Policy Brief — Arkansas Pension Transparency for 2027

Policy brief for Arkansas legislators on up to $100 million in authorized pension fund exposure to non-tradable foreign sovereign debt and the case for transparency legislation in 2027.

Executive summary

Arkansas pension funds have authorized up to $100 million in non-tradable foreign sovereign debt — direct loans to a foreign government — despite credit downgrades from major rating agencies, an internal Treasury memo recommending against new purchases, and the ATRS Board Chair’s dissent over process concerns. No independent credit analysis has been produced to justify these investments. This raises serious questions about fiduciary compliance under existing Arkansas law.

Six Arkansas pension benefit plans fall within the scope of Act 498 of 2023 (A.C.A. § 24-2-802(3)): ATRS, APERS, ASHERS, ASPRS, AJRS, and LOPFI. The Pension Investment Transparency Act would apply to acquisitions of non-tradable sovereign debt by any of these plans.

We are asking the General Assembly to strengthen pension transparency requirements so that Arkansans can be confident their retirement savings are managed based on financial merit — as the law already requires.

Key facts

Fact	Detail
State Treasury holdings	$55 million in non-tradable sovereign bonds as of mid-2025, including $20M purchased since May 2025
ATRS authorization	Up to $50 million (Resolution 2025-22, June 2, 2025)
APERS authorization	$25–50 million (Investment Subcommittee, May 15, 2025; full board, June 11, 2025)
Credit downgrades	All three major agencies (Moody’s, S&P, and Fitch) have downgraded the issuing country’s credit rating since 2024, citing economic instability and security risks
Internal staff advice	A late-2024 Treasury investment memo recommended against new purchases due to credit downgrades
Board Chair dissent	ATRS Board Chair Danny Knight cast the sole “no” vote, warning the process departed from ATRS’s normal manager-driven practice
Sales representative involvement	The bond issuer’s sales representatives met with two pension boards (ATRS, APERS) and the State Treasurer in April 2025; within weeks, new purchases and authorizations followed
Independent credit analysis	None found in more than 1,200 FOIA documents from Arkansas state agencies
Brady conduit confirmed	Auditor’s appointee Jason Brady introduced the investment to the APERS board citing Treasury’s $55M holdings; board approved $25–50M without independent analysis
APERS two-month purchase delay	Board authorized in May–June 2025; “Still zero for APERS” confirmed July 30, 2025; staff still establishing contact July 31
Divergent management approaches	APERS: direct purchase, no manager, no fees. ATRS: hired Reams Asset Management, formal guidelines established September 25, 2025
Dual fiduciary standard	Same APERS meetings: 37 pages of Callan analysis for other investments, 0 pages for the sovereign bond authorization
Cross-system coordination	ATRS Executive Director attended the APERS subcommittee meeting where the sovereign bond purchase was authorized
Subcommittee chair conflict	Larry Walther, former Treasurer who maintained $55M in Treasury sovereign bond holdings, chaired the APERS subcommittee that authorized $25–50M more
Total documents reviewed	1,227 across three FOIA rounds to Arkansas state agencies

The fiduciary concern

Arkansas law is clear about how pension investments must be made:

Sole interest rule (Ark. Code Ann. § 24-2-614): Trustees must invest assets “solely in the interest of the members and benefit recipients of the trust.”
Pecuniary factors only (Act 498 of 2023, Ark. Code § 24-2-804(a)): Pension board investment evaluations must be based “only on pecuniary factors” (§ 24-2-802(4)(A)) — those with a material financial effect on risk or return.
Prudent investor standard (Ark. Code §§ 24-2-610–619): Trustees must manage assets with the care an experienced, prudent investor would use. Section 24-2-611(d) further requires that trustees “shall make a reasonable effort to verify facts relevant to the investment and management of trust assets.”
Single agent / exclusive agency (Ark. Code § 24-2-618(e)): “Single agent or exclusive agency delegations by the trustees shall be discouraged” and require trustees to have “exercised extraordinary care and caution in selecting the exclusive agent.” This provision has particular relevance when a pension system acquires a fixed-income instrument exclusively through a single broker-dealer rather than through competitive market channels.

The pattern in the public record raises questions about whether these standards were met:

The idea originated through political channels. State Auditor Dennis Milligan, an ex officio trustee with voting rights on both boards (Ark. Code § 24-7-301), arranged meetings between the bond issuer’s sales representatives and state officials. In correspondence with the Auditor’s office, the bond issuer’s national managing director called Milligan “truly one of a kind” and expressed he was “forever grateful” for his support.

The conduit chain is now documented. New records confirm the specific mechanism. Jason Brady, appointed to the APERS board by Auditor Dennis Milligan, introduced the investment by telling the board “it had come to his attention” that it was available, and cited Treasury’s $55 million in holdings. The board approved $25–50 million following Brady’s presentation. The chain — Milligan as former Treasurer initiating Treasury purchases, then as Auditor placing his appointee on the APERS board to introduce the same investment — is documented across multiple independent FOIA responses.

