Rich Gulla

HOUSE EXECUTIVE DEPARTMENTS AND ADMINISTRATION COMMITTEE NH STATE EMPLOYEES’ ASSOCIATION WRITTEN TESTIMONY IN OPPOSITION TO: HB 1585-FN - AN ACT relative to environmental, social, and governance-related investment strategies by the state retirement system Submitted by: Rich Gulla, President of the New Hampshire State Employees’ Association POSITION: OPPOSE ______________________________________________________________________________ Honorable Members of the House ED&A Committee: I am submitting this testimony on behalf of the New Hampshire State Employees’ Association (SEA), which represents thousands of active and retired public employees who depend on the New Hampshire Retirement System (NHRS) for their earned retirement security. SEA respectfully opposes HB 1585. I. Existing Law Already Requires Fiduciary Loyalty NHRS fiduciaries are already legally required to act solely in the interest of members and beneficiaries, consistent with long-standing fiduciary principles under New Hampshire law. Those duties include prudence, loyalty, diversification, and acting exclusively for the purpose of providing benefits and defraying reasonable administrative costs. HB 1585 does not clarify or strengthen those obligations. Instead, it rewrites fiduciary duty by imposing rigid statutory constraints that replace professional judgment with prescriptive compliance mandates. II. HB 1585 Narrows Fiduciary Discretion and Increases Risk HB 1585 would: • Prohibit fiduciaries from considering any factor that could be characterized as “non-financial,” even where such factors materially affect long-term risk and return; • Require extensive documentation, proxy-voting disclosures, and public reporting; • Subject fiduciaries and investment managers to personal penalties, contract termination, and treble damages for alleged violations. These provisions incentivize defensive, liability-driven decision-making, rather than prudent investment management focused on long-term performance. III. Real-World Experience in Other States Shows Harm, Not Benefit This policy approach has already been tested in other states, and the results are consistent. In Texas, independent academic analyses found that restricting the pool of eligible financial institutions reduced competition and increased public-sector costs by hundreds of millions of dollars, with no improvement in financial outcomes.¹² While those studies focused on municipal finance, the same reduced-competition dynamics apply directly to pension asset management and advisory services. In Florida, implementation of “financial-only” certification and compliance requirements similar to those proposed here resulted in increased administrative burden, legal uncertainty, and conservative investment behavior, without measurable improvement in pension performance.³4 In Oklahoma and West Virginia, public retirement systems and state treasurers reported reduced access to qualified financial partners and increased costs, again with no evidence of improved returns for beneficiaries.56 Comparable concerns have been documented by pension administrators in Kansas, Arkansas, and Missouri, where ESG-restriction frameworks created compliance risk and governance challenges without delivering demonstrable financial benefit.78 No state has demonstrated improved pension returns, reduced employer contribution rates, or lower long-term risk as a result of these laws. IV. Fiscal and Governance Concerns for New Hampshire The Legislative Budget Assistant has already identified new ongoing state costs associated with HB 1585, including independent compliance audits beginning in FY 2028. More significantly, NHRS has warned that the bill’s restrictions could: • Negatively affect investment returns; • Increase employer contribution rates over time; • Discourage qualified fiduciaries and investment managers due to personal liability exposure. These risks ultimately fall on public employees, retirees, and taxpayers. V. HB 1585 Politicizes Pension Governance Although framed as a depoliticization measure, HB 1585 instead injects political judgment into pension law by legislatively prohibiting commonly used risk-management and engagement tools. Public pension systems function best when fiduciaries are permitted to exercise independent, professional judgment within established fiduciary standards—not when investment decisions are constrained by statutory ideology. VI. SEA Position and Conclusion SEA supports fiduciary responsibility, transparency, and accountability. We do not support legislation that: • Reduces investment flexibility; • Increases administrative and legal costs; • Discourages qualified fiduciary participation; or • Risks long-term pension performance without evidence of benefit. For these reasons, the State Employees’ Association respectfully urges the Committee to recommend HB 1585-FN as Inexpedient to Legislate. Thank you for the opportunity to submit this testimony. Respectfully, Richard Gulla - President State Employees' Association, SEIU, Local 1984 207 N. Main Street Concord, NH 03301 Phone: 603-271-3411 Ext 104 Email: rgulla@seiu1984.org FOOTNOTES ¹ Garrett, Daniel; Ivanov, Ivan. Gas, Guns, and Governments: Financial Costs of Anti-ESG Policies. Wharton School, University of Pennsylvania (2022). ? Cited in Section III, paragraph 1 (Texas cost and competition impacts). ² University of Chicago Booth School of Business. Analysis of Texas Senate Bill 13 and Municipal Finance Impacts (2022). ? Cited in Section III, paragraph 1 (reduced competition and higher costs). ³ Florida State Board of Administration. Implementation Guidance and Fiduciary Certification Reports (2023–2024). ? Cited in Section III, paragraph 2 (administrative burden). 4 Florida Office of Program Policy Analysis and Government Accountability (OPPAGA). Review of Pension Governance (2024). ? Cited in Section III, paragraph 2 (no performance improvement). 5 Oklahoma Public Employees Retirement System (OPERS). Board Minutes and Investment Policy Statements (2023).? Cited in Section III, paragraph 3 (reduced access to managers). 6 West Virginia State Treasurer’s Office. Banking and Investment Policy Reports (2022–2023). ? Cited in Section III, paragraph 3 (increased costs). 7 Kansas Public Employees Retirement System (KPERS). Legislative Testimony and Board Reports (2023). ? Cited in Section III, paragraph 4 (fiduciary discretion concerns). 8 National Conference on Public Employee Retirement Systems (NCPERS). Survey of State Pension ESG Restriction Laws (2023). ? Cited in Section III, paragraph 4 (multi-state findings).