J o u r n a l   o f   t h e   S e n a t e


                                SIXTY-SIXTH DAY
                                    --------


                                                SENATE CHAMBER, TOPEKA,
     KANSAS
                                                Sunday, May 4, 1997--2:00 p.m.

  The Senate was called to order by President Dick Bond.
  The roll was called with thirty-nine senators present.
  Senator Gooch was excused.
  President Bond introduced as guest chaplain, Senator Anthony Hensley, Topeka,
who delivered the invocation:
     Heavenly Father,
     The first name in the roll call is Barone.
     Give him guidance to make your work his own.
     Next is Becker, Biggs, Bleeker and Bond.
     Help them to feel your strength to carry on.
     Then there's Brownlee, Clark, Corbin, Donovan and Downey, too,
     Let them feel refreshed as we start this day anew.
     Emert, Feleciano, Gilstrap, Gooch and Goodwin,
     We pray for them, good Senators all, and good friends.
     Hardenburger, Harrington, me, Huelskamp and Jones,
     Again, we pray that the work we do is your own.
     Jordan, Karr, Langworthy, Lawrence and Lee,
     Grant them inner peace to do their best for all to see.
     Morris, Oleen, Praeger and Pugh,
     Your work in this Senate is in their hands, too.
     Next is Ranson, Salmans and Schraad, as well.
     They're also doing your good work as we can tell.
     Steffes, Steineger, Tyson and Umbarger,
     These are Senators who follow you, that's for sure.
     The last name in the roll call is Ben Vidricksen.
     Keep him strong, the loudest voice vote among these women and men.
     As I read through the roll, I intentionally left out,
     Three of our fellow members whose service is so devout.
     Long hours they spend on behalf of all of us,
     Negotiating with the House on that bill called Omnibus.
     They're the Senate conferees as it were,
     Senator Petty, Senator Salisbury and Senator Kerr.
     And as we pray to you on this Sunday afternoon,
     Give them the stamina and wisdom to end this session, soon.

MESSAGE FROM THE HOUSE

  Announcing passage of HB 2509, as amended.
  The House adopts the conference committee report on SB 132.
  The House adopts the conference committee report on SB 146.

766                          JOURNAL OF THE SENATE


INTRODUCTION OF HOUSE BILLS AND CONCURRENT RESOLUTIONS

  HB 2509 was thereupon introduced and read by title.

REFERENCE OF HOUSE BILLS

  The President referred HB 2509 to the Committee of the Whole.

ORIGINAL MOTION

  Senator Emert moved that subsection 4(k) of the Joint Rules of the Senate
and House of Representatives be suspended for the purpose of considering the
following bills: SB 132, 146.

CONFERENCE COMMITTEE REPORT

    Mr. President and Mr. Speaker: Your committee on conference on House
amend ments to SB 132, submits the following report:
  The Senate accedes to all House amendments to the bill, and your committee
on con ference further agrees to amend the bill, as printed with House
Committee amendments, as follows:
  On page 1, following line 14, by inserting the following:
  ``New Section 1.  (a) The director of investments shall accept requests
from banks in terested in obtaining investment accounts of state moneys. Such
requests may be submitted any business day and shall specify the dollar
amount, maturity or maturity range and interest rate. If the interest rate
bid by the bank is at or greater than the market rate determined by the
director of investments in accordance with subsection (b), the director of
investments is authorized to award the investment account to the bidding bank
at the market rate. Awards of investment accounts pursuant to this section
shall be subject to investment policies of the pooled money investment board.
When multiple bids are received and are in excess of the amount available for
investment that day for any maturity, awards shall be made available in
ascending order from smallest to largest dollar amount bid, subject to
investment policies of the board.
  (b)  The market rate shall be determined each business day by the director
of invest ments, in accordance with any procedures established by the pooled
money investment board. Subject to any policies of the board, the market rate
shall reflect the highest rate at which state moneys can be invested on the
open market in investments authorized by sub section (a) of K.S.A. 75-4209
and amendments thereto for equivalent maturities.
  New Sec. 2.  As used in article 14 of chapter 9 of the Kansas Statutes
Annotated:
  (a)  ``Bank'' means any bank incorporated under the laws of this state, or
organized under the laws of the United States and which has a main office in
this state;
  (b)  ``savings and loan association'' means any savings and loan
association incorporated under the laws of this state, or organized under the
laws of the United States and which has a main office in this state;
  (c)  ``savings bank'' means any savings bank organized under the laws of
the United States and which has a main office in this state;
  (d)  ``centralized securities depository'' means a clearing agency
registered with the se curities and exchange commission which provides
safekeeping and book-entry settlement services to its participants;
  (e)  ``municipal corporation'' or ``quasi-municipal corporation'' includes
each investing governmental unit under K.S.A. 12-1675, and amendments
thereto;
  (f)  ``main office'' means the place of business specified in the articles
of association, certificate of authority or similar document, where the
business of the institution is carried on and which is not a branch;
  (g)  ``branch'' means any office, agency or other place of business within
this state, other than the main office, at which deposits are received,
checks paid or money lent with approval of the appropriate regulatory
authorities. Branch does not include an automated teller ma chine, remote
service unit or similar device;
  (h)  ``securities,'' ``security entitlements,'' ``financial assets,''
``securities account,'' ``secu rity agreement,'' ``security interest,''
``perfection'' and ``control'' shall have the meanings given such terms under
the Kansas uniform commercial code.

                                  May 4, 1997                               767

  Sec. 3.  K.S.A. 9-1401 is hereby amended to read as follows: 9-1401. (a)
The governing body of any municipal corporation or quasi-municipal
corporation shall designate by official action recorded upon its minutes the
state and national banks, state and federally chartered savings
and loan associations and federally chartered savings banks with
home offices located in the state of Kansas which shall serve as
depositories of its funds and the officer and official having the custody of
such funds shall not deposit such funds other than at such designated banks,
state or federally chartered savings and loan associations and
federally chartered savings banks. The state and national banks,
state and federally chartered savings and loan associations and
federally chartered savings banks which have main or branch
offices in the county or counties in which all or part of such municipal
corporation or quasi-municipal corporation is located shall be designated as
such official depositories if the municipal or quasi-municipal corporation
can obtain satisfactory security therefor, and such official de positories
have a home office located in the state of Kansas. For purposes of this
subsection, banks, savings and loan associations or savings banks organized
under the laws of the United States or another state which do not have a main
office in this state, may be designated as depositories of such municipal
corporation's or quasi-municipal corporation's funds in ac cordance with this
subsection, if such banks, savings and loan associations and savings banks
have branch offices in the county or counties in which all or part of such
municipal corpo ration or quasi-municipal corporation is located, except that
such banks, savings and loan associations or savings banks shall not be
eligible to receive deposits except in accordance with subsection (c).
  (b)  Every officer or person depositing public funds shall deposit all such
public funds coming into such officer or person's possession in their name
and official title as such officer. If the governing body of the municipal
corporation or quasi-municipal corporation fails to designate an official
depository or depositories, the officer thereof having custody of its funds
shall deposit such funds with one or more state or national banks,
state or federally chartered savings and loan associations or
federally chartered savings banks which have main or branch
offices in the county or counties in which all or part of such municipal
corporation or quasi-municipal corporation is located if satisfactory
security can be obtained therefor and if not then elsewhere, but upon so
doing shall serve notice in writing on the governing body showing the names
and locations of such banks, state or federally chartered savings and
loan associations and federally chartered savings banks where such
funds are deposited, and upon so doing the officer having custody of such
funds shall not be liable for the loss of any portion thereof except for
official misconduct or for the misappropriation of such funds by such
officer.
  (c)  As used in this section and K.S.A. 9-1402, 9-1403 and 9-1405, and
amendments thereto, ``municipal corporation or quasi-municipal corporation''
includes each investing governmental unit under K.S.A. 12-1675, and
amendments thereto If eligible banks, savings and loan associations or
savings banks under subsections (a) or (b) cannot or will not provide an
acceptable bid, which shall include services, for the depositing of public
funds under this section, then banks, savings and loan associations or
savings banks organized under the laws of the United States or another state
which do not have a main office in this state, may receive deposits of such
municipal corporation or quasi-municipal corporation, if such banks, savings
and loan associations or savings banks have been designated as official
depositories under subsection (a), have branch offices in the county or
counties in which all or part of such municipal corporation or
quasi-municipal corporation is located and the municipal corporation or
quasi-municipal corporation can obtain satisfactory security therefor.
  Sec. 4.  K.S.A. 1996 Supp. 9-1402 is hereby amended to read as follows:
9-1402. (a) Before any deposit of public moneys or funds shall be made by any
municipal corporation or quasi-municipal corporation of the state of Kansas
with any state or national bank, state or federally chartered
savings and loan association or federally chartered savings bank, such
municipal or quasi-municipal corporation shall obtain security for such
deposit in one of the following manners prescribed by this section.
  (b)  Such bank, state or federally chartered savings and loan
association or federally chartered savings bank may give to the
municipal corporation or quasi-municipal corporation a personal bond in
double the amount which may be on deposit at any given time.

