Sec. PPPP-1. 30-A MRSA c. 225, sub-c. 4 is enacted to read:
SUBCHAPTER 4
PENSION COST REDUCTION BONDS
The Legislature finds that:
1. People served. The people of this State are served by dedicated teachers and state employees;
2. Unfunded liability. The State has a significant unfunded liability to its teacher and state employee retirement fund;
3. Sufficient investments essential. Ensuring sufficient investments in teacher and state employee retirement is essential to the continued vitality of the economy of this State;
4. Funding increased investment. Funding increased investment in teacher and state employee retirement with increased taxes or by cutting essential services to the most vulnerable citizens of this State is not in the best interests of the State and would undermine the economic recovery in this State; and
5. Pension obligation financings. Pension obligation financings as authorized in this subchapter are tax-exempt or taxable bonds repaid as provided in this subchapter and therefore do not represent constitutional debt of or the pledge of the full faith and credit of the State.
§6042. Pension cost reduction bonds authorized
Notwithstanding any other provision of law, no later than August 15, 2005, the bank may issue up to $410,000,138 plus financing costs, excluding bonds to refund bonds for the purpose of obtaining the economic benefit of reducing the debt service on the outstanding bonds, of pension cost reduction bonds, to be repaid solely from funds provided in this subchapter.
The bank may issue pension cost reduction bonds pursuant to a resolution to be adopted by the bank in the amount and upon such terms as it considers appropriate. The terms of the pension cost reduction bonds, their repayment schedule and other provisions to facilitate their creditworthiness must be determined by the bank.
The pension cost reduction bonds must be in the form, must bear interest at the rate or rates that, under the United States Internal Revenue Code of 1986, as amended, in the opinion of bond counsel to the bank may be included in or excludable from the gross income of the owners for federal income tax purposes and state income tax purposes, must mature at the time and must have such other terms as are determined by the bank except that no pension cost reduction bond may mature more than 20 years from the date of its issue.
Pension cost reduction bonds are not, and may not be deemed to constitute, a debt or liability of the State or of any political subdivision of the State, or a pledge of the full faith and credit of the State or of any political subdivision of the State, but are special obligations of the bank payable solely from the funds and revenues pledged therefor.
Proceeds from any sale of the pension cost reduction bonds must be deposited into the Retirement Allowance Fund established in Title 5, section 17251.
§6043. Maine Municipal Bond Bank provisions
The bank has the powers and duties provided by this chapter, modified and supplemented as provided in this section for the purposes set forth in this section.
1. Definitions. As used in this subchapter, unless the context otherwise indicates, the following terms have the following meanings.
A. "Ancillary obligation" means the obligation of the bank under any credit enhancement or liquidity agreement, including any obligation in the form of bond insurance, a letter of credit, standby bond purchase agreement, reimbursement agreement, liquidity facility or other similar arrangement; under any remarketing agreement, auction agent agreement, broker-dealer agreement or other agreement relating to the marketing of the bonds, interest rate or other type of swap or hedging contract; or under any investment agreement, forward purchase agreement or similarly structured investment contract, entered into by the bank in connection with any bonds issued under this subchapter.
B. "Bonds" or "pension cost reduction bonds" means any bonds, notes and other evidence of indebtedness issued by the bank pursuant to this subchapter.
C. "Costs of issuance" means any item of expense directly or indirectly payable or reimbursable by the bank and related to the authorization, sale or issuance of bonds, including, but not limited to, underwriting fees and fees and expenses of professional consultants and fiduciaries.
D. "Costs of the pension obligation" includes the amount of $410,000,138 for the payment to the Maine State Retirement System for the fiscal years ending June 30, 2006 and June 30, 2007 and financing costs.
E. "Debt service fund" means the trust fund established by the bank pursuant to subsection 5.
F. "Financing costs" means all costs of issuance, capitalized interest, capitalized operating expenses and debt service reserves, fees, and cost of any ancillary obligation and other fees, expenses and costs related to issuing, securing and marketing the bonds.
2. Declaration of purpose. It is declared to be in the public interest and to be the policy of the State to authorize the bank to issue pension cost reduction bonds.
3. Declaration of necessity. It is declared that credit and municipal bond market conditions may require the exercise of state powers by authorizing, but not requiring, a state instrumentality to issue its bonds to finance all or a portion of the costs of pension cost reduction under this subchapter.
4. Lending and borrowing powers. The bank may assist the State by borrowing money to finance or refinance from time to time all or a portion of the costs of the pension obligation and make the proceeds of such borrowing available to the State as set out in this subchapter. The principal of and interest on any pension cost reduction bonds issued by the bank and any ancillary obligation must be secured by the debt service fund and capital reserve fund established pursuant to subsection 6 in accordance with and as may be determined by resolution of the bank. Bonds, ancillary obligations or other forms of debt or liability entered into or issued by the bank under this section are not in any way a debt or liability of the State and do not constitute a loan of the credit of the State or create any debt or debts, liability or liabilities on behalf of the State or constitute a pledge of the faith and credit of the State. Each bond, ancillary obligation or other evidence of debt or liability entered into by the bank must contain a statement to the effect that the bank is obligated to pay the principal, interest, redemption premium, if any, and other amounts payable solely from the sources pledged for that purpose by the bank, and that neither the faith and credit nor the taxing power of the State is pledged to the payment of the principal, interest, premium, charge, fee or other amount on the bond, ancillary obligation or other form of indebtedness, as the case may be.
