SB 238-1_ Filed 01/27/2010, 15:31
Adopted 1/28/2010

COMMITTEE REPORT

MADAM PRESIDENT:

    The Senate Committee on Tax and Fiscal Policy, to which was referred Senate Bill No. 238, has had the same under consideration and begs leave to report the same back to the Senate with the recommendation that said bill be AMENDED as follows:

    Replace the effective dates in SECTIONS 2 through 7 with "[EFFECTIVE JULY 1, 2010]".

SOURCE: Page 1, line 1; (10)CR023802.1. -->     Page 1, delete lines 1 through 9.
    Page 2, between lines 4 and 5, begin a new paragraph and insert:
SOURCE: IC 5-13-8-9; (10)CR023802.3. -->     "SECTION 3. IC 5-13-8-9 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2010]: Sec. 9. (a) All public funds of all political subdivisions shall be deposited in the designated depositories located in the respective territorial limits of the political subdivisions, except as provided in this section.
    (b) Each board of finance of a political subdivision:
        (1) that is not a city, town, or school corporation; and
        (2) whose jurisdiction crosses one (1) or more county lines;
may limit its boundaries for the purpose of this section to that portion of the political subdivision within the county where its principal office is located.
    (c) If there is no principal office or branch of a financial institution located in the county or political subdivision, or if no financial institution with a principal office or branch in the county or political subdivision will accept public funds under this chapter, the board of finance of the county and the boards of finance of the political

subdivisions in the county shall designate one (1) or more financial institutions with a principal office or branch outside of the county or political subdivision, and in the state, as a depository or depositories.
    (d) The board of trustees for a hospital organized or operated under IC 16-22-1 through IC 16-22-5 or IC 16-23-1 may invest any money in the hospital fund anywhere in the state with any financial institution designated by the state board of finance as depositories for state deposits.
    (e) If only one (1) financial institution that has a branch or principal office in a county or political subdivision is willing to accept public funds, the board of finance for the county or political subdivision may:
        (1) treat the financial institution that is located within the county or political subdivision as if the financial institution were not located within the county or political subdivision; and
        (2) designate one (1) or more financial institutions to receive public funds under the requirements of subsection (c).
    (f) The investing officer shall maintain the deposits as follows:
        (1) In one (1) or more depositories designated for the political subdivision, if the sum of the monthly average balances of all the transaction accounts for the political subdivision does not exceed one hundred thousand dollars ($100,000).
        (2) In each depository designated for the political subdivision, if subdivision (1) does not apply and fewer than three (3) financial institutions are designated by the local board of finance as a depository.
        (3) In at least two (2) depositories designated for the political subdivision, if subdivision (1) does not apply and at least three (3) financial institutions are designated by the local board of finance as a depository.
     (g) An investing officer may not make a deposit of public funds, and the depository may not accept a deposit of public funds, if the deposit would cause the depository to have total deposit accounts and investments of public funds exceeding one hundred percent (100%) of the balance in the public deposit insurance fund as of the end of the preceding calendar quarter, unless the depository securitizes the excess amount of the deposit with assets of the depository. A deposit that is not prohibited by this subsection when the deposit is made remains legal even if a subsequent decrease in

the balance in the public deposit insurance fund causes the investments and deposit accounts of public funds in the depository to exceed one hundred percent (100%) of the balance in the public deposit insurance fund.".

SOURCE: Page 2, line 23; (10)CR023802.2. -->     Page 2, line 23, delete "." and insert " , if the issuer has not defaulted on any of the issuer's obligations within the twenty (20) years preceding the date of the purchase.".
    Page 3, line 28, strike "any number of years or having no".
    Page 3, line 29, strike "stated final maturity." and insert " not more than five (5) years.".
    Page 3, delete lines 37 through 42.
    Page 4, delete lines 1 through 37.
    Page 6, line 37, after "time in" insert " nonfederally insured".
    Page 6, between lines 38 and 39 begin a new paragraph and insert:
SOURCE: IC 5-13-9-10; (10)CR023802.8. -->     "SECTION 8. IC 5-13-9-10, AS AMENDED BY P.L.3-2008, SECTION 27, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2010]: Sec. 10. (a) The investing officers of two (2) or more political subdivisions located within a county may establish a joint investment fund by entering into a written master agreement that defines the rights and obligations of the participating political subdivisions.
    (b) An investing officer of a political subdivision that enters into a written master agreement under subsection (a) may pay funds that are held by the investing officer and that are available for investment into the joint investment fund.
    (c) The fund shall be administered by a board, which must be comprised of the investing officer of each of the participating political subdivisions and which must be an instrumentality of the participating political subdivisions. Each officer of a political subdivision located within the county who is designated in section 1 of this chapter may pay funds that are held by the officer and available for investment into a joint fund known as a joint investment fund. The fund is administered by a board comprised of the investing officer of each of the participating political subdivisions and is an instrumentality of the participating political subdivisions.
    (d) A joint investment fund must be invested and reinvested as a separate and individual fund. A joint investment fund may be invested or reinvested only in investments that are permitted for

