June 23, 2005, Introduced by Senators BISHOP and VAN WOERKOM and referred to the Committee on Finance.
A bill to amend 1976 PA 451, entitled
"The revised school code,"
by amending sections 622 and 1223 (MCL 380.622 and 380.1223),
section 622 as amended by 2001 PA 127 and section 1223 as amended
by 1997 PA 47.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 622. (1) The intermediate school board shall select
financial institutions for the deposit of school funds. The
intermediate school board shall keep a set of coded accounts to be
approved by the superintendent of public instruction and shall have
its books audited at least annually by a certified public
accountant. General operating funds, building and site funds,
cooperative education funds, special education funds, vocational-
technical education funds, and debt retirement funds shall be
maintained separately and shall not be commingled, except that the
intermediate school board, by resolution, may authorize the
treasurer to combine money from more than 1 fund for the purpose of
making
an investment authorized by subsection
(2)(g) (2)(i).
(2) The
Subject to subsection (6),
the treasurer of an
intermediate
school district board, if authorized by
resolution
of the intermediate school board, may invest general operating
funds, special education funds, area vocational-technical education
funds, building and site funds, cooperative education funds, and
debt retirement funds of the intermediate school district.
Investments
shall be made subject to subsection (4) and shall be
restricted
to any These investments are restricted to 1 or more of
the following:
(a)
Bonds, bills, or notes of the United
States or
obligations
of this state issued directly by the United States
department of treasury.
(b) United States department of treasury bonds, bills, or
notes for which the interest and principal have been separated and
sold individually as zero-coupon bonds.
(c) (b) Certificates of deposit issued by a rated financial
institution.
(d) (c) Commercial paper issued by a United States-domiciled
entity and rated prime at the time of purchase and maturing not
more than 270 days after the date of purchase or short-term
corporate obligations issued by a United States-domiciled
corporation and rated AAA at the time of purchase and maturing not
more than 270 days after the date of purchase.
(e) (d) Securities issued or guaranteed by agencies or
instrumentalities
of the United States government.
Bonds or notes
issued directly from, or guaranteed by, an agency or government-
sponsored enterprise of the United States, in the same form as when
they were issued.
(f) (e) United States
government or federal agency or
government-sponsored enterprise obligation repurchase agreements,
reverse repurchase agreements, or government lending agreements.
(g) Agreements to lend bonds, bills, or notes of the United
States, an agency of the United States, or a government-sponsored
enterprise of the United States. An agreement described in this
subdivision shall meet all of the following:
(i) Require that all collateral held in the form of a United
States treasury bond or note or other United States agency bond or
note, or cash, must be maintained at a value equal to or greater
than 102% of the market value of the securities or cash that has
been lent. The agreement shall require the custodian of the
collateral to determine the value of the collateral at least once
per day on days when the New York federal reserve bank is open.
(ii) If the transaction involves a reverse repurchase agreement
or a securities lending agreement, require that agreement to be
transacted through a qualified lending agent.
(iii) Require that a qualified Michigan custodial bank serve as
custodian for that agreement.
(iv) Require that all maturity dates for investments made from
cash received as collateral must not have a maturity date beyond
the final date agreed upon for return of the collateral.
(v) If the transaction involves a government lending agreement
or reverse repurchase agreement, require that the intermediate
school district must provide at least 3 business days' notice to
all parties involved in the government lending agreement or reverse
repurchase agreement before selling or transferring its interest in
any bond, bill, or note lent during the term of the agreement.
(h)
(f) Bankers'
acceptances issued by a rated bank that is
a member of the federal deposit insurance corporation.
(i) (g)
Investment pools, as authorized by the surplus funds
investment pool act, 1982 PA 367, MCL 129.111 to 129.118, composed
entirely of instruments that are legal for direct investment by an
intermediate school district.
(j) (h)
Mutual funds composed entirely of investment
vehicles that are legal for direct investment by an intermediate
school district.
(k) Debt obligations of this state or a political subdivision
of this state that at the time of purchase are rated at least AA as
determined by at least 1 recognized standard rating service and
having a final maturity date that is within 4 years of the purchase
date.
(l) Obligations of a political subdivision of another state
that at the time of purchase are rated at least AA as determined by
at least 1 recognized standard rating service and having a maturity
date that is within 12 months of the purchase date or subject to a
redemption that is backed by a letter of credit and that is not
greater than 12 months from purchase.
(3) The earnings of an investment shall become a part of the
fund from which the investment was made. When money of more than 1
fund of a single intermediate school district or money of more than
1 intermediate school district are combined for an investment pool
authorized
by subsection (2)(g) (2)(i), the money shall be
accounted for separately, and the earnings from the investment
shall be separately and individually computed, recorded, and
credited to the fund or intermediate school district, as the case
may be, for which the investment was acquired.