768                          JOURNAL OF THE SENATE

  (c)  Such bank, state or federally chartered savings and loan
association or federally chartered savings bank may give a corporate
surety bond of some surety corporation au thorized to do business in this
state, which bond shall be in an amount equal to the public moneys or funds
on deposit at any given time less the amount of such public moneys or
funds which is insured by the federal deposit insurance corporation or its
successor and such bond shall be conditioned that such deposit shall be
paid promptly on the order of the municipal corporation or quasi-municipal
corporation making such deposits.
  (d)  Any state or national Such bank, state or federally
chartered savings and loan asso ciation or federally chartered
savings bank may deposit, maintain, pledge and, assign, and
grant a security interest in, or cause its agent, trustee, wholly-owned
subsidiary or an affiliate bank having identical ownership
as the bank receiving the deposit of public moneys or funds to deposit,
maintain, pledge and, assign, and grant a security interest
in, for the benefit of the governing body of the municipal corporation or
quasi-municipal corporation in the manner provided in this act,
securities, security entitlements, financial assets and securities
accounts owned by it the depository institution directly or
indirectly through its agent or trustee holding securities on its behalf, or
owned by the depository institutions wholly-owned subsidiary or by such
affiliate bank, the market value of which is equal to 100% of the total
deposits at any given time, and such securities, security entitlements,
financial assets and securities accounts, may be accepted or rejected by
the governing body of the municipal corporation or quasi-municipal
corporation and shall consist of the following and security entitlements
thereto:
  (1)  Direct obligations of, or obligations that are insured as to principal
and interest by, the United States of America or any agency thereof and
obligations, including but not limited to letters of credit, and securities
of United States sponsored corporations which under federal law may be
accepted as security for public funds;
  (2)  bonds of any municipal corporation or quasi-municipal corporation of
the state of Kansas which have been refunded in advance of their maturity and
are fully secured as to payment of principal and interest thereon by deposit
in trust, under escrow agreement with a bank, of direct obligations of, or
obligations the principal of and the interest on which are unconditionally
guaranteed by, the United States of America;
  (3)  bonds of the state of Kansas;
  (4)  general obligation bonds of any municipal corporation or
quasi-municipal corpora tion of the state of Kansas;
  (5)  revenue bonds of any municipal corporation or quasi-municipal
corporation of the state of Kansas if approved by the state bank commissioner
in the case of banks and by the savings and loan commissioner in the case of
savings and loan associations or federally chartered savings banks;
  (6)  temporary notes of any municipal corporation or quasi-municipal
corporation of the state of Kansas which are general obligations of the
municipal or quasi-municipal corpora tion issuing the same;
  (7)  warrants of any municipal corporation or quasi-municipal corporation
of the state of Kansas the issuance of which is authorized by the state board
of tax appeals and which are payable from the proceeds of a mandatory tax
levy;
  (8)  bonds of either a Kansas not-for-profit corporation or of a local
housing authority that are rated at least Aa by Moody's Investors Service or
AA by Standard & Poor's Corp.;
  (9)  bonds issued pursuant to K.S.A. 12-1740 et seq., and amendments
thereto, that are rated at least MIG-1 or Aa by Moody's Investors Service or
AA by Standard & Poor's Corp.;
  (10)  notes of a Kansas not-for-profit corporation that are issued to
provide only the interim funds for a mortgage loan that is insured by the
federal housing administration;
  (11)  bonds issued pursuant to K.S.A. 74-8901 through 74-8916, and
amendments thereto;
  (12)  bonds issued pursuant to K.S.A. 68-2319 through 68-2330, and
amendments thereto; or
  (13)  commercial paper that does not exceed 270 days to maturity and
which has received one of the two highest commercial paper credit ratings by
a nationally recognized investment rating firm; or

                                  May 4, 1997                               769

  (13) (14) (A)  negotiable promissory notes together with first
lien mortgages on one to four family residential real estate located in
Kansas securing payment of such notes when such notes or mortgages:
  (i)  Are underwritten by the federal national mortgage association, the
federal home loan mortgage corporation, the federal housing administration or
the veterans administration standards; or are valued pursuant to rules and
regulations which shall be adopted by both the state bank commissioner and
the savings and loan commissioner after having first being submitted to and
approved by both the state banking board under K.S.A. 9-1713, and amendments
thereto, and the savings and loan board. Such rules and regulations shall be
published in only one place in the Kansas administrative regulations as
directed by the state rules and regulations board;
  (ii)  have been in existence with the same borrower for at least two years
and with no history of any installment being unpaid for 30 days or more; and
  (iii)  are valued at not to exceed 50% of the lesser of the following three
values: Out standing mortgage balance; current appraised value of the real
estate; or discounted present value based upon current federal national
mortgage association or government national mortgage association interest
rates quoted for conventional, federal housing administration or veterans
administration mortgage loans.
  (B)  Securities under (A) shall be taken at their value for not more than
50% of the security required under the provisions of this section.
  (C)  Securities under (A) shall be withdrawn immediately from the
collateral pool if any installment is unpaid for 30 days or more.
  (D)  A status report on all such loans shall be provided to the investing
governmental entity by the financial institution on a quarterly basis.
  (e)  No state or national such bank, state or federally
chartered savings and loan asso ciation or federally chartered
savings bank may deposit and maintain for the benefit of the governing body
of a municipal or quasi-municipal corporation of the state of Kansas, any
securities which consist of:
  (1)  Bonds secured by revenues of a utility which has been in operation for
less than three years; or
  (2)  bonds issued under K.S.A. 12-1740 et seq., and amendments
thereto, unless such bonds have been refunded in advance of their maturity as
provided in subsection (d) or such bonds are rated at least Aa by Moody's
Investors Service or AA by Standard & Poor's Corp.
  (f)  Whenever a bond is authorized to be pledged as a security under
this section, such bond shall be accepted as a security if
  (1)  In the case of a certificated bond, it is assigned, delivered or
pledged to the holder of the deposit for security;
  (2)  in the case of an uncertificated bond, registration of a pledge of the
bond is author ized by the system and the pledge of the uncertificated bond
is registered; or
  (3)  in a form approved by the attorney general, which assures the
availability of the bond proceeds pledged as a security for public
deposits.
  (g) (f)  Any expense incurred in connection with granting
approval of revenue bonds shall be paid by the applicant for approval.
  Sec. 5.  K.S.A. 9-1403 is hereby amended to read as follows: 9-1403. (a)
During the periods of peak deposits occurring at tax paying time and tax
distributing time and continuing for a period of not to exceed 60 continuous
days at any given time and not to exceed 120 days in any calendar year the
amount of security for the deposit of public moneys as required under K.S.A.
9-1402, and amendments thereto, may be reduced by not more than 1/2 in an
amount thereof.
  (b)  The provisions of this section shall apply only to the deposits of all
municipal cor porations and quasi-municipal corporations, but the custodian
of the funds of each of such municipal corporations or quasi-municipal
corporations together with an officer of the de pository state or
national bank, state or federally chartered savings and loan
association or federally chartered savings bank may enter into an
agreement which designates in writing the beginning of each such sixty-day
period, and a copy thereof, fully executed, shall be kept on file in the
office of the governing body of such municipal corporation or quasi-municipal