political subdivisions by this chapter.
    (e) A written master agreement under subsection (a) must provide the following:
        (1) A political subdivision may participate in a joint investment fund only with the written authorization of its local board of finance.
        (2) A political subdivision may participate in a joint investment fund only if its legislative body approves the written master agreement.
        (3) The board of a joint investment fund shall establish written policies for the investment and reinvestment of joint investment funds in the manner provided by IC 30-4-3-3.
        (4) A fund shall be invested and reinvested as prescribed in subdivision (3).
        (5) A custodian bank or trust company located in Indiana must:
            (A) be selected and contracted by the board of a joint investment fund to hold the securities and other investments of the joint investment fund;
            (B) collect the income and other receipts from the securities and other investments; and
            (C) provide any other services appropriate and customary for a custodian;
        subject to the direction of the board of a joint investment fund.
        (6) The board of a joint investment fund may select and contract with a fund administrator to provide investment advice to the board and any other services determined by the board to be appropriate and necessary for the efficient administration and accounting of the joint investment fund. The fund administrator shall agree to recommend only securities and other investments as prescribed in the written policies established by the board in rendering investment advice to the board and shall agree to be responsible, accountable, and liable for any breach of this provision. The fund administrator must have experience in the investment of public funds for governmental entities and must be either of the following:
            (A) A financial institution located in Indiana.
            (B) Registered as an investment adviser with the United States Securities and Exchange Commission under the Investment

Advisers Act of 1940, as amended (15 U.S.C. 80a-9 et seq.), with public funds under management in the amount of at least one hundred million dollars ($100,000,000).
        (7) A joint investment fund must be audited at least annually by an independent auditing firm, with a copy of the audit provided to each participating political subdivision.
        (8) The administrative expenses of a joint investment fund, including fees for the fund administrator, custodian, auditor, and other professional services, must be paid from the fund's interest earnings.
        (9) The interest earnings that exceed the administrative expenses of a joint investment fund must be credited to each political subdivision participating in the joint investment fund in a manner that equitably reflects the differing amounts and terms of the political subdivision's investment in the joint investment fund.
        (10) Each participating political subdivision shall receive reports, including a daily transaction confirmation reflecting any activity in the political subdivision's account and monthly reports reflecting its investment activity in the joint investment fund and the performance and composition of the joint investment fund itself.
        (11) The board of a joint investment fund shall meet at least annually to review the operation and performance of the joint investment fund, the custodian, the fund administrator, the auditor, and any other professional retained by the board.
        (12) The board of a joint investment fund shall provide for any other policies that are necessary for the efficient administration and accounting of the joint investment fund and are consistent with the law governing the investment, management, deposit, and safekeeping of public funds of political subdivisions.

SOURCE: IC 5-13-9.5-1; (10)CR023802.9. -->     SECTION 9. IC 5-13-9.5-1 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2010]: Sec. 1. (a) A financial institution may at any time file an application to become a depository and receive public funds of the state on deposit. Except as provided in IC 5-13-8-1 and IC 5-13-8-7, designation of a depository to receive public funds of the state qualifies a depository to receive public funds of a political subdivision. Applications for the state board of finance must be filed with the treasurer of state. The treasurer shall submit each

