House Bill No. 578

Introduced By lawson

A Bill for an Act entitled: An Act eliminating the Montana board of science and technology development in 1999; transferring the portfolios of the Montana board of science and technology development to the DEPARTMENT OF COMMERCE; revising the job investment loan laws; REVISING THE CONDITIONS FOR MEMBERSHIP ON THE BOARD; TRANSFERRING A PORTION OF THE INTEREST EARNINGS TO THE SUPREME COURT TO FUND JUDGES' RETIREMENT; AUTHORIZING A GRANT OF INTEREST EARNINGS TO THE UNIVERSITY SYSTEM; amending sections 2-15-1818, 2-18-103, 17-6-201, 17-6-302, 17-6-305, 17-6-308, 17-6-503, 17-6-509, 17-6-510, 17-7-502, and 90-8-201, MCA; repealing sections 2-15-1818, 90-3-101, 90-3-102, 90-3-201, 90-3-202, 90-3-203, 90-3-204, 90-3-301, 90-3-303, 90-3-304, 90-3-305, 90-3-501, 90-3-502, 90-3-503, 90-3-504, 90-3-505, 90-3-506, 90-3-519, 90-3-520, 90-3-521, 90-3-522, 90-3-523, 90-3-524, 90-3-525, and 90-3-901, MCA; and providing effective dates AND A RETROACTIVE APPLICABILITY DATE.

Be it enacted by the Legislature of the State of Montana:

Section 1. Section 2-15-1818, MCA, is amended to read:

"2-15-1818. Montana board of science and technology development -- allocation -- composition -- quasi-judicial powers. (1) There is a Montana board of science and technology development. The board is allocated to the department of commerce. The department shall select, prescribe the duties for, and supervise staff to administer board activities.

(2) The board consists of nine members appointed by the governor as prescribed in 2-15-124.

(3) In making appointments to the board, the governor shall consider people with extensive interest and experience in science and technology and the application of such interest and experience to economic development in Montana.

(4) The membership of the board must include:

(a) at least three members with knowledge of early stage financing of private businesses;

(b) at least one member with expertise in applied technology development; and

(5) The board is designated a quasi-judicial board for purposes of 2-15-124.

(6) A member of the board appointed after [the effective date of this section] may not be an officer or an employee of an entity that has received funding from the board."

Section 2. Section 2-18-103, MCA, is amended to read:

"2-18-103. Officers and employees excepted. (1) Parts 1 and 2 do not apply to the following positions in state government:

(a) elected officials;

(b) county assessors and their chief deputy;

(d) judges and employees of the judicial branch;

(e) members of boards and commissions appointed by the governor, the legislature, or other elected state officials;

(f) officers or members of the militia;

(g) agency heads appointed by the governor;

(h) academic and professional administrative personnel with individual contracts under the authority of the board of regents of higher education;

(i) academic and professional administrative personnel and live-in houseparents who have entered into individual contracts with the state school for the deaf and blind under the authority of the state board of public education;

(j) teachers under the authority of the department of corrections or the department of public health and human services;

(k) investment officer, assistant investment officer, executive director, and ~~three~~ five professional staff positions of the board of investments;

(l) four professional staff positions under the board of oil and gas conservation;

(m) assistant director for security of the Montana state lottery;

~~(n) executive director and senior investment officer of the Montana board of science and technology development;~~

~~(o)~~(n) executive director and employees of the state compensation insurance fund;

~~(p)~~(o) state racing stewards employed by the executive secretary of the Montana board of horseracing;

~~(q)~~(p) executive director of the Montana wheat and barley committee;

~~(r)~~(q) commissioner of banking and financial institutions; and

~~(s)~~(r) training coordinator for county attorneys.

(2) Employees of an entity of the legislative branch, other than the office of consumer counsel, are exempt from the application of 2-18-1011 through 2-18-1013. With respect to entities of the legislative branch, other than the office of consumer counsel:

(a) as used in parts 1 through 3 of this chapter, references to the "department of administration" or "department" apply to the legislative council established by 5-11-101, which may delegate administrative duties to the legislative services division established by 5-11-111;

(b) as used in 2-18-102, the term "governor" applies to the legislature; and

Section 3. Section 17-6-201, MCA, is amended to read:

"17-6-201. Unified investment program -- general provisions. (1) The unified investment program directed by Article VIII, section 13, of the Montana constitution to be provided for public funds must be administered by the board of investments in accordance with the prudent expert principle, which requires any investment manager to:

(a) discharge the duties with the care, skill, prudence, and diligence, under the circumstances then prevailing, that a prudent person acting in a like capacity with the same resources and familiar with like matters exercises in the conduct of an enterprise of a like character with like aims;

(b) diversify the holdings of each fund within the unified investment program to minimize the risk of loss and to maximize the rate of return unless, under the circumstances, it is clearly prudent not to do so; and

(c) discharge the duties solely in the interest of and for the benefit of the funds forming the unified investment program.

