Bill Number: H.B. 2173

                                                                                                              Biggs Floor Amendment

                                                                                         Reference to: House engrossed bill

                                                                                        Amendment drafted by: Leg Council

 

 

     In summary, the Biggs Floor Amendment is an emergency measure that establishes unemployment insurance tax anticipation notes, in an effort to bring the Unemployment Insurance Trust Fund into solvency and pay off debt and interest owed to the U.S. Department of Labor.  The notes are capped at $200 million and may only be issued during FY 2013-2014.  The Director of the Department of Economic Security is required to report on the notes and the UI system quarterly to JLBC and OSPB.

 

In detail, the Biggs Floor Amendment:

 

UI Tax Anticipation Notes

 

1. Authorizes the Director to issue unemployment insurance (UI) tax anticipation notes (notes) during FY 2013-2014.

 

2. Caps the total amount of the notes at $200 million and prohibits the notes from exceeding the amount determined by the Director that is sufficient to provide monies to:
1. repay the outstanding balance borrowed from the federal government to pay UI benefits;
2. provide for payment of UI benefits during FY 2013-2014 until UI tax receipts are sufficient; and
3. pay note related expenses.

 

3. Requires the Director to authorize the issuance of the notes with a signed document.

 

4. Requires the signed document to prescribe:
1. the fixed or variable rates of interest, the dates on which interest is payable and the denomination of the notes;
2. the dates of the notes and maturity within 12 months after the date of issuance;
3. the form of the notes;
4. the manner of executing the notes;
5. the medium and place of payment; and
6. the terms of redemption before maturity, including whether a premium is payable upon early redemption.

 

5. Allows the notes to be sold at public or private sale at the price and on the terms prescribed by the Director at, above or below par.

 

6. Requires the Director to deposit the net proceeds received from the sale of the notes in a separate account created for that purpose.  Allows the monies to be invested.

 

Unemployment Special Assessment Proceeds Fund

 

7. Establishes the Unemployment Special Assessment Proceeds Fund (Proceeds Fund), consisting of monies transferred to the Proceeds Fund.

 

8. Transfers any remaining monies in the Unemployment Special Assessment Fund to the Proceeds Fund.

 

9. Requires the Proceeds Fund to be kept separate from all other monies of the state.  Instructs DES to administer the Proceeds Fund.

 

10. Stipulates that monies in the Proceeds Fund are continuously appropriated and exempt from statute relating to the lapsing of appropriations.

 

11. Requires, if Arizona has an outstanding loan to pay UI benefits to eligible claimants, Proceeds Fund monies to be used:
1. first, to pay interest charges incurred on the loan; then
2. to retire the loan principal or, if the Director has issued notes, transferred to the Note Debt Service Fund (Note Fund).

 

12. Requires any monies remaining in the Proceeds Fund after payment of all principal and interest on the loan, including delinquent amounts collected after this payment, and amounts payable to be transferred to the UI Trust Fund (Trust Fund).

 

Note Debt Service Fund

 

13. Requires the Director, if notes are issued, to do all of the following:
1. establish a Note Fund, consisting of monies transferred pursuant to statute;
2. transfer monies from the Proceeds Fund to the Note Fund until the Note Fund contains monies sufficient to pay all interest to become due on the notes and note related expenses.
3. transfer monies from those credited to Arizona’s account in the U.S. UI Trust Fund to the Note Fund in an amount sufficient to repay all unpaid principal of the notes.

 

14.  Restricts monies in the Note Fund to only being used to pay amounts payable on notes and note related expenses as they become due.

 

15. Requires DES to administer and account for the Note Fund.

 

16. Directs any amounts remaining in the Note Fund, on the payment of all amounts due and to become due on the notes and the payment of all note related expenses, to be transferred to the UI Trust Fund.

 

Notes

 

17. Authorizes the Director, to secure the principal and interest on the notes, to:
1. segregate the Note Fund into one or more accounts and subaccounts and provide that notes may be secured by a lien on all or part of the monies paid to the Note Fund or any of its accounts or subaccounts;
2. provide that the notes are secured by a first lien on the monies paid into the Note Fund and pledge and assign to or in trust for the benefit of the holders of the notes all or part of the monies in the Note Fund or in any account or subaccount as is necessary to secure and pay the principal, interest and any premium on the notes as they come due;
3. establish priorities among noteholders based on criteria adopted by the Director;
4. set aside, regulate and dispose of reserves and sinking accounts;
5. prescribe the procedure, if any, by which the terms of any contract with noteholders may be amended or abrogated, the amount of notes the holders of which must consent to an amendment or abrogation and the manner in which the consent may be given;
6. provide for payment of note related expenses from the proceeds of the sale of the notes or other sources authorized and available to the Director;
7. provide for the services of trustees, agents and consultants and other specialized services with respect to the notes;
8. take any other action that may affect the security and protection of the notes or interest on the notes;
9. refund any notes issued by the Director by issuing new notes, if these new notes are secured by and payable from a source of authorized revenues; and
10. issue notes partly to refund outstanding notes and partly for any other consistent purpose.

