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| THE GENERAL ASSEMBLY OF PENNSYLVANIA |
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| SENATE BILL |
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| INTRODUCED BY STACK, SCARNATI, WASHINGTON, FONTANA, PIPPY, TARTAGLIONE, LOGAN, COSTA, ORIE, WARD, HUGHES, BOSCOLA, FARNESE, ALLOWAY, WOZNIAK, LEACH AND DINNIMAN, JULY 17, 2009 |
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| REFERRED TO FINANCE, JULY 17, 2009 |
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| AN ACT |
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1 | Providing for divestiture by the State Treasurer, the State |
2 | Employees' Retirement System and the Public School Employees' |
3 | Retirement System of investments in companies doing business |
4 | in Iran and Sudan. |
5 | The General Assembly of the Commonwealth of Pennsylvania |
6 | hereby enacts as follows: |
7 | Section 1. Short title. |
8 | This act shall be known and may be cited as the Protecting |
9 | Pennsylvania's Investments Act. |
10 | Section 2. Definitions. |
11 | The following words and phrases when used in this act shall |
12 | have the meanings given to them in this section unless the |
13 | context clearly indicates otherwise: |
14 | "Alternative investments." An investment in a private equity |
15 | fund, private debt fund, venture fund, real estate fund, hedge |
16 | fund or absolute return fund. |
17 | "Board." As defined in section 102 of the act of February 1, |
18 | 1974 (P.L.34, No.15), known as the Pennsylvania Municipal |
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1 | Retirement Law; 24 Pa.C.S. § 8102 (relating to definitions); or |
2 | 71 Pa.C.S. § 5102 (relating to definitions). |
3 | "Business activities." Owning or controlling property or |
4 | assets located in, having employees or facilities located in, |
5 | providing goods or services to, having distribution agreements |
6 | with, issuing credit or loans to, purchasing bonds or commercial |
7 | paper issued by, investing in or having equity ties to or with |
8 | Iran, Sudan or any company domiciled in Iran or Sudan. |
9 | "Company." Any sole proprietorship, organization, |
10 | association, corporation, partnership, joint venture, limited |
11 | partnership, limited liability partnership, limited liability |
12 | company or other entity or business association that exists for |
13 | the purpose of making a profit. |
14 | "Direct holdings." All securities of a company that are held |
15 | directly by the public fund. |
16 | "Foreign company." Any entity which is not organized under |
17 | the laws of the United States. |
18 | "Government of Iran." The government of Iran and its |
19 | instrumentalities and companies owned or controlled by the |
20 | government of Iran. |
21 | "Government of Sudan." The government in Khartoum, Sudan, |
22 | which is led by the National Congress Party, formerly known as |
23 | the National Islamic Front, or any successor government formed |
24 | on or after October 13, 2006, including the coalition the |
25 | National Unity Government agreed upon in the Comprehensive Peace |
26 | Agreement for Sudan. The term does not include the regional |
27 | government of southern Sudan. |
28 | "Inactive business activities." The continued holding or |
29 | renewal of rights to property previously operated for the |
30 | purpose of generating revenues but not presently deployed for |
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1 | that purpose. |
2 | "Indemnitee." Each current or former board member, duly |
3 | appointed designee of a board member, officer, employee, |
4 | including, without limitation, the attorneys in the Office of |
5 | Chief Counsel that serve a public fund, agent, research firm or |
6 | investment manager of a public fund who was or is a party to, or |
7 | is threatened to be made a party to, or is otherwise involved in |
8 | any proceeding by reason of the fact that the person is or was a |
9 | board member, designee of a board member, officer, employee, |
10 | agent, research firm or investment manager of a public fund. |
11 | "Indirect holdings." All securities held in an account or |
12 | fund such as a mutual fund managed by one or more persons not |
13 | employed by a public fund, in which the public fund owns shares |
14 | or interests together with other investors. |
15 | "Iran." The Islamic Republic of Iran. |
16 | "List of State Sponsors of Terrorism." The list of countries |
17 | designated by the United States Secretary of State as having |
18 | repeatedly provided support for acts of international terrorism |
19 | as reported annually in Country Reports on Terrorism under |
20 | section 140 of the Foreign Relations Authorization Act, Fiscal |
21 | Years 1988 and 1989 (Public Law 100-24, 26 U.S.C. § 2656(f)). |
22 | "Marginalized populations of Sudan." Include, but are not |
23 | limited to, the portion of the population in the Darfur region |
24 | that has been genocidally victimized; the portion of the |
25 | population of southern Sudan victimized by Sudan's North-South |
26 | civil war; the Beja, Rashidiya and other similarly underserved |
27 | groups of eastern Sudan; the Nubian and other similarly |
28 | underserved groups in Sudan's Abyei, Southern Blue Nile and Nuba |
29 | Mountain regions; and the Amri, Hamadab, Manasir and other |
30 | similarly underserved groups of northern Sudan. |
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1 | "Military equipment." Weapons, arms, military supplies and |
2 | equipment that may be used readily for military purposes, |
