Wyoming could lose $5 billion from Freedom Caucus’ investments bill. It advanced again Tuesday.

Despite estimates of billions in investment losses, Freedom Caucus lawmakers again advanced a bill Tuesday that would punish contracted financiers who invest Wyoming’s money in funds with environmental, social and governance goals. 

The faction, newly in control of the House, is dead set against seeing public investments put into such funds, which it sees as antithetical to Wyoming’s fossil fuel industries. 

Blocking investments based on such goals has broad support in the Capitol, and is already reflected in state policies, according to state agency testimony in recent days. But the state’s money managers say a piece of the bill that brings steep financial penalties against financiers who violate the rules against ESG investing would make Wyoming’s combined $40 billion in investments toxic to major firms and thus slow returns.

On the House floor Tuesday, Rep. Bob Nicholas, the former head of the House Appropriations Committee and a veteran of a separate committee that oversees the state’s investments, said Wyoming’s financiers estimate losses approaching $5 billion in lost returns over the next three years. 

State retirement system officials have estimated a loss of more than $1.2 billion in returns over the next three years from more than $8 billion in pension funds if managers drop Wyoming as a client. Separately, Wyoming’s Chief Investment Officer Patrick Fleming estimated lost revenue at around $3.5 billion from the more than $30 billion his office manages. 

The conflict is fueling fierce debate in the House. Lawmakers long-familiar with the state’s investment funds like Nicholas, R-Cheyenne, and Rep. Steve Harshman, R-Casper, spoke passionately against the bill, saying the House was ignoring people Wyoming had both hired, and in State Treasurer Curt Meier’s case elected, to manage the public’s money. 

“We’re debating whether or not the investment professionals that we hire are wrong or right,” Nicholas said. “They’ve got the biggest flashing red light up that you can see.” 

During Harshman’s tenure as House speaker, from 2016-2020, he leveraged returns from the state’s trust funds to protect public education through lean budget years. On Tuesday, he sought to defend those assets. The state’s investment pools, built up with mineral royalties, were a “tremendous gift from our forefathers and our energy companies,” that should not be risked, he said. “This is about Wyoming’s future.” 

But Harshman and Nicholas’ camp of traditional Republicans no longer command a voting majority on the House floor. The Freedom Caucus does, and its members pushed the bill through its first chamber vote, 34-26. The caucus accounts for 34 House members, according to public membership lists and campaign endorsements. 

By a similar margin, 33-25, House members voted down an amendment brought by Nicholas that would have struck the penalty for financiers from the bill. That penalty is driving most of the consternation, and even Nicholas said he might back the bill were it taken out. 

But Freedom Caucus lawmakers voiced skepticism of the losses estimated by the state treasurer and managers of the retirement pool, and even some antipathy to those officials. 

“Since when do employees of the state tell us what they will and won’t do for us?” Freedom Caucus member Rep. Pepper Ottman, R-Riverton, said. 

“These financial teams of the state they’re making a lot of money,” she said, referencing the investment team’s compensation. “If they want to go somewhere else … other states are doing the same thing and it’s not going to be that tough.” 

The bill’s primary sponsor, Gillette Republican Rep. Christopher Knapp, offered a more measured defense of the bill. Knapp amended the legislation in response to oppositional testimony during a Friday committee hearing. 

But Knapp stuck by the penalty. “All I’m trying to do is codify what those investment managers follow today,” Knapp said during Tuesday’s debate. “Yes that should be written into a contract,” with fund managers, he said. “Yes, [a contract] that will hold people accountable.”

After Nicholas’ amendment failed, lawmakers passed a second one, cosponsored by Knapp. That tweak exempted state employees, but not outside money managers, from the penalties. 

Monday, after adopting Knapp’s previous amendment, the House Minerals, Business and Economic Development Committee sent the bill to the House floor without taking further public testimony. The committee’s Freedom Caucus members overruled two of their Republican colleagues who sought to reopen testimony and gauge how state officials viewed the change. 

Treasurer Meier warned last week that “the better half of my staff are all going to walk out the door,” if the bill passes. He has not since publicly weighed in on the measure’s impacts in the wake of Knapp’s changes. 

But Nicholas told his colleagues both Fleming, the chief investment officer, and officials managing the pension fund are sticking by their estimates of dire losses. 

Other lawmakers told their colleagues that the news of potential pension fund losses has spawned waves of concerned calls from retired state employees. 

The bill is part of the Freedom Caucus’ “five and dime” plan — a package of legislation the bloc has pledged to pass by next week to demonstrate its ability to lead the House. 

On the floor Tuesday, one of the Minerals Committee members, Rep. Martha Lawley of Worland, reiterated her frustrations with the committee’s choice not to work on the bill further before sending it to the House floor. 

“It’s not a small matter at all,” she said. “We owe [voters] to get it right. I don’t understand why we are rushing this across an imaginary goal line. In their view, we are not authorized to play politics with their retirement fund.”