Memorandum WYOMING LEGISLATIVE SERVICE OFFICE - Wyoming Legislature
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
WY O M I N G L EG I S L A T I V E S E R V I C E O F F I C E
Memorandum
DATE August 14, 2020
TO Members Select Committee on Capital Financing and Investments
FROM Polly Scott, Senior Fiscal Analyst
SUBJECT Update on 2020 Adopted Legislation and FY2020 Spending Policy
A. 2020 Adopted Legislation Relating to Investments
HB 160 Background checks – state treasurer’s office
The act authorizes the State Treasurer to obtain the financial and criminal background history of its
employees, interns, and applicants for reemployment. The act requires the State Treasurer’s Office
employees who have access to confidential financial, accounting or investment information or records to
submit to fingerprinting for purposes of criminal background checks. The act authorizes the Division of
Criminal Investigation to disseminate criminal history records to the State Treasurer’s Office.
There is no fiscal impact resulting from this adopted legislation. The bill was sponsored by the Select
Committee on Capital Financing and Investments (Select CapFin).
HB 161 Reserve accounts- investments
Under prior law, the Reserve Accounts for the Permanent Wyoming Mineral Trust Fund (PWTMF) and the
Common School Account in the Permanent Land Fund (CSPLF) may not be invested in equities as they
are non-permanent funds of the state. Under Article 16, Section 6 of the Wyoming Constitution, non-
permanent funds may only be invested in common stock and other equities if the Legislature authorizes the
investment by a two-thirds (2/3) vote of the members elected to both houses voting separately. The act,
adopted in accordance with the constitutional requirement, authorizes a portion of the Permanent Wyoming
Mineral Trust Fund Reserve Account (PWMTF RA) and the Common School Permanent Land Fund
Reserve Account (CSPLF RA) to be invested in equities, including stock of corporations. The act also
specifies that the investment earnings on the PWMTF RA and the CSPLF RA shall be retained in each
account, respectively.
As a result of this adopted legislation in June 2020, $6.5 million was deposited to two reserve accounts
instead of the General Fund for fiscal year (FY) 2020 as shown in Table 1. This is less than the estimated
amount of $12.7 million, as the Treasurer’s Office deposited a proportionate share of the income earned
during FY 2020. This bill was effective immediately and was also sponsored by the Select CapFin
Committee.
LSO BUDGET/FISCAL SECTION • 200 W. 24TH STREET • CHEYENNE, WYOMING 82002
TELEPHONE (307)777-7881 • E-MAIL LSO@WYOLEG.GOV • WEB SITE WWW.WYOLEG.GOVAugust 14, 2020 • PAGE 2 OF 4
Table 1. Income Deposits to the PWMTF RA and CSPLF RA
FY 2020 FY 2020
Actual Impact Estimated Impact
PWMTF Reserve Account deposit 6/2020 $3,527,290 $6,900,000
CSPLF Reserve Account deposit 6/2020 $2,992,525 $5,800,000
Total $6,519,815 $12,700,000
Source: WOLFS data for actual transactions and LSO Fiscal Profile 5/26/2020
HB 162 State trust lands – proposals and study
The act requires the Office of State Lands and Investments (OSLI) to solicit proposals for potential
development opportunities for school trust land parcels and state trust lands in Teton County for potential
development to maximize the value of each parcel to its greatest extent. The act requires OSLI to review
all submitted proposals and to develop a report with preliminary plans and recommendations for developing
the parcels identified in the proposals, including opportunities for transferring, leasing, developing or
exchanging the parcels, the impacts associated with the possible opportunities and the costs and sources of
revenue from the opportunities. The act allows OSLI to engage with research firms and consultants to
solicit proposals and prepare the proposed plan. The act requires the plan that OSLI prepares to ensure that
any development opportunity would retain all of the state’s royalty and income interests and would include
only feasible proposals. Throughout the proposal process, OSLI must consult with agencies and local
governments and engage in good faith negotiations with Teton County’s commissioners, recognizing the
objectives of Teton County’s comprehensive master plan. OSLI must provide regular updates to the Joint
Appropriations Committee and the Select Committee on Capital Financing and Investments and must
provide the final version of the plan to both committees by October 31, 2020.
The fiscal impact of this adopted legislation thus far is $75,000 in General Funds, which was appropriated
to OSLI for the related study. This bill was sponsored by the Select CapFin Committee.
HB 164 Investment of public funds
The act makes several clarifications and requires reporting upon request by the committee:
• Specifies the State Treasurer is responsible for the investment of state funds;
• Requires retention of a designated chief investment officer within the State Treasurer’s Office;
• Revises requirements for the adoption of investment policy statements to include consultation with
the Investment Funds Committee (IFC);
• Requires review and recommendation by the IFC of new investments in alternative assets;
• Amends the membership and duties of the IFC;
• Revises reimbursement of expenses for IFC members;
• Authorizes the State Loan and Investment Board to hold an executive session meeting to receive
education regarding investment managers and to interview investment managers.
