COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.:4835H.02I Bill No.:HB 2143 Subject:Banks and Financial Institutions; State Treasurer Type:Original Date:February 20, 2024Bill Summary:This proposal creates the "Foreign Adversary Divestment Act", requiring the
state and local government entities to divest from investments in foreign
adversaries.
FISCAL SUMMARY
ESTIMATED NET EFFECT ON GENERAL REVENUE FUNDFUND AFFECTEDFY 2025FY 2026FY 2027
General Revenue*
$0
(Unknown, could be
substantial)
(Unknown, could be
substantial)
Total Estimated Net
Effect on General
Revenue $0
(Unknown, could be
substantial)
(Unknown, could be
substantial)
*Oversight assumes the potential loss of investment returns and increased costs could result in an
increase in employer contributions for state agencies that could exceed $250,000.
ESTIMATED NET EFFECT ON OTHER STATE FUNDSFUND AFFECTEDFY 2025FY 2026FY 2027State Road Fund*
$0
(Unknown, could be
substantial)
(Unknown, could be
substantial)
Various Other State
Funds* $0
(Unknown, could be
substantial)
(Unknown, could be
substantial)
Total Estimated Net
Effect on Other State
Funds $0
(Unknown, could be
substantial)
(Unknown, could be
substantial)
*Oversight assumes the potential loss of investment returns and increased costs could result in an
increase in employer contributions for state agencies that could exceed $250,000.
Numbers within parentheses: () indicate costs or losses. L.R. No. 4835H.02I
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ESTIMATED NET EFFECT ON FEDERAL FUNDSFUND AFFECTEDFY 2025FY 2026FY 2027
Federal Funds*$0
(Unknown, could be
substantial)
(Unknown, could be
substantial)
Total Estimated Net
Effect on All Federal
Funds $0
(Unknown, could be
substantial)
(Unknown, could be
substantial)
*Oversight assumes the potential loss of investment returns and increased costs could result in an
increase in employer contributions for state agencies that could exceed $250,000.
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 2027
Local Government$0
(Unknown, could be
substantial)
(Unknown, could be
substantial) L.R. No. 4835H.02I
Bill No. HB 2143
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FISCAL ANALYSIS
ASSUMPTION
Officials from the Office of the State Treasurer assume no fiscal impact from the proposal.
Officials from the Missouri State Employee's Retirement System (MOSERS) state under this
proposed legislation adding new Section 1.2020, a state-managed fund, which includes funds
controlled by political subdivisions of the state or in which the state or political subdivision has
primary discretion or vested interest, would be:
(a) prohibited from holding investments in any foreign adversary (as listed and defined in
the bill), state-owned enterprise of a foreign adversary, company domiciled within a
foreign adversary, or a company owned or controlled by any of the preceding, or
other entity within a foreign adversary;
(b) prohibited from investing or depositing public funds in any bank domiciled or having
its principal place of business within a foreign adversary;
(c) required to immediately, in good faith, begin divestment of any prohibited holdings
with total divestment achieved two years after the effective date of this new section.
For purposes of the prohibitions in this section, “domiciled” is defined as the place in which a
company is registered, where the company’s affairs are primarily completed, or whether the
majority of its ownership is held.
Fiscal Impact – MOSERS makes the following assumptions and clarifications in providing this
fiscal impact estimate:
(1) The proposed legislation will apply to require divestment of current MOSERS
investments in Global Private Equities, Direct Hedge Funds, and Alternative Beta, and
prohibit such investments in the future with exposure as prohibited by this new section.
(2) The proposed legislation will not apply to MO Deferred Comp investments, which funds
ultimately belong to the deferred compensation participants, who direct their investment.
(3) The proposed legislation will require MOSERS to include, in any contract for an
investment in an asset class that could otherwise potentially result in an investment in a
restricted entity or restricted investment product, a provision requiring the manager to
waive its discretion to make such prohibited investments.
(4) The MOSERS Board of Trustees adopted the following on December 12, 2023, and
MOSERS is in the process of implementing this policy:
MOSERS staff shall act with all deliberate speed to divest from all Global Public Equity
investments in China:
motion;
months without Board approval:
o L.R. No. 4835H.02I
Bill No. HB 2143
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o
markets;
o
necessitated and would result in a realized loss, staff are required to notify
the Board. If, within two business days, four Trustees object, no further
action shall be taken until a special or regular meeting of the Board; and
after the adoption of this motion by the Board, meaning that the Emerging
Markets portfolio shall be constructed “ex China” from this point forward
and Taiwan shall be excluded from the definition of China for purposes of
implementing this motion.
