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SENATE FLOOR VERSION
March 24, 2021
ENGROSSED HOUSE
BILL NO. 2870 By: Wallace of the House
and
Thompson of the Senate
An Act relating to Commissioners of the Land Office;
amending 62 O.S. 2011, Section 34.62, as last amended
by Section 28, Chapter 98, O.S.L. 2020 (62 O.S. Supp.
2020, Section 34.62), which relates to encumbrance
requirements for payments from state funds; allowing
the Commissioners of the Land Office to make fee
payments to multiple custodial banks and investment
consultants from certain proceeds; amending 64 O.S .
2011, Section 1013, as last amended by Section 1,
Chapter 8, O.S.L. 2020 (64 O.S. Supp. 2020, Section
1013), which relates to investment of the permanent
school funds; authorizing the Commissioners of the
Land Office to select one or more custodial banks ;
requiring competitive bids from custodial banks every
ten years rather than every five years; updating
statutory language; providing an effective date; and
declaring an emergency.
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1. AMENDATORY 62 O.S. 2011, Section 34.62, as
last amended by Section 28, Chapter 98, O.S.L. 2020 (62 O.S. Supp.
2020, Section 34.62), is amended to read as follows:
Section 34.62 Encumbrance requirements for payments from funds
of the state shall include the following:
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1. Whenever agencies of this state enter into contracts for, or
on behalf of the state for the purchase of tangible or intangible
property, or for services or labor, su ch agreement shall be
evidenced by written contracts or purchase orders, and must be
transmitted to the Director of the Office of Management and
Enterprise Services within a reasonable time from the date of the
awarding of the contract or purchase order, a s determined by the
Director;
2. The Director of th e Office of Management and Enterprise
Services shall charge such contracts or purchase orders against the
proper account as an outstanding order until it is liquidated by
payment of a claim, or claims, ag ainst the contracts or purchase
orders, or by cancel lation of the contract or purchase order;
3. The Director of the Office of Management and Enterprise
Services shall have the power to authorize agencies of the state to
make acquisitions without the subm ission of competitive bids or
compliance with the st ate purchase card program as otherwise
required by the Oklahoma Central Purchasing Act, for or on behalf of
the state whenever the Director determines that it is in the best
interests of the state. The a dministrative head of any agency shall
be personally liable for obligations incurred in excess of the
authorization granted by the Director;
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4. The Director of the Office of Management and Enterprise
Services shall never authorize payment of claims for an y agency of
the state unless they are supported by:
a. contracts or purchase orders of the Office of
Management and Enterprise Services,
b. institutional purchase orders or contracts,
c. departmental purchase orders or contracts, or
d. authorizations for p urchases granted by the Director
as provided by paragraph 3 of this section;
5. Any invoice or claim dated prior to the date of any of the
above-mentioned encumbrance documents shall be rejected by the
Office of Management and Enterprise Services;
6. Any encumbrance document that is outstanding on the rec ords
in the Office of Management and Enterprise Services when its funding
source or sources lapse shall be canceled, unless another current
funding source is assigned; and
7. The Commissioners of the Lan d Office shall be authorized to
make payment of fees to its custodial bank banks, investment
consultants and investment managers from the proceeds of total
realized investment gains and such payments may be made from a
special fund hereby created in the St ate Treasury for this purpose.
Total payments for t his purpose in a fiscal year shall not exceed
one-half percent (0.5%) of the market value of the funds under the
Commissioners' management on June 30 of the previous fiscal year.
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SECTION 2. AMENDATORY 64 O.S. 2011, Section 1013, a s
last amended by Section 1, Chapter 8, O.S.L. 2020 (64 O.S. Supp.
2020, Section 1013), is amended to read as follows:
Section 1013. A. The Commissioners of the Land Office shall be
responsible for the investment of the permanent school funds, other
educational funds and public building funds solely in the best
interests of the current and future beneficiaries. The
Commissioners of the Land Office shall make investments:
1. For the exclusive purpose of :
a. providing maximum benefits to current and futur e
beneficiaries, and
b. defraying reasonable expenses of administering the
trust funds;
2. With the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person actin g in a like
enterprise of a like character and with like aims would use; and
3. By diversifying the investments of the trust funds so as to
minimize the risk of large losses.
B. The permanent school fund and other educational funds may
only be invested in bonds issued in the United States, United States
dollar denominated or other investments settled in United States
dollars or traded on the United States exchange markets and real
property to be owned or acquired by the Commissioners of the Land
Office. The Commissioners of the Land Office shall not inves t more
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than sixty percent (60%) of the trust fund investments in equity
securities. The Commissioners of the Land Office are further
authorized to acquire, purchase, exchange and grant any real
property under its jurisdiction as is necessary to carry out the
investment in the real property. The Commissioners of the Land
Office shall not invest more than five percent (5%) of the total
value of the assets of the permanent school funds in connection with
investments in real property. In no case shall the Co mmissioners of
the Land Office bid against private -sector bidders above the
appraised value of any property to be acquired.
