Senate Bill 25-167 Reengrossed

A Bill for an Act

• Page 1, Line 101Concerning the investment of state fund money to benefit

• Page 1, Line 102Colorado communities, and, in connection therewith,

• Page 1, Line 103making an appropriation.

Bill Summary

(Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://leg.colorado.gov.)

Section 1 of the bill requires at least one member of the public school fund investment board (board) to have expertise in community investments, requires the board to direct the state treasurer to securely invest money deposited in the public school fund in a manner that prioritizes new investment objectives, and authorizes the board to enter into contracts with investment advisors or other investment professionals to provide advice on community investments. Section 2 makes conforming changes in order to expand the types of investments the state treasurer can make using public school fund money and extends the amount of time the treasurer has to offset an aggregate loss of principal to the public school fund from 18 to 24 months.

Section 3 creates the new community investment portfolio within the permanent school fund, and requires the state treasurer to invest at least 6% of the money in the permanent school fund into the community investment portfolio by July 1, 2027. The state treasurer is required to invest at least 20% of the money in the permanent school fund into the community investment portfolio by July 1, 2032.

Money in the portfolio must be invested in community investments, and allowable community investments include:

• Bonds issued by Colorado school districts and charter schools;
• Certificates of participation issued by Colorado school districts and charter schools;
• Mortgage pass-through securities and collateralized mortgage obligations secured by residential real estate, the majority of which is owned by public school employees;
• Loans to the Colorado middle income housing authority for a revolving loan fund that funds rental housing developments that include preferences for public school employees;
• Bonds issued by the middle income housing authority that fund rental housing developments which include preferences for public school employees;
• Bonds issued by the Colorado housing and finance authority that fund rental housing developments that include preferences for public school employees;
• Mortgage revenue bonds that support public school employee mortgages with interest rates of 3% or less;
• Loans to community development financial institutions that fund:
• The construction of housing developments that include preferences for public school employees; or
• Low-interest mortgages secured by residential real estate that is owned by public school employees; and
• Other venture capital, private equity, or public equity funds that support education in Colorado.
• By July 1, 2027, the greater of 6% of the fund's value or $100 million; and
• By July 1, 2028, the greater of 12% of the fund's value or $200 million.
• 75% of the money in the program shall be administered by the program administrator and used for a shared equity down payment assistance program that:
• Provides at least 15% of the total cost of a home to public school employees; and
• Allows appreciation-sharing between the program and the homeowner, with the program's share of appreciation capped at 10%.
• 25% of the money in the program must be invested in allowable community investments with the purpose of increasing the supply of houses for sale and access to home ownership in rural and other underserved communities.
• $100 million on July 1, 2025, that the department of local affairs shall use to create a new zero-interest revolving loan program for affordable housing developers; and
• $50 million that the department of local affairs shall use to create a new zero-interest revolving loan program to benefit fire protection districts and ambulance districts experiencing cash flow issues.
• The community investment portfolio;
• Bonds issued by Colorado school districts, charter schools, local governments, special districts, state enterprises, Indian tribes, or special purpose authorities;
• Certificates of participation issued by Colorado school districts, charter schools, local governments, special districts, state enterprises, Indian tribes, or special purpose authorities;
• Mortgage pass-through securities and collateralized mortgage obligations secured by Colorado residential real estate that is owned by Coloradans;
• Bonds issued by the middle income housing authority;
• Bonds issued by the Colorado housing and finance authority;
• Loans to community development financial institutions that fund:
• The construction of housing developments in Colorado; or
• Mortgages secured by Colorado residential real estate that is owned by Coloradans;
• Bonds issued by businesses headquartered in Colorado;
• Asset-backed securities supported by loans to small businesses in Colorado;
• The venture capital authority within the office of economic development and international trade; or
• Other venture capital, private equity, or public equity funds that support communities in Colorado.

The educator first home ownership program (program) is created within the community investment portfolio. The treasurer shall invest the following amounts in the program by the following dates:

The treasurer shall invest the money in the program as follows:

The program administrator shall ensure that mortgages in the shared equity down payment assistance program bear interest rates that are at least as low as prevailing mortgage rates at the time the mortgages in the shared equity down payment assistance program are entered into. The program administrator shall present an annual report to the public school fund investment board on program outcomes.