5. Debt service fund. The bank shall establish and maintain a debt service fund as a trust fund called "the Pension Cost Reduction Debt Service Fund" and referred to in this subsection as "the debt service fund," into which there must be deposited directly money received into funds established by Title 8, section 386; Title 8, section 1036, subsection 2, paragraphs B, C, D, H and I; Title 10, sections 1527-B and 1527-D; Title 13-B, sections 1402-A and 1405; Title 13-C, sections 124 and 143; Title 31, sections 414 and 416; Title 31, sections 613 and 615; and Title 31, sections 813 and 815; all proceeds of bonds required to be deposited in the debt service fund by terms of any contract between the bank and its bondholders or any resolution of the bank with respect to the proceeds of bonds, any other money or funds of the bank that it determines to deposit in the debt service fund and any other money or funds transferred and made available to the bank only for the purposes of the debt service fund from any other source or sources. Money in the debt service fund must be held and applied solely to the payment of the interest on and principal of bonds secured by the debt service fund as they become due and payable and for the retirement of bonds, including the payment of any redemption premium required to be paid when any bonds are redeemed or retired before maturity or, in accordance with the resolution authorizing the issuance of the bonds, for the payment of ancillary obligations; except that, in each month, to the extent there is money or funds therein not needed in accordance with the resolution, and subject in all respects to the provisions of the resolution, the bank shall withdraw any excess money or funds and transfer it to accounts identified by the State Controller.
6. Capital reserve fund. Pursuant to this chapter, a capital reserve fund, upon the adoption of a resolution authorizing the issuance of pension cost reduction bonds, must be created pursuant to section 6006, subsection 1-A with the same effect as provided in section 6006 as if set forth fully in this subsection, including the provisions respecting the restoration of the capital reserve fund, except that, in lieu of investments prescribed in section 6006, subsection 3, the bank may provide for a surety on such terms and conditions as prescribed by the resolution establishing the capital reserve fund.
7. Transfer of funds. So long as there are any pension cost reduction bonds issued by the bank outstanding, as defined by and under its resolution, and subject to appropriation, if any, required by law, for payment and transfer to the Pension Cost Reduction Debt Service Fund established pursuant to subsection 5 the State Controller shall transfer immediately all sums deposited into accounts authorized by Title 8, section 386; Title 8, section 1036, subsection 2, paragraphs B, C, D, H and I; Title 10, sections 1527-B and 1527-D; Title 13-B, sections 1402-A and 1405; Title 13-C, sections 124 and 143; Title 31, sections 414 and 416; Title 31, sections 613 and 615; and Title 31, sections 813 and 815, less costs of administering the programs funded by these accounts, including prizes.
8. Corporate powers. In addition to all other powers granted to the bank, for carrying out the purposes of this subchapter, the bank may:
A. Make, enter into and enforce all contracts or agreements necessary, convenient or desirable for the purposes of financing or refinancing the costs of the pension obligation;
B. Invest any funds or money of the bank not then required for funding costs of the pension obligation in the same manner as permitted for the investment of funds belonging to the State or held in the State Treasury, except as otherwise permitted or provided by this subchapter; and
C. Fix and prescribe any form of application or procedure to be required of the State or of any agency, political subdivision, instrumentality or department of the State with respect to the costs of the pension obligation and fix the terms and conditions of the costs of the pension obligation and enter into agreements with the State or any agency, political subdivision, instrumentality or department of the State or of any political subdivision of the State in connection with the costs of the pension obligation.
9. Bonds of bank. Notwithstanding the provisions of section 6003, the bank may issue its bonds, including bonds to refund bonds, from time to time in any principal amounts pursuant to and as prescribed by this subchapter.
10. Agreements with financial institutions. Notwithstanding the provisions of section 6019, the bank may enter into any ancillary obligation or other agreements or contracts with any commercial banks, trust companies or banking or other financial institutions within or outside the State that are necessary, desirable or convenient in the opinion of the bank to provide any other services to the bank to assist the bank in effectuating the purposes of this subchapter. The bank may enter into, amend or terminate any ancillary obligation as it determines to be necessary or appropriate to place the obligations or investments of the bank, as represented by the bonds or the investment of their proceeds, in whole or in part, on the interest rate, cash flow or other basis approved by the bank. The obligation may include without limitation contracts commonly known as interest rate swap agreements, forward purchase contracts or guaranteed investment contracts and futures or contracts providing for payments based on levels of, or changes in, interest rates. These contracts or arrangements may be entered into by the bank in connection with or incidental to entering into or maintaining any agreement that secures bonds of the bank or any investment or contract providing for investment of reserves or similar facility guaranteeing an investment rate for a period of years not to exceed the underlying terms of the bonds. The determination by the bank that an ancillary obligation or the amendment or termination of an ancillary obligation is necessary or appropriate as provided in this subsection is conclusive. Any ancillary obligation may contain such payment, security, default, remedy, termination provisions and payments and other terms and conditions as determined by the bank, after giving due consideration to the creditworthiness of the counterparty or other obligated party, including any rating by any nationally recognized rating agency, and to any other criteria as may be appropriate.
