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

SPONSOR Ingle

ORIGINAL DATE

LAST UPDATED

2-22-07

2-24-07 HB

SHORT TITLE Educational Retirement Board Appointments

SB 1162/aSEC

ANALYST Aubel

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Educational Retirement Board (ERB)

SUMMARY

Synopsis of SEC Amendment

The Senate Education Committee Amendment establishes the new position on the ERB as an

elected position by the Council of University Presidents rather than as a governor-appointee.

This elected board member, the chief financial officer of a four-year state institution of higher

education, will serve for a term of four years.

Synopsis of Original Bill

Senate Bill 1162 changes the composition of the Educational Retirement Board by replacing the

member currently elected to a four-year term by the New Mexico members of the American

Association of University Professors with the chief financial officer of a four-year state

institution of higher education, appointed by the governor.

FISCAL IMPLICATIONS

There is no direct fiscal impact associated with this bill.

Senate Bill 1162/aSEC – Page

2

SIGNIFICANT ISSUES

The ERB fund is currently over $9.2 billion. This last year the board has been spending a great

deal of time assessing, learning, and moving into alternative investments. This area, along with

other recent changes in the investment world, is making expertise in investments essential to

board decisions and the fund’s performance. Adding that specific expertise on the board would

facilitate this knowledge transfer.

In addition, ERB has considering a reorganization that would place much more responsibility on

the Investment Committee, which is made up primarily of board members. Although the current

governor appointee to the board does have this expertise, this bill would codify the required

expertise into the appointment.

Of the seven board members, only two are elected. SB 1162 would reduce this number to one.

ERB notes that while the bill would add the financial expertise of a chief financial officer of an

institute of higher learning, it would remove the input and expertise of a professor and member

of the retirement fund.

PERFORMANCE IMPLICATIONS

Adding investment expertise will most likely add valued input into board decisions.

TECHNICAL ISSUES

SB 1162 amends Section 22-11-3 NMSA 1978 by striking reference to a member elected by the

American Association of University Professors and adding a governor appointee in Section

B.(5). However, the length of the term is also struck, which appears to leave length of the term

for this position unspecified.

ALTERNATIVES

One option is adding two positions to bring the total number of board members to nine: add the

governor appointee as specified in SB 1162 and add another representative with financial

expertise, such as an elected or appointed position from either the New Mexico School

Administrators or Counsel of University Presidents.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

The board will function as it currently structured.

MA/nt