 

18. Stipulates that a pledge made in connection with the notes is valid and binding from the time when the pledge is made.

 

19. Subjects the monies deposited in the Note Fund immediately to the lien of the pledge without any future physical delivery or further act.  Specifies that any lien of any pledge is valid and binding against all parties that have claims of any kind against this state, regardless of whether the parties have notice of the lien. 

 

20. Stipulates that the official instrument by which a pledge is created, when adopted by the Director, is notice to all concerned of the creation of the pledge, and specifies that the instrument does not need to be recorded in any other place to perfect the pledge.

 

21. Allows the Director to purchase notes for cancellation out of any monies available for the purchase.  Limits the purchase at a price not more than either:
1. the applicable redemption price plus accrued interest to the next interest payment date on the notes, if the notes are redeemable at the time of the purchase; or
2. the applicable redemption price on the first date after the purchase on which the notes become subject to redemption plus accrued interest to that date, if the notes are not redeemable at the time of purchase.

 

22. Instructs that the notes are paid solely from monies in the Note Fund.

 

23. Allows the Director to authorize the note trustee to invest the note proceeds and monies in the Note Fund.

 

24. Permits the order directing an investment to state a specified time when the invested monies will be used.  Requires the note trustee to make the investment in such a way so that the investment matures at the specified date.

 

25. Requires monies earned as interest or otherwise derived from the investment of the note proceeds or monies in the Note Fund to be used only for the purposes for which the monies invested may be used.

 

26. Allows, at the direction of the Director, the note trustee to invest or reinvest note proceeds and monies in the Note Fund in any authorized investments.  Requires the purchase of the securities to be made by the note trustee on authority of the Director.  Requires the note trustee to act as custodian of all securities purchase and allows the securities to be sold on an order of the Director.

 

27. Stipulates that the notes are fully negotiable within the meaning and for all purposes of the Uniform Commercial Code (UCC), subject only to any provisions for registration, regardless of whether the notes actually constitute negotiable instruments under the UCC.

 

28. Instructs that the notes, their transfer and the income from the notes are at all times free from taxation in this state.

 

29. Stipulates that the notes do not constitute a debt of this state and are:
1. payable only according to their terms;
2. not general, special or other obligations of this state;
3. not enforceable against this state nor is the payment of the notes enforceable out of any monies other than the revenue pledged and assigned to, or in trust for the benefit of, the holder or holders of the notes;
4. securities in which public officers and bodies of this state and of municipalities and political subdivisions of this state, all companies, associations and other persons carrying on an insurance business, all financial institutions, investment companies and other persons carrying on a banking business, all fiduciaries and all other persons who are authorized to invest in government obligations may properly and legally invest; and
5. securities that may be deposited with public officers or bodies of this state and municipalities and political subdivisions of this state for purposes that require the deposit of government notes or obligations.

 

30. Designates that an amendment of any provision of note-related statute does not diminish or impair the validity of notes issued or the remedies and rights of noteholders.

 

31. Stipulates that the state pledges to and agrees with the holders of the notes that this state will not limit, alter or impair the rights and remedies of the noteholders, until all notes issued, together with interest on the notes, interest on any unpaid installments of principal or interest and all costs and expenses in connection with any action or proceedings by or on behalf of the noteholders, are fully met and discharged.

 

32. Allows the Director, as agent for this state, to include this pledge and undertaking in the instruments authorizing and securing the notes.

 

33. Declares that note-related statute constitutes full authority for authorizing and issuing the notes without reference to any other law of this state.  Specifies that no other law with regard to authorizing or issuing obligations or that in any way impedes or restricts performing the acts authorized may be construed to apply to any proceedings taken or acts done pursuant to law.

 

34. Prescribes that the validity of the notes does not depend on and is not affected by the legality of any proceeding relating to any action relating to application of the proceeds of the notes.

 

35. Requires the notes to recite that they are regularly issued pursuant to law.  Constitutes that recital as prima facie evidence of the legality and validity of the notes.  Specifies that, from and after the sale and delivery of the notes, they are incontestable by the Director or this state.

