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


Sen. Laura Ellman

Filed: 4/5/2024





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2    AMENDMENT NO. ______. Amend Senate Bill 536 by replacing
3everything after the enacting clause with the following:
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,



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1    and its instrumentalities;
2        (3) in interest-bearing savings accounts,
3    interest-bearing certificates of deposit or
4    interest-bearing time deposits or any other investments
5    constituting direct obligations of any bank as defined by
6    the Illinois Banking Act;
7        (4) in short-term obligations of corporations
8    organized in the United States with assets exceeding
9    $500,000,000 if (i) such obligations are rated at the time
10    of purchase at one of the 3 highest classifications
11    established by at least 2 standard rating services and
12    which mature not later than 270 days from the date of
13    purchase, (ii) such purchases do not exceed 10% of the
14    corporation's outstanding obligations, and (iii) no more
15    than one-third of the public agency's funds may be
16    invested in short-term obligations of corporations under
17    this paragraph (4);
18        (4.5) in obligations of corporations organized in the
19    United States with assets exceeding $500,000,000 if (i)
20    such obligations are rated at the time of purchase at one
21    of the 3 highest classifications established by at least 2
22    standard rating services and which mature more than 270
23    days but less than 3 years from the date of purchase, (ii)
24    such purchases do not exceed 10% of the corporation's
25    outstanding obligations, and (iii) no more than one-third
26    of the public agency's funds may be invested in



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1    obligations of corporations under this paragraph (4.5); or
2        (5) in money market mutual funds registered under the
3    Investment Company Act of 1940, provided that the
4    portfolio of any such money market mutual fund is limited
5    to obligations described in paragraph (1) or (2) of this
6    subsection and to agreements to repurchase such
7    obligations.
8    (a-1) In addition to any other investments authorized
9under this Act, a municipality, park district, forest preserve
10district, conservation district, county, or other governmental
11unit may invest its public funds in interest bearing bonds of
12any county, township, city, village, incorporated town,
13municipal corporation, or school district, of the State of
14Illinois, of any other state, or of any political subdivision
15or agency of the State of Illinois or of any other state,
16whether the interest earned thereon is taxable or tax-exempt
17under federal law. The bonds shall be registered in the name of
18the municipality, park district, forest preserve district,
19conservation district, county, or other governmental unit, or
20held under a custodial agreement at a bank. The bonds shall be
21rated at the time of purchase within the 4 highest general
22classifications established by a rating service of nationally
23recognized expertise in rating bonds of states and their
24political subdivisions.
25    (b) Investments may be made only in banks which are
26insured by the Federal Deposit Insurance Corporation. Any



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1public agency may invest any public funds in short term
2discount obligations of the Federal National Mortgage
3Association or in shares or other forms of securities legally
4issuable by savings banks or savings and loan associations
5incorporated under the laws of this State or any other state or
6under the laws of the United States. Investments may be made
7only in those savings banks or savings and loan associations
8the shares, or investment certificates of which are insured by
9the Federal Deposit Insurance Corporation. Any such securities
10may be purchased at the offering or market price thereof at the
11time of such purchase. All such securities so purchased shall
12mature or be redeemable on a date or dates prior to the time
13when, in the judgment of such governing authority, the public
14funds so invested will be required for expenditure by such
15public agency or its governing authority. The expressed
16judgment of any such governing authority as to the time when
17any public funds will be required for expenditure or be
18redeemable is final and conclusive. Any public agency may
19invest any public funds in dividend-bearing share accounts,
20share certificate accounts or class of share accounts of a
21credit union chartered under the laws of this State or the laws
22of the United States; provided, however, the principal office
23of any such credit union must be located within the State of
24Illinois. Investments may be made only in those credit unions
25the accounts of which are insured by applicable law.
26    (c) For purposes of this Section, the term "agencies of



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1the United States of America" includes: (i) the federal land
2banks, federal intermediate credit banks, banks for
3cooperative, federal farm credit banks, or any other entity
4authorized to issue debt obligations under the Farm Credit Act
5of 1971 (12 U.S.C. 2001 et seq.) and Acts amendatory thereto;
6(ii) the federal home loan banks and the federal home loan
7mortgage corporation; and (iii) any other agency created by
8Act of Congress.
9    (d) Except for pecuniary interests permitted under
10subsection (f) of Section 3-14-4 of the Illinois Municipal
11Code or under Section 3.2 of the Public Officer Prohibited
12Practices Act, no person acting as treasurer or financial
13officer or who is employed in any similar capacity by or for a
14public agency may do any of the following:
15        (1) have any interest, directly or indirectly, in any
16    investments in which the agency is authorized to invest.
17        (2) have any interest, directly or indirectly, in the
18    sellers, sponsors, or managers of those investments.
19        (3) receive, in any manner, compensation of any kind
20    from any investments in which the agency is authorized to
21    invest.
22    (e) Any public agency may also invest any public funds in a
23Public Treasurers' Investment Pool created under Section 17 of
24the State Treasurer Act. Any public agency may also invest any
25public funds in a fund managed, operated, and administered by
26a bank, subsidiary of a bank, or subsidiary of a bank holding