(5) For purposes of this fiscal impact estimate, any short- and long-term fiscal impact that
MOSERS has incurred or would incur from the December 2023 policy has been excluded
from this estimate even though MOSERS has not yet fully implemented the policy and, if
this proposed legislation were enacted, such fiscal impact might be equally attributable to
this legislation.
(6) MOSERS is unclear the extent to which subsection 6 in this new section would limit the
divestment requirements and prohibitions in this bill or how it might protect investment
contracts pre-existing the bill’s effective date or in effect at the time of a governor’s
declaration as provided in subdivision (4) of subsection 2.
(7) The value of the MOSERS portfolio as stated in its 2023 Annual Comprehensive
Financial Report was $8.75 billion ($8,748,232,863).
To the extent any of its assumptions prove incorrect, MOSERS reserves the right to revise this
fiscal impact estimate accordingly.
As with other institutional investors, MOSERS hires external managers that invest across
different asset classes, such as private equity, hedge funds, private credit, etc., as these asset
classes cannot be directly implemented by MOSERS staff. These managers are investment
fiduciaries who act on behalf of the fund(s) they manage, which typically hold investments for
multiple investors in addition to MOSERS.
MOSERS anticipates that most or all top-tier investment managers will be unwilling to agree
contractually to waive their discretion to make investments in restricted entities or restricted
investment products as would be prohibited by this legislation, even if a manager had no
intention to make such an investment. Thus, the legislation will indirectly shrink MOSERS’s
investment opportunity set by eliminating, or at minimum severely limiting, MOSERS’s ability
to invest in Global Private Equities, Direct Hedge Funds, and Alternative Beta asset classes.
These asset classes combined make up 30% of its portfolio.
Private Markets
For private market investments, predicting the fiscal impact with certainty is challenging for
several reasons. First, the size and diversity of the private equity universe make it impossible to L.R. No. 4835H.02I
Bill No. HB 2143
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state reliably what investment opportunities might exist when the bill would be effected, but we
believe MOSERS’s ability to hire quality private market managers will be greatly diminished.
Second, we do not know future actual returns for any investment type. Despite these unknowns,
to the best of MOSERS’s ability, MOSERS has estimated a potential outcome for reallocating
the 15% of the MOSERS portfolio currently invested in Global Private Equities.
If MOSERS cannot invest in Global Private Equities at all as a result of managers’ unwillingness
to forgo their discretion, MOSERS instead would likely invest those dollars ($1.31 billion) in
Global Public Equities. According to Verus Advisory’s capital market assumptions, as of
December 2023, public equity is expected to earn at least 2.1% less per year than private equity
(estimated 9.0% return for private equities compared to 6.9% for public equities) each year for
the next 10 years. Therefore, we expect the future impact on investment in Global Private
Equities to have an estimated annual cost of at least $27.56 million per year resulting from its
investments currently in Global Private Equities being reallocated to comply with this legislative
proposal ($8.75 billion × 15% × 2.1%).
1
This result is more conservative than some estimates of
the private equity premium available over time.
In addition to the preceding recurring annual cost of divestment, the required divestment in this
proposed legislation of current Global Private Equities exposure that included any prohibited
foreign adversary exposure, the estimated short-term divestment impact would be
$99.60 million. This amount assumes that there would be 80% (0.80) of MOSERS’s original
committed investment amount ($415.00 million) remaining in market value that would have to
be divested at the end of the two-year deadline in the proposed legislation, forcing MOSERS to
sell its remaining stakes in these funds at a 30% loss (0.80 × $415.00 million × 0.30 =
$99.60 million).
Direct Hedge Funds and Alternative Beta
If MOSERS cannot invest in the Direct Hedge Funds and Alternative Beta asset classes as a
result of managers’ unwillingness to forgo their discretion, MOSERS would have to restructure
its portfolio to eliminate both, which together make up 15% of MOSERS’s overall investment
allocation. Their elimination would result in a long-term diminished rate of return following the
short-term costs of divestment to the portfolio.
