The State of Wisconsin Investment Board (SWIB) manages the State Investment Fund (SIF). The SIF invests the excess operating cash balances of State of Wisconsin agencies, the Wisconsin Retirement System, and the Wisconsin Local Government Investment Pool (LGIP). The LGIP is a voluntary option for local governments, such as counties, cities, villages, towns, and school districts.
We provided an unmodified opinion on the financial statements and related notes of the SIF as of and for the year ended June 30, 2021. Our unmodified opinion is included in SWIB’s State Investment Fund Annual Financial Report. We conducted the financial audit by auditing the SIF’s financial statements in accordance with applicable government auditing standards, issuing our auditor’s opinion, reviewing internal controls, and issuing our auditor’s report on internal control and compliance.
Participants in the SIF hold shares in the pool of investments. Shares held by State of Wisconsin agencies increased from $6.9 billion as of June 30, 2020, to $10.1 billion as of June 30, 2021. This increase in shares is largely attributed to federal funding received under the federal American Rescue Plan Act that was advanced to the State, but was not yet spent as of June 30, 2021.
SWIB’s investment objectives for the SIF are liquidity, safety of principal, and competitive rates of return. Wisconsin Statutes enumerate the types of investments in which the SIF can be invested. In addition to U.S. Treasury obligations and investments in securities of federal agencies, such as the Federal Home Loan Bank, the SIF investments included repurchase agreements, which are a form of short-term lending; commercial paper, which is short-term debt issued by companies; and certificates of deposit.
This decrease in net investment income reflects the significant decline in the federal funds rate, which reflects short-term investment market conditions. The average federal funds rate declined from 1.29 percent in fiscal year (FY) 2019-20 to 0.08 percent in FY 2020-21. The SIF has a large portion of investments in U.S. Treasury obligations, whose returns closely follow the federal funds rate. The investment return for the SIF decreased from 1.45 percent for FY 2019-20, to 0.09 percent for FY 2020-21. The SIF exceeded its one-year, five-year, and ten-year benchmarks as of June 30, 2021.
Net position is a measure of overall financial condition. The increase in net position for the SIF is largely attributed to federal funding the state and local governments received under the federal American Rescue Plan Act to aid in addressing the effects of the public health emergency. The increase in net position from June 30, 2019, to June 30, 2020, also was related to federal funding received by the state and local governments to address needs related to the public health emergency.
