1.1 	A bill for an act
1.2 	relating to state government; regulating the State Board of Investment; regulating 
1.3 	expenses; appropriating money;amending Minnesota Statutes 2004, section 
1.4 	11A.07, subdivision 5; Minnesota Statutes 2005 Supplement, sections 11A.04; 
1.5 	11A.07, subdivision 4.
1.6 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.7 	Section 1. Minnesota Statutes 2005 Supplement, section 11A.04, is amended to read:
1.8 	11A.04 DUTIES AND POWERS.
1.9 	The state board shall:
1.10 	(1) Act as trustees for each fund for which it invests or manages money in 
1.11 	accordance with the standard of care set forth in section 11A.09 if state assets are involved 
1.12 	and in accordance with chapter 356A if pension assets are involved.
1.13 	(2) Formulate policies and procedures deemed necessary and appropriate to carry 
1.14 	out its functions. Procedures adopted by the board must allow fund beneficiaries and 
1.15 	members of the public to become informed of proposed board actions. Procedures and 
1.16 	policies of the board are not subject to the Administrative Procedure Act.
1.17 	(3) Employ an executive director as provided in section 11A.07.
1.18 	(4) Employ investment advisors and consultants as it deems necessary.
1.19 	(5) Prescribe policies concerning personal investments of all employees of the board 
1.20 	to prevent conflicts of interest.
1.21 	(6) Maintain a record of its proceedings.
1.22 	(7) As it deems necessary, establish advisory committees subject to section 15.059 to 
1.23 	assist the board in carrying out its duties.
2.1 	(8) Not permit state funds to be used for the underwriting or direct purchase of 
2.2 	municipal securities from the issuer or the issuer's agent.
2.3 	(9) Direct the commissioner of finance to sell property other than money that has 
2.4 	escheated to the state when the board determines that sale of the property is in the best 
2.5 	interest of the state. Escheated property must be sold to the highest bidder in the manner 
2.6 	and upon terms and conditions prescribed by the board.
2.7 	(10) Undertake any other activities necessary to implement the duties and powers 
2.8 	set forth in this section.
2.9 	(11) Establish a formula or formulas to measure management performance and 
2.10 	return on investment. Public pension funds in the state shall utilize the formula or 
2.11 	formulas developed by the state board.
2.12 	(12) Except as otherwise provided in article XI, section 8, of the Constitution of the 
2.13 	state of Minnesota, employ, at its discretion, qualified private firms to invest and manage 
2.14 	the assets of funds over which the state board has investment management responsibility. 
2.15 	There is annually appropriated to the state board, from the assets of the funds for which 
2.16 	the state board utilizes a private investment manager, sums sufficient to pay the costs of 
2.17 	employing private firms. Each year, by January 15, the board shall report to the governor 
2.18 	and legislature on the cost and the investment performance of each investment manager 
2.19 	employed by the board.
2.20 	(13) Adopt an investment policy statement that includes investment objectives, asset 
2.21 	allocation, and the investment management structure for the retirement fund assets under 
2.22 	its control. The statement may be revised at the discretion of the state board. The state 
2.23 	board shall seek the advice of the council regarding its investment policy statement. 
2.24 	Adoption of the statement is not subject to chapter 14.
2.25 	(14) Adopt a compensation plan setting the terms and conditions of employment for 
2.26 	unclassified board employees who are not covered by a collective bargaining agreement.
2.27 	There is annually appropriated to the state board, from the assets of the funds for 
2.28 	which the state board provides investment services, sums sufficient to pay the costs of 
2.29 	all necessary expenses for the administration of the board. These sums will be deposited 
2.30 	in the State Board of Investment operating account, which must be established by the 
2.31 	commissioner of finance.

