Bill Text: IL SB0536 | 2023-2024 | 103rd General Assembly | Engrossed

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Amends the Public Funds Investment Act. Provides that a public agency may adopt an ordinance or resolution to allow for investment of public funds in instruments that are not specifically listed as authorized investments if those investments comply with (i) any other law that authorizes public agencies to invest funds and (ii) the investment policy adopted by the public agency.

Spectrum: Slight Partisan Bill (Democrat 5-2)

Status: (Passed) 2024-08-09 - Public Act . . . . . . . . . 103-0880 [SB0536 Detail]

Download: Illinois-2023-SB0536-Engrossed.html

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AN ACT concerning finance.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Public Funds Investment Act is amended by
changing Section 2 as follows:
(30 ILCS 235/2) (from Ch. 85, par. 902)
Sec. 2. Authorized investments.
(a) Any public agency may invest any public funds as
follows:
(1) in bonds, notes, certificates of indebtedness,
treasury bills or other securities now or hereafter
issued, which are guaranteed by the full faith and credit
of the United States of America as to principal and
interest;
(2) in bonds, notes, debentures, or other similar
obligations of the United States of America, its agencies,
and its instrumentalities;
(3) in interest-bearing savings accounts,
interest-bearing certificates of deposit or
interest-bearing time deposits or any other investments
constituting direct obligations of any bank as defined by
the Illinois Banking Act;
(4) in short-term obligations of corporations

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organized in the United States with assets exceeding
$500,000,000 if (i) such obligations are rated at the time
of purchase at one of the 3 highest classifications
established by at least 2 standard rating services and
which mature not later than 270 days from the date of
purchase, (ii) such purchases do not exceed 10% of the
corporation's outstanding obligations, and (iii) no more
than one-third of the public agency's funds may be
invested in short-term obligations of corporations under
this paragraph (4);
(4.5) in obligations of corporations organized in the
United States with assets exceeding $500,000,000 if (i)
such obligations are rated at the time of purchase at one
of the 3 highest classifications established by at least 2
standard rating services and which mature more than 270
days but less than 10 3 years from the date of purchase,
(ii) such purchases do not exceed 10% of the corporation's
outstanding obligations, and (iii) no more than one-third
of the public agency's funds may be invested in
obligations of corporations under this paragraph (4.5); or
(5) in money market mutual funds registered under the
Investment Company Act of 1940, provided that the
portfolio of any such money market mutual fund is limited
to obligations described in paragraph (1) or (2) of this
subsection and to agreements to repurchase such
obligations.

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(a-1) In addition to any other investments authorized
under this Act, a municipality, park district, forest preserve
district, conservation district, county, or other governmental
unit may invest its public funds in interest bearing bonds of
any county, township, city, village, incorporated town,
municipal corporation, or school district, of the State of
Illinois, of any other state, or of any political subdivision
or agency of the State of Illinois or of any other state,
whether the interest earned thereon is taxable or tax-exempt
under federal law. The bonds shall be registered in the name of
the municipality, park district, forest preserve district,
conservation district, county, or other governmental unit, or
held under a custodial agreement at a bank. The bonds shall be
rated at the time of purchase within the 4 highest general
classifications established by a rating service of nationally
recognized expertise in rating bonds of states and their
political subdivisions.
(b) Investments may be made only in banks which are
insured by the Federal Deposit Insurance Corporation. Any
public agency may invest any public funds in short term
discount obligations of the Federal National Mortgage
Association or in shares or other forms of securities legally
issuable by savings banks or savings and loan associations
incorporated under the laws of this State or any other state or
under the laws of the United States. Investments may be made
only in those savings banks or savings and loan associations

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the shares, or investment certificates of which are insured by
the Federal Deposit Insurance Corporation. Any such securities
may be purchased at the offering or market price thereof at the
time of such purchase. All such securities so purchased shall
mature or be redeemable on a date or dates prior to the time
when, in the judgment of such governing authority, the public
funds so invested will be required for expenditure by such
public agency or its governing authority. The expressed
judgment of any such governing authority as to the time when
any public funds will be required for expenditure or be
redeemable is final and conclusive. Any public agency may
invest any public funds in dividend-bearing share accounts,
share certificate accounts or class of share accounts of a
credit union chartered under the laws of this State or the laws
of the United States; provided, however, the principal office
of any such credit union must be located within the State of
Illinois. Investments may be made only in those credit unions
the accounts of which are insured by applicable law.
(c) For purposes of this Section, the term "agencies of
the United States of America" includes: (i) the federal land
banks, federal intermediate credit banks, banks for
cooperative, federal farm credit banks, or any other entity
authorized to issue debt obligations under the Farm Credit Act
of 1971 (12 U.S.C. 2001 et seq.) and Acts amendatory thereto;
(ii) the federal home loan banks and the federal home loan
mortgage corporation; and (iii) any other agency created by

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Act of Congress.
(d) Except for pecuniary interests permitted under
subsection (f) of Section 3-14-4 of the Illinois Municipal
Code or under Section 3.2 of the Public Officer Prohibited
Practices Act, no person acting as treasurer or financial
officer or who is employed in any similar capacity by or for a
public agency may do any of the following:
(1) have any interest, directly or indirectly, in any
investments in which the agency is authorized to invest.
(2) have any interest, directly or indirectly, in the
sellers, sponsors, or managers of those investments.
(3) receive, in any manner, compensation of any kind
from any investments in which the agency is authorized to
invest.
(e) Any public agency may also invest any public funds in a
Public Treasurers' Investment Pool created under Section 17 of
the State Treasurer Act. Any public agency may also invest any
public funds in a fund managed, operated, and administered by
a bank, subsidiary of a bank, or subsidiary of a bank holding
company or use the services of such an entity to hold and
invest or advise regarding the investment of any public funds.
(f) To the extent a public agency has custody of funds not
owned by it or another public agency and does not otherwise
have authority to invest such funds, the public agency may
invest such funds as if they were its own. Such funds must be
released to the appropriate person at the earliest reasonable

