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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.

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