CaliforniaCalifornia local agencies gain investment and deposit security options
California local agencies would gain specified investment and deposit-security options, and some could keep higher commercial paper limits beyond 2031.
What it does
Local agencies may invest public money in certain commercial paper issued by banks and in qualifying obligations from the Inter-American Investment Corporation.
Local agencies may keep using the exception for certain U.S. government securities during negative interest rates, with no 2031 end date.
Some local agencies with at least $100 million in investment assets may keep a 40% commercial paper limit after 2031; smaller agencies remain capped at 25%.
Certain large pooled agencies may accept deposit security from an eligible out-of-state bank through a letter of credit from that bank's regional federal home loan bank.
Argument forAgencies could have more choices for investments and deposit security, including certain bank-backed commercial paper and letters of credit from regional federal home loan banks.
Argument againstAgencies could face greater investment risk if they place more money in commercial paper or keep using the higher limit after 2031.
More detail
Local agencies may invest public money in specified commercial paper and international development bank obligations. The rules cover local agencies investing public funds that are not needed for immediate needs. Commercial paper must meet the bill's rating and other eligibility rules, and agencies must follow the applicable investment caps.
The exception allowing certain U.S. government securities during negative interest rates no longer has a 2031 end date. This applies to local agency investments in securities issued by or backed by the United States government. The exception applies only during a period of negative market interest rates and only for that period. The exception no longer ends on January 1, 2031.
Certain local agencies may continue investing up to 40% of their funds in eligible commercial paper after 2031. The investment limits govern local agencies investing in eligible commercial paper. The 40% cap applies to counties, the City and County of Los Angeles, the City of Los Angeles, and agencies that pool funds with other agencies, subject to the statutory pooling exception. Other agencies with at least $100 million in assets also retain a 40% cap; agencies below that amount have a 25% cap. No more than 10% of total investment assets may be invested in one issuer's commercial paper and medium-term notes, as applicable. The change removes the scheduled reduction on January 1, 2031.
Certain pooled local agencies may use letters of credit drawn on a regional federal home loan bank by an eligible out-of-state bank. This applies to counties, cities and counties, and local agencies pooling deposits or investments with other agencies, when the agency has at least $100 million under management. The bank must be selected by the treasurer for safekeeping local agency money, and the agency must meet the specified pooled-agency and asset requirements. The letters of credit remain subject to the requirements for securing local agency deposits.
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Where it stands
- Introduced
- Passed Senate
- Passed Assembly
- To Governor
- Became Law
Looking ahead
No hearings or votes scheduled.
History
- 2026
- Sep 27Chaptered by Secretary of State. Chapter 715, Statutes of 2026.Latest
- Sep 27Approved by the Governor Gavin Newsom.Became Law
- Sep 4Enrolled and presented to the Governor at 2 p.m.To Governor
- Aug 27Assembly amendments concurred in. (Ayes 40. Noes 0. Page 5981.) Ordered to engrossing and enrolling.Major
- Vote recorded Special Consent SB1438 L. GOV. Result: pass.Upper
- Aug 25Ordered to special consent calendar.
- Jun 25In Senate. Concurrence in Assembly amendments pending.
- Jun 25Read third time. Passed. (Ayes 73. Noes 0. Page 5864.) Ordered to the Senate.Passed Assembly
- Jun 22Read second time. Ordered to consent calendar.Minor
- Jun 18From committee: Do pass. Ordered to consent calendar. (Ayes 10. Noes 0.) (June 17).Minor
- Jun 17
- Vote recorded Do pass. To Consent Calendar. Result: pass.Lower
- Jun 1From committee with author's amendments. Read second time and amended. Re-referred to Com. on L. GOV.Major
- May 18Referred to Com. on L. GOV.Minor
- Apr 30In Assembly. Read first time. Held at Desk.Minor
- Vote recorded Consent Calendar 2nd SB1438 L. GOV. Result: pass.Upper
- Apr 30Read third time. Passed. (Ayes 36. Noes 0. Page 4113.) Ordered to the Assembly.Passed Senate
- Apr 23Read second time. Ordered to consent calendar.Minor
- Apr 22From committee: Do pass. Ordered to consent calendar. (Ayes 7. Noes 0. Page 4015.) (April 22).Minor
- Vote recorded Do pass and be ordered to the Consent Calendar. Result: pass.Upper
- Apr 13From committee with author's amendments. Read second time and amended. Re-referred to Com. on L. GOV.Major
- Apr 9Set for hearing April 22.
- Mar 18Referred to Com. on L. GOV.Minor
- Mar 12From printer. May be acted upon on or after April 11.
- Mar 11Introduced. Read first time. To Com. on RLS. for assignment. To print.Introduced
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