House Bill text for HB0326

HOUSE BILL 326

47th legislature - STATE OF NEW MEXICO - second session, 2006

INTRODUCED BY

Luciano "Lucky" Varela

AN ACT

RELATING TO PUBLIC FINANCES; ESTABLISHING DUTIES AND OBLIGATIONS OF THE STATE BOARD OF FINANCE AND THE STATE TREASURER; RECONCILING MULTIPLE AMENDMENTS TO THE SAME SECTION OF LAW IN LAWS 2005; DECLARING AN EMERGENCY.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. Section 6-1-1 NMSA 1978 (being Laws 1923, Chapter 76, Section 3, as amended) is amended to read:

"6-1-1. MEMBERSHIP OF STATE BOARD OF FINANCE--POWERS AND DUTIES--ESTABLISHMENT IN CONNECTION WITH THE BOARD OF FINANCE DIVISION OF THE DEPARTMENT OF FINANCE AND ADMINISTRATION.--

A. The state board of finance shall consist of seven members:

(1) the governor;

(2) the lieutenant governor;

(3) the state treasurer; and

(4) four members appointed by the governor with the advice and consent of the senate, subject to the following conditions:

(a) no more than two of these members [to] shall be from the same political party; and

(b) one member shall have no fewer than three years of professional experience in the field of finance or investments.

B. The terms of office for members appointed by the governor shall be two years. The term of each remaining member shall be coextensive with [his] the member's term of office. If the office of lieutenant governor becomes vacant, [his] the lieutenant governor's position on the state board of finance shall remain vacant until the election and qualification of a new lieutenant governor.

C. Members of the state board of finance, other than the governor and the state treasurer, shall be reimbursed for attending meetings of the board as provided in the Per Diem and Mileage Act and shall receive no other compensation, perquisite or allowance.

D. The governor shall be president of the state board of finance, and the board shall annually elect a secretary from its membership. Meetings of the board shall be held at the state capitol at times determined by the governor. Four voting members of the board constitute a quorum for the transaction of business. Minutes of all proceedings and transactions of the board shall be kept in the offices of the department of finance and administration.

E. The state board of finance, in addition to other powers and duties provided by law, has general supervision of the fiscal affairs of the state and of the safekeeping, investing and depositing of all money and securities belonging to or in the custody of the state, and it may make rules [and regulations] for carrying out the provisions of Sections 6-1-1, 6-1-1.1, 6-10-2, 6-10-3, 6-10-10, 6-10-10.1, 6-10-20, 6-10-21, 6-10-25, 6-10-29, 6-10-37 through 6-10-44, 6-10-46, 6-10-47, 6-10-50, 6-10-52 through 6-10-54, 6-10-58 and 6-10-61 NMSA 1978. The state board of finance may:

(1) adopt policies and to enact rules concerning:

(a) procedures for investing and handling state money and money entrusted to the state for investment pursuant to Section 6-10-10.1 NMSA 1978;

(b) investments that may be made with state funds or funds entrusted to the state treasurer for investment, including authority to enact rules allowing the state treasurer to make investments not otherwise provided by law so long as the investments are rated "investment grade" as defined by the state board of finance and approved by a recognized rating agency;

(c) relationships with investment advisors or broker dealers who work with the state treasurer's office, including establishing standards for the use, qualification, supervision, compensation and regulation of investment advisors and broker dealers;

(d) public disclosure of state investments; and

(e) the establishment of public and internal reporting and other requirements to increase public access to information about the activities of the state treasurer's office and to assist the state board of finance in supervising compliance with the rules adopted pursuant to this section;

(2) recommend to the legislature proposed changes in statutes governing the deposit and investment of public funds;

(3) establish and supervise a whistleblower program that will solicit information regarding the activities of the state treasurer's office;

(4) hire an independent auditor to perform a fiduciary audit of the state treasurer's office;

(5) undertake investigations it deems necessary to enable it to perform the duties imposed on it by law;

(6) instruct the director of the board of finance division of the department of finance and administration to employ experts, auditors, accountants and attorneys as required, to set forth their duties and to fix their compensation within the appropriations made for that purpose by the legislature for use by the state board of finance; and

(7) designate investments that are required to be approved by the state treasurer's investment committee created in Section 6-1-1.1 NMSA 1978.

