Illinois General Assembly - Full Text of SB0536
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Full Text of SB0536  103rd General Assembly



SB0536 EnrolledLRB103 03007 HLH 48013 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
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



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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 10 3 years from the date of purchase,
17    (ii) 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.



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1    (a-1) In addition to any other investments authorized
2under this Act, a municipality, park district, forest preserve
3district, conservation district, county, or other governmental
4unit may invest its public funds in interest bearing bonds of
5any county, township, city, village, incorporated town,
6municipal corporation, or school district, of the State of
7Illinois, of any other state, or of any political subdivision
8or agency of the State of Illinois or of any other state,
9whether the interest earned thereon is taxable or tax-exempt
10under federal law. The bonds shall be registered in the name of
11the municipality, park district, forest preserve district,
12conservation district, county, or other governmental unit, or
13held under a custodial agreement at a bank. The bonds shall be
14rated at the time of purchase within the 4 highest general
15classifications established by a rating service of nationally
16recognized expertise in rating bonds of states and their
17political subdivisions.
18    (b) Investments may be made only in banks which are
19insured by the Federal Deposit Insurance Corporation. Any
20public agency may invest any public funds in short term
21discount obligations of the Federal National Mortgage
22Association or in shares or other forms of securities legally
23issuable by savings banks or savings and loan associations
24incorporated under the laws of this State or any other state or
25under the laws of the United States. Investments may be made
26only in those savings banks or savings and loan associations



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1the shares, or investment certificates of which are insured by
2the Federal Deposit Insurance Corporation. Any such securities
3may be purchased at the offering or market price thereof at the
4time of such purchase. All such securities so purchased shall
5mature or be redeemable on a date or dates prior to the time
6when, in the judgment of such governing authority, the public
7funds so invested will be required for expenditure by such
8public agency or its governing authority. The expressed
9judgment of any such governing authority as to the time when
10any public funds will be required for expenditure or be
11redeemable is final and conclusive. Any public agency may
12invest any public funds in dividend-bearing share accounts,
13share certificate accounts or class of share accounts of a
14credit union chartered under the laws of this State or the laws
15of the United States; provided, however, the principal office
16of any such credit union must be located within the State of
17Illinois. Investments may be made only in those credit unions
18the accounts of which are insured by applicable law.
19    (c) For purposes of this Section, the term "agencies of
20the United States of America" includes: (i) the federal land
21banks, federal intermediate credit banks, banks for
22cooperative, federal farm credit banks, or any other entity
23authorized to issue debt obligations under the Farm Credit Act
24of 1971 (12 U.S.C. 2001 et seq.) and Acts amendatory thereto;
25(ii) the federal home loan banks and the federal home loan
26mortgage corporation; and (iii) any other agency created by



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1Act of Congress.
2    (d) Except for pecuniary interests permitted under
3subsection (f) of Section 3-14-4 of the Illinois Municipal
4Code or under Section 3.2 of the Public Officer Prohibited
5Practices Act, no person acting as treasurer or financial
6officer or who is employed in any similar capacity by or for a
7public agency may do any of the following:
8        (1) have any interest, directly or indirectly, in any
9    investments in which the agency is authorized to invest.
10        (2) have any interest, directly or indirectly, in the
11    sellers, sponsors, or managers of those investments.
12        (3) receive, in any manner, compensation of any kind
13    from any investments in which the agency is authorized to
14    invest.
15    (e) Any public agency may also invest any public funds in a
16Public Treasurers' Investment Pool created under Section 17 of
17the State Treasurer Act. Any public agency may also invest any
18public funds in a fund managed, operated, and administered by
19a bank, subsidiary of a bank, or subsidiary of a bank holding
20company or use the services of such an entity to hold and
21invest or advise regarding the investment of any public funds.
22    (f) To the extent a public agency has custody of funds not
23owned by it or another public agency and does not otherwise
24have authority to invest such funds, the public agency may
25invest such funds as if they were its own. Such funds must be
26released to the appropriate person at the earliest reasonable



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1time, but in no case exceeding 31 days, after the private
2person becomes entitled to the receipt of them. All earnings
3accruing on any investments or deposits made pursuant to the
4provisions of this Act shall be credited to the public agency
5by or for which such investments or deposits were made, except
6as provided otherwise in Section 4.1 of the State Finance Act
7or the Local Governmental Tax Collection Act, and except where
8by specific statutory provisions such earnings are directed to
9be credited to and paid to a particular fund.
10    (g) A public agency may purchase or invest in repurchase
11agreements of government securities having the meaning set out
12in the Government Securities Act of 1986, as now or hereafter
13amended or succeeded, subject to the provisions of said Act
14and the regulations issued thereunder. The government
15securities, unless registered or inscribed in the name of the
16public agency, shall be purchased through banks or trust
17companies authorized to do business in the State of Illinois.
18    (h) Except for repurchase agreements of government
19securities which are subject to the Government Securities Act
20of 1986, as now or hereafter amended or succeeded, no public
21agency may purchase or invest in instruments which constitute
22repurchase agreements, and no financial institution may enter
23into such an agreement with or on behalf of any public agency
24unless the instrument and the transaction meet the following
26        (1) The securities, unless registered or inscribed in



