Bill Text: HI SB2833 | 2010 | Regular Session | Introduced
Bill Title: ERS; Pension Obligation Bonds; Authorized; Appropriation
Spectrum: Partisan Bill (Democrat 9-0)
Status: (Introduced - Dead) 2010-02-09 - (S) Report adopted; Passed Second Reading, as amended (SD 1) and referred to WAM. [SB2833 Detail]
Download: Hawaii-2010-SB2833-Introduced.html
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THE SENATE |
S.B. NO. |
2833 |
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TWENTY-FIFTH LEGISLATURE, 2010 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
relating to the issuance of pension obligation bonds.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that adverse economic times have negatively impacted the employees' retirement system, resulting in investment losses of four and eighteen per cent during fiscal years 2008 and 2009, respectively. Consequently, the unfunded actuarially accrued liability has increased from $5.2 billion in 2008 to $6.2 billion in 2009. The unfunded actuarially accrued liability represents the amount the employees' retirement system will be deficient to pay for benefits already earned by active and retired employees and beneficiaries of the system without further employer contributions. The legislature further finds that, to avoid market volatility in the unfunded actuarially accrued liability, investment gains and losses are recognized or "smoothed" over a period of time. Thus, the recent losses will continue to be carried over to the next two to three years, or longer, and will affect the unfunded actuarially accrued liability.
The legislature finds that during periods of substantial or prolonged budget deficits, several jurisdictions throughout the country have utilized pension obligation bonds to experience budget relief. That budget relief, depending upon the jurisdiction's applicable laws, has been accomplished either through the reamortization of the unfunded actuarially accrued liability resulting in lower or no payments in the early years and/or longer terms, or funding the employer's normal annual contribution for the current and future fiscal year. The majority of these jurisdictions have experienced interest rate savings, particularly when taxable bond rates are low.
The legislature further finds that the issuance of pension obligation bonds to replace all or a portion of the contribution could replace the employer's fluctuating annual unfunded actuarially accrued liability amortization payments with fixed debt service payments at potentially lower interest rates.
The purpose of this Act is to authorize the State and counties to issue general obligation bonds to finance employer contributions to the employees' retirement system.
SECTION 2. Chapter 39, Hawaii Revised Statutes, is amended by adding a new section to part I to be appropriately designated and to read as follows:
"§39- General obligation bonds; pension obligation funding; authorized. (a) Notwithstanding the authority to issue general obligation bonds under section 39-1, and the application of proceeds therefrom pursuant to section 39-2, the director of finance, with the approval of the governor, may issue in accordance with the limitations provided in subsection (b), general obligation bonds of the State issued for the purpose of funding the State's contributions to the employees' retirement system pursuant to section 88-123, in an amount not to exceed the total amount of all general obligation bonds authorized to be issued by acts of the legislature and any amendments thereto in effect at the date of issue of the bonds, and shall not exceed the debt limitation prescribed by the Constitution of the State of Hawaii. Except as otherwise specifically provided in the act or acts authorizing the issuance thereof, the bonds shall be issued in the manner and upon the terms provided in this part and shall be known as "pension obligation bonds".
(b) For purposes of subsection (a), the director of finance shall consider:
(1) Security for the bonds, rating agency perspectives, structure of savings, impact of lump sum funding, asset allocation review, redemption features, high cost of call option, and bond insurance; and
(2) Risk factors, including flexibility risk, reinvestment risk, and funding discipline risk."
SECTION 3. Chapter 47, Hawaii Revised Statutes, is amended by adding a new section to part I to be appropriately designated and to read as follows:
"§47- General obligation bonds; pension obligation funding; authorized. (a) Notwithstanding the authority to issue general obligation bonds under section 47-3, and the application of proceeds therefrom pursuant to section 47-5, the director of finance may issue in accordance with the limitations provided in subsection (b), general obligation bonds issued for the purpose of funding a county's contributions to the employees' retirement system pursuant to section 88-123, in an amount not to exceed the total amount of all general obligation bonds authorized to be issued by acts of the county's governing body and any amendments thereto in effect at the date of issue of the bonds, and shall not exceed the debt limitation prescribed by the Constitution of the State of Hawaii. Except as otherwise specifically provided in the act or acts authorizing the issuance thereof, the bonds shall be issued in the manner and upon the terms provided in this part and shall be known as "pension obligation bonds".
(b) For purposes of subsection (a), the director of finance shall consider:
(1) Security for the bonds, rating agency perspectives, structure of savings, impact of lump sum funding, asset allocation review, redemption features, high cost of call option, and municipal bond insurance; and
(2) Risk factors, including flexibility risk, reinvestment risk, and funding discipline risk."
SECTION 4. The director of finance is authorized to issue general obligation bonds in the sum of $ or so much thereof as may be necessary and the same sum or so much thereof as may be necessary is appropriated for fiscal year 2010-2011 for the purpose of funding the State's employer contribution to the employees' retirement system.
SECTION 5. The appropriation made for the pension obligation funding authorized by this Act shall not lapse at the end of the fiscal biennium for which the appropriation is made; provided that all moneys from the appropriation unencumbered as of June 30, 2012, shall lapse as of that date.
SECTION 6. New statutory material is underscored.
SECTION 7. This Act shall take effect on July 1, 2010.
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INTRODUCED BY: |
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Report Title:
ERS; Pension Obligation Bonds; Authorized; Appropriation
Description:
Authorizes the issuance of pension obligation bonds to fund the employer contributions of the State and counties to the employees' retirement system to reduce unfunded actuarial accrued liability. Appropriates funds for payment of the employers' contribution to the employees' retirement system.
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
