Committee Substitute for HB0289FHS

HOUSE FLOOR SUBSTITUTE FOR

HOUSE TAXATION AND REVENUE COMMITTEE SUBSTITUTE FOR

HOUSE BILL 289

49th legislature - STATE OF NEW MEXICO - second session, 2010

AN ACT

RELATING TO THE PUBLIC PEACE, HEALTH, SAFETY AND WELFARE; CHANGING THE COMPOSITION OF THE STATE INVESTMENT COUNCIL; CHANGING THE POWERS AND DUTIES OF THE STATE INVESTMENT COUNCIL AND STATE INVESTMENT OFFICER; CHANGING THE METHOD OF APPOINTMENT OF PUBLIC MEMBERS OF THE STATE INVESTMENT COUNCIL; DECLARING AN EMERGENCY.

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

Section 1. Section 6-8-2 NMSA 1978 (being Laws 1957, Chapter 179, Section 2, as amended) is amended to read:

"6-8-2. STATE INVESTMENT COUNCIL.--

A. There is created a "state investment council". The council shall be composed of:

[A.] (1) the governor;

[B.] (2) the state treasurer;

[C.] (3) the commissioner of public lands;

[D.] (4) the secretary;

[E. three public members appointed by the governor with the advice and consent of the senate;

F. the state investment officer; and

G.] (5) the chief financial officer of a state institution of higher education appointed by the governor with the advice and consent of the senate;

(6) four members appointed by the New Mexico legislative council with the advice and consent of the senate; provided that no more than two members shall be members of the same political party; and

(7) two members appointed by the governor with the advice and consent of the senate.

B. The [chairman] chair of the council shall be the governor, and the vice chair shall be selected by the council. All actions of the council shall be by majority vote, and [at least three members appointed pursuant to Subsections E and G of this section must be present to] a majority of the members shall constitute a quorum.

C. Members of the council appointed pursuant to Paragraphs (6) and (7) of Subsection [E] A of this section shall be reimbursed per diem and mileage pursuant to the provisions of the Per Diem and Mileage Act."

Section 2. Section 6-8-3 NMSA 1978 (being Laws 1957, Chapter 179, Section 3, as amended) is amended to read:

"6-8-3. COUNCIL TERMS AND QUALIFICATIONS.--

A. Members of the council appointed [by the governor] pursuant to Paragraphs (6) and (7) of Subsection A of Section 6-8-2 NMSA 1978, with the advice and consent of the senate, shall serve for staggered terms of five years. Members of the council shall serve until their successors are appointed and have qualified.

B. The members of the council appointed pursuant to Paragraphs (6) and (7) of Subsection [E] A of Section 6-8-2 NMSA 1978 shall be qualified by competence and no less than ten years experience in the field of investment or finance. [During tenure, a member of the council shall not be engaged in any capacity in the sale of securities to the state.] A member of the council shall not have had any contracts to do business with the state investment council, the investment office, the office of the state treasurer, the educational retirement board, the public employees retirement association, the New Mexico finance authority or the state board of finance for a period of two calendar years prior to the person's appointment to the council and shall not enter into any contracts to do business with any of the named state agencies or instrumentalities for a period of two calendar years after the end of the term for which the member was appointed. Members of the council and officers and employees of the council shall be governed by the provisions of the [Conflict of Interest] Governmental Conduct Act. Nothing in this section or in the [Conflict of Interest] Governmental Conduct Act shall be construed as prohibiting an officer of a financial institution from participating as a member of the council in setting general policies of the council, nor shall any provision of the [Conflict of Interest] Governmental Conduct Act prohibit the council or the state treasurer from depositing funds under the jurisdiction of the council in any financial institution. A council member shall not hold an office or employment in a political party.

C. The member appointed pursuant to Paragraph (5) of Subsection A of Section 6-8-2 NMSA 1978 shall serve at the pleasure of the governor. [Any] A member of the council appointed pursuant to Paragraph (6) or (7) of Subsection [E or G] A of Section 6-8-2 NMSA 1978 may be removed from the council by the [governor] appointing person or entity, for failure to attend three consecutive meetings or other cause, in the manner provided for removal of members of boards of regents under Article 12, Section 13 of the constitution of New Mexico. A vacancy in the membership of the council occurring other than by expiration of term shall be filled in the same manner as the original appointment but for the unexpired term only."

