State and local surplus funds: investments.

(1) Existing law specifies the types of securities that are eligible for the investment of surplus state funds. This bill would require that the first priority for the investment of surplus moneys in negotiable certificates of deposit under specified provisions be given to time deposits in an eligible community bank, as defined, or a credit union operating in this state to the maximum extent consistent with liquidity requirements and prudent management of surplus moneys. (2) Existing law prescribes the instruments in, and criteria by, which local agencies, as defined, may invest surplus funds. Existing law authorizes, until January 1, 2012, the investment of up to 30% of those funds in certificates of deposit at a commercial bank, savings bank, savings and loan association, or credit union that uses a private sector entity that assists in the placement of certificates of deposit, as specified. This bill would provide that a local agency, when it chooses to invest surplus funds in certificates of deposit, give priority to an eligible community bank or a credit union operating in this state.