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F I S C A L I M P A C T R E P O R T
SPONSOR Varela
DATE TYPED 01/28/05 HB HJM 20
SHORT TITLE Create State Investment Funds Task Force
SB
ANALYST Padilla-Jackson
REVENUE
Estimated Revenue
Subsequent
Years Impact
Recurring
or Non-Rec
Fund
Affected
FY05
FY06
NFI*
NFI*
(Parenthesis ( ) Indicate Revenue Decreases)
*See Fiscal Implications section below
SOURCES OF INFORMATION
LFC Files
Responses Received From
None.
SUMMARY
Synopsis of Bill
House Joint Memorial 20 requests that the Legislative Council create and appoint members of
the legislature to the State Investment Fund Task Force. The State Investment Funds Task Force
would continue the work of the State Permanent Fund Task Force, which was created in 2004 to
examine the controls and safeguards applicable to investments of the permanent funds. House
Joint Memorial 20 also requests that the Department of Finance and Administration, the State
Investment Council, the Public Employees Retirement Association and the Educational Retire-
ment Board appointment members to the State Investment Funds Taskforce.
This joint memorial is being proposed on behalf of the State Permanent Fund Task Force.
pg_0002
House Joint Memorial 20 -- Page 2
Significant Issues
Work During the 2004 Interim
According to the Final Report of the State Permanent Fund Task Force, the task force convened
on four occasions in Santa Fe. At these meetings, the task force received testimony on the history
of the severance tax and its relationship with severance tax bonds, the permanent fund and public
school capital outlay. Also, the task force received testimony concerning the sources and uses of
funds associated with the land grant permanent fund. The two retirement funds were explored in
depth with emphasis on unfunded liabilities, contribution rates and investment performance. The
task force also received testimony concerning investment instruments, market performance,
banking practices and alternative strategies for financing capital projects.
PERFORMANCE IMPLICATIONS
According to the final report, the task force focused on four areas intended to assist the invest-
ment agencies in the performance of their duties. These are:
removal of statutory limitations on investment instruments in favor of the higher
standard imposed by the Prudent Investor Act;
exempting the investment agencies from the lengthy bid process required by the
procurement ode in the case of personal service investment advisor contracts;
revision of the statutes that prohibit the use of out-of-state custodial banks; and
permitting custodial banks to serve as securities lenders.
FISCAL IMPLICATIONS
There is no direct fiscal impact. That said, an appropriation has already been made in House Bill
1 for $886 thousand for all 2005 interim committees. According to estimates from the Legisla-
tive Council Service, including per diem and mileage, a committee this size, meeting around
four times throughout the summer, could cost anywhere from $4 to $7 thousand.
ADMINISTRATIVE IMPLICATIONS
Over the interim, the State Permanent Fund Taskforce was assigned two staff members from the
Legislative Council Service. On occasion, staff of the legislative finance committee and public
school facilities authority also assisted.
According to the Legislative Council Service, approximately 40 man hours were spent over the
2004 interim (4 meetings x approximately 10 man hours per meeting). Activities included pre-
paring the agenda and lining up witnesses (approximately 4 hours per meeting), and writing the
minutes. (approximately 4 hours per meeting). Research was occasionally requested from the
Legislative Council staff (average of 2 hours per meeting). Witnesses would typically provide
their own photocopies and no external resources were necessary.
OPJ/lg