SF0028

Official summary

2008 General Session Summary for SF0028 Bill No.: SF0028 Drafter: DKG LSO No.: 08LSO-0145 Effective Date: 7/1/2008 Enrolled Act No.: SEA0042 Chapter No.: Prime Sponsor: Select Committee on Capital Financing and Investments Catch Title: Investment of state funds-revisions. Subject: Statutes governing the investment of state funds. Summary/Major Elements: The act consolidates and rearranges state investment statutes, removing conflicting, redundant or unclear provisions and replacing cross-referenced provisions with fewer statutes. The definition of "permanent funds" is amended to remove spending policy reserve accounts for the common school account and the permanent mineral trust fund as "permanent funds." The effect of the change is that the funds in the reserve accounts cannot be invested in equities as only permanent funds (and other constitutionally designated funds) may be. Rather than listing or referencing listings of authorized securities or other investments, the bill provides general authority to invest. Investments: Must be authorized by law or authorized or approved by the SLIB; Are subject to the prudent investor rule; Are to be judged by the entire portfolio and purposes underlying the fund not by a single investment. The Treasurer would still need approval of the SLIB to invest in alternative investments (i.e., nontraditional investments). Current law contains a number of legislatively designated investments and a cap of $500 million on all LDIs. Under current law unless an LDI is specifically excluded from the cap, it counts toward the cap. The separate "laundry list" of legislatively designated investments (LDIs) is repealed and replaced with more general language capping investments for a specific public purpose at $500 million (the same as current law). The one LDI excluded from the cap are bonds of the infrastructure authority. This is the same as current law. Requirements for the retention of investment managers are amended. The statutes contained many cross references between the investment statutes in title 9 and farm loan statutes in title 11. The act consolidates these by moving them to title 11. The most significant repealers deal with current statutes containing restrictions and limitations on investing through mutual funds and commingled funds. These were removed as many investments today involve the use of commingled funds that are not held by a trust company or a trust department of a bank.