HOUSE OF REPRESENTATIVES

H.B. NO.

1179

TWENTY-SIXTH LEGISLATURE, 2011

H.D. 3

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO INVESTMENTS.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 


     SECTION 1.  Chapter 36, Hawaii Revised Statutes, is amended by adding two new sections to be appropriately designated and to read as follows:

     "§36-A  Advisory committee on short-term investments.  (a)  There is established an advisory committee on short-term investments administratively attached to the department of budget and finance and consisting of the following members:

(1)  The director of finance;

(2)  Two members appointed by the Hawaii bankers association;

(3)  One member appointed by the speaker of the house of representatives; and

(4)  One member appointed by the president of the senate.

     (b)  The advisory committee shall assist and advise the director of finance on the establishment and operation of a short-term investment pool, including:

(1)  Formulating an investment policy;

(2)  Determining eligible investment vehicles;

(3)  Establishing performance standards;

(4)  Monitoring the outflow of funds from financial institutions;

(5)  Determining compliance with written investment policies; and

(6)  Conducting periodic reviews of the short-term investment pool.

     §36-B  Short-term investment of state moneys.  (a)  The director of finance, with the assistance of the advisory committee on short-term investments, may invest any moneys of the State which, in the director of finance's judgment, exceed the amounts necessary to meet the immediate requirements of the State and whereby, in the director of finance's judgment, the action will not impede or hamper the necessary financial operations of the State.  The short-term investments shall be limited to:

(1)  Any bonds, interest-bearing notes, or obligations:

(A)  Of the State (including the director of finance's warrant notes issued pursuant to chapter 40);

(B)  Of the United States; and

(C)  For which the full faith and credit of the United States are pledged for the payment of principal and interest;

(2)  Federal Farm Credit System notes and bonds;

(3)  Federal Agricultural Mortgage Corporation notes and bonds;

(4)  Federal Home Loan Bank notes and bonds;

(5)  Federal Home Loan Mortgage Corporation notes and bonds;

(6)  Federal National Mortgage Association notes and bonds;

(7)  Student Loan Marketing Association notes and bonds;

(8)  Tennessee Valley Authority notes and bonds;

     (9)  Securities of a mutual fund whose portfolio is limited to bonds or securities issued or guaranteed by the United States or an agency thereof or repurchase agreements fully collateralized by any such bonds or securities;

    (10)  Securities of a money market mutual fund that is rated AAA, or its equivalent, by a nationally recognized rating agency or whose portfolio consists of securities that are rated as first-tier securities by a nationally-recognized statistical rating organization as provided in Title 17 Code of Federal Regulations Section 270.2a-7;

    (11)  Federally insured savings accounts;

    (12)  Time certificates of deposit;

    (13)  Certificates of deposit open account;

    (14)  Repurchase agreements with federally insured banks, savings and loan associations, and financial services loan companies;

    (15)  Student loan resource securities, including:

(A)  Student loan auction rate securities;

(B)  Student loan asset-backed notes;

(C)  Student loan program revenue notes and bonds; and

(D)  Securities issued pursuant to Rule 144A of the Securities Act of 1933, including any private placement issues,

issued with either bond insurance or over collateralization guaranteed by the United States Department of Education; provided that all insurers maintain a triple-A rating by Standard & Poor's, Moody's, Duff & Phelps, Fitch, or any other major national securities-rating agency;

    (16)  Commercial paper with an A1/P1 or equivalent rating by any national securities-rating service; and

    (17)  Bankers' acceptances with an A1/P1 or equivalent rating by any national securities-rating service;

provided that for authorized investments with stated maturity dates, the investment, as well as any underlying securities of those investments, are due to mature not more than five years from the date of investment.  Income derived from those investments shall be a realization of the general fund; provided that, except as provided by Act 79, Session Laws of Hawaii 2009, income earned from moneys invested by the general funds, special funds, bond funds, and trust and agency funds on an investment pool basis shall be paid into and credited to the respective funds based on the contributions of moneys into the investment pool by each fund.

     As used in this section:

     "Investment pool" means the aggregate of state treasury moneys that are maintained in the custody of the director of finance for investment and reinvestment without regard to fund designation.