For the past 5 years, Direct Hedge Funds and Alternative Beta asset classes have been a primary
driver of MOSERS’s excess return, or its out performance. Replacing these out-performing asset
classes with assets with a similar risk profile would require substituting and over-allocating to
other asset classes, which we believe would result in a portfolio with overall lower returns than
with a full opportunity set of managers, funds, and investments.
Hence, they expect that the future prohibition on investment in Direct Hedge Funds and
Alternative Beta would have an estimated annual cost ranging from $35.00 million to $65.00 L.R. No. 4835H.02I
Bill No. HB 2143
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million. This is based on their collective investment experience and knowledge as well as the
historical and expected returns of these investments compared with other permitted investments
with similar risks.
Summary
Based on the foregoing, they estimate that the annual cost to MOSERS from the proposed
legislation would be $77.56 million ($27.56 million (relating to moving assets from Global
Private Equities to Global Public Equities) + $50.00 million (the median estimated loss for
moving assets from Direct Hedge Funds and Alternative Beta)). Using the 10-year time frame
for the private equity over public equity estimated returns, the estimated cumulative loss in value
to the portfolio from the proposed legislation during that time frame would be $1.07 billion. See
Attachment A. This would be on top of the one-time cost of divestment, required to occur within
two years of the bill’s effective date. The estimated one-time cost would be $99.60 million for
Global Private Equities divestment.
The MOSERS Board of Trustees sets its portfolio asset allocation in consultation with external
investment consultants. From the asset allocation analysis, along with MOSERS’s actuarial
professionals, the Board also adopts actuarial assumptions including the assumed investment rate
of return (currently 6.95%). The Board would likely need to modify the asset allocation
significantly to achieve the expected 6.95%, lower the investment return assumption, or both,
should this proposal become law.
A reduction of this investment return assumption would increase the actuarial accrued liabilities,
causing an increase in the actuarially determined employer contribution and a decrease in the
funded ratio of the system, ultimately resulting in an increased cost to employers to fill a larger
gap between obligations and funding. At its September 2023 meeting, the Board adopted a
28.75% employer contribution rate for FY2025, but long-term diminished returns would cause
the Board to increase its rates.
Information supplied by MOSERS's external actuarial professionals indicates a 1% reduction in
MOSERS’s assumed portfolio valuation would increase the actuarial accrued liabilities by an
estimated $1.85 billion for FY2025. As a result, the employer contribution rate and employer
contribution dollars are projected as follows:
Employer
Contribution
Rate
Employer
Contribution
Dollars
Baseline - 6.95% -
FY25
28.75%$684,161,428
Reduced - 5.95% -
FY25
35.57%$846,456,417
INCREASE6.82%$162,294,989 L.R. No. 4835H.02I
Bill No. HB 2143
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Baseline - 6.95% -
FY26
30.25%$733,091,749
Reduced - 5.95% -
FY26
35.79%$867,350,535
INCREASE5.54%$134,258,786Baseline - 6.95% -
FY27
32.00%$790,719,979
Reduced - 5.95% -
FY27
35.51%$877,452,076
INCREASE3.51%$86,732,097Total Estimated 3-Year Increase$383,285,872
Total Estimated 10-Year Increase $926,003,600
Projections are based on the June 30, 2023 actuarial
valuation and assume that all assumptions are met in the
future. See
Officials from MoDOT & Patrol Employees’ Retirement System (MPERS) state HB 2143, if
enacted, would modify provisions related to public pension funds prohibiting investment activity
in countries designated as foreign adversaries. The countries include the following: China, North
Korea, Syria, Iran, Venezuela’s Maduro Regime, Cuba, Russia, or any other entity designated by
the governor in consultation with the attorney general. Within six months of the act’s effective
date, the state treasurer shall have identified all the companies domiciled in the countries
designated as foreign adversaries. Divestment of holdings related to these foreign adversaries is
required within two years of the effective date of this bill. HB 2143 would also require the
divestment of companies identified by the state treasurer and the prohibition from investing in
the future in the same companies.
Most of the foreign adversaries defined in the bill have existing and complete investment
prohibitions and financial sanctions enforced by the United States federal government, except for
China. While there are currently some investment prohibitions and trade restrictions against
China, investing in China has not been completely prohibited.
