GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2001
H	4
HOUSE BILL 327*
 Committee Substitute Favorable 3/19/01 
Third Edition Engrossed 3/27/01
 Senate Finance Committee Substitute Adopted 9/3/01 

Short Title:	Revise Treasurer Investment Authority.	()	
Sponsors:	     	
Referred to:	     	
March 1, 2001

A BILL TO BE ENTITLED
AN ACT TO MAKE TECHNICAL AND CONFORMING CHANGES TO THE STATE TREASURER'S INVESTMENT AUTHORITY AND TO GIVE THE STATE TREASURER MORE INVESTMENT FLEXIBILITY WITH RETIREMENT SYSTEMS' ASSETS.  

The General Assembly of North Carolina enacts:
SECTION 1.  G.S. 147‑69.1 reads as rewritten:
"§ 147‑69.1.  Investments authorized for General Fund and Highway Funds assets.
(a)	The Governor and Council of State, with the advice and assistance of the State Treasurer, shall adopt such rules and regulations as shall be necessary and appropriate to implement the provisions of this section.
(b)	This section applies to funds held by the State Treasurer to the credit of:
(1)	The General Fund;
(2)	The Highway Fund and Highway Trust Fund.
(c)	It shall be the duty of the State Treasurer to invest the cash of the funds enumerated in subsection (b) of this section in excess of the amount required to meet the current needs and demands on such funds, selecting from among the following:
(1)	Obligations of the United States or obligations fully guaranteed both as to principal and interest by the United States.
(2)	Obligations of the Federal Financing Bank, the Federal Farm Credit Bank,  the Federal Home Loan Banks, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Government National Mortgage Association, the Federal Housing Administration, the Farmers Home Administration, the United States Postal Service, the Export‑Import Bank, the International Bank for Reconstruction and Development, the International Finance Corporation, the Inter‑American Development Bank, the Asian Development Bank, the African Development Bank, and the Student Loan Marketing Association.
(3)	Repurchase Agreements with respect to securities issued or guaranteed by the United States government or its agencies or other securities eligible for investment by this section executed by a bank or trust company or by primary or other reporting dealers to the Federal Reserve Bank of New York.
(4)	Obligations of the State of North Carolina.
(5)	Time deposits of financial institutions with a physical presence in North Carolina for the purpose of receiving commercial or retail deposits; provided that any principal amount of such deposit in excess of the amount insured by the federal government or any agency thereof, be fully secured by surety bonds, or be fully collateralized; provided further that the rate of return or investment yield may not be less than that available in the market on United States government or agency obligations of comparable maturity.
(6)	Repealed by Session Laws 1989 (Regular Session, 1990), c. 813, s. 10.
(7)	Prime quality commercial paper bearing the highest rating of at least one nationally recognized rating service and not bearing a rating below the highest by any nationally recognized rating service which rates the particular obligation.
(8)	Bills of exchange or time drafts drawn on and accepted by a commercial bank and eligible for use as collateral by member banks in borrowing from a federal reserve bank, provided that the accepting bank or its holding company is either (i) incorporated in the State of North Carolina or (ii) has outstanding publicly held obligations bearing the highest rating of at least one nationally recognized rating service and not bearing a rating below the highest by any nationally recognized rating service which rates the particular obligations.
(9)	Asset‑backed securities (whether considered debt or equity) provided they bear the highest rating of at least one nationally recognized rating service and do not bear a rating below the highest rating by any nationally recognized rating service which rates the particular securities.
(10)	Corporate bonds and notes provided they bear the highest rating of at least one nationally recognized rating service and do not bear a rating below the highest by any nationally recognized rating service which rates the particular obligation.
(d)	Unless otherwise provided by law, the interest or income received and accruing from all deposits or investments of such cash balances shall be paid into the State's General Fund, except that all interest or income received and accruing on the monthly balance of the Highway Fund and Highway Trust Fund shall be paid into the State Highway Fund and Highway Trust Fund. The cash balances of the several funds may be combined for deposit or investment purposes; and when such combined deposits or investments are made, the interest or income received and accruing from all deposits or investments shall be prorated among the funds in conformity with applicable law and the rules and regulations adopted by the Governor and Council of State.
(e)	The State Treasurer shall cause to be prepared quarterly statements on or before the tenth day of February, May, August, and November in each year, which shall show the amount of cash on hand, the amount of money on deposit, the name of each depository, and all investments for which he is in any way responsible. Each quarterly statement shall be delivered to the Governor, Council of State, President Pro Tempore of the Senate, and Speaker of the House of Representatives; and a copy shall be posted in the office of the State Treasurer for the information of the public.
