Full Text of HB0177 96th General Assembly
HB0177enr 96TH GENERAL ASSEMBLY
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| AN ACT concerning State government.
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| Be it enacted by the People of the State of Illinois,
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| represented in the General Assembly:
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| Section 5. The Public Funds Investment Act is amended by | 5 |
| changing Section 2 as follows:
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| (30 ILCS 235/2) (from Ch. 85, par. 902)
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| Sec. 2. Authorized investments.
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| (a) Any public agency may invest any public funds as | 9 |
| follows:
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| (1) in bonds, notes, certificates of indebtedness, | 11 |
| treasury bills or
other securities now or hereafter issued, | 12 |
| which are guaranteed by the full
faith and credit of the | 13 |
| United States of America as to principal and interest;
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| (2) in bonds, notes, debentures, or other similar | 15 |
| obligations of the
United States of America , or its | 16 |
| agencies , and its instrumentalities ;
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| (3) in interest-bearing savings accounts, | 18 |
| interest-bearing
certificates of deposit or | 19 |
| interest-bearing time deposits or any other
investments | 20 |
| constituting direct obligations of any bank as defined by | 21 |
| the
Illinois Banking Act;
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| (4) in short term obligations of corporations
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| organized in the United States with assets exceeding |
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| $500,000,000 if (i)
such obligations are rated at the time | 2 |
| of purchase at one of the 3 highest
classifications | 3 |
| established by at least 2 standard rating services and
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| which mature not later than 270 180 days from the date of | 5 |
| purchase, (ii)
such purchases do not exceed 10% of the | 6 |
| corporation's outstanding
obligations and (iii) no more | 7 |
| than one-third of the public agency's funds
may be invested | 8 |
| in short term obligations of corporations; or
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| (5) in money market mutual funds registered under the | 10 |
| Investment
Company Act of 1940, provided that the portfolio | 11 |
| of any such money market
mutual fund is limited to | 12 |
| obligations described in paragraph (1) or (2) of this
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| subsection and to agreements to repurchase such | 14 |
| obligations.
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| (a-1) In addition to any other investments authorized under | 16 |
| this Act, a
municipality may invest its public funds in | 17 |
| interest bearing bonds of any
county, township, city, village, | 18 |
| incorporated town, municipal corporation, or
school district, | 19 |
| of the State of Illinois, of any other state, or of
any | 20 |
| political subdivision or
agency of the State of Illinois or of | 21 |
| any other state, whether the interest
earned thereon is taxable | 22 |
| or tax-exempt under federal law. The bonds shall
be registered | 23 |
| in the name of the municipality
or held under a custodial | 24 |
| agreement at a bank. The bonds shall be rated at the
time of | 25 |
| purchase within the 4 highest general classifications | 26 |
| established by a
rating service of nationally recognized |
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| expertise in rating bonds of states and
their political | 2 |
| subdivisions.
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| (b) Investments may be made only in banks which are insured | 4 |
| by the
Federal Deposit Insurance Corporation. Any public agency | 5 |
| may invest any
public funds in short term discount obligations | 6 |
| of the Federal National
Mortgage Association or in shares or | 7 |
| other forms of securities legally
issuable by savings banks or | 8 |
| savings and loan associations incorporated under
the laws of | 9 |
| this State or any other state or under the laws of the United
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| States. Investments may be made only in those savings banks or | 11 |
| savings and
loan associations the shares, or investment | 12 |
| certificates of which are insured
by the Federal Deposit | 13 |
| Insurance Corporation. Any such securities may be
purchased at | 14 |
| the offering or market price thereof at the time of such
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| purchase. All such securities so purchased shall mature or be | 16 |
| redeemable on
a date or dates prior to the time when, in the | 17 |
| judgment of
such governing authority, the public funds so | 18 |
| invested will be required
for expenditure by such public agency | 19 |
| or its governing authority. The
expressed judgment of any such | 20 |
| governing authority as to the time when
any public funds will | 21 |
| be required for expenditure or be redeemable is
final and | 22 |
| conclusive. Any public agency may invest any public funds in
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| dividend-bearing share accounts, share certificate accounts or | 24 |
| class of
share accounts of a credit union chartered under the | 25 |
| laws of this State
or the laws of the United States; provided, | 26 |
| however, the principal office
of any such credit union must be |
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| located within the State of Illinois.
Investments may be made | 2 |
| only in those credit unions the accounts of which
are insured | 3 |
| by applicable law.
