BILL NUMBER: SB 68 CHAPTERED 09/21/02 CHAPTER 761 FILED WITH SECRETARY OF STATE SEPTEMBER 21, 2002 APPROVED BY GOVERNOR SEPTEMBER 20, 2002 PASSED THE SENATE AUGUST 22, 2002 PASSED THE ASSEMBLY AUGUST 15, 2002 AMENDED IN ASSEMBLY JULY 25, 2002 AMENDED IN ASSEMBLY JUNE 12, 2002 AMENDED IN ASSEMBLY MAY 21, 2002 AMENDED IN SENATE MARCH 15, 2001 INTRODUCED BY Senator Battin (Principal coauthor: Senator Torlakson) JANUARY 8, 2001 An act to amend Sections 16305.2, 16429.1, and 16480 of, and to add Sections 16305.9 and 16429.4 to, the Government Code, relating to local agency investments, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST SB 68, Battin. Local agency investments. Under existing law, all money in the possession of or collected by any state agency or department is state money and is subject to provisions governing its deposit and handling in trust accounts. Existing law also establishes the Local Agency Investment Fund, authorizes a local government having money in its treasury not required for immediate needs to remit it to the Treasurer for deposit in that fund for the purpose of investment, and prescribes the handling of that money. This bill would designate money in the Local Agency Investment Fund as nonstate money and would enact additional separate provisions governing the deposit and handling of that money in trust accounts. The bill would declare that it is to take effect immediately as an urgency statute. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 16305.2 of the Government Code is amended to read: 16305.2. All money in the possession of or collected by any state agency or department, except for money in the Local Agency Investment Fund, is subject to Sections 16305.3 to 16305.7, inclusive, and is hereafter referred to as state money. SEC. 2. Section 16305.9 is added to the Government Code, to read: 16305.9. (a) All money in the Local Agency Investment Fund shall be held in trust in the custody of the Treasurer. (b) All money in the Local Agency Investment Fund is nonstate money. That money shall be held in a trust account or accounts. The Controller shall be responsible for maintaining those accounts to record the Treasurer's accountability, and shall maintain a separate account for each trust deposit in the Local Agency Investment Fund. (c) That money shall be subject to audit by the Department of Finance and to cash count as provided for in Sections 13297, 13298, and 13299. It may be withdrawn only upon the order of the depositing entity or its disbursing officers. The system that the Director of Finance has established for the handling, receiving, holding, and disbursing of state agency money shall also be used for the money in the Local Agency Investment Fund. (d) All money in the Local Agency Investment Fund shall be deposited, invested, and reinvested in the same manner and to the same extent as if it were state money in the State Treasury. SEC. 3. Section 16429.1 of the Government Code is amended to read: 16429.1. (a) There is in trust in the custody of the Treasurer the Local Agency Investment Fund, which fund is hereby created. The Controller shall maintain a separate account for each governmental unit having deposits in this fund. (b) Notwithstanding any other provisions of law, a local governmental official, with the consent of the governing body of that agency, having money in its treasury not required for immediate needs, may remit the money to the Treasurer for deposit in the Local Agency Investment Fund for the purpose of investment. (c) Notwithstanding any other provisions of law, an officer of any nonprofit corporation whose membership is confined to public agencies or public officials, or an officer of a qualified quasi-governmental agency, with the consent of the governing body of that agency, having money in its treasury not required for immediate needs, may remit the money to the Treasurer for deposit in the Local Agency Investment Fund for the purpose of investment. (d) Notwithstanding any other provision of law or of this section, a local agency, with the approval of its governing body, may deposit in the Local Agency Investment Fund proceeds of the issuance of bonds, notes, certificates of participation, or other evidences of indebtedness of the agency pending expenditure of the proceeds for the authorized purpose of their issuance. In connection with these deposits of proceeds, the Local Agency Investment Fund is authorized to receive and disburse moneys, and to provide information, directly with or to an authorized officer of a trustee or fiscal agent engaged by the local agency, the Local Agency Investment Fund is authorized to hold investments in the name and for the account of that trustee or fiscal agent, and the Controller shall maintain a separate account for each deposit of proceeds. (e) The local governmental unit, the nonprofit corporation, or the quasi-governmental agency has the exclusive determination of the length of time its money will be on deposit with the Treasurer. (f) The trustee or fiscal agent of the local governmental unit has the exclusive determination of the length of time proceeds from the issuance of bonds will be on deposit with the Treasurer. (g) The Local Investment Advisory Board shall determine those quasi-governmental agencies which qualify to participate in the Local Agency Investment Fund. (h) The Treasurer may refuse to accept deposits into the fund if, in the judgment of the Treasurer, the deposit would adversely affect the state's portfolio. (i) The Treasurer may invest the money of the fund in securities prescribed in Section 16430. The Treasurer may elect to have the money of the fund invested through the Surplus Money Investment Fund as provided in Article 4 (commencing with Section 16470) of Chapter 3 of Part 2 of Division 4 of Title 2. (j) Money in the fund shall be invested to achieve the objective of the fund which is to realize the maximum return consistent with safe and prudent treasury management. (k) All instruments of title of all investments of the fund shall remain in the Treasurer's vault or be held in safekeeping under control of the Treasurer in any federal reserve bank, or any branch thereof, or the Federal Home Loan Bank of San Francisco, with any trust company, or the trust department of any state or national bank. (l) Immediately at the conclusion of each calendar quarter, all interest earned and other increment derived from investments shall be distributed by the Controller to the contributing governmental units or trustees or fiscal agents, nonprofit corporations, and quasi-governmental agencies in amounts directly proportionate to the respective amounts deposited in the Local Agency Investment Fund and the length of time the amounts remained therein. An amount equal to the reasonable costs incurred in carrying out the provisions of this section, not to exceed a maximum of one-half of 1 percent of the earnings of this fund, shall be deducted from the earnings prior to distribution. The amount of this deduction shall be credited as reimbursements to the state agencies having incurred costs in carrying out the provisions of this section. (m) The Treasurer shall prepare for distribution a monthly report of investments made during the preceding month. (n) As used in this section, "local agency," "local governmental unit," and "local governmental official" includes a campus or other unit and an official, respectively, of the California State University who deposits moneys in funds described in Sections 89721, 89722, and 89725 of the Education Code. SEC. 4. Section 16429.4 is added to the Government Code, to read: 16429.4. The right of a city, county, city and county, special district, nonprofit corporation, or qualified quasi-governmental agency to withdraw its deposited moneys from the Local Agency Investment Fund, upon demand, may not be altered, impaired, or denied, in any way, by any state official or state agency based upon the state's failure to adopt a State Budget by July 1 of each new fiscal year. SEC. 5. Section 16480 of the Government Code is amended to read: 16480. All state money held by the State Treasurer in treasury trust accounts, and all money in the State Treasury, except money in the Unemployment Compensation Disability Fund during any period when an election under Section 16470 is not in effect, is appropriated for the purpose of investment and deposit as provided in this article. In addition, nonstate money held by the Treasurer in the Local Agency Investment Fund may be included in those investments and deposits as provided in this article. SEC. 6. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to preserve the ability of cities, counties, cities and counties, special districts, nonprofit corporations, and qualified quasi-government agencies that invest in the Local Agency Investment Fund to pay current expenditures, and to avoid potential claims or litigation against the State of California, it is necessary that this act take effect immediately.