SSB 1179 (LSB 1972XC (4) 90)

SENATE FILE _____ 

BY  (PROPOSED COMMITTEE ON COMMERCE BILL BY CHAIRPERSON BROWN)

A BILL FOR

An Act relating to bonding requirements for certain public entities and public fund investment requirements.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 12.8, subsection 1, Code 2023, is amended to read as follows:
   1.  The treasurer of state shall invest or deposit, subject to chapters 12F, 12H, and 12J, and 12K and as provided by law, any of the public funds not currently needed for operating expenses and shall do so upon receipt of monthly notice from the director of the department of administrative services of the amount not so needed. In the event of loss on redemption or sale of securities invested as prescribed by law, and if the transaction is reported to the executive council, neither the treasurer nor director of the department of administrative services is personally liable but the loss shall be charged against the funds which would have received the profits or interest of the investment and there is appropriated from the funds the amount so required.
    Sec. 2.  NEW SECTION.  12.30A  Bonding requirements.
   1.  As used in this section, unless the context otherwise requires:
   a.  “Issuing authority” means an authority as defined in section 12.30, the state board of regents, and the Iowa finance authority.
   b.  “Obligations” means notes, bonds, including refunding bonds, and other evidences of indebtedness of an issuing authority.
   2.  The documents or instruments necessary to effectuate issuance of an obligation by an issuing authority shall not include any of the following provisions:
   a.  A provision that would require or forbid the state of the issuing authority to enact, adopt, execute, or implement any policy, whether by law, rule, order, or other action except with respect to a policy directly affecting the creditworthiness of the state or issuing authority.
   b.  A provision obliging, promoting, forbidding, or impeding any action by the issuing authority except where such action would have a direct and material effect on the financial risk to a lender of a loan to the issuing authority, or the return to the lender on any such loan.
    Sec. 3.  NEW SECTION.  12K.1  Definition.
   As used in this chapter, unless the context otherwise requires, “public fund” means the treasurer of state, the state board of regents, the public safety peace officers’ retirement system created in chapter 97A, the Iowa public employees’ retirement system created in chapter 97B, the statewide fire and police retirement system created in chapter 411, or the judicial retirement system created in chapter 602.
    Sec. 4.  NEW SECTION.  12K.2  Public fund investment requirements.
   1.  A public fund shall exercise any voting rights of securities held in any separate account, or in any collective, common, or pooled fund, of the public fund. Each public fund casting such a vote shall file a written report, quarterly, with the governor and the treasurer of state stating, for all votes cast in the preceding quarter, the substance of the question voted on, the vote cast, the date of the vote, and number of shares voted.
   2.  An investment manager for a public fund shall not undertake any transaction on behalf of such public fund for any reason other than to maximize investment return, unless the investment manager provides written notice of the proposed action, including the reasons therefor, to the public fund and has received written authorization from the public fund for the proposed transaction. This subsection does not apply to a transaction taken in conformity with the requirements of chapters 12F, 12H, or 12J.
    Sec. 5.  Section 35A.13, subsection 4, paragraph a, Code 2023, is amended to read as follows:
   a.  Notwithstanding subsection 5, moneys in the fund, except so much of the fund as may be necessary to be kept on hand for the making of disbursements under this section, shall be invested by the treasurer of state, in consultation with the commission and the public retirement systems committee established by section 97D.4, in any investments authorized for the Iowa public employees’ retirement system in section 97B.7A, including common stock, and subject to the requirements of chapters 12F, 12H, and 12J, and 12K, and the earnings therefrom shall be credited to the fund. The treasurer of state may execute contracts and agreements with investment advisors, consultants, and investment management and benefit consultant firms in the administration of investments of moneys in the fund.
    Sec. 6.  Section 97A.7, subsection 1, Code 2023, is amended to read as follows:
   1.  The board of trustees shall be the trustees of the retirement fund created by this chapter as provided in section 97A.8 and shall have full power to invest and reinvest funds subject to the terms, conditions, limitations, and restrictions imposed by subsection 2 and chapters 12F, 12H, and 12J, and 12K and subject to like terms, conditions, limitations, and restrictions said trustees shall have full power to hold, purchase, sell, assign, transfer, or dispose of any of the securities and investments of the retirement fund which have been invested, as well as of the proceeds of said investments and any moneys belonging to the retirement fund. The board of trustees may authorize the treasurer of state to exercise any of the duties of this section. When so authorized the treasurer of state shall report any transactions to the board of trustees at its next monthly meeting.
    Sec. 7.  Section 97B.4, subsection 5, Code 2023, is amended to read as follows:
   5.  Investments.  The system, through the chief investment officer, shall invest, subject to chapters 12F, 12H, and 12J, and 12K and in accordance with the investment policy and goal statement established by the board, the portion of the retirement fund which, in the judgment of the system, is not needed for current payment of benefits under this chapter subject to the requirements of section 97B.7A.
    Sec. 8.  Section 262.14, unnumbered paragraph 1, Code 2023, is amended to read as follows:
   The board may invest funds belonging to the institutions, subject to chapters 12F, 12H, and 12J, and 12K and the following regulations:
    Sec. 9.  Section 411.7, subsection 1, Code 2023, is amended to read as follows:
   1.  The board of trustees is the trustee of the fire and police retirement fund created in section 411.8 and shall annually establish an investment policy to govern the investment and reinvestment of the moneys in the fund, subject to the terms, conditions, limitations, and restrictions imposed by subsection 2 and chapters 12F, 12H, and 12J, and 12K. Subject to like terms, conditions, limitations, and restrictions the system has full power to hold, purchase, sell, assign, transfer, or dispose of any of the securities and investments in which the fund has been invested, as well as of the proceeds of the investments and any moneys belonging to the fund.
    Sec. 10.  Section 602.9111, subsection 1, Code 2023, is amended to read as follows:
   1.  So much of the judicial retirement fund as may not be necessary to be kept on hand for the making of disbursements under this article shall be invested by the treasurer of state in any investments authorized for the Iowa public employees’ retirement system in section 97B.7A and subject to the requirements of chapters 12F, 12H, and 12J, and 12K, and the earnings therefrom shall be credited to the fund. The treasurer of state may execute contracts and agreements with investment advisors, consultants, and investment management and benefit consultant firms in the administration of the judicial retirement fund.
EXPLANATION
The inclusion of this explanation does not constitute agreement with