(f)	Repealed by Session Laws 1989 (Regular Session, 1990), c. 813, s. 10.
	"
SECTION 2.  G.S. 147‑69.2(b) reads as rewritten:
"(b)	It shall be the duty of the State Treasurer to invest the cash of the funds enumerated in subsection (a) of this section in excess of the amount required to meet the current needs and demands on such funds, selecting from among the following:
(1)	Any of the investments authorized by 
G.S. 147-69.1(c)(1)-(7).
(2)	General obligations of other states of the United  States.
(3)	General obligations of cities, counties and special districts in North  Carolina.
(4)	Obligations of any company, other organization or legal entity incorporated or otherwise created or located within or  outside the United States if  the obligations bear one of the four highest ratings of at least one nationally recognized rating service and do not bear a rating below the four highest by any nationally recognized rating service which rates the particular  security.
	(6)	Asset‑backed securities (whether considered debt or equity) provided they bear ratings by nationally recognized rating services as provided in G.S. 147‑69.2(b)(4) and that they do not bear a rating below the four highest by any nationally recognized rating service  that rates the particular  securities.
(7)	With respect to Retirement Systems' assets referred to in G.S. 147‑69.2(b)(8), (i) insurance contracts  that provide for participation in individual or pooled separate accounts of insurance companies, (ii) group trusts, (iii) individual,  common, or collective trust funds of banks and trust  companies, (iv) real estate investment trusts, and (v) limited partnerships, whether described as limited liability partnerships or limited liability companies; provided the investment manager has assets under management of at least one hundred million dollars ($100,000,000); provided such investment assets are managed primarily for the purpose of investing in or owning real estate or related debt financing located within or outside the United States; and provided that the investment authorized by this subsection shall not exceed ten percent (10%) of the market value of all invested assets of the Retirement Systems.
(8)	With respect to assets of the Teachers' and State Employees' Retirement System, the Consolidated Judicial Retirement System, the Firemen's and Rescue Workers' Pension Fund, the Local Governmental Employees' Retirement System,  the Legislative Retirement System, and the North Carolina National Guard Pension Fund (hereinafter referred to collectively as the Retirement Systems), they may be invested in preferred or common stocks issued by any company incorporated or otherwise created or located within or outside the United  States provided the investments meet the conditions of this subdivision.
The investments authorized under this subdivision cannot exceed sixty-five percent (65%) of the market value of all invested assets of the Retirement Systems. Up to five percent (5%) of the amount that may be invested under this subdivision may be invested in the stocks or shares of a diversified investment company registered under the "Investment Company Act of 1940" that has total assets of at least fifty million dollars ($50,000,000).  
The assets authorized under this subdivision can be invested through individual, common, or collective trust funds of banks, trust companies, and group trust funds of investment advisory companies so long as the investment manager has assets under management of at least one hundred million dollars ($100,000,000).
The assets authorized under this subdivision can also be invested directly, if all of the following conditions are met:
a.	 The common stock or preferred stock of such corporation is registered on a national securities exchange as provided in the Federal Securities Exchange Act or quoted through the National Association of Securities Dealers' Automated Quotations (NASDAQ)  system.
b.	The corporation  has paid a cash dividend on its common stock in each year of the 5‑year period next preceding the date of investment and the aggregate net earnings available for dividends on the common stock of  the corporation for the whole of  that period  have been at least equal to the amount of  the dividends  paid.
c.	 In applying the dividend and earnings test under this section to any issuing, assuming, or guaranteeing corporation,  if the corporation acquired its property or any substantial part thereof within a five‑year period immediately preceding the date of investment by consolidation, merger, or by the purchase of all or a substantial portion of the property of any other corporation or corporations, or acquired the assets of any unincorporated business enterprise by purchase or otherwise, the dividends and net earnings of the several predecessor or constituent corporations or enterprises shall be consolidated and adjusted so as to ascertain whether or not the applicable requirements of this  subdivision have been complied  with.
		
No more than one and one‑half percent (1 1/2%) of the market value of the Retirement Systems' assets that may be invested under this subdivision can be invested in the stock of a single corporation, and  the total number of shares in that single corporation cannot exceed eight percent (8%) of the issued and outstanding stock of that corporation.				g.	That investments may be made in securities convertible into common stocks issued by any such company, if such securities bear one of the four highest ratings of at least one nationally recognized rating service and do not bear a rating below the four highest by any nationally recognized rating service which may then rate the particular security.