     (b)  Except with respect to an early withdrawal penalty on an investment permitted by this section, the amount of such penalty being mutually agreed upon at the time of acquisition of such investment, no investment permitted by this section shall require or may in the future require payments by the State, whether unilateral, reciprocal, or otherwise, including margin payments, or shall bear interest at a variable rate which causes or may cause the market price of such investment to fluctuate; provided that such limitations shall not apply to money market mutual funds that:

(1)  Invest solely in:

(A)  Direct and general obligations of the United States; or

(B)  Obligations of any agency or instrumentality of the United States, the payment of the principal and interest on which are unconditionally guaranteed by the full faith and credit of the United States;

(2)  Are rated at the time of purchase "AAAm-G" or its equivalent by Standard & Poor's Ratings Group; and

(3)  Are open-end management investment companies regulated under the Investment Company Act of 1940, as amended, which calculate their current price per share pursuant to Rule 2a-7 (17 Code of Federal Regulations section 270.2a-7) promulgated under such act.

     (c)  The State shall not acquire any investment or enter into any agreement in connection with the acquisition of any investment or related to any existing investment held by the State, which would require or may in the future require any payment by the State, whether unilateral, reciprocal, or otherwise, such as swap agreements, hedge agreements, or other similar agreements.  For purposes of this section, a swap or hedge payment is any payment made by the State in consideration or in exchange for a reciprocal payment by any person, such as a variable rate payment in exchange for a fixed rate payment, a fixed rate payment in exchange for a variable rate payment, a payment when a cap or a floor amount is exceeded, or other similar payment.

     (d)  The short-term investment pool may be operated under contract with a private investment advisor or advisors, approved by the director of finance and the advisory committee on short-term investments, in accordance with chapter 103D.

     (e)  The director of finance shall ensure that periodic statements of accounts and reports on holdings are provided to state agencies with accounts participating in the pool, relative to their proportionate share of the pool.

     (f)  The investment pool shall be subject to independent audit conducted on an annual basis, as part of the State's comprehensive annual financial audit."

     SECTION 2.  Act 79, Session Laws of Hawaii 2009, is amended as follows:

     1.   By amending subsection (a) of section 30 to read:

     "(a)  Notwithstanding any other law to the contrary, from July 1, 2009, until June 30, 2015, the director of finance may deposit into the general fund the interest earned on the short-term investment of moneys of the special funds, revolving funds, and special accounts listed in this section.  For purposes of this section, "short-term investment" means an investment made by the director of finance in accordance with [section 36-21, Hawaii Revised Statutes.] section 36-B, Hawaii Revised Statutes, of section 1, of Act   , Session Laws of Hawaii 2011.

     This subsection shall be applicable to the following special funds, revolving funds, and special accounts:

     (1)  Tobacco enforcement special fund -- section 28-15, Hawaii Revised Statutes;

     (2)  Environmental response revolving fund -- section 128D-2, Hawaii Revised Statutes;

     (3)  Special land and development fund -- section 171-19, Hawaii Revised Statutes;

     (4)  Beach restoration special fund -- section 171-156, Hawaii Revised Statutes;

     (5)  Land conservation fund -- section 173A-5, Hawaii Revised Statutes;

     (6)  Dam and reservoir safety special fund -- section 179D-25, Hawaii Revised Statutes;

     (7)  State parks special fund -- section 184-3.4, Hawaii Revised Statutes;

     (8)  Firefighter's contingency fund -- section 185-4(d), Hawaii Revised Statutes;

     (9)  Commercial fisheries special fund -- section 189-2.4, Hawaii Revised Statutes;

    (10)  Natural area reserve fund -- section 195-9, Hawaii Revised Statutes;

    (11)  Forest stewardship fund -- section 195F-4, Hawaii Revised Statutes;

    (12)  Housing finance revolving fund -- section 201H-80, Hawaii Revised Statutes;

    (13)  Rental assistance revolving fund -- section 201H-123, Hawaii Revised Statutes;

    (14)  Dwelling unit revolving fund -- section 201H-191, Hawaii Revised Statutes;

    (15)  Rental motor vehicle customer facility charge special fund -- section 261-5.6, Hawaii Revised Statutes;

    (16)  Education research and development revolving fund -- section 302A-305, Hawaii Revised Statutes;

    (17)  School bus fare revolving fund -- section 302A-407.5, Hawaii Revised Statutes;

    (18)  Hawaii teacher standards board special fund -- section 302A-806, Hawaii Revised Statutes;

