S.L. 1979-467

NORTH CAROLINA GENERAL ASSEMBLY

1979 SESSION

CHAPTER 467

HOUSE BILL 962

AN ACT TO CONSOLIDATE AND RECODIFY THOSE PORTIONS OF THE GENERAL STATUTES CONCERNING THE STATE TREASURER'S INVESTMENT PROGRAMS.

The General Assembly of North Carolina enacts:

Section 1. G.S. 147-69.1 is rewritten to read as follows:

"§ 147-69.1. Investments authorized for General Fund and Highway Fund assets. — (a) The Governor and Council of State, with the advice and assistance of the State Treasurer, shall adopt such rules and regulations as shall be necessary and appropriate to implement the provisions of this section.

(b) This section applies to funds held by the State Treasurer to the credit of:

(1) the General Fund

(2) the Highway Fund.

(c) It shall be the duty of the State Treasurer to invest the cash of the funds enumerated in subsection (b) of this section in excess of the amount required to meet the current needs and demands on such funds, selecting from among the following:

(1) obligations of the United States or obligations fully guaranteed both as to principal and interest by the United States;

(2) obligations of the Federal Financing Bank, the Federal Farm Credit Bank, the Bank for Cooperatives, the Federal Intermediate Credit Bank, the Federal Land Banks, the Federal Home Loan Banks, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Government National Mortgage Association, the Federal Housing Administration, the Farmers Home Administration, the United States Postal Service, the Export-Import Bank, the International Bank for Reconstruction and Development, the Inter-American Development Bank, and the Asian Development Bank;

(3) obligations of the State of North Carolina;

(4) a. savings certificates issued by any savings and loan association organized under the laws of the State of North Carolina or by any federal savings and loan association having its principal office in North Carolina; provided that any principal amount of such certificate in excess of the amount insured by the federal government or any agency thereof, or by a mutual deposit guaranty association authorized by the Administrator of the Savings and Loan Division of the Department of Commerce of the State of North Carolina, be fully collateralized;

b. certificates of deposit issued by banks organized under the laws of the State of North Carolina, or by any national bank having its principal office in North Carolina; provided that any principal amount of such certificate in excess of the amount insured by the federal government or any agency thereof, be fully collateralized;

c. with respect to Savings Certificates and Certificates of Deposit, the rate of return or investment yield may not be less than that available in the market on United States government or agency obligations of comparable maturity.

(d) Unless otherwise provided by law, the interest or income received and accruing from all deposits or investments of such cash balances shall be paid into the State's General Fund, except that all interest or income received and accruing on the monthly balance of the Highway Fund shall be paid into the State Highway Fund. The cash balances of the several funds may be combined for deposit or investment purposes; and when such combined deposits or investments are made, the interest or income received and accruing from all deposits or investments shall be prorated among the funds in conformity with applicable law and the rules and regulations adopted by the Governor and Council of State.

(e) The State Treasurer shall cause to be prepared quarterly statements on or before the tenth day of January, April, July and October in each year, which shall show the amount of cash on hand, the amount of money on deposit, the name of each depository, and all investments for which he is in any way responsible. Each quarterly statement shall be delivered to the Governor and Council of State; and a copy shall be posted in the office of the State Treasurer for the information of the public."

Sec. 2. Chapter 147, Article 6, of the General Statutes is amended by inserting therein a new section as follows:

"§ 147-69.2. Investments authorized for special funds held by the State Treasurer. — (a) This section applies to funds held by the State Treasurer to the credit of:

(1) the Teachers' and State Employees' Retirement System,

(2) the Uniform Judicial Retirement System,

(3) the Uniform Solicitorial Retirement System,

(4) the Uniform Clerks of Superior Court Retirement System,

(5) the Teachers' and State Employees' Hospital and Medical Insurance Plan,

(6) the General Assembly Medical and Hospital Care Plan,

(7) the Disability Salary Continuation Plan,

(8) the Firemen's Pension Fund,

(9) the Local Governmental Employees' Retirement System,

(10) the Law Enforcement Officers' Benefit and Retirement Fund,

(11) the Escheat Fund,

(12) the Legislative Retirement Fund,

(13) the State Education Assistance Authority,

(14) the State Property Fire Insurance Fund,

(15) the Stock Workmen's Compensation Fund,

(16) the Mutual Workmen's Compensation Fund,

(17) the Public School Insurance Fund,

(18) the Liability Insurance Trust Fund,

(19) trust funds of The University of North Carolina and its constituent institutions deposited with the State Treasurer pursuant to G.S. 116-36.1, and

(20) any other special fund created by or pursuant to law for purposes other than meeting appropriations made pursuant to the Executive Budget Act.

