STAND. COM. REP. NO. 549

 

Honolulu, Hawaii

                  

 

RE:    S.B. No. 1036

 

 

 

Honorable Donna Mercado Kim

President of the Senate

Twenty-Seventh State Legislature

Regular Session of 2013

State of Hawaii

 

Madam:

 

     Your Committee on Judiciary and Labor, to which was referred S.B. No. 1036 entitled:

 

"A BILL FOR AN ACT RELATING TO EMPLOYEES' RETIREMENT SYSTEM PERSONNEL,"

 

begs leave to report as follows:

 

     The purpose and intent of this measure is to:

 

     (1)  Authorize the Board of Trustees of the Employees' Retirements System, through its administrator, to appoint one or more investment officers to the Employees' Retirement System Investment Office; and

 

     (2)  Change the Administrator's title from "Administrator of the Employees' Retirement System" to "Executive Director of the Employees' Retirement System".

 

     Your Committee received testimony in support of this measure from the Department of Budget and Finance and Board of Trustees of the Employees' Retirement System.

 

     Your Committee finds that the successful investment of the funds of the Employees' Retirement System (ERS) is one of the foundations to the longevity and stability of the system.  The system currently has over $12,000,000,000 in domestic and international investments, and decisions made by the ERS Board of Trustees concerning these investments are critical to the current and future funding of the ERS, which had an unfunded actuarial accrued liability of $8,400,000,000 as of June 30, 2012.

 

     The ERS' investment staff currently consists of a Chief Investment Officer and an Investment Specialist, which is inadequate given the uncertainty and complexity of the modern financial markets and the need for the Board of Trustees to be provided with ongoing tactical and strategic insights into the risk-return trade-offs of multiple asset class investments.  This measure will authorize the Board of Trustees of the ERS, through its administrator, to appoint one or more investment officers to the ERS Investment Office to ensure that the system's investment portfolio is best positioned to meet its asset goals and reduce the ERS' unfunded liability.  The in-house knowledge and expertise can also save up to $1,000,000 in annual research, analytics, transition, monitoring, and other functions that would ordinarily be paid to consultants.  Furthermore, this measure changes the ERS Administrator's title to "Executive Director" to be consistent with the title of the administrative heads of other governmental agencies and other public pension funds.

 

     As affirmed by the record of votes of the members of your Committee on Judiciary and Labor that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1036 and recommends that it pass Second Reading and be placed on the calendar for Third Reading.

 

Respectfully submitted on behalf of the members of the Committee on Judiciary and Labor,

 

 

 

____________________________

CLAYTON HEE, Chair