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First Substitute H.B. 232

Representative Sheryl L. Allen proposes to substitute the following bill:


             1     
PUBLIC EDUCATION FOUNDATION AMENDMENTS

             2     
1999 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Sponsor: Sheryl L. Allen

             5      Lloyd W. Frandsen
             6      Ron Bigelow
David L. Hogue
A. Lamont Tyler
Afton B. Bradshaw
Judy Ann Buffmire


             7      AN ACT RELATING TO EDUCATION FOUNDATIONS; EXPANDING THE POWERS OF
             8      PUBLIC EDUCATION FOUNDATIONS; REQUIRING THE FOUNDATIONS TO COMPLY
             9      WITH THE STATE MONEY MANAGEMENT ACT; AND ALLOWING THE FOUNDATIONS
             10      TO PARTICIPATE IN THE RISK MANAGEMENT FUND.
             11      This act affects sections of Utah Code Annotated 1953 as follows:
             12      AMENDS:
             13          51-7-11, as last amended by Chapter 375, Laws of Utah 1997
             14          51-7-13, as last amended by Chapter 169, Laws of Utah 1997
             15          53A-4-205, as enacted by Chapter 2, Laws of Utah 1988
             16          63A-4-204, as last amended by Chapter 55, Laws of Utah 1997
             17      Be it enacted by the Legislature of the state of Utah:
             18          Section 1. Section 51-7-11 is amended to read:
             19           51-7-11. Authorized deposits or investments of public funds.
             20          (1) A public treasurer may conduct investment transactions only through qualified
             21      depositories, certified dealers, or directly with issuers of the investment securities.
             22          (2) The remaining term to maturity of the investment may not exceed the period of
             23      availability of the funds to be invested.
             24          (3) Except as provided in Subsection (4), all public funds may be deposited or invested
             25      only in the following assets that meet the criteria of Section 51-7-17 :


             26          (a) negotiable or nonnegotiable deposits of qualified depositories;
             27          (b) qualifying or nonqualifying repurchase agreements and reverse repurchase agreements
             28      with qualified depositories using collateral consisting of:
             29          (i) Government National Mortgage Association mortgage pools;
             30          (ii) Federal Home Loan Mortgage Corporation mortgage pools;
             31          (iii) Federal National Mortgage Corporation mortgage pools;
             32          (iv) Small Business Administration loan pools;
             33          (v) Federal Agriculture Mortgage Corporation pools; or
             34          (vi) other investments authorized by this section;
             35          (c) qualifying repurchase agreements and reverse repurchase agreements with certified
             36      dealers, permitted depositories, or qualified depositories using collateral consisting of:
             37          (i) Government National Mortgage Association mortgage pools;
             38          (ii) Federal Home Loan Mortgage Corporation mortgage pools;
             39          (iii) Federal National Mortgage Corporation mortgage pools;
             40          (iv) Small Business Administration loan pools; or
             41          (v) other investments authorized by this section;
             42          (d) commercial paper that is classified as "first tier" by two nationally recognized statistical
             43      rating organizations, one of which must be Moody's Investors Service or Standard and Poor's,
             44      which has a remaining term to maturity of 270 days or less;
             45          (e) bankers' acceptances that:
             46          (i) are eligible for discount at a Federal Reserve bank; and
             47          (ii) have a remaining term to maturity of 270 days or less;
             48          (f) fixed rate negotiable deposits issued by a permitted depository that have a remaining
             49      term to maturity of 365 days or less;
             50          (g) obligations of the United States Treasury, including United States Treasury bills,
             51      United States Treasury notes, and United States Treasury bonds;
             52          (h) obligations other than mortgage pools and other mortgage derivative products issued
             53      by, or fully guaranteed as to principal and interest by, the following agencies or instrumentalities
             54      of the United States in which a market is made by a primary reporting government securities
             55      dealer:
             56          (i) Federal Farm Credit banks;


