NOTE:  As provided in LFC policy, this report is intended only for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used for other purposes.

 

The most recent FIR version (in HTML & Adobe PDF formats) is available on the Legislative Website.  The Adobe PDF version includes all attachments, whereas the HTML version does not.  Previously issued FIRs and attachments may be obtained from the LFC in Suite 101 of the State Capitol Building North.

 

F I S C A L   I M P A C T   R E P O R T

 

SPONSOR:

Jennings

 

DATE TYPED:

02/09/03

 

HB

 

 

SHORT TITLE:

Local Government Investments

 

SB

41/aSFC

 

 

ANALYST:

Gilbert

 

APPROPRIATION

 

Appropriation Contained

Estimated Additional Impact

Recurring

or Non-Rec

Fund

Affected

FY03

FY04

FY03

FY04

 

 

 

NFI

 

 

 

 

(Parenthesis ( ) Indicate Expenditure Decreases)

 

SOURCES OF INFORMATION

 

LFC Files

 

SUMMARY

 

     Synopsis of SFC Amendment

 

The Senate Finance Committee amendment to Senate Bill 41 strikes general language allowing county or municipal treasurers to invest in agencies sponsored by the United States government, and instead lists the “sponsored” agencies as outlined below:

 

The Federal Home Loan Mortgage Association

The Federal National Mortgage Association

The Federal Farm Credit Bank

The Student Loan Marketing Association

 

     Synopsis of Original Bill

 

Senate Bill 41 amends NMSA 1978, § 6-10-10, Section 1(F)(2) to clarify that county or municipal treasurers may invest in securities issued by the United States government or by its agencies or instrumentalities and that are either direct obligations of the United States or are backed by the full faith and credit of the United States government or agencies guaranteed sponsored by the United States government.

 

     Significant Issues

 

Allowing counties and municipalities to investment in securities of agencies sponsored by the United States Government versus guaranteed by the United States Government will significantly increase their investment options.  For example, this bill would allow the purchase of Federal Home Loan Bank bonds.

 

OTHER SUBSTANTIVE ISSUES

 

Although the United States Government does not guarantee the new investment options allowed by this bill, they are all AA or AAA rated securities. Although these securities are quite sound, counties and municipalities will be accepting slightly more credit risk. However, they will also be gaining the flexibility to obtain higher investment yields.

 

RLG/nw