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AN ACT

RELATING TO THE INVESTMENT OF PUBLIC MONEY; CLARIFYING THE

TYPE OF MONEY MARKET MUTUAL FUNDS IN WHICH THE STATE

TREASURER MAY INVEST; PROVIDING ADDITIONAL CRITERIA FOR

INVESTMENTS BY THE STATE TREASURER IN REPURCHASE AGREEMENTS;

REQUIRING THAT THE SHORT-TERM INVESTMENT FUND MAINTAIN A "AA"

OR HIGHER RATING; RECONCILING MULTIPLE AMENDMENTS TO THE SAME

SECTION OF LAW IN LAWS 2005.

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

Section 1. 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

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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

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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, 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

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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, 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

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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

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consent of the body charged with the supervision and control

of the local public body's respective funds, 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

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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, 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 may be made 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.

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 contract shall not be invested in unless the contract is

fully secured by obligations of the United States or its

agencies or instrumentalities or by other securities backed

by the United States or its agencies or instrumentalities

having a market value of at least one hundred two percent of

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the amount of the contract. The securities required as

collateral under this subsection shall be delivered to a

third-party custodian bank pursuant to a contract with the

state and the counterparty or to the fiscal agent of New

Mexico or its designee. Delivery shall be made

simultaneously with the transfer of funds or as soon as

practicable, but no later than the same day that the funds

are transferred.

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. The

collateral required by this subsection shall be delivered to

the fiscal agent of New Mexico or its designee simultaneously

with the transfer of funds or as soon as practicable, but no

later than the same day that the state-owned securities are

transferred.

L. Neither of the contracts in Subsection J or K

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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).

M. 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.

N. The state treasurer, with the advice and

consent of the state board of finance, may also invest in:

(1) shares of an open-ended diversified

investment company that:

(a) is registered with the United

States securities and exchange commission;

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(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

12b-1, or any successor rule, of the United States securities

and exchange commission, no sales load on the purchase of

shares and no contingent deferred sales charge or other

similar charges, however designated, provided that the state

shall not, at any time, own more than five percent of a money

market mutual fund's assets; or

(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 M 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.

O. 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,

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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 2. Section 6-10-10.1 NMSA 1978 (being Laws

1988, Chapter 61, Section 2, as amended) is amended to read:

"6-10-10.1. SHORT-TERM INVESTMENT FUND CREATED--

DISTRIBUTION OF EARNINGS--REPORT OF INVESTMENTS.--

A. There is created in the state treasury the

"short-term investment fund". The fund shall consist of all

deposits from governmental entities and Indian tribes or

pueblos that are placed in the custody of the state treasurer

for short-term investment purposes pursuant to this section.

The state treasurer shall maintain a separate account for

each governmental entity and Indian tribe or pueblo having

deposits in the fund.

B. If a local public body is unable to receive

payment on public money at the rate of interest as set forth

in Section 6-10-36 NMSA 1978 from financial institutions

within the geographic boundaries of the governmental unit,

then a local public finance official having money of that

local public body in that official's custody not required for

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current expenditure may, with the consent of the appropriate

local board of finance, if any, remit some or all of such

money to the state treasurer for deposit for the purpose of

short-term investment as allowed by this section.

C. Before local funds are invested or reinvested

for the purpose of short-term investment pursuant to this

section, the local public body finance official shall notify

and make such funds available to banks, savings and loan

associations and credit unions located within the

geographical boundaries of their respective governmental

unit, subject to the limitation on credit union accounts. To

be eligible for such funds, the financial institution shall

pay to the local public body the rate established by the

state treasurer pursuant to a policy adopted by the state

board of finance for such short-term investments.

D. The local public body finance official shall

specify the length of time a deposit shall be in the

short-term investment fund, but in any event the deposit

shall not be made for more than one hundred eighty-one days.

The state treasurer through the use of the state fiscal agent

shall separately track each such deposit and shall make such

information available to the public upon written request.

E. The state treasurer shall invest the short-term

investment fund as provided for state funds under Section

6-10-10 NMSA 1978 in investments with a maturity at the time

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of purchase that does not exceed three hundred ninety-seven

days. The state treasurer may elect to have the short-term

investment fund consolidated for investment purposes with the

state funds under the control of the state treasurer;

provided that accurate and detailed accounting records are

maintained for the account of each participating entity and

Indian tribe or pueblo and that a proportionate amount of

interest earned is credited to each of the separate

government accounts. The fund shall be invested to achieve

its objective, which is to realize the maximum return

consistent with safe and prudent management.

F. At the end of each month, all net investment

income or losses from investment of the short-term investment

fund shall be distributed by the state treasurer to the

contributing entities and Indian tribes or pueblos in amounts

directly proportionate to the respective amounts deposited in

the fund and the length of time the amounts in the fund were

invested. The state treasurer shall charge participating

entities, Indian tribes and pueblos reasonable audit,

administrative and investment expenses to be paid directly

from their net investment income for the investment and

administrative services provided pursuant to this section.

G. Investments of the short-term investment fund

shall be made in such a manner that the fund maintains a "AA"

or higher rating. Each fiscal year and at such other times

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as directed by the state board of finance, the state

treasurer shall cause to have the short-term investment fund

rated by a nationally recognized statistical rating

organization. If the rating received by the fund is lower

than "AA", the state treasurer shall immediately submit a

plan to the state board of finance detailing the steps that

will be taken to obtain a "AA" or higher rating.

H. As used in this section, "local public body"

means a political subdivision of the state, including school

districts and post-secondary educational institutions.

I. In addition to the deposit of funds of local

public bodies, the state treasurer may also accept for

deposit, deposit and account for, in the same manner as funds

of local public bodies, funds of the following governmental

entities if the governing authority of the entity approves by

resolution the deposit of the funds for the short-term

investment:

(1) the agricultural commodity commission

established under the Agricultural Commodity Commission Act;

(2) the Albuquerque metropolitan arroyo

flood control authority established under the Arroyo Flood

Control Act;

(3) the business improvement district

management committee established under the Business

Improvement District Act;

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(4) the New Mexico community development

council established under the New Mexico Community Assistance

Act;

(5) the governing authority of only special

districts authorized under Chapter 73 NMSA 1978;

(6) the board of trustees established under

the Economic Advancement District Act;

(7) the board of directors of a corporation

or foundation established under the Educational Assistance

Act;

(8) a board of directors established under

the Flood Control District Act;

(9) the New Mexico hospital equipment loan

council established under the Hospital Equipment Loan Act;

(10) the authority established under the

Industrial and Agricultural Finance Authority Act;

(11) the authority established under the Las

Cruces Arroyo Flood Control Act;

(12) the authority established under the

Mortgage Finance Authority Act;

(13) the authority established under the

Municipal Mortgage Finance Act;

(14) the authority established under the

Public School Insurance Authority Act;

(15) the authority established under the

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Southern Sandoval County Arroyo Flood Control Act;

(16) a board of trustees established under

the Special Hospital District Act;

(17) the authority established under the

New Mexico Finance Authority Act; and

(18) the corporation established under the

Small Business Investment Act.

J. In addition to the deposit of funds of local

public bodies, the state treasurer may also accept for deposit

and deposit and account for, in the same manner as funds of

local public bodies, funds of any Indian tribe or pueblo in

the state if authorized to do so under a joint powers

agreement executed by the state treasurer and the governing

authority of the Indian tribe or pueblo under the provisions

of the Joint Powers Agreements Act."