 

36. Requires all state officials to comply with any requirement, prescribed by the Director, deemed necessary to obtain or retain an exemption from federal income taxes for interest income on the notes.

 

Reporting Requirements

 

37. Requires DES to report to the Directors of the Joint Legislative Budget Committee (JLBC) and the Governor’s Office of Strategic Planning and Budgeting (OSPB) on the finalized debt issuance, including the principal amount, interest rate, the debt service schedule, the length of term, the interest to be paid over the life of the loan and the status of the bonds as taxable or non-taxable, within 15 days after the issuance of the notes.

 

38. Requires DES to report to JLBC and OSPB concerning the status of the UI system 30 days after the end of each calendar quarter of FY 2013-2014.  Requires the report to include the beginning balance in Arizona’s U.S. UI Trust Fund account, revenue during the year, net assessment revenue, federal UI tax reduction revenue, fund outlays, the ending balance, interest charges on the loan and any outstanding federal debt.  Requires each report to also provide quarterly estimates for each of these categories through the final quarter of calendar year 2014.

 

Miscellaneous

 

39. Defines director, note, note debt service fund, note related expenses and unemployment special assessment fund.

 

40. Repeals note-related statute on January 1, 2016.

 

41. Adds an emergency clause.

 

Fifty-first Legislature                                                     Biggs

First Regular Session                                                   H.B. 2173

 

BIGGS FLOOR AMENDMENT

SENATE AMENDMENTS TO H.B. 2173

(Reference to House engrossed bill)

 

Page 1, between lines 1 and 2, insert:

"Section 1.  Title 23, chapter 4, Arizona Revised Statutes, is amended by adding article 2.1, to read:

ARTICLE 2.1.  UNEMPLOYMENT INSURANCE TAX ANTICIPATION NOTES

START_STATUTE23-665.  Definitions

In this article, unless the context otherwise requires:

1.  "Director" means the director of the department.

2.  "Note" means a note issued pursuant to this article.

3.  "Note debt service fund" means the fund ESTABLISHED and administered pursuant to section 23-665.03.

4.  "note related expenses" means any expenses incurred by the director to issue and administer the notes including underwriting fees and costs, trustee fees, financial consultant fees, printing and advertising costs, paying agent fees, transfer agent fees, legal, accounting, feasibility consultant and other professional fees and expenses, note insurance or other credit enhancements or liquidity facilities, attorney and accounting fees and expenses related to credit enhancement, remarketing fees, rating agency fees and costs, travel and telecommunications expenses and all other fees considered necessary by the director to market and administer the notes.

5.  "Unemployment special assessment fund" means the fund established pursuant to section 23-665.02. END_STATUTE

START_STATUTE23-665.01.  Authorization of unemployment insurance tax anticipation notes

A.  The director may issue unemployment insurance tax anticipation notes pursuant to this article during fiscal year 2013–2014 in an amount not to exceed the lesser of two hundred million dollars and the amount determined by the director to be sufficient to provide monies to do all of the following:

1.  Repay the outstanding balance borrowed from the federal government to pay unemployment insurance benefits.

2,  provide for payment of unemployment insurance benefits during fiscal year 2013–2014 until unemployment insurance tax receipts are sufficient to provide for payment of benefits.

3.  Pay note related expenses.

B.  The director shall authorize the issuance of the notes with a signed document that prescribes all of the following:

1.  The fixed or variable rates of interest, the dates on which interest is payable and the denominations of the notes.

2.  The dates of the notes and maturity within twelve months after the date of issuance.

3.  The form of the notes.

4.  The manner of executing the notes.

5.  The medium and place of payment.

6.  The terms of redemption before maturity, including whether a premium is payable on early redemption.

C.  The notes may be sold at public or private sale at the price and on the terms prescribed by the director at, above or below par.

D.  The director shall deposit the net proceeds received from the sale of the notes in a separate account created for that purpose.  Monies in the account may be invested as provided in section 23-665.08. END_STATUTE

START_STATUTE23-665.02.  Unemployment special assessment proceeds fund

A.  The unemployment special assessment proceeds fund is established and consists of monies transferred to the fund as provided by law.  The fund shall be kept separate from all other monies of this state.  The department shall administer the fund.  Monies in the fund are continuously appropriated for the purposes prescribed in this section and are exempt from the provisions of section 35-190, relating to the lapsing of appropriations.

B.  Notwithstanding any other law, if this state has an outstanding loan to pay unemployment insurance benefits to eligible claimants, fund monies shall be:

1.  Used to pay interest charges incurred on the loan.

2.  After payments pursuant to paragraph 1 of this subsection, used to retire the loan principal or, if the director has issued notes pursuant to this article, transferred to the note debt service fund as prescribed in section 23-665.03.