770                          JOURNAL OF THE SENATE

corporation and in the files of such bank, state or federally chartered
savings and loan association or federally chartered savings bank.
  Sec. 6.  K.S.A. 1996 Supp. 9-1405 is hereby amended to read as follows:
9-1405. (a) All bonds and securities given by any bank, state or federally
chartered savings and loan asso ciation or federally chartered
savings bank to secure public moneys of the United States or any board,
commission or agency thereof, shall be deposited as required by the United
States government or any of its designated agencies.
  (b)  All bonds and securities pledged to secure securities,
security entitlements and fi nancial assets securing the deposits of any
municipal corporation or quasi-municipal cor poration shall be deposited
in a securities account with a bank, trust company, or national bank
authorized to do business in Kansas having adequate modern facilities for the
safe keeping of securities, the federal reserve bank of Kansas City
bank incorporated under the laws of this state, or organized under the
laws of the United States or another state and which has a main or branch
office in this state, a trust company incorporated under the laws of this
state or another state, the federal home loan bank of Topeka or with the
state treasurer, pursuant to a written custodial agreement and a
joint custody receipt taken there for with one copy going to the
municipal corporation or quasi-municipal corporation making the public
deposit and one copy going to the bank, state or federally chartered
savings and loan association or federally chartered savings bank which
has secured such public deposits. The receipt shall identify the
securities, security entitlements and financial assets which are subject to a
security interest to secure payment of the deposits of the municipal
corporation or quasi-municipal corporation. This section shall not
prohibit any custodial bank or trust company receiving securities
for safekeeping, security entitlements and financial assets on
deposit from issuing a joint custody receipt and placing those
depositing securities, security entitlements and financial assets
identified in the receipt in such bank's account with any bank chartered
in Kansas or any other state, any trust company chartered in Kansas or any
other state, any national bank, or any centralized securities depository
wherever located within the United States. No bonds or securities
pledged to secure, security entitlements and financial assets
securing public deposits shall be left for safekeeping
deposited in any bank, trust company, or national bank which is
owned directly or indirectly by any parent corporation of the depository
bank, or with any bank, trust company, or national bank, having common
controlling shareholders, having a common majority of the board of directors
or having common directors with the ability to control or influence directly
or indirectly the acts or policies of the bank, state or federally
chartered savings and loan association or federally chartered
savings bank securing such public deposits.  When bonds and
securities, security entitlements and financial assets are deposited
with the state treasurer as authorized by this subsection, the state
treasurer shall make a charge for such service which is equivalent to the
reasonable and customary charge made therefor. Securities, security
entitlements and financial assets securing the deposits of any municipal
corporation or quasi-municipal cor poration may be deposited with the federal
reserve bank of Kansas City to be there held in such manner, under
regulations and operating letters of the bank, as to secure payment of the
deposits of the municipal corporation or quasi-municipal corporation in the
depository institution.
  (c)  All such bonds and securities shall be deposited under a joint
custody receipt issued by a bank or trust company within the state of Kansas
or the federal reserve bank of Kansas City, the federal home loan bank of
Topeka or with the state treasurer. All bonds or securities held by any
depository and for which a joint custody receipt has been issued shall be
retained by such depository and not released except upon consent of both the
municipal corporation or quasi-municipal corporation making the deposit and
the bank, state or federally chartered savings and loan association or
federally chartered savings bank taking or securing such deposit. In every
report required to be published by any bank, state or federally chartered
savings and loan association or federally chartered savings bank it shall
show in full all of the assets pledged or deposited as security for public
moneys. The depository bank, savings and loan association or savings
bank and any agent, trustee, wholly-owned subsidiary or affiliate having
identical ownership granting a security interest shall enter into a written
agreement with the municipal corporation or quasi-municipal corporation
granting the mu nicipal corporation or quasi-municipal corporation a security
interest in the securities, se

                                  May 4, 1997                               771

curity entitlements and financial assets qualified under K.S.A. 9-1402, and
amendments thereto, to secure payment of deposits of public moneys of the
municipal corporation or quasi-municipal corporation. Such security interests
shall be perfected by the depository bank, savings and loan association or
savings bank and any agent, trustee, wholly-owned subsidiary or affiliate
having identical ownership granting a security interest causing control of
the securities, security entitlements and financial assets under the Kansas
uniform com mercial code to be given to the municipality or
quasi-municipality. The security agreement and the custodial agreement shall
be in writing, executed by all parties thereto, maintained as part of their
official records, and except for the municipal corporations or
quasi-municipal corporation, approved by their boards of directors or their
loan committees, which approvals shall be reflected in the minutes of the
boards or committees.
  (d)  A bank, state or federally chartered savings and loan
association or federally char tered savings bank which fails to pay
according to its terms any deposit of public moneys of any municipal or
quasi-municipal corporation shall immediately take such actions as are
required to enable bonds and securities pledged to secure such deposit to be
sold to satisfy its obligation to the municipal or quasi-municipal
corporation.
  (e)  As used in this section:
    ``Centralized securities depository'' means a clearing agency registered
with the secu rities and exchange commission which provides safekeeping and
book-entry settlement serv ices to its participants.
  Sec. 7.  K.S.A. 9-1406 is hereby amended to read as follows: 9-1406. No
public officer nor the sureties upon such officer's bond shall be liable for
any loss sustained by the failure or default of any designated depository or
depositories after a deposit or deposits have been made in an officially
designated bank, state or federally chartered savings and loan associ
ation or federally chartered savings bank as provided in this act. This
exemption from liability shall apply even though other statutes shall require
the furnishing of a bond or other se curities by the designated depositories
of public moneys.
  Sec. 8.  K.S.A. 9-1407 is hereby amended to read as follows: 9-1407. That
portion of any deposit of public moneys or funds which is insured by the
federal deposit insurance corporation, or its successor, or the federal
savings and loan insurance corporation, or its successor, need not be
secured as provided in this act.
  Also on page 1, in line 15, by striking ``Section 1.'' and inserting ``Sec.
9.'';
  And by renumbering sections accordingly;
  On page 8, in line 13, by striking ``1'' and inserting ``9'';
  On page 16, by striking all in lines 8 and 9 and inserting:
  ``New Sec. 13.  As used in K.S.A. 12-1675, 12-1676 and 12-1677 and K.S.A.
1996 Supp. 12-1677a and 12-1677b, and amendments thereto:
  (a)  ``Bank'' means any bank incorporated under the laws of this state, or
organized under the laws of the United States and which has a main office in
this state;
  (b)  ``savings and loan association'' means any savings and loan
association incorporated under the laws of this state, or organized under the
laws of the United States and which has a main office in this state;
  (c)  ``savings bank'' means any savings bank organized under the laws of
the United States and which has a main office in this state;
  (d)  ``municipality'' includes each investing governmental unit under
K.S.A. 12-1675, and amendments thereto;
  (e)  ``main office'' means the place of business specified in the articles
of association, certificate of authority or similar document, where the
business of the institution is carried on and which is not a branch;
  (f)  ``branch'' means any office, agency or other place of business within
this state, other than the main office, at which deposits are received,
checks paid or money lent with approval of the appropriate regulatory
authorities. Branch does not include an automated teller ma chine, remote
service unit or similar device; and
  (g)  ``investment rate'' means a rate which is the equivalent yield for
United States gov ernment securities having a maturity date as published in
the Wall Street Journal, nearest the maturity date for equivalent maturities.
The 0-90 day rate shall be computed on the

772                          JOURNAL OF THE SENATE

average effective federal funds rate as published by the federal reserve
system for the pre vious week.
  Sec. 14.  K.S.A. 1996 Supp. 12-1675 is hereby amended to read as follows:
12-1675. (a) The governing body of any county, city, township, school
district, area vocational-technical school, community college, firemen's
relief association, community mental health center, community facility for
the mentally retarded or any other governmental entity, unit or sub division
in the state of Kansas having authority to receive, hold and expend public
moneys or funds may invest any moneys which are not immediately required for
the purposes for which the moneys were collected or received, and the
investment of which is not subject to or regulated by any other statute.
  (b)  Such moneys shall be invested only:
  (1)  In temporary notes or no-fund warrants issued by such investing
governmental unit;
  (2)  in time deposit, open accounts or, certificates of deposit
with maturities of not more than two years: (A) In commercial banks which
have offices located in such investing gov ernmental unit; or (B) if the
office of no commercial bank is located in such investing governmental unit,
then in commercial banks or time certificates of deposit with
maturities of not more than two years: (A) In banks, savings and loan
associations and savings banks, which have main or branch offices located in
such investing governmental unit; or (B) if no main or branch office of a
bank, savings and loan association or savings bank is located in such
investing governmental unit, then in banks, savings and loan associations and
savings banks, which have main or branch offices in the county or
counties in which all or part of such investing governmental unit is located;
  (3)  in time certificates of deposit with maturities of not more than
two years: (A) With state or federally chartered savings and loan
associations or federally chartered savings banks which have offices located
in such investing governmental unit; or (B) if the office of no state or
federally chartered savings and loan association or federally chartered
savings bank is located in such governmental unit, then with state or
federally chartered savings and loan associations or federally chartered
savings banks which have offices in the county or counties in which all or
part of such investing governmental unit is located;
  (4) (3)  in repurchase agreements with: (A) Commercial
banks, state or federally char tered savings and loan associations or
federally chartered savings banks Banks, savings and loan associations
and savings banks, which have main or branch offices located in such
investing governmental unit, for direct obligations of, or obligations that
are insured as to principal and interest by, the United States government or
any agency thereof; or (B) (i) if the office of no commercial bank, state
or federally chartered savings and loan association or federally chartered
savings bank no main or branch office of a bank, savings and loan
association or savings bank, is located in such investing governmental
unit; or (ii) if no commercial such bank, state or federally
chartered savings and loan association or federally chartered
savings bank has an having a main or branch office located in
such investing governmental unit is willing to enter into such an agreement
with the investing governmental unit at an interest rate equal to or greater
than the investment rate, as defined in subsection (l) of K.S.A. 75-4201,
and amendments thereto (g) of section 13, then such repurchase
agreements may be entered into with commercial banks, state or
federally chartered savings and loan associations or federally
chartered savings banks which have main or branch offices in the
county or counties in which all or part of such investing governmental unit
is located; or (C) if no bank, state or federally chartered savings and
loan association or federally chartered savings bank which has
its, having a main or branch office in such county or counties is
willing to enter into such an agreement with the investing governmental unit
at an interest rate equal to or greater than the investment rate, as defined
in subsection (l) of K.S.A. 75-4201, and amendments thereto (g) of
section 13, then such repurchase agreements may be entered into with
commercial banks, state or federally chartered savings and loan
associations or federally chartered savings banks which have offices
in the state of Kansas;
  (5) (4)  in United States treasury bills or notes with
maturities as the governing body shall determine, but not exceeding two
years. Such investment transactions shall only be conducted with the
following, which is doing business within the state of Kansas, any state or
national bank, state or federally chartered savings and loan association, or
federally char tered savings bank banks, savings and loan associations
and savings banks; the federal re