(b) It shall be the duty of the State Treasurer to invest the cash of the funds enumerated in subsection (a) of this section in excess of the amount required to meet the current needs and demands on such funds, selecting from among the following:

(1) any of the investments authorized by G.S. 147-69.1(c);

(2) general obligations of other states of the United States;

(3) general obligations of cities, counties and special districts in North Carolina;

(4) obligations of any company incorporated within the United States if such obligations bear one of the three highest ratings of at least one nationally recognized rating service and do not bear a rating below the three highest by any nationally recognized rating service which rates the particular security;

(5) notes secured by mortgages insured by the Federal Housing Administration or guaranteed by the Veterans Administration on real estate located within the State of North Carolina;

(6) with respect to assets of the Teachers' and State Employees' Retirement System, the Uniform Judicial Retirement System, the Uniform Solicitorial Retirement System, the Uniform Clerks of Superior Court Retirement System, the Firemen's Pension Fund, the Local Governmental Employees' Retirement System, and the Law Enforcement Officers' Benefit and Retirement Fund (hereinafter referred to collectively as the Retirement Systems), preferred or common stocks issued by any company incorporated within the United States, provided:

a. that for a period of five fiscal years for which the necessary statistical data are available next preceding the date of investment, such corporation, as disclosed by its published fiscal annual statements, shall have had an average annual net income plus its average annual fixed charges (as herein used, fixed charges shall mean interest on funded or unfunded debt, contingent interest charges, amortization of debt discount and expense and rentals for leased property and, in the case of consolidated earnings statements of parent and subsidiary corporations, shall include all fixed charges and preferred dividend requirement, if any, of the subsidiaries) at least equal to one and one-half times the sum of its average annual dividend requirement for preferred stock and its average annual fixed charges for the same period; however, during neither of the last two years of such period shall the sum of its annual net income and its annual fixed charges have been less than one and one-half times the sum of its dividend requirements for preferred stock and its fixed charges for the same period;

b. that such corporation shall have no arrears of dividends on its preferred stock;

c. that such common stock is registered on a national securities exchange as provided in the Federal Securities Exchange Act, but such registration shall not be required of the following stocks:

1. the common stock of a bank which is a member of the Federal Deposit Insurance Corporation and has capital funds, represented by capital, surplus and undivided profits, of at least twenty million dollars ($20,000,000);

2. the common stock of a life insurance company which has capital funds represented by capital, special surplus funds and unassigned surplus, of at least fifty million dollars ($50,000,000);

3. the common stock of a fire or casualty insurance company, or a combination thereof, which has capital funds represented by capital, net surplus and voluntary reserves, of at least fifty million dollars ($50,000,000);

d. that the preferred stock of such corporation, if any be outstanding, shall qualify for investment under this section;

e. that such corporation, having no preferred stock outstanding, shall have had earnings for the five fiscal years next preceding the date of investment of at least twice the interest on all mortgages, bonds, debentures, and funded debts, if any, after deduction of the proper charges for replacements, depreciation, and obsolescence;

f. that such corporation shall have paid a cash dividend on its common stock in each year of the 10-year period next preceding the date of investment and the aggregate net earnings available for dividends on the common stock of such corporation for the whole of such period shall have been at least equal to the amount of such dividends paid;

g. that in applying the earnings test under this section to any issuing, assuming, or guaranteeing corporation, where such corporation shall have acquired its property or any substantial part thereof within a five-year period immediately preceding the date of investment by consolidation, merger, or by the purchase of all or a substantial portion of the property of any other corporation or corporations, or shall have acquired the assets of any unincorporated business enterprise by purchase of otherwise, net income, fixed charges and preferred dividends of the several predecessor or constituent corporations or enterprises shall be consolidated and adjusted so as to ascertain whether or not the applicable requirements of this section have been complied with;

h. that the total value of common and preferred stocks shall not exceed twenty-five per centum (25%) of the total value of all invested assets of the Retirement Systems; provided, further:

1. not more than one and one-half per centum (1 1/2%) of the total value of such assets shall be invested in the stock of a single corporation, and provided further;

2. the total number of shares in a single corporation shall not exceed eight per centum (8%) of the issued and outstanding stock of such corporation, and provided further;

3. as used in this subdivision h., value shall consist of the par value or unpaid balance of all unmatured or unpaid investments requiring the payment of a fixed amount at payment date and the cost price of all other investments.

