Bill Text: NJ S714 | 2010-2011 | Regular Session | Introduced
Bill Title: Bars State from speculative investment of pension and annuity funds in oil futures.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2010-01-12 - Introduced in the Senate, Referred to Senate State Government, Wagering, Tourism & Historic Preservation Committee [S714 Detail]
Download: New_Jersey-2010-S714-Introduced.html
STATE OF NEW JERSEY
214th LEGISLATURE
PRE-FILED FOR INTRODUCTION IN THE 2010 SESSION
Sponsored by:
Senator JOSEPH PENNACCHIO
District 26 (Morris and Passaic)
SYNOPSIS
Bars State from speculative investment of pension and annuity funds in oil futures.
CURRENT VERSION OF TEXT
Introduced Pending Technical Review by Legislative Counsel
An Act barring the State from investing pension and annuity funds in oil futures, and supplementing P.L.1950, c.270.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. a. Notwithstanding any provision of law to the contrary, no assets of any pension or annuity fund under the jurisdiction of the Division of Investment in the Department of the Treasury, or its successor, shall be invested in any oil future.
b. As used in this section, "oil future" means a contract, agreement, or transaction for the future delivery of crude oil, gasoline, heating oil, or diesel fuel executed on a regulated trading facility; or a derivative, option contract or other financial product based, in whole or in part, on crude oil, gasoline, heating oil, or diesel fuel executed on a regulated trading facility. The term "oil future" also encompasses a commodity index fund trading in oil futures.
c. The State Investment Council and the Director of the Division of Investment shall take appropriate action to sell, redeem, divest or withdraw any investment held in violation of subsection a. of this section. This section shall not be construed to require the premature or otherwise imprudent sale, redemption, divestment or withdrawal of an investment, but such sale, redemption, divestment or withdrawal shall be completed not later than 90 days following the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill).
d. Within 30 days after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), the Director of the Division of Investment shall file with the Legislature, in accordance with section 2 of P.L.1991, c.164 (C.52:14-19.1), a report of all investments held as of the effective date that are in violation of subsection a. of this section.
The director shall notify the Legislature, in accordance with section 2 of P.L.1991, c.164 (C.52:14-19.1), of the full implementation of subsection c. of this section. That notification shall include a listing of all investments sold, redeemed, divested or withdrawn in compliance with subsection c. of this section.
e. State Investment Council members, jointly and individually, and State officers and employees involved therewith, shall be indemnified and held harmless by the State of New Jersey from all claims, demands, suits, actions, damages, judgments, costs, charges and expenses, including court costs and attorney's fees, and against all liability, losses and damages of any nature whatsoever that these State Investment Council members, and State officers and employees, shall or may at any time sustain by reason of any decision to restrict, reduce or eliminate investments pursuant to this act.
2. This act shall take effect immediately.
STATEMENT
This bill eases the unrelenting surge in gas prices by prohibiting the speculative investment of State pension and annuity funds in oil futures. The prohibition also covers the indirect investment of pension fund assets in oil futures through firms engaged by the State to provide investment services, such as hedge funds. The bill allows 90 days for the complete divestment of oil futures and imposes divestiture-related reporting requirements on the Director of the Division of Investment.
Soaring gasoline prices are inflicting harrowing agony on New Jersey drivers. At the pump, they are now paying 39 percent more per gallon of regular unleaded gas than a year ago, as average statewide prices have increased from $2.87 to $3.99 as of June 16, 2008. Because of pricier gasoline, a family who had a $4,800 annualized gasoline budget at last year's price of $2.87 per gallon (or $400 per month) now has to shell out $6,673 per year at $3.99 per gallon ($556 per month), all other factors being equal.
Unbridled speculation in oil futures has put drivers in this stranglehold. Having discovered oil as an investment vehicle, speculators have stampeded into the market with predictable results. Buoyed by hyperinflated demand, oil prices have rallied from one record to the next. To illustrate, the number of transactions involving oil futures on the New York Mercantile Exchange (NYMEX) has almost tripled since 2004. So have oil prices, which now trade in the $135 to $140 range per barrel. Tellingly, the amount investors have placed in commodity funds reportedly increased from $13 billion in 2003 to $260 billion in 2008.
This bill seeks to loosen the gradual strangulation of drivers by mandating that New Jersey pension funds cannot be invested in oil futures. If other states take the same stance and reduce the speculative demand for oil, drivers may eventually be able to breathe again.