(2) (a) Retirement funds may be invested in common stocks of any corporation, except that an investment may not be made at any time that would cause the book value of the investments in any retirement fund to exceed 50% of the book value of the fund or would cause the stock of one corporation to exceed 2% of the book value of the retirement fund.

(b) Other public funds may not be invested in private corporate capital stock. "Private corporate capital stock" means only the common stock of a corporation.

(3) (a) This section does not prevent investment in any business activity in Montana, including activities that continue existing jobs or create new jobs in Montana.

(b) The board is urged under the prudent expert principle to invest up to 3% of retirement funds in venture capital companies. Whenever possible, preference should be given to investments in those venture capital companies that demonstrate an interest in making investments in Montana.

(c) In discharging its duties, the board shall consider the preservation of purchasing power of capital during periods of high monetary inflation.

(d) The board may not make a direct loan to an individual borrower. The purchase of a loan or a portion of a loan originated by a financial institution is not considered a direct loan.

(4) The board has the primary authority to invest state funds. Another agency may not invest state funds unless otherwise provided by law. The board shall direct the investment of state funds in accordance with the laws and constitution of this state. The board has the power to veto any investments made under its general supervision.

(5) The board shall:

(a) assist agencies with public money to determine if, when, and how much surplus cash is available for investment;

(b) determine the amount of surplus treasury cash to be invested;

(d) prepare the claim to pay for the investment; and

(e) keep an account of the total of each investment fund and of all the investments belonging to the fund and a record of the participation of each treasury fund account in each investment fund.

(6) The board may:

(a) execute deeds of conveyance transferring all real property obtained through foreclosure of any investments purchased under the provisions of 17-6-211 when full payment has been received for the property;

(b) direct the withdrawal of any funds deposited by or for the state treasurer pursuant to 17-6-101 and 17-6-105;

(c) direct the sale of any securities in the program at their full and true value when found necessary to raise money for payments due from the treasury funds for which the securities have been purchased;

(d) expend funds needed to cover costs of necessary repairs to property owned by the board as an investment. The expenditures may be made directly by the board and are statutorily appropriated, as provided in 17-7-502. Repairs that cost in excess of $2,500 must be bid, and the bid must be awarded in compliance with existing state law and regulations. Emergency repairs may be made by the board without bid if approved by the state architect.

(7) The cost of administering and accounting for each investment fund must be deducted from the income from each fund.

(8) At the beginning of each fiscal year, the board shall, from the appropriate fund, reimburse the department of commerce for the costs of administering programs established under Title 90, chapter 3, that are not covered by payback funds available from the account established in 90-3-305."

Section 4. Section 17-6-302, MCA, is amended to read:

"17-6-302. Definitions. As used in this part, unless the context requires otherwise, the following definitions apply:

(1) "Board" means the board of investments created in 2-15-1808.

(2) "Capital company" means a Montana capital company created pursuant to Title 90, chapter 8.

(3) "Clean and healthful environment" means an environment that is relatively free from pollution that threatens human health, including as a minimum, compliance with federal and state environmental and health standards.

(4) "Department" means the department of commerce provided for in 2-15-1801.

~~(4)~~(5) "Employee-owned enterprise" means any enterprise at least 51% of whose stock, partnership interests, or other ownership interests is owned and controlled by residents of Montana each of whose principal occupation is as an employee, officer, or partner of the enterprise.

~~(5)~~(6) "Financial institution" includes but is not limited to a state- or federally chartered bank or a savings and loan association, credit union, or development corporation created pursuant to Title 32, chapter 4.

~~(6)~~(7) "Loan participation" means loans or portions ~~thereof~~ of loans bought from a financial institution and does not include the purchase of debentures issued by a capital company.

~~(7)~~(8) "Locally owned enterprise" means any enterprise 51% of whose stock, partnership interests, or other ownership interests ~~are~~ is owned and controlled by residents of Montana.

~~(8)~~(9) "Long-term benefit to the Montana economy" means an activity that strengthens the Montana economy and that has the potential to maintain and create jobs, increase per capita income, or increase Montana tax ~~revenues~~ revenue in the future to the people of Montana, either directly or indirectly.

~~(9)~~(10) "Montana economy" means any business activity in the state of Montana, including those ~~which~~ that continue existing jobs or create new jobs in Montana.

