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January 19, 2007
Room 302, Capitol Building
Cheyenne, Wyoming
Senators Jim Anderson, Hank Coe, Bob Fecht, Jayne Mockler, Drew Perkins and Kathryn Sessions;
Representatives Roy Cohee, Marty Martin, Lisa Shepperson and Colin Simpson.
Representatives Ross Diercks and Alan Jones.
Dave Gruver
Please refer to Appendix 1 to review the Committee Sign-in Sheet for a list of other individuals who attended the meeting.
All meeting materials and handouts provided to the Committee by the Legislative Service Office (LSO), public officials, lobbyists, and the public are referenced in the Meeting Materials Index, attached to the minutes. These materials are on file at the LSO and are part of the official record of the meeting.
Speaker Cohee called the meeting to order at 7:30 a.m. He noted the House and Senate had historically rotated chairmanship of the Committee, and as he was chairman last year he nominated Senator Anderson as chairman. The Committee cast an unanimous vote for Senator Anderson as chair. Speaker Cohee nominated Representative Simpson as vice-chair and a unanimous vote was cast for Representative Simpson.
State investments
State Treasurer Meyer explained the history of state investments and the retention of a state investment consultant, RV Kuhns and associates. He noted that the consultant would be in the state on February 28 and that the Committee could meet with the consultant at that time. The Treasurer explained that his intent was to familiarize himself with state investment policies and how it was developed. His goal was to work with the Committee to understand those issues involved and to make the policies behind investment decisions as transparent as possible. Treasurer Meyer presented a draft of a state primer on investments and in response to the Committee's request, Michael Walden-Newman, Chief Investment Officer with the State Treasurer's Office provided information regarding the status of the state's investments, a primer on the state's investment history, an overview of investment strategies and investment performance analysis for the quarter ending September, 2006. (Appendix 2).
Higher education endowment funds
The Committee next discussed draft legislation (07 LSO 242.C3, appendix 3). Chairman Anderson explained the need for a meeting on the draft legislation prior to the session. He asked that LSO provide additional background and to explain the legislation. A detailed background and explanation of the bill was provided to the Committee and is attached as appendix 4. The bill was largely in response to a constitutional amendment passed at the last election authorizing the creation of inviolate trust funds for higher education purposes and specifying in the ballot statement that two current funds, the Hathaway student scholarship endowment fund and the excellence in higher education trust fund would be included as inviolate funds. Only the earnings from those funds could be expended. The amendment also allowed the funds to be invested as the legislature authorizes, including in stocks.
Two bills had been drafted for Committee consideration at an earlier meeting and the Committee directed amendments be made after consultation with the Treasurer and other interested parties and a new draft be presented. A summary of 07 LSO 242.C3 follows:
1. The Hathaway endowment and excellence in higher education accounts are renamed permanent funds under W.S. 9-4-204. It is specified that monies in the funds cannot be expended, as they are permanent inviolate funds. Earnings may be expended as currently provided in law.
2. A spending policy is put in place only for the excellence in higher education fund. The spending policy amount is 5% of the market value of the corpus (5 year average – with a roll-in for the first five years). A reserve account is created for that fund. The reserve account is funded by earnings from the endowment in excess of the annual spending policy. The reserve account is capped at 75% of the spending policy (3.75% of the corpus 5 year average value). The reserve account is used to supplement earnings on the endowment in those years in which earnings are below the spending policy amount.
3. Annual spending policy report recommendations are gathered in one place, with the new spending policy recommendation report.
4. Investment of the two funds is provided for in the same manner as other permanent funds, under the Treasurer.
5. The current provisions for the funds are amended to reflect investment by the state treasurer and distributions of earnings only. Earnings within the spending policy are distributed quarterly to the institutions. The investment of the excellence in higher education endowment fund by the State Treasurer rather than by foundations of each institution is a major change made by the bill. The use of these earnings by the institutions was not changed. There was now, however, with the inclusion of a spending policy amount, a cap on the amount of earnings expended each year.
6. The bill included a provision for the institutions to report on reserve fund distributions.
7. For the Hathaway endowment fund – there was an insertion of a provision requiring a report from the treasurer to the education and select capital financing committee regarding the status of the Hathaway reserve fund.
8. Section 3 provided for the remittance by the foundations to the State Treasurer of distributions to the foundations made prior to this bill's effective date. The remittance is to be as expeditious as possible, but is authorized to be done in a manner to maximize total net earnings.
Senator Mockler moved the bill be sponsored as a Committee bill in the upcoming session. State Treasurer Meyer spoke in support of the bill. Rick Miller, representing the University of Wyoming, Community College Commission executive director Jim Rose and Casper College President Walter Nolte addressed the Committee regarding the bill. Angela Gload, executive director of the Laramie Community College foundation, noted the foundation believed it has invested well and that investment fees had been lowered and there was some concern regarding the transfer of investment authority and that the transfer be made in such a manner as to not suffer investment losses.
The main motion passed unanimously without amendment, with the bill designated as a Senate File.
Respectfully submitted,
Senator Jim Anderson, Chairman