SB0009

SENATE BILL 9

51st legislature - STATE OF NEW MEXICO - first session, 2013

INTRODUCED BY

Steven P. Neville

FOR THE INVESTMENTS AND PENSIONS OVERSIGHT COMMITTEE

AN ACT

RELATING TO PUBLIC FINANCES; CHANGING THE MEMBERSHIP, POWERS AND DUTIES OF THE STATE INVESTMENT COUNCIL; PROVIDING ELIGIBILITY REQUIREMENTS FOR CERTAIN MEMBERS; CHANGING MEETING FREQUENCY AND NOTICE REQUIREMENTS; PROVIDING FOR THE ELECTION OF THE CHAIR AND VICE CHAIR OF THE COUNCIL; EXTENDING REPORTING DEADLINES; AUTHORIZING THE COUNCIL TO INVEST FUNDS FOR THE SMALL BUSINESS INVESTMENT CORPORATION.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1. Section 6-8-2 NMSA 1978 (being Laws 1957, Chapter 179, Section 2, as amended) is amended to read:

"6-8-2. STATE INVESTMENT COUNCIL.--

A. There is created a "state investment council". The council shall be composed of:

(1) the [governor] secretary;

(2) a member appointed by the state treasurer with the advice and consent of the senate;

(3) a member appointed by the commissioner of public lands with the advice and consent of the senate;

[(4) the secretary;

(5) the chief financial officer of a state institution of higher education appointed by the governor with the advice and consent of the senate;

(6) four members appointed by the New Mexico legislative council with the advice and consent of the senate; provided that no more than two members shall be members of the same political party;]

(4) one public member appointed by the president pro tempore of the senate with the advice and consent of the senate;

(5) one public member appointed by the minority floor leader of the senate with the advice and consent of the senate;

(6) one public member appointed by the speaker of the house of representatives with the advice and consent of the senate;

(7) one public member appointed by the minority floor leader of the house of representatives with the advice and consent of the senate; and

[(7) two] (8) four members appointed by the governor with the advice and consent of the senate; provided that no more than two members shall be members of the same political party.

B. The chair [of the council shall be the governor] and the vice chair of the council shall be selected by the council from among the members appointed pursuant to Paragraphs (2) through (8) of Subsection A of this section for terms of two years; provided that the chair and the vice chair shall serve staggered terms and shall serve no more than two consecutive terms and the vice chair elected in 2012 shall serve a one-year term to allow for staggered terms.

C. All actions of the council shall be by majority vote, and a majority of the members shall constitute a quorum.

[C.] D. Members of the council appointed pursuant to Paragraphs [(6) and (7)] (2) through (8) of Subsection A of this section [shall be reimbursed] are entitled to receive per diem and mileage pursuant to the provisions of the Per Diem and Mileage Act."

SECTION 2. Section 6-8-3 NMSA 1978 (being Laws 1957, Chapter 179, Section 3, as amended) is amended to read:

"6-8-3. COUNCIL TERMS AND QUALIFICATIONS.--

A. Members of the council appointed pursuant to Paragraphs [(6) and (7)] (2) through (8) of Subsection A of Section 6-8-2 NMSA 1978 [with the advice and consent of the senate] shall serve for staggered terms of five years. Members of the council shall serve until their successors are appointed and have qualified.

B. The members of the council appointed pursuant to Paragraphs [(6) and (7)] (2) through (8) of Subsection A of Section 6-8-2 NMSA 1978 shall:

(1) be qualified by competence and no less than ten [years] years' experience in the field of investment [or finance] management, investment accounting, investment risk management or governance in public or private entities;

(2) be citizens of the United States and residents of New Mexico; and

(3) not be eligible for membership on the council if convicted of a felony or of a misdemeanor involving moral turpitude.

C. A member of the council shall not have had any contracts to do business with the state investment council, the investment office, the office of the state treasurer, the educational retirement board, the public employees retirement association, the New Mexico finance authority or the state board of finance for a period of two calendar years prior to the person's appointment to the council and shall not enter into any contracts to do business with any of the named state agencies or instrumentalities for a period of two calendar years after the end of the term for which the member was appointed. Members of the council and officers and employees of the council shall be governed by the provisions of the Governmental Conduct Act. Nothing in this section or in the Governmental Conduct Act shall be construed as prohibiting an officer of a financial institution from participating as a member of the council in setting general policies of the council, nor shall any provision of the Governmental Conduct Act prohibit the council or the state treasurer from depositing funds under the jurisdiction of the council in any financial institution. A council member shall not hold an office or employment in a political party.