F. The state board of finance shall have access to all reports and correspondence relating to the condition of banks, and of savings and loan associations whose deposits are insured by an agency of the United States, in this state which are in the possession of the financial institutions division of the department of finance and administration or any department or agency of the state. If the board deems action necessary to enable it to perform its duties, it may require the director of the financial institutions division to make a special examination of any state bank or trust company or any state savings and loan association whose deposits are insured by an agency of the United States.

[F. The state board of finance may make investigations it deems necessary to enable it to perform the duties imposed on it by law and may instruct the director of the board of finance division to employ experts, auditors, accountants and attorneys as it may, from time to time, deem necessary and prescribe their duties and fix their compensation within the appropriations made for that purpose by the legislature for use by the board.]

G. When it appears to the state board of finance that a person has engaged in, is engaging in or is about to engage in a practice constituting a violation of a provision of Chapter 6 NMSA 1978 or a rule adopted pursuant to that chapter:

(1) the state board of finance may request that the attorney general bring an action in the appropriate district court of the state or the appropriate court of another state to enjoin the acts or practices and to enforce compliance with the provisions of Chapter 6 NMSA 1978 or a rule adopted pursuant to that chapter; and

(2) the court may grant the state the relief requested and:

(a) impose a fine of not more than fifty thousand dollars ($50,000) for each violation of Chapter 6 NMSA 1978;

(b) award the state the costs, including reasonable attorney fees, incurred in bringing the action; or

[G.] H. The state board of finance is established in connection with the board of finance division of the department of finance and administration. The secretary of finance and administration, with the approval of the board, shall appoint a director of the division. This subsection shall not be construed to affect the exercise of any board power or duty nor shall it be construed as placing the board under the provisions of the Executive Reorganization Act or the provisions of Section 9-6-5 NMSA 1978."

Section 2. A new Section 6-1-1.1 NMSA 1978 is enacted to read:

"6-1-1.1. [NEW MATERIAL] STATE TREASURER'S INVESTMENT COMMITTEE.--

A. The "state treasurer's investment committee" is created and shall consist of the following five members:

(1) the state treasurer;

(2) one member of the state board of finance and the director of the board of finance division of the department of finance and administration; and

(3) two public members.

B. One public member shall be selected by the state treasurer, and the second public member shall be selected by the state board of finance. The public members shall have at least three years of professional experience in the field of finance or investments.

C. A public member of the state treasurer's investment committee shall:

(1) serve terms of two years from the date of the public member's appointment; and

(2) be reimbursed for attending meetings of the state treasurer's investment committee as provided in the Per Diem and Mileage Act and shall receive no other compensation.

D. The state treasurer's investment committee shall:

(1) periodically review the state treasurer's investment policies and recommend modifications as needed;

(2) provide advice to the state treasurer regarding the selection of investments;

(3) identify potential violations of the law and of the state treasurer's rules adopted by the state board of finance, report potential violations to the state board of finance and suggest remedial action to achieve conformity with the applicable laws, policies and rules;

(4) provide periodic reports as required by the state board of finance concerning the activities of the state treasurer's office and investment of public funds under the state treasurer's control; and

(5) approve transactions as designated by the state board of finance.

E. The state treasurer's investment committee may appoint an advisory committee that may include representatives from state agencies and local public bodies that have funds deposited with the state."

Section 3. Section 6-10-10 NMSA 1978 (being Laws 1933, Chapter 175, Section 4, as amended by Laws 2005, Chapter 238, Section 1 and by Laws 2005, Chapter 239, Section 1) is amended to read:

"6-10-10. DEPOSIT AND INVESTMENT OF FUNDS.--

A. Upon the certification or designation of a bank, savings and loan association or credit union whose deposits are insured by an agency of the United States to receive public money on deposit, the state treasurer and county or municipal treasurers who have on hand any public money by virtue of their offices shall make deposit of that money in banks and savings and loan associations, and may make deposit of that money in credit unions whose deposits are insured by an agency of the United States, designated by the authority authorized by law to so designate to receive the deposits of all money thereafter received or collected by the treasurers.

B. County or municipal treasurers may deposit money in one or more accounts with any such bank, savings and loan association or credit union located in their respective counties, subject to limitation on credit union accounts.

C. The state treasurer may deposit money in one or more accounts with any such bank, savings and loan association or credit union, subject to the limitation on credit union accounts.

