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1 AN ACT concerning finance.

2 Be it enacted by the People of the State of Illinois, 
3represented in the General Assembly: 

4 Section 5. The Public Funds Investment Act is amended by 
5changing Section 2 as follows:

6 (30 ILCS 235/2) (from Ch. 85, par. 902)
7 Sec. 2. Authorized investments. 
8 (a) Any public agency may invest any public funds as 
9follows:
10  (1) in bonds, notes, certificates of indebtedness, 
11 treasury bills or other securities now or hereafter 
12 issued, which are guaranteed by the full faith and credit 
13 of the United States of America as to principal and 
14 interest;
15  (2) in bonds, notes, debentures, or other similar 
16 obligations of the United States of America, its agencies, 
17 and its instrumentalities;
18  (3) in interest-bearing savings accounts, 
19 interest-bearing certificates of deposit or 
20 interest-bearing time deposits or any other investments 
21 constituting direct obligations of any bank as defined by 
22 the Illinois Banking Act;
23  (4) in short-term obligations of corporations 
 
 
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1 organized in the United States with assets exceeding 
2 $500,000,000 if (i) such obligations are rated at the time 
3 of purchase at one of the 3 highest classifications 
4 established by at least 2 standard rating services and 
5 which mature not later than 270 days from the date of 
6 purchase, (ii) such purchases do not exceed 10% of the 
7 corporation's outstanding obligations, and (iii) no more 
8 than one-third of the public agency's funds may be 
9 invested in short-term obligations of corporations under 
10 this paragraph (4);
11  (4.5) in obligations of corporations organized in the 
12 United States with assets exceeding $500,000,000 if (i) 
13 such obligations are rated at the time of purchase at one 
14 of the 3 highest classifications established by at least 2 
15 standard rating services and which mature more than 270 
16 days but less than 10 3 years from the date of purchase, 
17 (ii) such purchases do not exceed 10% of the corporation's 
18 outstanding obligations, and (iii) no more than one-third 
19 of the public agency's funds may be invested in 
20 obligations of corporations under this paragraph (4.5); or 
21  (5) in money market mutual funds registered under the 
22 Investment Company Act of 1940, provided that the 
23 portfolio of any such money market mutual fund is limited 
24 to obligations described in paragraph (1) or (2) of this 
25 subsection and to agreements to repurchase such 
26 obligations.
 
 
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1 (a-1) In addition to any other investments authorized 
2under this Act, a municipality, park district, forest preserve 
3district, conservation district, county, or other governmental 
4unit may invest its public funds in interest bearing bonds of 
5any county, township, city, village, incorporated town, 
6municipal corporation, or school district, of the State of 
7Illinois, of any other state, or of any political subdivision 
8or agency of the State of Illinois or of any other state, 
9whether the interest earned thereon is taxable or tax-exempt 
10under federal law. The bonds shall be registered in the name of 
11the municipality, park district, forest preserve district, 
12conservation district, county, or other governmental unit, or 
13held under a custodial agreement at a bank. The bonds shall be 
14rated at the time of purchase within the 4 highest general 
15classifications established by a rating service of nationally 
16recognized expertise in rating bonds of states and their 
17political subdivisions.
18 (b) Investments may be made only in banks which are 
19insured by the Federal Deposit Insurance Corporation. Any 
20public agency may invest any public funds in short term 
21discount obligations of the Federal National Mortgage 
22Association or in shares or other forms of securities legally 
23issuable by savings banks or savings and loan associations 
24incorporated under the laws of this State or any other state or 
25under the laws of the United States. Investments may be made 
26only in those savings banks or savings and loan associations 
 
