103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024
HB2058

 

Introduced 2/7/2023, by Rep. Kelly M. Burke

 

SYNOPSIS AS INTRODUCED:
 
30 ILCS 235/2  from Ch. 85, par. 902

    Amends the Public Funds Investment Act. Provides that any public agency may invest any public funds, in addition to other investments, in pooled life settlement policies in which each of the underlying insurance policies have no greater than 60-day liquidity and are issued by insurance companies of A-grade investment quality. Provides further requirements concerning the investment of public funds in specified pooled life settlement policies.


LRB103 25199 HLH 51540 b

 

 

A BILL FOR

 

HB2058LRB103 25199 HLH 51540 b

1    AN ACT concerning finance.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Public Funds Investment Act is amended by
5changing Section 2 as follows:
 
6    (30 ILCS 235/2)  (from Ch. 85, par. 902)
7    Sec. 2. Authorized investments.
8    (a) Any public agency may invest any public funds as
9follows:
10        (1) in bonds, notes, certificates of indebtedness,
11    treasury bills or other securities now or hereafter
12    issued, which are guaranteed by the full faith and credit
13    of the United States of America as to principal and
14    interest;
15        (2) in bonds, notes, debentures, or other similar
16    obligations of the United States of America, its agencies,
17    and its instrumentalities;
18        (3) in interest-bearing savings accounts,
19    interest-bearing certificates of deposit or
20    interest-bearing time deposits or any other investments
21    constituting direct obligations of any bank as defined by
22    the Illinois Banking Act;
23        (4) in short-term obligations of corporations

 

 

HB2058- 2 -LRB103 25199 HLH 51540 b

1    organized in the United States with assets exceeding
2    $500,000,000 if (i) such obligations are rated at the time
3    of purchase at one of the 3 highest classifications
4    established by at least 2 standard rating services and
5    which mature not later than 270 days from the date of
6    purchase, (ii) such purchases do not exceed 10% of the
7    corporation's outstanding obligations, and (iii) no more
8    than one-third of the public agency's funds may be
9    invested in short-term obligations of corporations under
10    this paragraph (4);
11        (4.5) in obligations of corporations organized in the
12    United States with assets exceeding $500,000,000 if (i)
13    such obligations are rated at the time of purchase at one
14    of the 3 highest classifications established by at least 2
15    standard rating services and which mature more than 270
16    days but less than 3 years from the date of purchase, (ii)
17    such purchases do not exceed 10% of the corporation's
18    outstanding obligations, and (iii) no more than one-third
19    of the public agency's funds may be invested in
20    obligations of corporations under this paragraph (4.5); or
21        (5) in money market mutual funds registered under the
22    Investment Company Act of 1940, provided that the
23    portfolio of any such money market mutual fund is limited
24    to obligations described in paragraph (1) or (2) of this
25    subsection and to agreements to repurchase such
26    obligations; or .

 

 

HB2058- 3 -LRB103 25199 HLH 51540 b

1        (6) in pooled life settlement policies in which each
2    of the underlying insurance policies have no greater than
3    60-day liquidity and are issued by insurance companies of
4    A-grade investment quality. The maximum amount that may be
5    invested under this paragraph (6) may be no more than 5% or
6    less of the total assets in the fund plan or account. The
7    modified duration of the investment into a particular pool
8    of life settlements shall not exceed 10 years, and the
9    premium on the life settlement policies may be
10    transferable or contractually assigned. The entity that
11    creates the pool of life settlements must be an
12    Illinois-registered entity. The provider of the life
13    settlement policies must be licensed in the State of
14    Illinois.
15    (a-1) In addition to any other investments authorized
16under this Act, a municipality, park district, forest preserve
17district, conservation district, county, or other governmental
18unit may invest its public funds in interest bearing bonds of
19any county, township, city, village, incorporated town,
20municipal corporation, or school district, of the State of
21Illinois, of any other state, or of any political subdivision
22or agency of the State of Illinois or of any other state,
23whether the interest earned thereon is taxable or tax-exempt
24under federal law. The bonds shall be registered in the name of
25the municipality, park district, forest preserve district,
26conservation district, county, or other governmental unit, or

 

 

