Committee raises alternative-investment cap for state retirement fund; firefighters' cap increased by amendment

A retirement committee on the House floor advanced House Bill 78 (LC 560,227) and approved an amendment increasing the Georgia Firefighters Pension Fundalternative-investment cap. The committee voted to raise the Employees' Retirement System of Georgia(ERS) alternative-investment limit from 5% to 10% and approved an amendment changing the firefighters' cap from 15% to 20%.

The bill sponsor described HB 78 as a department-request bill asking "to raise the alternative investment from 5% to 10% for the Employees' Retirement System," saying the increase is meant to give the system "a little bit more freedom...to diversify their portfolio." The sponsor also proposed and supported an amendment to raise the firefighters' alternative-investment limit.

Jim, Executive Director of the Employees' Retirement System of Georgia, told the committee the state first authorized alternative investments in 2012 and that the current statutory limit is a 5% commitment. "We first passed an alternative investments bill back in 2012, with this current limit of 5% of our portfolio," Jim said, and added that actual invested commitments have typically been about 3% to 3.5% at any given time. He also told members that, historically, the private-equity component has outperformed public allocations: "private equity...has returned between 4 and 4.5 percent more on average per year than our public equity," he said.

Representative Franklin offered an amendment to the bill to change language affecting the Georgia Firefighters Pension Fundfrom a 15% cap on alternative investments to a 20% cap. Committee members discussed whether firefighters' leadership was present to request the change; the sponsor said the change stemmed from a request by the fund. Committee staff said they would seek a fiscal certification from the state auditor. A staff member explained that if the auditor determines the amendment is fiscal (raises costs), the bill would be returned to the committee for further action.

The committee approved the Franklin amendment by voice vote and then passed HB 78 as amended. Votes were taken by voice; the transcript does not record a roll-call tally. Committee members asked staff to obtain the auditor's fiscal certification for the firefighters' amendment before the bill proceeds beyond the floor.

Why it matters: increasing the statutory cap allows the systems to make larger commitments to private or alternative investments, which proponents say can improve diversification and long-term returns but can also change the portfolio's liquidity profile and governance requirements.

Next steps: with the amendment adopted, the bill will proceed per the legislative calendar; staff will submit the firefighters' amendment for a state-auditor fiscal certification and return the bill to committee if the auditor deems the amendment fiscal.

Votes at a glance: The committee approved the Franklin amendment (striking 15% and replacing it with 20% for the firefighters' fund) and then passed HB 78 as amended. The record in the transcript shows the amendment and final passage by voice vote; no roll-call counts were recorded in the transcript.