Master FIR (1988)

NOTE: As provided in LFC policy, this report is intended for use by the standing finance committees of the legislature. The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.

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F I S C A L I M P A C T R E P O R T

SPONSOR:	Irwin		DATE TYPED:	02/24/01		HB	254/aHAFC
SHORT TITLE:		Clarify Security for Public Deposits				SB
					ANALYST:		Valdes

APPROPRIATION

Appropriation Contained

Estimated Additional Impact

Recurring

or Non-Rec

Fund

Affected

FY01

FY02

FY01

FY02

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

Financial Institutions Division, Regulation and Licensing Department

SUMMARY

Synopsis of HAFC Amendment

The amendment requires a surety company issuing a surety bond to be rated in the highest category by at least one nationally recognized statistical rating agency.

Synopsis of Original Bill

House Bill 254 amends and clarifies the requirement for security of deposits of public money, by allowing the security for public funds to include surety bonds.

Significant Issues

The amendment, by adding the rating requirement, assumes the quality and solvency of the surety company issuing the surety bond to protect the deposits of public money. It is recommended the bill be further amended to require the surety company be licensed in New Mexico.

In lieu of using the securities defined in Section 6-10-16 NMSA 1978 as security for public deposits, surety bonds may be utilized as security for those deposits. Types of securities presently allowed for public deposits are:

•Direct obligations of the United States Government, obligations of federal government agencies and instrumentalities;

•Securities of the State of New Mexico, it agencies, instrumentalities, counties, municipalities or other subdivisions

•N.A.S.D. Revenue bonds rated BAA or above

•Letters of credit issued by the Federal Home Loan Bank

Pledged securities are not needed for any deposits covered by the Federal Deposit Insurance Corporation.

ADMINISTRATIVE IMPLICATIONS

The Financial Institutions Division reviews securities for public funds during each bank, credit union and savings and loan examination. This bill would not affect the financial institution review process.

OTHER SUBSTANTIVE ISSUES

Because this bill has an emergency clause, it would take effect immediately upon signature by the Governor.

MV/ar/njw