(9)	With respect to Retirement Systems' assets, as defined in subdivision (b)(8) of this subsection,  they may be invested in limited partnership interests in a partnership or in interests in a limited liability company if the primary purpose of the partnership or limited liability company is to invest in public or private debt, public or private equity, or corporate buyout transactions, within or outside the United States. The amount invested under this subdivision shall not exceed five percent (5%) of the market value of all invested assets of the Retirement Systems. (10)	Recodified as part of subdivision (b)(9) by Session Laws 2000‑160, s. 2.
(11)	With respect to assets of the Escheat Fund, obligations of the North Carolina Global TransPark Authority authorized by G.S. 63A‑4(a)(22), not to exceed twenty‑five million dollars ($25,000,000), that have a final maturity not later than September 1, 2004. The obligations shall bear interest at the rate set by the State Treasurer. No commitment to purchase obligations may be made pursuant to this subdivision after September 1, 1993, and no obligations may be purchased after September 1, 1994. In the event of a loss to the Escheat Fund by reason of an investment made pursuant to this subdivision, it is the intention of the General Assembly to hold the Escheat Fund harmless from the loss by appropriating to the Escheat Fund funds equivalent to the loss."
SECTION 3.  G.S. 147‑69.3 reads as rewritten:
"§ 147‑69.3.  Administration of State Treasurer's investment programs.
(a)	The State Treasurer shall establish, maintain, administer, manage, and operate within the Department of State Treasurer one or more investment programs for the deposit and investment of assets pursuant to the provisions of G.S. 147‑69.1 and G.S. 147‑69.2.
(b)	Any official, board, commission, other public authority, local government, school administrative unit, local ABC board, or community college of the State having custody of any funds not required by law to be deposited with and invested by the State Treasurer may deposit all or any portion of  those funds with the State Treasurer for investment in one of the investment programs established pursuant to this section, subject to any provisions of law with respect to eligible investments, provided that any occupational licensing board as defined in G.S. 93B‑1 may participate in one of the investment programs established pursuant to this section regardless of whether or not the funds were required by law to be deposited with and invested by the State Treasurer. In the absence of specific statutory provisions to the contrary, any  of those funds may be invested in accordance with the provisions of G.S. 147‑69.2 and 147‑69.3. Upon request from any depositor eligible under this subsection, the State Treasurer may authorize moneys invested pursuant to this subsection to be withdrawn by warrant on the State Treasurer.
(c)	The State Treasurer's investment programs shall be so managed that in the judgment of the State Treasurer funds may be readily converted into cash when needed.
(d)	Except as provided by G.S. 147‑69.1(d),  the total return earned on investments shall accrue pro rata to the fund whose assets are invested according to  the formula prescribed by the State Treasurer with the approval of the Governor and Council of State.
(e)	The State Treasurer has full powers as a fiduciary to hold, purchase, sell, assign, transfer, lend and dispose of any of the securities or investments in which any of the programs created pursuant to this section have been invested, and may reinvest the proceeds from the sale of  those securities or investments and any other investable assets of the program.
(f)	The cost of administration, management, and operation of investment programs established pursuant to this section shall be apportioned equitably among the programs in such manner as may be prescribed by the State Treasurer, such costs to be paid from each program, and to the extent not otherwise chargeable directly to the income or assets of the specific investment program or pooled investment vehicle, shall be deposited with the State Treasurer as a General Fund nontax revenue. The cost of administration, management, and operation of investment programs established pursuant to this section and not directly paid from the income or assets of such program shall be covered by an appropriation to the State Treasurer for this purpose in the Current Operations Appropriations Act. 
(g)	The State Treasurer is authorized to retain the services of  independent appraisers, auditors, actuaries, attorneys, investment counseling firms, statisticians, custodians, or other persons or firms possessing specialized skills or knowledge  necessary for the proper administration of investment programs created pursuant to this section.
(h)	The State Treasurer shall prepare, as of the end of each fiscal year, a report on the financial condition of each investment program created pursuant to this section. A copy of each report shall be submitted within 30 days following the end of the fiscal year to the official, institution, board, commission or other agency whose funds are invested, the State Auditor, and the Advisory Budget Commission.
(i)	The State Treasurer's annual report to the General Assembly shall include a full and complete statement of all moneys invested by virtue of the provisions of G.S. 147‑69.1 and G.S. 147‑69.2, the nature and character of investments therein, and the revenues derived therefrom. (j)	Subject to the provisions of G.S. 147-69.1(d), the State Treasurer shall adopt any rules necessary to carry out the provisions of this section."
SECTION 4.  This act becomes effective October 1, 2001.