CHEYENNE – Members of the Joint Appropriations Committee have fine-tuned a proposal to expand investments of Wyoming’s “rainy-day” fund. The bill making its way to the Legislature in 2019 now includes guidelines that seek to balance ensuring a large pool of money is readily available in times of emergency while still trying to increase Wyoming’s investment income.
Legislators worked last week to try to find the right balance of risk and reward for investments coming out of the Legislative Stabilization Reserve Account, also referred to as the LSRA. The fund has often been used by lawmakers to fill funding gaps or other unmet state expenses.
Rep. Bob Nicholas, R-Cheyenne, said lawmakers and the state Treasurer’s Office agreed the state should look for ways to open up investments from the LSRA.
“Because of the size of the balance of the LSRA, it does not make sense to not maximize the interest in income off of that fund in such a way that we increase revenues. But also to (invest) it in a way that minimizes any type of risk so that we don’t lose money in that process,” Nicholas said during the Friday meeting. “There needs to be a base amount liquidity to cover other obligations and duties, which is the very purpose of the LSRA.”
Currently, the fund has about $1.5 billion in the bank after the Legislature in 2018 spent several hundred million dollars to help fund various government programs.
Investments from the LSRA are currently constitutionally limited to fixed-income assets like government bonds. Both the House and Senate would have to vote by a two-thirds majority in the Legislature to approve changing the constitutional restrictions on the LSRA.
The proposed bill that gained sponsorship from the JAC on Friday would set aside $500 million from the account to be invested in short-term fixed income investments like government bonds. Those investments are considered both more secure and more liquid, meaning Wyoming can easily access it to help pay the state’s bills.
Above that $500 million, the bill would allow the state to invest 55 percent of the remaining unobligated money left in the account to be invested in equities including company stock.
“The rest of the investments will be in some form of fixed-income (investments),” said Betsy Anderson, general counsel for the Treasurer’s Office.
Anderson said for those fixed-income investments, the Treasurer’s Office would continue to work with the Legislature to understand how much money Wyoming would need on hand when planning the budget. The office would then invest in short-, medium- or long-term fixed income investments based on the needs of the Legislature.
The bill also would create an annual report for the JAC on how investments from the LSRA were performing, and whether the investment strategy was in line with a newly created policy statement that outlined the importance of long-term security.
The report and investment statements were something that State Treasure and Gov.-elect Mark Gordon said were vital if riskier investments were going to be considered for the LSRA during his testimony on the bill last week.