State funds: investments.
The proposed legislation is expected to have significant implications for state investment strategies and financial management. By enabling the investment of surplus state funds in foreign government securities, California may diverge from a historically conservative investment approach. Supporters assert that this broadening of investment options could enhance the state’s portfolio and yield better returns for taxpayers while contributing to global financial stability.
Assembly Bill 1176, introduced by Assembly Member Bloom on February 21, 2019, seeks to amend Section 16430 of the Government Code in California. The primary objective of AB 1176 is to expand the range of securities eligible for investment of surplus state funds. Specifically, the bill allows for the inclusion of bonds, notes, debentures, and similar obligations issued by foreign governments listed as industrialized by the International Monetary Fund, provided these governments have pledged their full faith and credit for the payment of principal and interest, subject to certain conditions.
However, the bill may not be without controversy. Critics may raise concerns regarding the potential risks associated with investing in foreign securities, especially given fluctuations in international markets and political climates. There are also implications of potential exposure to foreign influence on state financial strategies, which could evoke debate around national security and fiscal responsibility. The necessity of adhering to stringent eligibility criteria—such as maintaining a minimum credit rating—aims to mitigate these risks, but the discussion on balancing return with security is likely to persist.