STAND. COM. REP. NO. 2826

Honolulu, Hawaii

RE: S.B. No. 2869

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirtieth State Legislature

Regular Session of 2020

State of Hawaii

Sir:

Your Committees on Labor, Culture and the Arts and Government Operations, to which was referred S.B. No. 2869 entitled:

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

beg leave to report as follows:

The purpose and intent of this measure is to identify certain specific types of alternative investment fund information, the disclosure of which would likely put the Employees' Retirement System (the system) at a competitive disadvantage. This measure exempts such categories of information from disclosure under chapter 92F, Hawaii Revised Statutes, consistent with market best practices.

Your Committees received testimony in support of this measure from the Employees' Retirement System. Your Committee received testimony in opposition to this measure from the Civil Beat Law Center for Public Interest, Common Cause Hawaii, Hawaii Professional Chapter of the Society of Professional Journalists, 350 Hawaii, and six individuals.

Your Committees find, in order to address the system's unfunded liability and other financial needs, the system engages in diversified investment, including high—yield private alternative investment funds. Due diligence into such investments requires that the system invest time and money for detailed proprietary and confidential information regarding the projected performance of each fund. If the system is required to disclose such confidential information, the system is disadvantaged as a competitive investor. Competing investors would be able to acquire, at no cost, the system's investment intelligence, resulting in oversubscription of the system's best investments, reducing the system's access.

Your Committees further find that if the system is required to disclose confidential information that the investment funds require to be kept confidential, some high‑performing funds will be deterred from allowing the system to invest with them. In order to manage such risks, the system currently expends significant resources and efforts in responding to requests for such confidential information.

Your Committees have heard the concerns of the Civil Beat Law Center for the Public Interest and its request to limit exemptions to specifically identified records pursuant to section 92F13‑4 of the Hawaii Revised Statutes. Accordingly, your Committees have amended this measure by:

(1) Referencing section 92F-13 as to the list of exempt records;

(2) Deleting repetitive proposed language; and

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

As affirmed by the records of votes of the members of your Committees on Labor, Culture and the Arts and Government Operations that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 2869, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 2869, S.D. 1, and be referred to your Committee on Judiciary.

Respectfully submitted on behalf of the members of the Committees on Labor, Culture and the Arts and Government Operations,

________________________________ LAURA H. THIELEN, Chair

________________________________ BRIAN T. TANIGUCHI, Chair