Section 3. Section 6-8-4 NMSA 1978 (being Laws 1957, Chapter 179, Section 4, as amended) is amended to read:

"6-8-4. INVESTMENT OFFICE--STATE INVESTMENT OFFICER--TERMS.--

A. There is established an "investment office". The chief administrative officer of the office shall be known as the "state investment officer".

B. The state investment officer shall be appointed by the [governor with the advice and consent of the senate. Recommendations as to his appointment shall be made to the governor by the investment] council. The state investment officer shall devote [his] the officer's entire time and attention to the duties of [his] that office and shall not engage in any other occupation or profession [nor shall he] or hold any other public office, appointive or elective. [He] The officer shall be a person qualified, by training and investment experience, to direct the work of the investment [division] office and shall have had at least five years' professional experience as an investment officer. [He] The officer shall receive a salary to be determined by the state investment council but in no case less than fifty thousand dollars ($50,000) annually.

C. The state investment officer shall serve for an initial term of two years beginning July 1, 1981 and thereafter for terms of four years. The state investment officer may be removed from office by the [governor] council for cause [in the manner provided for removal of members of boards of regents under Article 12, Section 13 of the constitution of New Mexico]."

Section 4. Section 6-8-7 NMSA 1978 (being Laws 1957, Chapter 179, Section 7, as amended by Laws 2005, Chapter 194, Section 1 and by Laws 2005, Chapter 240, Section 1) is amended to read:

"6-8-7. POWERS AND DUTIES OF THE STATE INVESTMENT COUNCIL AND STATE INVESTMENT OFFICER--INVESTMENT POLICY--INVESTMENT MANAGERS.--

A. Subject to the limitations, conditions and restrictions contained in policy-making regulations or resolutions adopted by the council, [and subject to prior authorization by] the council [the state investment officer] may make purchases, sales, exchanges, investments and reinvestments of the assets of all funds [administered under the supervision of the council] in accordance with the Uniform Prudent Investor Act. The state investment officer and the council are trustees of all funds under their control and shall see that money invested is at all times handled in the best interests of the state. The council may delegate administrative functions to the state investment officer.

B. The state investment officer shall formulate and recommend to the council for approval investment regulations or resolutions pertaining to the kind or nature of investments and limitations, conditions and restrictions upon the methods, practices or procedures for investment, reinvestment, purchase, sale or exchange transactions that should govern the activities of the investment office.

C. The council shall meet at least once each month, and as often as exigencies may demand, to consult with the state investment officer concerning the work of the investment office. The council shall have access to all files and records of the investment office and shall require the state investment officer to report on and provide information necessary to the performance of council functions. The council may hire one or more investment management firms to advise the council with respect to the council's overall investment plan for the investment of all funds managed by the investment office and pay reasonable compensation for such advisory services from the assets of the applicable funds, subject to budgeting and appropriation by the legislature. The terms of any such investment management services contract shall incorporate the statutory requirements for investment of funds under the council's jurisdiction.

D. The council shall provide an opportunity for public comment at meetings of the council. Advance notice of meetings shall be published on the council's web site and in a newspaper of general circulation at least ten days in advance of the meeting.

[D.] E. All funds managed by the state investment officer shall be managed in accordance with the Uniform Prudent Investor Act. [With the approval of] The council [the state investment officer] may employ investment management services to invest the funds and may pay reasonable compensation for investment management services from the assets of the applicable funds, subject to budgeting and appropriation by the legislature.

F. The council, the state investment officer, any person providing investment advice to the council or state investment officer for a fee or other compensation and all persons exercising discretionary authority or control of funds under the management of the council are fiduciaries.

G. The council may select and contract for the services of one or more custodian banks for all funds under the council's management. For the purpose of this subsection, "custodian bank" means a financial institution with the general fiduciary duties to manage, control and collect the assets of an investment fund, including receiving all deposits and paying all disbursements as directed by staff, safekeeping of assets, coordination of asset transfers, timely settlement of securities transactions and accurate and timely reporting of the assets by individual account and in total.

