Appropriates funds to the employees' retirement system to be utilized in attracting additional private venture capital to accelerate the growth of Hawaii's technology sectors. (SD1)

A BILL FOR AN ACT

SECTION 1. The legislature finds that Hawaii's emerging growth companies continue to face a shortage of available private sector venture capital. Much progress has been made in recent years, but the continued shortfall of equity growth financing stifles new company expansion and the State's economic development. The Hawaii strategic development corporation has been effective as a catalyst in generating venture funding in conjunction with private investors, directly leveraging its $16,000,000 of public funds over seven times with private capital and indirectly leveraging its funds over thirty times for investment in Hawaii's startup companies. Further, Act 215, Session Laws of Hawaii 2004, has greatly stimulated new private investment by providing incentives to investors in qualified high technology businesses. Nevertheless, more funding is needed.

The legislature also finds that the employees' retirement system has been effective as a proven investment leader and currently has the authority to act as a catalyst in generating venture funding in conjunction with private investors.

With additional resources, the employees' retirement system could expand its public/private partnerships with market-based investment firms that can provide equity capital to high-growth companies and strengthen and diversify Hawaii's economy. These opportunities can potentially yield additional economic stability and vitality to the State's economy, which in turn strengthens the State's ability to pay its employer contributions to the employees' retirement system. Consequently, expanded economic growth will ensure that the employees' retirement system will meet its pension benefit obligations. This Act will provide funding for the employees' retirement system to invest in the growth of Hawaii's technology sectors, thereby attracting additional private venture capital to the State.

The purpose of this Act is to appropriate funds to the employees' retirement system so that it may invest in sound, Hawaii-based investment opportunities for the benefit of public employees and to attract additional private venture capital to accelerate the growth of Hawaii's technology sectors.

SECTION 2. There is appropriated out of the general revenues of the State of Hawaii the sum of $25,000,000, or so much thereof as may be necessary for fiscal year 2006-2007, for the purpose of investing moneys in Hawaii high technology businesses, venture capital investments meeting the qualifications of section 88-119(11), Hawaii Revised Statutes, or Hawaii-based life science research businesses.

SECTION 3. The sum appropriated shall be expended by the employees' retirement system for the purposes of this Act.

SECTION 4. The moneys appropriated under this Act shall be in addition to any moneys appropriated by the State as its employer obligation to contribute toward state employee retirement benefits under section 88-124, Hawaii Revised Statutes.

SECTION 5. The employees' retirement system shall deposit the moneys appropriated pursuant to this Act in the pension accumulation fund established under section 88-109, Hawaii Revised Statutes; provided that the employees' retirement system shall maintain a separate accounting of the moneys appropriated for the report required under section 7 of this Act. The employees' retirement system shall invest the moneys appropriated under this Act in accordance with section 6 of this Act and with the investment guidelines established under chapter 88, Hawaii Revised Statutes.

SECTION 6. (a) The employees' retirement system shall invest moneys appropriated pursuant to this Act in Hawaii-based high technology businesses, venture capital investments meeting the qualifications of section 88-119(11), Hawaii Revised Statutes, or Hawaii-based life science research businesses.

(b) Investments made under this Act shall be in privately held Hawaii high technology businesses, venture capital investments, and Hawaii-based life science businesses that, in the informed opinion of the employees' retirement system's board of trustees, are appropriate entities in which to invest funds of the system. In evaluating venture capital investments, the employees' retirement system's board of trustees shall consider, among other things, the impact an investment may have on job creation in Hawaii and on the state economy. Any interest earned on investments made pursuant to this Act shall be deposited into the portion of the pension accumulation fund subject to the separate accounting as provided under section 5 of this Act. The employees' retirement system may reinvest any capital or interest, or any combination thereof, in subsequent investments authorized under subsection (a).

(c) Any investment made by the employees' retirement system pursuant to this Act and any earnings accrued or losses incurred thereon shall not be included in the employees' retirement system's calculation of the investment yield rate established under section 88-122(b), Hawaii Revised Statutes.

SECTION 7. The employees' retirement system shall submit a report annually to the legislature at least twenty days prior to the convening of each regular session on the actions taken and investments made pursuant to this Act. The report shall include but not be limited to nonproprietary information on the businesses receiving investment capital pursuant to this Act and five-year investment benchmarks that are appropriate for each business.

SECTION 8. For the purposes of this Act:

"Hawaii-based high technology businesses" has the same meaning as "qualified high technology business" as defined in section 235-110.9, Hawaii Revised Statutes.

"Hawaii-based life science research business" means a business employing or owning capital or property, or maintaining an office, in this State; provided that:

"Qualified research":

SECTION 9. This Act shall take effect on July 1, 2006.