C. The Commissioners shall establish an investment committee.
The investment committee shall be composed of not more than three
members of the Commissioners of the Land Office or their designees.
The committee shall make recommendations to the Commissioners of the
Land Office on all matters related to the choice of managers of the
assets of the funds, on the establishment of investm ent and fund
management guidelines, and in planning future investment policy.
The committee shall have no authority to act on behalf of the
Commissioners of the Land Office in any circumstances whatsoeve r.
No recommendations of the committee shall have e ffect as an action
of the Commissioners of the Land Office or take effect without the
approval of the Commissioners as provided by law. The Commissioners
shall promulgate and adopt on an annual basis an investment plan.
The investment plan shall state th e criteria for selecting
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investment managers, the allocation of assets among investment
managers, and established standards of investment and fund
management.
D. The Commissioners shall retain qualified investment managers
to provide for investment of the fund monies and for the management
of investment real property pursuant to the investment plan.
Investment managers shall be chosen by a solicitation of proposals
on a competitive bid basis pursuant to standards set by the
Commissioners. Subject to the investment plan, each investment
manager shall have full discretion in the management of the funds or
investment real property allocated to said the investment managers.
The funds allocated to investment managers shall be actively managed
by them, which may include selling investments and realizing losses
if the action is considered advantageous to longer term return
maximization. Because of the total return objective, no distinction
shall be made for ma nagement and performance evaluation purposes
between realized and unrealized capital gains and losses.
E. The Commissioners shall take any measures they deem
appropriate to safeguard custody of securities and other assets of
the trusts.
F. By September 1 of each year, the Commissioners shall develop
a written investment plan for the trust funds.
G. The Commissioners shall compile a quarterly financial report
showing the performance of all the combined funds under their
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control on a fiscal year basis. Th e report shall contain a list of
all investments made by the Commissioners and a list of any
commissions, fees or payments made for services regarding the
investments for that reporting period. The report shall be based on
market values and shall be compi led pursuant to uniform reporting
standards prescribed by the Oklahoma State Pension Commission for
all state retirement systems. The report shall be distributed to
the Oklahoma State Pension Commission, the Cash Management and
Investment Oversight Commis sion, and the Legislative Service Bureau.
H. Before January 1 of each year, the Commissioners shall
publish an annual report of all Trust operations, presented in a
simple and easily understood manner to the extent possible. The
report shall be submitted to the Governor, the Speaker of the House
of Representatives, the President Pro Tempore of the Senate, the
State Department of Education and each higher education beneficiary.
The annual report shall cover the operation of the Trusts during the
past fiscal year, including income, disbursements and the fin ancial
condition of the Trusts at the end of each fiscal year on a cash
basis. The annual report shall also contain a summary of the assets
of each trust and current market value as of the report date.
I. The Cash Management and Investment Oversight Comm ission
shall review reports prepared by the Commissioners of the Land
Office pursuant to this subsection and shall make recommendations
regarding the investment strategies and practices, the development
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of internal auditing procedures and practices and any other matters
as determined necessary and applicable.
J. The Commissioners of the Land Office shall select one or
more custodial bank banks to settle transactions involving the
investment of the funds u nder the control of the Commissioners of
the Land Office. The Commissioners of the Land Office shall review
the performance of the each custodial bank at least once every year.
The Commissioners of the Land Office shall require a written
competitive bid every five (5) ten (10) years. The custodial bank
shall have a minimum of Five Hundred Million Dollars
($500,000,000.00) in assets to be eligible for selection. Any out -
of-state custodial bank shall have a service agent in the State of
Oklahoma so that service of summons or legal notice may be had on
the designated agent, and the bank shall submit to the jurisdiction
of Oklahoma state courts for resolution of any and all disputes. In
order to be eligible for selection, the custodial bank shall allow
electronic access to all transaction and portfolio repor ts
maintained by the custodial bank involving the investment of state
funds under control of the Commissioners of the Land Office and to
the Cash Management and Investment Oversight Commission. The
requirement for electronic access shall be incorporated i nto any
contract between the Commissioners of the Land Office and the
custodial bank. Neither the Commissioners of the Land Office nor
the custodial bank shall permit any of the funds under the control
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of the Commissioners of the Land Office or any of the documents,
instruments, securities or other evidence of a right to be paid
money to be located in any place other than within a jurisdiction or
territory under the control or regulatory power of the Unit ed States
government.
SECTION 3. This act shall become effective July 1, 2021.
SECTION 4. It being immediately necessary for the preservation
of the public peace, health or safety, an emergency is hereby
declared to exist, by reason whereof this act shall take effect and
be in full force from and after its passage and approval.
COMMITTEE REPORT BY: COMMITTEE ON APPROPRIATIONS
March 24, 2021 - DO PASS