(4) An intermediate school district shall ensure that an
investment described in subsection (2) is held in custody or
safekeeping by a financial institution.
(5) An intermediate school district shall not invest money in
an investment that is not specifically listed in subsection (2).
(6) (4)
Notwithstanding subsection (2), additional funds of
an
An intermediate school district shall not be
deposited or
invested
deposit or invest money in a
fund described in subsection
(2) in a financial institution that is not eligible to be a
depository or custodian of surplus funds belonging to this state
under section 6 of 1855 PA 105, MCL 21.146.
(7) (5)
Assets acceptable for pledging to secure deposits of
funds under this act are limited to any of the following:
(a) Assets considered acceptable to the state treasurer under
section 3 of 1855 PA 105, MCL 21.143, to secure deposits of state
surplus funds.
(b) Any of the following:
(i) Securities issued by the federal home loan mortgage
corporation.
(ii) Securities issued by the federal national mortgage
association.
(iii) Securities issued by the government national mortgage
association.
(c) Securities considered acceptable to the intermediate
school board and the financial institution.
(8) (6)
As used in this section: ,
"deposit"
(a) "Deposit" includes purchases of or investment in shares of
a rated Michigan credit union.
(b) (7)
As used in this section, "financial "Financial
institution" means a state or nationally chartered bank or a state
or federally chartered savings and loan association, savings bank,
or credit union whose deposits are insured by an agency of the
United
States government and that maintains a
principal office or
at
least 1 branch office located in this
state. under the laws of
this
state or the United States.
(c) "Government-sponsored enterprise" means a privately held
corporation with a public purpose that is created by federal
statute.
(d) "Qualified lending agent" means an entity that is
regulated by the United States securities and exchange commission
and that manages or controls agreements described in subsection
(2), or similar agreements, with market values of at least
$5,000,000,000.00.
(e) "Qualified Michigan custodial bank" means a financial
institution that has expertise in serving as a custodian for
securities lending and reverse repurchase agreements.
Sec.
1223. (1) If Subject
to subsection (8), if authorized
by
resolution of the board of a the school district, the
treasurer of a school board may invest debt retirement funds,
building and site funds, building and site sinking funds, or
general
funds of the district. The investment shall be made under
subsection
(7) and shall be restricted to These
investments are
restricted to 1 or more of the following:
(a)
Bonds, bills, or notes of the United
States; obligations,
the
principal and interest of which are fully guaranteed by the
United
States; or obligations of the state. In a primary or fourth
class
school district, the bonds, bills, or notes shall be payable,
at
the option of the holder, upon not more than 90 days' notice, or
if
not so payable, shall have maturity dates not more than 5 years
after
the purchase dates. issued directly by the United States
department of treasury.
(b) United States department of treasury bonds, bills, or
notes for which the interest and principal have been separated and
sold individually as zero-coupon bonds.
(c) (b) Certificates of
deposit issued by a rated financial
institution or share certificates of a rated state or federal
credit union that is a financial institution.
(d) (c) Commercial paper issued by a United States-domiciled
entity and rated prime at the time of purchase and maturing not
more than 270 days after the date of purchase or short-term
corporate obligations issued by a United States-domiciled
corporation and rated AAA at the time of purchase and maturing not
more than 270 days after the date of purchase.
(e) (d) Securities issued or guaranteed by agencies or
instrumentalities
of the United States government.
Bonds or notes
issued directly from, or guaranteed by, an agency or government-
sponsored enterprise of the United States, in the same form as when
they were issued.
(f) (e) United States
government or federal agency or
government-sponsored enterprise obligation repurchase agreements,
reverse repurchase agreements, or government lending agreements.
(g) Agreements to lend bonds, bills, or notes of the United
States, an agency of the United States, or a government-sponsored
enterprise of the United States. An agreement described in this
subdivision shall meet all of the following:
(i) Require that all collateral held in the form of a United
States treasury bond or note or other United States agency bond or
note, or cash, must be maintained at a value equal to or greater
than 102% of the market value of the securities or cash that has
been lent. The agreement shall require the custodian of the
collateral to determine the value of the collateral at least once
per day on days when the New York federal reserve bank is open.
(ii) If the transaction involves a reverse repurchase agreement
or a securities lending agreement, require that agreement to be
transacted through a qualified lending agent.
(iii) Require that a qualified Michigan custodial bank serve as
custodian for that agreement.
(iv) Require that all maturity dates for investments made from
cash received as collateral must not have a maturity date beyond
the final date agreed upon for return of the collateral.
