IL
Illinois Senate Bill SB1721

Illinois 2025-2026 Regular Session

Illinois Senate Bill SB1721 Compare Versions

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11 104TH GENERAL ASSEMBLY State of Illinois 2025 and 2026 SB1721 Introduced 2/5/2025, by Sen. Li Arellano, Jr. SYNOPSIS AS INTRODUCED: 30 ILCS 235/2 from Ch. 85, par. 902 Amends the Public Funds Investment Act. Provides that any public agency may invest any public funds in broad-based index funds that track the performance of a large group of stocks picked to represent the broader market. LRB104 08134 RTM 18180 b A BILL FOR 104TH GENERAL ASSEMBLY State of Illinois 2025 and 2026 SB1721 Introduced 2/5/2025, by Sen. Li Arellano, Jr. SYNOPSIS AS INTRODUCED: 30 ILCS 235/2 from Ch. 85, par. 902 30 ILCS 235/2 from Ch. 85, par. 902 Amends the Public Funds Investment Act. Provides that any public agency may invest any public funds in broad-based index funds that track the performance of a large group of stocks picked to represent the broader market. LRB104 08134 RTM 18180 b LRB104 08134 RTM 18180 b A BILL FOR
22 104TH GENERAL ASSEMBLY State of Illinois 2025 and 2026 SB1721 Introduced 2/5/2025, by Sen. Li Arellano, Jr. SYNOPSIS AS INTRODUCED:
33 30 ILCS 235/2 from Ch. 85, par. 902 30 ILCS 235/2 from Ch. 85, par. 902
44 30 ILCS 235/2 from Ch. 85, par. 902
55 Amends the Public Funds Investment Act. Provides that any public agency may invest any public funds in broad-based index funds that track the performance of a large group of stocks picked to represent the broader market.
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1111 1 AN ACT concerning finance.
1212 2 Be it enacted by the People of the State of Illinois,
1313 3 represented in the General Assembly:
1414 4 Section 5. The Public Funds Investment Act is amended by
1515 5 changing Section 2 as follows:
1616 6 (30 ILCS 235/2) (from Ch. 85, par. 902)
1717 7 Sec. 2. Authorized investments.
1818 8 (a) Any public agency may invest any public funds as
1919 9 follows:
2020 10 (1) in bonds, notes, certificates of indebtedness,
2121 11 treasury bills or other securities now or hereafter
2222 12 issued, which are guaranteed by the full faith and credit
2323 13 of the United States of America as to principal and
2424 14 interest;
2525 15 (2) in bonds, notes, debentures, or other similar
2626 16 obligations of the United States of America, its agencies,
2727 17 and its instrumentalities;
2828 18 (3) in interest-bearing savings accounts,
2929 19 interest-bearing certificates of deposit or
3030 20 interest-bearing time deposits or any other investments
3131 21 constituting direct obligations of any bank as defined by
3232 22 the Illinois Banking Act;
3333 23 (4) in short-term obligations of corporations
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3737 104TH GENERAL ASSEMBLY State of Illinois 2025 and 2026 SB1721 Introduced 2/5/2025, by Sen. Li Arellano, Jr. SYNOPSIS AS INTRODUCED:
3838 30 ILCS 235/2 from Ch. 85, par. 902 30 ILCS 235/2 from Ch. 85, par. 902
3939 30 ILCS 235/2 from Ch. 85, par. 902
4040 Amends the Public Funds Investment Act. Provides that any public agency may invest any public funds in broad-based index funds that track the performance of a large group of stocks picked to represent the broader market.