             57          (ii) Federal Home Loan banks;
             58          (iii) Federal National Mortgage Association;
             59          (iv) Student Loan Marketing Association;
             60          (v) Federal Home Loan Mortgage Corporation;
             61          (vi) Federal Agriculture Mortgage Corporation; and
             62          (vii) Tennessee Valley Authority;
             63          (i) fixed rate corporate obligations that:
             64          (i) are rated "A" or higher or the equivalent of "A" or higher by two nationally recognized
             65      statistical rating organizations, one of which must be by Moody's Investors Service or Standard
             66      and Poor's;
             67          (ii) are publicly traded; and
             68          (iii) have a remaining term to final maturity of 365 days or less or is subject to a hard put
             69      at par value or better, within 365 days;
             70          (j) tax anticipation notes and general obligation bonds of the state or of any county,
             71      incorporated city or town, school district, or other political subdivision of this state, including
             72      bonds offered on a when-issued basis without regard to the limitation in Subsection (7);
             73          (k) bonds, notes, or other evidence of indebtedness of any county, incorporated city or
             74      town, school district, or other political subdivision of the state that are payable from assessments
             75      or from revenues or earnings specifically pledged for payment of the principal and interest on these
             76      obligations, including bonds offered on a when-issued basis without regard to the limitation in
             77      Subsection (7);
             78          (l) shares or certificates in a money market mutual fund as defined in Section 51-7-3 ;
             79          (m) variable rate negotiable deposits that:
             80          (i) are issued by a qualified depository or a permitted depository;
             81          (ii) are repriced at least semiannually; and
             82          (iii) have a remaining term to final maturity not to exceed two years;
             83          (n) variable rate securities that:
             84          (i) (A) are rated "A" or higher or the equivalent of "A" or higher by two nationally
             85      recognized statistical rating organizations, one of which must be by Moody's Investors Service or
             86      Standard and Poor's;
             87          (B) are publicly traded;


             88          (C) are repriced at least semiannually; and
             89          (D) have a remaining term to final maturity not to exceed two years or are subject to a hard
             90      put at par value or better, within 365 days;
             91          (ii) are not mortgages, mortgage-backed securities, mortgage derivative products, or any
             92      security making unscheduled periodic principal payments other than optional redemptions.
             93          (4) The following public funds are exempt from the requirements of Subsection (3):
             94          (a) funds of the permanent land grant trust funds established pursuant to the Utah Enabling
             95      Act and the Utah Constitution;
             96          (b) funds of member institutions of the state system of higher education and funds of
             97      public education foundations acquired by:
             98          (i) gift, devise, or bequest; or
             99          (ii) federal or private grant;
             100          (c) the corpus of funds functioning as endowments of member institutions of the state
             101      system of higher education and the corpus of funds functioning as endowments of public education
             102      foundations;
             103          (d) the Employers' Reinsurance Fund created in Section 34A-2-702 ; and
             104          (e) the Uninsured Employers' Fund created in Section 34A-2-704 .
             105          (5) If any of the deposits authorized by Subsection (3)(a) are negotiable or nonnegotiable
             106      large time deposits issued in amounts of $100,000 or more, the interest shall be calculated on the
             107      basis of the actual number of days divided by 360 days.
             108          (6) A public treasurer may maintain fully-insured deposits in demand accounts in a
             109      federally insured nonqualified depository only if a qualified depository is not reasonably
             110      convenient to the entity's geographic location.
             111          (7) The public treasurer shall ensure that all purchases and sales of securities are settled
             112      within 15 days of the trade date.
             113          Section 2. Section 51-7-13 is amended to read:
             114           51-7-13. Funds of member institutions of state system of higher education and public
             115      education foundations -- Authorized deposits or investments -- Release of restrictions on
             116      gifts.
             117          (1) The provisions of this section apply to all funds of member institutions of the state
             118      system of higher education that are not transferred to the state treasurer under Section 51-7-4 and


             119      all funds of public education foundations established under Section 53A-4-205 .
             120          (2) (a) (i) Except as provided in Subsection (ii), the following funds shall be invested
             121      according to rules established by the council:
             122          (A) all funds acquired by gift, devise, or bequest or by federal or private grant; and
             123          (B) the corpus of funds functioning as endowments.
             124          (ii) Notwithstanding Subsection (2)(a)(i), if the terms of a gift or grant require particular
             125      investments, the funds shall be invested according to those terms.
             126          (b) Proceeds of general obligation bond issues and all funds pledged or otherwise
             127      dedicated to the payment of interest and principal of general obligation bonds issued by or for the
             128      benefit of the institution shall be invested according to the requirements of:
             129          (i) Section 51-7-11 and the rules of the council; or
             130          (ii) the terms of the borrowing instruments applicable to those bonds and funds if those
             131      terms are more restrictive than Section 51-7-11 .
             132          (c) (i) The public treasurer shall invest the proceeds of bonds other than general obligation
             133      bonds issued by or for the benefit of the institution and all funds pledged or otherwise dedicated
             134      to the payment of interest and principal of bonds other than general obligation bonds according to
             135      the terms of the borrowing instruments applicable to those bonds.
             136          (ii) If no provisions governing investment of bond proceeds or pledged or dedicated funds
             137      are contained in the borrowing instruments applicable to those bonds or funds, the public treasurer
             138      shall comply with the requirements of Section 51-7-11 in investing those proceeds and funds.
             139          (d) All other funds in the custody or control of any of those institutions or public education
             140      foundations shall be invested as provided in Section 51-7-11 and the rules of the council.
             141          (3) (a) Each institution shall make monthly reports detailing the deposit and investment
             142      of funds in its custody or control to its institutional council and the State Board of Regents.
             143          (b) The state auditor may conduct or cause to be conducted an annual audit of the
             144      investment program of each institution.
             145          (c) The State Board of Regents shall:
             146          (i) require whatever internal controls and supervision are necessary to ensure the
             147      appropriate safekeeping, investment, and accounting for all funds of these institutions; and
             148          (ii) submit annually to the governor and the Legislature a summary report of all
             149      investments by institutions under its jurisdiction.


