1.1                          A bill for an act
  1.2             relating to state government; prohibiting investment 
  1.3             of public funds in certain assets; amending Minnesota 
  1.4             Statutes 1994, sections 11A.24, subdivision 1; 
  1.5             356A.06, by adding a subdivision; and 475.66, 
  1.6             subdivision 3. 
  1.7   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.8      Section 1.  Minnesota Statutes 1994, section 11A.24, 
  1.9   subdivision 1, is amended to read: 
  1.10     Subdivision 1.  [SECURITIES GENERALLY.] The state board 
  1.11  shall have the authority to purchase, sell, lend or exchange the 
  1.12  following securities for funds or accounts specifically made 
  1.13  subject to this section including puts and call options and 
  1.14  future contracts traded on a contract market regulated by a 
  1.15  governmental agency or by a financial institution regulated by a 
  1.16  governmental agency.  These securities may be owned as units in 
  1.17  commingled trusts that own the securities described in 
  1.18  subdivisions 2 to 6.  Any agreement to lend securities must be 
  1.19  concurrently collateralized with cash or securities with a 
  1.20  market value of not less than 100 percent of the market value of 
  1.21  the loaned securities at the time of the agreement.  Any 
  1.22  agreement for put and call options and futures contracts may 
  1.23  only be entered into with a fully offsetting amount of cash or 
  1.24  securities.  Only securities authorized by this section, 
  1.25  excluding those under subdivision 6, paragraph (a), clauses (1) 
  1.26  to (4), may be accepted as collateral or offsetting securities. 
  2.1      Sec. 2.  Minnesota Statutes 1994, section 356A.06, is 
  2.2   amended by adding a subdivision to read: 
  2.3      Subd. 7a.  [RESTRICTIONS.] Any agreement to lend securities 
  2.4   must be concurrently collateralized with cash or securities with 
  2.5   a market value of not less than 100 percent of the market value 
  2.6   of the loaned securities at the time of the agreement.  For a 
  2.7   covered pension authorized to purchase put and call options and 
  2.8   futures contracts under subdivision 7, any agreement for put and 
  2.9   call options and futures contracts may only be entered into with 
  2.10  a fully offsetting amount of cash or securities.  Only 
  2.11  securities authorized by this section, excluding those under 
  2.12  subdivision 7, paragraph (g), clause (1), items (i) to (iv), may 
  2.13  be accepted as collateral or offsetting securities. 
  2.14     Sec. 3.  Minnesota Statutes 1994, section 475.66, 
  2.15  subdivision 3, is amended to read: 
  2.16     Subd. 3.  Subject to the provisions of any resolutions or 
  2.17  other instruments securing obligations payable from a debt 
  2.18  service fund, any balance in the fund may be invested 
  2.19     (a) in governmental bonds, notes, bills, mortgages, and 
  2.20  other securities, which are direct obligations or are guaranteed 
  2.21  or insured issues of the United States, its agencies, its 
  2.22  instrumentalities, or organizations created by an act of 
  2.23  Congress, excluding mortgage-backed securities that are defined 
  2.24  as high risk pursuant to subdivision 5, or in certificates of 
  2.25  deposit secured by letters of credit issued by federal home loan 
  2.26  banks, 
  2.27     (b) in shares of an investment company (1) registered under 
  2.28  the Federal Investment Company Act of 1940, whose shares are 
  2.29  registered under the Federal Securities Act of 1933, and (2) 
  2.30  whose only investments are in (i) securities described in the 
  2.31  preceding clause, except that the exclusion of mortgage-backed 
  2.32  securities defined as high risk pursuant to subdivision 5 does 
  2.33  not apply to mortgage-backed securities in the portfolio of an 
  2.34  investment company, (ii) general obligation tax-exempt 
  2.35  securities rated A or better by a national bond rating service, 
  2.36  and (iii) repurchase agreements or reverse repurchase agreements 
  3.1   fully collateralized by those securities, if the repurchase 
  3.2   agreements or reverse repurchase agreements are entered into 