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1    the name of the public agency, are purchased through banks
2    or trust companies authorized to do business in the State
3    of Illinois.
4        (2) An authorized public officer after ascertaining
5    which firm will give the most favorable rate of interest,
6    directs the custodial bank to "purchase" specified
7    securities from a designated institution. The "custodial
8    bank" is the bank or trust company, or agency of
9    government, which acts for the public agency in connection
10    with repurchase agreements involving the investment of
11    funds by the public agency. The State Treasurer may act as
12    custodial bank for public agencies executing repurchase
13    agreements. To the extent the Treasurer acts in this
14    capacity, he is hereby authorized to pass through to such
15    public agencies any charges assessed by the Federal
16    Reserve Bank.
17        (3) A custodial bank must be a member bank of the
18    Federal Reserve System or maintain accounts with member
19    banks. All transfers of book-entry securities must be
20    accomplished on a Reserve Bank's computer records through
21    a member bank of the Federal Reserve System. These
22    securities must be credited to the public agency on the
23    records of the custodial bank and the transaction must be
24    confirmed in writing to the public agency by the custodial
25    bank.
26        (4) Trading partners shall be limited to banks or



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1    trust companies authorized to do business in the State of
2    Illinois or to registered primary reporting dealers.
3        (5) The security interest must be perfected.
4        (6) The public agency enters into a written master
5    repurchase agreement which outlines the basic
6    responsibilities and liabilities of both buyer and seller.
7        (7) Agreements shall be for periods of 330 days or
8    less.
9        (8) The authorized public officer of the public agency
10    informs the custodial bank in writing of the maturity
11    details of the repurchase agreement.
12        (9) The custodial bank must take delivery of and
13    maintain the securities in its custody for the account of
14    the public agency and confirm the transaction in writing
15    to the public agency. The Custodial Undertaking shall
16    provide that the custodian takes possession of the
17    securities exclusively for the public agency; that the
18    securities are free of any claims against the trading
19    partner; and any claims by the custodian are subordinate
20    to the public agency's claims to rights to those
21    securities.
22        (10) The obligations purchased by a public agency may
23    only be sold or presented for redemption or payment by the
24    fiscal agent bank or trust company holding the obligations
25    upon the written instruction of the public agency or
26    officer authorized to make such investments.



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1        (11) The custodial bank shall be liable to the public
2    agency for any monetary loss suffered by the public agency
3    due to the failure of the custodial bank to take and
4    maintain possession of such securities.
5    (i) Notwithstanding the foregoing restrictions on
6investment in instruments constituting repurchase agreements
7the Illinois Housing Development Authority may invest in, and
8any financial institution with capital of at least
9$250,000,000 may act as custodian for, instruments that
10constitute repurchase agreements, provided that the Illinois
11Housing Development Authority, in making each such investment,
12complies with the safety and soundness guidelines for engaging
13in repurchase transactions applicable to federally insured
14banks, savings banks, savings and loan associations or other
15depository institutions as set forth in the Federal Financial
16Institutions Examination Council Policy Statement Regarding
17Repurchase Agreements and any regulations issued, or which may
18be issued by the supervisory federal authority pertaining
19thereto and any amendments thereto; provided further that the
20securities shall be either (i) direct general obligations of,
21or obligations the payment of the principal of and/or interest
22on which are unconditionally guaranteed by, the United States
23of America or (ii) any obligations of any agency, corporation
24or subsidiary thereof controlled or supervised by and acting
25as an instrumentality of the United States Government pursuant
26to authority granted by the Congress of the United States and



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1provided further that the security interest must be perfected
2by either the Illinois Housing Development Authority, its
3custodian or its agent receiving possession of the securities
4either physically or transferred through a nationally
5recognized book entry system.
6    (j) In addition to all other investments authorized under
7this Section, a community college district may invest public
8funds in any mutual funds that invest primarily in corporate
9investment grade or global government short term bonds.
10Purchases of mutual funds that invest primarily in global
11government short term bonds shall be limited to funds with
12assets of at least $100 million and that are rated at the time
13of purchase as one of the 10 highest classifications
14established by a recognized rating service. The investments
15shall be subject to approval by the local community college
16board of trustees. Each community college board of trustees
17shall develop a policy regarding the percentage of the
18college's investment portfolio that can be invested in such
20    (k) In addition to all other investments authorized under
21this Section, a public agency may adopt an ordinance or
22resolution to allow for investment of public funds in other
23instruments not specifically listed in this Section provided
24that those investments comply with (i) any other law that
25authorizes public agencies to invest funds and (ii) the
26investment policy adopted by the public agency under Section



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12.5 of this Act.
2    Nothing in this Section shall be construed to authorize an
3intergovernmental risk management entity to accept the deposit
4of public funds except for risk management purposes.
5(Source: P.A. 102-285, eff. 8-6-21.)