C.  Any monies remaining in the fund after payment of all principal and interest on the loan, including delinquent amounts collected after this payment, and amounts payable as prescribed in section 23-655.03, subsection A, paragraph 2 shall be transferred to the unemployment compensation fund established by section 23-701. END_STATUTE

START_STATUTE23-665.03.  Note debt service fund

A.  If the director issues notes, the director shall do all of the following:

1.  Establish a note debt service fund consisting of monies transferred to the fund pursuant to law. 

2.  Transfer monies from the unemployment special assessment proceeds fund to the note debt service fund until the debt service fund contains monies sufficient to pay all interest to become due on the notes and note related expenses.

3.  Transfer monies from the monies credited to this state's account in the unemployment trust fund pursuant to 42 United States Code section 1103 to the note debt service fund in an amount sufficient to repay all unpaid principal of the notes.

B.  Monies in the note debt service fund may be used only to pay amounts payable on notes and note related expenses as they become due.

C.  The department shall administer and account for the note debt service fund.

D.  On the payment of all amounts due and to become due on the notes and the payment of all note related expenses, any amounts remaining in the note debt service fund shall be transferred to the unemployment compensation fund established by section 23-701. END_STATUTE

START_STATUTE23-665.04.  Securing principal and interest; refunding notes

To secure the principal and interest on notes, the director may:

1.  Segregate the note debt service fund into one or more accounts and subaccounts and provide that notes may be secured by a lien on all or part of the monies paid to the note debt service fund or to any account or subaccount in the fund.

2.  Provide that the notes are secured by a first lien on the monies paid into the note debt service fund as provided in this article and pledge and assign to or in trust for the benefit of the holders of the notes all or part of the monies in the note debt service fund or in any account or subaccount in the fund as is necessary to secure and pay the principal, the interest and any premium on the notes as they come due.

3.  Establish priorities among noteholders based on criteria adopted by the director.

4.  Set aside, regulate and dispose of reserves and sinking accounts.

5.  Prescribe the procedure, if any, by which the terms of any contract with noteholders may be amended or abrogated, the amount of notes the holders of which must consent to an amendment or abrogation and the manner in which the consent may be given.

6.  Provide for payment of note related expenses from the proceeds of the sale of the notes or other sources authorized by this article and available to the director.

7.  Provide for the services of trustees, agents and consultants and other specialized services with respect to the notes.

8.  Take any other action that may affect the security and protection of the notes or interest on the notes.

9.  Refund any notes issued by the director by issuing new notes, if these new notes are secured by and payable from a source of revenues authorized by this article.

10.  Issue notes partly to refund outstanding notes and partly for any other purpose consistent with this article. END_STATUTE

START_STATUTE23-665.05.  Lien of pledge

A.  A pledge made under this article in connection with the notes is valid and binding from the time when the pledge is made.

B.  The monies deposited in the note debt service fund are immediately subject to the lien of the pledge without any future physical delivery or further act.  Any lien of any pledge is valid and binding against all parties that have claims of any kind against this state, regardless of whether the parties have notice of the lien.  The official instrument by which a pledge is created, when adopted by the director, is notice to all concerned of the creation of the pledge, and the instrument need not be recorded in any other place to perfect the pledge. END_STATUTE

START_STATUTE23-665.06.  Note purchase; cancellation

The director may purchase notes for cancellation out of any monies available for the purchase, at a price of not more than either of the following:

1.  If the notes are redeemable at the time of the purchase, the applicable redemption price plus accrued interest to the next interest payment date on the notes.

2.  If the notes are not redeemable at the time of the purchase, the applicable redemption price on the first date after the purchase on which the notes become subject to redemption plus accrued interest to that date. END_STATUTE

START_STATUTE23-665.07.  Payment of notes

The notes shall be paid solely from monies in the note debt service fund. END_STATUTE

START_STATUTE23-665.08.  Investment of note proceeds and note debt service fund monies

A.  The director may authorize the note trustee to invest the note proceeds and monies in the note debt service fund.

B.  The order directing an investment may state a specified time when the monies invested will be used.  The note trustee shall make the investment in such a way so that the investment matures at the specified date.

C.  Monies earned as interest or otherwise derived from the investment of the note proceeds or monies in the note debt service fund shall be used only for the purposes for which the monies invested may be used.