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6868 1 organized in the United States with assets exceeding
6969 2 $500,000,000 if (i) such obligations are rated at the time
7070 3 of purchase at one of the 3 highest classifications
7171 4 established by at least 2 standard rating services and
7272 5 which mature not later than 270 days from the date of
7373 6 purchase, (ii) such purchases do not exceed 10% of the
7474 7 corporation's outstanding obligations, and (iii) no more
7575 8 than one-third of the public agency's funds may be
7676 9 invested in short-term obligations of corporations under
7777 10 this paragraph (4);
7878 11 (4.5) in obligations of corporations organized in the
7979 12 United States with assets exceeding $500,000,000 if (i)
8080 13 such obligations are rated at the time of purchase at one
8181 14 of the 3 highest classifications established by at least 2
8282 15 standard rating services and which mature more than 270
8383 16 days but less than 10 years from the date of purchase, (ii)
8484 17 such purchases do not exceed 10% of the corporation's
8585 18 outstanding obligations, and (iii) no more than one-third
8686 19 of the public agency's funds may be invested in
8787 20 obligations of corporations under this paragraph (4.5); or
8888 21 (5) in money market mutual funds registered under the
8989 22 Investment Company Act of 1940, provided that the
9090 23 portfolio of any such money market mutual fund is limited
9191 24 to obligations described in paragraph (1) or (2) of this
9292 25 subsection and to agreements to repurchase such
9393 26 obligations; or .
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104104 1 (6) in broad-based index funds that track the
105105 2 performance of a large group of stocks picked to represent
106106 3 the broader market.
107107 4 (a-1) In addition to any other investments authorized
108108 5 under this Act, a municipality, park district, forest preserve
109109 6 district, conservation district, county, or other governmental
110110 7 unit may invest its public funds in interest bearing bonds of
111111 8 any county, township, city, village, incorporated town,
112112 9 municipal corporation, or school district, of the State of
113113 10 Illinois, of any other state, or of any political subdivision
114114 11 or agency of the State of Illinois or of any other state,
115115 12 whether the interest earned thereon is taxable or tax-exempt
116116 13 under federal law. The bonds shall be registered in the name of
117117 14 the municipality, park district, forest preserve district,
118118 15 conservation district, county, or other governmental unit, or
119119 16 held under a custodial agreement at a bank. The bonds shall be
120120 17 rated at the time of purchase within the 4 highest general
121121 18 classifications established by a rating service of nationally
122122 19 recognized expertise in rating bonds of states and their
123123 20 political subdivisions.
124124 21 (b) Investments may be made only in banks which are
125125 22 insured by the Federal Deposit Insurance Corporation. Any
126126 23 public agency may invest any public funds in short term
127127 24 discount obligations of the Federal National Mortgage
128128 25 Association or in shares or other forms of securities legally
129129 26 issuable by savings banks or savings and loan associations
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140140 1 incorporated under the laws of this State or any other state or
141141 2 under the laws of the United States. Investments may be made
142142 3 only in those savings banks or savings and loan associations
143143 4 the shares, or investment certificates of which are insured by
144144 5 the Federal Deposit Insurance Corporation. Any such securities
145145 6 may be purchased at the offering or market price thereof at the
146146 7 time of such purchase. All such securities so purchased shall
147147 8 mature or be redeemable on a date or dates prior to the time
148148 9 when, in the judgment of such governing authority, the public
149149 10 funds so invested will be required for expenditure by such
150150 11 public agency or its governing authority. The expressed
151151 12 judgment of any such governing authority as to the time when
152152 13 any public funds will be required for expenditure or be
153153 14 redeemable is final and conclusive. Any public agency may
154154 15 invest any public funds in dividend-bearing share accounts,
155155 16 share certificate accounts or class of share accounts of a
156156 17 credit union chartered under the laws of this State or the laws
157157 18 of the United States; provided, however, the principal office
158158 19 of any such credit union must be located within the State of
159159 20 Illinois. Investments may be made only in those credit unions
160160 21 the accounts of which are insured by applicable law.
161161 22 (c) For purposes of this Section, the term "agencies of
162162 23 the United States of America" includes: (i) the federal land
163163 24 banks, federal intermediate credit banks, banks for
164164 25 cooperative, federal farm credit banks, or any other entity
165165 26 authorized to issue debt obligations under the Farm Credit Act
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176176 1 of 1971 (12 U.S.C. 2001 et seq.) and Acts amendatory thereto;
177177 2 (ii) the federal home loan banks and the federal home loan
178178 3 mortgage corporation; and (iii) any other agency created by
179179 4 Act of Congress.
