| 122nd MAINE LEGISLATURE | |||||||||
| LD 1758 | LR 2471(01) | ||||||||
| An Act to Require the Maine State Retirement System To Divest Itself of Certain Holdings | |||||||||
| Fiscal Note for Original Bill | |||||||||
| Sponsor: Sen. Strimling of Cumberland | |||||||||
| Committee: Labor | |||||||||
| Fiscal Note Required: Yes | |||||||||
| Fiscal Note | |||||||||
| Undetermined future biennium cost increase -All Funds | |||||||||
| Fiscal Detail and Notes | |||||||||
| This legislation may increase costs to the State and other public employers who make contributions to the Maine State Retirement System to fund the pension benefits of State employees, teachers, judges, legislators and municipal employees. Although the total impact can not be determined at this time, the Maine State Retirement System has provided an assessment of the implications of this bill. | |||||||||
| First, divestiture of MSRS holdings in the nation of Sudan may result in the future investment performance of the MSRS Trust Funds being lower than the 8% projected investment return currently in place. A lower than anticipated return on investment will result in higher contributions from the State and other public employers. Although the actual impact of this measure on investment returns can not be determined at this time, the MSRS estimates that approximately $6.4 billion of its $9.5 billion in assets, or 67.4%, would be affected. | |||||||||
| A second implication is the one-time cost of the actual divestiture which the Retirement System estimates could range from $1.0 million to $2.2 million. | |||||||||
| Third, there may be a need for the Retirement System to replace a current portfolio manager with one that would be able to manage a portfolio that does not include any investments in the nation of Sudan. Although the actual cost is not known, the MSRS estimates the cost to be several million dollars. | |||||||||
| Fourth, the creation of "Sudan-free" portfolios will increase costs to the Retirement System from increased investment fees. The MSRS indicates that fees paid to managers of $2.25 billion in passive index funds will increase by one-third. The impact on fees associated with the $1.0 billion of other commingled funds that are actively managed can not be determined at this time. | |||||||||
| Finally, the Retirement System has identified a cost of approximately $84,000 per year to purchase lists that are needed in order to identify companies doing business in Sudan. | |||||||||