Researcher: RP Page 1 5/4/23
OLR Bill Analysis
sSB 1235
AN ACT IMPLEMENTING THE TREASURER'S
RECOMMENDATIONS CONCERNING THE INVESTMENT
ADVISORY COUNCIL AND RELATED STATUTES AND
CONCERNING THE BABY BOND TRUST PROGRAM.
SUMMARY
This bill makes the following changes concerning the state treasurer
and Investment Advisory Council (IAC):
1. expands the investment-related job titles for which the state
treasurer, in consultation with the IAC, may set compensation;
2. eliminates a prohibition against the IAC’s public members and
their business organizations or affiliates contracting with or
providing investment services for state trust funds while they
serve on the council and for one year after, but requires that they
recuse themselves from discussions or votes related to these
contracts (§ 2); and
3. eliminates the requirement that the IAC review contracts for
investment-related services before the treasurer may award
them, but authorizes the IAC to review any of these contracts that
deviate from the investment policy statement that sets standards
for investing state trust funds.
It also makes various changes to the Connecticut Baby Bond Trust
program (see BACKGROUND). Principally, the bill:
1. allows the program’s implementation expenses to be added to
the capped amount of bonds authorized for each year of the
program;
2. subjects the bonds to standard statutory general obligation bond
procedures and repayment requirements; 2023SB-01235-R000705-BA.DOCX
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3. exempts disbursements from the trust, rather than the trust’s
property and earnings, from all state and local taxes (§ 5);
4. requires that the disbursements, rather than funds invested in the
trust, be disregarded as assets or income for state assistance
programs and need-based educational aid;
5. eliminates the requirement that the state treasurer establish an
accounting for each designated beneficiary and makes
conforming changes;
6. exempts the trust’s property from the law for determining when
property held by a fiduciary is presumed abandoned (§ 4);
7. explicitly subjects the treasurer’s trust investments to the same
oversight and requirements that the law establishes for other
treasurer-administered funds, such as the Teachers’ Pension
Fund, the State Employee Retirement Fund, and the Connecticut
Municipal Employees’ Retirement Fund (e.g., investment review
by the Investment Advisory Council) (§ 10); and
8. makes various minor, technical, and conforming changes and
corrections.
EFFECTIVE DATE: Upon passage
§ 1 — INVESTMENT OFFICER A ND PERSONNEL SALARIE S
Existing law authorizes the treasurer to set the salary ranges for the
chief, deputy, and principal investment officers, in consultation with the
IAC. The bill additionally authorizes him to do so for investment officers
and other personnel that assist the chief investment officer. In doing so,
it exempts these officers and personnel from the requirement that
executive branch employee salaries not set by law must be set by the
administrative services commissioner and approved by the Office of
Policy and Management secretary.
By law, unchanged by the bill, the cost of operating the investment
department, including personnel costs and professional investment
counsel, is paid from state trust funds’ income. 2023SB-01235-R000705-BA.DOCX
Researcher: RP Page 3 5/4/23
§ 3 — INVESTMENT-RELATED SERVICE CONTRACTS
The bill eliminates the requirement that all investment-related service
contracts be reviewed by the IAC before the treasurer may award them
and limits the IAC’s review to contracts that deviate from the IAC-
approved investment policy statement. In doing so, it allows the
treasurer to award contracts that conform to the state’s investment
policy statement without IAC review. For contracts that deviate from
the policy statement, it (1) requires the treasurer to notify the IAC at a
council meeting of his recommendation for a provider and (2)
authorizes the IAC to review the treasurer’s recommendation.
Under the bill, after the council meeting during which it receives this
notice from the treasurer, the council has 45 days within which it may
file a written review of the treasurer’s recommendation. After the 45-
day period expires, the treasurer may award the contract. The same
notification process and 45-day waiting period applies under current
law for the IAC’s required review of all investment-related service
contracts. As under current law, any written review by the IAC must be
available for public inspection.
The bill also requires the treasurer to submit quarterly reports to the
IAC on investment-related service contracts awarded each quarter. The
first report must cover the quarter ending September 30, 2023, and
include contracts awarded and in effect on July 1, 2023. Each report must
include the name of the contracted service provider and contract’s
value.
§§ 6-9 — CONNECTICUT BABY BONDS TRUST PROGRAM
Implementation Costs and Bond Procedures (§ 9)
Existing law authorizes the treasurer to issue up to $600 million in
state general obligation bonds for the program, in amounts of up to $50
million per year from FYs 25-36. The bill authorizes the program’s
implementation expenses to be added to the capped amount of bonds
authorized for each year of the program.
Current law requires the Baby Bonds program to be funded with
bonds from a specific bond issuance and incorporates certain provisions 2023SB-01235-R000705-BA.DOCX
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relating to this issuance, including the treasurer’s powers in connection
with the bond sale and certain legal actions related to the bonds. The bill
instead subjects the bonds authorized under the program to standard
statutory bond procedures and repayment requirements.
Impact on Assistance Programs and Need-Based Aid (§ 6)
The bill prohibits disbursements from the trust from being
considered assets or income when determining an individual’s
eligibility for (1) state-administered assistance programs, to the extent
allowed by federal law, or (2) need-based, institutional aid grants
offered at the state’s public eligible educational institutions. In doing so,
it eliminates similar provisions in current law that applied to funds
invested in the trust.
Amounts Transferred for Designated Beneficiaries (§§ 7-9)
Under current law, the state treasurer must establish an accounting
for each designated beneficiary and may transfer up to $3,200 from the
program’s bond proceeds to the trust to be credited to the beneficiary’s
accounting at birth. The bill eliminates the requirement that (1) each
designated beneficiary have an accounting and (2) the transferred funds
come from these bond proceeds. It also allows the transfer to be made
after the designated beneficiary’s birth, rather than at birth.
Under current law, if a designated beneficiary fails to submit a valid
claim before his or her 30th birthday or dies before doing so, the amount
of his or her accounting is credited back to the trust’s assets. The bill
instead requires that this amount be retained by the trust to credit to
designated beneficiaries born in subsequent years.
Existing law requires the treasurer to proportionately reduce the
transfer amount for any year in which the bond funds are insufficient to
provide the $3,200 transfer to each beneficiary. The bill also requires, for
any year in which these funds exceed the amount required to provide
the transfer, that any excess be kept by the trust to credit to designated
beneficiaries born in subsequent years. It also makes technical and
conforming changes. 2023SB-01235-R000705-BA.DOCX
Researcher: RP Page 5 5/4/23
BACKGROUND
Connecticut Baby Bond Trust Program
Administered by the state treasurer, the program authorizes up to
$600 million in bonds to give designated beneficiaries (i.e., babies born
on or after July 1, 2023, whose births were covered under HUSKY) up to
$3,200 in a state trust. Once they reach age 18, designated beneficiaries
that meet the program’s eligibility requirements may receive the funds,
including any investment earnings, to be used for an eligible
expenditure (e.g., education, buying a home or investing in a business
in Connecticut, or personal financial investments).
COMMITTEE ACTION
Finance, Revenue and Bonding Committee
Joint Favorable Substitute
Yea 34 Nay 17 (04/18/2023)