Sections 4 and 5 clarify that the state treasurer may invest state money in direct and indirect equity investments and other asset classes including mutual funds, exchange-traded funds, direct and indirect real estate investments, and education-related community investments.

Section 6 requires the state treasurer to invest at least 20% of the money in the unclaimed property trust fund in direct and indirect equity investments, mutual funds, exchange-traded funds, direct and indirect real estate investments, and other asset classes by July 1, 2032. The state treasurer is also required to make 2 loans of money from the unclaimed property trust fund to the department of local affairs, both of which must be paid back in full by July 1, 2045, including:

Section 7 creates the new Colorado investment portfolio (Colorado portfolio) within the unclaimed property trust fund. The treasurer is required to invest at least 5% of the money in the unclaimed property trust fund into the Colorado portfolio by July 1, 2027, and at least 20% of the money in the unclaimed property trust fund into the Colorado portfolio by July 1, 2032.

Money in the Colorado portfolio must be invested in:

Section 8 reduces the amount credited to the housing development grant fund from the general fund by $15 million for state fiscal year 2026-27.

• Page 4, Line 1Be it enacted by the General Assembly of the State of Colorado:

• Page 4, Line 2SECTION 1.  In Colorado Revised Statutes, 22-41-102, amend (3)(j)(I) and (3)(k)(I) as follows:

• Page 4, Line 322-41-102.  Fund inviolate. (3) (j)  For the 2025-26 state fiscal

• Page 4, Line 4year, interest and income earned on the investment of the money in the public school fund must be used or credited as follows:

• Page 5, Line 1(I)  The general assembly shall annually appropriate to the state

• Page 5, Line 2treasurer an amount necessary to pay for the services of the investment

• Page 5, Line 3consultant hired by the public school fund investment board pursuant to

• Page 5, Line 4section 22-41-102.5 (5) and to pay for any reimbursement for travel and

• Page 5, Line 5other necessary expenses incurred by the members of the public school

• Page 5, Line 6fund investment board pursuant to section 22-41-102.5 (2) and to pay

• Page 5, Line 7for costs required to accommodate tranche payments to the program manager, pursuant to 22-41-104.7(4)(b)(I);

• Page 5, Line 8(k)  For the 2026-27 state fiscal year and each state fiscal year

• Page 5, Line 9thereafter, interest and income earned on the investment of the money in the public school fund must be used or credited as follows:

• Page 5, Line 10(I)  The general assembly shall annually appropriate to the state

• Page 5, Line 11treasurer an amount necessary to pay for the services of the investment

• Page 5, Line 12consultant hired by the public school fund investment board pursuant to

• Page 5, Line 13section 22-41-102.5 (5) and to pay for any reimbursement for travel and

• Page 5, Line 14other necessary expenses incurred by the members of the public school

• Page 5, Line 15fund investment board pursuant to section 22-41-102.5 (2) and to pay

• Page 5, Line 16for costs required to accommodate tranche payments to the program manager, pursuant to 22-41-104.7(4)(b)(I);

• Page 5, Line 17SECTION 2.  In Colorado Revised Statutes, 22-41-102.5, amend (1)(a)(III), (3), (4)(a)(II), and (5) as follows:

• Page 5, Line 1822-41-102.5.  Public school fund investment board - creation

• Page 5, Line 19- working group - report. (1) (a)  There is hereby created the public

• Page 5, Line 20school fund investment board, referred to in this section as the "board". The board consists of five members as follows:

• Page 5, Line 21(III)  Three members appointed by the state treasurer Such

• Page 6, Line 1appointees must have diversity in party affiliation and with diverse

• Page 6, Line 2party affiliations. At least one appointee required by this

• Page 6, Line 3subsection (1)(a)(III) must have expertise in community

• Page 6, Line 4investments, as defined in section 22-41-104.7 (1), and the other

• Page 6, Line 5two must have professional qualifications regarding the prudent

• Page 6, Line 6investment of trust fund money or expertise in institutional investment management.