HB2058- 4 -LRB103 25199 HLH 51540 b

1held under a custodial agreement at a bank. The bonds shall be
2rated at the time of purchase within the 4 highest general
3classifications established by a rating service of nationally
4recognized expertise in rating bonds of states and their
5political subdivisions.
6    (b) Investments may be made only in banks which are
7insured by the Federal Deposit Insurance Corporation. Any
8public agency may invest any public funds in short term
9discount obligations of the Federal National Mortgage
10Association or in shares or other forms of securities legally
11issuable by savings banks or savings and loan associations
12incorporated under the laws of this State or any other state or
13under the laws of the United States. Investments may be made
14only in those savings banks or savings and loan associations
15the shares, or investment certificates of which are insured by
16the Federal Deposit Insurance Corporation. Any such securities
17may be purchased at the offering or market price thereof at the
18time of such purchase. All such securities so purchased shall
19mature or be redeemable on a date or dates prior to the time
20when, in the judgment of such governing authority, the public
21funds so invested will be required for expenditure by such
22public agency or its governing authority. The expressed
23judgment of any such governing authority as to the time when
24any public funds will be required for expenditure or be
25redeemable is final and conclusive. Any public agency may
26invest any public funds in dividend-bearing share accounts,

 

 

HB2058- 5 -LRB103 25199 HLH 51540 b

1share certificate accounts or class of share accounts of a
2credit union chartered under the laws of this State or the laws
3of the United States; provided, however, the principal office
4of any such credit union must be located within the State of
5Illinois. Investments may be made only in those credit unions
6the accounts of which are insured by applicable law.
7    (c) For purposes of this Section, the term "agencies of
8the United States of America" includes: (i) the federal land
9banks, federal intermediate credit banks, banks for
10cooperative, federal farm credit banks, or any other entity
11authorized to issue debt obligations under the Farm Credit Act
12of 1971 (12 U.S.C. 2001 et seq.) and Acts amendatory thereto;
13(ii) the federal home loan banks and the federal home loan
14mortgage corporation; and (iii) any other agency created by
15Act of Congress.
16    (d) Except for pecuniary interests permitted under
17subsection (f) of Section 3-14-4 of the Illinois Municipal
18Code or under Section 3.2 of the Public Officer Prohibited
19Practices Act, no person acting as treasurer or financial
20officer or who is employed in any similar capacity by or for a
21public agency may do any of the following:
22        (1) have any interest, directly or indirectly, in any
23    investments in which the agency is authorized to invest.
24        (2) have any interest, directly or indirectly, in the
25    sellers, sponsors, or managers of those investments.
26        (3) receive, in any manner, compensation of any kind

 

 

HB2058- 6 -LRB103 25199 HLH 51540 b

1    from any investments in which the agency is authorized to
2    invest.
3    (e) Any public agency may also invest any public funds in a
4Public Treasurers' Investment Pool created under Section 17 of
5the State Treasurer Act. Any public agency may also invest any
6public funds in a fund managed, operated, and administered by
7a bank, subsidiary of a bank, or subsidiary of a bank holding
8company or use the services of such an entity to hold and
9invest or advise regarding the investment of any public funds.
10    (f) To the extent a public agency has custody of funds not
11owned by it or another public agency and does not otherwise
12have authority to invest such funds, the public agency may
13invest such funds as if they were its own. Such funds must be
14released to the appropriate person at the earliest reasonable
15time, but in no case exceeding 31 days, after the private
16person becomes entitled to the receipt of them. All earnings
17accruing on any investments or deposits made pursuant to the
18provisions of this Act shall be credited to the public agency
19by or for which such investments or deposits were made, except
20as provided otherwise in Section 4.1 of the State Finance Act
21or the Local Governmental Tax Collection Act, and except where
22by specific statutory provisions such earnings are directed to
23be credited to and paid to a particular fund.
24    (g) A public agency may purchase or invest in repurchase
25agreements of government securities having the meaning set out
26in the Government Securities Act of 1986, as now or hereafter

 

 

HB2058- 7 -LRB103 25199 HLH 51540 b

1amended or succeeded, subject to the provisions of said Act
2and the regulations issued thereunder. The government
3securities, unless registered or inscribed in the name of the
4public agency, shall be purchased through banks or trust
5companies authorized to do business in the State of Illinois.
6    (h) Except for repurchase agreements of government
7securities which are subject to the Government Securities Act
8of 1986, as now or hereafter amended or succeeded, no public
9agency may purchase or invest in instruments which constitute
10repurchase agreements, and no financial institution may enter
11into such an agreement with or on behalf of any public agency
12unless the instrument and the transaction meet the following
13requirements:
14        (1) The securities, unless registered or inscribed in
15    the name of the public agency, are purchased through banks
16    or trust companies authorized to do business in the State
17    of Illinois.
18        (2) An authorized public officer after ascertaining
19    which firm will give the most favorable rate of interest,
20    directs the custodial bank to "purchase" specified
21    securities from a designated institution. The "custodial
22    bank" is the bank or trust company, or agency of
23    government, which acts for the public agency in connection
24    with repurchase agreements involving the investment of
25    funds by the public agency. The State Treasurer may act as
26    custodial bank for public agencies executing repurchase