Fiscal Impact
To comply with this bill, MPERS would have to sell, at a minimum, all public and private
holdings in China and Hong Kong. MPERS currently owns approximately $48 million in
Chinese public equities, $40 million in Hong Kong public equities, and $19 million in Chinese
private equity. MPERS estimates lost profit of $4 million annually from selling public market
equities. This cost estimate takes the projected return of MCSI ACWI with China relative to the
MCSI ACWI without China. Selling Chinese private equity would result in an immediate loss of L.R. No. 4835H.02I
Bill No. HB 2143
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approximately $5 million and an additional estimated loss of $800,000 per year. In total, the lost
profit is estimated to be $5 million immediately and $4.8 million per year.
Estimating the cost of future divestment of or inability to invest in companies added by the
governor or the state treasurer in the future is an impossible task. Until additional companies or
foreign adversaries are identified for divestment, additional costs are indeterminable.
Officials from the University of Missouri state they have reviewed this proposed legislation. To
the extent this proposed statute would force divestment of private market vehicles (i.e., private
equity funds) within a two-year period, the costs to implement would be significant (potentially
in excess of $5 million).
Officials from Northwest Missouri State University assume additional costs and losses
depending on the timeline to divest or limiting only future investments.
Officials from the University of Central Missouri
Officials from the City of Kansas City state the proposal will have a negative fiscal impact of an
indeterminate amount.
Officials from the County Employees Retirement Fund (CERF) state they assume that the
language in subsection 3 prohibiting state-managed funds from holding investments in any
foreign adversary only applies to investments directly held by a state-managed fund and would
not apply to investments indirectly held by a state-managed fund in a mutual fund. Assuming
that this interpretation of the prohibition from holding these investments is accurate, HB 2143
would have no fiscal impact to CERF.
However, if the language in subsection 3 prohibiting state-managed funds from holding
investments in any foreign adversary would include or apply to investments indirectly held by a
state-managed fund in a mutual fund, then HB 2143 would likely require CERF to terminate
relationships with two investment managers and would likely have a negative fiscal impact to
CERF.
CERF’s investment portfolio includes two international equity funds. These funds are actively
managed. CERF’s third-party investment consultant has identified whether these international
equity funds include any investments in companies in countries prohibited by HB 2143. The
investment consultant has determined that these two international equity funds hold investments
in companies in countries that would be prohibited by HB 2143. As of the end of the third
quarter 2023, these investments comprise 0.31% of the total CERF investment portfolio.
Because these investment vehicles are structured as commingled investment funds, CERF would
be unable to divest these particular companies; instead, HB 2143 would require CERF to
terminate its relationship with the investment managers. CERF notes that it has worked with
these two investment managers on a long-term basis since 1998 and 2012. L.R. No. 4835H.02I
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Terminating these two investment managers would likely have a negative fiscal impact to CERF.
First, terminating the investment managers would require CERF to incur transaction costs and
would increase administrative work to CERF, its investment consultant, its investment custodian,
and the investment managers. Second, CERF would need to perform a manager search for
different international equity funds that would not invest in any companies in countries
prohibited by HB 2143. Given that HB 2143’s scope includes investments in the People’s
Republic of China, as described in the act, and China is the world’s second largest economy, it
may be difficult to identify two similar actively managed international equity funds in terms of
risk/return profile and fee structure that do not have investments in China; this may result in a
lower investment return. Third, the divestment and transition process may cause CERF to lose
out on investment return as assets would be sold and transferred to different investment
managers.
In addition, CERF notes that the prohibition on page 2, subsection 3, line 40 includes the phrase
“or other entity within a foreign adversary.” This phrase is not defined; CERF is unclear as to its
scope. CERF notes that this language seems broad and could be interpreted to apply to any
company that has a presence within a foreign adversary. For example, numerous US companies
have operations in China, such as Apple and General Motors, that could potentially be affected.
If this is the case, then this phrase may result in reducing a portion of the investable universe.