[E.] H. For funds available for investment for more than one year, the [state investment officer] council may contract with any state agency to provide investment advisory or investment management services, separately or through a pooled investment fund, provided the state agency enters into a joint powers agreement with the council and that state agency pays at least the direct cost of such services. Notwithstanding any statutory provision governing state agency investments, the [state investment officer] council may invest funds available from a state agency pursuant to a joint powers agreement in any type of investment permitted for the land grant permanent funds under the prudent investor rule. In performing investment services for a state agency, the council and the state investment officer are exempt from the New Mexico Uniform Securities Act [of 1986]. As used in this subsection, "state agency" means any branch, agency, department, board, instrumentality, institution or political subdivision of the state, the New Mexico finance authority, the New Mexico mortgage finance authority and any tax-exempt private endowment entity whose sole beneficiary is a state agency.

[F.] I. The state investment officer shall provide quarterly performance reports to the legislative finance committee. Annually, the state investment officer shall ratify and provide written investment policies, including any amendments, to the legislative finance committee."

Section 5. Section 6-8-14 NMSA 1978 (being Laws 1957, Chapter 179, Section 14, as amended) is amended to read:

"6-8-14. MONTHLY REPORTS.--No later than ten days after the close of each month, the state investment officer shall submit to the secretary and the state investment council a report of the operations of the [division] office during the past month. Each report shall give a complete statement of the state investment portfolio as of the time of the report and in addition, shall include a detailed summary of the month's investment, reinvestment, purchase, sale and exchange transactions, setting forth the investments bought, sold or exchanged, the dates thereof, the prices paid or obtained, the names of the dealers involved, fees paid for each transaction, disclosure of contractor arrangements and a statement of the funds or accounts referred to herein. The reports shall also be circulated to a mailing list of investment bankers and brokers recommended by the council. The reports shall be published on the web sites of the council, the legislature and the department of finance and administration and shall be open for inspection to the public and the press in the office of the state investment officer."

Section 6. Section 6-8-20 NMSA 1978 (being Laws 1987, Chapter 219, Section 3, as amended) is amended to read:

"6-8-20. PRIVATE EQUITY INVESTMENT ADVISORY COMMITTEE CREATED--MEMBERSHIP--DUTIES--TERMS--LIABILITIES--CONFLICT OF INTEREST.--

A. There is created the "private equity investment advisory committee" to the council. The committee consists of the state investment officer, a member of the council appointed by the [governor] council and three members who are qualified by competence and experience in finance and investment and knowledgeable about the private equity investment process and who are appointed by the [governor] council.

B. Members appointed by the [governor] council, except the council member, shall be appointed for three-year terms; provided that the terms of the initial committee members shall be staggered so that the term of one member expires each year. After the initial appointments, all [governor] appointed members shall be appointed for three-year terms. Members shall serve until their successors are appointed. A vacancy occurring other than by expiration of term shall be filled in the same manner as the original appointment, but only for the unexpired term.

C. The committee shall review and make recommendations to the council on investments authorized pursuant to Sections 7-27-5.15 and 7-27-5.26 NMSA 1978 and all other private equity investments and shall advise the council in matters and policies related to such investments. The committee shall establish policies for national private equity fund investments, New Mexico private equity fund investments and New Mexico film private equity fund investments not less often than annually and shall make copies available to interested parties.

D. Members of the committee shall receive per diem and mileage as provided for nonsalaried public officers in the Per Diem and Mileage Act and shall receive no other compensation, perquisite or allowance.

E. The committee shall elect annually a [chairman] chair from among its members and may elect other officers as necessary. The committee shall meet upon the call of the [chairman] chair or the state investment officer.

F. Members of the committee are public employees within the meaning of the Tort Claims Act and are entitled to all immunity and indemnification provided under that act.

G. A person shall not be a member of the committee if any recommendation, action or decision of the committee will or is likely to result in direct, measurable economic gain to that person or that person's employer.

