regarding the com-

plexities of modern investing and the impact of recent statute relating to state investments.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

Oversight of the various state funds and pension plans will be marginalized. Expenses incurred

by the legislative council service for a “task force"-type legislative interim investment and pen-

sion oversight committee will remain unfunded. Improved legislation resulting from informed

legislators may be curtailed. The forum for improved communication among the various in-

vestment and pension agencies will not be provided.

MA/yr:nt