D. Duplicate receipts or deposit slips shall be taken for each deposit made pursuant to Subsection A, B or C of this section. When deposits are made by the state treasurer, one copy of the receipt or deposit slip shall be retained by the state treasurer and the other copy shall be filed monthly on the first day of each month with the financial control division of the department of finance and administration. When deposits are made by the treasurer or any other authorized person making the deposits for a board of finance of a public or educational institution, one copy of the receipt or deposit slip shall be retained by the treasurer or authorized person making the deposit and the other copy shall be filed monthly on the first day of each month with that board of finance. When deposits are made by a county or municipal treasurer, one of the duplicate receipts or deposit slips shall be retained by the treasurer making the deposit and the other copy shall be filed monthly on the first day of each month with the secretary of the board of finance of the county or municipality for which that treasurer is acting.

E. "Deposit", as used in this section, means either investment or deposit and includes share, share certificate and share draft.

F. County or municipal treasurers, with the advice and consent of their respective boards of finance charged with the supervision and control of the respective funds, [have the power to] may invest all sinking funds or money remaining unexpended from the proceeds of any issue of bonds or other negotiable securities of any county, municipality or school district that is entrusted to their care and custody and all money not immediately necessary for the public uses of the counties, municipalities or school districts not invested or deposited in banks, savings and loan associations or credit unions in:

(1) bonds or negotiable securities of the United States, the state or a county, municipality or school district that has a taxable valuation of real property for the last preceding year of at least one million dollars ($1,000,000) and that has not defaulted in the payment of any interest or sinking fund obligation or failed to meet any bonds at maturity at any time within five years last preceding; or

(2) securities that are issued by the United States government or by its agencies or instrumentalities and that are either direct obligations of the United States, the federal home loan mortgage association, the federal national mortgage association, the federal farm credit bank, federal home loan banks or the student loan marketing association or that are backed by the full faith and credit of the United States government.

G. The treasurer of a class A county or the treasurer of a municipality having a population of more than sixty-five thousand according to the most recent federal decennial census and located within a class A county, with the advice and consent of the boards of finance charged with the supervision and control of the funds, [has the power to] may invest all sinking funds or money remaining unexpended from the proceeds of any issue of bonds or other negotiable securities of the county or municipality that is entrusted to the treasurer's care and custody and all money not immediately necessary for the public uses of the county or municipality not invested or deposited in banks, savings and loan associations or credit unions in:

(1) shares of a diversified investment company registered pursuant to the federal Investment Company Act of 1940 that invests in fixed-income securities or debt instruments that are listed in a nationally recognized, broad-market, fixed-income-securities market index; provided that the investment company or manager has total assets under management of at least one hundred million dollars ($100,000,000) and provided that the board of finance of the county or municipality may allow reasonable administrative and investment expenses to be paid directly from the income or assets of these investments;

(2) individual, common or collective trust funds of banks or trust companies that invest in fixed-income securities or debt instruments that are listed in a nationally recognized, broad-market, fixed-income-securities market index; provided that the investment company or manager has total assets under management of at least one hundred million dollars ($100,000,000) and provided that the board of finance of the county or municipality may allow reasonable administrative and investment expenses to be paid directly from the income or assets of these investments; or

(3) shares of pooled investment funds managed by the state investment officer, as provided in [Subsection G of] Section 6-8-7 NMSA 1978; provided that the board of finance of the county or municipality may allow reasonable administrative and investment expenses to be paid directly from the income or assets of these investments.

H. A local public body, with the advice and consent of the body charged with the supervision and control of the local public body's respective funds, [has the power to] may invest all sinking funds or money remaining unexpended from the proceeds of any issue of bonds or other negotiable securities of the investor that is entrusted to the local public body's care and custody and all money not immediately necessary for the public uses of the investor and not otherwise invested or deposited in banks, savings and loan associations or credit unions in contracts with banks, savings and loan associations or credit unions for the present purchase and resale at a specified time in the future of specific securities at specified prices at a price differential representing the interest income to be earned by the investor. The contract shall be fully secured by obligations of the United States or other securities backed by the United States having a market value of at least one hundred two percent of the contract. The collateral required for investment in the contracts provided for in this subsection shall be shown on the books of the financial institution as being the property of the investor and the designation shall be contemporaneous with the investment. As used in this subsection, "local public body" includes all political subdivisions of the state and agencies, instrumentalities and institutions thereof; provided that home rule municipalities that prior to July 1, 1994 had enacted ordinances authorizing the investment of repurchase agreements may continue investment in repurchase agreements pursuant to those ordinances.