H. The state investment officer may enter into contracts with investment advisors for private equity fund investments and film fund investments authorized pursuant to Sections 7-27-5.15 and 7-27-5.26 NMSA 1978 and all other private equity investments and may pay budgeted expenses for the advisors from the assets of any fund administered under the supervision of the council, as applicable.

I. As used in this section, "private equity investments" means any legal entity that has as its primary business activity the investment of funds in return for equity in or debt of businesses for the purpose of providing capital for startup, expansion, new product development, recapitalization or a similar business purpose."

Section 7. Section 6-10-35 NMSA 1978 (being Laws 1934 (S.S.), Chapter 24, Section 3, as amended by Laws 1987, Chapter 79, Section 14 and by Laws 1987, Chapter 87, Section 1) is amended to read:

"6-10-35. FISCAL AGENT OF NEW MEXICO--STATE CHECKING DEPOSITORIES--STATE DEPOSITORIES--DESIGNATION BY BOARD OF FINANCE.--

A. Except as otherwise provided by law, the state board of finance may designate a bank or savings and loan association doing business in this state and having an unimpaired capital and surplus of at least one hundred fifty thousand dollars ($150,000) as the "fiscal agent of New Mexico". The designation is subject to change, from time to time, by the state board of finance; however, the board shall formulate and adopt designation procedures, filed in accordance with the State Rules Act, [which] that shall be adhered to on each occasion of designation. The board, after it has designated the [state] fiscal agent, shall apprise the legislature of its action and, in addition to the name of the designated fiscal agent, the communication shall include a brief description of the designee's particular qualifications.

B. The bank or savings and loan association [so] designated as the fiscal agent of New Mexico shall enter into an agreement with the state, acting through [its] the state board of finance, for:

(1) the collection for the state of all checks and other items received by the state on any account;

(2) the handling of the checking account of the state treasurer;

(3) the handling of all transfers of money in connection with the sale or retirement of bonds or obligations of the state or the purchase by the state of bonds or other securities;

(4) the investment of permanent or other funds of the state;

(5) the safekeeping of bonds or other securities belonging to or held by the state or any official [thereof] of the state;

(6) the rate of interest to be paid upon average daily balances of state funds; and

(7) acting as the agent of the state in fiscal matters generally, subject always to the supervision and approval of the state board of finance.

C. The agreement shall contain the terms and conditions [which] that are necessary, in the judgment of the state board of finance, for the proper conduct of the fiscal affairs of the state and the safekeeping of the money of the state.

D. The state board of finance shall require the fiscal agent of New Mexico to furnish surety company bond or securities of the kinds specified by law for the security of deposits of public money in an amount not less than two million five hundred thousand dollars ($2,500,000) as security for the safekeeping of the money of the state and the faithful performance of its duties as the fiscal agent. The state board of finance may adjust the amount of bond or security from time to time, but in no event shall the bond or security be in an amount less than two million five hundred thousand dollars ($2,500,000). No other bond or security is required of the fiscal agent for the securing of funds deposited by the state treasurer in the fiscal agency account, and the state treasurer is not liable upon [his] the state treasurer's official bond on account of [any] funds deposited in the fiscal agency account when the account is so secured. Nothing in this section shall prevent the bank or savings and loan association designated as fiscal agent from also qualifying as a state depository [under Sections 11-2-18 NMSA 1953 or 6-10-30, 6-10-35 and 6-10-36] pursuant to Chapter 6, Article 10 NMSA 1978.

E. Payment to the fiscal agent of New Mexico for services performed may be made by the state board of finance upon warrants drawn by the secretary [of finance and administration] upon the state treasury as provided by law for expenditure of state funds or by compensating balances or a combination thereof. The legislature shall appropriate funds to the state board of finance for this purpose annually.