                                  May 4, 1997                               773

serve bank of Kansas City, Missouri; or with primary government securities
dealers which report to the market report division of the federal reserve
bank of New York, or any brokerdealer engaged in the business of selling
government securities which is registered in com pliance with the
requirements of section 15 or 15C of the securities exchange act of 1934 and
registered pursuant to K.S.A. 17-1254, and amendments thereto;
  (6) (5)  in the municipal investment pool fund established in
K.S.A. 1996 Supp. 12-1677a, and amendments thereto;
  (7) (6)  in the investments authorized and in accordance with
the conditions prescribed in K.S.A. 1996 Supp. 12-1677b, and amendments
thereto; or
  (8) (7)  in multiple municipal client investment pools managed
by the trust departments of commercial banks which have main or
branch offices located in the county or counties where such investing
governmental unit is located or with trust companies incorporated under
the laws of this state which have contracted to provide trust services
under the pro visions of K.S.A. 9-2107, and amendments thereto, with
commercial banks which have main or branch offices located in the
county or counties in which such investing governmental unit is located.
Public moneys invested under this paragraph shall be secured in the same
manner as provided for under K.S.A. 9-1402, and amendments thereto. Pooled
investments of public moneys made by trust departments under this paragraph
shall be subject to the same terms, conditions and limitations as are
applicable to the municipal investment pool established by K.S.A. 1996 Supp.
12-1677a, and amendments thereto.
  (c)  The investments authorized in paragraphs (4), (5), (6),
or (7) or (8) of subsection   (b) shall be utilized only if
the appropriate eligible commercial banks, which have offices located in
the investing governmental unit or in the county or counties in which all or
a part of such investing governmental unit is located if no such bank has an
office which is located within such governmental unit, or the appropriate
eligible state or federally chartered savings and loan associations or
federally chartered savings banks, which have offices located in the
investing governmental unit or in the county or counties in which all or a
part of such investing governmental unit is located if no such state or
federally chartered savings and loan association or federally chartered
savings bank has an office which is located within such governmental unit
banks, savings and loan associations and savings banks eligible for
investments authorized in paragraph (2) of subsection (b), cannot or will
not make the investments authorized in paragraph (2) or (3) of
subsection (b) available to the investing governmental unit at interest rates
equal to or greater than the investment rate, as defined in subsection (l)
of K.S.A. 75-4201, and amendments thereto (g) of section 13.
  (d)  In selecting a depository pursuant to paragraph (2) or (3) of
subsection (b), if a commercial bank, state or federally
chartered savings and loan association or federally char tered
savings bank eligible for an investment deposit thereunder has an
office located in the investing governmental unit and such financial
institution will make such deposits available to the investing governmental
unit at interest rates equal to or greater than the investment rate, as
defined in subsection (l) of K.S.A. 75-4201, and amendments thereto
(g) of section 13, and such financial institution otherwise
qualifies for such deposit, the investing govern mental unit shall select one
or more of such eligible financial institutions for deposit of funds
pursuant to this section. If no such financial institution qualifies for such
deposits, the investing governmental unit shall select for such deposits one
or more commercial eligible banks, state or federally
chartered savings and loan associations or federally chartered
savings banks which have offices in the county or counties in which all or a
part of such investing governmental unit is located which will make such
deposits available to the investing gov ernmental unit at interest rates
equal to or greater than the investment rate, as defined in subsection (l)
of K.S.A. 75-4201, and amendments thereto (g) of section 13, and
which otherwise qualify for such deposits.
  (e) (1)  All security purchases and repurchase agreements shall occur on a
delivery ver sus payment basis.
  (2)  All securities, including those acquired by repurchase agreements,
shall be perfected in the name of the investing governmental unit and shall
be delivered to the purchaser or a third-party custodian which may be the
state treasurer.
  Sec. 15.  K.S.A. 12-1676 is hereby amended to read as follows: 12-1676.
Except as oth erwise provided in K.S.A. 12-1678a, and amendments thereto, the
provisions of this act

774                          JOURNAL OF THE SENATE

authorizing the investment of moneys shall not apply to moneys collected or
received by a county for apportionment, credit or distribution to the state
or any political subdivision thereof. Interest paid by commercial
eligible banks, savings and loan associations and savings
banks on time deposit, open accounts, time certificates of deposit
and certificates of deposit of investing governmental units and by state
or federally chartered savings and loan asso ciations or federally chartered
savings banks on time certificates of deposit of investing governmental
units shall be at rates agreed upon by the governmental units and the
eligible banks, state or federally chartered savings and loan
associations or federally chartered savings banks.
  Sec. 16.  K.S.A. 1996 Supp. 12-1677a is hereby amended to read as follows:
12-1677a.   (a) Moneys deposited by any municipality with the state treasurer
for investment authorized in paragraph (6) (5) of subsection (b)
of K.S.A. 12-1675, and amendments thereto, shall be deposited in the
municipal investment pool fund which is hereby created in the state treas
ury. The state treasurer shall provide the board a monthly record of the
deposits and with drawals of municipalities. Such record may include the
amount of the deposit, the date of the deposit and such other information as
the pooled money investment board may require.
  (b)  The director of investments may invest and reinvest moneys in the
municipal in vestment pool fund in accordance with investment policies
established by the pooled money investment board under K.S.A. 75-4232, and
amendments thereto, and in accordance with K.S.A. 1996 Supp. 75-4234 and
K.S.A. 75-4209, and amendments thereto.
  (c)  The director of investments shall apportion earnings and losses among
the accounts of the depositors in the various investment options of the
municipal investment pool in accordance with policies approved and published
by the board. A statement for each mu nicipality participating unit account
showing deposits, withdrawals, earnings and losses dis tributions shall be
provided monthly to the municipality. The director of investments shall make
comprehensive reports monthly to those municipalities participating in the
municipal investment pool fund and to other interested parties requesting
such reports. Such reports shall include a summary of transactions for the
month, the current market value of the pooled money investment portfolio
investments, the weighted average maturity of the port folio, the original
costs of the investments in the portfolio, including any fees associated with
such investments and such other relevant information the director of
investments may wish to include in such report.
  (d)  The municipal investment pool reserve fund is abolished effective July
1, 1996, and any unencumbered balance remaining therein shall be applied to
net losses in the municipal investment pool fund. The municipal investment
pool fund fee fund is abolished on July 1, 1997, and any unencumbered balance
remaining therein shall be transferred to the pooled money investment
portfolio fee fund and such amounts shall be applied to net losses, as of
July 1, 1996, in the municipal investment pool fund.
  (e)  The pooled money investment board may adopt rules and regulations
necessary for the administration and operation of the municipal investment
pool fund and may enter into agreements with any municipality as to methods
of deposits, withdrawals and investments.
  (f)  Deposits in the municipal investment pool fund: (1) May only be made
for the same maturity as the maturity which is offered under paragraphs
(2) and (3) paragraph (2) of subsection (b) of K.S.A. 12-1675 and
amendments thereto; and (2) upon the maturity of such deposits, such moneys
shall be offered for investment under paragraphs (2) or (3)
paragraph (2) of subsection (b) of K.S.A. 12-1675, and amendments
thereto, and may be reinvested in such fund only if the conditions contained
in subsection (c) of K.S.A. 12-1675, and amendments thereto, have been
satisfied.
  (g)  Moneys and investments in the municipal investment pool fund shall be
managed by the pooled money investment board in accordance with investment
policies provided for in K.S.A. 75-4209, and amendments thereto. A copy of
such published policies shall be distributed to all municipalities
participating in the municipal investment pool fund and to other interested
persons requesting a copy of such policies. The pooled money investment board
shall not contract for management of investments by a money manager.
  (h)  For the purpose of this section, ``municipality'' means those
entities specified in subsection (a) of K.S.A. 12-1675, and amendments
thereto, and K.S.A. 1996 Supp. 75-4263, and amendments thereto.