2.32 	Sec. 2. Minnesota Statutes 2005 Supplement, section 11A.07, subdivision 4, is 
2.33 	amended to read:
2.34 		Subd. 4.Duties and powers. The director, at the direction of the state board, shall:
3.1 	(1) plan, direct, coordinate, and execute administrative and investment functions 
3.2 	in conformity with the policies and directives of the state board and the requirements of 
3.3 	this chapter and of chapter 356A;
3.4 	(2) prepare and submit biennial and annual budgets to the board and with the 
3.5 	approval of the board submit the budgets to the Department of Finance;
3.6 	(2) (3) employ professional and clerical staff as necessary. Employees whose 
3.7 	primary responsibility is to invest or manage money or employees who hold positions 
3.8 	designated as unclassified under section 43A.08, subdivision 1a, are in the unclassified 
3.9 	service of the state. Other employees are in the classified service. Unclassified employees 
3.10 	who are not covered by a collective bargaining agreement are employed under the terms 
3.11 	and conditions of the compensation plan approved under section 43A.18, subdivision 3b;
3.12 	(3) (4) report to the state board on all operations under the director's control and 
3.13 	supervision;
3.14 	(4) (5) maintain accurate and complete records of securities transactions and official 
3.15 	activities;
3.16 	(5) (6) establish a policy relating to the purchase and sale of securities on the basis of 
3.17 	competitive offerings or bids. The policy is subject to board approval;
3.18 	(6) (7) cause securities acquired to be kept in the custody of the commissioner of 
3.19 	finance or other depositories consistent with chapter 356A, as the state board deems 
3.20 	appropriate;
3.21 	(7) (8) prepare and file with the director of the Legislative Reference Library, by 
3.22 	December 31 of each year, a report summarizing the activities of the state board, the 
3.23 	council, and the director during the preceding fiscal year. The report must be prepared 
3.24 	so as to provide the legislature and the people of the state with a clear, comprehensive 
3.25 	summary of the portfolio composition, the transactions, the total annual rate of return, and 
3.26 	the yield to the state treasury and to each of the funds whose assets are invested by the 
3.27 	state board, and the recipients of business placed or commissions allocated among the 
3.28 	various commercial banks, investment bankers, and brokerage organizations. The report 
3.29 	must contain financial statements for funds managed by the board prepared in accordance 
3.30 	with generally accepted accounting principles;
3.31 	(8) (9) require state officials from any department or agency to produce and provide 
3.32 	access to any financial documents the state board deems necessary in the conduct of 
3.33 	its investment activities;
3.34 	(9) (10) receive and expend legislative appropriations;
3.35 	(10) (11) undertake any other activities necessary to implement the duties and 
3.36 	powers set forth in this subdivision consistent with chapter 356A.

4.1 	Sec. 3. Minnesota Statutes 2004, section 11A.07, subdivision 5, is amended to read:
4.2 		Subd. 5.Apportionment of expenses. The executive director shall apportion 
4.3 	the actual expenses incurred by the board on an accrual basis among the several funds 
4.4 	whose assets are invested by the board based on the weighted average assets under 
4.5 	management during each quarter. The charge to each fund must be calculated, billed, and 
4.6 	paid on a quarterly basis in accordance with procedures for interdepartmental payments 
4.7 	established by the commissioner of finance. The amounts necessary to pay these charges 
4.8 	are appropriated from the investment earnings of each fund. Receipts must be credited 
4.9 	to the general fund as nondedicated receipts. The annual expenses incurred by the state 
4.10 	board will be apportioned among the state general fund, the retirement funds administered 
4.11 	by the Minnesota State Retirement System, Public Employees Retirement Association, 
4.12 	and Teachers Retirement Association, and all other funds as follows:
4.13 	(1) on a biennial basis, the state board, in accordance with biennial budget 
4.14 	procedures established by the commissioner of finance, may request a direct appropriation 
4.15 	that represents the portion of the state board's expenses necessary to provide investment 
4.16 	services to the state general funds. This appropriation must be deposited in the State 
4.17 	Board of Investment operating account;
4.18 	(2) the executive director shall apportion the actual expenses incurred by the state 
4.19 	board, less the charge to the state general fund, among the funds whose assets are invested 
4.20 	by the state board, with the exception of the state general fund, based on the weighted 
4.21 	average assets under management during the fiscal year. The amounts necessary to pay 
4.22 	these charges are apportioned from the investment earnings of each fund. Receipts must 
4.23 	be credited to the State Board of Investment operating account;
4.24 	(3) the actual expenses apportioned and charged to the funds, with the exception 
4.25 	of the state general fund and the retirement funds administered by the Minnesota State 
4.26 	Retirement System, Public Employees Retirement Association, and Teachers Retirement 
4.27 	Association, must be calculated, billed, and paid on a quarterly basis in accordance with 
4.28 	procedures for interdepartmental payments established by the commissioner of finance; 
4.29 	and
4.30 	(4) the annual estimated expenses to be incurred by the state board that will be 
4.31 	payable by the retirement funds administered by the Minnesota State Retirement System, 
4.32 	Public Employees Retirement Association, and Teachers Retirement Association must 
4.33 	be deposited in the State Board of Investment operating account on the first business day 
4.34 	of each fiscal year. A reconciliation of the actual expenses compared to the estimated 
4.35 	costs must occur at the end of each fiscal year with any surplus or deficit being credited 
5.1 	or debited to each of the respective funds. The state board must present a statement of 
5.2 	accrued actual expenses to each fund at the end of each quarter during each fiscal year.