Bill Text: NJ A1865 | 2022-2023 | Regular Session | Introduced
Bill Title: Adjusts membership process and reports of State Investment Council; requires plan for economically targeted investments.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2022-01-11 - Introduced, Referred to Assembly State and Local Government Committee [A1865 Detail]
Download: New_Jersey-2022-A1865-Introduced.html
STATE OF NEW JERSEY
220th LEGISLATURE
PRE-FILED FOR INTRODUCTION IN THE 2022 SESSION
Sponsored by:
Assemblyman THOMAS P. GIBLIN
District 34 (Essex and Passaic)
SYNOPSIS
Adjusts membership process and reports of State Investment Council; requires plan for economically targeted investments.
CURRENT VERSION OF TEXT
Introduced Pending Technical Review by Legislative Counsel.
An Act concerning the membership and duties of the State Investment Council and amending and supplementing P.L.1950, c.270.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 5 of P.L.1950, c.270 (C.52:18A-83) is amended to read as follows:
5. a. There is hereby established in the Division of Investment a State Investment Council which shall consist of 16 members.
(1) Each of the following agencies, namely, the Board of Trustees of the Public Employees' Retirement System, the Board of Trustees of the Teachers' Pension and Annuity Fund, and the Board of Trustees of the Police and Firemen's Retirement System of New Jersey, shall designate one board member elected to serve on the board, to serve as a member of the State Investment Council herein established. The three members of the council so designated shall serve as such for a period of three years from the date of their designation and until their respective successors are in like manner designated.
(2) [Eight] Five of the members of the State Investment Council shall be appointed by the Governor, with the advice and consent of the Senate, for a term of five years and shall serve until the member's successor is appointed and has qualified. Of the initial members appointed following the effective date of P.L.2011, c.78, one shall serve for an initial period of three years, and one shall serve for an initial period of two years.
(3) One member of the State Investment Council shall be appointed by the Governor from among three persons nominated jointly by the President of the Senate and the Speaker of the General Assembly and shall serve for a term of five years and until the member's successor is appointed and has qualified.
(4) [Two] Five members of the State Investment Council shall be appointed [by the Governor from among six persons nominated] by the Public Employee Committee of the New Jersey State AFL-CIO and shall serve for a term of five years and until the member's successor is appointed and has qualified. At least [one] two of the [two] five members appointed shall be a member of a union representing police officers or firefighters. [If the persons nominated are not acceptable to the Governor for appointment, the Governor may request submission of new nominees.]
(5) One member of the State Investment Council shall be appointed by the [Governor from among three persons nominated by the] New Jersey Education Association and shall serve for a term of three years and until the member's successor is appointed and has qualified. [If the persons nominated are not acceptable to the Governor for appointment, the Governor may request submission of new nominees.]
(6) One member of the State Investment Council shall be appointed [by the Governor from among three persons nominated] by the State Troopers Fraternal Association and shall serve for a term of three years and until the member's successor is appointed and has qualified. [If the persons nominated are not acceptable to the Governor for appointment, the Governor may request submission of new nominees.]
The [four] seven members appointed pursuant to paragraphs (4), (5) and (6) of this subsection [by the Governor] to the council shall be qualified by training, experience or long-term interest in the direct management, analysis, supervision or investment of assets, and this training, experience or long-term interest shall have been supplemented by academic training in the fields of economics, business, law, finance or actuarial science or by actual employment in those fields.
The five members appointed pursuant to paragraph (4) of this subsection shall be comprised in any combination of the following: active members of the New Jersey State AFL-CIO who are receiving full-time salaries from active employment or retired members of the New Jersey State AFL-CIO receiving pension benefits, but not members receiving both full-time salaries and pension benefits.
At least [seven] four of the [nine] six members appointed pursuant to paragraphs (2) and (3) of this subsection by the Governor to the council shall be qualified by training and experience in the direct management, analysis, supervision or investment of assets, which training and experience shall have been acquired through academic training or through actual employment in those fields.
b. No member of the State Investment Council shall hold any office, position or employment in any political party other than a county or municipal position nor shall any such member benefit directly or indirectly from any transaction made by the Director of the Division of Investment provided for herein.