application to the board.
    (b) An application must:
        (1) be made in writing on forms prescribed under section 8 of this chapter;
        (2) contain terms and conditions as required and authorized by this chapter; and
        (3) offer to:
            (A) receive public funds of the state on deposit; and
            (B) provide the security required by IC 5-13-13-7 for the safekeeping and prompt payment of the deposited funds.
    (c) A financial institution is ineligible to become a depository and receive public funds of the state if the institution:
         (1) fails to maintain a capital ratio in excess of the minimum required by the governmental supervisory body of the institution; or
         (2) issues a credit card as a card issuer, as defined in 15 U.S.C. 1602(n), and the interest rate on the credit card issued exceeds twenty-one percent (21%). This subdivision does not apply to an institution that serves only as an agent of such a credit card issuer.
If the financial institution is already a depository, the institution may continue to hold the public funds until maturity to avoid the imposition of a penalty upon the depositor, although the financial institution may not accept the public funds for reinvestment and may not accept additional public funds. A determination of the ratio described in this subsection must be based on the institution's most recent periodic statement of condition filed with the institution's governmental supervisory body under the regulatory accounting principles as prescribed by the supervisory body.
    (d) A financial institution shall furnish to the board a certificate executed by an officer of the institution signifying that the institution satisfies:
        (1) the requirements of subsection (c); and
        (2) the requirement in section 6(b) of this chapter that the sum of:
            (A) the total principal amount of the depository's outstanding loans to Indiana residents; plus
            (B) the total value of the depository's investments in Indiana residents;


        is at least equal to the total amount of public funds of the state and political subdivisions of the state that are on deposit in the depository.
The board may rely on a certificate furnished under this subsection in determining whether to deposit public funds or reinvest public funds in the institution.
SOURCE: IC 5-13-9.5-6; (10)CR023802.10. -->     SECTION 10. IC 5-13-9.5-6 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2010]: Sec. 6. (a) The board for depositories regarding depositories of public funds of the state may revoke the commission of any depository at any time for any cause considered sufficient by the board for depositories.
    (b) The causes for which the board for depositories may revoke the commission of a depository under subsection (a) include:
         (1) the failure of the depository to conduct lending activities in Indiana to such an extent that, at the end of each quarter, pursuant to the depository's certification, the sum of:
            (1) (A) the total principal amount of the depository's outstanding loans to Indiana residents (as defined in IC 5-13-8-7); plus
            (2) (B) the total value of the depository's investments in Indiana residents (as defined in IC 5-13-8-7);
        is at least equal to the total amount of public funds of the state and political subdivisions of the state that are on deposit in the depository; and
         (2) the depository being ineligible to be a depository under section 1(c)(2) of this chapter.
    (c) Upon revocation, the depository shall immediately render an accounting and make settlement for all public funds deposited with the depository.
SOURCE: IC 5-13-10-3; (10)CR023802.11. -->     SECTION 11. IC 5-13-10-3 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2010]: Sec. 3. (a) The treasurer of state may not deposit aggregate funds in deposit accounts in any one (1) designated depository in an amount aggregating at any one (1) time more than the lesser of the following:
         (1) Fifty percent (50%) of the combined capital, surplus, and undivided profits of that depository, as determined by its last published statement of condition filed with the treasurer of state.
         (2) The amount that would cause the total investments and

deposit accounts of public funds in the designated depository to exceed one hundred percent (100%) of the balance in the public deposit insurance fund as of the end of the preceding calendar quarter, unless the depository securitizes the excess amount of the deposit with assets of the depository.
    (b) A deposit that is not prohibited by subsection (a)(2) when the deposit is made in a depository remains legal even if a subsequent decrease in the balance in the public deposit insurance fund causes the investments and deposit accounts of public funds in the depository to exceed one hundred percent (100%) of the balance in the public deposit insurance fund.

     (c) Each depository shall file with the treasurer of state each periodic statement of condition required to be filed by it with its governmental supervisory body. If the state board for depositories finds that excess cash of the state is substantially more than that which had been anticipated, it may increase that maximum percentage in any depository, and the treasurer of the state may invest the additional funds in deposit accounts distributed among the depositories substantially in proportion to their respective capital, surplus, and undivided profits.".