    (19)  Textbook and instructional materials fee special account -- section 302A-1130.6, Hawaii Revised Statutes;

    (20)  After-school plus program revolving fund -- section 302A-1149.5, Hawaii Revised Statutes;

    (21)  Food distribution program revolving fund -- section 302A-1315, Hawaii Revised Statutes;

    (22)  Federal grants search, development, and application revolving fund -- section 302A-1405, Hawaii Revised Statutes;

    (23)  School-level minor repairs and maintenance special fund -- section 302A-1504.5, Hawaii Revised Statutes;

    (24)  Domestic violence and sexual assault special fund -- section 321-1.3, Hawaii Revised Statutes;

    (25)  Early intervention special fund -- section 321-355, Hawaii Revised Statutes;

    (26)  Public health nursing services special fund -- section 321-432, Hawaii Revised Statutes;

    (27)  Neurotrauma special fund -- section 321H-4, Hawaii Revised Statutes;

    (28)  State health planning and development special fund -- section 323D-12.6, Hawaii Revised Statutes;

    (29)  Hawaii tobacco settlement special fund -- section 328L-2, Hawaii Revised Statutes;

    (30)  Vital statistics improvement special fund -- section 338-14.6, Hawaii Revised Statutes;

    (31)  Wastewater treatment certification board special fund -- section 340B-3.5, Hawaii Revised Statutes;

    (32)  Deposit beverage container deposit special fund -- section 342G-104, Hawaii Revised Statutes;

    (33)  Leaking underground storage tank fund -- section 342L-51, Hawaii Revised Statutes;

    (34)  Correctional industries revolving fund -- section 354D-10, Hawaii Revised Statutes;

    (35)  Employment and training fund -- section 383-128, Hawaii Revised Statutes;

    (36)  Hoisting machine operators' certification revolving fund -- section 396-20, Hawaii Revised Statutes;

    (37)  Notaries public revolving fund -- section 456-9.5, Hawaii Revised Statutes;

    (38)  Solicitation of funds for charitable purposes special fund -- section 467B-15, Hawaii Revised Statutes;

    (39)  Bureau of conveyances special fund -- section 502-8, Hawaii Revised Statutes;

    (40)  Drug demand reduction assessments special fund -- section 706-650, Hawaii Revised Statutes;

    (41)  Criminal forfeiture fund -- section 712A-16, Hawaii Revised Statutes;

    (42)  Criminal history record improvement revolving fund -- section 846-10.6, Hawaii Revised Statutes; and

    (43)  State identification revolving fund -- section 846-27, Hawaii Revised Statutes."

     2.   By amending section 34 to read:

     "SECTION 34.  This Act shall take effect upon its approval; provided that:

     (1)  Part I shall take effect on June 1, 2009;

     (2)  Part II shall take effect on June 1, 2009;

     (3)  Part III shall take effect on July 1, 2009, and shall be repealed on June 30, 2015; provided that sections 21D-5, 36-27, 36-30, 201-85, 304A-3005, 342D-82, and 261D-3, Hawaii Revised Statutes, shall be reenacted in the form in which they read on June 30, 2009; and

     (4)  Part IV shall take effect on July 1, 2009, and shall be repealed on July 1, 2015[; provided that section 36-21, Hawaii Revised Statutes, shall be reenacted in the form in which it read on June 30, 2009]."

     SECTION 3.  Section 36-21, Hawaii Revised Statutes, is repealed.

     ["§36-21  Short-term investment of state moneys.  (a)  The director of finance may invest any moneys of the State which in the director's judgment are in excess of the amounts necessary for meeting the immediate requirements of the State and where in the director's judgment the action will not impede or hamper the necessary financial operations of the State in:

     (1)  Any bonds or interest-bearing notes or obligations:

         (A)  Of the State (including state director of finance's warrant notes issued pursuant to chapter 40);

         (B)  Of the United States;

         (C)  For which the faith and credit of the United States are pledged for the payment of principal and interest;

     (2)  Federal Farm Credit System notes and bonds;

     (3)  Federal Agricultural Mortgage Corporation notes and bonds;

     (4)  Federal Home Loan Bank notes and bonds;

     (5)  Federal Home Loan Mortgage Corporation bonds;

     (6)  Federal National Mortgage Association notes and bonds;

