BILL NUMBER: AB 743 CHAPTERED 10/02/01 CHAPTER 430 FILED WITH SECRETARY OF STATE OCTOBER 2, 2001 APPROVED BY GOVERNOR OCTOBER 2, 2001 PASSED THE ASSEMBLY AUGUST 30, 2001 PASSED THE SENATE AUGUST 27, 2001 AMENDED IN SENATE AUGUST 22, 2001 INTRODUCED BY Assembly Member Robert Pacheco FEBRUARY 22, 2001 An act to amend Sections 1340, 17524, 24976, 33333, 48938, and 81400 of the Education Code, and to amend Sections 12320, 12325, 15364.77, 31966, and 32271 of the Government Code, relating to deposit of funds in credit unions. LEGISLATIVE COUNSEL'S DIGEST AB 743, Robert Pacheco. Credit unions. Existing law provides for regulation of credit unions and other financial institutions by the Department of Financial Institutions, and by various federal agencies, if the financial institutions are federally chartered. Existing law, with respect to deposit of various funds held by certain public agencies and officials, or for other finance-related purposes, specifies appropriate financial institutions that may be used for those purposes by those public agencies and officials, including county superintendents of schools, school districts, Director of Education, Treasurer, directors of overseas trade offices, and county boards of retirement for various public agency employees. This bill would provide that credit unions may also be appropriately used for these purposes by the above-mentioned agencies and officials. This bill would incorporate additional changes in Section 15364.77 of the Government Code, proposed by AB 968, to be operative only if AB 968 and this bill are both enacted and become effective on or before January 1, 2002, and this bill is enacted last. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 1340 of the Education Code is amended to read: 1340. Notwithstanding any other provision of law to the contrary, the following procedure may be utilized for payroll-related payments as limited in this section. The county superintendent of schools may designate one or more national or state banks, savings and loan associations, or federal or state credit unions with the principal office in this state, if the deposits are insured by the Federal Deposit Insurance Corporation, the Federal Savings and Loan Insurance Corporation, the National Credit Union Share Insurance Fund, or other private insurance or guaranty of share accounts that is acceptable to the Commissioner of Financial Institutions, to act as disbursing agents for the county superintendent of schools and for school districts and community colleges in the territory under his or her jurisdiction. The county superintendent of schools may draw orders and requisitions upon the funds of the respective public employers, in favor of the designated institutions, for tax-sheltered annuities, custodial accounts, individual retirement accounts, credit union deductions, insurance plan payments, deferred compensation, withholding taxes, professional dues, and other payroll-related deductions or employer contributions. The county auditor shall follow the procedure with respect to examining and allowing the orders and requisitions set forth in Sections 42639 and 85239. The county superintendent of schools, upon receiving allowed warrants from the county auditor, shall deposit the warrants in the designated institutions. As soon as feasible following deposit, the county superintendent of schools shall furnish the designated institutions with information required to enable disbursement of payments to insurance companies, credit unions, and other recipients, including identification of the employees for whom the payments are to be made, the amount of payment on behalf of each designated employee, and the company to which the payment on behalf of each designated employee is to be made. It shall be the duty of each designated institution to disburse the payments to the recipients entitled thereto by check, bank draft, or other appropriate method, within a reasonable time after receipt of each payment, with necessary information for disbursements, which time period shall not exceed 5 working days. Designated institutions receiving deposits and making disbursements, and the county superintendent of schools, shall be deemed to be agents of the respective public employers, for payment of annuities on behalf of their respective employees, and for other payments as specified, and the moneys received by the designated institutions shall be deemed to be deposits of the county superintendents of schools. Security for the deposits shall be furnished as required by the laws of this state. The county superintendent of schools may directly prepare the information and necessary checks, bank drafts, or other appropriate instruments, on the account or accounts within the designated institutions, providing that payment to recipients entitled thereto with required information is made within the timeframe specified. SEC. 2. Section 17524 of the Education Code is amended to read: 17524. (a) After considering all proposals submitted, the governing board of the school district may, subject to Section 17525, select the plan or proposal that best meets the needs of the school district and enter into a contract incorporating that plan or proposal either as submitted or as revised by the governing board of the school district. However, the governing board shall not approve any proposal nor enter into a lease or contract incorporating a proposal until the governing board has submitted the proposal to the State Board of Education, and the State Board of Education has approved the proposal. The State Board of Education shall, within 45 days of the date of submission, notify the governing board of its approval or disapproval. (b) The governing board shall require any person, firm, or corporation with whom it enters into a lease or agreement pursuant to this article to file one of the following, as determined by the governing board: (1) A bond for the performance of the lease or agreement. (2) An irrevocable letter of credit issued by a state or national bank or a federal or state credit union for the performance of the lease or agreement. SEC. 3. Section 24976 of the Education Code is amended to read: 24976. (a) The Teachers' Deferred Compensation Fund is hereby established to serve as the repository