State investment staff had already flagged the risk. In late 2024, Steve Pulley — Senior Investment Officer in the State Treasurer’s office — recommended holding existing positions and letting them roll off, citing credit downgrades. The Treasury purchased $20 million more anyway. The pension boards then authorized up to $100 million more in 2025 without producing any independent credit analysis of their own.

Public statements emphasized political symbolism. As documented in public records, Governor Sanders stated: “Arkansas puts its money where its mouth is and is investing millions in Israeli bonds.” At the APERS committee meeting, as documented in public records, Deputy Auditor Jason Brady referenced the U.S. Ambassador to Israel as “my and Amy’s former boss.” None of these are pecuniary factors.

The normal investment process was bypassed. ATRS Board Chair Danny Knight warned that selecting a specific bond at a trustee’s request was “going outside of the scope of the way we usually do things.” ATRS typically relies on professional investment managers — not board members — to recommend specific securities.

The process divergence extends further: APERS chose to purchase the bonds directly without an external manager, while ATRS hired Reams Asset Management and established — as documented in the public record — a dedicated “Israeli Jubilee bond account” with written investment guidelines, but only four months after the board authorized the purchase. In neither case was independent credit analysis completed before authorization.

The financial profile of these bonds

Unlike U.S. Treasury bonds and most fixed-income instruments available to pension funds, these bonds have characteristics that require heightened due diligence:

No secondary market — they cannot be sold or traded before maturity, limiting a fund’s ability to rebalance or access liquidity
Declining credit quality — all three major agencies (Moody’s, S&P, and Fitch) have downgraded the issuing country’s rating since 2024, with negative outlooks citing ongoing military operations and economic uncertainty
Lower yields relative to risk — press analysis has noted that the bond market “brims with other offerings that have higher credit ratings and that are liquid,” questioning why the fund chose this specific instrument over higher-rated liquid alternatives
Concentrated sovereign exposure — these bonds represent a direct, single-country government debt position
Sold by a broker-dealer with three enforcement events — the broker-dealer (FINRA CRD# 11148) has been censured by the SEC for currency reporting violations (1983), ordered to make rescission offers for selling securities while unregistered in North Carolina (1984), and fined $9,500 by NASD for operating with an unregistered principal (1997–98). In 2000, NASD granted this broker-dealer special accommodations on suitability requirements. Full regulatory record (PDF)

These are not inherently disqualifying characteristics, but they demand exactly the kind of independent, documented financial analysis that appears to be missing from the record.

The exclusive-agency provision

Arkansas’s prudent investor rule includes a provision that is directly relevant to instruments sold through a single broker-dealer with no competitive market channel.

A.C.A. § 24-2-618(e): “Single agent or exclusive agency delegations by the trustees shall be discouraged, but, if the trustees enter into an exclusive agency delegation, the trustees shall have exercised extraordinary care and caution in selecting the exclusive agent.”

The bonds under investigation are sold exclusively through a single for-profit broker-dealer (FINRA CRD# 11148). That broker-dealer’s Arkansas Securities Department registration is limited by its terms to bonds of a single issuer — a scope shared in only two other states (North Dakota and Arizona). There is no competitive market channel for these instruments and no alternative broker-dealer through which an Arkansas pension system could acquire them. When a pension trustee selects this instrument, the trustee is also selecting that broker-dealer as the exclusive agent for the transaction.

The “extraordinary care and caution” the statute requires has independent content beyond the pecuniary-factors and prudent-investor standards. It establishes a heightened bar for the trustees’ due diligence on the broker-dealer itself — not only on the instrument. The Pension Investment Transparency Act would specify what that diligence must produce on the record before a vote.

The Pension Investment Transparency Act

We urge the Arkansas General Assembly to enact the Pension Investment Transparency Act during the 2027 Regular Session. This legislation is issuer-neutral — it does not single out any country, issuer, or political position. It establishes procedural standards for acquisitions of non-tradable sovereign debt by any Arkansas pension benefit plan within the scope of Act 498 of 2023: ATRS, APERS, ASHERS, ASPRS, AJRS, and LOPFI.

The five provisions

For any acquisition of non-tradable sovereign debt by an Arkansas pension benefit plan, PITA would require:

Independent credit analysis by the fund’s own investment consultant or staff, documented in writing before the purchase. Our FOIA investigation found zero such analyses across 1,227 documents from Arkansas state agencies.
Written comparison of the proposed investment’s risk, return, and liquidity against comparable fixed-income alternatives available to the fund. The bond issuer’s representatives provided all investment materials; no independent comparative analysis appears in the record.
Disclosure of liquidity characteristics, including the absence of any secondary market, in the board materials provided to trustees before a vote. The publicly-posted APERS board packet for the meeting that authorized $25–50 million in these instruments contained no such disclosure on the page.
Written fiduciary determination that the investment satisfies the pecuniary-factors standard of § 24-2-804(a). The record contains no such written determination at either pension system. The ATRS Kelly + Comstock memo at Attachment 17 of the 6/2/2025 Board packet contains header and disclaimer text only — no body content.
Public posting of the analysis and determination on the pension system’s website within thirty days of the investment. Obtaining what record exists has required two rounds of FOIA requests over nearly a year.