180180 5 (d) Except for pecuniary interests permitted under
181181 6 subsection (f) of Section 3-14-4 of the Illinois Municipal
182182 7 Code or under Section 3.2 of the Public Officer Prohibited
183183 8 Practices Act, no person acting as treasurer or financial
184184 9 officer or who is employed in any similar capacity by or for a
185185 10 public agency may do any of the following:
186186 11 (1) have any interest, directly or indirectly, in any
187187 12 investments in which the agency is authorized to invest.
188188 13 (2) have any interest, directly or indirectly, in the
189189 14 sellers, sponsors, or managers of those investments.
190190 15 (3) receive, in any manner, compensation of any kind
191191 16 from any investments in which the agency is authorized to
192192 17 invest.
193193 18 (e) Any public agency may also invest any public funds in a
194194 19 Public Treasurers' Investment Pool created under Section 17 of
195195 20 the State Treasurer Act. Any public agency may also invest any
196196 21 public funds in a fund managed, operated, and administered by
197197 22 a bank, subsidiary of a bank, or subsidiary of a bank holding
198198 23 company or use the services of such an entity to hold and
199199 24 invest or advise regarding the investment of any public funds.
200200 25 (f) To the extent a public agency has custody of funds not
201201 26 owned by it or another public agency and does not otherwise
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212212 1 have authority to invest such funds, the public agency may
213213 2 invest such funds as if they were its own. Such funds must be
214214 3 released to the appropriate person at the earliest reasonable
215215 4 time, but in no case exceeding 31 days, after the private
216216 5 person becomes entitled to the receipt of them. All earnings
217217 6 accruing on any investments or deposits made pursuant to the
218218 7 provisions of this Act shall be credited to the public agency
219219 8 by or for which such investments or deposits were made, except
220220 9 as provided otherwise in Section 4.1 of the State Finance Act
221221 10 or the Local Governmental Tax Collection Act, and except where
222222 11 by specific statutory provisions such earnings are directed to
223223 12 be credited to and paid to a particular fund.
224224 13 (g) A public agency may purchase or invest in repurchase
225225 14 agreements of government securities having the meaning set out
226226 15 in the Government Securities Act of 1986, as now or hereafter
227227 16 amended or succeeded, subject to the provisions of said Act
228228 17 and the regulations issued thereunder. The government
229229 18 securities, unless registered or inscribed in the name of the
230230 19 public agency, shall be purchased through banks or trust
231231 20 companies authorized to do business in the State of Illinois.
232232 21 (h) Except for repurchase agreements of government
233233 22 securities which are subject to the Government Securities Act
234234 23 of 1986, as now or hereafter amended or succeeded, no public
235235 24 agency may purchase or invest in instruments which constitute
236236 25 repurchase agreements, and no financial institution may enter
237237 26 into such an agreement with or on behalf of any public agency
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248248 1 unless the instrument and the transaction meet the following
249249 2 requirements:
250250 3 (1) The securities, unless registered or inscribed in
251251 4 the name of the public agency, are purchased through banks
252252 5 or trust companies authorized to do business in the State
253253 6 of Illinois.
254254 7 (2) An authorized public officer after ascertaining
255255 8 which firm will give the most favorable rate of interest,
256256 9 directs the custodial bank to "purchase" specified
257257 10 securities from a designated institution. The "custodial
258258 11 bank" is the bank or trust company, or agency of
259259 12 government, which acts for the public agency in connection
260260 13 with repurchase agreements involving the investment of
261261 14 funds by the public agency. The State Treasurer may act as
262262 15 custodial bank for public agencies executing repurchase
263263 16 agreements. To the extent the Treasurer acts in this
264264 17 capacity, he is hereby authorized to pass through to such
265265 18 public agencies any charges assessed by the Federal
266266 19 Reserve Bank.
267267 20 (3) A custodial bank must be a member bank of the
268268 21 Federal Reserve System or maintain accounts with member
269269 22 banks. All transfers of book-entry securities must be
270270 23 accomplished on a Reserve Bank's computer records through
271271 24 a member bank of the Federal Reserve System. These
272272 25 securities must be credited to the public agency on the
273273 26 records of the custodial bank and the transaction must be
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284284 1 confirmed in writing to the public agency by the custodial
285285 2 bank.