[C. The member appointed pursuant to Paragraph (5) of Subsection A of Section 6-8-2 NMSA 1978 shall serve at the pleasure of the governor.]

D. A member of the council appointed pursuant to Paragraphs [(6) and (7)] (2) through (8) of Subsection A of Section 6-8-2 NMSA 1978 may be removed from the council by the appointing person or entity, for failure to attend three consecutive meetings or other cause, in the manner provided for removal of members of boards of regents under Article 12, Section 13 of the constitution of New Mexico. A vacancy in the membership of the council occurring other than by expiration of term shall be filled in the same manner as the original appointment but for the unexpired term only."

SECTION 3. Section 6-8-4 NMSA 1978 (being Laws 1957, Chapter 179, Section 4, as amended) is amended to read:

"6-8-4. INVESTMENT OFFICE--STATE INVESTMENT OFFICER--TERMS.--

A. There is established an "investment office". The chief administrative officer of the office shall be known as the "state investment officer".

B. The state investment officer shall be appointed by the council with the advice and consent of the senate. The state investment officer shall devote the officer's entire time and attention to the duties of that office and shall not engage in any other occupation or profession or hold any other public office, appointive or elective. The state investment officer shall be a person qualified, by training and investment experience, to direct the work of the investment office and shall have had at least five years' professional experience as an investment officer. The state investment officer shall receive a salary to be determined by the [state investment] council [but in no case less than fifty thousand dollars ($50,000) annually].

C. The state investment officer shall serve for an initial term of two years beginning July 1, 1981 and thereafter for terms of four years. The state investment officer may be removed from office by the council for cause."

SECTION 4. Section 6-8-5 NMSA 1978 (being Laws 1957, Chapter 179, Section 5, as amended) is amended to read:

"6-8-5. BOND--STAFF--BUDGET.--

A. Before the state investment officer or other responsible employee of the investment office enters upon [his] the officer's or employee's duties, the secretary shall require an individual bond or include the state investment officer and other responsible employees under a blanket bond for an amount and for a coverage deemed best to protect the state's interest. The bond premiums shall be paid by the state.

B. The state investment officer shall annually prepare a budget for administering and investing all funds managed by the investment office, which shall be reviewed by the council. Any funds provided for the operating budget of the investment office shall be appropriated from the assets of the land grant permanent funds, the severance tax permanent fund, funds available for investment pursuant to Subsection [G] I of Section 6-8-7 NMSA 1978 or any other funds managed by the investment office, as authorized by law; however, in regard to the land grant permanent funds, appropriation shall be made from earnings on investments of the land grant permanent funds before distribution to the income funds during the period prior to the date the United States congress consents to the provisions of Constitutional Amendment 1 approved at the 1996 general election.

C. Amounts budgeted or appropriated from the land grant permanent funds and the severance tax permanent fund for the costs of administering and investing those funds shall be in addition to the amounts distributed to the beneficiaries of the land grant permanent funds and to the general fund from the severance tax permanent fund as provided by law; provided that amounts budgeted or appropriated from the land grant permanent funds shall be made from earnings on investments of the funds before distribution to the income funds during the period prior to the date the United States congress consents to the provisions of Constitutional Amendment 1 approved at the 1996 general election.

D. The state investment officer shall appoint all employees of the investment office."

SECTION 5. Section 6-8-7 NMSA 1978 (being Laws 1957, Chapter 179, Section 7, as amended) is amended to read:

"6-8-7. POWERS AND DUTIES OF THE STATE INVESTMENT COUNCIL AND STATE INVESTMENT OFFICER--INVESTMENT POLICY--INVESTMENT MANAGERS.--

A. Subject to the limitations, conditions and restrictions contained in policymaking regulations or resolutions adopted by the council, the council may make purchases, sales, exchanges, investments and reinvestments of the assets of all funds in accordance with the Uniform Prudent Investor Act. The state investment officer and the council are trustees of all funds under their control and shall see that money invested is at all times handled in the best interests of the state. The council may delegate administrative and investment-related functions to the state investment officer.

B. The state investment officer shall formulate and recommend to the council for approval investment [regulations or resolutions] policies pertaining to the kind or nature of investments and limitations, conditions and restrictions upon the methods, practices or procedures for investment, reinvestment, purchase, sale or exchange transactions that should govern the activities of the investment office.

