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H.B. 337 Enrolled

             1     

PERMANENT STATE TRUST FUND INVESTMENT

             2     
AMENDMENTS

             3     
2013 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Chief Sponsor: Jim Nielson

             6     
Senate Sponsor: Wayne A. Harper

             7     
             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;
             21          .    exempts funds of the permanent state trust fund from the State Money Management
             22      Act; and
             23          .    makes technical changes.
             24      Money Appropriated in this Bill:
             25          None
             26      Other Special Clauses:
             27          None
             28      Utah Code Sections Affected:
             29      AMENDS:


             30          51-7-2, as last amended by Laws of Utah 2011, Chapter 46
             31          51-9-202, as last amended by Laws of Utah 2011, Chapter 119
             32      ENACTS:
             33          51-7b-101, Utah Code Annotated 1953
             34          51-7b-102, Utah Code Annotated 1953
             35          51-7b-201, Utah Code Annotated 1953
             36          51-7b-202, Utah Code Annotated 1953
             37      REPEALS:
             38          51-7-12.1, as enacted by Laws of Utah 2000, Chapter 351
             39     
             40      Be it enacted by the Legislature of the state of Utah:
             41          Section 1. Section 51-7-2 is amended to read:
             42           51-7-2. Exemptions from chapter.
             43          The following funds are exempt from this chapter:
             44          (1) funds invested in accordance with the participating employees' designation or
             45      direction pursuant to a public employees' deferred compensation plan established and operated
             46      in compliance with Section 457 of the Internal Revenue Code of 1986, as amended;
             47          (2) funds of the Workers' Compensation Fund;
             48          (3) funds of the Utah State Retirement Board;
             49          (4) funds of the Utah Housing Corporation;
             50          (5) endowment funds of higher education institutions;
             51          (6) permanent and other land grant trust funds established pursuant to the Utah
             52      Enabling Act and the Utah Constitution;
             53          (7) the State Post-Retirement Benefits Trust Fund; [and]
             54          (8) the funds of the Utah Educational Savings Plan[.]; and
             55          (9) funds of the permanent state trust fund created by and operated under Utah
             56      Constitution, Article XXII, Section 4.
             57          Section 2. Section 51-7b-101 is enacted to read:


             58     
CHAPTER 7b. INVESTMENT OF PERMANENT STATE TRUST FUND MONEY

             59     
Part 1. General Provisions

             60          51-7b-101. Title.
             61          This chapter is known as "Investment of Permanent State Trust Fund Money."
             62          Section 3. Section 51-7b-102 is enacted to read:
             63          51-7b-102. Definition.
             64          As used in this chapter, "permanent state trust fund" means the permanent state trust
             65      fund created by and operated under Utah Constitution, Article XXII, Section 4.
             66          Section 4. Section 51-7b-201 is enacted to read:
             67     
Part 2. State Treasurer Investment Duties

             68          51-7b-201. Investment of money in the permanent state trust fund.
             69          (1) The state treasurer shall:
             70          (a) invest money in the permanent state trust fund with the primary goal of providing
             71      for the stability, income, and growth of the permanent state trust fund's principal;
             72          (b) in making investment decisions, consider:
             73          (i) general economic conditions;
             74          (ii) the possible effect of inflation and deflation;
             75          (iii) the role that each investment or course of action plays within the overall
             76      permanent state trust fund portfolio;
             77          (iv) the expected total return from income and the appreciation of capital; and
             78          (v) needs for liquidity, regularity of income, and preservation or appreciation of capital;
             79      and
             80          (c) diversify the investments of the permanent state trust fund, unless the state treasurer
             81      reasonably determines that the purposes of the permanent state trust fund are better served
             82      without diversifying.
             83          (2) Nothing in this section requires a specific outcome in investing.
             84          (3) The state treasurer may deduct any administrative costs incurred in managing
             85      permanent state trust fund assets from earnings before transferring them to the General Fund.