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time, but in no case exceeding 31 days, after the private
person becomes entitled to the receipt of them. All earnings
accruing on any investments or deposits made pursuant to the
provisions of this Act shall be credited to the public agency
by or for which such investments or deposits were made, except
as provided otherwise in Section 4.1 of the State Finance Act
or the Local Governmental Tax Collection Act, and except where
by specific statutory provisions such earnings are directed to
be credited to and paid to a particular fund.
(g) A public agency may purchase or invest in repurchase
agreements of government securities having the meaning set out
in the Government Securities Act of 1986, as now or hereafter
amended or succeeded, subject to the provisions of said Act
and the regulations issued thereunder. The government
securities, unless registered or inscribed in the name of the
public agency, shall be purchased through banks or trust
companies authorized to do business in the State of Illinois.
(h) Except for repurchase agreements of government
securities which are subject to the Government Securities Act
of 1986, as now or hereafter amended or succeeded, no public
agency may purchase or invest in instruments which constitute
repurchase agreements, and no financial institution may enter
into such an agreement with or on behalf of any public agency
unless the instrument and the transaction meet the following
requirements:
(1) The securities, unless registered or inscribed in

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the name of the public agency, are purchased through banks
or trust companies authorized to do business in the State
of Illinois.
(2) An authorized public officer after ascertaining
which firm will give the most favorable rate of interest,
directs the custodial bank to "purchase" specified
securities from a designated institution. The "custodial
bank" is the bank or trust company, or agency of
government, which acts for the public agency in connection
with repurchase agreements involving the investment of
funds by the public agency. The State Treasurer may act as
custodial bank for public agencies executing repurchase
agreements. To the extent the Treasurer acts in this
capacity, he is hereby authorized to pass through to such
public agencies any charges assessed by the Federal
Reserve Bank.
(3) A custodial bank must be a member bank of the
Federal Reserve System or maintain accounts with member
banks. All transfers of book-entry securities must be
accomplished on a Reserve Bank's computer records through
a member bank of the Federal Reserve System. These
securities must be credited to the public agency on the
records of the custodial bank and the transaction must be
confirmed in writing to the public agency by the custodial
bank.
(4) Trading partners shall be limited to banks or

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trust companies authorized to do business in the State of
Illinois or to registered primary reporting dealers.
(5) The security interest must be perfected.
(6) The public agency enters into a written master
repurchase agreement which outlines the basic
responsibilities and liabilities of both buyer and seller.
(7) Agreements shall be for periods of 330 days or
less.
(8) The authorized public officer of the public agency
informs the custodial bank in writing of the maturity
details of the repurchase agreement.
(9) The custodial bank must take delivery of and
maintain the securities in its custody for the account of
the public agency and confirm the transaction in writing
to the public agency. The Custodial Undertaking shall
provide that the custodian takes possession of the
securities exclusively for the public agency; that the
securities are free of any claims against the trading
partner; and any claims by the custodian are subordinate
to the public agency's claims to rights to those
securities.
(10) The obligations purchased by a public agency may
only be sold or presented for redemption or payment by the
fiscal agent bank or trust company holding the obligations
upon the written instruction of the public agency or
officer authorized to make such investments.

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(11) The custodial bank shall be liable to the public
agency for any monetary loss suffered by the public agency
due to the failure of the custodial bank to take and
maintain possession of such securities.
(i) Notwithstanding the foregoing restrictions on
investment in instruments constituting repurchase agreements
the Illinois Housing Development Authority may invest in, and
any financial institution with capital of at least
$250,000,000 may act as custodian for, instruments that
constitute repurchase agreements, provided that the Illinois
Housing Development Authority, in making each such investment,
complies with the safety and soundness guidelines for engaging
in repurchase transactions applicable to federally insured
banks, savings banks, savings and loan associations or other
depository institutions as set forth in the Federal Financial
Institutions Examination Council Policy Statement Regarding
Repurchase Agreements and any regulations issued, or which may
be issued by the supervisory federal authority pertaining
thereto and any amendments thereto; provided further that the
securities shall be either (i) direct general obligations of,
or obligations the payment of the principal of and/or interest
on which are unconditionally guaranteed by, the United States
of America or (ii) any obligations of any agency, corporation
or subsidiary thereof controlled or supervised by and acting
as an instrumentality of the United States Government pursuant
to authority granted by the Congress of the United States and

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provided further that the security interest must be perfected
by either the Illinois Housing Development Authority, its
custodian or its agent receiving possession of the securities
either physically or transferred through a nationally
recognized book entry system.
(j) In addition to all other investments authorized under
this Section, a community college district may invest public
funds in any mutual funds that invest primarily in corporate
investment grade or global government short term bonds.
Purchases of mutual funds that invest primarily in global
government short term bonds shall be limited to funds with
assets of at least $100 million and that are rated at the time
of purchase as one of the 10 highest classifications
established by a recognized rating service. The investments
shall be subject to approval by the local community college
board of trustees. Each community college board of trustees
shall develop a policy regarding the percentage of the
college's investment portfolio that can be invested in such
funds.
(k) In addition to all other investments authorized under
this Section, a public agency may adopt an ordinance or
resolution to allow for investment of public funds in other
instruments not specifically listed in this Section provided
that those investments comply with (i) any other law that
authorizes public agencies to invest funds and (ii) the
investment policy adopted by the public agency under Section

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