CHEYENNE, Wyo. (AP) - State Treasurer Mark Gordon is proposing to change the Wyoming Constitution to allow a “rainy day fund” and other state funds to be invested at least partially in stocks to realize a better rate of return.
Wyoming lawmakers have squirreled away roughly $2 billion in the state’s Legislative Stabilization Reserve Fund. That balance is lumped together with state agency operating funds and other cash to form the state’s total “state agency pool,” which stood at just over $6.2 billion at the end of September.
The pool is a substantial piece of the state’s total financial pie. The only larger pots of state money are the $6.8 billion Permanent Mineral Trust Fund and the state’s combined pension plans, which stood at nearly $7.5 billion as of the end of last year.
But while the Permanent Mineral Trust Fund and the pension funds may be invested partially in stocks, Gordon said the state constitution currently restricts investments of the pool funds to fixed-income investments, such as bonds.
Accordingly, while the Permanent Mineral Trust Fund has been clocking about 12 percent annual growth, Gordon said the pool funds are gaining returns of only roughly half that much.
“Frankly, in my view, the best use from an investment standpoint is to be able to diversify prudently and thoughtfully,” Gordon said of the non-permanent funds.
The Legislature could impose safeguards, such as specifying a cap on the percentage of the non-permanent funds that could be invested in equities, Gordon said. If the Legislature approved the change, it would go before Wyoming voters for consideration in 2016.
“Assuming that the constitutional amendment allowed us to do that, we’d take that money and invest it more broadly,” Gordon said. “It wouldn’t be invested exactly the same way the permanent funds would be, because conceivably you might run into a rainy day, at which point you’d want to draw those funds out.”
As the Legislative Stabilization Reserve Fund approaches $2 billion, more politicians are calling for an open discussion about how big the fund should get and what it should be used for. Several Democratic legislators have been voicing concern for years that the state should spend more of the money on programs.
Sen. Eli Bebout, R-Riverton, is chairman of the Senate Appropriations Committee. The committee is set to consider Gordon’s proposal at a Nov. 17 meeting in Casper.
In a telephone interview Friday, Bebout said he supports seeing the state get a better return on its money. Yet he said he’s familiar with the cyclical nature of Wyoming’s economy and believes the state needs to maintain a healthy balance in its rainy-day account against inevitable downturns.
He would favor discussing in the coming legislative session how much the state should have in the Legislative Stabilization Reserve Fund and over what time period, Bebout said.
“Having said that, one of the things I think we need to do is look for a better return on our pooled income money, which includes the LSRA and other funds as well,” Bebout said. “The catch to that is we have to be smart about how we do it. I do support the idea, but also understand that you can’t have a lot of that money tied up in long-term investments. You may need some liquidity issues, so there’s a balance there.”
Gov. Matt Mead told reporters at a news conference in Cheyenne this week that he also wants to see the Legislature address the issue of how much to put in the Legislative Stabilization Reserve Fund and how to manage it.
“When I came into office, the rainy day fund, the LSRA, was around $800 million,” Mead said. “We’re just short of $2 billion now. I think it’s time for myself and the Legislature and the citizens to be asking the question: What is the appropriate amount of money in there? What is it going to be used for?”
While Mead said it’s great for the state to have so much in savings, he said, “we cannot forget that Wyoming is the state that is providing those funds, and we need to continue to invest back in Wyoming.”
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