Officials from the Kansas City Civilian Police Employee’s Retirement System state divesting
from investments in state-owned or domiciled companies may have negative economic
consequences. The Police Retirement System of Kansas City and the Civilian Employees’
Retirement System of the Police Department of Kansas City invest in diverse portfolios to
maximize returns and optimize benefits for present and future retirees. Also, identifying and
monitoring investments related to foreign adversaries requires a sophisticated and constantly
updated system. Implementing and maintaining such a system would be resource-intensive and
may create economic challenges for the Retirement System. Engaging a third-party independent
research firm to identify companies that fit the criteria would incur additional costs, which
cannot be determined at this time.
Officials from the Kansas City Public Retirement System (KCPSRS) state there may be a
potential fiscal impact. Not able to estimate.
KCPSRS' various global or private equity managers may at times make an investment with a
company or entity domiciled within a "foreign adversary." Restricting such investment
opportunities may result in a lost investment opportunity resulting in a lower investment return
for the System.
Officials from the Public Schools and Education Employee Retirement Systems (PSRS) and
Public Education Employee Retirement System (PEERS) state this legislation, as currently
drafted, is expected to impact the PSRS and the PEERS, by adding additional investment
transaction costs and reducing the long-term investment earnings of the Systems in total. We
have included our understanding of the proposed changes and the overall analysis by the
Systems’ actuaries, PwC US. L.R. No. 4835H.02I
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HB 2143 would amend Chapter 1 of the Revised Statutes of the State of Missouri (“RSMo”) by
adding a new section 1.2020. The bill prohibits all public pension funds in the state of Missouri,
inclusive of PSRS and PEERS, from holding investments in any company domiciled within a
foreign adversary. Foreign adversary is defined in the bill as the People’s Republic of China, the
Russian Federation, the Islamic Republic of Iran, the Democratic People’s Republic of Korea,
the Republic of Cuba, the Venezuelan regime of Nicolas Maduro, the Syrian Arab Republican,
or any other entity designated by the governor [of Missouri] in consultation with the [Missouri]
attorney general. Domicile is defined under in the bill as either the country in which a company
is registered, or where the company’s affairs are primarily completed. The bill requires the
Systems to begin immediate divestment of holdings prohibited under the bill’s provisions,
beginning on August 28, 2024, and ending no later than August 28, 2026.
The above is our summary of the proposed changes and is not intended to be a comprehensive
outline of the provisions of HB 2143.
As communicated to us by the Systems' staff ("Staff"), the Systems have an Investment Policy
that has been reviewed and approved by the Board of Trustees and that governs how the
Systems’ funds shall be invested, and which includes an Anti-Terrorism and Economic Sanctions
Policy for almost 20 years as of the date of this letter. Based on discussions with the Staff, it is
our understanding that the Anti-Terrorism and Economic Sanctions Policy requires Staff to
provide a full report to the Board on an annual basis that identifies compliance with the Policy
and any action taken due to economic sanctions and terrorist activities. Further to this
requirement, based on our discussions, we understand that the Systems monitor active holdings
on a monthly basis, utilizing guidance from the U.S. Department of Commerce and the Office of
Foreign Assets Control, including the Specially Designated Nationals and Blocked Persons List,
Foreign Sanctions Evaders List and Sectoral Sanctions List. Additionally, we understand that the
Systems contractually require investment managers and global custodians do the same.
Given HB 2143 will add additional restrictions to the investment options and transactional costs,
we believe HB 2143 is expected to have a fiscal impact on the Systems. We understand that the
Systems' asset allocation and overall performance would be directly impacted by the inability to
invest in the broadest available opportunity set in the world economy as the bill would diminish
the Systems’ opportunity set; inclusive of public companies headquartered in the United States
and other nations, and with regard to direct public holdings and access to private market
investments. The impact of the diminished opportunity set is currently unknown. To illustrate the
sensitivity of the potential fiscal impact, the following pages present a detailed estimate of the
fiscal impact for both PSRS and PEERS of a 1.0% decrease in the overall return on assets in the
Systems' portfolio. The Systems have acknowledged that the impact may vary from this level of
decrease in returns, and could be a more substantial decrease; however the 1.0% sensitivity is
consistent with the sensitivity analysis required by Government Accounting Standards Board
Statement No. 67, Financial Reporting for Pension Plans . Due to the unknown impact on future
returns, we have also included a chart summarizing the estimated fiscal impact for both PSRS L.R. No. 4835H.02I
Bill No. HB 2143
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and PEERS for a reduction in the assumed rate of return in increments of 0.10% from the current
7.3% assumption down to 6.3%.