                                  May 4, 1997                               775

  Sec. 17.  K.S.A. 1996 Supp. 12-1677b is hereby amended to read as follows:
12-1677b.   (a) The governing body of any city or county which has a written
investment policy approved by the governing body of such city or county and
approved by the pooled money investment board may invest and reinvest
pursuant to the approved investment policy in the following investments, as
authorized under paragraph (7) (6) of subsection (b) of K.S.A.
12-1675, and amendments thereto:
  (1)  Direct obligations of, or obligations that are insured as to principal
and interest by, the United States of America or any agency thereof and
obligations and securities of United States sponsored enterprises which under
federal law may be accepted as security for public funds, except that such
investments shall not be in mortgage-backed securities;
  (2)  interest-bearing time deposits in any of the following, which is
doing business within the state of Kansas, any state or national bank, state
or federally chartered savings and loan association, or federally chartered
savings bank banks, savings and loan associations and savings banks;
or
  (3)  repurchase agreements with a Kansas bank, savings and loan
association, a federally chartered savings bank banks, savings and loan
associations and savings banks, or with a primary government securities
dealer which reports to the market reports division of the federal reserve
bank of New York for direct obligations of, or obligations that are insured
as to principal and interest by, the United States government or any agency
thereof and obligations and securities of United States government sponsored
enterprises which under federal law may be accepted as security for public
funds.
  (b)  The investment policy of any city or county approved by the pooled
money invest ment board under this section shall be reviewed and approved at
least annually by such board or when such city or county makes changes in
such investment policy.
  (c)  City and county investment policies shall address liquidity,
diversification, safety of principal, yield, maturity and quality, and
capability of investment management staff.
  (d) (1)  All security purchases shall occur on a delivery versus payment
basis.
  (2)  All securities shall be perfected in the name of the city or county
and shall be delivered to the purchaser or a third party custodian which may
be the state treasurer.
  (3)  Investment transactions shall only be conducted with the following,
which is doing business within the state of Kansas, any state or national
bank, state or federally chartered savings and loan association, or federally
chartered savings bank banks, savings and loan associations and savings
banks; or with primary government securities dealers which report to the
market report division of the federal reserve bank of New York; or any
broker-dealer which is registered in compliance with the requirements of
section 15C of the securities exchange act of 1934 and registered pursuant to
K.S.A. 17-1254, and amendments thereto.
  (4)  The maximum maturity for investments under subsection (a) shall be
four years.
  (e)  Investments in securities under paragraph (1) of subsection (a) shall
be limited to securities which do not have any more interest rate risk than
do direct United States gov ernment obligations of similar maturities. For
purposes of this subsection, ``interest rate risk'' means market value
changes due to changes in current interest rates.
  (f)  A city or county which violates subsection (c) or (d) of K.S.A.
12-1675 and amend ments thereto or the rules and regulations of the pooled
money investment board shall forfeit its rights under this section for a two
year period and shall be reinstated only after a complete review of its
investment policy as provided for in subsection (b). Such forfeiture shall be
determined by the pooled money investment board after notice and opportunity
to be heard in accordance with the Kansas administrative procedure act.
  Sec. 18.  K.S.A. 1996 Supp. 12-1677d is hereby amended to read as follows:
12-1677d.   (a) As used in this act:
  (1)  ``Municipality'' means any city, county or other political or taxing
subdivision of the state.
  (2)  ``Foundation'' means any not for profit charitable or
eleemosynary corporation es tablished by a municipality which is exempt
from taxation pursuant to section 501(c)(3) of the internal revenue code and
which has been in existence at least 15 years. Any such foundation is
hereby deemed to be a public body.

776                          JOURNAL OF THE SENATE

  (b)  The board of directors of any foundation shall invest the funds held
by such foun dation which are not required immediately for the purposes of
the foundation in the manner provided by this section:
  (1)  Any funds in an amount equal to 110% of the average annual expenses of
the foun dation for the next preceding five years may be invested in the
manner provided by K.S.A. 12-1675, and amendments thereto. If funds in the
amount required by this paragraph are available from the municipality which
established the foundation, the foundation may invest all of its funds in the
manner provided in paragraph (2).
  (2)  Any funds exceeding the amount described in paragraph (1) may be
invested in such investments that may be lawful for fiduciaries in this state
and also may be invested in such investments as would be lawful for a private
corporation or other foundation having purposes similar to the foundation. No
moneys derived pursuant to any tax may be invested under this paragraph.
  (c)  Nothing in this act shall effect the status of the foundation as a
municipal entity.
  (d)  The provisions of this section shall apply to foundations whether
created before or after the effective date of this act. Any investment of
funds by a foundation prior to July 1, 1997, which would have complied with
the provisions of this section, as amended by this act, are hereby
validated.
  Sec. 19.  K.S.A. 17-5002 is hereby amended to read as follows: 17-5002. (a)
Adminis trators, executors, conservators, trustees, insurance companies and
other financial institu tions, charitable, educational, eleemosynary
corporations and organizations are authorized, in addition to investments now
authorized by law, to invest funds which they are authorized by law to
invest, in shares or savings deposits of federally insured savings and loan
associa tions or federally chartered savings banks with home main or
branch offices, as defined in section 13, in the state of Kansas and
in credit unions which are, in whole or in part, insured with an insurer or
guarantee corporation as required under K.S.A. 17-2246, and amend ments
thereto, and such investment shall be deemed and held to be legal investments
for such funds.
  (b)  The governing body of any municipal corporation or quasi-municipal
corporation, county, township, school district, area vocational-technical
school, community college, fi remen's relief association, community mental
health center, community facility for the men tally retarded or any other
governmental entity, unit or division in the state of Kansas having authority
to receive, hold and expend public moneys or funds may invest the same in
state or federally chartered savings and loan associations or federally
chartered savings banks with home offices in the state of Kansas subject
to and as provided by K.S.A. 9-1401, 9-1402, 91405, 9-1407, 12-1675 and
12-1676 and amendments to such sections thereto.
  Sec. 20.  K.S.A. 68-2060 is hereby amended to read as follows: 68-2060. All
moneys received pursuant to the authority of this act, whether as proceeds
from the sale of bonds or as revenues or otherwise, shall be deemed to be
trust funds to be held and applied solely as provided in this act. Any
officer with whom, or any bank or trust company with which, such moneys shall
be deposited shall act as trustee of such moneys and shall hold and apply the
same for the purposes hereof, subject to such regulations as this act and the
resolution authorizing the bonds or the trust agreement securing such bonds
may provide. Trust funds received pursuant to this act may be invested as
determined by the authority with banks authorized to do business in Kansas at
rates of interest not less than the investment rate, as defined in subsection
(1) of K.S.A. 75-4201, and amendments thereto (g) of section 13
or in direct obligations of the United States or in obligations that are
fully guaranteed as to principal and interest by the United States.
  Sec. 21.  K.S.A. 1996 Supp. 75-4201 is hereby amended to read as follows:
75-4201. As used in this act, unless the context otherwise requires:
  (a)  ``Treasurer'' means state treasurer.
  (b)  ``Controller'' means director of accounts and reports.
  (c)  ``Board'' means the pooled money investment board.
  (d)  ``Bank'' means a state bank incorporated under the laws of
Kansas or a national bank having such bank's home office within the state
of Kansas of this state, or organized under the laws of the United
States or another state and which has a main or branch office in this
state.

                                  May 4, 1997                               777

  (e)  ``State moneys'' means all moneys in the treasury of the state or
coming lawfully into the possession of the treasurer.
  (f)  ``State bank account'' means state moneys or fee agency account moneys
deposited in accordance with the provisions of this act.
  (g)  ``Operating account'' means a state bank account which is payable or
withdrawable, in whole or in part, on demand.
  (h)  ``Investment account'' means a state bank account which is not payable
on demand.
  (i)  ``Market rate'' means the average of the average equivalent yields,
with equivalent maturities, of: (1) United States government securities; and
(2) debt obligations of the fol lowing United States government agencies,
federal home loan banks, federal national mort gage association and federal
farm credit bank.
  (j)  ``Investment rate'' means a rate which is the equivalent yield for
United States gov ernment securities having a maturity date as published in
the Wall Street Journal, nearest the maturity date for equivalent maturities.
 The 0-90 day rate shall be computed on the average effective federal funds
rate as published by the federal reserve system for the pre vious week.
  (k) (i)  ``Fee agency account'' means a state bank account of
any state agency consisting of fees, tuition or charges authorized by law
prior to remittance to the state treasurer.
  (l) (j)  ``Disbursement'' means a payment of any kind
whatsoever made from the state treasury or from any operating account, except
transfer of moneys between or among op erating accounts and investment
accounts or either or both of them.
  (m) (k)  ``Securities'' means, for the purposes of this
section and K.S.A. 75-4218, and amendments thereto, securities,
security entitlements, financial assets and securities account consisting
of any one or more of the following, and security entitlements
thereto, which may be accepted or rejected by the pooled money investment
board:
  (1)  Direct obligations of, or obligations that are insured as to principal
and interest by, the United States government or any agency thereof and
obligations, letters of credit and securities of United States sponsored
enterprises which under federal law may be accepted as security for public
funds.
  (2)  Kansas municipal bonds which are general obligations of the
municipality issuing the same.
  (3)  Revenue bonds of any agency or arm of the state of Kansas.
  (4)  Revenue bonds of any municipality, as defined by K.S.A. 10-101, and
amendments thereto, within the state of Kansas or bonds issued by a public
building commission as authorized by K.S.A. 12-1761, and amendments thereto,
if approved by the state bank commissioner, except (A) bonds issued under the
provisions of K.S.A. 12-1740 et seq., and amendments thereto, unless
such bonds are rated at least MIG-1 or Aa by Moody's Investors Service or AA
by Standard & Poor's Corp. and (B) bonds secured by revenues of a utility
which has been in operation for less than three years. Any expense incurred
in connection with granting approval of revenue bonds shall be paid by the
applicant for approval.
  (5)  Temporary notes of any municipal corporation or quasi-municipal
corporation within the state of Kansas which are general obligations of the
municipal corporation or quasimunicipal corporation issuing the same.
  (6)  Warrants of any municipal corporation or quasi-municipal corporation
within the state of Kansas the issuance of which is authorized by the state
board of tax appeals and which are payable from the proceeds of a mandatory
tax levy.
  (7)  Bonds of any municipal or quasi-municipal corporation of the state of
Kansas which have been refunded in advance of their maturity and are fully
secured as to payment of principal and interest thereon by deposit in trust,
under escrow agreement with a bank, of direct obligations of, or obligations
the principal of and the interest on which are uncondi tionally guaranteed
by, the United States of America. A copy of such escrow agreement shall be
furnished to the treasurer.
  (8)  Securities listed in paragraph (13) (14) of subsection (d)
of K.S.A. 9-1402 and amend ments thereto within limitations of K.S.A. 9-1402
and amendments thereto.
  (9)  A corporate surety bond guaranteeing deposits in a bank, savings or
savings and loan association in excess of federal deposit insurance
corporation insurance, underwritten by an insurance company authorized to do
business in the state of Kansas.