 

 

HB2058- 8 -LRB103 25199 HLH 51540 b

1    agreements. To the extent the Treasurer acts in this
2    capacity, he is hereby authorized to pass through to such
3    public agencies any charges assessed by the Federal
4    Reserve Bank.
5        (3) A custodial bank must be a member bank of the
6    Federal Reserve System or maintain accounts with member
7    banks. All transfers of book-entry securities must be
8    accomplished on a Reserve Bank's computer records through
9    a member bank of the Federal Reserve System. These
10    securities must be credited to the public agency on the
11    records of the custodial bank and the transaction must be
12    confirmed in writing to the public agency by the custodial
13    bank.
14        (4) Trading partners shall be limited to banks or
15    trust companies authorized to do business in the State of
16    Illinois or to registered primary reporting dealers.
17        (5) The security interest must be perfected.
18        (6) The public agency enters into a written master
19    repurchase agreement which outlines the basic
20    responsibilities and liabilities of both buyer and seller.
21        (7) Agreements shall be for periods of 330 days or
22    less.
23        (8) The authorized public officer of the public agency
24    informs the custodial bank in writing of the maturity
25    details of the repurchase agreement.
26        (9) The custodial bank must take delivery of and

 

 

HB2058- 9 -LRB103 25199 HLH 51540 b

1    maintain the securities in its custody for the account of
2    the public agency and confirm the transaction in writing
3    to the public agency. The Custodial Undertaking shall
4    provide that the custodian takes possession of the
5    securities exclusively for the public agency; that the
6    securities are free of any claims against the trading
7    partner; and any claims by the custodian are subordinate
8    to the public agency's claims to rights to those
9    securities.
10        (10) The obligations purchased by a public agency may
11    only be sold or presented for redemption or payment by the
12    fiscal agent bank or trust company holding the obligations
13    upon the written instruction of the public agency or
14    officer authorized to make such investments.
15        (11) The custodial bank shall be liable to the public
16    agency for any monetary loss suffered by the public agency
17    due to the failure of the custodial bank to take and
18    maintain possession of such securities.
19    (i) Notwithstanding the foregoing restrictions on
20investment in instruments constituting repurchase agreements
21the Illinois Housing Development Authority may invest in, and
22any financial institution with capital of at least
23$250,000,000 may act as custodian for, instruments that
24constitute repurchase agreements, provided that the Illinois
25Housing Development Authority, in making each such investment,
26complies with the safety and soundness guidelines for engaging

 

 

HB2058- 10 -LRB103 25199 HLH 51540 b

1in repurchase transactions applicable to federally insured
2banks, savings banks, savings and loan associations or other
3depository institutions as set forth in the Federal Financial
4Institutions Examination Council Policy Statement Regarding
5Repurchase Agreements and any regulations issued, or which may
6be issued by the supervisory federal authority pertaining
7thereto and any amendments thereto; provided further that the
8securities shall be either (i) direct general obligations of,
9or obligations the payment of the principal of and/or interest
10on which are unconditionally guaranteed by, the United States
11of America or (ii) any obligations of any agency, corporation
12or subsidiary thereof controlled or supervised by and acting
13as an instrumentality of the United States Government pursuant
14to authority granted by the Congress of the United States and
15provided further that the security interest must be perfected
16by either the Illinois Housing Development Authority, its
17custodian or its agent receiving possession of the securities
18either physically or transferred through a nationally
19recognized book entry system.
20    (j) In addition to all other investments authorized under
21this Section, a community college district may invest public
22funds in any mutual funds that invest primarily in corporate
23investment grade or global government short term bonds.
24Purchases of mutual funds that invest primarily in global
25government short term bonds shall be limited to funds with
26assets of at least $100 million and that are rated at the time

 

 

HB2058- 11 -LRB103 25199 HLH 51540 b

1of purchase as one of the 10 highest classifications
2established by a recognized rating service. The investments
3shall be subject to approval by the local community college
4board of trustees. Each community college board of trustees
5shall develop a policy regarding the percentage of the
6college's investment portfolio that can be invested in such
7funds.
8    Nothing in this Section shall be construed to authorize an
9intergovernmental risk management entity to accept the deposit
10of public funds except for risk management purposes.
11(Source: P.A. 102-285, eff. 8-6-21.)