The Systems have communicated to us that their investment returns for the 10-year time period
ended June 30, 2023, exceeded the return of a passive portfolio of 60% global stocks and 40%
bonds by 2.2% per year, resulting in added value above a traditional portfolio of $11.9 billion,
while internal investment staff and external investment managers added value above the policy
benchmark of almost $7.0 billion over the same time period. This outperformance was due to
portfolio construction as well as active management on the part of external managers, which we
understand the Systems believe would be impaired going forward if HB 2143 were enacted.
Officials from the Missouri Sheriffs' Retirement System state they 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.
Officials from the St. Louis Employees Retirement System state they utilize many commingled
investment vehicles for international investments because they are less cumbersome and less
expensive to administer and the managers of these funds are experts in international investment
opportunities and the processes for administering those assets. This legislation would prevent or
hamper those investment opportunities. The Board believes that Missouri public pension
investment fiduciaries should not be required to consider a standard other than the normal
prudent investor standard currently imposed on Missouri public pension investment fiduciaries
lest the System miss out on excellent investment opportunities.
Officials from the St. Louis Public School Retirement System (PSRSSTL) state the mission of
the PSRSSTL is to enhance the well-being and financial security of its Members, Retirees and
Beneficiaries through benefit programs and services that are soundly financed and prudently
administered in an effective and efficient manner. To accomplish this mission, the System’s
Trustees, Staff, and investment professionals operate as fiduciaries with exclusive loyalty to act
in the best interests of the System’s Members and Beneficiaries and maintain the duty to invest
assets according to prudent investor standards.
In evaluating HB 2143 and the provisions relating to divesting from foreign adversaries, the
Trustees, Staff, and investment professionals of the System believe that complying with HB
2143 may result in the System violating its fiduciary duties owed to its Members. Furthermore,
in reviewing other pending legislation pertaining to the State’s Pension Systems, HB 2143 is in
direct conflict with HB 1937, HB 1700, SB 815, SB 827 and SB 1113, all of which serve to
prohibit non-pecuniary Environmental, Social and Governance issues as a basis for investing
assets and voting proxies.
The System’s Trustees, Staff, and Investment professionals must consider the needs of, or impact
on the System’s Members and Beneficiaries, the financial benefits or risks related to divestment, L.R. No. 4835H.02I
Bill No. HB 2143
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or any investment processes or policies in making the decisions. The following are potential
impacts of divestment that may result in a breach of fiduciary duty and operating in a manner
contrary to the best interests of Members and Beneficiaries:
opportunity set resulting in potential risks from less-than-optimal diversification and
concentration to other regions, companies, and economic factors. In certain time periods
this lack of diversification may result in tracking/error, relative performance differentials,
and adverse risk-adjusted results versus market benchmarks.
manufacturing, and finance sectors. Divesting may result in missed opportunities as
China continues to be a major driver of global economic growth. Interconnected global
supply chains and market dynamics also translate to bigger risks for countries and
companies with interrelated exposures that will be impacted by divestment.
(commissions) and market impact factors that accompany this type of legislation. If a
short time window is presented to divest, the market will experience a negative impact
from high-volume selling; essentially all required divestors will be forced to sell into
declining markets and losses could be amplified.
$1.3 million of
exposure to “foreign adversaries” that would need to be divested and would need to be
addressed in the Investment Policy Statement and Manager Guidelines. If such
legislation were to pass, the System would need to work in a measured and systematic
pace, within the time frame prescribed, to allow managers to divest and to minimize
potential negative cost and market impacts.
Continued engagement with global economic partners and diplomacy can promote near- and
long-term benefits relative to a strategy of divestment. Maintaining investments and economic
ties with major global economic participants can be a more effective lever for positive change
and cooperation all while supporting the ability of large retirement systems to operate according
to prudent fiduciary standards that place the interests of Members and Beneficiaries above all
else.
Officials from the Metro St. Louis Sewer District Employees Pension Plan assume no fiscal
impact from the proposal.