I. The state treasurer, with the advice and consent of the state board of finance, [has the power to] may invest money held in demand deposits and not immediately needed for the operation of state government and money held in the short-term investment fund, except as provided in Section 6-10-10.1 NMSA 1978. The investments shall be made only in securities [that are issued by the United States government or by its departments or agencies and are either direct obligations of the United States or are backed by the full faith and credit of the United States government or agencies sponsored by the United States government] permitted by this section or approved by the state board of finance pursuant to Section 6-1-1 NMSA 1978.

J. The state treasurer, with the advice and consent of the state board of finance, may also invest in contracts for the present purchase and resale at a specified time in the future, not to exceed one year or, in the case of bond proceeds, not to exceed three years, of specific securities at specified prices at a price differential representing the interest income to be earned by the state. [Such] The state treasurer shall not invest in the contract unless the contract is fully secured by obligations of the United States or other securities backed by the United States [having] or by fixed-income securities issued by agencies of the United States or government-sponsored organizations, including mortgage-backed, pass-through certificates and mortgage-backed bonds. The security shall have a market value of at least one hundred two percent of the amount of the contract.

K. The state treasurer, with the advice and consent of the state board of finance, may also invest in contracts for the temporary exchange of state-owned securities for the use of broker-dealers, banks or other recognized institutional investors in securities, for periods not to exceed one year for a specified fee rate. Such contract shall not be invested in unless the contract is fully secured by exchange of an irrevocable letter of credit running to the state, cash or equivalent collateral of at least one hundred two percent of the market value of the securities plus accrued interest temporarily exchanged.

L. The collateral required for either of the forms of investment in Subsection J or K of this section shall be delivered to the fiscal agent of New Mexico or its designee contemporaneously with the transfer of funds or delivery of the securities at the earliest time industry practice permits, but in all cases, settlement shall be on a same-day basis.

M. Neither of the contracts in Subsection J or K of this section shall be invested in unless the contracting bank, brokerage firm or recognized institutional investor has a net worth in excess of five hundred million dollars ($500,000,000).

N. The state treasurer, with the advice and consent of the state board of finance, may also invest in any of the following investments in an amount not to exceed forty percent of any fund that the state treasurer invests:

(1) commercial paper rated "prime" quality by a national rating service, issued by corporations organized and operating within the United States;

(2) medium-term notes and corporate notes with a maturity not exceeding five years that are rated A or its equivalent or better by a nationally recognized rating service and that are issued by a corporation organized and operating in the United States; or

(3) an asset-backed obligation with a maturity not exceeding five years that is rated AAA or its equivalent by a nationally recognized rating service.

O. The state treasurer, with the advice and consent of the state board of finance, may also invest in:

(1) shares of [a] an open-ended diversified investment company [registered pursuant to the federal Investment Company Act of 1940 that invests in United States fixed income securities or debt instruments authorized pursuant to Subsections I, J and N of this section, provided that the investment company has total assets under management of at least one billion dollars ($1,000,000,000) and the investments made by the state treasurer pursuant to this paragraph are less than five percent of the assets of the investment company; or] that:

(a) is registered with the United States securities and exchange commission;

(b) complies with the diversification, quality and maturity requirements of rule 2a-7, or any successor rule, of the United States securities and exchange commission applicable to money market mutual funds; and

(c) assesses no sales load on the purchase of shares and no contingent deferred sales charge or other similar charges, however designated; provided that the New Mexico government shall not, at any time, own more than five percent of the fund's assets;

(2) individual, common or collective trust funds of banks or trust companies that invest in United States fixed income securities or debt instruments authorized pursuant to Subsections I, J and N of this section, provided that the investment manager has assets under management of at least one billion dollars ($1,000,000,000) and the investments made by the state treasurer pursuant to this paragraph are less than five percent of the assets of the individual, common or collective trust fund; or

(3) any other security that has otherwise been approved by the state board of finance pursuant to Section 6-1-1 NMSA 1978.

