State of Illinois
2021 and 2022


Introduced 2/19/2021, by Sen. Donald P. DeWitte


30 ILCS 235/2  from Ch. 85, par. 902

    Amends the Public Funds Investment Act. Authorizes public agencies to invest public funds in obligations of corporations organized in the United States with assets exceeding $500,000,000 if, among other requirements, no more than two-thirds (currently, one-third) of the public agency's funds are invested in obligations of corporations. Effective immediately.

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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
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 obligations of corporations organized in the



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1    United States with assets exceeding $500,000,000 if (i)
2    such obligations are rated at the time of purchase at one
3    of the 3 highest classifications established by at least 2
4    standard rating services and which mature not later than 3
5    years from the date of purchase, (ii) such purchases do
6    not exceed 10% of the corporation's outstanding
7    obligations and (iii) no more than two-thirds one-third of
8    the public agency's funds may be invested in short term
9    obligations of corporations; or
10        (5) in money market mutual funds registered under the
11    Investment Company Act of 1940, provided that the
12    portfolio of any such money market mutual fund is limited
13    to obligations described in paragraph (1) or (2) of this
14    subsection and to agreements to repurchase such
15    obligations.
16    (a-1) In addition to any other investments authorized
17under this Act, a municipality, park district, forest preserve
18district, conservation district, county, or other governmental
19unit may invest its public funds in interest bearing bonds of
20any county, township, city, village, incorporated town,
21municipal corporation, or school district, of the State of
22Illinois, of any other state, or of any political subdivision
23or agency of the State of Illinois or of any other state,
24whether the interest earned thereon is taxable or tax-exempt
25under federal law. The bonds shall be registered in the name of
26the municipality, park district, forest preserve district,



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1conservation district, county, or other governmental unit, or
2held under a custodial agreement at a bank. The bonds shall be
3rated at the time of purchase within the 4 highest general
4classifications established by a rating service of nationally
5recognized expertise in rating bonds of states and their
6political subdivisions.
7    (b) Investments may be made only in banks which are
8insured by the Federal Deposit Insurance Corporation. Any
9public agency may invest any public funds in short term
10discount obligations of the Federal National Mortgage
11Association or in shares or other forms of securities legally
12issuable by savings banks or savings and loan associations
13incorporated under the laws of this State or any other state or
14under the laws of the United States. Investments may be made
15only in those savings banks or savings and loan associations
16the shares, or investment certificates of which are insured by
17the Federal Deposit Insurance Corporation. Any such securities
18may be purchased at the offering or market price thereof at the
19time of such purchase. All such securities so purchased shall
20mature or be redeemable on a date or dates prior to the time
21when, in the judgment of such governing authority, the public
22funds so invested will be required for expenditure by such
23public agency or its governing authority. The expressed
24judgment of any such governing authority as to the time when
25any public funds will be required for expenditure or be
26redeemable is final and conclusive. Any public agency may



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1invest any public funds in dividend-bearing share accounts,
2share certificate accounts or class of share accounts of a
3credit union chartered under the laws of this State or the laws
4of the United States; provided, however, the principal office
5of any such credit union must be located within the State of
6Illinois. Investments may be made only in those credit unions
7the accounts of which are insured by applicable law.
8    (c) For purposes of this Section, the term "agencies of
9the United States of America" includes: (i) the federal land
10banks, federal intermediate credit banks, banks for
11cooperative, federal farm credit banks, or any other entity
12authorized to issue debt obligations under the Farm Credit Act
13of 1971 (12 U.S.C. 2001 et seq.) and Acts amendatory thereto;
14(ii) the federal home loan banks and the federal home loan
15mortgage corporation; and (iii) any other agency created by
16Act of Congress.
17    (d) Except for pecuniary interests permitted under
18subsection (f) of Section 3-14-4 of the Illinois Municipal
19Code or under Section 3.2 of the Public Officer Prohibited
20Practices Act, no person acting as treasurer or financial
21officer or who is employed in any similar capacity by or for a
22public agency may do any of the following:
23        (1) have any interest, directly or indirectly, in any
24    investments in which the agency is authorized to invest.
25        (2) have any interest, directly or indirectly, in the
26    sellers, sponsors, or managers of those investments.



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1        (3) receive, in any manner, compensation of any kind
2    from any investments in which the agency is authorized to
3    invest.
4    (e) Any public agency may also invest any public funds in a
5Public Treasurers' Investment Pool created under Section 17 of
6the State Treasurer Act. Any public agency may also invest any
7public funds in a fund managed, operated, and administered by
8a bank, subsidiary of a bank, or subsidiary of a bank holding
9company or use the services of such an entity to hold and
10invest or advise regarding the investment of any public funds.
11    (f) To the extent a public agency has custody of funds not
12owned by it or another public agency and does not otherwise
13have authority to invest such funds, the public agency may
14invest such funds as if they were its own. Such funds must be
15released to the appropriate person at the earliest reasonable
16time, but in no case exceeding 31 days, after the private
17person becomes entitled to the receipt of them. All earnings
18accruing on any investments or deposits made pursuant to the
19provisions of this Act shall be credited to the public agency
20by or for which such investments or deposits were made, except
21as provided otherwise in Section 4.1 of the State Finance Act
22or the Local Governmental Tax Collection Act, and except where
23by specific statutory provisions such earnings are directed to
24be credited to and paid to a particular fund.
25    (g) A public agency may purchase or invest in repurchase
26agreements of government securities having the meaning set out