C. The council shall meet [at least once each month, and as often as exigencies may demand] no fewer than ten times annually and at the call of the chair or when three members request a meeting in writing, to consult with the state investment officer concerning the work of the investment office. The council shall have access to all files and records of the investment office and shall require the state investment officer to report on and provide information necessary to the performance of council functions. The council may hire one or more investment management or consulting firms to advise the council with respect to the council's [overall investment plan for the investment of all funds managed by the investment office] investments and pay reasonable compensation for such advisory services from the assets of the applicable funds, subject to budgeting and appropriation by the legislature. The terms of any such investment management services contract shall incorporate the statutory requirements for investment of funds under the council's jurisdiction.

D. The council shall provide an opportunity for public comment at meetings of the council. Advance notice of meetings shall be published on the council's web site [and in a newspaper of general circulation] at least ten days in advance of the meeting.

E. All funds managed by the [state investment officer] council shall be managed in accordance with the Uniform Prudent Investor Act. [The council may employ investment management services to invest the funds and may pay reasonable compensation for investment management services from the assets of the applicable funds, subject to budgeting and appropriation by the legislature.]

F. The council, the state investment officer, any person providing investment advice to the council [or], state investment officer or investment office staff for a fee or other compensation and all persons exercising discretionary authority or control of funds under the management of the council are fiduciaries.

G. The council may contract for legal services for litigation on a contingent or partly contingent fee basis, subject to an expedited solicitation process devised and approved by the council; provided that:

(1) amounts recovered by the legal services contractor shall be deposited in the state investment council suspense fund;

(2) the council shall submit each proposed contract to the attorney general and the department for review of the contingency fee. The attorney general's and the department's review shall take into account the complexity of the factual and legal issues presented by the claims to be pursued under the contract. If the attorney general or the department advises the council that the proposed contingency fee is not reasonable, the council may nevertheless approve the contract and the contingency fee by a majority vote of its members; and

(3) each prospective legal services contractor seeking to represent the council on a contingent or partly contingent fee basis shall file with the council the disclosure required by Section 13-1-191.1 NMSA 1978 disclosing all campaign contributions made to the governor, attorney general, state treasurer or any member of the council, or to a political committee that is intended to aid or promote the nomination or election of any candidate to a state office if the committee is:

(a) established by any of the foregoing persons or their agents;

(b) established in consultation with or at the request of any of the foregoing persons or their agents; or

H. The council may select and contract for the services of one or more custodian banks for all funds under the council's management. For the purpose of this subsection, "custodian bank" means a financial institution with the general fiduciary duties to manage, control and collect the assets of an investment fund, including receiving all deposits and paying all disbursements as directed by staff, safekeeping of assets, coordination of asset transfers, timely settlement of securities transactions and accurate and timely reporting of the assets by individual account and in total.

I. For funds available for investment for more than one year, the council may contract with any state agency to provide investment advisory or investment management services, separately or through a pooled investment fund, provided the state agency enters into a joint powers agreement with the council and that state agency pays at least the direct cost of such services. Notwithstanding any statutory provision governing state agency investments, the council may invest funds available from a state agency pursuant to a joint powers agreement in any type of investment permitted for the land grant permanent funds under the prudent investor rule. In performing investment services for a state agency, the council [and], the state investment officer and investment office staff are exempt from the New Mexico Uniform Securities Act. As used in this subsection, "state agency" means any branch, agency, department, board, instrumentality, institution or political subdivision of the state, the New Mexico finance authority, the New Mexico mortgage finance authority, the small business investment corporation and any tax-exempt private endowment entity whose sole beneficiary is a state agency.

J. The state investment officer shall provide quarterly performance reports to the legislative finance committee. Annually, the [state investment officer] council shall [ratify and] provide written investment policies [including any amendments] to the legislative finance committee."

SECTION 6. Section 6-8-14 NMSA 1978 (being Laws 1957, Chapter 179, Section 14, as amended) is amended to read:

"6-8-14. MONTHLY REPORTS.--No later than [ten] thirty days after the close of each month, the state investment officer shall submit to the secretary and the [state investment] council a report of the operations of the office during the past month. Each report shall give a complete statement of the state investment portfolio as of the time of the report and, in addition, shall include a detailed summary of the month's investment, reinvestment, purchase, sale and exchange transactions, setting forth the investments bought, sold or exchanged, the dates thereof, the prices paid or obtained, the names of the dealers involved, fees paid for each transaction, disclosure of contractor arrangements and a statement of the funds or accounts referred to herein. [The reports shall also be circulated to a mailing list of investment bankers and brokers recommended by the council.] The reports shall be published on the web [sites] site of the council [the legislature and the department of finance and administration] and shall be open for inspection to the public and the press in the office of the state investment officer."