(c) With respect to investments authorized by subsection (b)(6), the State Treasurer shall appoint an Equity Investment Advisory Committee, which shall consist of five members: the State Treasurer, who shall be chairman ex officio; two members selected from among the members of the boards of trustees of the Retirement Systems; and two members selected from the general public. The State Treasurer shall also appoint a Secretary of the Equity Investment Advisory Committee who need not be a member of the committee. Members of the committee shall receive for their services the same per diem and allowances granted to members of the State boards and commissions generally. The committee shall have advisory powers only and membership shall not be deemed a public office within the meaning of Article VI, Section 9 of the Constitution of North Carolina or G.S. 128-1.1."

Sec. 3. G.S. Chapter 147, Article 6, is amended by inserting therein a new section as follows:

"§ 147-69.3. Administration of State Treasurer's investment programs. — (a) The State Treasurer shall establish, maintain, administer, manage, and operate within the Department of State Treasurer one or more investment programs for the deposit and investment of assets pursuant to the provisions of G.S. 147-69.1 and G.S. 147-69.2.

(b) Any official, board, commission, or other public authority of the State having custody of any trust funds not required by law to be deposited with and invested by the State Treasurer may deposit all or any portion of such funds with the State Treasurer for investment in one of the investment programs established pursuant to this section, subject to any provisions of law with respect to eligible investments. In the absence of specific statutory provisions to the contrary, any such funds may be invested in accordance with the provisions of G.S. 147-69.2 and G.S. 147-69.3.

(c) The State Treasurer's investment programs shall be so managed that in the judgment of the State Treasurer funds may be readily converted into cash when needed.

(d) Except as provided by G.S. 147-69. 1(d), interest earned on investments shall be credited pro rata to the fund whose assets are invested according to such formula as may be prescribed by the State Treasurer with the approval of the Governor and Council of State.

(e) The State Treasurer shall have full powers as a fiduciary to hold, purchase, sell, assign, transfer, lend and dispose of any of the securities or investments in which any of the programs created pursuant to this section have been invested, and may re-invest the proceeds from the sale of such securities or investments and any other investable assets of the program.

(f) The cost of administration, management, and operation of investment programs established pursuant to this section shall be apportioned equitably among the programs in such manner as may be prescribed by the State Treasurer.

(g) The State Treasurer is authorized to retain the services of such independent appraisers, auditors, actuaries, attorneys, investment counseling firms, statisticians, custodians, or other persons or firms possessing specialized skills or knowledge as may be necessary for the proper administration of investment programs created pursuant to this section.

(h) The State Treasurer shall prepare, as of the end of each fiscal year, a report on the financial condition of each investment program created pursuant to this section. A copy of each report shall be submitted within 30 days following the end of the fiscal year to the official, institution, board, commission or other agency whose funds are invested, the State Auditor, and the Advisory Budget Commission.

(i) The State Treasurer's annual report to the General Assembly shall include a full and complete statement of all monies invested by virtue of the provisions of G.S. 147-69.1 and G.S. 147-69.2, the nature and character of investments therein, and the revenues derived therefrom.

(j) Subject to the provisions of G.S. 147-69.1(e), the State Treasurer shall adopt such rules and regulations as may be necessary to carry out the provisions of this section.

Sec. 4. The second sentence of the second unnumbered paragraph of G.S. 58-189 is rewritten to read as follows: "The State Treasurer shall be the custodian of the 'State Property Fire Insurance Fund' and shall invest its assets in accordance with the provisions of G.S. 147-69.2 and G.S. 147-69.3."

Sec. 5. G.S. 97-112 is rewritten to read as follows:

"§ 97-112. Separation of stock fund; disbursements; investments. — The stock fund created by this Article shall be separate and apart from any other funds so created and from all other State monies. The State Treasurer shall be the custodian of said fund; and all disbursements from said fund shall be made by the State Treasurer upon vouchers signed by the Commissioner as hereinafter provided. The State Treasurer shall invest the assets of the fund in accordance with the provisions of G.S. 147-69.2 and G.S. 147-69.3."

Sec. 6. G.S. 97-114 is amended by adding a new sentence to the end thereof as follows: "The State Treasurer shall be the custodian of the fund, and shall invest its assets in accordance with the provisions of G.S. 147-69.2 and G.S. 147-69.3."

Sec. 7. The last two sentences of the first paragraph of G.S. 115-135 are repealed and are replaced by the following: "The State Treasurer shall be the custodian of the fund and shall invest its assets in accordance with the provisions of G.S. 147-69.2 and G.S. 147-69.3."

Sec. 8. The third and fourth unnumbered paragraphs of G.S. 116-209 are repealed and the first sentence of the fifth unnumbered paragraph is rewritten to read as follows: "The State Treasurer shall be the custodian of the assets of the Authority and shall invest them in accordance with the provisions of G.S. 147-69.2 and G.S. 147-69.3."

