State Board of Investment billing, expenses, and reporting practices modifications

A bill for an act

relating to the State Board of Investment; modifying practices for billing, expenses,

and reporting; amending Minnesota Statutes 2024, section 11A.07, subdivision 5;

Minnesota Statutes 2025 Supplement, sections 11A.04; 11A.07, subdivision 4.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2025 Supplement, section 11A.04, is amended to read:

11A.04 DUTIES AND POWERS; APPROPRIATION.

The state board shall:

(1) Act as trustees for each fund for which it invests or manages money in accordance

with the standard of care set forth in section
11A.09
if state assets are involved and in

accordance with chapter 356A if pension assets are involved.

(2) Formulate policies and procedures deemed necessary and appropriate to carry out

its functions. Procedures adopted by the
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state
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board must allow fund beneficiaries and

members of the public to become informed of proposed board actions. Procedures and

policies of the
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state
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board are not subject to the Administrative Procedure Act.

(3) Employ an executive director as provided in section
11A.07
.

(4)
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Employ
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Retain
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investment advisors and consultants as it deems necessary.

(5) Prescribe policies concerning personal investments of all employees of the
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state
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board to prevent conflicts of interest.

(6) Maintain a record of its proceedings.

(7) As it deems necessary, establish advisory committees subject to section
15.059
to

assist the
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state
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board in carrying out its duties.

(8) Not permit state funds to be used for the underwriting or direct purchase of municipal

securities from the issuer or the issuer's agent.

(9) Direct the commissioner of management and budget to sell property other than money

that has escheated to the state when the
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state
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board determines that sale of the property is

in the best interest of the state. Escheated property must be sold to the highest bidder in the

manner and upon terms and conditions prescribed by the
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state
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board.

(10) Undertake any other activities necessary to implement the duties and powers set

forth in this section.

(11) Establish a formula or formulas to measure management performance and return

on investment. Public pension funds in the state shall utilize the formula or formulas

developed by the state board.

(12) Except as otherwise provided in article XI, section 8, of the Constitution of the state

of Minnesota,
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employ
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retain
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, at its discretion, qualified
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private
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external
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firms to invest
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and
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,
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manage
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, or provide services with respect to
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the assets of funds over which the state board

has investment management responsibility.
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There is annually appropriated to the state board,

from the assets of the funds for which the state board utilizes a private investment manager,

sums sufficient to pay the costs of employing private firms. Each year, by January 15, the

board shall report to the governor and legislature on the cost and the investment
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The state

board must include in the report required under section 11A.07, subdivision 4, clause (8),

the management fees paid under this clause and the
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performance of each investment manager
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employed
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retained
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by the
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state
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board.

(13) Adopt an investment policy statement that includes investment objectives, asset

allocation, and the investment management structure for the retirement fund assets under

its control. The statement may be revised at the discretion of the state board. The state board

shall seek the advice of the council regarding its investment policy statement. Adoption of

the statement is not subject to chapter 14.

(14) Adopt a compensation plan setting the terms and conditions of employment for

unclassified employees of the state board pursuant to section
43A.18, subdivision 3b
.

(15) Contract, as necessary, with the board of trustees of the Minnesota State Colleges

and Universities System for the provision of investment review and selection services under

section
354B.25, subdivision 3
, and arrange for the receipt of payment for those services.

There is annually appropriated to the state board, from the assets of the funds for which

the state board provides investment services, sums sufficient to pay the
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costs of all necessary
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expenses
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for the administration
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of the
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state
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board
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, including any fees or expenses charged

by advisors, consultants, or external firms
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. These sums will be deposited in the State Board

of Investment operating account, which must be established by the commissioner of

management and budget
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in the special revenue fund
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.

Sec. 2.

Minnesota Statutes 2025 Supplement, section 11A.07, subdivision 4, is amended

to read:

Subd. 4.

Duties and powers.

The
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executive
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director, at the direction of the state board,

shall:

(1) plan, direct, coordinate, and execute administrative and investment functions in

conformity with the policies and directives of the state board and the requirements of this

chapter and of chapter 356A;

(2) prepare and submit biennial and annual budgets to the
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state
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board and with the

approval of the
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state
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board submit the budgets to the Department of Management and Budget;

(3) employ professional and clerical staff as necessary;

(4) report to the state board on all operations under the
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executive
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director's control and

supervision;

(5) maintain accurate and complete records of securities transactions and official

activities;

(6) establish a policy, which is subject to state board approval, relating to the purchase

and sale of securities on the basis of competitive offerings or bids;