SOURCE: Page 7, line 5; (10)CR023802.7. -->     Page 7, line 5, after "For" insert " appointments after June 30, 2010, all four (4) appointees must be a chief executive officer or a chief financial officer of a depository at the time of the appointment. In making these appointments, the governor shall provide for geographic representation of all regions of Indiana, including both urban and rural communities. In addition, the appointees must, at the time of the appointment, be employed by the following depositories:
        (1) One (1) must be employed by a depository that has total assets of less than five hundred million dollars ($500,000,000).
        (2) One (1) must be employed by a depository that has total assets of less than one billion dollars ($1,000,000,000).
        (3) One (1) must be employed by a depository that has total assets of at least one billion dollars ($1,000,000,000) but less than five billion dollars ($5,000,000,000).
        (4) One (1) must be employed by a depository that has total assets of at least five billion dollars ($5,000,000,000).
Total assets shall be determined using the depository's
".
    Page 7, delete lines 6 through 9.
    Page 7, line 11, strike "extend for" and insert " are".
    Page 7, line 11, strike "year periods." and insert " years from the effective date of the member's appointment.".
    Page 7, line 12, after "appointment" insert ".".
    Page 7, line 12, strike "and serves after the".
    Page 7, strike line 13.
    Page 7, line 14, strike "appointed and qualified." and insert " An appointed member may be reappointed if the individual satisfies the requirements of this subsection at the time of the reappointment.".
    Page 8, between lines 5 and 6, begin a new paragraph and insert:
SOURCE: IC 5-13-12-4; (10)CR023802.14. -->     "SECTION 14. IC 5-13-12-4, AS AMENDED BY P.L.146-2008, SECTION 39, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2010]: Sec. 4. (a) The secretary-investment manager shall administer, manage, and direct the affairs and activities of the board under the policies and under the control and direction of the board. In carrying out these duties, the secretary-investment manager has the power to do the following:
        (1) Approve all accounts for salaries and allowable expenses of the board, including, but not limited to:
            (A) the employment of general or special attorneys, consultants, and employees and agents as may be necessary to assist the secretary-investment manager in carrying out the duties of that office and to assist the board in its consideration of applications for a guarantee of an industrial development obligation or credit enhancement obligation guarantee; and
            (B) the setting of compensation of persons employed under clause (A).
        (2) Approve all expenses incidental to the operation of the public deposit insurance fund.
        (3) Perform other duties and functions that may be delegated to the secretary-investment manager by the board or that are necessary to carry out the duties of the secretary-investment manager under this chapter.
    (b) The secretary-investment manager shall keep a record of the proceedings of the board, and shall maintain and be custodian of all books, documents, and papers filed with the board, and its official seal.

The secretary-investment manager may make copies of all minutes and other records and documents of the board, and may give certificates under seal of the board to the effect that the copies are true copies. All persons dealing with the board may rely upon the certificates.
    (c) Each year, beginning in 2001 and ending in 2021, after the treasurer of state prepares the annual report required by IC 4-8.1-2-14, the secretary-investment manager shall determine:
        (1) the amount of interest earned by the public deposit insurance fund during the state fiscal year ending on the preceding June 30, after deducting:
            (A) all expenses and other costs of the board for depositories that were not paid from other sources during that state fiscal year; and
            (B) all expenses and other costs associated with the Indiana education savings authority that were not paid from other sources during that state fiscal year; and
        (2) the amount of interest earned during the state fiscal year ending on the preceding June 30 by the pension distribution fund established by subsection (g). (e).
    (d) On or before November 1 of each year, beginning in 2001 and ending in 2021, the public employees' retirement fund shall provide a report to the secretary-investment manager concerning the individual and aggregate payments made by all units of local government (as defined in IC 5-10.3-11-3) during the preceding calendar year for benefits under the police and firefighter pension funds established by IC 36-8-6, IC 36-8-7, and IC 36-8-7.5.
    (e) On or before the last business day of November of each year, beginning in 2001 and ending in 2021, the secretary-investment manager shall compute the amount of earned interest to be distributed under this section to each unit of local government (as defined in IC 5-10.3-11-3) in accordance with subsection (h) according to the following formula:
        STEP ONE: Add the amount determined under subsection (c)(1) to the amount determined under subsection (c)(2).
        STEP TWO: Divide the STEP ONE sum by the aggregate amount of payments made by all units of local government during the preceding calendar year for benefits under the police and firefighter pension funds established by IC 36-8-6, IC 36-8-7, and

