S T A T E   O F   N E W   Y O R K
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                                  7971

                       2009-2010 Regular Sessions

                          I N  A S S E M B L Y

                             April 30, 2009
                               ___________

Introduced  by  M.  of  A. ABBATE, McENENY, COLTON -- (at request of the
  State Comptroller) -- read once  and  referred  to  the  Committee  on
  Governmental Employees

AN  ACT  to amend the retirement and social security law, in relation to
  increasing the portion of public  pension  fund  assets  that  may  be
  invested  according  to  the  prudent  investor standards (Part A); to
  amend the retirement and social security law, in relation to  increas-
  ing  the portion of public pension fund assets that may be invested in
  global equity securities (Part B); to amend the retirement and  social
  security law, in relation to investments by public pension funds (Part
  C);  to  amend  the retirement and social security law, in relation to
  making technical corrections relating to the mortgage advisory commit-
  tee (Part D); and to amend the retirement and social security law,  in
  relation to credit enhancement programs (Part E)

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. This act enacts into law major  components  of  legislation
which  relate  to investments by public pension funds. Each component is
wholly contained within a Part identified as  Parts  A  through  E.  The
effective  date for each particular provision contained within such Part
is set forth in the last section of such  Part.  Any  provision  in  any
section  contained  within  a  Part, including the effective date of the
Part, which makes reference to a section "of this  act",  when  used  in
connection  with  that particular component, shall be deemed to mean and
refer to the corresponding section of the Part in  which  it  is  found.
Section  four  of this act sets forth the general effective date of this
act.
  S 2. Short title. This act shall be known and may be cited as the "New
York state comptroller's asset protection and investment  accountability
act of 2009".

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD10311-02-9

              

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                                 PART A

  Section  1.  Paragraph  (a)  of  subdivision  9  of section 177 of the
retirement and social security law, as amended by chapter 22 of the laws
of 2006, is amended to read as follows:
  (a) the investments by a fund made pursuant to this subdivision  shall
not  at  any  time  exceed  [twenty-five]  THIRTY-FIVE per centum of the
assets of such fund;
  S 2. This act shall take effect immediately.

                                 PART B

  Section 1. Subdivision 8 of section 177 of the retirement  and  social
security  law, as amended by chapter 594 of the laws of 1993, is amended
to read as follows:
  8. The trustees of a fund shall have the power to  invest  the  moneys
thereof  in  foreign equity securities provided that (a) any such equity
security is registered on a national securities exchange, as provided in
an act of congress  of  the  United  States,  entitled  the  "Securities
Exchange  Act  of  1934",  approved June sixth, nineteen hundred thirty-
four, as amended, or otherwise registered pursuant to said act  and,  if
such equity security is so otherwise registered, price quotations there-
for  are  furnished  through  a  nationwide  automated  quotation system
approved by the National Association of Securities Dealers, Inc.  or  is
registered on a foreign exchange organized and regulated pursuant to the
laws  of  the  jurisdiction of such exchange and (b) the corporation has
averaged at least one billion dollars in  annual  sales  for  the  three
consecutive  years preceding the year in which the investment is made or
has market capitalization of at least one billion dollars  at  the  time
the  investment  is  made. Investments in such foreign equities shall be
included together with a fund's investments in other  equity  securities
for  purposes  of  the percentage limitations set forth in the foregoing
subdivisions of this section, and not more than [ten] TWENTY per  centum
of  the  assets  of  any fund shall be invested in the aggregate in such
foreign equities.
  S 2. This act shall take effect immediately.

                                 PART C

  Section 1. Paragraph (e) of  subdivision  6  of  section  177  of  the
retirement  and  social  security  law, as amended by chapter 560 of the
laws of 1997, is amended and a new paragraph (f) is  added  to  read  as
follows:
  (e)  Such  real property, other than property to be used primarily for
agricultural, horticultural, ranch, mining, recreational,  amusement  or
club  purposes,  as may be acquired, as an investment for the production
of income, INCLUDING CAPITAL APPRECIATION, or as may be acquired  to  be
improved  or developed for such investment purpose pursuant to an exist-
ing program therefor, subject to the following limitations: (1) the cost
of each parcel of real property so acquired under the authority of  this
subdivision, including the estimated cost to the fund of the improvement
or  development thereof, when added to the value of all other real prop-
erty then held by it pursuant to  this  subdivision,  shall  not  exceed
[five]  TEN  per  cent of its assets, and (2) the cost of each parcel of
real property acquired under the authority of this subdivision,  includ-