             150          (4) (a) The State Board of Regents may release, in whole or in part, a restriction imposed
             151      by the applicable gift instrument on the investment of a fund held by a member institution by
             152      obtaining the written consent of the donor.
             153          (b) (i) If written consent of the donor cannot be obtained because the donor is dead,
             154      disabled, unavailable, or cannot be identified, the State Board of Regents may apply in the name
             155      of the institution to the district court of the district in which the institution is located for a release
             156      from the restriction.
             157          (ii) If, after notice and opportunity to be heard, the court finds that the restriction is
             158      obsolete, inappropriate, or impracticable, it may by order release the restriction in whole or in part.
             159          Section 3. Section 53A-4-205 is amended to read:
             160           53A-4-205. Establishment of public education foundations -- Powers and duties --
             161      Tax exempt status.
             162          (1) [School districts] State and local school boards may establish foundations to:
             163          (a) assist in the development and implementation of the programs authorized under this
             164      part to promote educational excellence; and
             165          (b) assist in the accomplishment of other education-related objectives.
             166          (2) A foundation established under Subsection (1):
             167          (a) may solicit and receive contributions from private enterprises for the purpose of this
             168      part;
             169          (b) shall comply with Title 51, Chapter 7, State Money Management Act, and rules made
             170      under the act;
             171          [(b)] (c) has no power or authority to incur contractual obligations or liabilities that
             172      constitute a claim against public funds except as provided in this section;
             173          [(c)] (d) may not exercise executive, administrative, or rulemaking authority over the
             174      programs referred to in this part, except to the extent specifically authorized by the [local]
             175      responsible school board; [and]
             176          [(d)] (e) is exempt from all taxes levied by the state or any of its political subdivisions with
             177      respect to activities conducted under this part; and
             178          (f) may participate in the Risk Management Fund under Section 63A-4-204 .
             179          Section 4. Section 63A-4-204 is amended to read:
             180           63A-4-204. School district participation in Risk Management Fund.


             181          (1) (a) For the purpose of this section, action by a public school district shall be taken upon
             182      resolution by a majority of the members of its board of education.
             183          (b) (i) Upon [the] approval [of] by the state risk manager and the board of education of the
             184      school district, a public school district may participate in the Risk Management Fund and may
             185      permit a foundation established under Section 53A-4-205 to participate in the Risk Management
             186      Fund.
             187          (ii) Upon approval by the state risk manager and the State Board of Education, a state
             188      public education foundation may participate in the Risk Management Fund.
             189          (c) Subject to any cancellation or other applicable coverage provisions, either the state risk
             190      manager or the public school district may terminate participation in the fund.
             191          (2) The state risk manager shall contract for all insurance, legal, loss adjustment,
             192      consulting, loss control, safety, and other related services necessary to support the insurance
             193      program provided to a participating public school district, except that all supporting legal services
             194      are subject to the prior approval of the state attorney general.
             195          (3) (a) The state risk manager shall treat each participating public school district as a state
             196      agency when participating in the Risk Management Fund.
             197          (b) Each public school district participating in the fund shall comply with the provisions
             198      of this part that affect state agencies.
             199          (4) (a) The risk manager shall at least annually:
             200          (i) prepare information summarizing the coverage provided to school teachers by the Risk
             201      Management Fund; and
             202          (ii) provide that information to participating school districts.
             203          (b) Each participating school district shall provide the coverage information to each school
             204      teacher.


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