SF 3565

as introduced - 84th Legislature (2005 - 2006) Posted on 12/15/2009 12:00am

A bill for an act
relating to state government; regulating the State Board of Investment; regulating
expenses; appropriating money; amending Minnesota Statutes 2004, section
11A.07, subdivision 5; Minnesota Statutes 2005 Supplement, sections 11A.04;
11A.07, subdivision 4.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2005 Supplement, section 11A.04, is amended to read:

11A.04 DUTIES AND POWERS.

The state board shall:

(1) Act as trustees for each fund for which it invests or manages money in
accordance with the standard of care set forth in section 11A.09 if state assets are involved
and in accordance with chapter 356A if pension assets are involved.

(2) Formulate policies and procedures deemed necessary and appropriate to carry
out its functions. Procedures adopted by the board must allow fund beneficiaries and
members of the public to become informed of proposed board actions. Procedures and
policies of the board are not subject to the Administrative Procedure Act.

(3) Employ an executive director as provided in section 11A.07.

(4) Employ investment advisors and consultants as it deems necessary.

(5) Prescribe policies concerning personal investments of all employees of the board
to prevent conflicts of interest.

(6) Maintain a record of its proceedings.

(7) As it deems necessary, establish advisory committees subject to section 15.059 to
assist the board in carrying out its duties.

(8) Not permit state funds to be used for the underwriting or direct purchase of
municipal securities from the issuer or the issuer's agent.

(9) Direct the commissioner of finance to sell property other than money that has
escheated to the state when the board determines that sale of the property is in the best
interest of the state. Escheated property must be sold to the highest bidder in the manner
and upon terms and conditions prescribed by the board.

(10) Undertake any other activities necessary to implement the duties and powers
set forth in this section.

(11) Establish a formula or formulas to measure management performance and
return on investment. Public pension funds in the state shall utilize the formula or
formulas developed by the state board.

(12) Except as otherwise provided in article XI, section 8, of the Constitution of the
state of Minnesota, employ, at its discretion, qualified private firms to invest and manage
the assets of funds over which the state board has investment management responsibility.
There is annually appropriated to the state board, from the assets of the funds for which
the state board utilizes a private investment manager, sums sufficient to pay the costs of
employing private firms. Each year, by January 15, the board shall report to the governor
and legislature on the cost and the investment performance of each investment manager
employed by the board.

(13) Adopt an investment policy statement that includes investment objectives, asset
allocation, and the investment management structure for the retirement fund assets under
its control. The statement may be revised at the discretion of the state board. The state
board shall seek the advice of the council regarding its investment policy statement.
Adoption of the statement is not subject to chapter 14.

(14) Adopt a compensation plan setting the terms and conditions of employment for
unclassified board employees who are not covered by a collective bargaining agreement.

new text begin There is annually appropriated to the state board, from the assets of the funds for
which the state board provides investment services, sums sufficient to pay the costs of
all necessary expenses for the administration of the board. These sums will be deposited
in the State Board of Investment operating account, which must be established by the
commissioner of finance.
new text end

Sec. 2.

Minnesota Statutes 2005 Supplement, section 11A.07, subdivision 4, is
amended to read:

Subd. 4.

Duties and powers.

The director, at the direction of the state board, shall:

(1) plan, direct, coordinate, and execute administrative and investment functions
in conformity with the policies and directives of the state board and the requirements of
this chapter and of chapter 356A;

new text begin (2) prepare and submit biennial and annual budgets to the board and with the
approval of the board submit the budgets to the Department of Finance;
new text end

deleted text begin (2) deleted text end new text begin (3) new text end employ professional and clerical staff as necessary. Employees whose
primary responsibility is to invest or manage money or employees who hold positions
designated as unclassified under section 43A.08, subdivision 1a, are in the unclassified
service of the state. Other employees are in the classified service. Unclassified employees
who are not covered by a collective bargaining agreement are employed under the terms
and conditions of the compensation plan approved under section 43A.18, subdivision 3b;

deleted text begin (3) deleted text end new text begin (4) new text end report to the state board on all operations under the director's control and
supervision;