A. 7971                             3

ing  the  estimated  cost  to the fund of the improvement or development
thereof, shall not exceed two per cent of the fund's assets.
  (F) NOTWITHSTANDING ANY OTHER PROVISION OF LAW CONTAINED IN THIS ARTI-
CLE,  FOR  THE PURPOSES OF THIS SUBDIVISION, AN INVESTMENT IN AN ENTITY,
OTHER THAN AN ENTITY DESCRIBED IN SUBDIVISION TWO OF THIS SECTION,  THAT
INVESTS  OR  PROPOSES  TO  INVEST, DIRECTLY OR INDIRECTLY THROUGH ONE OR
MORE OTHER ENTITIES, AT LEAST A MAJORITY  OF  ITS  ASSETS  IN:  (1)  ANY
INTEREST  IN REAL PROPERTY OF ANY KIND OR CHARACTER AS AN INVESTMENT FOR
THE PRODUCTION OF INCOME, INCLUDING CAPITAL APPRECIATION,  OR  (2)  DEBT
INSTRUMENTS,  OTHER THAN DEBT INSTRUMENTS DESCRIBED IN SUBDIVISION ONE-A
OF THIS SECTION, SECURED BY ANY INTEREST IN REAL ESTATE SHALL BE CONSID-
ERED AN INVESTMENT IN REAL ESTATE  PURSUANT  TO  THIS  SUBDIVISION,  AND
SHALL  BE  SUBJECT TO EACH OF THE LIMITATIONS SET FORTH IN THIS SUBDIVI-
SION.
  S 2. This act shall take effect immediately.

                                 PART D

  Section 1. The first closing paragraph of section 423 of  the  retire-
ment  and  social  security  law, as added by chapter 770 of the laws of
1970, is amended to read as follows:
  The comptroller shall appoint a separate [mortgage] REAL ESTATE  advi-
sory  committee,  with the advice and consent of the investment advisory
committee, to review proposed [mortgage and] real  estate  AND  MORTGAGE
investments  by  the  common  retirement fund. In making investments, as
authorized by law, the comptroller shall be guided  by  policies  estab-
lished by each committee from time to time; and, in the event the [mort-
gage]  REAL  ESTATE  advisory committee disapproves a proposed [mortgage
or] real estate OR MORTGAGE investment, such  INVESTMENT  shall  not  be
made.  NOTWITHSTANDING ANY OTHER PROVISION OF LAW, INDIVIDUALS APPOINTED
TO THE REAL ESTATE ADVISORY COMMITTEE SHALL BE ELIGIBLE FOR DEFENSE  AND
INDEMNIFICATION IN ACCORDANCE WITH SECTION SEVENTEEN OF THE PUBLIC OFFI-
CERS LAW.
  S  2.  This  act  shall take effect immediately and shall apply to all
claims, actions and proceedings pending on or commenced on or after such
effective date.

                                 PART E

  Section 1. The retirement and social security law is amended by adding
a new section 177-e to read as follows:
  S 177-E. CREDIT ENHANCEMENT PROGRAMS.  1.  NOTWITHSTANDING  ANY  OTHER
PROVISION  OF LAW, THE TRUSTEES OF ANY FUND MAY, SUBJECT TO AND CONSIST-
ENT WITH THEIR FIDUCIARY DUTIES, ESTABLISH CREDIT  ENHANCEMENT  PROGRAMS
TO  ASSIST  ENTITIES  OF STATE AND LOCAL GOVERNMENT AND OTHER ISSUERS OF
MUNICIPAL AND PUBLIC DEBT  TO  SECURE  MORE  FAVORABLE  FINANCING  TERMS
THROUGH  A  VARIETY  OF  TYPES OF CREDIT ENHANCEMENT, INCLUDING, BUT NOT
LIMITED TO, ENHANCEMENT OF THE CREDIT OF BONDS, NOTES, AND OTHER INDEBT-
EDNESS THROUGH:
  (A) PROVIDING LETTERS OF CREDIT, STAND BY BOND PURCHASE AGREEMENTS AND
SIMILAR LIQUIDITY FACILITIES; AND
  (B) INVESTMENT IN EXISTING OR NEW MONOLINE INSURERS THAT ENHANCE  SUCH
TYPES OF DEBT.
  2.  ANY  CREDIT  ENHANCEMENT PROGRAM ESTABLISHED PURSUANT TO PARAGRAPH
(A) OF SUBDIVISION ONE OF THIS SECTION SHALL COMPLY  WITH  THE  REQUIRE-
MENTS OF SECTION 503(B) OF THE INTERNAL REVENUE CODE.