     (7)  Student Loan Marketing Association notes and bonds;

     (8)  Tennessee Valley Authority notes and bonds;

     (9)  Securities of a mutual fund whose portfolio is limited to bonds or securities issued or guaranteed by the United States or an agency thereof or repurchase agreements fully collateralized by any such bonds or securities;

    (10)  Securities of a money market mutual fund that is rated AAA, or its equivalent, by a nationally recognized rating agency or whose portfolio consists of securities that are rated as first tier securities by a nationally recognized statistical rating organization as provided in 17 Code of Federal Regulations section 270.2a-7;

    (11)  Federally insured savings accounts;

    (12)  Time certificates of deposit;

    (13)  Certificates of deposit open account;

    (14)  Repurchase agreements with federally insured banks, savings and loan associations, and financial services loan companies;

    (15)  Student loan resource securities including:

         (A)  Student loan auction rate securities;

         (B)  Student loan asset-backed notes;

         (C)  Student loan program revenue notes and bonds; and

         (D)  Securities issued pursuant to Rule 144A of the Securities Act of 1933, including any private placement issues;

          issued with either bond insurance or overcollateralization guaranteed by the United States Department of Education; provided all insurers maintain a triple-A rating by Standard & Poor's, Moody's, Duff & Phelps, Fitch, or any other major national securities rating agency;

    (16)  Commercial paper with an A1/P1 or equivalent rating by any national securities rating service; and

    (17)  Bankers' acceptances with an A1/P1 or equivalent rating by any national securities rating service;

provided that for authorized investments with stated maturity dates, the investment, as well as the underlying securities of those investments, are due to mature not more than five years from the date of investment.  Income derived from those investments shall be a realization of the general fund; provided that, except as provided by Act 79, Session Laws of Hawaii 2009, income earned from moneys invested by the general funds, special funds, bond funds, and trust and agency funds on an investment pool basis shall be paid into and credited to the respective funds based on the contribution of moneys into the investment pool by each fund.  As used in this section, "investment pool" means the aggregate of state treasury moneys that are maintained in the custody of the director of finance for investment and reinvestment without regard to fund designation.

     (b)  Except with respect to an early withdrawal penalty on an investment permitted by this section, the amount of such penalty being mutually agreed at the time of acquisition of such investment, no investment permitted by this section shall require or may in the future require payments by the State, whether unilateral, reciprocal, or otherwise, including margin payments, or shall bear interest at a variable rate which causes or may cause the market price of such investment to fluctuate; provided that such limitation shall not apply to money market mutual funds which:

     (1)  Invest solely in:

         (A)  Direct and general obligations of the United States of America; or

         (B)  Obligations of any agency or instrumentality of the United States of America the payment of the principal and interest on which are unconditionally guaranteed by the full faith and credit of the United States of America;

     (2)  Are rated at the time of purchase "AAAm-G" or its equivalent by Standard & Poor's Ratings Group; and

     (3)  Are open-end management investment companies regulated under the Investment Company Act of 1940, as amended, which calculate their current price per share pursuant to Rule 2a-7 (17 Code of Federal Regulations section 270.2a-7) promulgated under such act.

     (c)  Furthermore, the State shall not acquire any investment or enter into any agreement in connection with the acquisition of any investment or related to any existing investment held by the State, which would require or may in the future require any payment by the State, whether unilateral, reciprocal, or otherwise, such as swap agreements, hedge agreements, or other similar agreements.  For purposes of this section, a swap or hedge payment is any payment made by the State in consideration or in exchange for a reciprocal payment by any person, such as a variable rate payment in exchange for a fixed rate payment, a fixed rate payment in exchange for a variable rate payment, a payment when a cap or a floor amount is exceeded, or other similar payment."]

     SECTION 4.  In codifying the new sections added by section 1 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

     SECTION 5.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 6.  This Act shall take effect on July 1, 2112.



 

Report Title:

State Monies; Short-term Investments

 

Description:

Establishes an Advisory Committee on Short-term Investments administratively attached to the Department of Budget and Finance to assist the Director of Finance in making short-term investments.  Establishes additional requirements in the management of the short-term investments.  Allows for the operation of the short-term investment pool under contract with a private investment advisor or advisors.  Effective July 1, 2112.  (HB1179 HD3)

 

 

 

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