COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.:2894H.01I Bill No.:HB 1937 Subject:Retirement Systems and Benefits - General; Retirement - Schools; Employees -
Employers; Teachers
Type:Original Date:January 17, 2024Bill Summary:This proposal modifies provisions related to proxy voting and fiduciary
investment duties for certain public employee retirement and pension
systems.
FISCAL SUMMARY
ESTIMATED NET EFFECT ON GENERAL REVENUE FUNDFUND AFFECTEDFY 2025FY 2026FY 2027Total Estimated Net
Effect on General
Revenue $0$0$0
ESTIMATED NET EFFECT ON OTHER STATE FUNDSFUND AFFECTEDFY 2025FY 2026FY 2027Total Estimated Net
Effect on Other State
Funds $0$0$0
Numbers within parentheses: () indicate costs or losses. L.R. No. 2894H.01I
Bill No. HB 1937
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ESTIMATED NET EFFECT ON FEDERAL FUNDSFUND AFFECTEDFY 2025FY 2026FY 2027Total Estimated Net
Effect on All Federal
Funds $0$0$0
ESTIMATED NET EFFECT ON FULL TIME EQUIVALENT (FTE)FUND AFFECTEDFY 2025FY 2026FY 2027Total Estimated Net
Effect on FTE 000
☐ Estimated Net Effect (expenditures or reduced revenues) expected to exceed $250,000 in any
of the three fiscal years after implementation of the act or at full implementation of the act.
☐ Estimated Net Effect (savings or increased revenues) expected to exceed $250,000 in any of
the three fiscal years after implementation of the act or at full implementation of the act.
ESTIMATED NET EFFECT ON LOCAL FUNDSFUND AFFECTEDFY 2025FY 2026FY 2027Local Government$0$0$0 L.R. No. 2894H.01I
Bill No. HB 1937
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FISCAL ANALYSIS
ASSUMPTION
Officials from the Joint Committee on Public Employee Retirement (JCPER) state this
proposal has no direct fiscal impact to the JCPER. The JCPER’s review of this legislation
indicates it will not affect retirement plan benefits as defined in Section 105.660(9).
Officials from the Missouri State Employee's Retirement System, Kansas City Public School
Retirement System, City of Kansas City, City of Osceola, Northwest Missouri State
University, University of Central Missouri and the Metro St. Louis Sewer District
Employees Pension Plan each assume the proposal will have no fiscal impact on their
respective organizations.
Officials from MoDOT & Patrol Employees’ Retirement System state this proposal, if
enacted, would modify provisions related to proxy voting and fiduciary investment duties for
public retirement plans. Specifically, the proposed provision addressing the approach to
environmental, social, and governance (ESG) issues would exclude those issues from
consideration if consideration would override the investment fiduciary’s duty as otherwise
defined in section 105.688.
The second proposed amendment to section 105.688 states that the investment fiduciary shall not
be subject to divestment legislation.
Proposed section 105.692 defines how proxy voting should be handled, in general and
specifically where (ESG) issues are a factor. In this case, voting shares for the purpose to further
ESG is prohibited.
The changes proposed in this bill would have the effect of managing matters that are currently
politically and socially important without the negative impact of more restrictive legislation on
public retirement system investments.
Officials from Public Schools and Education Employee Retirement Systems state this
legislation as currently drafted has no substantial fiscal or operational impact on PSRS or PEERS
of Missouri.
Officials from the Sheriffs' Retirement System state this proposal may have a negative impact
if this legislation passes. The Retirement system hires investment managers to invest its assets
based on the investment policy. Setting constraints on investment guidelines has a potential of
limiting investment earnings used to finance the retirement system. At the time the negative
impact is unknown. L.R. No. 2894H.01I
Bill No. HB 1937
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Officials from the University of Missouri System have reviewed this proposed legislation and
do not anticipate a significant financial impact.
Officials from the Employees Retirement System of the City of St. Louis state, the money
managers hired by the Board also vote proxies on the System’s behalf. The System’s only
requirement for voting the proxies is that the vote be in the best interests of the System and its
participants. By requiring or prohibiting certain considerations which could be viewed by the
money managers as in the best interests of the System and its participants or creating economic
value, you restrict the money manager’s ability to vote the proxies in a manner that may enhance
shareholder value. It is speculative to put a dollar amount on such considerations, but it will cost
more to administer such considerations as money managers may be unwilling to accept the risk
associated with voting the proxies. This would require the System to hire a proxy voting
company and pay additional fees.
The representatives of Marquette Associates expressed their belief that requiring consideration of
such matters may prevent some investment managers from managing assets of Missouri public
pension plans and severely limit opportunities offered by commingled investment vehicles
(which are much more cost effective for smaller public pension plans like the System). Proposed
pieces of legislation which impose financial penalties on investment fiduciaries who take these
matters into consideration may have a chilling effect on the number of money managers willing
to provide services to Missouri public pension plans. The money managers may decide not to
take on risk when public pension plans in other states don’t have financial penalties.
In response to a similar proposal, SB 1113 (2024), officials from the Kansas City Employees'
Retirement System, Kansas City Firefighter's Pension System, Kansas City Supplemental
Retirement Plan and the Rock Community Fire Protection District Retirement Plan each
assume the proposal will have no fiscal impact on their respective organizations. Oversight does
not have any information to the contrary. Therefore, Oversight will reflect a zero impact in the
fiscal note for these agencies.
Oversight assumes this proposal may limit investment decisions to already established fiduciary
duties. Based on the majority of responses, Oversight assumes this proposal would not have a
material direct fiscal impact.
FISCAL IMPACT – State GovernmentFY 2025
(10 Mo.)
FY 2026FY 2027$0$0$0 L.R. No. 2894H.01I
Bill No. HB 1937
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FISCAL IMPACT – Local GovernmentFY 2025
(10 Mo.)
FY 2026FY 2027$0$0$0
FISCAL IMPACT – Small Business
No direct fiscal impact to small businesses would be expected as a result of this proposal.
FISCAL DESCRIPTION
The proposed legislation appears to have no direct fiscal impact.
This legislation is not federally mandated, would not duplicate any other program and would not
require additional capital improvements or rental space.
SOURCES OF INFORMATION
Joint Committee on Public Employee Retirement
Missouri State Employee's Retirement System
MoDOT & Patrol Employees’ Retirement System
Public Schools and Education Employee Retirement Systems
Kansas City Employees' Retirement System
Kansas City Firefighter's Pension System
Kansas City Supplemental Retirement Plan
Rock Community Fire Protection District Retirement Plan
Sheriffs' Retirement System
Employees Retirement System of the City of St. Louis
Metro St. Louis Sewer District Employees Pension Plan
City of Kansas City
City of Osceola
Julie MorffRoss StropeDirectorAssistant DirectorJanuary 17, 2024January 17, 2024