~~(10)~~(11) "Service fees" means the fees normally charged by a financial institution for servicing a loan, including amounts charged for collecting payments and remitting amounts to the fund."

Section 5. Section 17-6-305, MCA, is amended to read:

"17-6-305. Investment of up to twenty-five percent of coal tax trust fund in Montana economy -- report by board. (1) Subject to the provisions of 17-6-201(1), the board shall endeavor to invest up to 25% of the permanent coal tax trust fund established in 17-6-203(6) in the Montana economy, with special emphasis on investments in new or expanding locally owned enterprises. Investments made pursuant to this section do not include investments made pursuant to 17-6-309(2). For purposes of calculating the 25% of the permanent coal tax trust fund, the board shall include all funds listed in 17-5-703(1). The portion of the permanent coal tax trust fund contained in portfolios formerly administered by the Montana board of science and technology development and administered by the department pursuant to ~~17-6-308(3)~~ part 5 of this chapter ~~may~~ is ~~not be~~ included in the 25% of the trust fund allocated to the board for in-state investment under this section.

(2) In determining the probable income to be derived from investment of this revenue, the long-term benefit to the Montana economy must be considered.

(3) The legislature may provide additional procedures to implement this section.

(4) The board shall include a report on the investments made under this section as a part of the information required by 17-7-111."

Section 6. Section 17-6-308, MCA, is amended to read:

"17-6-308. Authorized investments. (1) Except as provided in subsections (2) and (3) and subject to the provisions of 17-6-201, the Montana permanent coal tax trust fund must be invested as authorized by rules adopted by the board.

(2) The board may make loans from the permanent coal tax trust fund to the capital reserve account created pursuant to 17-5-1515 to establish balances or restore deficiencies in the account. The board may agree in connection with the issuance of bonds or notes secured by the account or fund to make the loans. Loans must be on terms and conditions determined by the board and must be repaid from revenue realized from the exercise of the board's powers under 17-5-1501 through 17-5-1518 and 17-5-1521 through 17-5-1529, subject to the prior pledge of the revenue to the bonds and notes.

(3) The ~~board~~ department shall ~~allow~~ manage the seed capital and research and development loan portfolios created by the former Montana board of science and technology development, provided for in 2-15-1818, to administer $12.5 million of the permanent coal tax trust fund for seed capital project loans or mezzanine financing loans and $11.1 million of the permanent coal tax trust fund for research and development project matching funds for projects at Montana public universities. This authority does not extend beyond June 30, 1997, for seed capital project loans and beyond June 30, 1997, for research and development projects. The department shall establish an appropriate repayment schedule for all outstanding research and development loans made to the university system. The department shall report the schedule to the 56th legislature. The department shall develop a business investment strategy for investing in Montana business and shall present the proposal to the 56th legislature. The department is the successor in interest to all agreements, contracts, loans, notes, or other instruments entered into by the Montana board of science and technology development as part of the seed capital and research and development loan portfolios. Until the ~~Montana board of science and technology development~~ department makes a loan pursuant to the provisions of ~~Title 90,~~ part 5 of this chapter 3, the $915,000 in funds under its administration must be invested by the board pursuant to the provisions of 17-6-201. As ~~seed capital and mezzanine financing~~ loans made pursuant to part 5 of this ~~subsection~~ chapter are repaid, the ~~Montana board of science and technology development~~ department may reinvest the principal in new loans pursuant to part 5 of this chapter.

(4) The board shall adopt rules to allow a nonprofit corporation to apply for economic assistance. The rules must recognize that different criteria may be needed for nonprofit corporations than for for-profit corporations.

(5) Beginning July 1, 1999, all repayments proceeds in excess of $4.395 million must be deposited in the coal severance tax permanent fund. In the fiscal year ending June 30, 1998, the department shall transfer $250,000 from the interest and earnings from job investment loans to the Montana supreme court to be used to fund the judges' retirement system."