778                          JOURNAL OF THE SENATE

  (10)  Commercial paper that does not exceed 270 days to maturity and which
has re ceived one of the two highest commercial paper credit ratings by a
nationally recognized investment rating firm.
  (11)  All of such securities shall be current as to interest according to
the terms thereof.
  (12)  Whenever a bond is authorized to be pledged as a security under
this section, such bond shall be accepted as a security if: (i) In the case
of a certificated bond, it is assigned, delivered or pledged to the holder of
the deposit for security; (ii) in the case of an uncer tificated bond,
registration of a pledge of the bond is authorized by the system and the
pledge of the uncertificated bond is registered; or (iii) in a form approved
by the attorney general, which assures the availability of the bond proceeds
pledged as a security for public deposits.
  (n) (l)  ``Savings bank'' means a federally chartered
savings bank organized under the laws of the United States or another
state insured by the federal deposit insurance corpo ration or its
successor and doing business within the state of Kansas having a
main or branch office in the county in which a state agency making collection
of any fees, tuition, or charges is located.
  (o) (m)  ``Savings and loan association'' means a state or
federally chartered savings and loan association incorporated under the
laws of this state or organized under the laws of the United States or
another state, insured by the federal deposit insurance corporation or
its successor and doing business within the state of Kansas
having a main or branch office in the county in which a state agency
making collection of any fees, tuition or charges is located.
  (p) (n)  ``Custodial bank'' means a bank designated to keep
safely holding on deposit collateral pledged as which is
security for state bank accounts.
  (q) (o)  ``Centralized securities depository'' means a clearing
agency registered with the securities and exchange commission which provides
safekeeping and book-entry settlement services to its participants.
  (r) (p)  ``Depository bank'' means a bank, savings bank or
savings and loan association authorized and eligible to receive state moneys.
  (q)  ``main office'' means the place of business specified in the
articles of association, certificate of authority or similar document, where
the business of the institution is carried on and which is not a branch;
  (r)  ``branch'' means any office, agency or other place of business within
this state, other than the main office, at which deposits are received,
checks paid or money lent with approval of the appropriate regulatory
authorities. Branch does not include an automated teller ma chine, remote
service unit or similar device;
  (s)  ``securities,'' ``security entitlements,'' ``financial assets,''
``securities account,'' ``security agreement,'' ``security interest,''
``perfection'' and ``control'' shall have the meanings given such terms under
the Kansas uniform commercial code.
  Sec. 22.  K.S.A. 1996 Supp. 75-4208 is hereby amended to read as follows:
75-4208. The board shall follow the procedure prescribed in rules and
regulations adopted under the provisions of K.S.A. 1996 Supp. 75-4232, in
designating banks to receive deposit of state moneys in operating accounts
and investment accounts. The board shall determine which banks shall receive
state operating and investment accounts and shall designate the types of
accounts to be awarded each such bank and the initial amount of each award.
Such initial awards which are operating accounts shall be made as provided in
K.S.A. 75-4205, and amendments thereto. Such initial awards which are
investment accounts shall be appor tioned awarded as is provided
in K.S.A. 75-4209, and amendments thereto. Upon making the awards provided
for above, the board shall notify each bank of its award, and that the same
is subject to approval of securities to be pledged as prescribed in this act.
  Sec. 23.  K.S.A. 1996 Supp. 75-4209 is hereby amended to read as follows:
75-4209. (a) After the director of investments determines the liquidity
needs for the state, and determines the varying maturities of the investment
accounts to be offered and the amount of state moneys to be invested in each
of the maturities offered, in accordance with rules and regulations adopted
pursuant to K.S.A. 1996 Supp. 75-4232, and amendments thereto, the director
of investments shall make available state moneys eligible for investment
accounts in the following manner:

                                  May 4, 1997                               779

  (1) (A)  The director of investments shall offer to qualified banks, on a
competitive bid basis, state moneys for deposit in investment accounts at
maturities of not more than four years and such bids shall be at a rate of at
least the market rate, as defined in subsection   (k) of K.S.A. 75-4201, and
amendments thereto.
  (B)  As part of the offering under subparagraph (A) the director of
investments shall offer to qualified banks, on a twelve-month average, 50% of
the amount of state moneys available for investment or $350,000,000,
whichever amount is greater, at maturities of not more than four years and at
the investment rate as defined in subsection (l) of K.S.A. 754201, and
amendments thereto. Such accounts shall be apportioned by the director of in
vestments among the banks which propose to receive such accounts and which
qualify therefor on the basis of the ratio of each bank's combined capital,
undivided profits and surplus to the total capital, undivided profits and
surplus of all such banks.
  (C)  Qualified banks shall be determined in accordance with requirements
established by rules and regulations adopted pursuant to K.S.A. 1996 Supp.
75-4232, and amendments thereto.
  (2)  The director of investments may invest and reinvest state moneys
eligible for in vestment which are not invested in accordance with
paragraph (1) section 1, in the following investments:
  (A) (1)  Direct obligations of, or obligations that are insured
as to principal and interest by, the United States of America or any agency
thereof and obligations and securities of the United States sponsored
enterprises which under federal law may be accepted as security for public
funds, on and after the effective date of this act moneys available for
investment under this subsection shall not be invested in mortgage-backed
securities of such enterprises and of the government national mortgage
association, except that any such mortgage-backed securities held prior to
the effective date of this act may be held to maturity;
  (B) (2)  repurchase agreements with a Kansas bank or a
primary government securities dealer which reports to the market reports
division of the federal reserve bank of New York for direct obligations of,
or obligations that are insured as to principal and interest by, the United
States government or any agency thereof and obligations and securities of
United States government sponsored enterprises which under federal law may be
accepted as se curity for public funds;
  (C)  investments in SKILL act projects and bonds pursuant to K.S.A. 1996
Supp. 748920, and amendments thereto, and investments in any state agency
bonds or bond project;
  (D)  until July 1, 1996, in the municipal investment pool fund, created
under K.S.A. 1996 Supp. 12-1677a, and amendments thereto, in accordance with
the policies adopted by the board on January 30, 1995. Any investment of such
state moneys in such fund prior to the effective date of this act are hereby
authorized, confirmed and validated. On July 1, 1996, all state moneys
invested in the municipal investment pool fund under this paragraph shall be
removed from such fund; or
  (E) (3)  commercial paper that does not exceed 270 days to
maturity and which has received one of the two highest commercial paper
credit ratings by a nationally recognized investment rating firm.
  (b)  At any time moneys are available for deposits or investments for a
period of time which is insufficient to permit deposit in investment accounts
or to provide for the liquidity needs for the state, the director of
investments may invest such moneys in repurchase agreements as authorized in
subparagraph (B) of paragraph (2) of subsection (a) When moneys are
available for deposit or investments, the director of investments may invest
in SKILL act projects and bonds pursuant to K.S.A. 1996 Supp. 74-8920, and
amendments thereto, and in state agency bonds and bond projects.
  (c)  When moneys are available for deposits or investments, the director of
investments may invest in preferred stock of Kansas venture capital, inc.,
under terms and conditions prescribed by K.S.A. 74-8203, and amendments
thereto, but such investments shall not in the aggregate exceed a total
amount of $10,000,000.
  (d)  When moneys are available for deposits or investments, the director of
investments may invest in loans pursuant to legislative mandates, except that
not more than the lesser of 10% or $80,000,000 of the state moneys shall be
invested.

