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H.B. 298

             1     

BUDGET RESERVE ACCOUNT AND MONEY

             2     
MANAGEMENT ACT AMENDMENTS

             3     
2000 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Sponsor: Lloyd W. Frandsen

             6      AN ACT RELATING TO THE BUDGET RESERVE ACCOUNT; AUTHORIZING THE
             7      BUDGET RESERVE ACCOUNT TO BE INVESTED IN CERTAIN COMMON AND
             8      PREFERRED STOCK AND BONDS; INCREASING THE BUDGET RESERVE ACCOUNT
             9      CAP; REQUIRING DEPOSIT OF INVESTMENT INCOME FROM THE BUDGET RESERVE
             10      ACCOUNT INTO THE UNIFORM SCHOOL FUND WHEN THE BUDGET RESERVE
             11      ACCOUNT REACHES ITS CAP; AND MAKING TECHNICAL CORRECTIONS.
             12      This act affects sections of Utah Code Annotated 1953 as follows:
             13      AMENDS:
             14          63-38-2.5, as last amended by Chapter 6, Laws of Utah 1996, Second Special Session
             15      ENACTS:
             16          51-7-12.3, Utah Code Annotated 1953
             17      Be it enacted by the Legislature of the state of Utah:
             18          Section 1. Section 51-7-12.3 is enacted to read:
             19          51-7-12.3. Deposit or investment of Budgetary Reserve Account -- Authorized
             20      deposits and investments -- Asset manager.
             21          (1) Notwithstanding the requirements of Section 51-7-11 , the principal of the Budget
             22      Reserve Account established by Section 63-38-2.5 shall be deposited or invested only in the
             23      following:
             24          (a) any deposit or investment authorized by Section 51-7-11 ;
             25          (b) equity securities, including common and preferred stock issued by corporations listed
             26      on a major securities exchange, in accordance with the following criteria applied at the time of
             27      investment:


             28          (i) the treasurer may not invest more than 5%, determined on a cost basis, of the total
             29      account assets in the securities of any one issuer;
             30          (ii) the treasurer may not invest more than 25%, determined on a cost basis, of the total
             31      account assets in a particular industry;
             32          (iii) the treasurer may not invest more than 5%, determined on a cost basis, of the total
             33      account assets in securities of corporations that have been in continuous operation for less than
             34      three years;
             35          (iv) the account may not hold in excess of 5% of the outstanding voting securities of any
             36      one corporation; and
             37          (v) at least 75% of the corporations in which investments are made under Subsection (1)(b)
             38      must appear on the Standard and Poor's 500 Composite Stock Price Index;
             39          (c) fixed-income securities, including bonds, notes, mortgage securities, zero coupon
             40      securities and convertible securities issued by domestic corporations rated A or higher by Moody's
             41      Investor's Service, Inc. or by Standard and Poor's Corporation in accordance with the following
             42      criteria applied at the time of investment:
             43          (i) the treasurer may not invest more than 5%, determined on a cost basis, of the total
             44      account assets in the securities of any one issuer;
             45          (ii) the treasurer may not invest more than 25%, determined on a cost basis, of the total
             46      account assets in a particular industry;
             47          (iii) the treasurer may not invest more than 5%, determined on a cost basis, of the total
             48      account assets in securities of corporations that have been in continuous operation for less than
             49      three years; and
             50          (iv) the dollar-weighted average maturity of fixed-income securities acquired under
             51      Subsection (1)(c) may not exceed ten years;
             52          (d) fixed-income securities issued by agencies of the United States and
             53      government-sponsored organizations, including mortgage-backed pass-through certificates and
             54      mortgage-backed bonds;
             55          (e) shares of an open-end diversified management investment company established under
             56      the Investment Companies Act of 1940; and
             57          (f) shares of or deposits in a pooled-investment program.
             58          (2) (a) No more than 65% of the total account assets of any of these funds, on a cost basis,


             59      may be invested in common or preferred stocks at any one time.
             60          (b) At least 35% of the total assets of the total account assets shall be invested in
             61      fixed-income securities authorized by Subsections (1)(a), (c), and (d).
             62          (3) The state treasurer shall use appropriate investment strategies to protect the principal
             63      of the funds administered under this section during periods of financial market volatility.
             64          (4) (a) The state treasurer may employ professional asset managers to assist in the
             65      investment of assets of the Budget Reserve Account.
             66          (b) The treasurer may provide compensation to asset managers from earnings generated
             67      by the accounts' investments.
             68          (5) The council shall give suggestions, advice, and opinions to the state treasurer in regard
             69      to this section.
             70          Section 2. Section 63-38-2.5 is amended to read:
             71           63-38-2.5. Establishing a Budget Reserve Account -- Providing for deposits and
             72      expenditures from the account.
             73          (1) There is created within the General Fund a restricted account to be known as the
             74      Budget Reserve Account, which is designated to receive the surplus revenue required by this
             75      section.
             76          (2) (a) Beginning June 30, 1993, at the end of any fiscal year in which the Division of
             77      Finance, in conjunction with the completion of the annual audit by the state auditor, determines
             78      that there is a General Fund surplus, 25% of the surplus shall be transferred to the Budget Reserve
             79      Account, except that the amount in the Budget Reserve Account may not exceed [8% of the
             80      General Fund appropriation amount for the fiscal year in which the surplus occurred]
             81      $500,000,000.
             82          (b) The amount to be transferred to the Budget Reserve Account shall be determined
             83      before any other contingency appropriation using surplus funds.
             84          (3) (a) Any appropriation made by the Legislature from the Budget Reserve Account may
             85      only be used to cover operating deficits or retroactive tax refunds.
             86          (b) The [Budgetary] Budget Reserve Account is available for appropriation to fund
             87      operating deficits in public education appropriations.
             88          (4) (a) [All interest generated from investments of money] The treasurer shall invest
             89      monies in the Budget Reserve Account as required by Section 51-7-12.3 .


             90          (b) Except as provided in Subsection (4)(c), all interest generated from investments of
             91      money in the Budget Reserve Account shall be deposited into the account.
             92          (c) When the amount in the Budget Reserve Account reaches $500,000,000, all interest
             93      generated from investments of money in the Budget Reserve Account shall be deposited into the
             94      Uniform School Fund.




Legislative Review Note
    as of 1-28-00 8:57 AM


A limited legal review of this legislation raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel


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