286286 3 (4) Trading partners shall be limited to banks or
287287 4 trust companies authorized to do business in the State of
288288 5 Illinois or to registered primary reporting dealers.
289289 6 (5) The security interest must be perfected.
290290 7 (6) The public agency enters into a written master
291291 8 repurchase agreement which outlines the basic
292292 9 responsibilities and liabilities of both buyer and seller.
293293 10 (7) Agreements shall be for periods of 330 days or
294294 11 less.
295295 12 (8) The authorized public officer of the public agency
296296 13 informs the custodial bank in writing of the maturity
297297 14 details of the repurchase agreement.
298298 15 (9) The custodial bank must take delivery of and
299299 16 maintain the securities in its custody for the account of
300300 17 the public agency and confirm the transaction in writing
301301 18 to the public agency. The Custodial Undertaking shall
302302 19 provide that the custodian takes possession of the
303303 20 securities exclusively for the public agency; that the
304304 21 securities are free of any claims against the trading
305305 22 partner; and any claims by the custodian are subordinate
306306 23 to the public agency's claims to rights to those
307307 24 securities.
308308 25 (10) The obligations purchased by a public agency may
309309 26 only be sold or presented for redemption or payment by the
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320320 1 fiscal agent bank or trust company holding the obligations
321321 2 upon the written instruction of the public agency or
322322 3 officer authorized to make such investments.
323323 4 (11) The custodial bank shall be liable to the public
324324 5 agency for any monetary loss suffered by the public agency
325325 6 due to the failure of the custodial bank to take and
326326 7 maintain possession of such securities.
327327 8 (i) Notwithstanding the foregoing restrictions on
328328 9 investment in instruments constituting repurchase agreements
329329 10 the Illinois Housing Development Authority may invest in, and
330330 11 any financial institution with capital of at least
331331 12 $250,000,000 may act as custodian for, instruments that
332332 13 constitute repurchase agreements, provided that the Illinois
333333 14 Housing Development Authority, in making each such investment,
334334 15 complies with the safety and soundness guidelines for engaging
335335 16 in repurchase transactions applicable to federally insured
336336 17 banks, savings banks, savings and loan associations or other
337337 18 depository institutions as set forth in the Federal Financial
338338 19 Institutions Examination Council Policy Statement Regarding
339339 20 Repurchase Agreements and any regulations issued, or which may
340340 21 be issued by the supervisory federal authority pertaining
341341 22 thereto and any amendments thereto; provided further that the
342342 23 securities shall be either (i) direct general obligations of,
343343 24 or obligations the payment of the principal of and/or interest
344344 25 on which are unconditionally guaranteed by, the United States
345345 26 of America or (ii) any obligations of any agency, corporation
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356356 1 or subsidiary thereof controlled or supervised by and acting
357357 2 as an instrumentality of the United States Government pursuant
358358 3 to authority granted by the Congress of the United States and
359359 4 provided further that the security interest must be perfected
360360 5 by either the Illinois Housing Development Authority, its
361361 6 custodian or its agent receiving possession of the securities
362362 7 either physically or transferred through a nationally
363363 8 recognized book entry system.
364364 9 (j) In addition to all other investments authorized under
365365 10 this Section, a community college district may invest public
366366 11 funds in any mutual funds that invest primarily in corporate
367367 12 investment grade or global government short term bonds.
368368 13 Purchases of mutual funds that invest primarily in global
369369 14 government short term bonds shall be limited to funds with
370370 15 assets of at least $100 million and that are rated at the time
371371 16 of purchase as one of the 10 highest classifications
372372 17 established by a recognized rating service. The investments
373373 18 shall be subject to approval by the local community college
374374 19 board of trustees. Each community college board of trustees
375375 20 shall develop a policy regarding the percentage of the
376376 21 college's investment portfolio that can be invested in such
377377 22 funds.
378378 23 (k) In addition to all other investments authorized under
379379 24 this Section, a public agency may adopt an ordinance or
380380 25 resolution to allow for investment of public funds in other
381381 26 instruments not specifically listed in this Section provided
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