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LEGISLATURE OF NEBRASKA
ONE HUNDRED SEVENTH LEGISLATURE
FIRST SESSION
LEGISLATIVE BILL 654
Introduced by Wayne, 13.
Read first time January 20, 2021
Committee: Banking, Commerce and Insurance
1 A BILL FOR AN ACT relating to public funds; to adopt the Public Entities
2 Investment Trust Act.
3 Be it enacted by the people of the State of Nebraska,
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1 Section 1. Sections 1 to 5 of this act shall be known and may be
2 cited as the Public Entities Investment Trust Act.
3 Sec. 2. The purpose of the Public Entities Investment Trust Act is
4 to authorize the creation of trusts to provide an investment pool open to
5 all public entities in the State of Nebraska without favor to one type of
6 entity. Further, the act permits participating entities to commingle
7 funds with other entities to take advantage of economies of scale and
8 professional management, and to provide for investment earnings while
9 maintaining safety and liquidity for all participants.
10 Sec. 3. For purposes of the Public Entities Investment Trust Act:
11 (1) Eligible entities means all public, governmental, or quasi-
12 public entities, joint public agencies created pursuant to the Joint
13 Public Agency Act, and entities created pursuant to the Interlocal
14 Cooperation Act located in Nebraska, including, but not limited to,
15 entities designated as political subdivisions, vested with taxing
16 authority, or whose membership is wholly comprised by such entities and
17 funds created by such entities. Eligible entities shall not include the
18 State of Nebraska or any department, agency, division, office,
19 commission, court, board, or elected, appointed, or constitutional
20 officer thereof;
21 (2)(a) Eligible investments means those not prohibited by Article
22 XI, section 1, of the Constitution of Nebraska, including, but not
23 limited to:
24 (i) Obligations, including letters of credit, of any agency or
25 instrumentality of the United States government, including bonds,
26 debentures, or notes issued by the Federal Home Loan Bank system;
27 (ii) Direct obligations of or other obligations the principal of and
28 interest on which are guaranteed by the United States government or its
29 agencies or instrumentalities, including collateralized mortgage
30 obligations and obligations that are fully guaranteed or insured by the
31 Federal Deposit Insurance Corporation or by the explicit full faith and
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1 credit of the United States;
2 (iii) Direct obligations of the state, its agencies, and
3 instrumentalities receiving an investment quality rate by a nationally
4 recognized investment rating firm not less than A or its equivalent at
5 the time of purchase;
6 (iv) Obligations of other states, agencies, counties, cities, and
7 political subdivisions of any state receiving an investment quality rate
8 by a nationally recognized investment rating firm not less than A or its
9 equivalent at the time of purchase;
10 (v) Commercial paper, if such commercial paper:
11 (A) Has a stated maturity of three hundred sixty-five days or fewer
12 from its date of issuance; and
13 (B) Receives an investment quality rating of not less than A-1 or
14 P-1, or an equivalent rating, by a nationally recognized investment
15 rating firm;
16 (vi) Money market mutual funds whose shares are sold without fees,
17 commissions, or other sales charges, that have a fixed net asset value of
18 one dollar, and are comprised of obligations of the Unites States, its
19 agencies, or instrumentalities;
20 (vii) Fully collateralized repurchase agreements, if such
21 agreements:
22 (A) Have a defined termination date;
23 (B) Are secured by a combination of cash and obligations of the
24 Unites States, its agencies and or instrumentalities;
25 (C) Require securities purchased by the trust or cash held by the
26 trust to be pledged to the trust, held in the trust's name, and deposited
27 at the time the investment is made with the trust or with a third party
28 selected and approved by the trust; and
29 (D) Are invested through a primary government securities dealer, as
30 defined by the Board of Governors of the Federal Reserve System, or a
31 financial institution;
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1 (viii) Overnight and time deposits made in state or national banks,
2 capital stock financial institutions, or qualifying mutual financial
3 institutions doing business in the state, if such deposits are:
4 (A) Guaranteed or insured by the Federal Deposit Insurance
5 Corporation or its successor or the National Credit Union Share Insurance
6 Fund or its successor, including deposits meeting the requirements of the
7 Public Funds Deposit Security Act; or
8 (B) If in excess of the amount insured or guaranteed by the Federal
9 Deposit Insurance Corporation, secured by furnishing the securities
10 described in subdivision (14) of section 77-2387; or
11 (ix) Any other allowable investments permitted under state law.
12 (b) Eligible investments does not include funds created pursuant to
13 the federal Employee Retirement Income Security Act of 1974, 29 U.S.C.
14 1001 et seq.; and
15 (3) State means a state of the United States and the District of
16 Columbia.
17 Sec. 4. (1) A trust created pursuant to the Public Entities
18 Investment Trust Act shall be established within the office and oversight
19 of the State Treasurer and the State Treasurer shall administer the
20 trust.
21 (2) The State Treasurer shall establish the trust in conformance
22 with common law principles and register the trust pursuant to section
23 30-3816. Following such registration and creation of a declaration of
24 trust, eligible entities may invest funds for purpose of deposit,
25 investment, or reinvestment of such funds by the trustee or trustees.
26 Sec. 5. A declaration of trust for a trust shall establish policies
27 to ensure the efficient administration, investment management, and
28 accounting for the trust. A declaration of trust shall include policies
29 which allow for:
30 (1) Election of a board of trustees whose membership shall include
31 the treasurer and two or more representatives chosen from the
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1 participating eligible entities;
2 (2) The board of trustees to contract with fund administrators,
3 accountants, attorneys, registered investment advisors, and other finance
4 and investment professionals to make investments and provide for public
5 accounting and legal compliance necessary to ensure the safety,
6 liquidity, and yield of the trust;
7 (3) Daily liquidity, including a prohibition on establishing a
8 minimum time for which funds from eligible entities must be retained by
9 the trust;
10 (4) Remittance of earnings derived in excess of expenses to
11 participating eligible entities in a manner that equitably reflects the
12 proportion of each eligible entities' investment in the fund;
13 (5) Establishment of multiple accounts within the trust by
14 participating eligible entities;
15 (6) Regular reporting, including daily transactional confirmations,
16 monthly statements, and other such reporting as is necessary to inform
17 participating eligible entities of investment activity and portfolio
18 composition and performance;
19 (7) Auditing, at least on an annual basis, by an independent
20 auditing firm registered as an accounting firm with the Public Company
21 Accounting Oversight Board, the results of which must be provided to the
22 board of trustees within sixty days after the fiscal year end;
23 (8) Development of reports and other procedures necessary to ensure
24 the safety, liquidity, and yield of the trust;
25 (9) The board of trustees to contract with a third-party to maintain
26 custody of or physical control over funds or other property provided for
27 investment by the eligible entities. Any contract with a custodian shall
28 contain any provisions that the board of trustees believes to be
29 necessary or appropriate to safeguard and secure all invested funds or
30 other property; and
31 (10) An established percentage of trust assets which must be
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1 deposited with banks, capital stock financial institutions, and
2 qualifying mutual funds as defined in section 77-2387, including deposits
3 with banks, capital stock financial institutions, and qualifying mutual
4 funds whose total assets do not exceed one billion dollars.
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