Summary#

The Investment Performance Authority bill would create a new special purpose authority and amend the definition of “special purpose authority” in the Colorado Revised Statutes. Its stated goal is to earn more from some public money and use part of the investment earnings to support child care assistance for low-income families. The supplied status says the bill failed, so it did not make these changes.

• The authority would be a separate public body, not a division of a state agency. Its seven-member board would include the state treasurer as chair, the state budget director or a designee, and appointees with government-money, investment, and child-care experience.
• Eligible government entities could choose to invest some or all of qualifying money through the authority instead of the state treasurer or another authorized investor. The money must meet conditions, including being liquid, unencumbered, and outside the state’s general revenues.
• The authority would have to offer multiple investment options, including at least two with different durations. It could invest in securities not otherwise allowed under state laws governing public money.
• The authority would have to act as a prudent investor, considering both safety and return. It could deduct investment earnings for costs, reserves, and county child-care assistance; administrative costs deducted from earnings could not exceed 1% of those earnings.
• The authority could charge participating entities fees, hire staff, and borrow or seek gifts, grants, and donations for startup costs.

What it means for you#

• Government entities: If the bill had passed, an eligible entity could opt in only with approval from its governing leadership and either the state treasurer or the state budget director. The money would also have to meet the bill’s conditions. The authority could set rules for account size, deposits, withdrawals, early-withdrawal penalties, and reports.
• Counties and families seeking child care assistance: The authority would have to set a formula with the state child-care allocation committee and Department of Early Childhood for county payments. The bill does not promise a particular amount or guarantee that waitlists or enrollment freezes would end.
• Taxpayers and the public: The authority would be subject to open-meeting and public-records requirements, annual audits, and annual reporting. It would not be subject to administrative direction by a state agency. The bill does not directly change taxes, child-care eligibility, or the amount of assistance a family receives.

Money#

No publicly available information gives a total cost estimate or expected investment returns.

• The authority could charge participating entities fees and deduct reasonable administrative costs from investment earnings, subject to the 1% cap on those deductions.
• It could use earnings for reserves and county child-care assistance, but the bill does not set the shares for either.
• The authority or Treasury could seek grants and donations or borrow for startup costs, including borrowing from specified Treasury fee revenue; borrowed money would have to be repaid.
• The Department of Early Childhood and the child-care allocation committee would have to provide consultation and support within existing appropriations.

What is unclear#

• The bill does not set the amount or share of earnings that would go to counties, or how much a county would receive.
• It leaves key investment choices to the authority’s discretion. The bill does not state what investments it would actually choose or what returns they would produce.
• The authority would develop important operating rules, including withdrawal penalties and account limits. Those rules are not in the bill.
• The bill does not explain how the authority’s child-care funding would interact with existing assistance programs.
• The materials do not include the full current laws referenced by the bill, so I could not verify how the proposal would compare with those laws in practice.

Case for#

• The bill appears intended to address a funding gap for child-care assistance without relying only on general-fund spending.
• Letting eligible entities choose among investment options could give them more flexibility than the investment limits described in the bill’s findings.
• If investments earn money beyond costs and reserves, some earnings could support county child-care assistance while participating entities also receive pro-rata distributions when available.
• The proposal includes public meetings, public records, annual audits, and annual reports.

Case against#

• Public money could be invested in options not allowed under the usual state investment rules. A prudent-investor duty does not guarantee that investments will preserve principal or earn more.
• The bill does not specify how much child-care funding counties would receive; the amount would depend on investment earnings and decisions about costs and reserves.
• The authority could charge fees as well as deduct costs from investment earnings, creating costs for entities that opt in.
• The authority would be outside administrative direction by state agencies, while the bill leaves many operating rules and investment choices to its board.