 
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1the shares, or investment certificates of which are insured by 
2the Federal Deposit Insurance Corporation. Any such securities 
3may be purchased at the offering or market price thereof at the 
4time of such purchase. All such securities so purchased shall 
5mature or be redeemable on a date or dates prior to the time 
6when, in the judgment of such governing authority, the public 
7funds so invested will be required for expenditure by such 
8public agency or its governing authority. The expressed 
9judgment of any such governing authority as to the time when 
10any public funds will be required for expenditure or be 
11redeemable is final and conclusive. Any public agency may 
12invest any public funds in dividend-bearing share accounts, 
13share certificate accounts or class of share accounts of a 
14credit union chartered under the laws of this State or the laws 
15of the United States; provided, however, the principal office 
16of any such credit union must be located within the State of 
17Illinois. Investments may be made only in those credit unions 
18the accounts of which are insured by applicable law.
19 (c) For purposes of this Section, the term "agencies of 
20the United States of America" includes: (i) the federal land 
21banks, federal intermediate credit banks, banks for 
22cooperative, federal farm credit banks, or any other entity 
23authorized to issue debt obligations under the Farm Credit Act 
24of 1971 (12 U.S.C. 2001 et seq.) and Acts amendatory thereto; 
25(ii) the federal home loan banks and the federal home loan 
26mortgage corporation; and (iii) any other agency created by 
 
 
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1Act of Congress.
2 (d) Except for pecuniary interests permitted under 
3subsection (f) of Section 3-14-4 of the Illinois Municipal 
4Code or under Section 3.2 of the Public Officer Prohibited 
5Practices Act, no person acting as treasurer or financial 
6officer or who is employed in any similar capacity by or for a 
7public agency may do any of the following:
8  (1) have any interest, directly or indirectly, in any 
9 investments in which the agency is authorized to invest.
10  (2) have any interest, directly or indirectly, in the 
11 sellers, sponsors, or managers of those investments.
12  (3) receive, in any manner, compensation of any kind 
13 from any investments in which the agency is authorized to 
14 invest.
15 (e) Any public agency may also invest any public funds in a 
16Public Treasurers' Investment Pool created under Section 17 of 
17the State Treasurer Act. Any public agency may also invest any 
18public funds in a fund managed, operated, and administered by 
19a bank, subsidiary of a bank, or subsidiary of a bank holding 
20company or use the services of such an entity to hold and 
21invest or advise regarding the investment of any public funds.
22 (f) To the extent a public agency has custody of funds not 
23owned by it or another public agency and does not otherwise 
24have authority to invest such funds, the public agency may 
25invest such funds as if they were its own. Such funds must be 
26released to the appropriate person at the earliest reasonable 
 
 
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1time, but in no case exceeding 31 days, after the private 
2person becomes entitled to the receipt of them. All earnings 
3accruing on any investments or deposits made pursuant to the 
4provisions of this Act shall be credited to the public agency 
5by or for which such investments or deposits were made, except 
6as provided otherwise in Section 4.1 of the State Finance Act 
7or the Local Governmental Tax Collection Act, and except where 
8by specific statutory provisions such earnings are directed to 
9be credited to and paid to a particular fund.
10 (g) A public agency may purchase or invest in repurchase 
11agreements of government securities having the meaning set out 
12in the Government Securities Act of 1986, as now or hereafter 
13amended or succeeded, subject to the provisions of said Act 
14and the regulations issued thereunder. The government 
15securities, unless registered or inscribed in the name of the 
16public agency, shall be purchased through banks or trust 
17companies authorized to do business in the State of Illinois.
18 (h) Except for repurchase agreements of government 
19securities which are subject to the Government Securities Act 
20of 1986, as now or hereafter amended or succeeded, no public 
21agency may purchase or invest in instruments which constitute 
22repurchase agreements, and no financial institution may enter 
23into such an agreement with or on behalf of any public agency 
24unless the instrument and the transaction meet the following 
25requirements:
26  (1) The securities, unless registered or inscribed in 
 
 
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1 the name of the public agency, are purchased through banks 
2 or trust companies authorized to do business in the State 
3 of Illinois.
4  (2) An authorized public officer after ascertaining 
5 which firm will give the most favorable rate of interest, 
6 directs the custodial bank to "purchase" specified 
7 securities from a designated institution. The "custodial 
8 bank" is the bank or trust company, or agency of 
9 government, which acts for the public agency in connection 
10 with repurchase agreements involving the investment of 
11 funds by the public agency. The State Treasurer may act as 
12 custodial bank for public agencies executing repurchase 
13 agreements. To the extent the Treasurer acts in this 
14 capacity, he is hereby authorized to pass through to such 
15 public agencies any charges assessed by the Federal 
16 Reserve Bank.
17  (3) A custodial bank must be a member bank of the 
18 Federal Reserve System or maintain accounts with member 
19 banks. All transfers of book-entry securities must be 
20 accomplished on a Reserve Bank's computer records through 
21 a member bank of the Federal Reserve System. These 
22 securities must be credited to the public agency on the 
23 records of the custodial bank and the transaction must be 
24 confirmed in writing to the public agency by the custodial 
25 bank.
26  (4) Trading partners shall be limited to banks or 
 