the explanation’s substance by the members of the general assembly.
   This bill concerns bonding requirements for certain public entities and public fund investment requirements.
   New Code section 12.30A requires an authority, as defined in Code section 12.30, the state board of regents, and the Iowa finance authority, to not include in any document or instrument necessary to effectuate issuance of a debt obligation by the issuer any provision requiring any action by the state or issuing entity except an action directly affecting the creditworthiness of the state or authority or an action that would have a direct and material effect on the financial risk or return to a lender.
   The bill also creates new Code chapter 12K, which imposes certain investment restrictions on public funds, defined as the treasurer of state, the state board of regents, the Iowa public employees’ retirement system (IPERS), the public safety peace officers’ retirement system, the statewide fire and police retirement system, and the judicial retirement system. The bill requires public funds to exercise any voting rights of securities held by the public fund and to file a written report, quarterly, with the governor and the treasurer of state concerning each vote taken, to include the substance of the question voted on, the vote cast, the date of the vote, and number of shares voted. The bill also provides that an investment manager for a public fund shall not undertake any transaction on behalf of such public fund for any reason other than to maximize investment return, unless the investment manager provides written notice of the proposed transaction and receives written authorization from the public fund for the proposed transaction. The bill provides that this restriction does not apply to transactions taken in conformity with the divestment and other requirements of Code chapter 12F, 12H, or 12J. The bill makes conforming changes to Code sections 12.8, 35A.13, 97A.7, 97B.4, 262.14, 411.7, and 602.9111.