The members of the council shall elect annually from their number [a chairman] two co-chairs of such council. Any member of the council so elected shall serve as such [chairman] co-chair for a term of one year and until a successor is, in like manner, elected. The [chairman] co-chairs of the council shall be its presiding [officer] officers, and they shall alternate leading council meetings. One co-chair shall be selected from the Governor's appointees or from one of the appointees designated from one of the retirement boards in accordance with paragraph (1) of subsection a. of this section, and one co-chair shall be selected from the remaining appointees. Either co-chair may call a meeting of the council, including for a vote on any single investment recommendation, based on consent from more than one-third of the total council membership.
The members of the council shall serve without compensation but shall be reimbursed for necessary expenses, including reasonable and relevant educational expenses, incurred in the performance of their duties as approved by the [chairman] co-chairs of the council. A co-chair seeking reimbursement for a necessary expense incurred in the performance of the co-chair's duties shall obtain the approval of the other co-chair. Such approval shall not be unreasonably withheld. The members of the council shall be required to file the same annual financial disclosure statements as those required to be filed by members of other State boards and commissions who are not compensated for their services, as such statements shall be required by law or executive order of the Governor. The financial disclosure statements of council members shall be made available to the public in the same manner as the statements of members of other State boards and commissions are made available to the public.
Each member of the council, except the member appointed from among persons nominated by the President of the Senate and the Speaker of the General Assembly, may be removed from office by the Governor, for [cause] egregious conduct or for financial conflicts of interest, upon notice and opportunity to be heard at a public hearing. Any vacancy in the membership of the council occurring other than by expiration of term shall be filled in the same manner as the original appointment, but for the unexpired term only.
c. The terms of the members of the council serving pursuant to paragraph (1) of subsection a. of this section and serving on the effective date of P.L.2011, c.78 are terminated as of that effective date. A member terminated pursuant to this subsection shall be eligible for reappointment.
d. The co-chairs of the council may establish such committees as deemed necessary for the council to perform its duties. Any committee within the council shall be comprised of no more than half of the council members who were appointed by the Governor or from one of the appointees designated from one of the retirement boards in accordance with paragraph (1) of subsection a. of this section, and no more than half of the remaining appointees.
(cf: P.L.2011, c.78, s.28)
2. Section 13 of P.L.1950, c.270 (C.52:18A-91) is amended to read as follows:
13. a. The State Investment Council shall consult with the Director of the Division of Investment from time to time with respect to the work of the division. It shall have access to all files and records of the division and may require any officer or employee therein to provide such information as it may deem necessary in the performance of its functions. The council shall have authority to inspect and audit the respective accounts and funds administered through the Division of Investment. It shall formulate and establish, and may from time to time amend, modify or repeal, such policies as it may deem necessary or proper, which shall govern the methods, practices or procedures for investment, reinvestment, purchase, sale or exchange transactions to be followed by the Director of the Division of Investment established hereunder, except that the provisions of this subsection shall not apply to the operations account of Common Pension Fund L established pursuant to section 6 of P.L.2017, c.98 (C.5:9-22.10). Notwithstanding any provision of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) to the contrary, the council may adopt, immediately upon filing with the Office of Administrative Law such policies and regulations relating to the investment account, established pursuant to section 6 of P.L.2017, c.98 (C.5:9-22.10), as are necessary to implement that section, which regulations shall be effective for a period not to exceed 12 months following adoption, and may thereafter be amended, adopted, or readopted by the council in accordance with the requirements of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.).
b. On or before January first of each year, and at such other times as it may deem in the public interest, the council shall report to the Governor, the Legislature, and the State Treasurer with respect to its work and the work of the Division of Investment. In addition to the reports specified above and in section 14 of P.L.1950, c.270 (C.52:18A-92), the council shall issue a report by March 1 of each year on the investment activities for the prior State fiscal year, which shall include a summary of the current investment policies and strategies of the council and those in effect during the prior State fiscal year, a detailed summary for each financial product of the amount invested, performance benchmarks, and actual performance during the State fiscal year. The report shall be submitted to the Governor, the Legislature, and the State Treasurer, and shall be made available to the public through the official Internet site of the State. In addition, the council shall issue a report listing, in the aggregate and segregated by asset class, the investment returns achieved by the State-administered retirement system funds under the council's supervision by external managers and alternative investment managers, as appropriate. As part of any contract between the council and an external manager, or alternative investment manager, or both, as appropriate, for the investment of State-administered retirement system funds executed after the effective date of P.L.2017, c.277, the council shall require the external manager, or alternative investment manager, or both, as appropriate, to disclose the rate and amount of fees charged by the external manager, or alternative investment manager, or both, as appropriate, including performance-based earnings and carried interest. The council shall include such rate and fees in the council's report and shall submit the report to the boards of trustees of each State-administered retirement system mentioned in the report and to the Division of Pensions and Benefits, which shall post the report on its Internet website in the same location as other reports and analyses produced by the division.
