Bill Text For HB2871 - Senate Floor Version

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  |                           March 24, 2021                              |
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 3|ENGROSSED HOUSE                                                        |
  |BILL NO. 2871                        By: Wallace of the House          |
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  |                                         Thompson of the Senate        |
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 8|       An Act relating to Commissioners of the Land Office;            |
  |       amending 64 O.S. 2011, Section 1013, as last amended            |
 9|       by Section 1, Chapter 8, O.S.L. 2020 (64 O.S. Supp.             |
  |       2020, Section 1013), which relates to investment of             |
10|       the permanent school funds; clarifying that                     |
  |       calculation of certain cap on certain investment does           |
11|       not include certain real property; providing an                 |
  |       effective date; and declaring an emergency.                     |
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14|BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:                  |
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15|    SECTION 1.     AMENDATORY     64 O.S. 2011, Section 1013, as       |
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16|last amended by Section 1, Chapter 8, O.S.L. 2020 (64 O.S. Supp.       |
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17|2020, Section 1013), is amended to read as follows:                    |
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18|    Section 1013.  A.  The Commissioners of the Land Office shall be   |
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19|responsible for the investment of the permanent school funds, other    |
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20|educational funds and public building funds solely in the best         |
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21|interests of the current and future beneficiaries.  The                |
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22|Commissioners of the Land Office shall make investments:               |
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23|    1.  For the exclusive purpose of:                                  |
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 1|         a.   providing maximum benefits to current and future         |
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 2|              beneficiaries, and                                       |
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 3|         b.   defraying reasonable expenses of administering the       |
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 4|              trust funds;                                             |
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 5|    2.  With the care, skill, prudence and diligence under the         |
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 6|circumstances then prevailing that a prudent person acting in a like   |
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 7|enterprise of a like character and with like aims would use; and       |
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 8|    3.  By diversifying the investments of the trust funds so as to    |
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 9|minimize the risk of large losses.                                     |
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10|    B.  The permanent school fund and other educational funds may      |
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11|only be invested in bonds issued in the United States, United States   |
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12|dollar denominated or other investments settled in United States       |
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13|dollars or traded on the United States exchange markets and real       |
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14|property to be owned or acquired by the Commissioners of the Land      |
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15|Office.  The Commissioners of the Land Office shall not invest more    |
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16|than sixty percent (60%) of the trust fund investments in equity       |
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17|securities.  The Commissioners of the Land Office are further          |
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18|authorized to acquire, purchase, exchange and grant any real           |
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19|property under its jurisdiction as is necessary to carry out the       |
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20|investment in the real property.  The Commissioners of the Land        |
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21|Office shall not invest more than five percent (5%) of the total       |
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22|value of the assets of the permanent school funds in connection with   |
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23|investments in real property.  The calculation of investments in       |
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24|real property within the cap of five percent (5%) shall not include    |
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 1|the value of real property under long-term lease to the State of       |
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 2|Oklahoma, agencies of the state or subdivisions thereof.  In no case   |
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 3|shall the Commissioners of the Land Office bid against                 |
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 4|private-sector bidders above the appraised value of any property to    |
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 5|be acquired.                                                           |
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 6|    C.  The Commissioners shall establish an investment committee.     |
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 7|The investment committee shall be composed of not more than three      |
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 8|members of the Commissioners of the Land Office or their designees.    |
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 9|The committee shall make recommendations to the Commissioners of the   |
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10|Land Office on all matters related to the choice of managers of the    |
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11|assets of the funds, on the establishment of investment and fund       |
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12|management guidelines, and in planning future investment policy.       |
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13|The committee shall have no authority to act on behalf of the          |
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14|Commissioners of the Land Office in any circumstances whatsoever.      |
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15|No recommendations of the committee shall have effect as an action     |
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16|of the Commissioners of the Land Office or take effect without the     |
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17|approval of the Commissioners as provided by law.  The Commissioners   |
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18|shall promulgate and adopt on an annual basis an investment plan.      |
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19|The investment plan shall state the criteria for selecting             |
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20|investment managers, the allocation of assets among investment         |
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21|managers, and established standards of investment and fund             |
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22|management.                                                            |
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23|    D.  The Commissioners shall retain qualified investment managers   |
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24|to provide for investment of the fund monies and for the management    |
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 1|of investment real property pursuant to the investment plan.           |
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 2|Investment managers shall be chosen by a solicitation of proposals     |
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 3|on a competitive bid basis pursuant to standards set by the            |
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 4|Commissioners.  Subject to the investment plan, each investment        |
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 5|manager shall have full discretion in the management of the funds or   |
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 6|investment real property allocated to said the investment managers.    |
