This section includes summaries-- developed by the Office of Legislative Research -- of certain key legislation passed by the 2000 Connecticut General Assembly which was advocated by and/or is within the jurisdiction of the Office of State Treasurer.
Powers and Duties of the State Treasurer and the Investment Advisory Council
Public Act 00-43
This act establishes additional oversight and disclosure requirements for state pension investments and places additional ethics, revolving door, and campaign donation limits on the members of the Investment Advisory Council (IAC), the treasurer, candidates for treasurer, and treasury employees and contractors. The Act:
- Prohibits the state treasurer from negotiating for, seeking, or accepting a job with any party to an investment services contract valued at $50,000 or more that she authorized, negotiated, or renegotiated for one year after her term ends;
- Prohibits the treasurer, the deputy treasurer, candidates for treasurer, and IAC members from soliciting campaign contributions from owners and employees of investment services firms that do business with the;
- Extends the ban on such owners and employees making or soliciting contributions to or for treasurer candidates to cover all candidates;
- Prohibits the appointed members of the IAC (the 5 union and 5 public members) from making campaign contributions to, or soliciting contributions for, a candidate for treasurer;
- Subjects the IAC’s appointed members to the State Ethics Code and requires all IAC members to file annual financial disclosure statements with the State Ethics Commission; and
- Increases the limit on state trust fund common stock investments from 55% to 60% but lets the percentage rise to 65% for up to six months in the event of market fluctuations.
The act requires the treasurer, with IAC approval, to adopt a policy for investing state retirement and benefit funds (trust funds). It enhances the IAC’s authority to review investments and investment services contracts and requires IAC approval for certain investments by lame-duck or acting treasurers.
It requires the treasurer, with IAC approval, to appoint a chief investment officer for the Connecticut retirement, pension, and trust funds and set his compensation. This officer replaces the assistant treasurer for investments.
The act restricts the governor’s power to appoint someone to fill a vacancy in the Office of Treasurer when the General Assembly is not in session. It also requires the deputy treasurer to fill out any vacancy that occurs in a year when a regular election for treasurer is scheduled.
The act requires prior disclosure of third-party fees the treasurer and quasi-public agencies pay in connection with securities investment contracts, and bars the treasurer, her agents, and employees from directing the payment of third-party fees or making personal use of credits or other valuable items given by a broker or firm in connection with trust fund investments.
The act bans anyone from paying or receiving “finder’s fees,” including lobbying fees, in connection with any transaction involving the state, a quasi-public agency, or a political subdivision. The ban does not apply to compensation paid to investment professionals for specified investment-related services or to licensed real-estate brokers and salespeople.
Finally, the act imposes civil penalties for violating the third-party and finder’s fee provisions.
(Effective on passage, except the provisions raising the limit on investments in stock and requiring the treasurer to invest trust funds according to the investment policy are effective January 1, 2001).
Individual Development Accounts
Public Act 00-192
This act establishes a statewide individual development account (IDA) program that allows certain low-income and qualified disabled people to open savings accounts and receive matching funds as an incentive for saving for specified purposes.
Purpose and Eligibility
The act establishes a statewide IDA program, called the “Connecticut IDA Initiative,” to be run by the state Labor Department through eligible tax-exempt, nonprofit community-based organizations. Under the act, an IDA is a savings account in a state-certified IDA program that contains an individual’s funds, which he may withdraw solely for one of several permissible purposes. The IDA program encourages low-income employed people and qualified disabled people to save for specified purposes by matching the money they deposit in the account. The maximum match ratio is $2 for every $1 a participant deposits; the match cannot exceed $1,000 per calendar year and $3,000 for the program’s duration.
The act makes someone eligible for the program if he has earned income and belongs to a household whose adjusted gross income is not over 80% of the area median income. But someone who has no earned income solely because of a qualified disability can also participate. Withdrawals from the accounts can be used only for (1) education and job training costs, (2) a home purchase, (3) entrepreneurial activity, (4) an automobile purchase to obtain or maintain employment, or (5) a lease deposit on a primary residence.
Labor Department Responsibilities
The act requires the Labor Department (DOL), in accordance with regulations the commissioner adopts, to establish and administer an “Individual Development Account Reserve Fund.” This is a nonlapsing fund to provide matching funds for IDA accounts in state-certified IDA programs. The fund can also provide money for the community-based organizations’ operating and administrative costs and the DOL’s administrative costs for the Initiative.
