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Backers line up to push putting 'rainy day' funds in stock market

Oct 23, 2016 By Ben Neary, The Associated Press

Looking to stretch Wyoming's finances in the face of a combined downturn in energy revenues and the sagging bond market, state lawmakers are asking voters to allow them to invest more state money in stocks.

A ballot measure going before voters in the November general election would change the Wyoming Constitution to allow the investment of billions more dollars of state funds in stocks.

Proponents, including Wyoming Treasurer Mark Gordon, say the state's faltering energy economy combined with painfully low yields in the bond market make it increasingly important for voters to approve the measure.

"It really comes down to being able to be more diversified, and having the opportunity to protect against some of the risks that are inherent in the bond market now," Gordon said recently.

He added that it's important his office have utmost flexibility to mitigate market risks.

Opponents, however, include some Wyoming lawmakers who say they don't want to see the state risk money in the stock market that it can't afford to lose. The measure passed through the Legislature last year by wide margins in both houses.

"I have strong reservations due to the increased risk and volatility of the stock market," said Rep. Garry C. Piiparinen, R-Evanston, one of those who voted against the change.

"That's just me. I have no crystal ball, but only a (feeling) this is not the time to take on more risk, regardless of what Treasurer Gordon or others may advocate."

Rep. Kendell Kroeker, R-Evansville, also voted against the measure last year but says he senses no organized opposition to it as Election Day nears.

"I would say the overwhelming majority of what I've heard is people saying they're going to vote for it," he said.

In response to objections that investing in stocks would hike the state's level of risk, Gordon emphasizes bonds are no longer the virtually risk-free investment they once were.

The state constitution currently allows the Legislature to direct the investment of state permanent funds into stocks and other equities but prohibits investing operating funds in stocks. Current state law limits stock investments to 55 percent of permanent funds.

As of Aug. 31, Wyoming had about $20 billion in various funds, including roughly $6 billion in state operating funds and other funds that may not now be invested in stocks.

Bond interest rates have fallen so low in some parts of the world that they've reached negative territory, meaning that investors who hold bonds to maturity don't get all of their original investment back. While that hasn't happened in the United States, Gordon said, it's conceivable that it could.

"Traditionally, absolutely correctly, people have thought stocks had more risk than bonds," Gordon said.

"That's no longer the case, because bonds are down near zero, and because since the 1980s, generally speaking, we've seen interest rates decline."

For the ballot measure to become effective, it would have to be approved by a majority of Wyoming voters.

If that happens, a two-thirds majority vote in both houses of the Legislature would still be required to invest money from the state's non-permanent funds in stocks.

Stock investments would still need approval of state investment advisers as well as top state elected officials sitting as the Loan and Investment Board.

The Wyoming Business Alli-ance, a statewide organization that represents major players in the business community, is supporting the measure.

Bill Schilling, president of business alliance, said that while he believes there's not much public awareness of the pending ballot measure, people around the state are concerned about cutbacks in government services at the state and local level as a result in the downturn in the state's energy economy.

In a column supporting the measure, Schilling wrote that passing the amendment would allow Wyoming, "to do more with existing tax dollars without raising taxes. That is about opportune as it gets."

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2017-10-22