The fiscal impact of this legislation is the appropriation of $75,000 for FY 2020 to be used to reimburse
expenses of the IFC members. This bill was sponsored by the Select CapFin Committee.
W Y O M I N G L E G I S L A T I V E S E R V I C E O F F I C E Memorandum
LSO BUDGET/FISCAL SECTION • 200 W. 24TH STREET• CHEYENNE, WYOMING 82002
TELEPHONE (307)777-7881 • E-MAIL LSO@WYOLEG.GOV • WEB SITE WWW.WYOLEG.GOVAugust 14, 2020 • PAGE 3 OF 4
HB 53 Education accounts – investment earnings
This legislation was sponsored by the Joint Appropriations Committee. It amended the law to direct the
investment earnings of the School Capital Construction Account (SCCA) and the Common School
Permanent Fund Reserve Account (CSPLF RA) to the respective accounts instead of the General Fund.
Because the legislation went into effect as of July 1, 2020 it is too soon to report on the specific dollar
impact. The fiscal impact should be trackable for fiscal year 2021 and forward.
HB 136 Unclaimed property funds – investments
This legislation was sponsored by the Joint Appropriations Committee. The Uniform Unclaimed Property
Act requires all abandoned and unclaimed property to be held by the State Treasurer for the owner’s benefit
until claimed by the owner. This legislation authorizes the State Treasurer to invest up to 50 percent of the
unclaimed property funds in the Pool A Investment Account, which authorizes investment of up to 70
percent of the funds in Pool A in equities.
Because the legislation went into effect as of July 1, 2020 it is too soon to report on the fiscal impact. The
specific fiscal impact of increased allocation to Pool A should be trackable for fiscal year 2021 going
forward.
B. Spending Policy Flowcharts and FY2020 Results
The Legislature established in statute the amount that can be spent annually from the following accounts:
PWMTF, CSPLF, Excellence in Higher Education Endowment and Hathaway Student Scholarship
Endowment. This is known as the Spending Policy Amount (SPA). The actual SPA is calculated after the
fiscal year-end, based upon the average market value of the prior five years. The attached flowcharts depict
the amounts that flow through related accounts, summarize the spending policy for each fund and provide
a statutory reference. When reviewing the flowcharts, please note figures are rounded. Revisions may
occur and finalized results will be provided to the Committee at its November meeting along with estimated
income and distributions for FY2021.
Legislated changes to spending policies, which have not yet taken effect, are as follows:
• The PWMTF spending policy will be reduced to 4.75% for FY 2023 and 4.5% for FY 2024
and thereafter.
• The CSPLF spending policy will be reduced to 4.75% for FY 2025 and 4.5% for FY 2026
and thereafter.
• The Excellence in Higher Education Endowment spending policy was reduced from 5% to
4.75% in FY2019 and remains at that level.
• The spending policy for the Hathaway Student Scholarship Endowment operates
differently. In sum, the spending policy is equal to the scholarship obligations to the extent
sufficient investment earnings or, alternatively, the balance of the Hathaway Student
Scholarship Endowment Reserve Account is sufficient to cover the obligations.
W Y O M I N G L E G I S L A T I V E S E R V I C E O F F I C E Memorandum
LSO BUDGET/FISCAL SECTION • 200 W. 24TH STREET• CHEYENNE, WYOMING 82002
TELEPHONE (307)777-7881 • E-MAIL LSO@WYOLEG.GOV • WEB SITE WWW.WYOLEG.GOVAugust 14, 2020 • PAGE 4 OF 4
C. PWMTF RA Distribution Timing
The relevant statute and constitutional provision (quoted below) reference payout to the PWMTF RA on an
annual basis but is silent as to the frequency of transfers. A monthly, quarterly, or semi-annual payout
rather than at the end of the year could assist in the State’s cashflow during times of declining revenue.
The State Treasurer’s Office has volunteered to make monthly payments from the PWMTF RA for FY
2021, as sufficient revenues exist to make these payments. This approach requires some additional
administrative work throughout the year and at fiscal yearend. The Committee may want to review W.S.
9-4-719(b) and assess whether clarification to the timing of distributions from the PWMTF RA is
warranted. Additionally, a dialogue about this may fit well at a meeting that coincides with the State
Treasurer’s Office annual recommendations on spending policy typically at the November meeting of this
Committee.
