WHEREAS, the State of Wisconsin Investment Board manages the Wisconsin Retirement System Trust Funds and five other trust funds established by that state; and

WHEREAS, while there is no Wisconsin statute or rule requiring the Wisconsin Investment Board to invest locally, the Board, on its own initiative, does make an effort to "invest locally", and because the Wisconsin legislature is of the same mind, there is no need for a legislative mandate to invest locally in that state; and

WHEREAS, the Board makes an extra effort, on its own, to examine potential "local" investments, for example, through personal visits by the Board's researchers and analysts to in-state companies in which they are considering investing -- something they will not necessarily do for out-of-state companies; and

WHEREAS, the Wisconsin Investment Board is aware of the ambiguity of the concept of "local investment" and cautions that "investing locally" in Wisconsin includes a substantial amount of ordinary investment in publicly-traded companies that satisfies the Board's overall investment strategy with respect to expected return versus risk, based on the Board's fiduciary responsibility, but that it just happens that those companies have headquarters in Wisconsin or employ at least twenty Wisconsin residents; and

WHEREAS, it must be realized that, compared to Hawaii, Wisconsin has many more of these high-profile, multinational, but "locally"-eligible companies in which to invest; and

WHEREAS, in attempting to spur the development of certain industries, such as health care and high technology, the Wisconsin Investment Board also commits a certain amount to venture capital for investment in Wisconsin and the Midwest; and

WHEREAS, the Wisconsin Investment Board's Wisconsin Certificate of Deposit Program provides a competitive rate of return on certificates of deposit purchased by the Board from Wisconsin banks and thrifts, which can then put more capital to work in their communities; and

WHEREAS, in addition, at any given time, the Wisconsin Investment Board may have between $350,000,000 and $400,000,000 invested in Wisconsin business loans; and

WHEREAS, private placement investments have been part of the Board's investment strategy since the 1960s and includes companies nationwide. The Board has also used this expertise to direct a portion of its private investments to Wisconsin companies. Often, smaller companies that are not able to attract large investors may find a long-term financing relationship through the Board's private placements portfolios. Approved loans usually run ten to fifteen years and carry a fixed rate of interest for life. Wisconsin companies can qualify for loans as small as $5,000,000, whereas the investment minimum for national investments is $15,000,000; and

WHEREAS, the Board also has leveraged buyout and equity financing available, including a venture capital initiative focused on biotechnology and high-technology firms in Wisconsin and the Midwest; and

WHEREAS, the State of Wisconsin Investment Board offers certain guidelines that may be replicated in Hawaii for directing investments locally by the Employees' Retirement System of the State of Hawaii; now, therefore,

BE IT RESOLVED by the House of Representatives of the Twenty-third Legislature of the State of Hawaii, Regular Session of 2005, that the Board of Trustees of the Employees' Retirement System is requested to evaluate the policies and practices of the State of Wisconsin in relation to local investments of the Wisconsin retirement system trust fund for possible consideration and implementation in Hawaii; and

BE IT FURTHER RESOLVED that the Board of Trustees of the Employees' Retirement System is requested to submit its findings and recommendations, including any necessary proposed legislation, to the Legislature no later than twenty days prior to the convening of the Regular Session of 2006; and

BE IT FURTHER RESOLVED that certified copies of this Resolution be transmitted to the Chairperson of the Board of Trustees of the Employees' Retirement System and to the Director of Finance.

Report Title:

ERS; Local Investment; Study Wisconsin Investment Board