Bonds or any ancillary obligation may contain a recital that they are issued or executed, respectively, pursuant to this subchapter. The recital is conclusive evidence of their validity and of the regularity of the proceedings relating to them.
11. Remedies of holders of bonds. In addition to all other rights or remedies set forth in section 6023, subsection 2, the trustee appointed pursuant to section 6023, subsection 1 may, and upon written request of the holders of 25% in principal amount of all outstanding bonds or holders of ancillary obligations in the percentage set forth in the bank's authorizing resolution, shall, in the trustee's or the bank's own name, by mandamus or other suit, action or proceeding at law or in equity, enforce all rights of the bondholders or holders of the ancillary obligations and require the bank to carry out any other agreements with the bondholders or holders of such ancillary obligations and to perform its duties under this subchapter, provided the bonds are limited revenue obligations of the bank. The bank's obligations to make debt service payments do not constitute a debt or liability of the State or any political subdivision of the State other than the bank within the meaning of any constitutional or statutory limitation, or a loan of the credit of the State, or a pledge of the faith and credit of the State or any political subdivision of the State other than the bank, or a contractual obligation in excess of the amounts deposited therein, and the State has no continuing legal or moral obligation to appropriate money for said payments or other obligations of the bank. Payments of the principal of, redemption premium, if any, and interest on the bonds must be made solely from amounts derived from the Pension Cost Reduction Debt Service Fund established pursuant to subsection 5. Neither the faith and credit nor the taxing power of the State or of any political subdivision of the State is pledged to the payment of the principal of, redemption premium, if any, or interest on the bonds. The bank has no taxing power.
This subchapter and all powers granted by this subchapter must be liberally construed to effectuate its intent and their purposes, without implied limitations thereon. This subchapter constitutes full and complete authority for all things contemplated to be done in this subchapter. All rights and powers granted in this subchapter are cumulative with those derived from other sources and may not, except as expressly stated in this subchapter, be construed in limitation thereof. Insofar as the provisions of this subchapter are inconsistent with any other provision of law or the provisions of any other act, general or special, the provisions of this subchapter are controlling.
Sec. PPPP-2. Prepayment of teacher retirement contribution. The State Controller shall transfer $41,908,402 from General Fund unappropriated surplus on or before January 1, 2006 to the Retirement Allowance Fund. This transfer must be deposited as a prepayment of the unfunded actuarial liability of teachers.
Sec. PPPP-3. Funds reserved in Budget Stabilization Fund. On or before June 30, 2007, the State Controller shall reserve $66,656,703 in the Budget Stabilization Fund.
Sec. PPPP-4. Transfer to Pension Cost Reduction Debt Service Fund. On June 30, 2007, the State Controller shall transfer $8,000,000 from the Budget Stabilization Fund to the Pension Cost Reduction Debt Service Fund within the Maine Municipal Bond Bank to be held as a working capital reserve to account for the seasonality of revenues deposited to the account to ensure timely payment of debt service to the Bond Bank. After the final payment to the bank, the working capital reserve along with any interest earned, and after all fees have been paid to the trustee, shall revert to the Budget Stabilization Fund or its successor.
Sec. PPPP-5. Appropriations and allocations. The following appropriations and allocations are made.
EDUCATION, DEPARTMENT OF
Teacher Retirement 0170
Initiative: Deappropriates funds due to the prefunding of the normal cost of teachers' retirement with proceeds from the Pension Cost Reduction Bond.
GENERAL FUND 2005-06 2006-07
All Other ($61,167,861) ($64,532,094)
_____________ ____________
GENERAL FUND TOTAL ($61,167,861) ($64,532,094)
Teacher Retirement 0170
Initiative: Deappropriates funds due to prefunding of the unfunded actuarial liability of teachers' retirement with proceeds from the Pension Cost Reduction Bond.
GENERAL FUND 2005-06 2006-07
All Other ($113,316,207) ($119,548,943)
_____________ ____________
GENERAL FUND TOTAL ($113,316,207) ($119,548,943)
EDUCATION, DEPARTMENT OF
DEPARTMENT TOTALS 2005-06 2006-07
GENERAL FUND ($174,484,068) ($184,081,037)
_____________ ____________
DEPARTMENT TOTAL -
ALL FUNDS ($174,484,068) ($184,081,037)
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