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H.B. 390

             1     

ENDOWMENT FUND FOR TOBACCO

             2     
SETTLEMENT MONIES

             3     
2000 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Sponsor: Richard L. Walsh

             6      AN ACT RELATING TO THE TOBACCO SETTLEMENT ACCOUNT; AUTHORIZING THE
             7      TOBACCO SETTLEMENT ACCOUNT TO BE INVESTED IN CERTAIN COMMON AND
             8      PREFERRED STOCK AND BONDS; AMENDING THE NAME OF THE ACCOUNT;
             9      PERMITTING ONLY THE INTEREST AND DIVIDENDS EARNED ON THE ACCOUNT TO
             10      BE APPROPRIATED; AND PROVIDING AN EFFECTIVE DATE.
             11      This act affects sections of Utah Code Annotated 1953 as follows:
             12      AMENDS:
             13          63-97-101, as enacted by Chapter 78, Laws of Utah 1999
             14          63-97-102, as enacted by Chapter 78, Laws of Utah 1999
             15      ENACTS:
             16          51-7-12.1, Utah Code Annotated 1953
             17      Be it enacted by the Legislature of the state of Utah:
             18          Section 1. Section 51-7-12.1 is enacted to read:
             19          51-7-12.1. Deposit or investment of Tobacco Settlement Endowment -- Authorized
             20      deposits and investment -- Asset manager.
             21          (1) Notwithstanding the requirements of Section 51-7-11 , monies in the Tobacco
             22      Settlement Endowment established by Section 63-97-102 shall be deposited or invested only in
             23      the 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      endowment 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      endowment assets in a particular industry;
             32          (iii) the treasurer may not invest more than 5%, determined on a cost basis, of the total
             33      endowment assets in securities of corporations that have been in continuous operation for less than
             34      three years;
             35          (iv) the endowment may not hold in excess of 5% of the outstanding voting securities of
             36      any 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      endowment 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      endowment assets in a particular industry;
             47          (iii) the treasurer may not invest more than 5%, determined on a cost basis, of the total
             48      fund assets in the 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 fund assets of any of this endowment, on a cost


             59      basis, may be invested in common or preferred stocks at any one time.
             60          (b) At least 35% of the total assets of this endowment shall be invested in fixed-income
             61      securities authorized by Subsections (1)(a), (c), and (d).
             62          (3) The treasurer shall use appropriate investment strategies to protect the principal of the
             63      endowment administered under this section during periods of financial market volatility.
             64          (4) (a) The treasurer may employ professional asset managers to assist in the investment
             65      of assets of the endowment.
             66          (b) The treasurer may provide compensation to asset managers from earnings generated
             67      by the funds' investments.
             68          (5) The council shall give suggestions, advice, and opinions to the treasurer in regard to
             69      this section.
             70          Section 2. Section 63-97-101 is amended to read:
             71     
CHAPTER 97. TOBACCO SETTLEMENT ENDOWMENT

             72           63-97-101. Title.
             73          This chapter is known as the "Tobacco Settlement [Account] Endowment."
             74          Section 3. Section 63-97-102 is amended to read:
             75           63-97-102. Creation of restricted account.
             76          (1) There is created within the General Fund a restricted account known as the Tobacco
             77      Settlement [Account] Endowment.
             78          (2) Monies in the account shall be deposited or invested pursuant to Section 51-7-12.1 .
             79          [(2)] (3) The account shall consist of:
             80          (a) all funds received by the state that are related to the settlement agreement that the state
             81      entered into with leading tobacco manufacturers on November 23, 1998[.];
             82          (b) capital gains on assets in the account; and
             83          (c) interest and dividends earned on investments.
             84          (4) Tobacco settlement funds and capital gains in the account pursuant to Subsections
             85      (3)(a) and (b) shall be treated as principal and may not be appropriated for any purpose, but shall
             86      remain in the account for the purpose of earning interest and dividends to be appropriated in
             87      accordance with Subsection (5).
             88          [(3) Funds in] (5) Interest and dividends earned on the account may only be used as
             89      directed by the Legislature through appropriation.


             90          Section 4. Effective date.
             91          This act takes effect on July 1, 2000.




Legislative Review Note
    as of 2-7-00 6:56 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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