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AN ACT

RELATING TO PUBLIC FUNDS; CLARIFYING THE PROVISION REGARDING

INVESTMENTS OF PUBLIC FUNDS OF LOCAL GOVERNING BODIES AND

OTHER ELIGIBLE GOVERNING BODIES; EXPANDING PARTICIPATION OF

PARTICIPATING GOVERNMENTS IN CERTAIN INVESTMENT FUNDS;

AMENDING SECTIONS OF THE NMSA 1978; MAKING APPROPRIATIONS;

DECLARING AN EMERGENCY.

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

Section 1. Section 6-10-1.1 NMSA 1978 (being Laws 1987,

Chapter 79, Section 3, as amended) is amended to read:

"6-10-1.1. DEFINITIONS.--As used in Chapter 6, Article

10 NMSA 1978:

A. "department" means the department of finance

and administration;

B. "deposit" includes share, share certificate and

share draft;

C. "eligible governing body" means a local

governing body, the governing authority of a tribe or any

other governmental or quasi-governmental body created or

authorized to be created pursuant to New Mexico statutes;

D. "finance officer" means the chief financial

officer of an eligible governing body or a participating

government;

E. "local governing body" means a political

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subdivision of the state, including a school district or a

post-secondary educational institution;

F. "participating government" means an eligible

governing body or the state treasurer on behalf of the general

fund that has invested money in the participating government

investment fund;

G. "secretary" means the secretary of finance and

administration; and

H. "tribe" means a federally recognized Indian

nation, tribe or pueblo or a subdivision or agency of a

federally recognized Indian nation, tribe or pueblo, located

wholly or partially in New Mexico."

Section 2. Section 6-10-10 NMSA 1978 (being Laws 1933,

Chapter 175, Section 4, as amended) 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

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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

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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

preceding; or

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(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

instruments that are listed in a nationally recognized, broad-

market, fixed-income-securities market index; provided that

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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 E 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, may invest all

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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.

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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

participating government 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 the

amount of the contract. The securities required as collateral

under this subsection shall be delivered to a third-party

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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

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).

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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;

(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

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(c) assesses no fees pursuant to Rule

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;

(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; or

(3) the participating government investment

fund managed by the office of the state treasurer.

Investments made pursuant to this paragraph shall be less than

five percent of the total assets of the participating

government investment 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

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

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

"6-10-10.1. PARTICIPATING GOVERNMENT INVESTMENT FUND

CREATED--DISTRIBUTION OF EARNINGS--REPORT OF INVESTMENTS.--

A. There is created in the state treasury the

"participating government investment fund". The fund shall

consist of all deposits from participating governments,

including revenues dedicated to repaying bonds, that are

placed in the custody of the state treasurer for investment

purposes pursuant to this section. The state treasurer shall

maintain one or more separate accounts for each participating

government having deposits in the participating government

investment fund and may divide the fund into two or more

subfunds, as the state treasurer deems appropriate, for short-

term and medium-term investment purposes, including one or

more subfunds for bond proceeds deposited by participating

governments.

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B. If an eligible governing 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 eligible governing

body, or if the eligible governing body is not bound by the

terms of Section 6-10-36 NMSA 1978, the finance officer having

control of the money of that eligible governing body not

required for current expenditure may, with the consent of the

board of finance of the eligible governing body if consent is

required by the laws or rules of the eligible governing body,

remit some or all of the money to the state treasurer for

deposit for the purpose of investment as allowed by this

section.

C. Before funds are invested or reinvested

pursuant to this section, a finance officer shall notify and

make the funds available for investment to banks, savings and

loan associations and credit unions located within the

geographical boundaries of the participating government or the

eligible governing body, subject to the limitation on credit

union accounts. To be eligible for deposit of the government

funds, the financial institution shall pay to the

participating government or eligible governing body the rate

established by the state treasurer pursuant to a policy

adopted by the state board of finance for the investments.

D. A finance officer shall specify the length of

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time a deposit shall be in the participating government

investment fund. The state treasurer through the use of the

state fiscal agent shall separately track each deposit and

shall make information regarding the deposit available to the

public upon written request.

E. The state treasurer shall invest the

participating government investment fund as provided in

Section 6-10-10 NMSA 1978 regarding the investment of state

funds in investments with a maturity at the time of purchase

that does not exceed three years. The state treasurer may

elect to have the participating government 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 government and that a

proportionate amount of interest earned is credited to each of

the separate accounts of a participating government. 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 participating

government investment fund shall be distributed by the state

treasurer to the accounts of participating governments in

amounts directly proportionate to the respective amounts

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deposited by them in the participating government investment

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

invested.

G. The state treasurer shall charge participating

governments reasonable audit, administrative and investment

expenses and shall deduct those expenses directly from the net

investment income for the investment and administrative

services provided pursuant to this subsection. The amount of

the charges, the manner of the use by the state treasurer and

the nature of bond-related services to be offered shall be

established in rules adopted and promulgated by the state

treasurer subject to approval by the state board of finance.

H. Subject to appropriation by the legislature,

amounts deducted from the accounts of participating

governments for charges permitted pursuant to this section

shall be expended by the state treasurer in fiscal year 2008

and in subsequent fiscal years for the administration and

management of the participating government investment fund,

services provided to participating governments related to

investment of their money in that fund and other services

authorized by this section. Balances remaining at the end of

a fiscal year from the amounts deducted pursuant to this

section shall revert to the general fund. Balances in the

state treasurer's operating account resulting from deductions

taken pursuant to this section in excess of the amount

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required to provide administration, management and related

services required by this subsection or other services

authorized by this section shall be offset by reductions in

the charges made by the state treasurer to the accounts of

participating governments in subsequent deductions from

participating governments' accounts.

I. Investments of the participating government

investment fund shall be made in such a manner that the

portion of the fund invested in short-term investments

maintains a "AA" or higher rating. Each fiscal year and at

such other times as directed by the state board of finance,

the state treasurer shall cause to have the short-term

investment portion of the participating government investment

fund rated by a nationally recognized statistical rating

organization. If the rating received by the short-term

investment portion of 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.

J. The state treasurer may offer to provide to

participating governments services related to requirements of

the federal income tax laws applicable to the investment of

bond proceeds.

K. A tribe or quasi-governmental body created

pursuant to New Mexico statute may become a participating

government only if the governing authority of the tribe or

quasi-governmental body has adopted a resolution authorizing

the tribe or quasi-governmental body to remit money to the

state treasurer for investment in the participating government

investment fund.

L. Deposits by the state treasurer on behalf of

the general fund shall not exceed five percent of the total

amount in the participating government investment fund at any

time."

Section 4. EMERGENCY.--It is necessary for the public

peace, health and safety that this act take effect

immediately.

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