 
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1 trust companies authorized to do business in the State of 
2 Illinois or to registered primary reporting dealers.
3  (5) The security interest must be perfected.
4  (6) The public agency enters into a written master 
5 repurchase agreement which outlines the basic 
6 responsibilities and liabilities of both buyer and seller.
7  (7) Agreements shall be for periods of 330 days or 
8 less.
9  (8) The authorized public officer of the public agency 
10 informs the custodial bank in writing of the maturity 
11 details of the repurchase agreement.
12  (9) The custodial bank must take delivery of and 
13 maintain the securities in its custody for the account of 
14 the public agency and confirm the transaction in writing 
15 to the public agency. The Custodial Undertaking shall 
16 provide that the custodian takes possession of the 
17 securities exclusively for the public agency; that the 
18 securities are free of any claims against the trading 
19 partner; and any claims by the custodian are subordinate 
20 to the public agency's claims to rights to those 
21 securities.
22  (10) The obligations purchased by a public agency may 
23 only be sold or presented for redemption or payment by the 
24 fiscal agent bank or trust company holding the obligations 
25 upon the written instruction of the public agency or 
26 officer authorized to make such investments.
 
 
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1  (11) The custodial bank shall be liable to the public 
2 agency for any monetary loss suffered by the public agency 
3 due to the failure of the custodial bank to take and 
4 maintain possession of such securities.
5 (i) Notwithstanding the foregoing restrictions on 
6investment in instruments constituting repurchase agreements 
7the Illinois Housing Development Authority may invest in, and 
8any financial institution with capital of at least 
9$250,000,000 may act as custodian for, instruments that 
10constitute repurchase agreements, provided that the Illinois 
11Housing Development Authority, in making each such investment, 
12complies with the safety and soundness guidelines for engaging 
13in repurchase transactions applicable to federally insured 
14banks, savings banks, savings and loan associations or other 
15depository institutions as set forth in the Federal Financial 
16Institutions Examination Council Policy Statement Regarding 
17Repurchase Agreements and any regulations issued, or which may 
18be issued by the supervisory federal authority pertaining 
19thereto and any amendments thereto; provided further that the 
20securities shall be either (i) direct general obligations of, 
21or obligations the payment of the principal of and/or interest 
22on which are unconditionally guaranteed by, the United States 
23of America or (ii) any obligations of any agency, corporation 
24or subsidiary thereof controlled or supervised by and acting 
25as an instrumentality of the United States Government pursuant 
26to authority granted by the Congress of the United States and 
 
 
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1provided further that the security interest must be perfected 
2by either the Illinois Housing Development Authority, its 
3custodian or its agent receiving possession of the securities 
4either physically or transferred through a nationally 
5recognized book entry system.
6 (j) In addition to all other investments authorized under 
7this Section, a community college district may invest public 
8funds in any mutual funds that invest primarily in corporate 
9investment grade or global government short term bonds. 
10Purchases of mutual funds that invest primarily in global 
11government short term bonds shall be limited to funds with 
12assets of at least $100 million and that are rated at the time 
13of purchase as one of the 10 highest classifications 
14established by a recognized rating service. The investments 
15shall be subject to approval by the local community college 
16board of trustees. Each community college board of trustees 
17shall develop a policy regarding the percentage of the 
18college's investment portfolio that can be invested in such 
19funds.
20 (k) In addition to all other investments authorized under 
21this Section, a public agency may adopt an ordinance or 
22resolution to allow for investment of public funds in other 
23instruments not specifically listed in this Section provided 
24that those investments comply with (i) any other law that 
25authorizes public agencies to invest funds and (ii) the 
26investment policy adopted by the public agency under Section 
 
 
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