Investment Statutes and Guidelines
State statute governs the investment of the State's operating and restricted cash (i.e. nonpension funds) through two sections. One statute provides a list of eligible investments for all public monies while the latter governs trust funds (the Trust Investment Account) with a longer horizon. In addition, the Treasurer's Office issues additional guidance that is reviewed periodically, to assure that the three investment objectives -- safety, liquidity, and yield -- are met.
State Statutes Pertaining to Cash Management
This is an unofficial copy of the pertinent Vermont Statutes Annotated, provided as a convenience. It has not been edited for publication. It is current as of the 2003 legislative session.
The "official" version of the Vermont Statutes Annotated is online at LexisNexis Publishing. The LexisNexis site includes the Vermont Statutes, the Vermont Court Rules, and a sophisticated search capability.
§ 433. Investment of state money
(a) Investments of state funds shall be made in:
(1) obligations of the United States, its agencies and instrumentalities, which have a liquid market with readily determinable market value;
(2) certificates of deposit and other evidences of deposit at banks and savings and loan associations approved by the treasurer;
(3) bankers' acceptances issued by domestic banks where the guaranteeing bank is rated in the highest tier assigned to the investments by at least two nationally recognized rating agencies;
(4) commercial paper rated in the highest tier by at least two nationally recognized rating agencies;
(5) investment-grade obligations of state or local governments, instrumentalities, and public authorities;
(6) repurchase agreements whose underlying purchased securities consist of any of the investments specified in subdivisions (1) through (5) of this subsection;
(7) investment agreements or guaranteed investment contracts rated or guaranteed by a financial institution whose senior long-term debt obligations are rated, at the time such agreement or contract is entered into, in the highest tier assigned to such investments by a nationally recognized rating agency, and where the treasurer has the option to terminate each agreement in the event such rating is downgraded below the highest rating tier; and
(8) money market mutual funds that either are regulated by the securities and exchange commission and whose portfolios consist only of dollar-denominated securities or are managed in a manner consistent with Rule 2a-7 of the Investment Company Act of 1940.
(b) Investments of state funds shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived.
(c) Investments of state funds shall be made in accordance with written guidelines adopted by the treasurer. Such guidelines shall address the liquidity, diversification, safety of principal, yield, maturity and quality and capability of investment management, with primary emphasis on safety and liquidity. (Amended 1991, No. 238 (Adj. Sess.), § 1, eff. May 28, 1992; 2005, No. 46, § 1.)
§ 434. Investment of certain funds
(a)(1) A "trust investment account" is hereby created to maximize the earnings of individual funds by associating them together for common investment.
(2) The trust investment account may include:
(A) the whole or any part of individual trust funds resulting from court settlements, private bequests, grants, or other awards accepted in accordance with section 5 of this title, provided the terms thereof do not require a separate investment.
(B) the whole or any part of the funds created by express enactment of the general assembly to finance particular or restricted programs that provide that only investment earnings of the fund shall be used for program purposes, including but not limited to, the Vermont higher education endowment trust fund established pursuant to section 2885 of Title 16.
(C) any other funds which the state treasurer identifies, in consultation with the secretary of administration, as appropriate for inclusion in the account.
(3) The state treasurer may invest and reinvest the funds in the account, and hold, purchase, sell, assign, transfer and dispose of the investments in accordance with the standard of care established by the prudent investor rule under chapter 147 of Title 9. The treasurer shall apply the same investment objectives and policies adopted by the Vermont state employees' retirement system, where appropriate, to the investment of funds in the trust investment account.
(4) At reasonable intervals, but at least annually in June of each fiscal year, the treasurer shall credit each individual fund in the trust investment account with a pro rata share of the net income of the account. The value of the individual funds transferred to or withdrawn from the trust investment account shall be on the basis of the fair market value of the total funds of the account at the time of the transfer or withdrawal. The treasurer may withdraw monies from the account as permitted or required by the terms of the individual funds or as required by acts of the general assembly.
(5) Annually, the treasurer shall prepare a report on the financial activity of the trust investment account.
(b) The state treasurer may invest and reinvest the monies deposited into the tobacco litigation settlement fund established by section 435a of this title, and may hold, purchase, sell, assign, transfer and dispose of the investments in accordance with the standard of care established by the prudent investor rule under chapter 147 of Title 9.
(Added 1999, No. 66 (Adj. Sess.), § 60, eff. Feb. 8, 2000.)