D.  At the direction of the director, the note trustee may invest or reinvest note proceeds and monies in the note debt service fund in any investments authorized by section 35-313.  The purchase of the securities shall be made by the note trustee on authority of the director.  The note trustee shall act as custodian of all securities purchased.  The securities may be sold on an order of the director. END_STATUTE

START_STATUTE23-665.09.  Characteristics of notes

A.  The notes are fully negotiable within the meaning and for all purposes of the uniform commercial code, subject only to any provisions for registration, regardless of whether the notes actually constitute negotiable instruments under the uniform commercial code.

B.  The notes, their transfer and the income from the notes are at all times free from taxation in this state.

C.  The notes:

1.  Are payable only according to their terms.

2.  Are not general, special or other obligations of this state.

3.  Do not constitute a debt of this state.

4.  Are not enforceable against this state nor is the payment of the notes enforceable out of any monies other than the revenue pledged and assigned to, or in trust for the benefit of, the holder or holders of the notes.

5.  Are securities in which public officers and bodies of this state and of municipalities and political subdivisions of this state, all companies, associations and other persons carrying on an insurance business, all financial institutions, investment companies and other persons carrying on a banking business, all fiduciaries and all other persons who are authorized to invest in government obligations may properly and legally invest.

6.  Are securities that may be deposited with public officers or bodies of this state and municipalities and political subdivisions of this state for purposes that require the deposit of government notes or obligations. END_STATUTE

START_STATUTE23-665.10.  Effect of changing circumstances on notes; agreement of state

A.  An amendment of any provision of this act does not diminish or impair the validity of notes issued under this act or the remedies and rights of noteholders.

B.  This state pledges to and agrees with the holders of the notes that this state will not limit, alter or impair the rights and remedies of the  noteholders, until all notes issued under this article, together with interest on the notes, interest on any unpaid installments of principal or interest and all costs and expenses in connection with any action or proceedings by or on behalf of the noteholders, are fully met and discharged. The director, as agent for this state, may include this pledge and undertaking in the instruments authorizing and securing the notes. END_STATUTE

START_STATUTE23-665.11.  Validity of notes

A.  This article constitutes full authority for authorizing and issuing the notes without reference to any other law of this state.  No other law with regard to authorizing or issuing obligations or that in any way impedes or restricts performing the acts authorized by this article may be construed to apply to any proceedings taken or acts done pursuant to this article.

B.  The validity of the notes does not depend on and is not affected by the legality of any proceeding relating to any action relating to application of the proceeds of the notes.

C.  The notes shall recite that they are regularly issued pursuant to this article.  That recital constitutes prima facie evidence of the legality and validity of the notes.  From and after the sale and delivery of the notes, they are incontestable by the director or this state. END_STATUTE

START_STATUTE23-665.12.  Compliance with federal tax requirements

All state officials shall comply with any requirement prescribed by the director deemed necessary to obtain or retain an exemption from federal income taxes for interest income on the notes.END_STATUTE

START_STATUTE23-665.13.  Reports

A.  Within fifteen days after the issuance of the notes, the department shall report to the directors of the joint legislative budget committee and the governor's office of strategic planning and budgeting on the finalized debt issuance, including the principal amount, interest rate, the debt service schedule, the length of term, the interest to be paid over the life of the loan and the status of the bonds as taxable or non-taxable. 

B.  Thirty days after the end of each calendar quarter of fiscal year 2013-2014, the department shall report to the directors of the joint legislative budget committee and the governor's office of strategic planning and budgeting concerning the status of the unemployment insurance system.  Each quarterly report shall include the beginning balance in this state's account in the unemployment trust fund pursuant to 42 United States Code section 1103, revenue during the year, net assessment revenue, federal unemployment tax reduction revenue, fund outlays, the ending balance, interest charges on the loan, and any outstanding federal debt.  Each report shall also provide quarterly estimates for each of these categories through the final quarter of calendar year 2014." END_STATUTE

Renumber to conform

Page 4, after line 18, insert:

"Sec. 6.  Transfer of monies

Any monies remaining in the unemployment special assessment fund established by section 23-730.01, Arizona Revised Statutes, as added by Laws 2011, chapter 218, section 2 are transferred for deposit in the unemployment special assessment proceeds fund established by section 23-665.02, Arizona Revised Statutes, as added by this act.

Sec. 7.  Delayed repeal

Title 23, chapter 4, article 2.1, Arizona Revised Statutes, as added by this act, is repealed from and after December 31, 2015.

Sec. 8.  Emergency

This act is an emergency measure that is necessary to preserve the public peace, health or safety and is operative immediately as provided by law."

Amend title to conform

 

 

 

2173ab.doc

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