of funds for the deferred compensation plans administered by the system pursuant to this chapter. Notwithstanding any other provision of law, the system may retain a bank or trust company, or a credit union, to serve as custodian of the moneys of the Teachers' Deferred Compensation Fund and to provide for safekeeping, recordkeeping, delivery, securities valuation, or investment performance reporting services, or services in connection with investment of the Teachers' Deferred Compensation Fund. (b) The Teachers' Deferred Compensation Fund shall consist of the following sources and receipts, and disbursements shall be accounted for as set forth below: (1) Premiums determined by the system and paid by participating employers and employees for the cost of administering the deferred compensation plan. (2) Asset management fees as determined by the system assessed against investment earnings of investment option or of other investment funds. These fees shall be disclosed to employees participating in the deferred compensation plan. (3) Compensation deferrals to be paid in monthly installments by employers sponsoring deferred compensation plans described in Section 24975 for investment by the system. The moneys shall be deposited in the investment corpus account within the Teachers' Deferred Compensation Fund and invested in accordance with the investment options selected by the participating employee. (4) All moneys in the Teachers' Deferred Compensation Fund for disbursement to participating employees shall be continuously appropriated without regard to fiscal year. Disbursements to participating employees shall be paid from a disbursement account within the Teachers' Deferred Compensation Fund in accordance with applicable federal law pertaining to deferred compensation plans. (5) Income, of whatever nature, earned on the Teachers' Deferred Compensation Fund shall be credited to the appropriate account. The accounts of participating employees of the employer shall be individually posted to reflect amounts of compensation deferred and investment gains and losses. A periodic statement shall be given to each participating employee. (6) The system shall have exclusive control of the administration and investment of the Teachers' Deferred Compensation Fund. (7) All of the system's costs of administering the deferred compensation plans shall be recovered from the employees who participate in the plans or assets of the Teachers' Deferred Compensation Fund in a manner acceptable to the board. SEC. 4. Section 33333 of the Education Code is amended to read: 33333. Money received under Section 33332 may, with the approval of the Director of Finance, be deposited by the Director of Education to the credit of the department or of the school or institution designated by him or her, in accounts in banks, or credit unions, or transmitted by him or her to the State Treasurer for deposit in trust accounts. Withdrawals may be made from the bank or credit union account or trust account by the Director of Education or any employee of the Department of Education authorized by him or her to make withdrawals therefrom. SEC. 5. Section 48938 of the Education Code is amended to read: 48938. In schools or classes for adults, regional occupational centers or programs, or in elementary, continuation, or special education schools in which the student body is not organized, the governing board may appoint an employee or official to act as trustee for student body funds and to receive these funds in accordance with procedures established by the board. These funds shall be deposited in a bank, a savings and loan association, a credit union, or any combination of these financial institutions, approved by the board and shall be expended subject to the approval of the appointed employee or official and also subject to the procedure that may be established by the board. SEC. 6. Section 81400 of the Education Code is amended to read: 81400. (a) After considering all proposals submitted, the governing board of the community college district shall have the authority, subject to the provisions of Section 81401, to select the plan or proposal which best meets the needs of the district and to enter into a contract incorporating that plan or proposal either as submitted or as revised by the district's governing board. (b) The governing board shall require any person, firm or corporation with whom it enters into a lease or agreement pursuant to this article to file one of the following, as determined by the governing board: (1) A bond for the performance of the lease or agreement. (2) An irrevocable letter of credit issued by a state or national bank, or federal or state credit union, for the performance of the lease or agreement. SEC. 7. Section 12320 of the Government Code is amended to read: 12320. The Treasurer shall receive and keep in the vaults of the State Treasury or deposit in banks or credit unions all moneys belonging to the state, not required to be received and kept by some other person. Bonds, and other securities or investments belonging to the state, except those of the Public Employees' Retirement System and the State Teachers' Retirement System, shall be received by the Treasurer and kept in the vaults of the State Treasury or may be deposited by the State Treasurer for safekeeping with any federal reserve bank or any branch thereof, or with any trust company, or the trust department of any state or national bank located in a city designated as a reserve or central reserve city by the Board of Governors of the Federal Reserve System. SEC. 8. Section 12325 of the Government Code is amended to read: 12325. The Treasurer may attach to or indorse upon warrants drawn by the Controller an order directing payment by any bank or credit union in which money of the state is on deposit. Upon presentation for payment, the person to whom it is paid shall receipt therefor in the manner customary in the payment of bank or credit union checks. The Treasurer shall deliver daily to the Controller all canceled warrants, taking the Controller's receipt therefor. SEC. 9. Section 15364.77 of the Government Code is amended to read: 15364.77. Notwithstanding any other provision of law, upon the approval of the secretary, the director of an overseas trade