• Page 6, Line 7(3)  The board shall direct the state treasurer on how to securely invest money deposited in the public school fund:

• Page 6, Line 8(a)  For the intergenerational benefit of public schools; and

• Page 6, Line 9(b)  In a manner that complies with the "Uniform Prudent Investor Act", article 1.1 of title 15; C.R.S. and

• Page 6, Line 10(c)  In a manner that targets the following investment objectives:

• Page 6, Line 11(I)  Preserving the principal of the public school fund; and

• Page 6, Line 12(II)  Providing substantial benefit to the beneficiaries of

• Page 6, Line 13the public school fund through community investing as outlined in section22-41-104.7.

• Page 6, Line 15(4) (a)  No later than March 31, 2017, the board shall establish

• Page 6, Line 16policies that are necessary and proper for the administration of this section, including but not limited to:

• Page 6, Line 17(II)  A policy establishing allowable investments that comply with

• Page 6, Line 18section 22-41-104, section 22-41-104.7, and section 3 of article IX of the state constitution; and

• Page 6, Line 19(5)  The board may enter into contracts with private professional

• Page 6, Line 20fund managers, investment advisors, or other investment

• Page 7, Line 1professionals to provide expertise, technical support, and advice on

• Page 7, Line 2investment market conditions and to provide support for the

• Page 7, Line 3implementation of the community investment portfolio. Such

• Page 7, Line 4contract or contracts must be bid by employing standard public bidding

• Page 7, Line 5practices including, but not limited to, the use of requests for information,

• Page 7, Line 6requests for proposals, or any other standard vendor selection practices

• Page 7, Line 7determined by the board to be best suited to selecting an appropriate

• Page 7, Line 8private professional fund manager. Payments for these services will be

• Page 7, Line 9paid from the interest and income of the public school fund subject to the requirements set forth in section 22-41-102.

• Page 7, Line 10SECTION 3.  In Colorado Revised Statutes, 22-41-104, amend (1) and (2); and add (4) as follows:

• Page 7, Line 1122-41-104.  Lawful investments - legislative declaration.

• Page 7, Line 12(1)  The state treasurer, as directed by the public school fund investment

• Page 7, Line 13board, may invest and reinvest moneys money accrued or accruing to the

• Page 7, Line 14public school fund in the types of deposits and investments authorized in

• Page 7, Line 15sections 24-36-109, 24-36-112, and 24-36-113, C.R.S., and bonds issued

• Page 7, Line 16by school districts. The moneys money may also be invested in stocks

• Page 7, Line 17and other financial assets as specified in the public school fund

• Page 7, Line 18investment board investment policy established as required in section

• Page 7, Line 1922-41-102.5 (4)(b); except that investment includes only mutual funds,

• Page 7, Line 20index funds, and any other instrument that is not a direct investment in a corporation.

• Page 7, Line 21(2)  The state treasurer has authority, to be exercised at the state

• Page 7, Line 22treasurer's discretion, to effect exchanges or sales whenever such

• Page 7, Line 23exchanges or sales will not result in an aggregate loss of principal to the

• Page 7, Line 24public school fund. An aggregate loss of principal to the public school

• Page 8, Line 1fund occurs only when an exchange or sale that resulted in an initial loss

• Page 8, Line 2of principal is not offset by a gain on an exchange or sale in the fund

• Page 8, Line 3within eighteen twenty-four months. The calculation of an aggregate

• Page 8, Line 4loss must also include any gains that were realized in the twelve months prior to the loss of principal.

• Page 8, Line 5(4)  The general assembly finds and declares that:

• Page 8, Line 6(a)  The mission of the public school fund is to support

• Page 8, Line 7Colorado children and Colorado schools. The strategic

• Page 8, Line 8investment of capital can achieve positive social outcomes and

• Page 8, Line 9beneficial financial returns. The fund's intergenerational

• Page 8, Line 10mission is best served by investing a portion of the fund's corpus

• Page 8, Line 11in a way that advances clear, meaningful, and measurable

• Page 8, Line 12outcomes through the community investment portfolio.

