SENATE BILL NO. 495
INTRODUCED BY F. THOMAS, HALLIGAN, BECK, BERRY, BUTCHER, DEPRATU, DOHERTY, ELLIS, GLASER, GROSFIELD, JERGESON, LEWIS, MAHLUM, MCGEE, MCNUTT, NELSON, RYAN, SHEA, TESTER, SLITER, BOHLINGER
AN ACT REVISING SCHOOL FUNDING THROUGH THE USE OF THE PUBLIC SCHOOL FUND; REVISING THE STRUCTURE OF THE PUBLIC SCHOOL FUND; AUTHORIZING THE BOARD OF INVESTMENTS TO PURCHASE THE MINERAL PRODUCTION RIGHTS HELD BY THE PUBLIC SCHOOL FUND; PROVIDING THAT A PORTION OF ROYALTY PAYMENTS ON THE PURCHASED MINERAL PRODUCTION RIGHTS MUST BE DEPOSITED IN THE GUARANTEE ACCOUNT; LOANING MONEY FROM THE COAL SEVERANCE TAX PERMANENT FUND TO THE DEPARTMENT OF NATURAL RESOURCES AND CONSERVATION FOR THE PURCHASE OF THE MINERAL PRODUCTION RIGHTS; APPROPRIATING THE LOAN PROCEEDS; REQUIRING REPAYMENT OF THE EXPENDED AMOUNTS FROM MINERAL ROYALTY PROCEEDS; DELETING THE PROHIBITION ON PUBLIC FUND INVESTMENT IN CORPORATE STOCK CONTINGENT ON THE PASSAGE OF THE CONSTITUTIONAL AMENDMENT ALLOWING INVESTMENT IN CORPORATE STOCK; AMENDING SECTIONS 17-6-201, 77-2-303, AND 77-2-304, MCA; AND PROVIDING EFFECTIVE DATES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
Section 1. Definition. (1) As used in [sections 1 through 3] "distributable revenue" means 95% of all revenue from the management of school trust lands and the permanent fund, including timber sale proceeds, lease fees, interest, dividends, and net realized capital gains.
(2) The term does not include mineral royalties or land sale proceeds that are deposited directly in the permanent fund or net unrealized capital gains that remain in the permanent fund until realized.
Section 2. Permanent fund. (1) The public school fund provided for in Article X, section 2, of the Montana constitution consists of the permanent fund, which consists of the permanent corpus fund.
(2) The permanent fund must be invested for the purpose of generating future income for distribution to public elementary and secondary school districts as provided in Article X, section 5, of the Montana constitution.
Section 3. Guarantee account. (1) There is a guarantee account in the state special revenue fund. The guarantee account is intended to stabilize the long-term growth of the permanent fund and to maintain a constant and increasing distributable revenue stream. All realized capital gains and all distributable revenue must be deposited in the guarantee account. Except as provided in subsection (2), the guarantee account must be distributed to school districts through the basic and per-ANB entitlements.
(2) As long as a portion of the coal severance tax loan authorized in [section 8] is outstanding, the department shall annually transfer from the guarantee account to the general fund an amount that represents the amount of interest income that would be earned from the investment of the amount of the loan that is outstanding in the prior year.
Section 4. Purchase of permanent fund mineral estate. The department of natural resources and conservation may purchase the mineral production rights held by the public school fund established in Article X, section 2, of the Montana constitution for fair market value. If the department of natural resources and conservation purchases mineral production rights, any royalty payments received by the board that are not used to reimburse the coal severance tax trust fund for the loan used for purchasing the mineral production rights must be deposited in the guarantee account provided for in [section 3].
Section 5. 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 an 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.
(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 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;
(c) determine the type of investment to be made;
(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 real property obtained through investments. Prior to the transfer of real property directly purchased and held as an investment, the board shall obtain an appraisal by a qualified appraiser.
(b) direct the withdrawal of funds deposited by or for the state treasurer pursuant to 17-6-101 and 17-6-105;
(c) direct the sale of 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.
(7) The cost of administering and accounting for each investment fund must be deducted from the income from each fund."
Section 6. Section 77-2-303, MCA, is amended to read:
"77-2-303. Restrictions on land available for sale. (1) Lands Subject to purchase by the department pursuant to
[section 4], land that in the judgment of the board are department is likely to contain valuable deposits of coal, oil, oil shale,
phosphate, metals, sodium, or other valuable mineral deposits are is not subject to sale of either the surface land or any of
the mineral deposits. However, this subsection does not prohibit the sale of lands containing sand, gravel, building stone,
brick clay, or similar materials.