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  (e)  Interest on investment accounts in banks is to be paid at maturity,
but not less than annually.
  (f)  Investments made by the director of investments under the provisions
of this section 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.
  (g)  Investments under subsection (a) or (b) of this section or under
section 1 shall be for a period not to exceed four years.
  (h)  Investments in securities under subparagraph (A) of paragraph (2)
paragraph (1) of subsection (a) shall be limited to securities which
do not have any more interest rate risk than do direct United States
government obligations of similar maturities. For purposes of this
subsection, ``interest rate risk'' means market value changes due to changes
in current interest rates.
  (i)  On and after July 1, 1996, The director of investments shall not
invest state moneys eligible for investment under paragraph (2) of
subsection (a), in the municipal investment pool fund, created under K.S.A.
1996 Supp. 12-1677a, and amendments thereto.
  (j)  The director of investments shall not invest moneys in the pooled
money investment portfolio in derivatives. As used in this subsection,
``derivatives'' means a financial contract whose value depends on the value
of an underlying asset or index of asset values.
  (k)  Moneys and investments in the pooled money investment portfolio shall
be invested and reinvested by the director of investments in accordance with
investment policies de veloped, approved, published and updated on an annual
basis by the board. Such investment policies shall include at a minimum
guidelines which identify credit standards, eligible in struments, allowable
maturity ranges, methods for valuing the portfolio, calculating earnings and
yields and limits on portfolio concentration for each type of investment. Any
changes in such investment policies shall be approved by the pooled money
investment board. Such investment policies may specify the contents of
reports, methods of crediting funds and accounts and other operating
procedures.
  (l)  The board shall adopt rules and regulations to establish an overall
percentage limi tation on the investment of moneys in investments authorized
under subparagraph (E) of paragraph (2) paragraph (3) of
subsection (a), and within such authorized investment, the board shall
establish a percentage limitation on the investment in any single business
entity.
  Sec. 24.  K.S.A. 1996 Supp. 75-4210 is hereby amended to read as follows:
75-4210. The director of investments shall calculate the investment rate, as
defined in subsection (l) of K.S.A. 75-4201 and amendments thereto
(g) of section 13, on Monday of each week and publish such rate that
week in the Kansas register. The director of investments shall also
calculate the market rate as defined in subsection (k) of K.S.A. 75-4201 and
amendments thereto on the day before the offering of moneys to Kansas
banks.
  Sec. 25.  K.S.A. 1996 Supp. 75-4212a is hereby amended to read as follows:
75-4212a. Whenever the balance in operating accounts is insufficient to meet
the state's obligations or withdrawals from the municipal investment pool
fund, and there are state moneys in authorized investments, the director of
investments, with approval of the board, may:
  (a)  Borrow upon the security of any one or more investment accounts an
amount suf ficient to meet the state's or the municipal investment pool
fund's obligations. Any such loan shall be repaid in full within 60 days or
prior to July 1, whichever occurs first. Interest payment by the state for
any loan under this section shall be made only by way of setoff from interest
obligations to the state from the bank making such loan. The amount borrowed
under this section from any bank, shall never exceed an amount equal to the
amount of state moneys on deposit in such bank; or
  (b)  enter into reverse repurchase agreements utilizing securities
purchased by the board pursuant to subsection (a)(2)(A) of K.S.A.
75-4209, and amendments thereto. Such reverse repurchase agreements may
be entered into with Kansas banks or primary government securities
dealers which report to the market reports division of the federal reserve
bank of New York. Expenses of reverse repurchase agreements shall be paid by
deducting such expenses against other interest income to the state.

                                  May 4, 1997                               781

  Sec. 26.  K.S.A. 1996 Supp. 75-4217 is hereby amended to read as follows:
75-4217. Awards of all state bank accounts, aggregating more than
$100,000, shall be made pursuant to a written security agreement
between the depository bank and the board, granting the state of Kansas a
security interest in securities pledged to secure payment of deposits in
state bank accounts. This agreement shall be approved by the board of
directors of the depository bank, as and reflected in the minutes
of the board of directors. From the time of execution, the
security agreement shall remain continuously an official record of the
depository bank. Separate security agreements shall be entered into for
each class of account in each depository bank.
  Sec. 27.  K.S.A. 1996 Supp. 75-4218 is hereby amended to read as follows:
75-4218. (a) All state bank accounts shall be secured by pledge of
securities as provided in this section.
  (b)  The bank, savings bank or savings and loan association receiving
or having a state bank account shall deposit or cause its affiliate bank
to deposit securities acceptable to the board and owned by it or by its
affiliate bank, in one of the following ways:
  (1)  Deposit with the treasurer.
  (2)  Deposit with a custodial bank having adequate modern facilities for
the safekeeping of securities which shall have had the prior approval of the
board. Any such custodial bank receiving securities for safekeeping shall be
liable to the state for any loss suffered by the state in the event such
custodial bank relinquishes the custody of any such securities contrary to
the provisions of this act or rules and regulations adopted thereunder. This
section shall not prohibit any custodial bank receiving securities for
safekeeping from issuing a joint custody receipt and placing those securities
in such bank's account with any bank chartered in Kansas or any other state,
any trust company chartered in Kansas or any other state, any national bank,
or any centralized securities depository wherever located within the United
States. No bonds or securities pledged to secure public deposits shall be
left for safekeeping in any bank, trust company, or national bank which is
owned directly or indirectly by any parent corporation of the depository
bank, or with any bank, trust company, or national bank, having common
controlling shareholders, having a common majority of the board of directors
or having common directors with the ability to control or influence directly
or indirectly the acts or policies of the bank, state or federally chartered
savings and loan association or federally chartered savings bank securing
such public deposits.
  (3)  Deposit with the federal reserve bank of Kansas City, Missouri.
  (4)  Deposit with the federal home loan bank of Topeka, Kansas.
  (5)  Any combination of (1), (2), (3) and (4).
  (c)  The depository bank shall obtain a written agreement from its
affiliate bank that the affiliate bank grants a security interest to the
state of Kansas in securities owned by the affiliate bank which are pledged
on behalf of the depository bank to secure payment of deposits made with the
depository bank pursuant to this section. Such agreement shall be approved by
the board of directors of the affiliate bank and reflected in its minutes.
From the time of execution of such agreement, the agreement shall remain
continuously an official record of the affiliate bank. Any such deposit of
securities, except with the treasurer, shall have a joint custody receipt
which shall constitute a perfected security interest taken therefor with one
copy going to the treasurer and one copy going to the bank, savings bank or
savings and loan association which deposits such securities. In lieu of the
initial deposit of securities provided for in this subsection (c), the
treasurer or the treasurer's duly authorized deputy, for a period of not to
exceed 10 calendar days, may accept the telephone assurance of a bank
qualified as provided in (2) or (3) of subsection (b), that the depository
bank has requested the issuance of a joint custody receipt with the state of
Kansas, specifying the securities pledged, for the purpose of compliance with
this section and that such joint custody receipt will be forthcoming.
  (d)  The depository bank, the board and the custodial bank shall enter into
a written agreement for the safekeeping of securities and the agreement shall
be maintained in the records of the depository bank.
  (e)  Securities deposited to comply with this section may be withdrawn on
application of the bank, savings bank or savings and loan association
depositing the securities, if such application is approved by the treasurer
or the treasurer's duly authorized deputy for the reason that such deposit of
securities is no longer needed to comply with this section or are

782                          JOURNAL OF THE SENATE

required for collection by virtue of their maturity or for exchange.
Securities withdrawn for collection by virtue of their maturity or for
exchange shall be replaced within 15 calendar days, but until replaced the
state shall retain a first lien on the withdrawn security or the proceeds
therefrom.
  (f)  Operating accounts, investment accounts and fee agency accounts shall
be secured by pledge of securities, the market value of which is equal to
100% of the amount of the deposits in the account plus accrued interest, less
the amount of deposits in the account protected by the federal deposit
insurance corporation. Any agency responsible for a fee agency account shall
transfer immediately all moneys not so secured to the state treasurer for
deposit in the state treasury deposit, maintain, pledge, assign, and
grant a security in terest in, or cause its agent, trustee, wholly-owned
subsidiary, or affiliate having identical ownership to deposit, maintain,
pledge, assign, and grant a security interest in, for the benefit of the
state of Kansas, in the manner provided in this act, securities owned by the
depository bank directly or indirectly through its agent or trustee holding
securities on its behalf, or owned by the depository bank's wholly-owned
subsidiary or by such affiliate, the market value of which is equal to 100%
of the amount of the account plus accrued interest, less that portion of the
amount of the account plus accrued interest which is insured by the federal
deposit insurance corporation or its successor.
  (b)  All securities securing state bank accounts shall be deposited in a
securities account with a bank having the prior approval of the board, the
federal home loan bank of Topeka or with the state treasurer pursuant to a
written custodial agreement, and a receipt taken therefor with one copy going
to the treasurer and one copy going to the bank, savings bank or savings and
loan association which has secured such state bank account. The receipt shall
identify the securities which are subject to a security interest to secure
payment of the state bank account. This section shall not prohibit any
custodial bank receiving securities on deposit from issuing a receipt and
depositing securities identified in the receipt in such bank's account with
any bank chartered in Kansas or any other state, any trust company chartered
in Kansas or any other state, any national bank, or any centralized
securities depository wherever located within the United States. No
securities securing state bank accounts shall be deposited in any bank, trust
company or national bank which is owned directly or in directly by any parent
corporation of the depository bank, or with any bank, trust company, or
national bank having common controlling shareholders, having a common
majority of the board of directors or having common directors with the
ability to control or influence directly or indirectly the acts or policies
of the bank, savings and loan association or savings bank securing such state
bank account. Any custodial bank which releases securities securing a state
bank account without being authorized to do so under the custodial agreement
shall be liable to the state for any loss to the state resulting therefrom.
  (c)  Securities securing state bank accounts may be deposited with the
federal reserve bank of Kansas City to be there held in such manner, under
regulations and operating letters of the federal reserve bank, as to secure
payment of the state bank account in the depository bank.
  (d)  The depository bank, and any agent, trustee, wholly-owned subsidiary
or affiliate having identical ownership granting a security interest shall
enter into a written agreement with the state of Kansas granting the state of
Kansas a security interest in the securities to secure payment of the state
bank account. Such security interest shall be perfected by the depository
bank and any agent, trustee, wholly-owned subsidiary or affiliate having
identical ownership granting a security interest causing control of the
securities under the Kansas uniform commercial code to be given to the state
of Kansas. The security agreement and the custodial agreement shall be in
writing, executed by all parties thereto, maintained as part of their
official records, and, except for the state of Kansas, approved by their
boards of directors or their loan committees, which approvals shall be
reflected in the minutes of the boards or committees.
  Sec. 28.  K.S.A. 1996 Supp. 75-4220 is hereby amended to read as follows:
75-4220. (a) Each depository or its affiliate bank pledging
securities for such depository bank and its agent, trustee,
wholly-owned subsidiary or affiliate having identical ownership granting a
security interest pursuant to K.S.A. 75-4218, and amendments thereto,
shall be liable for payment if: (1) (a) The depository bank fails
to: (A) (1) Pay any check, draft or warrant

