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How West Virginia Learned the Cold Truth about Resource Abundance and Wealth

West Virginia - Jeff Kessler (D) - State Senator

West Virginia – Jeff Kessler (D) – State Senator

Having long been rattled by the booms and busts of the mining industry, the state of West Virginia learned a hard lesson about the importance of saving after years of seeing wealth flow out of state, leaving once resource rich areas in poverty. In anticipation of a shale gas boom from drilling the Marcellus Formation, the West Virginia State Senate proposed and passed a bill to establish a Future Fund to house oil and natural gas tax revenues.

Senate Bill 461 originally called for establishment of a Future Fund to pool 25 percent of oil and gas severance tax revenue in excess of US$ 175 million. With revenues forecasted to hit US$ 176 million in fiscal year 2015-2016, state legislators chose the US$ 175 million benchmark to allow the government more oil and gas proceeds to aid in balancing the state budget. The bill, proposed by WV Senate president Jeff Kessler (D), reached the floor of the state House of Delegates after passing the House Judiciary Committee on March 3rd and the House Finance Committee on March 5th.

It now goes to the Governor Earl Ray Tomblin to sign.

The House Finance Committee axed the US$ 175 million milestone, calling instead for the future fund to reap 3 percent of all gas, oil, coal, sandstone and limestone severance tax revenues which would have been deposited in the state’s general fund. Moreover, the committee amended the bill to freeze funding of the investment pool during times of financial stress if the state needs additional funds or has to slash spending. Finally, it capped the amount lawmakers can draw from the fund in a given year at the average interest income of the preceding five budget cycles.

A proposed constitutional amendment accompanies the bill, barring legislators from tapping the fund until 2020 and setting limits on where interest and investment income can be spent. If this joint resolution is passed by voters in November, spending of fund interest and income will be restricted to five general areas:

  • Workforce development and education enhancement
  • Infrastructure projects
  • Economic development and diversification
  • Tax relief measures for state citizens and businesses
  • Cultural and historical improvements/preservation

Passes in WV House and Senate

The House of Delegates amended Senate Bill 46. Both the Senate and House have approved the changes to the Future Fund bill. It now goes to the Governor Earl Ray Tomblin to sign.

SWFI First Read, December 15, 2017

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NZ Super Resumes Government Contributions

The New Zealand Superannuation Fund (NZ Super) has resumed receiving contributions from the New Zealand government in the face of rising obligations as an increasing proportion of the country’s population approaches retirement. According to a statement released by the fund’s managing Board of Guardians, the government plans on investing US$ 5.3 billion into NZ Super between now and June of 2022, with the first payment scheduled for December 15, 2017.

Policymakers believe the resumption of government contributions, which were halted in July of 2009, is expected to ease the burden on the country’s current taxpayers and future generations. Withdrawals from NZ Super are expected to peak in 2078, at which point the fund will be covering 12.8% of New Zealand’s pension obligations. The new wave of contributions will initially be invested in passive, low cost equity and bond investments, according to Catherine Savage, Chair of the Guardians.

Recent Performance & Leadership Change

NZ Super has enjoyed one of its best annual performances since its founding in 2001, with a reported return of 20.7% before tax for a 12-month trailing period ended June 30, 2017, up 5 billion NZD (US$ 3.6 billion) compared to 2016. NZ Super generated 21.85% annual return in its global equities, developed market portfolio, according to its 2017 annual report.

NZ Super faces a changing of leadership in the coming year with the exit of chief executive Adrian Orr, who will leave the Fund officially in March of 2018 to serve a five-year term as Governor of the Reserve Bank of New Zealand. Mr. Orr has earned a spot numerous times in the Sovereign Wealth Fund Institute’s Public Investor 100 annual ranking over the years, most recently in 2017 at #3.

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iZettle Raises US$ 47 Million in Series E, Prepares for 2018 Listing

Card transaction platform iZettle AB has raised another US$ 47 million in Series E funding, this time with new backing from Sweden’s AP4 and early-stage venture capital firm Dawn Capital. Previous investors in the Stockholm-based payments business include American Express, MasterCard, Intel, and Spain’s Santander Group. With US$ 235 million in equity to date, iZettle is quickly approaching an estimated valuation of US$ 1 billion.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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