Lawmakers seek more investment oversight

BISMARCK — In a bid for closer oversight of North Dakota’s state pension funds, a Republican Senate leader wants to replace four public employee and teacher representatives with lawmakers on a state board that oversees retirement investments.

Sen. Randy Christmann, R-Hazen, the assistant GOP Senate majority leader, said the changes would help the Legislature keep better track of the funds, which are seeking larger contributions from their taxpayer-financed employers to help recoup recent investment losses.

“I think that we have a responsibility to our constituents to, as a group, know more about” the state pension system, Christmann said Wednesday during a North Dakota Senate Industry, Business and Labor Committee hearing on his bill.

The panel on Wednesday examined Christmann’s proposal and a separate bill, introduced by Sen. David Hogue, R-Minot, that would create a new board to oversee investments for a newly created “Legacy Fund,” which is a trust fund for surplus oil tax collections. The committee did not make an immediate recommendation on either bill.

Analysts estimate the Legacy Fund, which the state’s voters created by approving a constitutional amendment last November, will have more than $600 million in oil tax collections by June 2013. Hogue said the fund may have more than $1 billion in four years.

The Christmann and Hogue bills both would change the makeup of the 11-member state Investment Board. It oversees investments that benefit the Teachers’ Fund for Retirement, which covers North Dakota public school teachers, and the state’s Public Employees Retirement System, which manages pension funds that benefit state and local government workers, judges and law enforcement officers.

The board now has three members each to represent the teachers’ and public employees’ pension funds. On Sept. 30, the board had charge of assets valued at $5.13 billion; the two funds accounted for almost $3.2 billion of that sum.

Other Investment Board members include the state insurance commissioner, treasurer, and land commissioner; a representative for Workforce Safety and Insurance, which has its $1.28 billion reserve fund managed by the Investment Board; and the lieutenant governor, who has served as the board’s chairman. Lt. Gov. Drew Wrigley attended Wednesday’s hearing.

Christmann’s legislation would add three North Dakota House members and three senators to the Investment Board, and remove two teacher and two public employee representatives, leaving one of each.

“I just think (legislators are) a good cross-section of the people of the state, and I think that is what we need on the Investment Board,” Christmann said.

Hogue’s proposal would create a separate, nine-member board that would oversee investment of the Legacy Fund and a separate state fund, called the Budget Stabilization Fund, which has about $330 million in assets. It would include three of the Investment Board’s present members — the lieutenant governor, the insurance commissioner and the treasurer — along with three state senators and three House members.

The constitutional amendment that created the Legacy Fund puts the Investment Board in charge of investing the fund’s principal.

John Geissinger, director and chief investment officer of North Dakota’s Retirement and Investment Office, said a separate panel of legislators could determine the investment objectives of the legacy and budget funds.

The teacher and public employee pension funds each have their own boards — which are separate from the Investment Board — that decide on investment strategies for the Investment Board to carry out, Geissinger said.

Establishing a subset of the existing Investment Board may not be the best way for legislators to determine the investment goals of the legacy and budget funds, Geissinger said.

“I think the form can be more efficient, in a different manner,” Geissinger said. “I’m not objecting to the concept.”

Sparb Collins, director of the North Dakota Public Employees Retirement System, and Fay Kopp, administrator of the Teachers’ Fund for Retirement, did not oppose either bill.

However, both Collins and Kopp said teachers and public employees had long held an Investment Board majority because their pension funds represent more than 60 percent of the assets managed by the board.

The Legislature is also considering proposals to close both funds to new members and enrolling newly hired teachers and public employees in 401(k)-style plans as a way of gradually shedding the risk of the pension funds, which must pay guaranteed benefits to retirees regardless of their investment performance.

The bills are SB2032 and SB2344.

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