On January 16, 2025, the Wyoming Legislature introduced Senate Bill 38, aimed at amending the performance compensation structure for investment management within the state. The bill seeks to establish a more systematic approach to calculating payments based on investment performance, which could significantly impact how state funds are managed and compensated.

The key provision of Senate Bill 38 outlines a dual method for determining performance compensation. For fiscal years 2022 through 2025, the bill proposes that payments be calculated using the arithmetic average of annual investment performance over the current and two preceding fiscal years. Starting in fiscal year 2026, the calculation will shift to a geometric average, which is often considered a more accurate reflection of investment performance over time, particularly in volatile markets.

This legislative change is designed to address concerns regarding the consistency and fairness of compensation for investment performance, ensuring that it aligns more closely with long-term results rather than short-term fluctuations. Proponents argue that this approach will incentivize better investment strategies and enhance the overall performance of state-managed funds.

While the bill has garnered support for its potential to improve financial management, it has also sparked debates regarding the implications of changing the compensation calculation method. Critics express concerns that the shift to a geometric average could complicate the compensation structure and may not adequately reward short-term successes, potentially discouraging aggressive investment strategies.

The economic implications of Senate Bill 38 could be significant, as it directly affects how state funds are allocated and managed. By refining the performance compensation plan, the state aims to optimize investment returns, which could ultimately benefit public services funded by these investments.

As the bill progresses through the legislative process, stakeholders from various sectors, including finance and public policy, will be closely monitoring its developments. The outcome of this legislation could set a precedent for how investment performance is evaluated and compensated in Wyoming and potentially influence similar discussions in other states.