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 7|The funds allocated to investment managers shall be actively managed   |
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 8|by them, which may include selling investments and realizing losses    |
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 9|if the action is considered advantageous to longer term return         |
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10|maximization.  Because of the total return objective, no distinction   |
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11|shall be made for management and performance evaluation purposes       |
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12|between realized and unrealized capital gains and losses.              |
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13|    E.  The Commissioners shall take any measures they deem            |
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14|appropriate to safeguard custody of securities and other assets of     |
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15|the trusts.                                                            |
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16|    F.  By September 1 of each year, the Commissioners shall develop   |
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17|a written investment plan for the trust funds.                         |
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18|    G.  The Commissioners shall compile a quarterly financial report   |
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19|showing the performance of all the combined funds under their          |
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20|control on a fiscal year basis.  The report shall contain a list of    |
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21|all investments made by the Commissioners and a list of any            |
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22|commissions, fees or payments made for services regarding the          |
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23|investments for that reporting period.  The report shall be based on   |
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24|market values and shall be compiled pursuant to uniform reporting      |
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 1|standards prescribed by the Oklahoma State Pension Commission for      |
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 2|all state retirement systems.  The report shall be distributed to      |
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 3|the Oklahoma State Pension Commission, the Cash Management and         |
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 4|Investment Oversight Commission, and the Legislative Service Bureau.   |
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 5|    H.  Before January 1 of each year, the Commissioners shall         |
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 6|publish an annual report of all Trust operations, presented in a       |
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 7|simple and easily understood manner to the extent possible.  The       |
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 8|report shall be submitted to the Governor, the Speaker of the House    |
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 9|of Representatives, the President Pro Tempore of the Senate, the       |
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10|State Department of Education and each higher education beneficiary.   |
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11| The annual report shall cover the operation of the Trusts during      |
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12|the past fiscal year, including income, disbursements and the          |
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13|financial condition of the Trusts at the end of each fiscal year on    |
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14|a cash basis.  The annual report shall also contain a summary of the   |
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15|assets of each trust and current market value as of the report date.   |
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16|    I.  The Cash Management and Investment Oversight Commission        |
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17|shall review reports prepared by the Commissioners of the Land         |
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18|Office pursuant to this subsection and shall make recommendations      |
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19|regarding the investment strategies and practices, the development     |
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20|of internal auditing procedures and practices and any other matters    |
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21|as determined necessary and applicable.                                |
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22|    J.  The Commissioners of the Land Office shall select one          |
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23|custodial bank to settle transactions involving the investment of      |
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24|the funds under the control of the Commissioners of the Land Office.   |
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 1| The Commissioners of the Land Office shall review the performance     |
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 2|of the custodial bank at least once every year.  The Commissioners     |
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 3|of the Land Office shall require a written competitive bid every       |
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 4|five (5) years.  The custodial bank shall have a minimum of Five       |
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 5|Hundred Million Dollars ($500,000,000.00) in assets to be eligible     |
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 6|for selection.  Any out-of-state custodial bank shall have a service   |
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 7|agent in the State of Oklahoma so that service of summons or legal     |
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 8|notice may be had on the designated agent, and the bank shall submit   |
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 9|to the jurisdiction of Oklahoma state courts for resolution of any     |
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10|and all disputes.  In order to be eligible for selection, the          |
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11|custodial bank shall allow electronic access to all transaction and    |
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12|portfolio reports maintained by the custodial bank involving the       |
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13|investment of state funds under control of the Commissioners of the    |
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14|Land Office and to the Cash Management and Investment Oversight        |
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15|Commission.  The requirement for electronic access shall be            |
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16|incorporated into any contract between the Commissioners of the Land   |
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17|Office and the custodial bank.  Neither the Commissioners of the       |
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18|Land Office nor the custodial bank shall permit any of the funds       |
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19|under the control of the Commissioners of the Land Office or any of    |
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20|the documents, instruments, securities or other evidence of a right    |
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21|to be paid money to be located in any place other than within a        |
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22|jurisdiction or territory under the control or regulatory power of     |
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23|the United States government.                                          |
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24|    SECTION 2.  This act shall become effective July 1, 2021.          |
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arsid4867561 SENATE FLOOR VERSION - HB2871 SFLR                    Page 6
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 1|    SECTION 3.  It being immediately necessary for the preservation    |
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 2|of the public peace, health or safety, an emergency is hereby          |
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 3|declared to exist, by reason whereof this act shall take effect and    |
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 4|be in full force from and after its passage and approval.              |
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 5|COMMITTEE REPORT BY: COMMITTEE ON APPROPRIATIONS                       |
  |March 24, 2021 - DO PASS                                               |
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