• Page 8, Line 13Investments should be aligned with the fund's mission and should benefit Colorado schools and children.

• Page 8, Line 14(b)  Investment in communities can lead to increased

• Page 8, Line 15construction of housing and affordable home ownership for

• Page 8, Line 16teachers and public school employees, scaling of innovative

• Page 8, Line 17educational tools, provision of capital for early childhood

• Page 8, Line 18businesses, and subsidization of school facilities. These

• Page 8, Line 19investments can improve the lives of Colorado families, increase

• Page 8, Line 20educational opportunities, and advance the intergenerational mission of the fund.

• Page 8, Line 21(c)  The public purpose of the community investment

• Page 8, Line 22portfolio within the public school fund is to amplify the benefit

• Page 8, Line 23provided to Colorado schools and children by investing in

• Page 8, Line 24Colorado children, families, and communities.

• Page 9, Line 1(d)  Investing money in the public school fund into the

• Page 9, Line 2community investment portfolio complies with the "Uniform

• Page 9, Line 3Prudent Investor Act", article 1.1 of title 15, and specifically

• Page 9, Line 4section 15-1.1-102.5, because the assets have a "special

• Page 9, Line 5relationship or special value" to the purposes of the trust and

• Page 9, Line 6to one or more of the beneficiaries. Community investments

• Page 9, Line 7benefit Colorado school children and advance "the

• Page 9, Line 8intergenerational benefit of public schools" in accordance with section 22-41-102.5 (3).

• Page 9, Line 9(e)  Housing developments that include preferences for

• Page 9, Line 10public school employees: promote a substantial, legitimate, and

• Page 9, Line 11nondiscriminatory state interest that cannot be served by

• Page 9, Line 12another practice with a less discriminatory effect; do not

• Page 9, Line 13constitute source of income discrimination under section

• Page 9, Line 1424-34-501 (4.5) or 24-34-502; and comply with the federal "Fair

• Page 9, Line 15Housing Act", 42 U. S.C. sec. 3601 et seq., part 5 of article 34 of

• Page 9, Line 16title 24, and other state and local laws, ordinances, and resolutions.

• Page 9, Line 17(f)  The state treasurer may invest in asset classes

• Page 9, Line 18including mutual funds and education-related community

• Page 9, Line 19investments. Investment in these asset classes furthers the

• Page 9, Line 20public purpose of increasing the fund balance for fund beneficiaries.

• Page 9, Line 21SECTION 4.  In Colorado Revised Statutes, add 22-41-104.7 as follows:

• Page 9, Line 2222-41-104.7.  Community investment portfolio - required

• Page 9, Line 23investments - creation - legislative declaration - definitions.

• Page 10, Line 1(1)  Definitions.As used in this section, unless the context otherwise requires:

• Page 10, Line 2(a)  "Community investment" means an investment that is

• Page 10, Line 3intended to generate positive, measurable impact for Colorado

• Page 10, Line 4school children, families, or communities while simultaneously

• Page 10, Line 5generating financial returns. Community investments may have below-market rates of return.

• Page 10, Line 6(b)  "Fund" means the public school fund of the state created in section 3 of article IX of the state constitution.

• Page 10, Line 7(c)  "Portfolio" means the community investment portfolio created in this section.

• Page 10, Line 8(d)  "Program" means the educator first home ownership program created in this section.

• Page 10, Line 9(e)  "Program manager" means the Colorado housing and

• Page 10, Line 10finance authority; except that, if the Colorado housing and

• Page 10, Line 11finance authority elects at any time not to serve as program

• Page 10, Line 12manager, the public school fund investment board shall select a replacement entity that agrees to serve as program manager.

• Page 10, Line 13(f)  "Public school employee" means any employee of a

• Page 10, Line 14Colorado school district, charter school, institute charter

• Page 10, Line 15school, board of cooperative educational services, or innovation zone.