P. Public funds to be invested in negotiable securities or loans to financial institutions fully secured by negotiable securities at current market value shall not be paid out unless there is a contemporaneous transfer of the securities at the earliest time industry practice permits, but in all cases, settlement shall be on a same-day basis either by physical delivery or, in the case of uncertificated securities, by appropriate book entry on the books of the issuer, to the purchaser or to a reputable safekeeping financial institution acting as agent or trustee for the purchaser, which agent or trustee shall furnish timely confirmation to the purchaser."

Section 4. Section 8-6-3 NMSA 1978 (being Laws 1851-1852, Page 170, as amended) is amended to read:

"8-6-3. DUTIES OF TREASURER--RECEIPTS.--

A. The state treasurer shall receive and keep all [moneys] money of the state except when otherwise specially provided; disburse the public money upon warrants drawn according to law and not otherwise; keep a just, true and comprehensive account of all [moneys] money received and disbursed; render [his] the state treasurer's accounts to the [division of] financial control division of the department of finance and administration annually, or [oftener] more often if required; and report to the legislature, at the commencement of each regular session, a detailed statement of the condition of the treasury. [He] The state treasurer shall grant duplicate receipts for all [sums of] money [which shall be] paid into the treasury, and the person receiving the [same] duplicate receipts shall deposit one with the [division of] financial control [who] division, which shall credit [such] the person accordingly and charge the state treasurer.

B. The state treasurer shall comply with all directives, requirements and policies made applicable to the state treasurer's office by the state board of finance pursuant to the board's authority granted by law."

Section 5. A new Section 8-6-8 NMSA 1978 is enacted to read:

"8-6-8. [NEW MATERIAL] STATE TREASURER CAMPAIGN CONTRIBUTIONS--CONFLICTS OF INTEREST--FINANCIAL DISCLOSURE.--

A. In addition to the requirements of the Campaign Reporting Act, within ten days after receiving a campaign contribution the state treasurer or a candidate for the office of state treasurer shall file with the state board of finance a report disclosing the contribution. The report shall identify:

(1) the name and address of the contributor;

(2) the occupation and business name of the contributor;

(3) the name of the employer of the contributor;

(4) the amount or value of the contribution;

(5) the date of the contribution;

(6) a statement as to whether the contributor directly or indirectly performs or seeks to perform business with the state treasurer's office; and

(7) whether a person who resides in the household of the contributor, a family member or employee of the contributor or any person affiliated with the contributor or the contributor's employer performs or seeks to perform business directly or indirectly with the state treasurer's office.

B. The state board of finance may prohibit the state treasurer from personally participating directly or indirectly in a decision affecting a contributor reported pursuant to Subsection A of this section or affecting a person who resides in the household of the contributor, is a family member or employee of the contributor or is affiliated with the contributor or the contributor's employer. In the event that the state treasurer is prohibited from participating in a decision pursuant to this subsection, the state treasurer shall recuse himself and leave the meeting at which the discussion and decision are to take place and appoint one or more qualified members of the state treasurer's staff who have no relationship with the contributor or to the contribution to participate in the meeting or to aid in making the decision.

C. The state treasurer or any person employed by the state treasurer's office shall not solicit, receive or accept campaign contributions or any other thing of value directly or indirectly from a person who:

(1) has a current contract with the state treasurer's office;

(2) is a potential bidder, offeror or contractor for the provision of services to the state treasurer's office; or

(3) is an organization, association or other legal entity having a membership that includes persons described in this subsection.

D. The state treasurer and each employee of the state treasurer's office shall file an annual report with the state board of finance disclosing all personal, financial or business relationships with banks, financial institutions, financial advisers or persons who perform or seek to perform business with the state treasurer's office. The report shall include:

(1) the name and address of the person with whom the relationship exists;

(2) the business affiliation of the person with whom the relationship exists;

(3) a statement as to whether the person with whom the relationship exists directly or indirectly performs or seeks to perform business with the state treasurer's office; and

(4) the nature of the relationship between the state treasurer or employee of the state treasurer's office and the person with whom the relationship exists.

E. As used in this section:

(1) "relationship" means a direct or indirect financial interest or a direct or indirect personal or business relationship, including handling of the financial or investment accounts of the person making the report or a member of the family or household of that person; and

(2) "thing of value" includes a contribution to a charitable or other organization, exempting only contributions to recognized political campaign organizations."

Section 6. EMERGENCY.--It is necessary for the public peace, health and safety that this act take effect immediately.

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