                                  May 4, 1997                               783

drawn by the treasurer and director of accounts and reports; or (B)
(2) account for any check, draft, warrant, order, or certificate of
deposit, or any money entrusted to such bank by the treasurer; or (2)
(b) a conservator or receiver is appointed for the depository bank.
  Any loss incurred by the state by reason of failure by any depository bank
to safely keep and account for moneys and interest thereon shall be recovered
by the state from the depository bank and a sale of the securities pledged
securing payment of such moneys under this act. The attorney general
is authorized to prosecute in the name of the state any and all actions for
recovery of any loss incurred by the state under this act.
  In case of default by any depository bank having a state bank account of
any type, the securities pledged securing payment of such account
under this act, if not in the possession of the treasurer, shall be
transferred to the treasurer by the custodial bank to be sold by the
treasurer and payment of the proceeds of such sale shall be made to the state
to the extent of the state's interest, subject to the provisions of K.S.A.
75-4221, and amendments thereto.
  Sec. 29.  K.S.A. 1996 Supp. 75-4263 is hereby amended to read as follows:
75-4263. (a) Except as provided in subsection (b), moneys of a state agency
or public instrumentality of this state which may be invested by the director
of investments in accordance with invest ment policies established by the
pooled money investment board under K.S.A. 75-4232, and amendments thereto,
expressly for such agency or instrumentality, or invested directly by the
agency or instrumentality, may be invested in the municipal investment pool
fund es tablished in K.S.A. 1996 Supp. 12-1677a and amendments thereto. Such
agency or instru mentality shall be treated as a municipality for purposes of
participation in such fund.
  (b)  On and after July 1, 1996, state moneys eligible for investment under
paragraph (2) of subsection (a) of K.S.A. 75-4209, and amendments
thereto, shall not be invested in the municipal investment pool fund.
  Sec. 30.  K.S.A. 9-1401, 9-1403, 9-1406, 9-1407, 12-1676, 17-5002 and
68-2060 and K.S.A. 1996 Supp. 9-1101, 9-1104, 9-1111, 9-1402, 9-1405,
12-1675, 12-1677a, 12-1677b, 12-1677d, 75-4201, 75-4208, 75-4209, 75-4210,
75-4212a, 75-4217, 75-4218, 75-4220 and 75-4263 are hereby repealed.'';
  Also on page 16, in line 10, by striking ``Sec. 6.'' and inserting ``Sec.
31.''; in line 11, by striking ``statute book'' and inserting ``Kansas
register'';
  On page 1, in the title, in line 10, by striking ``banks and banking'' and
inserting ``depository institutions''; in line 11, by striking ``K.S.A. 1996
Supp. 9-1101, 9-1104 and 9-1111'' and inserting ``K.S.A. 9-1401, 9-1403,
9-1406, 9-1407, 12-1676, 17-5002 and 68-2060 and K.S.A. 1996 Supp. 9-1101,
9-1104, 9-1111, 9-1402, 9-1405, 12-1675, 12-1677a, 12-1677b, 121677d,
75-4201, 75-4208, 75-4209, 75-4210, 75-4212a, 75-4217, 75-4218, 75-4220 and
754263''
  And your committee on conference recommends the adoption of this report.
Ray L. Cox
Joe Humerickhouse
Vernon W. Correll Conferees on part of House Don Steffes
Sandy Praeger
Paul Feleciano, Jr. Conferees on part of Senate   Senator Steffes moved the
Senate adopt the Conference Committee report on SB 132.
  On roll call, the vote was: Yeas 26, nays 12, present and passing 1; absent
or not voting 1.
  Yeas: Barone, Becker, Biggs, Bond, Brownlee, Donovan, Feleciano, Gilstrap,
Harden burger, Hensley, Jones, Karr, Kerr, Langworthy, Lawrence, Lee, Oleen,
Petty, Praeger, Ranson, Salisbury, Schraad, Steffes, Steineger, Tyson,
Vidricksen.
  Nays: Bleeker, Clark, Corbin, Downey, Emert, Goodwin, Harrington,
Huelskamp, Mor ris, Pugh, Salmans, Umbarger.
  Present and passing: Jordan.
  Absent or not voting: Gooch.
  The Conference Committee report was adopted.

784                          JOURNAL OF THE SENATE


CONFERENCE COMMITTEE REPORT

  Mr. President and Mr. Speaker: Your committee on conference on House amend
ments to SB 146, submits the following report:
  The House recedes from all of its amendments to the bill, and your
committee on con ference further agrees to amend the bill, as printed with
Senate Committee amendments, as follows:
  On page 1, in lines 20 and 31, by striking ``may'' and inserting ``shall'';
  And your committee on conference recommends the adoption of this report.
Joann Flower
John Ballou
Galen Weiland Conferees on part of House Janice L. Hardenburger
Rich Becker
Chris Steineger Conferees on part of Senate   Senator Hardenburger moved the
Senate adopt the Conference Committee report on SB 146.
  On roll call, the vote was: Yeas 39, nays 0, present and passing 0;
absent or not voting 1.
  Yeas: Barone, Becker, Biggs, Bleeker, Bond, Brownlee, Clark, Corbin,
Donovan, Downey, Emert, Feleciano, Gilstrap, Goodwin, Hardenburger,
Harrington, Hensley, Huelskamp, Jones, Jordan, Karr, Kerr, Langworthy,
Lawrence, Lee, Morris, Oleen, Petty, Praeger, Pugh, Ranson, Salisbury,
Salmans, Schraad, Steffes, Steineger, Tyson, Umbarger, Vidricksen.
  Absent or not voting: Gooch.
  The Conference Committee report was adopted.

ORIGINAL MOTION

  Senator Pugh moved the Senate concur in house amendments to SB 234.
  Citing Senate Rule 28, pertaining to reconsideration, the chair ruled the
motion to be out of order.
  The ruling of the chair was challenged, but sustained, and the motion to
concur was not considered.
  On motion of Senator Emert, the Senate recessed until 4:00 p.m.
   The Senate met pursuant to recess with President Bond in the chair.

MESSAGE FROM THE HOUSE

  Announcing the House adopts the conference committee report on HB
2007.
  The House adopts the conference committee report on HB 2278.
  The House not adopts the conference committee report on SB 11,
requests a conference and appoints Representatives Phil Kline, Farmer and
Helgerson as second conferees on the part of the House.
  The House announces the appointment of Representative Glasscock to replace
Repre sentative Benlon; also, the appointment of Representatives Welshimer
and Powers to re place Representatives Tomlinson and Sawyer as conferees on
HB 2315.

ORIGINAL MOTION

  Senator Emert moved that subsection 4(k) of the Joint Rules of the
Senate and House of Representatives be suspended for the purpose of
considering the following bill: SB 11.

ORIGINAL MOTION

  On motion of Senator Emert, the Senate acceded to the request of the
House for a conference on SB 11.
  The President appointed Senators Kerr, Salisbury and Petty as second
conferees on the part of the Senate.

                                  May 4, 1997                               785

  On motion of Senator Emert the Senate adjourned until 1:00 p.m., Monday,
May 5, 1997.
                                           HELEN A. MORELAND, Journal Clerk.
PAT SAVILLE, Secretary of the Senate.
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