• Page 10, Line 16(g)  "Shared equity down payment assistance program"

• Page 10, Line 17means a program through which a borrower receives financial

• Page 10, Line 18assistance for a down payment on a property in accordance with subsection (4) of this section.

• Page 10, Line 19(2)  Portfolio created.The community investment portfolio

• Page 11, Line 1is created within the fund. By July 1, 2032, the treasurer

• Page 11, Line 2shall invest at least twenty percent of the fund's value into the portfolio.

• Page 11, Line 3(3)  Allowable portfolio investments.Money in the portfolio

• Page 11, Line 4must be invested in community investments. Allowable community investments include but are not limited to:

• Page 11, Line 5(a)  Bonds issued by Colorado school districts and charter schools;

• Page 11, Line 6(b)  Certificates of participation issued by Colorado school districts and charter schools;

• Page 11, Line 7(c)  Mortgage pass-through securities and collateralized

• Page 11, Line 8mortgage obligations secured by residential real estate, the majority of which is owned by public school employees;

• Page 11, Line 9(d)  Loans to the Colorado middle income housing

• Page 11, Line 10authority for a revolving loan fund that funds rental housing

• Page 11, Line 11developments that include preferences for public school employees;

• Page 11, Line 12(e)  Bonds issued by the middle income housing authority

• Page 11, Line 13that fund rental housing developments that include preferences for public school employees;

• Page 11, Line 14(f)  Bonds or mortgage-backed securities issued by the

• Page 11, Line 15Colorado housing and finance authority that fund housing

• Page 11, Line 16developments that include preferences for public school

• Page 11, Line 17employees or mortgages secured by residential real estate, the majority of which is owned by public school employees;

• Page 11, Line 18(g)  Mortgage revenue bonds that support public school

• Page 11, Line 19employee mortgages with interest rates of three percent or less;

• Page 12, Line 1(h)  Loans to community development financial

• Page 12, Line 2institutions or nonprofits with a history of providing affordable homeownership financing that fund:

• Page 12, Line 3(I)  Housing that includes preferences for public school employees; or

• Page 12, Line 4(II)  Low-interest mortgages secured by residential real estate that is owned by public school employees;

• Page 12, Line 5(i)  Down payment shared appreciation products secured

• Page 12, Line 6by residential real estate that is owned by public school employees; and

• Page 12, Line 7(j)  Other investments that support the public purpose of the fund.

• Page 12, Line 8(4) Educator first home ownership program. (a)  The

• Page 12, Line 9educator first home ownership program is created within the

• Page 12, Line 10portfolio. In order to support public school employee home

• Page 12, Line 11ownership, address educator shortages, and support the

• Page 12, Line 12retention of public school employees, the treasurer shall invest

• Page 12, Line 13the following amounts into the program, except that the total

• Page 12, Line 14investment amount shall never exceed the sum of the

• Page 12, Line 15investments made in accordance with subsection (4)(c) of this

• Page 12, Line 16section plus the total amount of shared equity down payment

• Page 12, Line 17assistance that has been granted by the program manager through the program, by the following dates:

• Page 12, Line 18(I)  By July 1,2028,the greater of six percent of the fund's value or one hundred million dollars;

• Page 12, Line 19(II)  By July 1,2030,the greater of twelve percent of the fund's value or two hundred million dollars.

• Page 13, Line 1(b)  The treasurer shall aim to invest a target of

• Page 13, Line 2seventy-five percent of the money in the program into a shared

• Page 13, Line 3equity down payment assistance program for public school

• Page 13, Line 4employees to be managed by the program manager. The shared

• Page 13, Line 5equity down payment assistance program must be established by

• Page 13, Line 6July 1, 2026. Once the shared equity down payment assistance program is fully established:

• Page 13, Line 7(I)  The public school investment board shall purchase

• Page 13, Line 8from the program manager the mortgage products created

• Page 13, Line 9through the shared equity down payment assistance program in

• Page 13, Line 10tranches of reasonable amounts that are mutually agreed upon

• Page 13, Line 11by the public school investment board and the program manager; and

• Page 13, Line 12(II)  The public school investment board may provide

• Page 13, Line 13notice of any discontinuation of future investments that the

• Page 13, Line 14program manager has not already committed to the shared

• Page 13, Line 15equity down payment assistance program, which notice must be provided at least six months prior to discontinuation.