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| (c) For purposes of this Section, the term "agencies of the | 5 |
| United States
of America" includes: (i) the federal land banks, | 6 |
| federal intermediate
credit banks, banks for cooperative, | 7 |
| federal farm credit banks, or any other
entity authorized to | 8 |
| issue debt obligations under the Farm Credit Act of
1971 (12 | 9 |
| U.S.C. 2001 et seq.) and Acts amendatory thereto; (ii) the | 10 |
| federal
home loan banks and the federal home loan mortgage | 11 |
| corporation; and (iii)
any other agency created by Act of | 12 |
| Congress.
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| (d) Except for pecuniary interests permitted under | 14 |
| subsection (f) of
Section 3-14-4 of the Illinois Municipal Code | 15 |
| or under Section 3.2 of
the Public Officer Prohibited Practices | 16 |
| Act, no person acting as treasurer
or financial officer or who | 17 |
| is employed in any similar capacity by or for a
public agency | 18 |
| may do any of the following:
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| (1) have any interest, directly or indirectly, in any | 20 |
| investments in
which the agency is authorized to invest.
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| (2) have any interest, directly or indirectly, in the | 22 |
| sellers,
sponsors, or managers of those investments.
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| (3) receive, in any manner, compensation of any kind | 24 |
| from any
investments in which the agency is authorized to | 25 |
| invest.
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| (e) Any public agency may also invest any public funds in a |
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| Public
Treasurers' Investment Pool created under Section 17 of | 2 |
| the State Treasurer
Act. Any public agency may also invest any | 3 |
| public funds in a fund managed,
operated, and administered by a | 4 |
| bank, subsidiary of a bank, or
subsidiary of a bank holding | 5 |
| company or use the services of such an entity to
hold and | 6 |
| invest or advise regarding the investment of any public funds.
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| (f) To the extent a public agency has custody of funds not | 8 |
| owned by it or
another public agency and does not otherwise | 9 |
| have authority to invest
such funds, the public agency may | 10 |
| invest such funds as if they were its
own. Such funds must be | 11 |
| released to the appropriate person at the
earliest reasonable | 12 |
| time, but in no case exceeding 31 days, after the
private | 13 |
| person becomes entitled to the receipt of them. All earnings
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| accruing on any investments or deposits made pursuant to the | 15 |
| provisions
of this Act shall be credited to the public agency | 16 |
| by or for which such
investments or deposits were made, except | 17 |
| as provided otherwise in Section
4.1 of the State Finance Act | 18 |
| or the Local Governmental Tax Collection Act,
and except where | 19 |
| by specific statutory provisions such earnings are
directed to | 20 |
| be credited to and paid to a particular fund.
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| (g) A public agency may purchase or invest in repurchase | 22 |
| agreements of
government securities having the meaning set out | 23 |
| in the Government
Securities Act of 1986 , as now or hereafter | 24 |
| amended or succeeded, subject to the provisions of said Act and | 25 |
| the
regulations issued thereunder. The government securities, | 26 |
| unless
registered or inscribed in the name of the public |
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| agency, shall be
purchased through banks or trust companies | 2 |
| authorized to do business in the
State of Illinois.
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| (h) Except for repurchase agreements of government | 4 |
| securities which are
subject to the Government Securities Act | 5 |
| of 1986, as now or hereafter amended or succeeded, no public | 6 |
| agency may
purchase or invest in instruments which constitute | 7 |
| repurchase agreements,
and no financial institution may enter | 8 |
| into such an agreement with or on
behalf of any public agency | 9 |
| unless the instrument and the transaction meet
the following | 10 |
| requirements:
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| (1) The securities, unless registered or inscribed in | 12 |
| the name of the
public agency, are purchased through banks | 13 |
| or trust companies authorized to
do business in the State | 14 |
| of Illinois.
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| (2) An authorized public officer after ascertaining | 16 |
| which firm will give
the most favorable rate of interest, | 17 |
| directs the custodial bank to
"purchase" specified | 18 |
| securities from a designated institution.
The "custodial | 19 |
| bank" is the bank or trust company, or agency of
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| government, which acts for the public agency in connection | 21 |
| with repurchase
agreements involving the investment of | 22 |
| funds by the public agency. The
State Treasurer may act as | 23 |
| custodial bank for public agencies executing
repurchase | 24 |
| agreements. To the extent the Treasurer acts in this | 25 |
| capacity,
he is hereby authorized to pass through to such | 26 |
| public agencies any charges
assessed by the Federal Reserve |
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| Bank.
