BCPL Candidates Answer WEMTA's Questions

The Offices of Attorney General, Secretary of State and State Treasurer are extremely important to the WEMTA because they serve on the Board of Commissioners of Public Lands (BCPL).One of the funds overseen by BCPL Commissioners is the Common School Fund (CSF).  

WEMTA surveyed every candidate for Attorney General, Secretary of State and State Treasurer ahead of the August 14 primary and again ahead of the November 6 general election about their positions on key BCPL and Common School Fund issues. Our general election questionnaire included one new question about the Legislative Council Study Committee on the Investment and Use of the School Trust Funds. 

Read their responses here.

And don't forget to vote on November 6!

BCPL, CSF Study Committee Gets Closer to Making Recommendations

The Legislative Council Study Committee on the Investment and Use of the School Trust Funds met on October 11 to discuss possible recommendations for legislation. 

Committee Chair Representative Katsma told the Committee that his goal is to figure out what tools they can give to BCPL to increase the return for school libraries. Many of the Committee members agreed with Representative Katsma's statement about maximizing returns for the Common School Fund and school libraries. Senator Taylor said she would like to get more money to schools libraries but doesn't want to effect the stability of the Common School Fund. She also said she wants to see time-frames and reporting requirements to ensure that all required deposits of fines and forfeitures are making it into the Common School Fund. Senator Stroebel said he is interested in moving the Common School Fund to the Endowment Model (note: this would require changing the state constitution).

Legislative Council staff told the Committee they have several options to change the investment strategy of the Common School Fund. They could introduce legislation to:

1.Codify some of things that BCPL is already doing in state statute. For example, BCPL crated a smoothing fund for the Common School Fund but that is not currently authorized in state statutes. 

2.Change the State Constitution to modify investment strategy of the Common School Fund.

3. Find a middle ground to make changes to the investment strategy without changing the Constitution. 

The Committee asked for BCPL to make a presentation at their next meeting on November 14 to answer some of their questions about their investment strategy and get their reaction to these options. 

The Committee reached consensus to draft legislation to allow banks to make loans to municipalities for longer than 10 year terms. 

The Committee discussed possibly capping the amount or size of Trust Fund Loans BCPL can make, indexing their interest rates and requiring a pre-payment penalty on the loans. Senator Stroebel raised concerns about BCPL making pass-through loans. He said that BCPL can’t lend to an individual but that municipalities are getting loans and then using them to benefit a specific company or private developers.  The Committee did not reach consensus on these items yet. 

The Committee also heard from several presenters.

Chris Anton, Manager of Investments, Idaho Endowment Fund Investment Board, talked about Idaho's decision to amend their constitutions to facilitate investment of their trust funds. Anton said that prior to undertaking endowment reform, their trust funds were invested entirely in fixed income. As a result of their reforms, Idaho created both a land board and an investment board to help manage their trust funds. They adopted investment principles and goals and then amended their constitution. One of their goals is to provide consistent and sustainable distribution to beneficiaries. Unlike Wisconsin, Idaho have eight beneficiaries: public schools, several universities, two hospitals, a penitentiary fund, the school for the deaf and blind and a capital building fund.   Today their fund is invested in 66% equity, 26% fixed income and 8% real estate. Anton acknowledged that in years when the market is flat, they don't have much earnings but they do have a reserve fund. Idaho does not make loans to local governments but they do have a credit enhancement program for school districts who take out loans. 


Michael Wagner, Assistant Deputy Secretary, Department of Revenue (DOR) talked about DOR's role in administering the unclaimed property fund, which provides revenue to the Common School Fund. The unclaimed property program was transferred from the State Treasurer's Office to DOR in 2013. Wagner said DOR's annual projected payment to the CSF is between $26 million-$30 million over the next few years. DOR said that in recent years, the vast majority of matches for unclaimed property have been the result of incoming new unclaimed property. Senator Stroebel asked Wagner if other states have limitations on how long they can hold on to unclaimed property. DOR said that some states do have a statute of limitations on unclaimed property, so after 10-20 years if no one claims it it goes to their version of BCPL. 

Susan Gary, Orlando J. and Marian H. Hollis Professor of Law, University of Oregon walked the Committee through changes to investment strategies for trust funds and the prudent investor standard. Gary said the concept of the prudent investor has evolved over time. She said that early on, it was very focused on conservative investments. Fiduciary investors started to feel constrained by this standard, so they adopted the Uniform Prudent Investor Act, which allowed fiduciaries to consider factors carefully and make the best decision for a particular fund. Later on, the Uniform Prudent Management of Institutional Funds Act (UPMIFA) was adopted to allow for total return investing. UPMIFA directs the charity to spend from an endowment fund the amount determined to be “prudent for the uses, benefits, purposes, and duration for which the endowment fund is established.” Gary told the Committee that while these rules help set fiduciary standards, any type of state law or guidance document would trump them. She said that in Wisconsin our rules are in the constitution so that supersedes the Uniform Prudent Investor Act. Senator Taylor asked Gary if she thinks it's acceptable for a fund to use a more conservative approach to make sure it is able to deliver proceeds to its beneficiaries. Gary said that she thinks it’s reasonable to make a determination based on risk and how conservative that should be on one side or the other. She said that the important thing is to look at the fundamental purposes of the fund, and the policy needs to be good for the people who depend on the distributions.

Mark Ready, Professor and Chair, Department of Finance, Investments, and Banking, University of Wisconsin-Madison told the Committee about his role in consulting with BCPL on their investment policy. Ready said that when you set an investment policy, you think about the risk tolerance of the beneficiary. He said in Wisconsin, Libraries have a high dependence on this source of funding. A cut in this source of funding would be painful, so that is why it’s conservative strategy. Ready said that the perspective is that if it is difficult and painful for the beneficiary of the fund to take a big hit, the allocation should go much more heavily toward fixed income investments. He told the Committee if they want to move toward a more risky investment strategy, the beneficiaries better be able to handle a 12% drop in the portfolio. 

The Committee will meet again on November 14.

Study Committee on BCPL, CSF Meeting Today at 10!

The Legislative Council Study Committee on the Investment and Use of the School Trust Funds is meeting today from 10 a.m. to 4 p.m.

They will be discussing possible legislative options, which are outlined in this memo: https://docs.legis.wisconsin.gov/misc/lc/study/2018/1788/030_october_11_2018_meeting_10_00_a_m_room_411_south_state_capitol/001_oct4memo_trust

You can watch it live on Wisconsin Eye: http://www.wiseye.org/Live