(v) If the transaction involves a government lending agreement
or reverse repurchase agreement, require that the school district
must provide at least 3 business days' notice to all parties
involved in the government lending agreement or reverse repurchase
agreement before selling or transferring its interest in any bond,
bill, or note lent during the term of the agreement.
(h)
(f) Bankers'
acceptances issued by a bank that is a
member of the federal deposit insurance corporation.
(i) (g)
Mutual funds composed entirely of investment
vehicles that are legal for direct investment by a school district.
(j) (h)
Investment pools, as authorized by the surplus funds
investment pool act, 1982 PA 367, MCL 129.111 to 129.118, composed
entirely of instruments that are legal for direct investment by a
school district.
(k) Debt obligations of this state or a political subdivision
of this state that at the time of purchase are rated at least AA as
determined by at least 1 recognized standard rating service and
having a final maturity date that is within 4 years of the purchase
date.
(l) Obligations of a political subdivision of another state
that at the time of purchase are rated at least AA as determined by
at least 1 recognized standard rating service and having a maturity
date that is within 12 months of the purchase date or subject to a
redemption that is backed by a letter of credit and that is not
greater than 12 months from purchase.
(2)
An obligation purchased under this section, when
received
by
the treasurer, shall be deposited with the financial institution
having
the deposit of the money of the particular fund from which
the
obligation was purchased. A school district shall ensure that
an investment described in subsection (2) is held in custody or
safekeeping by a financial institution.
(3) A school district shall not invest money in an investment
that is not specifically listed in subsection (1).
(4) (3)
Money in the several funds of a A school district
shall
not be commingled commingle money in the funds described in
subsection (1) for the purpose of making an investment authorized
by
this section except that as
follows:
(a) The board of a school district may establish and maintain
1 common debt retirement fund for issues of bonds of similar
character.
(b) The board of a school district, by resolution, may
authorize the treasurer to combine money from more than 1 fund for
the
purpose of making an investment authorized by subsection (1)(h)
(1)(j).
(5) (4)
Earnings of an investment shall become a part of the
fund for which the investment was made. When money of more than 1
fund of a single district or money of more than 1 district are
combined
for an investment pool authorized by subsection (1)(h)
(1)(j), the money shall be accounted for separately, and the
earnings from the investment shall be separately and individually
computed, recorded, and credited to the fund or district, as the
case may be, for which the investment was acquired.
(6) (5)
The treasurer of a school district, if authorized by
resolution of the board, may deposit upon approval of the employee,
funds accumulated under a deferred compensation program in a
federally insured financial institution authorized by law to do
business in this state. If authorized by a resolution of the board,
the treasurer of a school district, with the prior consent of the
employee, may use funds accumulated under a deferred compensation
plan to purchase from a life insurance company authorized to do
business in this state an annuity contract or life insurance policy
in the manner and for the purposes described in section 457 of the
internal revenue code.
(7) (6)
Security in the form of collateral, surety bond, or
another form may be taken for the deposits or investments of a
school district in a financial institution. However, an investment
under
section 622(2)(e) or section 1223(1)(e) subsection (1)(f)
or section 622(2)(f) or in an investment pool that includes
instruments
eligible for investments under sections 622(2)(e) and
1223(1)(e)
subsection (1)(f) or section
622(2)(f) shall be secured
by the transfer of title and custody of the obligations to which
the repurchase agreements relate and an undivided interest in those
obligations must be pledged to the school district for these
agreements.
(8) (7)
Notwithstanding subsection (1), additional funds of a
A school district shall not be
deposited or invested deposit
or
invest money in a fund described in subsection (1) in a financial
institution which
that is not eligible to be a depository or
custodian of surplus funds belonging to this state under section 6
of 1855 PA 105, MCL 21.146.
(9) (8)
As used in this section: ,
"deposit"
(a) "Deposit" includes purchase of or investment in shares of
a rated Michigan credit union.
(b) (9)
As used in this section, "financial "Financial
institution" means a state or nationally chartered bank or a state
or federally chartered savings and loan association, savings bank,
or credit union whose deposits are insured by an agency of the
United
States government and which maintains
a principal office or
at
least 1 branch office located in this
state. under the laws of
this
state or the United States.
(c) "Government-sponsored enterprise" means a privately held
corporation with a public purpose that is created by federal
statute.
(d) "Qualified lending agent" means an entity that is
regulated by the United States securities and exchange commission
and that manages or controls agreements described in subsection
(1), or similar agreements, with market values of at least
$5,000,000,000.00.
(e) "Qualified Michigan custodial bank" means a financial
institution that has expertise in serving as custodian for
securities lending and reverse repurchase agreements.