W.S. 9-4-719(b) states in part,
There is created the permanent Wyoming mineral trust fund reserve account. Beginning
July 1, 2016 for fiscal year 2017 and each fiscal year thereafter, the state treasurer shall
transfer unobligated funds from this account to the general fund as necessary to ensure that
an amount equal to two and one-half percent (2.5%) of the previous five (5) year average
market value of the permanent Wyoming mineral trust fund, calculated on the first day of
the fiscal year, is available for expenditure annually during each fiscal year. As soon as
possible after the end of each of the fiscal years beginning on and after July 1, 2017, after
making any transfer required pursuant to paragraph (I) of this subsection, revenues in this
account in excess of one hundred fifty percent (150%) of the spending policy amount in
subsection (d) of this section shall be credited to the permanent Wyoming mineral trust
fund. For fiscal year 2020 and for each fiscal year thereafter… (emphasis added)
Article 15, Section 19 of the WY Constitution states in part,
The fund [PWMTF], including all monies deposited in the fund from whatever source,
shall remain inviolate. The monies in the fund shall be invested as prescribed by the
Legislature and all income from fund investments shall be deposited by the State Treasurer
in the general fund on an annual basis. (emphasis added)
W Y O M I N G L E G I S L A T I V E S E R V I C E O F F I C E Memorandum
LSO BUDGET/FISCAL SECTION • 200 W. 24TH STREET• CHEYENNE, WYOMING 82002
TELEPHONE (307)777-7881 • E-MAIL LSO@WYOLEG.GOV • WEB SITE WWW.WYOLEG.GOVSpending Policy for FY2020
Permanent Wyoming Mineral Trust Fund (PWMTF)
W.S. 9-4-719
The Spending Policy Amount (SPA) for FY2020 is 5% of the 5-year average market value of
the PWMTF corpus. W.S. 9-4-719(a) outlines the purpose of the spending policy as:
(a) The purpose of this section is to establish a spending policy for earnings on permanent fund
investments to provide, in descending order of importance:
(i) Consistent, sustainable flow of earnings for expenditure over time;
(ii) Protection of the corpus of the permanent funds against inflation; and
(iii) To the extent practicable, increases in earnings available for expenditure to offset
the effects of inflation.
Severance Taxes
PWMTF corpus
PWMTF Reserve Account*
Market value as of 6/30/2019 = $8.0 billion
FY2020 cap = $569.8 million
5-year average, 6/30/2019 = $7.6 billion
6/30/2020 est. available balance = $307.0 million
PWMTF Investment Earnings
Interest, dividends, and realized capital gains
FY2020 = $242.8
Guarantee to GF up to 2.5% per FY
General Fund
2.5%
FY2020 = $189.9 million Overflow above SPA**
Guarantees the
One-half of the amount over 2.5% and under the SPA is
difference
split evenly and deposited into the LSRA and SIPA.
between max
Legislative Stabilization Strategic Investments and amount and
Reserve Account (LSRA) Projects Account (SIPA) actual earnings
Up to 1.25% Up to 1.25% to SIPA
FY2020 = $26.4 million FY2020 = $94.9 million
School Major Maintenance SIPA Remainder
45% of SIPA 55% of SIPA
(For FY2021) 1. Wyoming State Penitentiary Capital
Construction Account
First $10 million
(For FY2021)
2. Legislative Deficit Control Account
65% of the remaining balance
(For FY2021)
Notes:
* For future years, the SPA will change as follows: FY2020-2022 = 5%, FY2023 = 4.75%, FY2024 = 4.5%
**Excess over 150% of the SPA in the PWMTF Reserve Account goes back to the PWMTF corpus.Spending Policy Reserve Account for FY2020
Common School Permanent Land Fund (CSPLF)
W.S. 9-4-719
The Spending Policy Amount (SPA) for FY2020 is 5% of the five-year average of the value of the
corpus.* W.S. 9-4-719(a) outlines the purpose of the spending policy as:
(a) The purpose of this section is to establish a spending policy for earnings on permanent fund
investments to provide, in descending order of importance:
(i) Consistent, sustainable flow of earnings for expenditure over time;
(ii) Protection of the corpus of the permanent funds against inflation; and
(iii) To the extent practicable, increases in earnings available for expenditure to offset the effects
of inflation.
Sale of school lands, at least 2/3 of production
and sale of state mineral royalties, easements,
surface damage payments, etc.
CSPLF Corpus*
Market value as of 6/30/2019 = $4.1 billion
5-year average, 6/30/2019= $3.8 billion
CSPLF Reserve Account**
CSPLF Investment Earnings FY2020 cap = $283.3 million
Interest, dividends, and realized capital gains 6/30/2020 est. available balance = $268.1 million
FY2020 = $138.4 million
Common School Land Income Fund
School Foundation Program (SFP)*** Federal Mineral Royalties****
5% of the 5-year average of the corpus
FY2020 = $188.9 million
Notes:
* Market value may be adjusted pending research on CSPLF II.