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1company or use the services of such an entity to hold and
2invest or advise regarding the investment of any public funds.
3    (f) To the extent a public agency has custody of funds not
4owned by it or another public agency and does not otherwise
5have authority to invest such funds, the public agency may
6invest such funds as if they were its own. Such funds must be
7released to the appropriate person at the earliest reasonable
8time, but in no case exceeding 31 days, after the private
9person becomes entitled to the receipt of them. All earnings
10accruing on any investments or deposits made pursuant to the
11provisions of this Act shall be credited to the public agency
12by or for which such investments or deposits were made, except
13as provided otherwise in Section 4.1 of the State Finance Act
14or the Local Governmental Tax Collection Act, and except where
15by specific statutory provisions such earnings are directed to
16be credited to and paid to a particular fund.
17    (g) A public agency may purchase or invest in repurchase
18agreements of government securities having the meaning set out
19in the Government Securities Act of 1986, as now or hereafter
20amended or succeeded, subject to the provisions of said Act
21and the regulations issued thereunder. The government
22securities, unless registered or inscribed in the name of the
23public agency, shall be purchased through banks or trust
24companies authorized to do business in the State of Illinois.
25    (h) Except for repurchase agreements of government
26securities which are subject to the Government Securities Act



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1of 1986, as now or hereafter amended or succeeded, no public
2agency may purchase or invest in instruments which constitute
3repurchase agreements, and no financial institution may enter
4into such an agreement with or on behalf of any public agency
5unless the instrument and the transaction meet the following
7        (1) The securities, unless registered or inscribed in
8    the name of the public agency, are purchased through banks
9    or trust companies authorized to do business in the State
10    of Illinois.
11        (2) An authorized public officer after ascertaining
12    which firm will give the most favorable rate of interest,
13    directs the custodial bank to "purchase" specified
14    securities from a designated institution. The "custodial
15    bank" is the bank or trust company, or agency of
16    government, which acts for the public agency in connection
17    with repurchase agreements involving the investment of
18    funds by the public agency. The State Treasurer may act as
19    custodial bank for public agencies executing repurchase
20    agreements. To the extent the Treasurer acts in this
21    capacity, he is hereby authorized to pass through to such
22    public agencies any charges assessed by the Federal
23    Reserve Bank.
24        (3) A custodial bank must be a member bank of the
25    Federal Reserve System or maintain accounts with member
26    banks. All transfers of book-entry securities must be



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1    accomplished on a Reserve Bank's computer records through
2    a member bank of the Federal Reserve System. These
3    securities must be credited to the public agency on the
4    records of the custodial bank and the transaction must be
5    confirmed in writing to the public agency by the custodial
6    bank.
7        (4) Trading partners shall be limited to banks or
8    trust companies authorized to do business in the State of
9    Illinois or to registered primary reporting dealers.
10        (5) The security interest must be perfected.
11        (6) The public agency enters into a written master
12    repurchase agreement which outlines the basic
13    responsibilities and liabilities of both buyer and seller.
14        (7) Agreements shall be for periods of 330 days or
15    less.
16        (8) The authorized public officer of the public agency
17    informs the custodial bank in writing of the maturity
18    details of the repurchase agreement.
19        (9) The custodial bank must take delivery of and
20    maintain the securities in its custody for the account of
21    the public agency and confirm the transaction in writing
22    to the public agency. The Custodial Undertaking shall
23    provide that the custodian takes possession of the
24    securities exclusively for the public agency; that the
25    securities are free of any claims against the trading
26    partner; and any claims by the custodian are subordinate



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1    to the public agency's claims to rights to those
2    securities.
3        (10) The obligations purchased by a public agency may
4    only be sold or presented for redemption or payment by the
5    fiscal agent bank or trust company holding the obligations
6    upon the written instruction of the public agency or
7    officer authorized to make such investments.
8        (11) The custodial bank shall be liable to the public
9    agency for any monetary loss suffered by the public agency
10    due to the failure of the custodial bank to take and
11    maintain possession of such securities.
12    (i) Notwithstanding the foregoing restrictions on
13investment in instruments constituting repurchase agreements
14the Illinois Housing Development Authority may invest in, and
15any financial institution with capital of at least
16$250,000,000 may act as custodian for, instruments that
17constitute repurchase agreements, provided that the Illinois
18Housing Development Authority, in making each such investment,
19complies with the safety and soundness guidelines for engaging
20in repurchase transactions applicable to federally insured
21banks, savings banks, savings and loan associations or other
22depository institutions as set forth in the Federal Financial
23Institutions Examination Council Policy Statement Regarding
24Repurchase Agreements and any regulations issued, or which may
25be issued by the supervisory federal authority pertaining
26thereto and any amendments thereto; provided further that the



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1securities shall be either (i) direct general obligations of,
2or obligations the payment of the principal of and/or interest
3on which are unconditionally guaranteed by, the United States
4of America or (ii) any obligations of any agency, corporation
5or subsidiary thereof controlled or supervised by and acting
6as an instrumentality of the United States Government pursuant
7to authority granted by the Congress of the United States and
8provided further that the security interest must be perfected
9by either the Illinois Housing Development Authority, its
10custodian or its agent receiving possession of the securities
11either physically or transferred through a nationally
12recognized book entry system.
13    (j) In addition to all other investments authorized under
14this Section, a community college district may invest public
15funds in any mutual funds that invest primarily in corporate
16investment grade or global government short term bonds.
17Purchases of mutual funds that invest primarily in global
18government short term bonds shall be limited to funds with
19assets of at least $100 million and that are rated at the time
20of purchase as one of the 10 highest classifications
21established by a recognized rating service. The investments
22shall be subject to approval by the local community college
23board of trustees. Each community college board of trustees
24shall develop a policy regarding the percentage of the
25college's investment portfolio that can be invested in such



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1    (k) In addition to all other investments authorized under
2this Section, a public agency may adopt an ordinance or
3resolution to allow for investment of public funds in other
4instruments not specifically listed in this Section provided
5that those investments comply with (i) any other law that
6authorizes public agencies to invest funds and (ii) the
7investment policy adopted by the public agency under Section
82.5 of this Act.
9    Nothing in this Section shall be construed to authorize an
10intergovernmental risk management entity to accept the deposit
11of public funds except for risk management purposes.
12(Source: P.A. 102-285, eff. 8-6-21.)".