STAND. COM. REP. NO. 2527

Honolulu, Hawaii

RE: S.B. No. 3072

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-First State Legislature

Regular Session of 2022

State of Hawaii

Sir:

Your Committees on Labor, Culture and the Arts and Judiciary, to which was referred S.B. No. 3072 entitled:

"A BILL FOR AN ACT RELATING TO THE HAWAII EMPLOYER-UNION HEALTH BENEFITS TRUST FUND INVESTMENTS,"

beg leave to report as follows:

The purpose and intent of this measure is to exempt the Hawaii Employer-Union Health Benefits Trust Fund ("Trust Fund") from disclosing certain documents relating to its alternative investments under the Uniform Information Practices Act (Modified), codified at chapter 92F, Hawaii Revised Statutes ("UIPA").

Your Committees received testimony in support of this measure from the Hawaii Employer-Union Health Benefits Trust Fund. Your Committee received comments on this measure from the Office of Information Practices.

Your Committees find that the Trust Fund engages in diversified investment, including high-yield private alternative investment funds, to address its unfunded liability for the State and counties, totaling $10,500,000,000 and $8,100,000,000, respectively, rather than increase the amount of member contributions. Your Committees further find that due diligence into such investments requires the Trust Fund to invest time and money in acquiring and analyzing detailed proprietary and confidential information regarding the projected performance of each alternative investment fund. Your Committees find it concerning that the potential risk of the Trust Fund being required to disclose the proprietary and confidential information pertaining to its portfolio under the UIPA may deter some high-performing funds from allowing the Trust Fund to invest with them. Your Committees acknowledge that information pertaining to the Trust Fund's portfolio may be protected from disclosure under the UIPA's frustration exception; however, your Committees believe that the statutory exemption provided by this measure will provide confidence to alternative investment funds that the Trust Fund will not be required to release their proprietary and confidential information to the public, thereby allowing the Trust Fund to continue investing in funds that generate high investment returns.

Your Committees note that the language in section 2 of this measure creating a new section in chapter 87A, Hawaii Revised Statutes, governing the Trust Fund's disclosure of alternative investments information, mirrors that of section 88‑103.5(c) through (e), Hawaii Revised Statutes, that governs the disclosure of alternative investment information for the Employees' Retirement System.

Accordingly, your Committees have amended this measure by:

(1) Replacing the contents of section 2 with language amending section 87A-31, Hawaii Revised Statutes, to specify that the exemptions from disclosure of information pursuant to the UIPA set forth in sections 88-103.5(c) through (e), Hawaii Revised Statutes, shall apply to the disclosure of information relating to the Trust Fund's alternative investments; and

(2) 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 Judiciary that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 3072, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 3072, S.D. 1, and be referred to your Committee on Ways and Means.

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

________________________________ KARL RHOADS, Chair

________________________________ BRIAN T. TANIGUCHI, Chair