             86          (4) (a) The state treasurer may contract with professional asset managers to assist in the
             87      investment of assets of the permanent state trust fund.
             88          (b) The treasurer may provide compensation to asset managers only from assets
             89      generated by the permanent state trust fund's investments.
             90          Section 5. Section 51-7b-202 is enacted to read:
             91          51-7b-202. Prudent investor standard -- Determining whether standard met.
             92          (1) The state treasurer shall invest and manage the permanent state trust fund assets as
             93      a prudent investor would, by:
             94          (a) considering the purposes, terms, distribution requirements, and other circumstances
             95      of the permanent state trust fund; and
             96          (b) exercising reasonable care, skill, and caution in order to meet the standard of care
             97      of a prudent investor.
             98          (2) In determining whether the state treasurer has met the standard of care of a prudent
             99      investor, a finder of fact shall:
             100          (a) consider the state treasurer's investment decision or action in light of the facts and
             101      circumstances existing at the time of the decision or action, and not by hindsight; and
             102          (b) evaluate the state treasurer's investment and management decisions respecting
             103      individual assets:
             104          (i) not in isolation, but in the context of the permanent state trust fund portfolio as a
             105      whole; and
             106          (ii) as a part of an overall investment strategy that has risk and return objectives
             107      reasonably suited to the permanent state trust fund.
             108          Section 6. Section 51-9-202 is amended to read:
             109           51-9-202. Permanent state trust fund.
             110          (1) Until July 1, 2003, 50% of all funds of every kind that are received by the state that
             111      are related to the settlement agreement that the state entered into with leading tobacco
             112      manufacturers on November 23, 1998, shall be deposited into the permanent state trust fund
             113      created by and operated under Utah Constitution Article XXII, Section 4.


             114          (2) On and after July 1, 2003 and until July 1, 2004 20% of the funds of any kind
             115      received by the state that are related to the settlement agreement that the state entered into with
             116      leading tobacco manufacturers shall be deposited into the permanent state trust fund created by
             117      and operated under Utah Constitution Article XXII, Section 4.
             118          (3) On and after July 1, 2004 and until July 1, 2005, 30% of all funds of any kind
             119      received by the state that are related to the settlement agreement that the state entered into with
             120      leading tobacco manufacturers shall be deposited into the General Fund Budget Reserve
             121      Account created in Section 63J-1-312 .
             122          (4) On and after July 1, 2005 and until July 1, 2007, 25% of all funds of any kind
             123      received by the state that are related to the settlement agreement that the state entered into with
             124      leading tobacco manufacturers shall be deposited into the permanent state trust fund created by
             125      and operated under Utah Constitution Article XXII, Section 4.
             126          (5) On and after July 1, 2007, 40% of all funds of every kind that are received by the
             127      state that are related to the settlement agreement that the state entered into with leading tobacco
             128      manufacturers on November 23, 1998, shall be deposited into the General Fund and the
             129      remaining funds deposited as directed.
             130          (6) Funds in the permanent state trust fund shall be deposited or invested pursuant to
             131      [Section 51-7-12.1 ] Chapter 7b, Investment of Permanent State Trust Fund Money.
             132          (7) (a) In accordance with Utah Constitution Article XXII, Section 4, the interest and
             133      dividends earned annually from the permanent state trust fund shall be deposited in the General
             134      Fund. There shall be transferred on an ongoing basis from the General Fund to the permanent
             135      state trust fund created under Utah Constitution Article XXII, Section 4, an amount equal to
             136      50% of the interest and dividends earned annually from the permanent state trust fund. The
             137      amount transferred into the fund under this Subsection (7)(a) shall be treated as principal.
             138          (b) Any annual interest or dividends earned from the permanent state trust fund that
             139      remain in the General Fund after Subsection (7)(a) may be appropriated by the Legislature.
             140          (c) Any realized or unrealized gains or losses on investments in the permanent state
             141      trust fund shall remain in the permanent state trust fund.


             142          (8) This section does not apply to funds deposited under Chapter 9, Part 3,
             143      Infrastructure and Economic Diversification Investment Account and Deposit of Certain
             144      Severance Taxes into Permanent State Trust Fund Act, into the permanent state trust fund.
             145          Section 7. Repealer.
             146          This bill repeals:
             147          Section 51-7-12.1, Deposit or investment of Tobacco Settlement Endowment --
             148      Authorized deposits and investments -- Asset manager.


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