Sec. 9. G.S. 116A-8(c) is rewritten to read as follows:

"(c) The State Treasurer shall be the custodian of the Escheats fund and shall invest its assets in accordance with the provisions of G.S. 147-69.2 and G.S. 147-69.3."

Sec. 10. G.S. 118-22 is rewritten to read as follows:

"§ 118-22. State Treasurer to be custodian of fund; appropriations; contributions to fund; expenditures. — The State Treasurer shall be the custodian of the North Carolina Firemen's Pension Fund and shall invest its assets in accordance with the provisions of G.S. 147-69.2 and G.S. 147-69.3. The appropriations made by the General Assembly out of the General Fund to provide money for administrative expenses shall be handled in the same manner as any other General Fund appropriation. One fourth of the appropriation made out of the General Fund to provide for the financing of the pension fund shall be transferred quarterly to a special fund to be known as the North Carolina Firemen's Pension Fund. There shall be set up in the State Treasurer's office a special fund to be known as the North Carolina Firemen's Pension Fund, and all contributions made by the members of this pension fund shall be deposited in said special fund. All expenditures for refunds, investments or benefits shall be in the same manner as expenditures of other special funds."

Sec. 11. Any other provisions of law to the contrary notwithstanding, the State Treasurer shall invest the assets of the Legislative Retirement Fund created by Chapter 1269 of the Session Laws of 1969, as amended by Chapter 905 of the Session Laws of 1971 and Chapter 1482 of the Session Laws of 1973, in accordance with the provisions of G.S. 147‑69.2 and G.S. 147-69.3.

Sec. 12. G.S. 128-29(a) is rewritten to read as follows:

"(a) Vested in board of trustees. The board of trustees shall be the trustee of the several funds created by this Article as provided in G.S. 128-30."

Sec. 13. The first sentence of G.S. 128-29(c) is rewritten to read as follows:

"The State Treasurer shall be the custodian of the several funds and shall invest their assets in accordance with the provisions of G.S. 147-69.2 and G.S. 147-69.3."

Sec. 14. G.S. 135-7(a) is rewritten to read as follows:

"(a) Vested in board of trustees. The board of trustees shall be the trustee of the several funds created by this Chapter as provided in G.S. 135-8."

Sec. 15. The first sentence of G.S. 135-7(c) is rewritten to read as follows:

"The State Treasurer shall be the custodian of the several funds and shall invest their assets in accordance with the provisions of G.S. 147-69.2 and G.S. 147-69.3."

Sec. 16. G.S. 135-7.1 is repealed.

Sec. 17. G.S. 135-7.2 is repealed.

Sec. 18. G.S. 135-66 is rewritten to read as follows:

"§ 135-66. Administration; management of funds. — The State Treasurer shall be the custodian of the assets of this Retirement System and shall invest them in accordance with the provisions of G.S. 147-69.2 and G.S. 147-69.3."

Sec. 19. G.S. 143-166(g) is rewritten to read as follows:

"(g) The board of commissioners of the said fund may take by gift, grant, devise, or bequest, any money, real or personal property, or other things of value and hold the same for the uses of said fund in accordance with the purposes of this Article. The State Treasurer shall be the custodian of the fund and shall invest its assets in accordance with the provisions of G.S. 147-69.2 and G.S. 147-69.3."

Sec. 20. Local ABC boards. G.S. 18A-17(16) is rewritten to read as follows:

"To invest any funds temporarily held in any form of investment allowed by law to the State Treasurer under G.S. 147-69.1, except that no such investments authorized herein shall be for periods of more than 90 days."

Sec. 21. Powers of a personal representative or fiduciary. G.S. 28A-13-3(6) is rewritten to read as follows:

"To make, as a fiduciary, any form of investment allowed by law to the State Treasurer under G.S. 147-69.1, with funds of the estate, when such are not needed to meet debts and expenses immediately payable and are not immediately distributable, including money received from the sale of other assets; or to enter into other short-term loan arrangements that may be appropriate for use by trustees or beneficiaries generally."

Sec. 22. Veterans' guardianship. G.S. 34-13(4) and (5) are rewritten and combined into a new paragraph (4) as follows:

"(4) any form of investment allowed by law to the State Treasurer under G.S. 147-69.1."

Sec. 23. Credit Union investments. G.S. 54-109.82(9) is rewritten to read as follows:

"In any form of investment allowed by law to the State Treasurer under G.S. 147-69.1."

Sec. 24. This act shall be effective upon ratification.

In the General Assembly read three times and ratified, this the 26th day of April, 1979.