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1in the Government Securities Act of 1986, as now or hereafter
2amended or succeeded, subject to the provisions of said Act
3and the regulations issued thereunder. The government
4securities, unless registered or inscribed in the name of the
5public agency, shall be purchased through banks or trust
6companies authorized to do business in the State of Illinois.
7    (h) Except for repurchase agreements of government
8securities which are subject to the Government Securities Act
9of 1986, as now or hereafter amended or succeeded, no public
10agency may purchase or invest in instruments which constitute
11repurchase agreements, and no financial institution may enter
12into such an agreement with or on behalf of any public agency
13unless the instrument and the transaction meet the following
15        (1) The securities, unless registered or inscribed in
16    the name of the public agency, are purchased through banks
17    or trust companies authorized to do business in the State
18    of Illinois.
19        (2) An authorized public officer after ascertaining
20    which firm will give the most favorable rate of interest,
21    directs the custodial bank to "purchase" specified
22    securities from a designated institution. The "custodial
23    bank" is the bank or trust company, or agency of
24    government, which acts for the public agency in connection
25    with repurchase agreements involving the investment of
26    funds by the public agency. The State Treasurer may act as



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1    custodial bank for public agencies executing repurchase
2    agreements. To the extent the Treasurer acts in this
3    capacity, he is hereby authorized to pass through to such
4    public agencies any charges assessed by the Federal
5    Reserve Bank.
6        (3) A custodial bank must be a member bank of the
7    Federal Reserve System or maintain accounts with member
8    banks. All transfers of book-entry securities must be
9    accomplished on a Reserve Bank's computer records through
10    a member bank of the Federal Reserve System. These
11    securities must be credited to the public agency on the
12    records of the custodial bank and the transaction must be
13    confirmed in writing to the public agency by the custodial
14    bank.
15        (4) Trading partners shall be limited to banks or
16    trust companies authorized to do business in the State of
17    Illinois or to registered primary reporting dealers.
18        (5) The security interest must be perfected.
19        (6) The public agency enters into a written master
20    repurchase agreement which outlines the basic
21    responsibilities and liabilities of both buyer and seller.
22        (7) Agreements shall be for periods of 330 days or
23    less.
24        (8) The authorized public officer of the public agency
25    informs the custodial bank in writing of the maturity
26    details of the repurchase agreement.



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1        (9) The custodial bank must take delivery of and
2    maintain the securities in its custody for the account of
3    the public agency and confirm the transaction in writing
4    to the public agency. The Custodial Undertaking shall
5    provide that the custodian takes possession of the
6    securities exclusively for the public agency; that the
7    securities are free of any claims against the trading
8    partner; and any claims by the custodian are subordinate
9    to the public agency's claims to rights to those
10    securities.
11        (10) The obligations purchased by a public agency may
12    only be sold or presented for redemption or payment by the
13    fiscal agent bank or trust company holding the obligations
14    upon the written instruction of the public agency or
15    officer authorized to make such investments.
16        (11) The custodial bank shall be liable to the public
17    agency for any monetary loss suffered by the public agency
18    due to the failure of the custodial bank to take and
19    maintain possession of such securities.
20    (i) Notwithstanding the foregoing restrictions on
21investment in instruments constituting repurchase agreements
22the Illinois Housing Development Authority may invest in, and
23any financial institution with capital of at least
24$250,000,000 may act as custodian for, instruments that
25constitute repurchase agreements, provided that the Illinois
26Housing Development Authority, in making each such investment,



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1complies with the safety and soundness guidelines for engaging
2in repurchase transactions applicable to federally insured
3banks, savings banks, savings and loan associations or other
4depository institutions as set forth in the Federal Financial
5Institutions Examination Council Policy Statement Regarding
6Repurchase Agreements and any regulations issued, or which may
7be issued by the supervisory federal authority pertaining
8thereto and any amendments thereto; provided further that the
9securities shall be either (i) direct general obligations of,
10or obligations the payment of the principal of and/or interest
11on which are unconditionally guaranteed by, the United States
12of America or (ii) any obligations of any agency, corporation
13or subsidiary thereof controlled or supervised by and acting
14as an instrumentality of the United States Government pursuant
15to authority granted by the Congress of the United States and
16provided further that the security interest must be perfected
17by either the Illinois Housing Development Authority, its
18custodian or its agent receiving possession of the securities
19either physically or transferred through a nationally
20recognized book entry system.
21    (j) In addition to all other investments authorized under
22this Section, a community college district may invest public
23funds in any mutual funds that invest primarily in corporate
24investment grade or global government short term bonds.
25Purchases of mutual funds that invest primarily in global
26government short term bonds shall be limited to funds with



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1assets of at least $100 million and that are rated at the time
2of purchase as one of the 10 highest classifications
3established by a recognized rating service. The investments
4shall be subject to approval by the local community college
5board of trustees. Each community college board of trustees
6shall develop a policy regarding the percentage of the
7college's investment portfolio that can be invested in such
9    Nothing in this Section shall be construed to authorize an
10intergovernmental risk management entity to accept the deposit
11of public funds except for risk management purposes.
12(Source: P.A. 100-752, eff. 8-10-18.)
13    Section 99. Effective date. This Act takes effect upon
14becoming law.