• Page 13, Line 16(c)  The treasurer shall aim to invest a target of

• Page 13, Line 17twenty-five percent of the money in the program into allowable

• Page 13, Line 18community investments described in subsection (3) of this section

• Page 13, Line 19with the purpose of increasing the supply of houses for sale and

• Page 13, Line 20access to home ownership in rural and other underserved communities.

• Page 13, Line 21(d)  The program manager shall establish underwriting

• Page 13, Line 22criteria for the shared down payment equity assistance program

• Page 14, Line 1and shall establish guidelines so that the shared down payment equity assistance program:

• Page 14, Line 2(I)  Prioritizes first-time home buyers that use the home as a primary residence;

• Page 14, Line 3(II)  Provides shared equity down payment assistance to

• Page 14, Line 4public school employees and aims to help as many public school employees as possible achieve affordable home ownership;

• Page 14, Line 5(III)  Allows appreciation-sharing between the shared

• Page 14, Line 6equity down payment assistance program and the borrower, with:

• Page 14, Line 7(A)  The shared equity down payment assistance program's

• Page 14, Line 8share of appreciation never exceeding the percentage that the

• Page 14, Line 9shared equity down payment assistance program's financial assistance represented of the purchase price; and

• Page 14, Line 10(B)  Any profit or loss realized in the share of appreciation

• Page 14, Line 11described in subsection (4)(d)(III)(A) of this section being borne

• Page 14, Line 12by the shared equity down payment assistance program rather than the borrower or the program manager.

• Page 14, Line 13(IV)  If the program manager is the Colorado housing and

• Page 14, Line 14finance authority, is paired with a first mortgage loan provided

• Page 14, Line 15through the program manager's participating lender network

• Page 14, Line 16that bears an interest rate that is at or below the prevailing mortgage rates.

• Page 14, Line 17(e)  The program manager shall annually publish and

• Page 14, Line 18present a report to the public school fund investment board on program outcomes, including:

• Page 14, Line 19(I)  The number of program borrowers;

• (II)  The geographic distribution of program borrowers;

• Page 15, Line 1(III)  The area median income of program borrowers;

• Page 15, Line 2(IV)  The median purchase price, median loan amount, and

• Page 15, Line 3average interest rate on first mortgages for public school employees that benefit from the program;

• Page 15, Line 4(V)  The amount of money provided in down payment

• Page 15, Line 5assistance by the shared equity down payment assistance program;

• Page 15, Line 6(VI)  The amount of money received as shared appreciation by the shared equity down payment assistance program; and

• Page 15, Line 7(VII)  The amount of shared appreciation profit or loss

• Page 15, Line 8experienced by the shared equity down payment assistance program.

• Page 15, Line 9(f)  Nothing in this section prevents the use of other

• Page 15, Line 10sources of state or local funding to be leveraged with the program.

• Page 15, Line 12SECTION 5.  Appropriation. (1)  For the 2025-26 state fiscal

• Page 15, Line 13year, $375,900 is appropriated to the department of the treasury for use

• Page 15, Line 14by administration. This appropriation is from the interest or income

• Page 15, Line 15earned on the investment of the money in the public school fund pursuant

• Page 15, Line 16to section 22-41-102 (3)(h)(I), C.R.S. To implement this act, administration may use this appropriation as follows:

• Page 15, Line 17(a)  $300,000 for personal services, which amount is based on an assumption that the department will require an additional 2.0 FTE; and

• Page 15, Line 18(b)  $75,900 for operating expenses.

• Page 15, Line 19SECTION 6.  Safety clause. The general assembly finds,

• Page 16, Line 1determines, and declares that this act is necessary for the immediate

• Page 16, Line 2preservation of the public peace, health, or safety or for appropriations for

• Page 16, Line 3the support and maintenance of the departments of the state and state institutions.