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  3.  NO  CREDIT  ENHANCEMENT  PROGRAM ESTABLISHED BY A FUND PURSUANT TO
PARAGRAPH (A) OF SUBDIVISION ONE OF THIS  SECTION  SHALL  BE  DEEMED  TO
PROVIDE  FINANCIAL  GUARANTY  INSURANCE  AS  DEFINED IN PARAGRAPH ONE OF
SUBSECTION (A) OF SECTION SIX THOUSAND NINE HUNDRED ONE OF THE INSURANCE
LAW.
  4.  ANY  CREDIT  ENHANCEMENT PROGRAM ESTABLISHED PURSUANT TO PARAGRAPH
(A) OF SUBDIVISION ONE OF THIS SECTION SHALL  ONLY  ENHANCE  OBLIGATIONS
THAT A FUND WOULD BE AUTHORIZED TO PURCHASE DIRECTLY, PROVIDED, HOWEVER,
THAT  THE  PERCENTAGE LIMITATIONS CONTAINED IN PARAGRAPH (B) OF SUBDIVI-
SION ONE-A OF SECTION ONE HUNDRED SEVENTY-SEVEN OF  THIS  ARTICLE  SHALL
NOT  APPLY TO INVESTMENTS MADE PURSUANT TO THIS SECTION AND THE PERCENT-
AGE LIMITATIONS CONTAINED  IN  PARAGRAPH  (A)  OF  SUBDIVISION  NINE  OF
SECTION ONE HUNDRED SEVENTY-SEVEN OF THIS ARTICLE SHALL APPLY TO INVEST-
MENTS  ENHANCING  OBLIGATIONS  THAT  WOULD ONLY BE ELIGIBLE FOR PURCHASE
PURSUANT TO SUBDIVISION NINE OF SECTION  ONE  HUNDRED  SEVENTY-SEVEN  OF
THIS ARTICLE.
  5.  THE AGGREGATE OUTSTANDING BALANCE OF OBLIGATIONS ENHANCED PURSUANT
TO PARAGRAPH (A) OF SUBDIVISION ONE OF THIS SECTION SHALL NOT EXCEED TEN
PERCENT OF THE ASSETS OF A FUND; AND THE AGGREGATE  OUTSTANDING  BALANCE
OF OBLIGATIONS ENHANCED FOR A SINGLE ISSUER SHALL NOT EXCEED TWO PERCENT
OF THE ASSETS OF A FUND.
  6.  THE  AGGREGATE  OF  ALL  INVESTMENTS  PURSUANT TO PARAGRAPH (B) OF
SUBDIVISION ONE OF THIS SECTION SHALL NOT EXCEED  FIVE  PERCENT  OF  THE
ASSETS OF A FUND, AND THE MAXIMUM LIABILITY OF A FUND AS A RESULT OF ITS
INVESTMENT IN ANY MONOLINE INSURER SHALL NOT EXCEED THE DOLLAR AMOUNT OF
SUCH INVESTMENT.
  S 2. This act shall take effect immediately.
  S 3. Severability clause. If any clause, sentence, paragraph, subdivi-
sion,  section  or  part  of  this act shall be adjudged by any court of
competent jurisdiction to be invalid, such judgement shall  not  affect,
impair,  or  invalidate  the remainder thereof, but shall be confined in
its operation to the clause, sentence, paragraph,  subdivision,  section
or  part  thereof  directly  involved  in  the controversy in which such
judgement shall have been rendered. It is  hereby  declared  to  be  the
intent  of the legislature that this act would have been enacted even if
such invalid provisions had not been included herein.
  S 4. This act shall take effect immediately  provided,  however,  that
the  applicable effective date of Parts A through E of this act shall be
as specifically set forth in the last section of such Parts.
  FISCAL NOTE.--Pursuant to Legislative Law, Section 50:
  This bill amends the Retirement and Social Security  Law  to  increase
the limit on non-legal list investments for the eight (8) public retire-
ment  systems  of New York State. It would replace the current 25% limit
with a 35% limit. It would also increase the amount of investment  which
may be made in foreign equities. The current 10% limit would be replaced
with a 20% limit.
  If  this  bill  is  enacted, insofar as this bill affects the New York
State and Local Employees' Retirement System and the New York State  and
Local  Police  and Fire Retirement System, we assume that there would be
small investment changes as a result  of  enactment.  Any  increases  or
decreases  in investment earnings will result in decreases or increases,
respectively, in employer contributions. Annual changes in  assets  will
be  shared  by  all employers and will be spread over the future working
lifetimes of active members.
  This estimate, dated March 17, 2009, and intended for use only  during
the 2009 Legislative Session, is Fiscal Note Number 2009-186 prepared by

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the  Actuary  for  the  New  York  State and Local Employees' Retirement
System and the New York State  and  Local  Police  and  Fire  Retirement
System.