IC 36-8-7.5, as reported under subsection (d).
        STEP THREE: Multiply the STEP TWO quotient by the amount of payments made by each unit of local government during the preceding calendar year for benefits under the police and firefighter pension funds established by IC 36-8-6, IC 36-8-7, and IC 36-8-7.5, as reported under subsection (d).
    (f) (d) Subject to subsection (j), (g), on or before the last business day of December of each year, beginning in 2001 and ending in 2021, the secretary-investment manager shall provide to the auditor of state
        (1) a report setting forth the amounts to be distributed to units of local government, as determined under subsection (e); and
        (2) a check payable from the public deposit insurance fund to the pension distribution fund established by subsection (g) (e) in an amount equal to the amount determined under subsection (c)(1). (c).
    (g) (e) The pension distribution fund is established. The pension distribution fund shall be administered by the treasurer of state. The treasurer of state shall invest money in the pension distribution fund not currently needed to meet the obligations of the pension distribution fund in the same manner as other public money may be invested. Interest that accrues from these investments shall be deposited in the pension distribution fund. Money in the pension distribution fund at the end of a state fiscal year does not revert to the state general fund.
    (h) (f) Subject to subsection (j), (g), on June 30 and October 1 of each year, beginning in 2002 and ending in 2022, the auditor of state shall distribute in two (2) equal installments from the pension distribution fund to the fiscal officer of each unit of local government identified under subsection (d) the amount computed for that unit under subsection (e) in November of the preceding year.
    (i) Each unit of local government shall deposit distributions received under subsection (h) in the pension fund or funds identified by the secretary-investment manager and shall use those distributions to pay a portion of the obligations with respect to the pension fund or funds. public employees' retirement fund for the benefit of the police and firefighter pension funds established by IC 36-8-6, IC 36-8-7, and IC 36-8-7.5 the amount deposited in the pension distribution fund in December of the preceding year under subsection (d).
    (j) (g) Before providing a check to the auditor of state under

subsection (f)(2) (d) in December of any year, the secretary-investment manager shall determine:
        (1) the total amount of payments made from the public deposit insurance fund under IC 5-13-13-3 after June 30, 2001;
        (2) the total amount of payments received by the board for depositories and deposited in the public deposit insurance fund under IC 5-13-13-3 after June 30, 2001; and
        (3) the total amount of interest earned by the public deposit insurance fund after the first of the payments described in subdivision (1).
If the total amount of payments determined under subdivision (1) less the total amount of payments determined under subdivision (2) (referred to in this subsection as the "net draw on the fund") exceeds ten million dollars ($10,000,000) and also exceeds the total amount of interest determined under subdivision (3), the secretary-investment manager may not provide a check to the auditor of state under subsection (f)(2) (d) and a distribution may not be made from the pension distribution fund under subsection (h) (f) in the following calendar year until the total amount of interest earned by the public deposit insurance fund equals the net draw on the fund. A check may not be provided under subsection (f)(2) (d) and a distribution may not be made under subsection (f) (d) in any subsequent calendar year if a study conducted by the board under section 7(b) of this chapter demonstrates that payment of the distribution would reduce the balance of the public deposit insurance fund to a level insufficient to ensure the safekeeping and prompt payment of public funds to the extent they are not covered by insurance of any federal deposit insurance agency.".

SOURCE: Page 9, line 24; (10)CR023802.9. -->     Page 9, line 24, after "to" insert in " capital adequacy, liquidity, and asset quality, and".
    Page 13, line 8, delete "five million".
    Page 13, line 9, delete "dollars ($5,000,000)." and insert " three hundred million dollars ($300,000,000)."
    Page 13, line 40, strike "of like character as those in which" and insert " that".
    Page 13, strike line 41.
    Page 13, line 42, strike "IC 5-13-12-7(d)." and insert " determines are acceptable collateral.".
    Page 14, line 9, after "payment," insert " as required by the

board,".
    Renumber all SECTIONS consecutively.
    (Reference is to SB 238 as introduced.)

and when so amended that said bill do pass.

Committee Vote: Yeas 11, Nays 0.

____________________________________

    Hershman
Chairperson


CR023802/DI 58    2010