The department must:
- Establish and operate, either directly or through contract with another entity, a clearinghouse to provide interested community organizations with literature on federal, state, and other funding sources, guidelines for best practices and program standards, and information on starting and maintaining certified IDA programs;
- Solicit, review, and accept or reject proposals by community organizations that meet the requirements in regulations issued under this act to operate state-certified IDA programs on a not-for-profit basis; and
- Perform appropriate monitoring, evaluation, and oversight functions.
IDA Reserve Fund
The act requires all state appropriations for the IDA Initiative, as well as grants, donations, contributions, or other revenue sources received for the program, to be deposited in the IDA Reserve Fund. The Reserve Fund must be used for grants the community organizations to provide matching funds for the IDAs in their programs and to help the organizations provide training, counseling, case management, and administration. The fund can also pay for evaluation, clearinghouse operations, and DOL administrative expenses. The department determines the proportion of the reserve fund to use for each purpose and sets the maximum amount of reserve funds that an organization can use for training, counseling, case management, and administration.
The act specifies procedures for administering the fund. It prohibits making new grants unless there is enough money in the fund to meet all existing obligations, including the maximum state matching funds that would be needed if each participant meets the savings goal in his approved plan. The act allows money remaining in the fund at the end of a fiscal year to be carried over to the next year.
The act specifies that, regardless of its provisions, any state or federal restrictions on funding expenditures apply.
Community-Based Organizations’ Responsibilities
The act requires each organization operating a state-certified IDA program to establish, through a financial institution:
- A trust or custodial account conforming to federal requirements for each program participant, into which he can deposit savings and
- A local reserve fund, separate from the participants’ IDA accounts, into which the DOL must deposit money from the state reserve fund, including matching grant funds, and funds it receives from other sources.
The organization must certify to the DOL that it has complied with these requirements. It must also monitor participants’ earned income and use its best efforts to ensure that at least 30% of account holders have earned income at or below 200% of the federal poverty level.
Financial Institutions’ Responsibilities
A financial institution establishing a trust or custodial account for a program participant must permit him to make deposits into the account and must pay a market interest rate.
The act authorizes the DOL and the organizations to solicit grants and private contributions for the state reserve fund and for the local reserve funds. It also specifies that community-based organizations or other entities are not precluded from establishing an IDA account program and receiving matching funds from sources other than the state reserve fund.
If a participant withdraws his money from the account because he decides to leave the program, he forfeits all matching funds designated for him. The organization must return these unused matching funds to the DOL for redeposit into the Reserve Fund by December 31 of that year. But if the withdrawal is because of an emergency, as defined in department regulations, or for reasons other than leaving the program, the organization can keep the funds in its local reserve fund until the participant redeposits his money or leaves the program.
When the participant has deposited enough to meet his savings goal, the organization must pay that sum and the matching funds from the local reserve account directly to the person or entity providing the qualifying goods or services. If the organization has not paid out matching funds for an account within five years because the participant has not made the required contributions, the matching funds must go back to the state reserve fund. But the act lets an organization grant a participant up to a two-year leave of absence or extension.
Program Evaluation and Report
The act requires the DOL to evaluate the IDA Initiative at the end of each fiscal year and to provide a comprehensive report to the House speaker and Senate president pro tempore by the following February 1, beginning with FY 2000-01.
The act requires the labor commissioner, in consultation with the state treasurer, to adopt implementing regulations. The regulations must establish standards and guidelines for the certified state IDA programs, including:
- income eligibility requirements;
- permissible savings goals;
- services that each program must provide to help participants meet their savings goals including credit history assessments, assistance in credit repair and on-going credit stability, general financial education and asset-specific training, case management, and other support services;
- procedures and timelines for opening savings accounts and making deposits;
- allowable uses of matching funds;
- procedures and permissible reasons for emergency withdrawals and leaves of absence;
- accounting and financial reporting procedures;
- content of and deadlines for organizations’ program and evaluation reports;
- required components of the approved plan (a plan prepared jointly by the account holder and the organization, as a contract between them, that defines savings goals, program requirements, and permissible uses of the IDA account and its matching funds);
- program approval, certification, suspension, and decertification processes; and
- application and implementation of state or federal restrictions or requirements.
The regulations must specify the process and criteria for the DOL to solicit proposals from organizations to operate the programs, certify them, and allocate funds. Criteria must include the organization’s level of competence in meeting all financial and program requirements, its fiscal capacity to meet financial obligations, and its geographic location.
Treasurer Nappier’s Treasury Reform agenda, proposed in 2000.