office may establish and maintain a checking account for depositing and withdrawing funds appropriated for the use of the trade office, in either of the following: (a) A bank located and qualified to do business in the country in which the trade office is established and that is, under California law, a branch of a state or national bank located in this state, or a foreign bank licensed under Article 3 (commencing with Section 1750) of Chapter 13.5 of Division 1 of the Financial Code to maintain a branch office in California, or that is authorized under federal law to maintain a federal branch in California. (b) A credit union located in this state, or that is located and qualified to do business in the country in which the trade office is established and that is, under California law, a branch of a credit union located in this state. SEC. 9.5. Section 15364.77 of the Government Code is amended to read: 15364.77. Notwithstanding any other provision of law, upon the approval of the secretary, the director of an international trade and investment office may establish and maintain a checking account for depositing and withdrawing funds appropriated for the use of the office, in either of the following: (a) A bank located and qualified to do business in the country in which the office is established and that is, under California law, a branch of a state or national bank located in this state, or a foreign bank licensed under Article 3 (commencing with Section 1750) of Chapter 13.5 of Division 1 of the Financial Code to maintain a branch office in California, or that is authorized under federal law to maintain a federal branch in California. (b) A credit union located in this state, or that is located and qualified to do business in the country in which the trade office is established and that is, under California law, a branch of a credit union located in this state. SEC. 10. Section 31966 of the Government Code is amended to read: 31966. The board shall invest and reinvest the funds of the system, and may from time to time sell any securities held by it and invest and reinvest the proceeds therefrom and all unappropriated income of the funds. All funds received by it not required for current disbursements shall be invested only in: (a) Securities that are legal for savings bank investments or that have been certified as legal investments for savings banks pursuant to Division 10 (commencing with Section 20000) of the Water Code, or any bonds which, pursuant to the statutes or laws providing for the issuance of those bonds are entitled to the same force or value or use as bonds issued by any municipality, or any bonds issued pursuant to those acts, statutes or laws of this state wherein the law specifically states by reference or otherwise that the bonds shall be legal investments for either savings banks, insurance companies, all trust funds, state school funds and any funds that may be invested in bonds of cities, counties, cities and counties, school districts, or municipalities in the state, or any bonds that have been investigated and approved by a commission or board now or hereafter authorized by law to conduct that investigation and give that approval and by authority of which those bonds are declared to be legal investments for insurers. (b) Obligations issued pursuant to Title IV of the National Housing Act, approved June 27, 1934. (c) Shares, share accounts, or investment certificates of any savings and loan association that has the protection provided by Title IV of the National Housing Act, approved June 27, 1934, to the extent of that insurance protection. (d) Deposits at interest in any state or national bank doing business with the county pursuant to the law authorizing and controlling the deposit of public funds in banks. (e) Shares, share accounts, or certificates of funds of a credit union that has the protection provided by the National Credit Union Share Insurance Fund or other private insurance or guaranty of share accounts that is acceptable to the Commissioner of Financial Institutions. SEC. 11. Section 32271 of the Government Code is amended to read: 32271. The board shall invest and reinvest the funds of the system, and may from time to time sell and invest and reinvest the proceeds of any securities held by it and invest and reinvest all unappropriated income of the funds. All funds received by it not required for current disbursements shall be invested only in: (a) Securities that are legal for savings bank investments or that have been certified as legal investments for savings banks pursuant to Division 10 (commencing with Section 20000) of the Water Code, or any bonds which, pursuant to the statutes or laws providing for the issuance of those bonds are entitled to the same force or value or use as bonds issued by any municipality, or any bonds issued pursuant to those acts, statutes or laws of this state wherein that law specifically states by reference or otherwise that the bonds shall be legal investments for either savings banks, insurance companies, all trust funds, state school funds and any funds that may be invested in bonds of cities, counties, cities and counties, school districts, or municipalities in the state, or any bonds that have been investigated and approved by a commission or board now or hereafter authorized by law to conduct that investigation and give that approval and by authority of which those bonds are declared to be legal investments for insurers. (b) Deposits at interest in any state or national bank doing business with the county pursuant to law authorizing and controlling the deposit of public funds in banks. (c) Shares, share accounts, or certificates of funds of a credit union that has the protection provided by the National Credit Union Share Insurance Fund or other private insurance or guaranty of share accounts that is acceptable to the Commissioner of Financial Institutions. SEC. 12. Section 9.5 of this bill incorporates amendments to Section 15364.77 of the Government Code proposed by both this bill and AB 968. It shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2002, (2) each bill amends Section 15364.77 of the Government Code, and (3) this bill is enacted after AB 968, in which case Section 9 of this bill shall not become operative.