STAND. COM. REP. NO. 2360

Honolulu, Hawaii

RE: S.B. No. 2765

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Twenty-Ninth State Legislature

Regular Session of 2018

State of Hawaii

Sir:

Your Committee on Labor, to which was referred S.B. No. 2765 entitled:

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

begs leave to report as follows:

The purpose and intent of this measure is to:

(1) Allow the Executive Director of the Board of Trustees of the Employees' Retirement System (ERS) to appoint one or more investment professionals under the direction of the Chief Investment Officer; and

(2) Exempt investment officers and investment professionals, including investment specialists, from civil service and collective bargaining laws.

Your Committee received testimony in support of this measure from the Board of Trustees of the Employees' Retirement System and University of Hawaii Professional Assembly.

Your Committee finds that successful investment of ERS funds is critical to the sustainability of the system. Although the members of the Board of Trustees have fiduciary responsibility of the general management of the system's assets and implementation of the system's investment policy, the Trustees themselves are not investment experts. This measure authorizes the ERS to hire professionals with investment expertise to assist in maintaining a healthy, sustainable ERS.

Your Committee has heard the testimony of the University of Hawaii Professional Assembly and agrees, to be consistent with the practices of other agencies, such as the Hawaii Employee-Union Health Benefits Trust Fund, that the Board of Trustees, rather than the Executive Director, should have the authority to appoint investment officers and investment professionals.

Accordingly, your Committee has amended this measure by:

(1) Repealing language that allows the Board of Trustees of the ERS to appoint investment officers through its Executive Director, to instead allow the Board to directly appoint investment officers and investment professionals; and

(2) Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

As affirmed by the record of votes of the members of your Committee on Labor that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2765, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2765, S.D. 1, and be referred to your Committee on Ways and Means.

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

________________________________

JILL N. TOKUDA, Chair