HB475 (2009) Detail

Prohibiting the investment of state funds in the energy sectors of countries that have been identified by the United States Department of State as state sponsors of terrorism.


HB 475-FN – AS INTRODUCED

2009 SESSION

09-0533

05/01

HOUSE BILL 475-FN

AN ACT prohibiting the investment of state funds in the energy sectors of countries that have been identified by the United States Department of State as state sponsors of terrorism.

SPONSORS: Rep. Bettencourt, Rock 4

COMMITTEE: Executive Departments and Administration

ANALYSIS

This bill prohibits the state treasurer, the state retirement system, and the judicial retirement plan from investing in the energy sectors of countries that have been identified by the United States Department of State as state sponsors of terrorism.

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Explanation: Matter added to current law appears in bold italics.

Matter removed from current law appears [in brackets and struckthrough.]

Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

09-0533

05/01

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Nine

AN ACT prohibiting the investment of state funds in the energy sectors of countries that have been identified by the United States Department of State as state sponsors of terrorism.

Be it Enacted by the Senate and House of Representatives in General Court convened:

1 New Subdivision; State Investment Policy. Amend RSA 6 by inserting after section 43 the following new subdivision:

State Investment Policy

6:44 Investment of Funds with Firms Linked to State Sponsors of Terrorism Prohibited.

I. No assets under the jurisdiction of the state treasurer shall be invested in the energy sector of any country identified by the United States Department of State as a state sponsor of terrorism; nor shall such assets be invested in any entity that invests $20,000,000 or more in the energy sector of a state sponsor of terrorism. In this section, the term “energy sector” means activities to develop petroleum or natural gas resources.

II. The state treasurer, after reviewing the recommendations of and consulting with an independent research firm that specializes in global security risk for portfolio determinations selected by the state treasurer, shall take appropriate action to sell, redeem, divest, or withdraw any investment held in violation of paragraph I. This paragraph shall not be construed to require the premature or otherwise imprudent sale, redemption, divestment, or withdrawal of an investment, but such sale, redemption, divestment, or withdrawal shall be completed not later than 2 years following the effective date of this section.

III. Within 60 days after the effective date of this section, the state treasurer shall file with the general court, a report of all investments held as of the effective date that are in violation of paragraph I. Every year thereafter, the treasurer shall report on all investments sold, redeemed, divested, or withdrawn in compliance with paragraph II.

IV. Each report after the initial report shall provide a description of the progress that the state treasurer has made since the previous report and since the effective date of this section.

2 New Paragraph; State Retirement System; State Investment Policy. Amend RSA 100-A:15 by inserting after paragraph I-c the following new paragraph:

I-d. Notwithstanding paragraph I, pursuant to the state investment policy in RSA 6:44, no assets under the jurisdiction of the system’s board of trustees shall be invested in the energy sector of any country identified by the United States Department of State as a state sponsor of terrorism; nor shall such assets be invested in any entity that invests $20,000,000 or more in the energy sector of a state sponsor of terrorism. The board of trustees, after reviewing the recommendations of and consulting with an independent research firm that specializes in global security risk for portfolio determinations selected by the board, shall take appropriate action to sell, redeem, divest, or withdraw any investment held in violation of the state investment policy. This paragraph shall not be construed to require the premature or otherwise imprudent sale, redemption, divestment, or withdrawal of an investment, but such sale, redemption, divestment, or withdrawal shall be completed not later than 2 years following the effective date of this paragraph. The board shall summarize compliance with the state investment policy in the comprehensive annual investment report submitted pursuant to paragraph VII.

3 New Paragraph; Judicial Retirement Plan; State Investment Policy. Amend RSA 100-C:12 by inserting after paragraph II the following new paragraph:

II-a. Notwithstanding paragraphs I and II, pursuant to the state investment policy in RSA 6:44, the board of trustees shall not invest any assets of the judicial retirement plan in the energy sector of any country identified by the United States Department of State as a state sponsor of terrorism; nor shall such assets be invested in any entity that invests $20,000,000 or more in the energy sector of a state sponsor of terrorism. The board of trustees, after reviewing the recommendations of and consulting with an independent research firm that specializes in global security risk for portfolio determinations selected by the board, shall take appropriate action to sell, redeem, divest, or withdraw any investment held in violation of the state investment policy. This paragraph shall not be construed to require the premature or otherwise imprudent sale, redemption, divestment, or withdrawal of an investment, but such sale, redemption, divestment, or withdrawal shall be completed not later than 2 years following the effective date of this paragraph. The board shall summarize compliance with the state investment policy in the annual report completed pursuant to RSA 100-C:11.

4 Effective Date. This act shall take effect 60 days after its passage.

LBAO

09-0533

01/16/09

HB 475-FN - FISCAL NOTE

AN ACT prohibiting the investment of state funds in the energy sectors of countries that have been identified by the United States Department of State as state sponsors of terrorism.

FISCAL IMPACT:

      The New Hampshire Retirement System, the New Hampshire Judicial Retirement Plan, and the Treasury Department state this bill may increase state, county, and local expenditures by an indeterminable amount in FY 2009 and each year thereafter. There will be no fiscal impact on state, county, and local revenue.

METHODOLOGY:

    The New Hampshire Retirement System, the New Hampshire Judicial Retirement Plan, and the Treasury Department state this bill prohibits investment in the energy sectors of countries that have been identified by the United States Department of State as state sponsors of terrorism. The New Hampshire Retirement System states it will have costs associated with retaining a consultant to identify impacted securities, staff time associated with coordinating efforts of the consultant and investment managers and staff time to ensure and report compliance with the law. Additionally, the System will have divestment trading commission costs and execution costs. The System estimates the increased expenditures for the administration of the proposed statute will exceed $100,000 in FY 2009 and each year thereafter, and bases that estimate on the actual expenditures ($100,000 between July and December of 2008) it has incurred in compliance with the 2008 law requiring divestiture from Sudanese assets. The System assumes state, county, and local employer contribution rates may need to increase above the level at which they would be set in the absence of this bill, to support the increased administrative costs. Additionally, as indicated by the System’s general investment consultant, the proposed restrictions and any related forced divestiture would narrow the scope of potential portfolio assets. The System maintains that this narrowing of scope could negatively impact fund performance and return on investment, leading to a lower funded ratio for the System, which could further exacerbate the rise in state, county, and local contribution rates.

    The Judicial Retirement Plan (Plan) states this bill will increase administrative costs to the Plan. The Plan states that the provisions of the proposed bill would force it to switch fund

                      LBAO

                      09-0533

                      01/16/09

    managers at a cost of at least $25,000, per the Plan’s outside consultant and based on the action required under the 2008 Sudan investment divestiture law. The bill would also require additional Plan staff time and expense to monitor investments and ensure compliance. The Plan estimates its costs will increase in total between $25,000 and $100,000 in FY 2009, and could not estimate the impact on the years thereafter. The increased cost to the Plan may require an increase in state contributions to the Plan.

    The Treasury Department states this bill will increase state expenditures. The Department estimates that its costs will increase by at least $75,000 in FY 2009 and at least $100,000 each year thereafter. These costs represent fees paid to an outside independent research firm for an initial review of Department investments in FY 2009, and for ongoing compliance monitoring and a quarterly (at $25,000 per quarter) update each year thereafter. The Department’s analysis did not include consideration of any potential increase of Department staff time or of the possible downward pressure on the investment rate of return, either of which could contribute further to the negative state impact.

    The bill does not contain an appropriation or establish positions.