(7) cause securities acquired to be kept in the custody of the commissioner of management

and budget or other depositories consistent with chapter 356A, as the state board deems

appropriate;

(8) prepare and file with the director of the Legislative Reference Library a report

summarizing the activities of the state board, the council, and the
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executive
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director during

the preceding fiscal year;

(9) include on the state board's website its annual report and an executive summary of

its quarterly reports;

(10) require state officials from any department or agency to produce and provide access

to any financial documents the state board deems necessary in the conduct of its investment

activities;

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(11) with respect to any fund for which the state board provides investment services,

modify the billing procedure or apportionment of expenses under subdivision 5 to the extent

the executive director determines is appropriate or necessary, with any such modification

consistent with the applicable duties in this chapter and section 356A.04;

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(11)
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(12)
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receive and expend legislative appropriations; and

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(12)
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(13)
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undertake any other activities necessary to implement the duties and powers

set forth in this subdivision consistent with chapter 356A.

Sec. 3.

Minnesota Statutes 2024, section 11A.07, subdivision 5, is amended to read:

Subd. 5.

Apportionment of expenses.

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(a)
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The annual expenses incurred by the
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State

Board of Investment will
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state board, including any fees or expenses charged by advisors,

consultants, or external firms, must
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be apportioned among
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the state general fund, the

retirement funds administered by the Minnesota State Retirement System, Public Employees

Retirement Association, and Teachers Retirement Association, and
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all
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other
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funds
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as follows:
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for which the state board provides investment services, in accordance with this subdivision.

There is annually appropriated to the state board, from the assets of all funds for which the

state board provides investment services, sums sufficient to pay the apportioned expenses.

These sums must be deposited in the State Board of Investment operating account, which

must be established by the commissioner of management and budget in the special revenue

fund. Those sums must be apportioned as follows:
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(1) on a biennial basis, the State Board of Investment, in accordance with biennial budget

procedures established by the commissioner of management and budget, may request a

direct appropriation that represents the portion of the State Board of Investment expenses

necessary to provide investment services to the state general fund. This appropriation must

be deposited in the State Board of Investment operating account;

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(2)
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(1)
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the executive director shall
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first
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apportion
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the actual
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expenses allocable solely

to a specific fund or in the case of multiple funds, among the funds proportionally based on

weighted average assets under management during the fiscal year; and
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(2) next, the executive director shall apportion the
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expenses incurred by the
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State Board

of Investment
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state board
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, less the
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charge to the state general fund
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charges apportioned

under clause (1) and accounting for any modification made pursuant to subdivision 4, clause

(11)
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, among the funds
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whose assets are invested by the State Board of Investment, with the

exception of the state general fund,
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for which the state board provides investment services,

with such expenses allocated proportionally
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based on the weighted average assets under

management during the fiscal year.
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The amounts necessary to pay these charges are

apportioned from the investment earnings of each fund. Receipts must be credited to the

State Board of Investment operating account;
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(3)
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(b)
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The
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actual
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expenses apportioned and charged to the funds
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under paragraph (a)
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,

with the exception of
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the state general fund and
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the retirement funds administered by the

Minnesota State Retirement System, Public Employees Retirement Association, and Teachers

Retirement Association, must be calculated, billed, and paid
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at least
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on a quarterly basis in

accordance with procedures for interdepartmental payments established by the commissioner

of management and budget
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; and
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. Sums received to pay the expenses must be deposited in

the operating account under section 11A.04.
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(4)
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(c)
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The annual estimated expenses to be incurred by the
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State Board of Investment
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state board
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that will be payable by the retirement funds administered by the Minnesota State

Retirement System, Public Employees Retirement Association, and Teachers Retirement

Association must be deposited in the State Board of Investment operating account
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under

section 11A.04
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on
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or about
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the first business day of each fiscal year. A reconciliation of the
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actual
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expenses
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allocable to each retirement fund
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compared to the
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applicable
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estimated
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costs
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expenses
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must occur
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at least annually
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at the end of
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each
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the
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fiscal year
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with any surplus or
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.

Any
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deficit
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being credited or debited to each of the respective funds. The State Board of

Investment must present a statement of accrued actual
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determined by such reconciliation

is due and payable to the State Board of Investment operating account promptly upon notice

of the amount due. Any fiscal year-end surplus may, at the executive director's discretion,

be retained in the operating account and credited against the following fiscal year's estimated
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expenses
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to
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of
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each
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respective retirement
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fund
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at the end of each quarter during each fiscal

year
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.
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The executive director must refund to the respective retirement fund any portion of

any surplus not credited against the following fiscal year's estimated expenses.
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