deleted text begin (4) deleted text end new text begin (5) new text end maintain accurate and complete records of securities transactions and official
activities;

deleted text begin (5) deleted text end new text begin (6) new text end establish a policy relating to the purchase and sale of securities on the basis of
competitive offerings or bids. The policy is subject to board approval;

deleted text begin (6) deleted text end new text begin (7) new text end cause securities acquired to be kept in the custody of the commissioner of
finance or other depositories consistent with chapter 356A, as the state board deems
appropriate;

deleted text begin (7) deleted text end new text begin (8) new text end prepare and file with the director of the Legislative Reference Library, by
December 31 of each year, a report summarizing the activities of the state board, the
council, and the director during the preceding fiscal year. The report must be prepared
so as to provide the legislature and the people of the state with a clear, comprehensive
summary of the portfolio composition, the transactions, the total annual rate of return, and
the yield to the state treasury and to each of the funds whose assets are invested by the
state board, and the recipients of business placed or commissions allocated among the
various commercial banks, investment bankers, and brokerage organizations. The report
must contain financial statements for funds managed by the board prepared in accordance
with generally accepted accounting principles;

deleted text begin (8) deleted text end new text begin (9) new text end require state officials from any department or agency to produce and provide
access to any financial documents the state board deems necessary in the conduct of
its investment activities;

deleted text begin (9) deleted text end new text begin (10) new text end receive and expend legislative appropriations;

deleted text begin (10) deleted text end new text begin (11) new text end undertake any other activities necessary to implement the duties and
powers set forth in this subdivision consistent with chapter 356A.

Sec. 3.

Minnesota Statutes 2004, section 11A.07, subdivision 5, is amended to read:

Subd. 5.

Apportionment of expenses.

deleted text begin The executive director shall apportion
the actual expenses incurred by the board on an accrual basis among the several funds
whose assets are invested by the board based on the weighted average assets under
management during each quarter. The charge to each fund must be calculated, billed, and
paid on a quarterly basis in accordance with procedures for interdepartmental payments
established by the commissioner of finance. The amounts necessary to pay these charges
are appropriated from the investment earnings of each fund. Receipts must be credited
to the general fund as nondedicated receipts. deleted text end new text begin The annual expenses incurred by the state
board will be apportioned among the state general fund, the retirement funds administered
by the Minnesota State Retirement System, Public Employees Retirement Association,
and Teachers Retirement Association, and all other funds as follows:
new text end

new text begin (1) on a biennial basis, the state board, in accordance with biennial budget
procedures established by the commissioner of finance, may request a direct appropriation
that represents the portion of the state board's expenses necessary to provide investment
services to the state general funds. This appropriation must be deposited in the State
Board of Investment operating account;
new text end

new text begin (2) the executive director shall apportion the actual expenses incurred by the state
board, less the charge to the state general fund, among the funds whose assets are invested
by the state board, with the exception of the state general fund, based on the weighted
average assets under management during the fiscal year. The amounts necessary to pay
these charges are apportioned from the investment earnings of each fund. Receipts must
be credited to the State Board of Investment operating account;
new text end

new text begin (3) the actual expenses apportioned and charged to the funds, with the exception
of the state general fund and the retirement funds administered by the Minnesota State
Retirement System, Public Employees Retirement Association, and Teachers Retirement
Association, must be calculated, billed, and paid on a quarterly basis in accordance with
procedures for interdepartmental payments established by the commissioner of finance;
and
new text end

new text begin (4) the annual estimated expenses to be incurred by the state board that will be
payable by the retirement funds administered by the Minnesota State Retirement System,
Public Employees Retirement Association, and Teachers Retirement Association must
be deposited in the State Board of Investment operating account on the first business day
of each fiscal year. A reconciliation of the actual expenses compared to the estimated
costs must occur at the end of each fiscal year with any surplus or deficit being credited
or debited to each of the respective funds. The state board must present a statement of
accrued actual expenses to each fund at the end of each quarter during each fiscal year.
new text end