F. The state board of finance may also designate, according to its adopted designation procedures, not more than two other banks or savings and loan associations doing business in this state as "state checking depositories" in which money necessary to meet the current obligations of the state may be deposited in temporary checking accounts. No bank or savings and loan association shall be so designated unless it has an unimpaired capital and surplus of at least one hundred fifty thousand dollars ($150,000). Not more than twenty percent of all the state's money on hand shall be on deposit in all such checking accounts, including the checking account with the fiscal agent of New Mexico, for any period of time longer than is required to distribute the amount above twenty percent to applying, qualified depository banks or savings and loan associations. The state board of finance shall require a designated state checking depository to furnish surety company bond or securities of the kinds specified by law for the security of deposits of public money in an amount established by the board. Nothing in this section shall prevent [any] a bank or savings and loan association designated as a state checking depository from also qualifying as a state depository [under Sections 11-2-18 NMSA 1953 and 6-10-30, 6-10-35 and 6-10-36] pursuant to Chapter 6, Article 10 NMSA 1978, and nothing in this section shall prohibit the state treasurer from transferring to out-of-state banks and keeping on deposit with them funds necessary to pay interest upon and principal of those outstanding bonds, debentures and certificates of indebtedness [which] that, with the interest coupons, were made payable at an out-of-state bank.

G. [Any] An authorized bank, savings and loan association or credit [unions] union desiring to receive public money deposits may file with the board of finance having control of [any such] the money its written proposal to receive the money on deposit, together with its agreement to pay interest on daily balances of the deposits at the rate of interest fixed by the state board of finance as prescribed in Section 6-10-30 NMSA 1978. The proposal shall specify whether the deposit is desired as a time deposit. [Such] The board of finance shall, at its next meeting after receipt of the proposal, consider the proposal, and, if it is in accordance with [Sections 11-2-18 NMSA 1953 and 6-10-30, 6-10-35 and 6-10-36] Chapter 6, Article 10 NMSA 1978, the board shall thereupon notify the bank or savings and loan association that upon its furnishing security as provided, it will be designated as a "state depository" of public money in an amount to be fixed by the board, which amount shall not exceed seventy-five percent of the capital and surplus of the applicant bank or savings and loan association if the deposit is secured by surety bond. If, after considering the proposal of a credit union and finding it in accordance with [Sections 6-10-30 and] Section 6-10-36 NMSA 1978, the board of finance may designate [such] the credit union a "state depository" of public money in an amount to be fixed by the board, which shall not exceed that amount insured by an agency of the United States. Upon furnishing proper bond or other security authorized by [Sections 11-2-18 NMSA 1953 and 6-10-30, 6-10-35 and 6-10-36] Chapter 6, Article 10 NMSA 1978, a certificate shall be issued to the bank or savings and loan association by the board of finance qualifying it as a depository of public money; and, if designated, a certificate shall be issued to a credit union qualifying it as a depository of public money; provided that a bank located [without] outside the state, acting solely in the capacity of a paying bank for the purpose of paying interest upon and principal of state obligations represented by bonds, debentures and certificates of indebtedness and attached interest coupons, is not required to furnish collateral security in excess of one hundred thousand dollars ($100,000) regardless of the amount of state public money on deposit."

Section 8. TEMPORARY PROVISIONS--TRANSITION MEMBERSHIP OF STATE INVESTMENT COUNCIL.--

A. On the effective date of this act, the state investment officer is no longer a member of the state investment council.

B. On the effective date of this act, the three public members serving on the state investment council the day before the effective date of this act are no longer members of the state investment council.

C. Within thirty days of the effective day of the act, four members shall be appointed to the state investment council by the New Mexico legislative council pursuant to Paragraph (6) of Subsection A of Section 6-8-2 NMSA 1978 and shall serve on an interim basis until confirmed by the senate.

D. Within thirty days of the effective date of this act, two members shall be appointed to the state investment council by the governor pursuant to Paragraph (7) of Subsection A of Section 6-8-2 NMSA 1978 and shall serve on an interim basis until confirmed by the senate.

E. The four members appointed pursuant to Subsection C of this section and the two members appointed pursuant to Subsection D of this section shall, by lot, determine the initial terms of office for each position so that one position will be for a term of one year, one position will be for a term of two years, two positions will be for terms of three years, one position will be for a term of four years and one position will be for a term of five years. Thereafter, the terms shall be for five years.

Section 9. EMERGENCY.--It is necessary for the public peace, health and safety that this act take effect immediately.

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