Section 7. Section 17-6-308, MCA, is amended to read:

(3) The board shall allow the Montana board of science and technology development, provided for in 2-15-1818, to administer $12.5 million of the permanent coal tax trust fund for seed capital project loans or mezzanine financing loans and $11.1 million of the permanent coal tax trust fund for research and development project matching funds for projects at Montana public universities. [The board may grant up to $2 million of interest and income from investments to research and development projects at Montana public universities. The research and development projects may include grant matching fund purposes.] This authority does not extend beyond June 30, ~~1997~~ 1999, for seed capital project loans and beyond June 30, ~~1997~~ 1999, for research and development projects. Except for $915,000, all uncommitted seed capital funds must revert to the coal severance tax permanent fund. The department may use up to $75,000 each year of the seed capital funds for administrative purposes. The board of science and technology development, with the concurrence of the director of the department, may extend an additional loan to an existing seed capital portfolio company by up to $700,000. In the fiscal year ending June 30, 1998, the department shall transfer $250,000 of interest and earnings to the Montana supreme court to be used to fund the judges' retirement system. Until the Montana board of science and technology development makes a loan pursuant to the provisions of Title 90, chapter 3, the funds under its administration must be invested by the board pursuant to the provisions of 17-6-201. As seed capital and mezzanine financing loans made pursuant to this subsection are repaid, ~~the Montana board of science and technology development may reinvest the principal in new loans~~ the proceeds of the seed capital portion of the Montana board of science and technology development loans must be deposited in the coal severance tax permanent fund until all loans have been repaid plus the amount of 7% simple interest for the years that the loans have been outstanding. The board shall calculate the amount of the interest charge. The board may use up to $25,000 of the repayments for administrative costs in the fiscal year ending June 30, 1997.

Section 8. Section 17-6-503, MCA, is amended to read:

"17-6-503. Definitions. As used in this part, unless the context requires otherwise, the following definitions apply:

~~(1) "Board" means the Montana board of science and technology development provided for in 2-15-1818.~~

~~(2)~~(1) "Department" means the department of commerce provided for in 2-15-1801.

(2) "Job investment administrative account" means the account established in 17-6-509.

~~(3)~~(3) "Loan review committee" means the committee that is established by the department to consider economic development loan applications for funding by the federal community development block grant program and that is responsible for reviewing and recommending to the ~~board~~ department the approval or denial of job investment loans subject to this part and rules implementing this part.

~~(4)~~(4) "Qualified business" means a business enterprise that either is or will be located in the state and that produces goods or provides services that will, as a result of receiving a job investment loan, create jobs for Montana workers."

Section 9. Section 17-6-509, MCA, is amended to read:

"17-6-509. Job investment administrative account. There is a job investment administrative account in the state special revenue fund. The department shall deposit up to 20% of interest payments on job investment loans into the account. Money in the account must be used to pay the costs of administering this part, including personnel costs, operating costs, and administrative costs. Interest payments must be deposited into the coal severance tax income fund established in 17-5-703."

Section 10. Section 17-6-510, MCA, is amended to read:

"17-6-510. Loan review committee -- conflict of interest -- servicing of loans. (1) The department shall establish a loan review committee to administer this part. The committee shall accept and review loan applications pursuant to rules adopted by the department. The committee shall recommend to the ~~board~~ department the approval or disapproval of loans. A loan may not exceed $500,000.

(2) If a member of the committee has a financial interest in a business that submits a job investment loan application, then the application must be denied.

(3) The department ~~shall~~ may contract for the servicing of loans.

(4) The department is the successor in interest to all agreements, contracts, loans, notes, or other instruments entered into under this part."

Section 11. Section 17-7-502, MCA, is amended to read:

"17-7-502. Statutory appropriations -- definition -- requisites for validity. (1) A statutory appropriation is an appropriation made by permanent law that authorizes spending by a state agency without the need for a biennial legislative appropriation or budget amendment.

(2) Except as provided in subsection (4), to be effective, a statutory appropriation must comply with both of the following provisions:

(a) The law containing the statutory authority must be listed in subsection (3).

(b) The law or portion of the law making a statutory appropriation must specifically state that a statutory appropriation is made as provided in this section.

(3) The following laws are the only laws containing statutory appropriations: 2-9-202; 2-17-105; 2-18-812; 3-5-901; 5-13-403; 10-3-203; 10-3-310; 10-3-312; 10-3-314; 10-4-301; 15-1-111; 15-23-706; 15-30-195; 15-31-702; 15-37-117; 15-38-202; 15-65-121; 15-70-101; 16-1-404; 16-1-410; 16-1-411; 16-11-308; 17-3-106; 17-3-212; 17-5-404; 17-5-424; 17-5-804; 17-6-101; 17-6-201; 17-7-304; 18-11-112; 19-2-502; 19-6-709; 19-9-1007; 19-17-301; 19-18-512; 19-18-513; 19-18-606; 19-19-205; 19-19-305; 19-19-506; 20-8-107; 20-8-111; 20-9-361; 20-26-1503; 23-5-136; 23-5-306; 23-5-409; 23-5-610; 23-5-612; 23-5-631; 23-7-301; 23-7-402; 32-1-537; 37-43-204; 37-51-501; 39-71-503; 39-71-907; 39-71-2321; 39-71-2504; 44-12-206; 44-13-102; 50-4-623; 50-5-232; 50-40-206; 53-6-150; 53-6-703; 53-24-206; 60-2-220; 67-3-205; 75-1-1101; 75-5-1108; 75-6-214; 75-11-313; 76-12-123; 80-2-103; 80-2-222; 80-4-416; 81-5-111; 82-11-136; 82-11-161; 85-1-220; 85-20-402; ~~90-3-301;~~ 90-4-215; 90-6-331; 90-7-220; 90-7-221; and 90-9-306.

