By Otto Fajen, MNEA legislative director
Trustees present
Jason Steliga, Chair
Dr. Kyle Collins
Allie Gassman
Beth Knes, Vice-Chair
Dr. D. Eric Park
Katie Webb
Trustees absent
Sharon Kissinger
SYSTEM OPERATIONS
The Board meeting started at 8:30 a.m. The Board approved the minutes from the December 6, 2022, meeting and established the order of business.
INVESTMENTS
Investment Performance Report - Craig Husting and other staff reviewed the December 31, 2022, investment update and provided more recent information. The calendar year 2022 was one of the worst market years ever for both stocks and bonds. The overall performance for the Systems was -8.5%. In the first half of FY 2023, the Systems showed slight growth of 0.2%. Updated figures showed 4.0% growth through January 31, 2023.
Husting discussed the current asset allocation of the PSRS/PEERS portfolio, and reviewed the long-term strategy, portfolio themes, and broad portfolio expectations. The Systems have been implementing the increase of private risk assets toward the goal of 40% of assets. Private equity market valuations are done on a quarterly basis and thus lag slightly behind the response of other asset classes. The Systems continue to manage total assets with less risk and more return than other comparable plans over all periods of one year or longer.
Anti-Terrorism Policy - Mr. Husting reviewed the Systems’ Anti-Terrorism and Economic Sanction Investment Policy. The Policy requires PSRS/PEERS staff to provide a report to the Board on an annual basis that identifies any investment actions taken due to links to terrorist or sanction-related activities. No action by the Board is needed at this time.
Affirmative Action Policy - Mr. Husting reviewed the Systems’ Affirmative Action Policy and Procurement Action Plan. The Policy requires PSRS/PEERS staff to provide a report to the Board on an annual basis regarding the Systems’ efforts to assure equal opportunities for minorities and women as money managers, brokers, and investment counselors. The Systems are complying with the policy. No action by the Board is needed at this time.
ACCOUNTING
Banking Resolution – The Board approved an updated banking resolution to replace Bill Betts, who left employment with the Systems in December, and to include Sarah Swoboda, who now serves as Chief Operating Officer.
MANAGEMENT REPORT
Employer Services – Staff presented a report on the services that the Systems provide to employers, primarily to school districts, community colleges, and associations. The staff educate and communicate with employers and review submitted information. They also do the GASB68 report and year-end audit reports.
Legislative Update –The state’s General Revenue (GR) balance is currently about $5 billion, due to federal stimulus payments. Moody believes the state is at a high funding point and expects the tax cuts will start to reduce GR collections. However, state tax cuts will begin to reduce revenues. The top state income tax rate will drop from 5.3% to 4.95% for the tax year beginning in January 2023.
Mike Moorefield has moved to General Counsel, and Doug Nelson of Nelson-Clarkson is the Systems’ lobbyist. As of the meeting, PSRS is tracking 197 bills and has 17 fiscal note requests. There are 20 priority bills, including 9 investment mandates and proxy policies, five WAR bills, five 2.55%, and one benefit change. Moorefield gave a presentation on the new legislative leadership, including committee chairs, and mentioned leaders who are System members.
The state’s proposed budget is over $50 billion, and the DESE budget is 29% of the GR budget. The state will have to recalculate Medicaid eligibility, which will remove 200,000 Missourians.
Education themes for the legislative session include: open enrollment bills, HB 253 (Pollitt) and SB 5 (Koenig), transgender sports, and curriculum bans/parent access, SB 4 (Koenig). The chambers are moving their priorities and soon will turn to budget.
Regarding restrictions on investments, HB 769 (Owen) is consistent with Systems’ investment and proxy policy. HB 770 (Thompson) affects state agencies and environmental, social, and governance (ESG) policies. SB 377 (Coleman) would affect all contracting, is more prescriptive, and is more likely to have a negative impact and added cost. SB 436 (Carter) only affects pension systems and would have a negative impact and cost.
Moorefield mentioned various bills addressing PSRS/PEERS pension topics:
HB 257 (Pollitt) extends the critical shortage WAR period to four years.
HB 495 (Lewis) increases the earnings limit for PSRS retirees working in PEERS positions (the so-called “bus driver” bill) from $15,000 per year to the SS earnings limit and creates a 2.55% benefit factor for 32+ years of PSRS service.
HB 496 (Lewis) increases the “bus driver” PSRS retiree earnings limit, extends the critical shortage WAR to 4 years, and creates a 2.55% factor for 32+ years.
HB 867 (Gragg) allows extends the current temporary/substitute WAR provision for the next four years and also allows PSRS retirees unlimited WAR in PEERS positions during the next four years.
HB 905 (Dinkins) provides a 2.55% benefit factor for 32+ years of PSRS service.
SB 556 (Beck) has a three-year schedule increasing the benefit factor to 2.6% for 33+ years of service.
SB 339 (Razer) creates a divorce pop-up provisions for same-sex couples similar to the existing divorce pop-up.
SB 75 (Rusty Black) has a 2.55% factor, PSRS retiree earnings limit change, and critical shortage WAR for up to four years. Heard in Senate committee with no opposition.
Year in Review (Areas of Impact) - The report focused on various new projects undertaken by the Systems. The report mentioned key projects and impacts affecting five key areas: members and employers, staff, investments, Board members, and government relations.
Current CPI-U Update – The Board reviewed CPI-U data. The current fiscal year CPI-U is .1640 % through December 31, 2022. Under current policy, when the final CPI-U for a fiscal year is between 2.0% and 5.0%, the Board will make a COLA for eligible retirees of 2.0%. When the CPI-U is between 0.0% and 2.0%, the Board will make a COLA for eligible retirees of 2.0% when the cumulative CPI-U growth reaches or exceeds 2.0%.
Public Comment – There was no public comment.
The public meeting adjourned at 11 a.m., and the Board went into a closed session.
Find more reports posted at www.mnea.org/psrs.