Management of State Funds

Adds to the list of permissible investments of excess state

THE SENATE                              S.B. NO.           2088
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  Section 36-21, Hawaii Revised Statutes, is
 2 amended to read as follows:
 3      "36-21  Short-term investment of state moneys.  (a)  The
 4 director of finance may invest any moneys of the State which in
 5 the director's judgment are in excess of the amounts necessary
 6 for meeting the immediate requirements of the State and where in
 7 the director's judgment the action will not impede or hamper the
 8 necessary financial operations of the State in:
 9      (1)  Any bonds or interest-bearing notes or obligations:
10           (A)  Of the State (including state director of
11                finance's warrant notes issued pursuant to chapter
12                40);
13           (B)  Of the United States;
14           (C)  For which the faith and credit of the United
15                States are pledged for the payment of principal
16                and interest;
17      (2)  [Federal land bank bonds;] Federal Farm Credit System
18           notes and bonds;
19      (3)  Federal Agricultural Mortgage Corporation notes and
20           bonds;

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                                     S.B. NO.           2088

 1      (4)  Federal Home Loan Bank notes and bonds;
 2      (5)  Federal Home Loan Mortgage Corporation bonds;
 3      (6)  Federal National Mortgage Association notes and bonds;
 4      (7)  Student Loan Marketing Association notes and bonds;
 5      (8)  Tennessee Valley Authority notes and bonds;
 6     [(7)] (9)  Securities of a mutual fund whose portfolio is
 7           limited to bonds or securities issued or guaranteed by
 8           the United States or an agency thereof;
 9     [(8)] (10)  Repurchase agreements fully collateralized by any
10           such bonds or securities;
11     [(9)] (11)  Federally insured savings accounts;
12    [(10)] (12)  Time certificates of deposit;
13    [(11)] (13)  Certificates of deposit open account;
14    [(12)] (14)  Repurchase agreements with federally insured
15           banks, savings and loan associations, and financial
16           services loan companies;
17    [(13)] (15)  Student loan resource securities including:
18           (A)  Student loan auction rate securities;
19           (B)  Student loan asset-backed notes;
20           (C)  Student loan program revenue notes and bonds; and
21           (D)  Securities issued pursuant to Rule 144A of the
22                Securities Act of 1933, including any private
23                placement issues;

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                                     S.B. NO.           2088

 1           issued with either bond insurance or
 2           overcollateralization guaranteed by the United States
 3           Department of Education; provided all insurers maintain
 4           a triple-A rating by Standard & Poor's, Moody's, Duff &
 5           Phelps, Fitch, or any other major national securities
 6           rating agency;
 7    [(14)] (16)  Commercial paper with an A1/P1 or equivalent
 8           rating by any national securities rating service; and
 9    [(15)] (17)  Bankers' acceptances with an A1/P1 or equivalent
10           rating by any national securities rating service;
11 provided that the investments are due to mature not more than
12 five years from the date of investment.  Income derived from
13 those investments shall be a realization of the general fund;
14 provided that income earned from moneys invested by the general
15 funds, special funds, bond funds, and trust and agency funds on
16 an investment pool basis shall be paid into and credited to the
17 respective funds based on the contribution of moneys into the
18 investment pool by each fund.  As used in this section,
19 "investment pool" means the aggregate of state treasury moneys
20 that are maintained in the custody of the director of finance for
21 investment and reinvestment without regard to fund designation.
22      (b)  Except with respect to an early withdrawal penalty on
23 an investment permitted by this section, the amount of such

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                                     S.B. NO.           2088

 1 penalty being mutually agreed at the time of acquisition of such
 2 investment, no investment permitted by this section shall require
 3 or may in the future require payments by the State, whether
 4 unilateral, reciprocal, or otherwise, including margin payments,
 5 or shall bear interest at a variable rate which causes or may
 6 cause the market price of such investment to fluctuate; provided
 7 that such limitation shall not apply to money market mutual funds
 8 which:
 9      (1)  Invest solely in:
10           (A)  Direct and general obligations of the United
11                States of America; or
12           (B)  Obligations of any agency or instrumentality of
13                the United States of America the payment of the
14                principal and interest on which are
15                unconditionally guaranteed by the full faith and
16                credit of the United States of America;
17      (2)  Are rated at the time of purchase "AAAm-G" or its
18           equivalent by Standard & Poor's Ratings Group; and
19      (3)  Are open-end management investment companies regulated
20           under the Investment Company Act of 1940, as amended,
21           which calculate their current price per share pursuant
22           to Rule 2a-7 (17 Code of Federal Regulations section
23           270.2a-7) promulgated under such act.

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                                     S.B. NO.           2088

 1      (c)  Furthermore, the State shall not acquire any investment
 2 or enter into any agreement in connection with the acquisition of
 3 any investment or related to any existing investment held by the
 4 State, which would require or may in the future require any
 5 payment by the State, whether unilateral, reciprocal, or
 6 otherwise, such as swap agreements, hedge agreements, or other
 7 similar agreements.  For purposes of this section, a swap or
 8 hedge payment is any payment made by the State in consideration
 9 or in exchange for a reciprocal payment by any person, such as a
10 variable rate payment in exchange for a fixed rate payment, a
11 fixed rate payment in exchange for a variable rate payment, a
12 payment when a cap or a floor amount is exceeded, or other
13 similar payment."
14      SECTION 2.  Statutory material to be repealed is bracketed.
15 New statutory material is underscored.
16      SECTION 3.  This Act shall take effect upon its approval.
18                           INTRODUCED BY:  _______________________
20                                           _______________________