c. The council shall hold a meeting each year that shall be open to the public, and shall accept comments from the public at such meeting. The matters that shall be open to discussion and public comment during this annual meeting shall include the investment policies and strategies of the council, the investment activities of the council, the financial disclosure statements filed by council members, and the certification of contributions filed by external managers and alternative investment managers, as appropriate, as well as other appropriate matters concerning the operations, activities and reports of the council.
d. An external manager, or alternative investment manager, or both, as appropriate, shall be required to file a certification before being retained, and annually thereafter, that discloses the political contributions made, during the 12 months preceding the certification, by the manager or the manager's firm, or a political committee in which the manager or firm was active. The certification shall specify the political contributions made to candidates for elective public office in this State and any political committee established for the support of such candidates, and contributions made for the transition and inaugural expenses of any candidate who is elected to public office. As used in this subsection, "contribution" and "political committee" shall have the meaning set forth in "The New Jersey Campaign Contributions and Expenditures Reporting Act," P.L.1973, c.83 (C.19:44A-1 et al.). This certification shall be in addition to any other such disclosure required by law or executive order of the Governor.
(cf: P.L.2017, c.277, s.2)
3. The terms of office of the members of a State Investment Council appointed pursuant to the provisions of section 5 of P.L.1950, c.270 (C.52:18A-83) shall terminate on the effective date of this act and those people appointed pursuant to that act shall cease to be members of the council. Notwithstanding the criteria established in section 1 of P.L. , c. (pending before the Legislature as this bill), existing members may be reappointed to the council.
4. (New section) a. Within 90 days of the effective date of P.L. , c. (pending before the Legislature as this bill), the Division of Investment shall develop a comprehensive plan for the State Investment Council to assess and identify the environmental, social, and governance, hereinafter "ESG," risk and exposure characteristics of managed investment portfolios. The plan shall include a minimum of three subscription options for an ESG ratings resource that will provide the division with access to ESG information and data to assess the managed investment portfolios.
b. Within 90 days of receiving the plan from the division, the State Investment Council shall vote to approve the plan, with or without amendments in the council's discretion, including the budgeted acquisition of a resource as selected by the division.
c. Upon approval of the plan, the division shall prepare and submit to the State Investment Council an ESG assessment analysis to accompany each prospective investment. The analysis shall detail ESG and other risk factors of the investment in addition to risks to the managed investment portfolios. The investment policy sub-committee of the council, or its successor, shall consider the analysis prior to the council's consideration of the analysis.
5. This act shall take effect immediately.
STATEMENT
This bill adjusts the membership of the State Investment Council. The State Investment Council presently has sixteen members, eight of whom are appointed directly by the Governor. This bill would decrease the members appointed by the Governor to five members, and it would increase the number of New Jersey State AFL-CIO members to five members. This adjustment to the membership of the council would reflect more parity in representation between employer membership and labor membership, comparable to the membership of the State Health Benefits Plan Design Committee.
Additionally, under this bill, the Governor would no longer be responsible for appointing the labor membership of the council. This change is also comparable to the manner of appointment for the State Health Benefits Plan Design Committee.
Further, the bill provides for co-chairs of the council, rather than one chair under the current law. Additionally, the bill allows the Governor to remove members based on the member's egregious conduct, rather than "for cause" as is the standard in current law.
The bill also adds the term "alternative investment managers" to be used in connection with the term "external managers" that is incorporated in current law, for the reports, contracts, and reviews of the State Investment Council because the Division of Investment recognizes alternative investment funds in addition to conventional investments.
Finally, the bill provides for the Division of Investment, in conjunction with the State Investment Council, to develop a plan to assess and identify the environmental, social, and governance, or "ESG," risk and exposure characteristics of managed investment portfolios. This provision is in response to the United States Department of Labor's 2015 guidance on economically targeted investments in retirement plans covered by the Employee Retirement Income Security Act (ERISA).
