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H.B. 337
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8 LONG TITLE
9 General Description:
10 This bill addresses the investment of money in the permanent state trust fund.
11 Highlighted Provisions:
12 This bill:
13 . repeals a provision relating to the state treasurer's investment of money in the
14 permanent state trust fund and replaces it with other provisions governing the
15 investment of permanent state trust fund money;
16 . provides for requirements and criteria for the state treasurer's investment of
17 permanent state trust fund money;
18 . requires the state treasurer to invest the money as a prudent investor would and
19 establishes criteria for determining whether the treasurer has met that prudent
20 investor standard; and
21 . makes technical changes.
22 Money Appropriated in this Bill:
23 None
24 Other Special Clauses:
25 None
26 Utah Code Sections Affected:
27 AMENDS:
28 51-9-202, as last amended by Laws of Utah 2011, Chapter 119
29 ENACTS:
30 51-7b-101, Utah Code Annotated 1953
31 51-7b-102, Utah Code Annotated 1953
32 51-7b-201, Utah Code Annotated 1953
33 51-7b-202, Utah Code Annotated 1953
34 REPEALS:
35 51-7-12.1, as enacted by Laws of Utah 2000, Chapter 351
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37 Be it enacted by the Legislature of the state of Utah:
38 Section 1. Section 51-7b-101 is enacted to read:
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41 51-7b-101. Title.
42 This chapter is known as "Investment of Permanent State Trust Fund Money."
43 Section 2. Section 51-7b-102 is enacted to read:
44 51-7b-102. Definition.
45 As used in this chapter, "permanent state trust fund" means the permanent state trust
46 fund created by and operated under Utah Constitution Article XXII, Section 4.
47 Section 3. Section 51-7b-201 is enacted to read:
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49 51-7b-201. Investment of money in the permanent state trust fund.
50 (1) The state treasurer shall:
51 (a) invest money in the permanent state trust fund with the primary goal of providing
52 for the stability, income, and growth of the permanent state trust fund's principal;
53 (b) in making investment decisions, consider:
54 (i) general economic conditions;
55 (ii) the possible effect of inflation and deflation;
56 (iii) the role that each investment or course of action plays within the overall
57 permanent state trust fund portfolio;
58 (iv) the expected total return from income and the appreciation of capital; and
59 (v) needs for liquidity, regularity of income, and preservation or appreciation of capital;
60 and
61 (c) diversify the investments of the permanent state trust fund, unless the state treasurer
62 reasonably determines that the purposes of the permanent state trust fund are better served
63 without diversifying.
64 (2) Nothing in this section requires a specific outcome in investing.
65 (3) The state treasurer may deduct any administrative costs incurred in managing
66 permanent state trust fund assets from earnings before distributing them.
67 (4) (a) The state treasurer may employ professional asset managers to assist in the
68 investment of assets of the permanent state trust fund.
69 (b) The treasurer may provide compensation to asset managers only from earnings
70 generated by the permanent state trust fund's investments.
71 Section 4. Section 51-7b-202 is enacted to read:
72 51-7b-202. Prudent investor standard -- Determining whether standard met.
73 (1) The state treasurer shall invest and manage the permanent state trust fund assets as
74 a prudent investor would, by:
75 (a) considering the purposes, terms, distribution requirements, and other circumstances
76 of the permanent state trust fund; and
77 (b) exercising reasonable care, skill, and caution in order to meet the standard of care
78 of a prudent investor.
79 (2) In determining whether the state treasurer has met the standard of care of a prudent
80 investor, a finder of fact shall:
81 (a) consider the state treasurer's investment decision or action in light of the facts and
82 circumstances existing at the time of the decision or action, and not by hindsight; and
83 (b) evaluate the state treasurer's investment and management decisions respecting
84 individual assets:
85 (i) not in isolation, but in the context of the permanent state trust fund portfolio as a
86 whole; and
87 (ii) as a part of an overall investment strategy that has risk and return objectives
88 reasonably suited to the permanent state trust fund.
89 Section 5. Section 51-9-202 is amended to read:
90 51-9-202. Permanent state trust fund.
91 (1) Until July 1, 2003, 50% of all funds of every kind that are received by the state that
92 are related to the settlement agreement that the state entered into with leading tobacco
93 manufacturers on November 23, 1998, shall be deposited into the permanent state trust fund
94 created by and operated under Utah Constitution Article XXII, Section 4.
95 (2) On and after July 1, 2003 and until July 1, 2004 20% of the funds of any kind
96 received by the state that are related to the settlement agreement that the state entered into with
97 leading tobacco manufacturers shall be deposited into the permanent state trust fund created by
98 and operated under Utah Constitution Article XXII, Section 4.
99 (3) On and after July 1, 2004 and until July 1, 2005, 30% of all funds of any kind
100 received by the state that are related to the settlement agreement that the state entered into with
101 leading tobacco manufacturers shall be deposited into the General Fund Budget Reserve
102 Account created in Section 63J-1-312 .
103 (4) On and after July 1, 2005 and until July 1, 2007, 25% of all funds of any kind
104 received by the state that are related to the settlement agreement that the state entered into with
105 leading tobacco manufacturers shall be deposited into the permanent state trust fund created by
106 and operated under Utah Constitution Article XXII, Section 4.
107 (5) On and after July 1, 2007, 40% of all funds of every kind that are received by the
108 state that are related to the settlement agreement that the state entered into with leading tobacco
109 manufacturers on November 23, 1998, shall be deposited into the General Fund and the
110 remaining funds deposited as directed.
111 (6) Funds in the permanent state trust fund shall be deposited or invested pursuant to
112 [
113 (7) (a) In accordance with Utah Constitution Article XXII, Section 4, the interest and
114 dividends earned annually from the permanent state trust fund shall be deposited in the General
115 Fund. There shall be transferred on an ongoing basis from the General Fund to the permanent
116 state trust fund created under Utah Constitution Article XXII, Section 4, an amount equal to
117 50% of the interest and dividends earned annually from the permanent state trust fund. The
118 amount transferred into the fund under this Subsection (7)(a) shall be treated as principal.
119 (b) Any annual interest or dividends earned from the permanent state trust fund that
120 remain in the General Fund after Subsection (7)(a) may be appropriated by the Legislature.
121 (c) Any realized or unrealized gains or losses on investments in the permanent state
122 trust fund shall remain in the permanent state trust fund.
123 (8) This section does not apply to funds deposited under Chapter 9, Part 3,
124 Infrastructure and Economic Diversification Investment Account and Deposit of Certain
125 Severance Taxes into Permanent State Trust Fund Act, into the permanent state trust fund.
126 Section 6. Repealer.
127 This bill repeals:
128 Section 51-7-12.1, Deposit or investment of Tobacco Settlement Endowment --
129 Authorized deposits and investments -- Asset manager.
Legislative Review Note
as of 1-25-13 1:06 PM