(2) (a) There is reserved from sale from all state lands land bordering on navigable lakes, nonnavigable meandered
lakes, and navigable streams, that the board considers in the best interests of the state, a strip of land that includes all the
land lying between low-water mark and high-water mark and that extends in width landward from the line of high-water
mark of the lake or stream the full width of the 40-acre tract or government lot abutting the line of high-water mark. If the
width of the abutting government lot at its narrowest point is less than 100 feet, then the strip reserved must extend to and
include the next adjoining 40-acre tract or government lot. The land reserved from sale by this subsection is subject to the
granting of easements the same as other state lands.
(b) Strips of land bordering on meandering lakes or on navigable streams, except the strip lying between low-water and high-water mark, whether surveyed and platted into blocks and lots or not, may be leased as provided in this title for the leasing of other state lands."
Section 7. Section 77-2-304, MCA, is amended to read:
"77-2-304. Mineral reservations in state lands land. All coal, oil, oil shale, gas, phosphate, sodium, and other
mineral deposits in state lands land, except sand, gravel, building stone, and brick clay, which were not reserved by the
United States before July 1, 1927, are reserved to the state. All Subject to [section 4], those deposits are reserved from sale
except upon a rental and royalty basis as provided by law. A purchaser of state lands land acquires no right, title, or interest
in or to any of those deposits. The state also reserves for itself and its lessees the right to enter upon these lands state land to
prospect for, develop, mine, and remove those mineral deposits and to occupy and use so much of the surface of the lands
land as may be required for all purposes reasonably extending to the exploring for, mining, and removal of the deposits
therefrom from the land, but the lessee shall make just payment to the purchaser for all damage done by reason of such
entry upon the land and the use and occupancy of the surface thereof of the land."
Section 8. Coal severance tax loan -- rate of interest -- appropriation. (1) There is appropriated to the department of natural resources and conservation from the coal severance tax permanent fund an amount not to exceed $75 million for the biennium ending June 30, 2003, for the purpose of purchasing mineral production rights as provided in [section 4]. The department shall deposit the appropriated loan proceeds in the guarantee account provided for in [section 3].
(2) The interest to be paid on the loan authorized under subsection (1) must be at the long-term investment rate. The interest is payable as of the date of the transfer of the loan proceeds from the coal severance tax permanent fund to the department.
Section 9. Loan agreement. (1) In order to make the loan authorized in [section 8], the board of investments shall enter into a contract with the department of natural resources and conservation pledging the percentage of mineral royalties to the repayment of the loan over a period of 30 years. The loan agreement may not require a payment on the loan until fiscal year 2004. In fiscal years 2004 and 2005, 20% of the mineral royalties deposited in the guarantee account provided for in [section 3] must be pledged to the loan repayment. In fiscal years 2006 through 2011, not less than 25% of the mineral royalties deposited in the guarantee account must be pledged to the loan repayment, and in succeeding fiscal years, not less than 34% of the mineral royalties deposited in the guarantee account must be pledged to the loan repayment until the loan is fully paid.
(2) The contract must provide that the loan repayment proceeds be deposited in the coal severance tax permanent fund. To the extent possible, the board of investments shall make the loan from the portion of the coal severance tax permanent fund invested in the short-term pool. The loan authorized in [section 8] may not be made until the contract required by this section has become effective.
Section 10. Codification instruction. (1) [Sections 1 through 3] are intended to be codified as an integral part of Title 20, chapter 9, and the provisions of Title 20, chapter 9, apply to [sections 1 through 3].
(2) [Section 4] is intended to be codified as an integral part of Title 17, chapter 6, part 3, and the provisions of Title 17, chapter 6, part 3, apply to [section 4].
Section 11. Three-fourths vote. Because [section 8] appropriates money from the coal severance tax permanent fund, Article IX, section 5, of the Montana constitution requires a vote of three-fourths of the members of each house of the legislature for passage.
Section 12. Coordination. If House Bill No. 41 and [this act] are both passed and approved, then the references to the state equalization aid account contained in 20-9-343(3) in [section 3] of House Bill No. 41 are changed to references to the guarantee account provided for in [section 3 of this act].
Section 13. Effective dates. (1) [Sections 1 through 4 and 6 through 12 and this section] are effective July 1, 2001.
(2) [Section 5] is effective January 1, 2003, if Senate Bill No. 493 is approved by the electorate.
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