**The SPA is “guaranteed” from the CSPLF Reserve Account to the Common School Land Income Fund. The
excess within the CSPLF Reserve Account over 150% of the SPA is directed to the CSPLF corpus (automatic
appropriation).
***For future years, the SPA will change as follows: FY2020-2024 = 5%, FY2025 = 4.75%, FY2026 = 4.5%
****There is an automatic appropriation to the CSPLF Reserve Account from FMR amounts exceeding $200
million that would otherwise be deposited in the SFP for any amounts in excess of the SPA.Spending Policy Reserve Account for FY2020
Excellence in Higher Education Endowment Program
W.S. 9-4-719
The Spending Policy Amount (SPA) for FY2020 is 4.75% of the 5-year average market value of the
Excellence in Higher Education corpus. W.S. 9-4-719(a) outlines the purpose of the spending policy as:
(a) The purpose of this section is to establish a spending policy for earnings on permanent fund
investments to provide, in descending order of importance:
(i) Consistent, sustainable flow of earnings for expenditure over time;
(ii) Protection of the corpus of the permanent funds against inflation; and
(iii) To the extent practicable, increases in earnings available for expenditure to offset the effects
of inflation.
Excellence in Higher Education Corpus*
Market value as of 6/30/2019 = $121.3 million Overflow above 150% of the SPA
5-year average, 6/30/2019 = $119.5 million FY2020 = $0 million**
Excellence in Higher Education
Reserve Account
Excellence in Higher Education
FY2020 cap = $8.5 million
Investment Earnings
6/30/2020 est. available balance = $19.1 million
Interest, dividends, and realized capital gains
FY2020 = $16.2 million During the fiscal year,
insufficient funds in the expenditure
account are supplemented
Excellence in Higher Education
by the reserve account*** Interest earnings
Income Account
SPA (4.75%) for FY2020 = $5.7 above SPA
million****
2/3 of the SPA 1/3 of the SPA
amount goes to the amount goes to
University of the Community
Wyoming***** Colleges*****
Notes:
*A portion of the federal mineral royalties over the $200 million cap that would have been deposited in the School
Foundation Program Account were deposited in the Excellence in Higher Education fund (corpus) until the
maximum of $105 million was achieved. It was fully funded in FY2008.
** 2018 Session Laws, Ch.134, Sec. 300(e) specifies no funds within the reserve account shall be credited to the
corpus between March 15, 2018 and June 30, 2020.
*** Pursuant to W.S. 9-4-719(n) the supplement for insufficient funds from the Excellence in Higher Education
Reserve Account is limited to one-half of the difference between the investment income earned and the SPA.
**** STO reported a correction to the distribution amount for FY2019 of approximately $185,000 that impacts the
FY2020 distribution amount.
***** Pursuant to W.S. 21-16-1201(c), the institutions shall only expend 90% of the distributions in fiscal years in
which the SPA is reached or exceeded.Spending Policy Reserve Account for FY2020
Hathaway Student Scholarship Endowment Program
W.S. 21-16-1302
The Spending Policy Amount (SPA) for this account is established as the amount necessary to
fund scholarships for Wyoming students to attend the University of Wyoming and community
colleges, if students meet legislatively established criteria, pursuant to W.S. 21-16-1303 through
1306.
Hathaway Student Scholarship Corpus*
Market value as of 6/30/2019 = $595.9 million Overflow above the greater of $12
5-year average, 6/30/2019 = $581.0 million million or 4.5% of the 5-year
average value of the corpus
FY2020 = $0
Hathaway Student Scholarship Hathaway Student Scholarship
Investment Earnings Reserve Account
Interest, dividends, and realized capital gains FY2020 cap = $26.1 million
FY2020 = $17.0** 6/30/2020 est. available balance = $24.9 million
At the end of the fiscal year,
earnings and transfers in During the fiscal
excess of scholarships year, insufficient
awarded are directed to the funds in the
Hathaway Student reserve account expenditure account
Scholarships are supplemented by
Expenditure the reserve account
Account***
20% goes to Needs 80% goes to Other
based scholarships scholarships
Notes:
*A portion of the federal mineral royalties over the $200 million cap that would have been deposited in the School
Foundation Program Account were deposited in the Hathway Student Scholarship fund (corpus) until the maximum
of $400 million was achieved. It was fully funded in FY2007. Pursuant to 2008 Session Laws, Ch. 48, Section 3,
Section 027, Footnote 2, an additional $50 million was appropriated from the federal coal lease bonus sales to the
Hathaway Student Scholarship fund (corpus).
** Based on amount reported by STO which varies from actual transaction in WOLFS.
*** $18.3 million was paid out in scholarships in FY2020.You can also read