(4) There is a statutory appropriation to pay the principal, interest, premiums, and costs of issuing, paying, and securing all bonds, notes, or other obligations, as due, that have been authorized and issued pursuant to the laws of Montana. Agencies that have entered into agreements authorized by the laws of Montana to pay the state treasurer, for deposit in accordance with 17-2-101 through 17-2-107, as determined by the state treasurer, an amount sufficient to pay the principal and interest as due on the bonds or notes have statutory appropriation authority for the payments. (In subsection (3): pursuant to sec. 7, Ch. 567, L. 1991, the inclusion of 19-6-709 terminates upon death of last recipient eligible for supplemental benefit; and pursuant to sec. 7(2), Ch. 29, L. 1995, the inclusion of 15-30-195 terminates July 1, 2001.)"

Section 12. Section 90-8-201, MCA, is amended to read:

"90-8-201. Certification of Montana capital companies -- certification of a Montana small business investment capital company. (1) The department shall certify one Montana small business investment capital company, and from time to time, the department shall certify Montana capital companies. A company seeking to be certified as a Montana capital company or as the Montana small business investment capital company shall make written application to the department on forms provided by the department. The application must contain the information required by 90-8-204 and other information that the department requires. The application and certificate must specify the level of capitalization that the company expects to qualify for the tax credits provided for in 90-8-202.

(2) The application must show that the applicant's purpose is to increase the general economic welfare of the state of Montana by:

(a) making investment capital available to businesses in Montana; and

(b) allowing for investment of up to 25% of its capital base in businesses outside Montana if there is a substantial likelihood that ~~such~~ the investment will produce a qualified investment in Montana.

(3) Certifiable applicants include but are not limited to local and community development corporations, small business administration 503 corporations, and small business investment companies.

(4) Certification is a prerequisite to and must be completed before seeking designation as a qualified capital company or as the qualified Montana small business investment capital company.

(5) To be eligible for certification under this section as the Montana small business investment capital company, the applicant shall commit to:

(a) ~~utilize~~ using the tax credits to accumulate private capital with the intention of being designated a small business investment corporation by the United States small business administration as provided in Title III of the Small Business Investment Act of 1958, as amended, and as implemented under 13 CFR 107;

(b) ~~target~~ targeting its investments as a small business investment capital company toward commercialization projects emerging from centers of excellence and entrepreneurship, federal laboratories, the federal small business innovative research program, the federal cooperative research and development agreement program, Montana university system research and development, ~~the Montana board of science and technology development (second stage),~~ small business incubators, community development block grant programs, and projects emerging from economic development programs of Montana certified communities, with the objective of providing significant investment opportunities in an area where economic development capital is limited;

(d) ~~adopt~~ adopting investment guidelines that ensure that not less than 10% of its available capital is invested in counties with populations of 20,000 or less."

Section 13. Repealer. Sections 2-15-1818, 90-3-101, 90-3-102, 90-3-201, 90-3-202, 90-3-203, 90-3-204, 90-3-301, 90-3-303, 90-3-304, 90-3-305, 90-3-501, 90-3-502, 90-3-503, 90-3-504, 90-3-505, 90-3-506, 90-3-519, 90-3-520, 90-3-521, 90-3-522, 90-3-523, 90-3-524, 90-3-525, and 90-3-901, MCA, are repealed.

Section 14. Saving clause. [This act] does not affect rights and duties that matured, penalties that were incurred, or proceedings that were begun before [the effective date of this act].

Section 15. Coordination instruction. (1) If House Bill No. 2 is vetoed, then the bracketed language in [section 7] is void.

(2) If the bracketed language in [section 7] is effective, then the $1 million for each fiscal year appropriated from the state special revenue account for university system research contained in House Bill No. 2 is void.

Section 16. Effective dates. (1) Except as provided in subsection (2), [this act] is effective July 1, 1999.

(2) [Sections 1, 6(5), and 7 and this section] are effective on passage and approval, and [section 7] applies retroactively, within the meaning of 1-2-109, to investment payments received on or after April 1, 1997.

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