SECTION 7. Section 6-8-20 NMSA 1978 (being Laws 1987, Chapter 219, Section 3, as amended) is amended to read:

"6-8-20. PRIVATE EQUITY INVESTMENT ADVISORY COMMITTEE CREATED--MEMBERSHIP--DUTIES--TERMS--LIABILITIES--CONFLICT OF INTEREST.--

A. There is created the "private equity investment advisory committee" to the council. The committee consists of the state investment officer, a member of the council appointed by the council and three members who are qualified by competence and experience in finance and investment and knowledgeable about the private equity investment process and who are appointed by the council.

B. Members appointed by the council, except the council member, shall be appointed for three-year terms; provided that the terms of the initial committee members shall be staggered so that the term of one member expires each year. After the initial appointments, all appointed members shall be appointed for three-year terms. Members shall serve until their successors are appointed. A vacancy occurring other than by expiration of term shall be filled in the same manner as the original appointment, but only for the unexpired term.

C. The committee shall review and make recommendations to the council on investments authorized pursuant to Sections 7-27-5.15 and 7-27-5.26 NMSA 1978 and all other private equity investments and shall advise the council in matters and policies related to such investments. The committee shall establish policies for national private equity fund investments, New Mexico private equity fund investments and New Mexico film [private equity fund] investments [not less often than annually] and shall make copies available to interested parties.

D. Members of the committee shall receive per diem and mileage as provided for nonsalaried public officers in the Per Diem and Mileage Act and shall receive no other compensation, perquisite or allowance.

E. The committee shall elect annually a chair from among its members and may elect other officers as necessary. The committee shall meet upon the call of the chair or the state investment officer.

F. Members of the committee are public employees within the meaning of the Tort Claims Act and are entitled to all immunity and indemnification provided under that act.

G. A person shall not be a member of the committee if any recommendation, action or decision of the committee will or is likely to result in direct, measurable economic gain to that person or that person's employer.

H. The state investment officer may enter into contracts with investment advisors for private equity fund investments and film fund investments authorized pursuant to Sections 7-27-5.15 and 7-27-5.26 NMSA 1978 and all other private equity investments and may pay budgeted expenses for the advisors from the assets of any fund administered under the supervision of the council, as applicable.

I. As used in this section, "private equity investments" means any legal entity that has as its primary business activity the investment of funds in return for equity in or debt of businesses for the purpose of providing capital for startup, expansion, new product development, recapitalization or a similar business purpose."

SECTION 8. Section 58-29-4 NMSA 1978 (being Laws 2000, Chapter 97, Section 6, as amended) is amended to read:

"58-29-4. SMALL BUSINESS INVESTMENT CORPORATION CREATED--POWERS OF THE CORPORATION.--

A. The "small business investment corporation" is created as a nonprofit, independent, public corporation. The corporation may:

(1) sue and be sued in all actions arising out of any act or omission in connection with its business or affairs;

(2) enter into any contracts or obligations relating to the corporation that are authorized or permitted by law;

(3) cooperate with small business development centers, regional economic development districts and parties that have demonstrated abilities and relationships in providing financial services to new and emerging businesses;

(4) make investments that consider the enhancement of economic development objectives of the state as described in the Small Business Investment Act; and

(5) make, alter or repeal such rules with respect to the corporation's operations as are necessary to carry out its functions and duties in the administration of the Small Business Investment Act.

B. The corporation shall not be considered a state agency for any purpose; provided, however, that the corporation may be considered a state agency for the purpose of contracting with the state investment council for the investment of funds. The corporation is exempted from the provisions of the Personnel Act and the Procurement Code.

C. Except as provided in the Tort Claims Act, the state shall not be liable for any obligations incurred by the corporation."

SECTION 9. TEMPORARY PROVISION--TRANSITION MEMBERSHIP OF STATE INVESTMENT COUNCIL.--

A. On July 1, 2013, the governor, state treasurer, commissioner of public lands and chief financial officer appointed by the governor are no longer members of the state investment council.

B. Within thirty days of July 1, 2013, the governor, state treasurer and commissioner of public lands shall appoint members of the state investment council, pursuant to Paragraphs (2), (3) and (8) of Subsection A of Section 6-8-2 NMSA 1978, who shall serve on an interim basis until confirmed by the senate.

C. The four public members serving on the state investment council who were appointed by the New Mexico legislative council shall continue to serve until their terms expire or they resign or are removed.

D. Members of the state investment council shall be appointed pursuant to Paragraphs (4) through (7) of Subsection A of Section 6-8-2 NMSA 1978 as vacancies occur on the board pursuant to Subsection C of this section and shall serve on an interim basis until confirmed by the senate. The four appointing entities shall, by lot, determine the order in which they will appoint replacement members to the council.

SECTION 10. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2013.

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