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| (3) A custodial bank must be a member bank of the | 3 |
| Federal Reserve System
or maintain accounts with member | 4 |
| banks. All transfers of book-entry
securities must be | 5 |
| accomplished on a Reserve Bank's computer records
through a | 6 |
| member bank of the Federal Reserve System. These securities | 7 |
| must
be credited to the public agency on the records of the | 8 |
| custodial bank and
the transaction must be confirmed in | 9 |
| writing to the public agency by
the custodial bank.
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| (4) Trading partners shall be limited to banks or trust | 11 |
| companies
authorized to do business in the State of | 12 |
| Illinois or to registered primary
reporting dealers.
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| (5) The security interest must be perfected.
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| (6) The public agency enters into a written master | 15 |
| repurchase agreement
which outlines the basic | 16 |
| responsibilities and liabilities of both buyer and
seller.
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| (7) Agreements shall be for periods of 330 days or | 18 |
| less.
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| (8) The authorized public officer of the public agency | 20 |
| informs the
custodial bank in writing of the maturity | 21 |
| details of the repurchase agreement.
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| (9) The custodial bank must take delivery of and | 23 |
| maintain the
securities in its custody for the account of | 24 |
| the public agency and confirm
the transaction in writing to | 25 |
| the public agency. The Custodial Undertaking
shall provide | 26 |
| that the custodian takes possession of the securities
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| exclusively for the public agency; that the securities are | 2 |
| free of any
claims against the trading partner; and any | 3 |
| claims by the custodian are
subordinate to the public | 4 |
| agency's claims to rights to those securities.
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| (10) The obligations purchased by a public agency may | 6 |
| only be sold or
presented for redemption or payment by the | 7 |
| fiscal agent bank or trust
company holding the obligations | 8 |
| upon the written instruction of the
public agency or | 9 |
| officer authorized to make such investments.
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| (11) The custodial bank shall be liable to the public | 11 |
| agency for any
monetary loss suffered by the public agency | 12 |
| due to the failure of the
custodial bank to take and | 13 |
| maintain possession of such securities.
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| (i) Notwithstanding the foregoing restrictions on | 15 |
| investment in
instruments constituting repurchase agreements | 16 |
| the Illinois Housing
Development Authority may invest in, and | 17 |
| any financial institution with
capital of at least $250,000,000 | 18 |
| may act as custodian for, instruments
that constitute | 19 |
| repurchase agreements, provided that the Illinois Housing
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| Development Authority, in making each such investment, | 21 |
| complies with the
safety and soundness guidelines for engaging | 22 |
| in repurchase transactions
applicable to federally insured | 23 |
| banks, savings banks, savings and loan
associations or other | 24 |
| depository institutions as set forth in the Federal
Financial | 25 |
| Institutions Examination Council Policy Statement Regarding
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| Repurchase Agreements and any regulations issued, or which may |
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| be issued by the
supervisory federal authority pertaining | 2 |
| thereto and any amendments thereto;
provided further that the | 3 |
| securities shall be either (i) direct general
obligations of, | 4 |
| or obligations the payment of the principal of and/or interest
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| on which are unconditionally guaranteed by, the United States | 6 |
| of America or
(ii) any obligations of any agency, corporation | 7 |
| or subsidiary thereof
controlled or supervised by and acting as | 8 |
| an instrumentality of the United
States Government pursuant to | 9 |
| authority granted by the Congress of the United
States and | 10 |
| provided further that the security interest must be perfected | 11 |
| by
either the Illinois Housing Development Authority, its | 12 |
| custodian or its agent
receiving possession of the securities | 13 |
| either physically or transferred through
a nationally | 14 |
| recognized book entry system.
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| (j) In addition to all other investments authorized
under | 16 |
| this Section, a community college district may
invest public | 17 |
| funds in any mutual funds that
invest primarily in corporate | 18 |
| investment grade or global government short term
bonds.
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| Purchases of mutual funds that invest primarily in global | 20 |
| government short
term bonds shall be limited to funds with | 21 |
| assets of at least $100 million and
that are rated at the time | 22 |
| of purchase as one of the 10 highest classifications
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| established by a recognized rating service. The investments | 24 |
| shall be subject
to approval by the local community college | 25 |
| board of trustees. Each community
college board of trustees | 26 |
| shall develop a policy regarding the percentage of
the |
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| college's investment portfolio that can be invested in such | 2 |
| funds.
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| Nothing in this Section shall be construed to authorize an
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| intergovernmental risk management entity to accept the deposit | 5 |
| of public funds
except for risk management purposes.
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| (Source: P.A. 93-360, eff. 7-24-03.)
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| Section 99. Effective date. This Act takes effect upon | 8 |
| becoming law.
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