June 12, 2007, Introduced by Reps. Knollenberg, Alma Smith, Young, Cushingberry, Vagnozzi, David Law, Hildenbrand, LaJoy, Pearce, Pastor, Hune, Moss, Miller, Ward, Marleau, Calley, Green, DeRoche, Elsenheimer, Pavlov, Meltzer, Hoogendyk, Amos, Moore, Agema, Palsrok, Melton, Horn, Dean, Schuitmaker, Rick Jones, Moolenaar, Stahl, Opsommer, Brandenburg, Stakoe, Booher, Meisner, Wojno, Leland, Tobocman, Hansen, Ball, Nitz, Garfield, Johnson, Huizenga, Brown, Kathleen Law, Warren, Donigan, Meadows, Espinoza, Bennett, Jackson, Shaffer, Byrnes, Clack, Corriveau, LeBlanc, Hammel, Condino, Emmons and Casperson and referred to the Committee on Government Operations.
A bill to amend 1965 PA 314, entitled
"Public employee retirement system investment act,"
(MCL 38.1132 to 38.1140m) by adding section 13c.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 13c. (1) As used in this section:
(a) "Company" means a union or association of persons for
carrying on a commercial or industrial enterprise. Company
includes, but is not limited to, a partnership, association,
corporation, limited liability company, or joint stock company.
(b) "Franchise" means an agreement under which the franchisee
undertakes to conduct a business or sell a product or service in
accordance with the methods or procedures prescribed by the
franchisor and under which the franchisor undertakes to assist the
franchisee through advertising, promotion, and other advisory
services.
(c) "Iran" means the Islamic republic of Iran.
(d) Notwithstanding anything to the contrary in section 12c,
"investment" means utilization of money in the expectation of
future returns in the form of income or capital gain. Investment
does not include the importation or exportation of goods.
(e) "Licensing agreement" means a contract with an individual
or company for the sale or lease of a license that permits the use
of a patent, trademark, or other technology by another individual
or company.
(f) "Management agreement" means a contract in which an
individual or company is chosen or appointed to manage, direct, or
administer the affairs of another individual or company.
(g) "North Korea" means the democratic people's republic of
Korea.
(h) "Retirement system" means the Michigan legislative
retirement system created by the Michigan legislative retirement
system act, 1957 PA 261, MCL 38.1001 to 38.1080, the retirement
system created under the fire fighters and police officers
retirement act, 1937 PA 345, MCL 38.551 to 38.562, the retirement
system created under the judges retirement act of 1992, 1992 PA
234, MCL 38.2101 to 38.2670, the retirement system created under
the state employees retirement act, 1943 PA 240, MCL 38.1 to 38.61,
and the retirement system created under the public school employees
retirement act of 1979, 1980 PA 300, MCL 38.1301 to 38.1408.
(i) "State sponsor of terrorism" means Iran, North Korea,
Sudan, or Syria.
(j) "Sudan" means the government in Khartoum, Sudan which is
led by the national congress party or a successor government formed
on or after October 13, 2006 and does not include the regional
government of southern Sudan.
(k) "Syria" means the Syrian Arab republic.
(2) Notwithstanding any other provision of this act, an
investment fiduciary for a retirement system shall not encourage or
condone governments that support terrorism and human rights abuses
by doing either of the following:
(a) Making a new investment of retirement system assets in
stock, securities, or other obligations of a franchise, company, or
other business located in a state sponsor of terrorism.
(b) Except as provided in subsection (3), failing to divest
retirement system assets in stocks, securities, or other
obligations of a national corporation of a state sponsor of
terrorism or a United States company listed in the register
described in subsection (4), as follows:
(i) Not less than 40% of the retirement system assets shall be
divested not later than 2 years after the effective date of the
amendatory act that added this section.
(ii) Not less than 60% of the retirement system assets shall be
divested not later than 3 years after the effective date of the
amendatory act that added this section.
(iii) Not less than 80% of the retirement system assets shall be
divested not later than 4 years after the effective date of the
amendatory act that added this section.
(iv) Not less than 100% of the retirement system assets shall
be divested not later than 5 years after the effective date of the
amendatory act that added this section.
(3) If the state treasurer determines that divestment would
jeopardize the fiscal integrity of a retirement system, the state
treasurer may extend for not more than 1 year the deadlines under
subsection (2)(b) for divestment of the assets of that retirement
system.
(4) The state treasurer shall develop and maintain a register
of United States companies that have 1 or more of the following:
(a) An investment in a state sponsor of terrorism.
(b) A franchise with an individual or company located in a
state sponsor of terrorism.
(c) A licensing agreement with an individual or company
located in a state sponsor of terrorism.
(d) A management agreement with an individual or company
located in a state sponsor of terrorism.
(5) The state treasurer shall provide the register described
in subsection (4) to each board of a retirement system. The
register shall be provided at least annually and whenever a change
is made in the register. The state treasurer shall also notify a
board of a system of those investments that the retirement system
has in a company included in the register.
(6) Not less than 90 days before the register is provided to
the boards of retirement systems as required by subsection (5), the
state treasurer shall provide the chief executive officer of each
United States company that is placed on the register and the
legislature with all of the following information:
(a) Notice that the company is being placed on the register.
(b) The reason why the company is being placed on the
register.
(c) The current value of system assets invested in the
company.
(d) Any other information that the state treasurer considers
necessary and appropriate.
(7) The state treasurer shall annually report to the senate
majority leader, the speaker of the house of representatives, the
senate minority leader, and the minority leader of the house of
representatives on divestment under this section. The report shall
include, but is not limited to, all of the following information:
(a) The progress of retirement systems in implementing the
divestment of assets under this section.
(b) The register described in subsection (4).
(c) The reason companies have been added to the register.
(d) The names of companies the state treasurer is considering
adding to the register.
(e) The amount of retirement system assets invested in
companies included in the register.
(f) The financial cost to the state of divestment under this
section.
(g) Any other information that the state treasurer considers
necessary or appropriate.
(8) The investment fiduciary of each retirement system shall
report annually to the governor and the senate majority leader, the
speaker of the house of representatives, the senate minority
leader, and the minority leader of the house of representatives any
gains or losses in the value of the investment portfolio of the
retirement system and in the portfolio's investment performance
attributable to the implementation of subsection (2). If there is
any gain in the value of the investment portfolio of the retirement
system or the portfolio's investment performance that is
attributable to the implementation of subsection (2), then these
gains shall be recorded annually and shall be used to compensate
for any losses or diminution of value attributable to the
implementation of subsection (2) in subsequent years.
(9) This section shall only apply until the state treasurer
determines and notifies the investment fiduciaries of the
retirement system that the former state sponsor of terrorism no
longer supports terrorist activity and no reasonable likelihood
exists that the former state sponsor of terrorism will support
terrorist activity in the future. The state treasurer may consult
with other departments and agencies, including, but not limited to,
the United States department of state, in making this
determination.
(10) This section does not alter or diminish the existing
fiduciary or statutory obligations and other terms, conditions, and
limitations on the investment of retirement system assets for the
exclusive interest and benefit of participants and beneficiaries of
the retirement system.