Wyoming Legislature

Committee Meeting Summary of Proceedings

Select Committee on Capital Financing and Investments

 

December 15, 2006

Room 302, Capitol Building

Cheyenne, Wyoming

 

Meeting Attendance

 

Committee Members (Present)

Senators Grant Larson, Jayne Mockler, John Schiffer and Kathryn Sessions;

Representatives Roy Cohee, Ross Diercks and Randall Luthi.

 

Committee Members (Absent)

Senators Hank Coe and Bill Hawks;

Representatives Doug Osborn and Wayne Reese . 

 

Other legislators present:        Representative Jack Landon (by telephone), Representative Marty Martin

 

Legislative Service Office

Dave Gruver

 

Others Present

Please refer to Appendix 1 to review the Committee Sign-in Sheet for a list of other individuals who attended the meeting.

 

Written Meeting Materials and Handouts

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.

 

The following sections summarize the Committee proceedings by topic.  Please refer to Appendix 2 to review the Agenda.

 

Call To Order

Chairman Cohee called the meeting to order at 3:30 p.m.

 

 

 

State investments

 

Deputy State Treasurer Sharon Garland and chief financial officer Michael Walden-Newman provided the Committee with information regarding state investments and diversification which has occurred over the past eight years.  Included in that presentation were three packets of material.  (Appendices 3 through 5).  Appendix 3 is the Treasurer's report to shareholders which summarizes changes in assets under management and investments with comparison dates of June 30, 1998 and December 1, 2006.  Investments under management totaled $8.2 billion as of 2006 fiscal year end, and over $8.6 billion in total market value on September 30, 2006, a $5 billion increase in eight years.  The Treasurer's statement identifies the change into a diversified asset allocation as the most significant achievement.  In the past eight years, asset allocations for the permanent Wyoming Mineral trust fund and permanent land funds have been changed from 95% fixed income and cash to 50% equities and 50% fixed income.  Permanent funds are now invested in each major asset class.  Appendix 4 is a condensed version of appendix 3.  Appendix 5 is a quarterly investment performance analysis.

 

Secretary of State and Treasurer-elect Joe Meyer addressed the Committee.  Secretary  Meyer provided a letter to Committee members outlining his intentions regarding a review of asset allocation and general investment strategies and management costs as he transitions to the office of State Treasurer.  (Appendix 6)  He noted that he will take some time to fully understand all state investment policy issues and ramifications, but that his overarching premise will be that the investment policy and associated issues are transparent.  Secretary Meyer also provided information  prepared by the State's investment manager, RV Kuhns.  (Appendices 7 and 8).  Appendix 7 is an explanation of asset allocations, and underlying strategies and assumptions related to asset allocation.  Appendix 8 is a primer on state investment strategy and history, including state investment policy and asset allocation developed over the past eight years. 

 

Higher education endowment funds

 

The Committee next discussed draft legislation (07 LSO 242.C1 and 243.C1, appendices 9 and 10).  LSO staff explained that the two pieces of legislation both dealt with higher education endowment funds.  The first with the inviolate nature of the funds and investment of the funds.  The second with establishing spending policy amounts for the funds.  Staff provided the following for the Committee's consideration:

            1.  A memo dated October 12, from LSO staff, regarding the issues presented by the passage of the constitutional amendment on higher education funds and the draft legislation.  (Appendix 11)   Those issues include the designation of the Hathaway endowment account and the excellence in higher education endowment account as inviolate funds by the Constitution, and whether further legislation is necessary or appropriate as a result of that designation.  A further question is whether spending policy amounts should be developed for those funds, and if so, how that should be implemented.

            2.  A memo from Rick Miller, University of Wyoming, explaining and supporting the draft legislation.  (Appendix 12)

            3. Flow charts explaining the funding of the Hathaway endowment and the excellence in higher education endowment and current spending policies for the common school account and permanent mineral trust fund.  (Appendix 13)

           

LSO staff explained that the draft bills had been delivered to Secretary Meyer recently and he suggested that the Committee and the Legislature should consider certain additional issues presented by the Constitutional amendment and draft legislation.  Secretary Meyer addressed the Committee and summarized his December 15 memo to the Committee, explaining the issues presented.  (Appendix 14)  He noted it was not his intent to kill the legislation, but to raise issues he thought should be addressed.

 

The Committee, Secretary Meyer and LSO staff discussed the issues presented, which included the inviolate nature of the funds and what "inviolate" entails, the manner in which the funds are currently held and invested, whether state permanent funds should be invested by private endowments and what policies would govern those investments.  LSO staff provided information regarding Attorney General formal opinions on the issues of "inviolate".  Staff also provided the Committee with a draft bill which would provide for investment of excellence in higher education endowment funds by the State Treasurer, rather than the Institutions' foundations through contractual arrangements as provided in current law.  (LSO 242.W2).  Staff noted the draft had been prepared the day before the meeting.  It did not address spending policy issues or reserve accounts, but there was an amendment which would address those issues, should the Committee decide to proceed with this version of the bill.

 

The Committee discussed how to proceed.  Draft 242.C1 failed for lack of a motion.  The Committee next discussed the alternative to that draft (242.W2, Appendix 15).  Senator Mockler moved the Committee sponsor the draft in the upcoming session.  Committee members expressed reservations regarding knowing the exact impact of the draft and the lack of distribution of the draft to the public and interested parties.  The motion failed 0-7.  The Committee directed staff to meet with interested parties, including the Attorney General's Office, the University and community college representatives and Secretary Meyer and attempt to address the issues raised.  Senator Schiffer clarified that the draft was to include spending policy provisions.  The Committee requested that LSO post the revised draft under the Committee's name on the legislative website in order for the public to have an opportunity to review the potential bill before the session.  The Committee also discussed the possibility of a new Committee being appointed earlier than normal in order to take action on the revised draft.  Draft 243.C1 died for lack of a motion.

 

Staff presented a proposed spending policy report, required by law to be submitted by the Committee to the Legislature each year.  Since the Committee took no action to establish spending policies for the higher education endowments, the draft report simply recites the history of the spending policies for the permanent mineral trust fund and common school account, acknowledges the State Treasurer recommended no changes for this year to either spending policy, and states that the Committee agrees with that recommendation and makes the same to the Legislature.  (Appendix 16)

    

The Committee adjourned at 5:30 p.m.

 

 

Respectfully submitted,

Representative Roy Cohee, Chairman