BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 1933|
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CONSENT
Bill No: AB 1933
Author: Levine (D)
Amended: 4/24/14 in Assembly
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 7-0, 6/11/14
AYES: Wolk, Knight, Beall, DeSaulnier, Hernandez, Liu, Walters
ASSEMBLY FLOOR : 75-0, 5/1/14 - See last page for vote
SUBJECT : Local government: investments
SOURCE : California Association of County Treasurers and Tax
Collectors
DIGEST : This bill expands the list of financial instrument in
which local agencies may invest surplus funds to include United
States dollar denominated senior unsecured unsubordinated
obligations issued or unconditionally guaranteed by the
International Bank for Reconstruction and Development (IBRD),
International Finance Corporation (IFC), or Inter-American
Development Bank (IADB).
ANALYSIS : Since 1913, existing law has authorized local
officials to invest a portion of their temporarily idle funds in
a variety of financial instruments. Existing law originally
limited these local investments to government bonds, but over
time legislators expanded the list to include numerous
additional financial instruments.
CONTINUED
AB 1933
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Multilateral lending institutions - also known as
"supranationals" - provide development financing, advisory
services and other financial services to their member countries
to promote improved living standards through sustainable
economic growth. Three of these supranationals are
headquartered in the United States and issue highly-rated bonds
that are denominated in U.S. currency.
This bill expands the list of financial instrument in which
local agencies may invest surplus funds to include United States
dollar denominated senior unsecured unsubordinated obligations
issued or unconditionally guaranteed by the IBRD, IFC, or IADB.
This bill specifies that those investments must:
Have a maximum remaining maturity of five years or less,
Be eligible for purchase and sale within the United States,
Be rated "AA" or better by a nationally recognized statistical
rating organization, and
Not exceed 30% of the agency's surplus funds that may be
invested pursuant to existing law.
Comments
In response to a recent decrease in the supply of debt issued by
government sponsored enterprises, like mortgage-related
securities issued by Fannie Mae and Freddie Mac, local
investment officers are seeking other highly-rated, medium-term
financial instruments in which to invest public funds. Existing
law already allows state surplus funds and state and local
pension funds to be invested in supranational organizations'
bonds. The State Treasurer's Pooled Money Investment Account,
which includes funds from some local agencies, invests a portion
of its portfolio in debt instruments issued by supranationals.
Allowing local agencies' surplus funds to be invested directly
in debt issued by three supranational finance organizations will
give local finance officers access to a wider pool of secure
investment options that provide better returns than U.S.
Treasury securities and will help to diversify local investment
portfolios.
AB 1933
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Prior Legislation
SB 194 (Senate Governance and Finance Committee, Chapter 382,
Statutes of 2011) added the federally chartered branches of
foreign banks to the list of financial institutions whose
certificates of deposit are eligible for local agencies'
investments.
AB 1745 (Assembly Revenue and Taxation Committee, Chapter 340,
Statutes of 2007) added registered treasury notes or bonds,
including bonds payable solely out of the revenues from a
revenue-producing property owned by a state, department, board,
agency or authority.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 6/13/14)
California Association of County Treasurers and Tax Collectors
(source)
ARGUMENTS IN SUPPORT : According to the author's office, "The
Great Recession has changed the investment landscape. The
diversity of triple-A bond rated investments has shrunk
dramatically. As a result local agency investment officers are
in great need of additional investment options that provide for
safe returns and help diversify the investment portfolio.
"AB 1933 would extend the same authority afforded to state and
local public retirement systems to local agencies by clarifying
that investment in supranationals is a permissible investment."
ASSEMBLY FLOOR : 75-0, 5/1/14
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Buchanan, Ian Calderon,
Campos, Chau, Ch�vez, Chesbro, Conway, Cooley, Dababneh,
Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox, Frazier,
Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell,
Gray, Grove, Hagman, Harkey, Roger Hern�ndez, Holden, Jones,
Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein,
Medina, Melendez, Mullin, Muratsuchi, Nazarian, Nestande,
Olsen, Pan, Patterson, Perea, V. Manuel P�rez, Quirk,
Quirk-Silva, Rendon, Ridley-Thomas, Rodriguez, Skinner, Stone,
AB 1933
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Ting, Wagner, Waldron, Weber, Wieckowski, Wilk, Williams,
Yamada, John A. P�rez
NO VOTE RECORDED: Brown, Hall, Mansoor, Salas, Vacancy
AB:e 6/13/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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