¶ 22. A similar analysis is found in other Wisconsin cases. See Wis. Solid Waste Recycling Auth. v. Earl, 70 Wis. 2d 464, 482, 235 N.W.2d 648 (1975) (holding that the issuance of bonds by the Wisconsin Solid Waste Recycling Authority to finance its programs was not “public debt” where there was no recourse against the State because “no state debt or pledge of state credit exists unless there is an obligation which is legally enforceable against the state”); State ex rel. Hammermill Paper Co. v. La Plante, 58 Wis. 2d 32, 64, 205 N.W.2d 784 (1973) (in the parallel municipal context, concluding there was no public debt where “bonds shall not constitute nor give use to a pecuniary liability of the municipality or a charge against its general credit or taxing powers” but rather were payable out of a project).
¶ 23. Regarding SWIB’s status, the court of appeals has held that, like the Wisconsin Housing Finance Authority in Nusbaum, SWIB is not an arm of the State but is an “independent going concern” with “independent proprietary powers and functions.” Bahr v. State Inv. Bd., 186 Wis. 2d 379, 388–89, 521 N.W.2d 152 (Ct. App. 1994) (discussing these principles in the context of sovereign immunity). The Bahr court observed that SWIB is designated “an independent agency of the state.” Id. at 396 (emphasis omitted) (quoting Wis. Stat. § 25.15(1)). Consistent with that, its operation and finances are a closed system. It is not funded by general state revenue but rather employers and employees contribute to the fund. Wis. Stat. § 40.05(1)–(2) (discussing employee and employer contributions). SWIB then has “exclusive control” and can, for example, act “to execute instruments indemnifying against its failures and losses, to secure insurance against any risks relating to its functions, to liquidate any corporation in which it owns 100% of the stock, [and] to sell stock and engage in a variety of financial and stock transactions.” Bahr, 186 Wis. 2d at 396–98. “In each instance, the expenses incurred in the exercise of these powers are to be paid by the board out of the current income of the particular fund for which the action is taken; no state-appropriated funds are involved.” Id. at 397. ¶ 24. Thus, like the Authority in Nusbaum, SWIB has the characteristics of an independent going concern whose Core Fund investment-management actions do not create debt payable by the State. Rather, obligations run against the funds, not the State, as in Nusbaum. That is consistent with the representations in SWIB’s request letter, which explains that any debt issuance it would engage in would explicitly be limited to recourse against the Core Fund and not the State.
¶ 25. As a final note, a previous opinion, 78 Op. Att’y Gen. 189, addressed SWIB’s powers prior to the 2008 Amendments discussed in OAG—11—08 and, in passing, made reference to whether SWIB was an independent going concern, suggesting it might not be. 78 Op. Att’y Gen. 189 addressed the constitutional limits on contracting debt for “internal improvements,” something that is not at issue in this request. See id. at 194, 197 (discussing internal-improvements analysis in State ex rel. Dep’t of Dev. v. State Bldg. Comm’n, 139 Wis. 2d 1, 12–13, 18, 406 N.W.2d 728 (1987), and reconfirming the separate analysis in Nusbaum). In the course of addressing that separate provision, this office opined, with little analysis, that SWIB did not “appear[ ]” to be an independent authority. 78 Op. Att’y Gen. at 195. The only reasoning, however, was that SWIB was created to be in the executive branch. Id. at 195–96. As discussed above, the salient question posed by Nusbaum and answered by Bahr is whether an entity is created to be independent in its function. Bahr ruled that SWIB was indeed an “independent going concern” and not an “arm” of the State for the reasons summarized above. To the extent this office’s pre-Bahr comment in the context of internal improvements is in tension with the subsequent Bahr decision, Bahr is controlling.4
¶ 26. In sum, the analysis in Wis. Op. Att’y Gen. OAG—11—08 of SWIB’s broad management authority would apply equally to debt issuance as a management strategy for the Core Fund. SWIB would have the statutory authority to issue debt as part of its Core Fund management authority if the statutory “prudent person” standard is met. Whether a particular use of debt issuance meets the standards in Wis. Stat. § 25.15(2), including the “prudent person” standard, would depend on the circumstances. (See PDF for image)
Sincerely, JLK:ADR:jrs
(See PDF for image)
4 Also, for the reasons discussed in this opinion and the 2008 Opinion, the discussion in
78 Op. Att’y Gen. 189 (1989) about a lack of authority “to borrow money for leverage purposes” no longer applies because SWIB’s statutory powers no longer are limited to an investment list. 78 Op. Att’y Gen. at 192; see also 60 Op. Att’y Gen. 266 (1971) (also addressing the superseded statutory scheme).