Existing Arkansas law establishes a rigorous standard for what factors pension fiduciaries may consider. PITA establishes specific procedural requirements for how fiduciaries must document their compliance with that standard before committing pension funds to an asset class that lacks secondary-market price discovery.

The committee pathway

This legislation would go through the Joint Committee on Public Retirement & Social Security Programs, which has legislative oversight of all public retirement systems in the state. The committee consists of 20 members (10 senators, 10 representatives) with an approximately 14–6 Republican supermajority.

Committee leadership:

Senate Co-Chair: Sen. Jim Dotson (R, SD-34) — Senate Republican leadership. Sensitive to any framing that resembles a political boycott; transparency legislation must be presented strictly as fiduciary process and asset-class discipline.
House Co-Chair: Rep. Les Warren (R, HD-84) — FOIA records place Warren at the April 14, 2025 meeting where bond issuer sales executives pitched state officials in the Auditor’s Capitol office — the same meeting that preceded the pension fund authorizations. Warren attended alongside Speaker Brian Evans and the bond issuer’s national managing director, Lawrence Berman.

Five current committee members co-sponsored Act 411 of 2023.

Rep. Kendon Underwood (R, HD-16) is the most promising pathway for bipartisan support. Despite co-sponsoring Act 411, Underwood also authored Act 994 (2025) on campaign contribution transparency — demonstrating openness to transparency-focused governance reform.

Three committee members will depart before the 2027 session: Sen. Fredrick Love and Sen. Reginald Murdock are term-limited, and Sen. Kim Hammer is running for Secretary of State. Their replacements represent both uncertainty and opportunity for early engagement.

Why pension boards need this standard

Act 498 of 2023, the State Government Employee Retirement Protection Act (Ark. Code § 24-2-804(a)), requires pension board investment evaluations to be based “only on pecuniary factors” (§ 24-2-802(4)(A)) — those with a material financial effect on risk or return, under the standard of care at § 24-2-803. Act 498 establishes the standard but does not prescribe the specific procedural safeguards — independent credit analysis, documented rationale, consultant independence — necessary for non-tradable sovereign debt that has no secondary market. The Pension Investment Transparency Act adds those safeguards for sovereign debt acquisitions. The case for the extension is the asset class itself: non-tradable sovereign debt cannot be sold before maturity and lacks the continuous market repricing that gives most fixed-income instruments their built-in credit check. For that class, independent credit analysis is the substitute for the market scrutiny the absence of a secondary market eliminates.

Three actions we are calling for

Arkansans for Pension Integrity is calling for three concrete actions to apply Arkansas’s existing fiduciary standards to non-tradable sovereign debt acquisitions:

The General Assembly — enact the Pension Investment Transparency Act during the 2027 Regular Session, with the bill referred to the Joint Interim Committee on Public Retirement and Social Security Programs (A.C.A. § 10-3-703).
The Joint Interim Committee on Public Retirement and Social Security Programs — exercise its statutory authority under A.C.A. § 10-3-703(c) to study whether current pension investment practices comply with the standards established by Act 498 of 2023, including whether documented, independent credit analyses were prepared before recent acquisitions of non-tradable sovereign debt.
Arkansas pension benefit plan fiduciaries — adopt, as a matter of board policy pending legislative action, the practice of obtaining and publicly disclosing independent credit analyses before authorizing any new acquisition of non-tradable sovereign debt, consistent with the fiduciary obligations established by Act 498 of 2023 and the prudent investor rule.

The standard already exists

Arkansas’s pecuniary-factors standard (Act 498 of 2023, the State Government Employee Retirement Protection Act, Ark. Code §§ 24-2-802(4)(A), 24-2-804(a)) and the prudent-investor rule (Ark. Code §§ 24-2-610–619) already require investment decisions to be evaluated on financial merit, with the diligence an experienced fiduciary would apply. The Pension Investment Transparency Act does not invent a new test — it adds the specific procedural requirements those standards demand for a class of instruments that bypass the market signals on which most investment evaluations rely.

For the full timeline and detailed source documentation, see our evidence page. You can also browse the FOIA document archive directly.

Request a briefing

For detailed findings, source documents, and a full research briefing, contact us at info@arpensions.org.

We are available to meet with legislators and staff to discuss these findings in detail. All claims in this brief are backed by public records obtained through FOIA requests to Arkansas state agencies.