  3.3   only with those primary reporting dealers that report to the 
  3.4   Federal Reserve Bank of New York and with the 100 largest United 
  3.5   States commercial banks, 
  3.6      (c) in any security which is (1) a general obligation of 
  3.7   the state of Minnesota or any of its municipalities, or (2) a 
  3.8   general obligation of another state or local government with 
  3.9   taxing powers which is rated A or better by a national bond 
  3.10  rating service, or (3) a general obligation of the Minnesota 
  3.11  housing finance agency, or (4) a general obligation of a housing 
  3.12  finance agency of any state if it includes a moral obligation of 
  3.13  the state, or (5) a general or revenue obligation of any agency 
  3.14  or authority of the state of Minnesota other than a general 
  3.15  obligation of the Minnesota housing finance agency.  Investments 
  3.16  under clauses (3) and (4) must be in obligations that are rated 
  3.17  A or better by a national bond rating service and investments 
  3.18  under clause (5) must be in obligations that are rated AA or 
  3.19  better by a national bond rating service, 
  3.20     (d) in bankers acceptances of United States banks eligible 
  3.21  for purchase by the Federal Reserve System, 
  3.22     (e) in commercial paper issued by United States 
  3.23  corporations or their Canadian subsidiaries that is of the 
  3.24  highest quality and matures in 270 days or less, or 
  3.25     (f) in guaranteed investment contracts issued or guaranteed 
  3.26  by United States commercial banks or domestic branches of 
  3.27  foreign banks or United States insurance companies or their 
  3.28  Canadian or United States subsidiaries; provided that the 
  3.29  investment contracts rank on a parity with the senior unsecured 
  3.30  debt obligations of the issuer or guarantor and, (1) in the case 
  3.31  of long-term investment contracts, either (i) the long-term 
  3.32  senior unsecured debt of the issuer or guarantor is rated, or 
  3.33  obligations backed by letters of credit of the issuer or 
  3.34  guarantor if forming the primary basis of a rating of such 
  3.35  obligations would be rated, in the highest or next highest 
  3.36  rating category of Standard & Poor's Corporation, Moody's 
  4.1   Investors Service, Inc., or a similar nationally recognized 
  4.2   rating agency, or (ii) if the issuer is a bank with headquarters 
  4.3   in Minnesota, the long-term senior unsecured debt of the issuer 
  4.4   is rated, or obligations backed by letters of credit of the 
  4.5   issuer if forming the primary basis of a rating of such 
  4.6   obligations would be rated in one of the three highest rating 
  4.7   categories of Standard & Poor's Corporation, Moody's Investors 
  4.8   Service, Inc., or similar nationally recognized rating agency, 
  4.9   or (2) in the case of short-term investment contracts, the 
  4.10  short-term unsecured debt of the issuer or guarantor is rated, 
  4.11  or obligations backed by letters of credit of the issuer or 
  4.12  guarantor if forming the primary basis of a rating of such 
  4.13  obligations would be rated, in the highest two rating categories 
  4.14  of Standard and Poor's Corporation, Moody's Investors Service, 
  4.15  Inc., or similar nationally recognized rating agency.  
  4.16     The fund may also be used to purchase any obligation, 
  4.17  whether general or special, of an issue which is payable from 
  4.18  the fund, at such price, which may include a premium, as shall 
  4.19  be agreed to by the holder, or may be used to redeem any 
  4.20  obligation of such an issue prior to maturity in accordance with 
  4.21  its terms.  The securities representing any such investment may 
  4.22  be sold or hypothecated by the municipality at any time, but the 
  4.23  money so received remains a part of the fund until used for the 
  4.24  purpose for which the fund was created. 
  4.25     Sec. 4.  [EFFECTIVE DATE; TRANSITION.] 
  4.26     Sections 1 to 3 are effective the day following final 
  4.27  enactment.  Sections 1 to 3 apply only to investments made after 
  4.28  that date, and do not require sale of assets purchased before 
  4.29  that date.