Based on the responses received, Oversight assumes there could be costs and investment losses
to retirement systems as a result of this proposal which would result in an increase the actuarial
accrued liability and a subsequent increase in the actuarially determined employer contribution
rates. Based upon the responses provided, Oversight will reflect the fiscal impact as (Unknown,
could be substantial) to the state, universities and local political subdivisions. L.R. No. 4835H.02I
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Oversight assumes “all state-managed funds are required to immediately, in good faith, begin
divestment of any holdings prohibited in subsection 3 of this section (section 1.2020), with total
divestment achieved two years after the effective date of this section.” Therefore, Oversight
assumes this could impact employer contribution rates as soon as FY 2026.
FISCAL IMPACT – State GovernmentFY 2025
(10 Mo.)
FY 2026FY 2027GENERAL REVENUE
Costs – increase in employer
contribution rates$0
(Unknown,
could be
substantial)
(Unknown,
could be
substantial)
ESTIMATED NET EFFECT ON
GENERAL REVENUE$0
(Unknown,
could be
substantial)
(Unknown,
could be
substantial)
STATE ROAD FUND
Costs – increase in employer
contribution rates$0
(Unknown,
could be
substantial)
(Unknown,
could be
substantial)
ESTIMATED NET EFFECT ON
STATE ROAD FUND$0
(Unknown,
could be
substantial)
(Unknown,
could be
substantial)
VARIOUS OTHER STATE FUNDS
Costs – increase in employer
contribution rates$0
(Unknown,
could be
substantial)
(Unknown,
could be
substantial)
ESTIMATED NET EFFECT ON
VARIOUS OTHER STATE FUNDS$0
(Unknown,
could be
substantial)
(Unknown,
could be
substantial) L.R. No. 4835H.02I
Bill No. HB 2143
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February 20, 2024
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FISCAL IMPACT – State GovernmentFY 2025
(10 Mo.)
FY 2026FY 2027FEDERAL FUNDS
Costs – increase in employer
contribution rates$0
(Unknown,
could be
substantial)
(Unknown,
could be
substantial)
ESTIMATED NET EFFECT ON
FEDERAL FUNDS$0
(Unknown,
could be
substantial)
(Unknown,
could be
substantial)
FISCAL IMPACT – Local GovernmentFY 2025
(10 Mo.)
FY 2026FY 2027LOCAL POLITICAL
SUBDIVISIONSCosts – increase in employer
contribution rates$0
(Unknown,
could be
substantial)
(Unknown,
could be
substantial)
ESTIMATED NET EFFECT ON
LOCAL POLITICAL
SUBDIVISIONS$0
(Unknown,
could be
substantial)
(Unknown,
could be
substantial)
FISCAL IMPACT – Small Business
No direct fiscal impact to small businesses would be expected as a result of this proposal.
FISCAL DESCRIPTION
This bill establishes the "Foreign Adversary Divestment Act".
All state-managed funds, as defined in the bill, are prohibited from holding investments in any
foreign adversary, as defined in the bill, state-owned enterprise of a foreign adversary, company
domiciled within a foreign adversary, or a company owned or controlled by any such entity.
State-managed funds are further prohibited from investing or depositing public funds in any bank
domiciled or principally located within a foreign adversary.
Any state-managed fund in violation of this bill is required to immediately begin divestment of
any public holdings, to be fully divested within two years of the effective date of the bill. L.R. No. 4835H.02I
Bill No. HB 2143
Page 15 of 15
February 20, 2024
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Within six months after the effective date of this bill, the State Treasurer shall identify
companies subject to these restrictions and distribute a list of these restricted companies to each
state managed fund. Methods of gathering this information are specified in the bill.
his legislation is not federally mandated, would not duplicate any other program and would not
require additional capital improvements or rental space.
SOURCES OF INFORMATION
Office of the State Treasurer
Missouri State Employee's Retirement System
MoDOT & Patrol Employees’ Retirement System
University of Missouri System
City of Kansas City
County Employees Retirement Fund
Kansas City Civilian Police Employees' Retirement
Kansas City Police Retirement System
Kansas City Public School Retirement System
Metropolitan St. Louis Sewer District Employees Pension Plan
Public Schools and Education Employee Retirement Systems
Sheriff's Retirement System
St. Louis Employees Retirement System
St. Louis Public School Retirement System
Northwest Missouri State University
University of Central Missouri
Julie MorffRoss StropeDirectorAssistant DirectorFebruary 20, 2024February 20, 2024