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First Substitute H.B. 232
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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) [
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 [
172 constitute a claim against public funds except as provided in this section;
173 [
174 programs referred to in this part, except to the extent specifically authorized by the [
175 responsible school board; [
176 [
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 [
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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