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