3 | including, but not limited to, radar systems or military-grade |
4 | transport vehicles. This term shall also include supplies or |
5 | services sold or provided directly or indirectly to any force |
6 | actively participating in armed conflict in Sudan. |
7 | "Mineral extraction activities." Include exploring, |
8 | extracting, processing, transporting or wholesale selling or |
9 | trading of elemental minerals or associated metal alloys or |
10 | oxides (ore), including gold, copper, chromium, chromite, |
11 | diamonds, iron, iron ore, silver, tungsten, uranium and zinc, as |
12 | well as facilitating such activities, including by providing |
13 | supplies or services in support of such activities. |
14 | "Oil-related activities." The term includes all of the |
15 | following: |
16 | (1) Development of petroleum or natural gas resources of |
17 | Iran or Sudan. This paragraph does not include the mere sale |
18 | of gasoline and related consumer products. |
19 | (2) Owning rights to oil or natural gas blocks. |
20 | (3) Exporting, extracting, producing, refining, |
21 | processing, exploring for, transporting, selling or trading |
22 | oil or natural gas. |
23 | (4) Constructing, maintaining or operating any pipeline, |
24 | refinery, liquefaction facility or other oil or natural gas |
25 | infrastructure. |
26 | (5) Facilitating activities referred to in paragraph |
27 | (1), (2), (3) or (4), including by supplying services in |
28 | support of the activities. |
29 | "Power production activities." Business operations that |
30 | involve a project commissioned by the National Electricity |
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1 | Corporation (NEC) of Sudan or other similar government of Sudan |
2 | entity whose purpose is to facilitate power generation and |
3 | delivery, including, but not limited to, establishing power- |
4 | generating plants or hydroelectric dams, selling or installing |
5 | components for the project, providing service contracts related |
6 | to the installation or maintenance of the project, as well as |
7 | facilitating such activities, including by providing supplies or |
8 | services in support of such activities. |
9 | "Proceeding." Any threatened, pending or completed action, |
10 | suit or proceeding, including, without limitation, an action, |
11 | suit or proceeding by or in the right of a public fund, relating |
12 | to compliance with any investment limitations imposed by |
13 | statute, whether civil, criminal, administrative, investigative |
14 | or through arbitration. |
15 | "Public fund." Any of the following: |
16 | (1) The State Employees' Retirement Fund established |
17 | pursuant to 71 Pa.C.S. Pt. XXV (relating to retirement for |
18 | State employees and officers). |
19 | (2) The Public School Employees' Retirement Fund |
20 | established pursuant to 24 Pa.C.S. Pt. IV (relating to |
21 | retirement for school employees). |
22 | (3) The Pennsylvania Municipal Retirement Fund. |
23 | (4) Any Commonwealth fund of which the State Treasurer |
24 | is the custodian. |
25 | "Scrutinized business activities." Business activities that |
26 | have resulted in a company becoming a scrutinized company. |
27 | "Scrutinized company." Any of the following: |
28 | (1) Any foreign company that has: |
29 | (i) invested at least $20,000,000 in oil-related |
30 | activities in Iran in any 12-month period since August 5, |
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1 | 1996; |
2 | (ii) supplied military equipment to the government |
3 | of Iran within the 12-month period prior to the effective |
4 | date of this section; or |
5 | (iii) knowingly and intentionally violated the |
6 | United States export controls with respect to Iran during |
7 | the 12-month period prior to the effective date of this |
8 | section. |
9 | (2) Any foreign company that meets the criteria set |
10 | forth either in subparagraph (i) or (ii): |
11 | (i) The company has business operations that involve |
12 | contracts with or provision of supplies or services to |
13 | the government of Sudan, companies in which the |
14 | government of Sudan has any direct equity share, |
15 | government of Sudan-commissioned consortiums or projects, |
16 | or companies involved in government of Sudan-commissioned |
17 | consortiums or projects; and |
18 | (A) More than 10% of the company's revenue or |
19 | assets linked to Sudan involve oil-related activities |
20 | or mineral extraction activities; less than 75% of |
21 | the company's revenues or assets linked to Sudan |
22 | involve contracts with or provision of oil-related or |
23 | mineral extracting products or services to the |
24 | regional government of southern Sudan or a project or |
25 | consortium created exclusively by that regional |
26 | government; and the company has failed to take |
27 | substantial action specific to Sudan; or |
28 | (B) More than 10% of the company's revenues or |
29 | assets linked to Sudan involve power production |
30 | activities; less than 75% of the company's power |
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1 | production activities include projects whose intent |
2 | is to provide power or electricity to the |
3 | marginalized populations of Sudan; and the company |
4 | has failed to take substantial action specific to |
5 | Sudan. |
6 | (ii) The company supplies military equipment within |
7 | Sudan, unless it clearly shows that the military |
8 | equipment cannot be used to facilitate offensive military |
9 | actions in Sudan or the company implements rigorous and |
10 | verifiable safeguards to prevent use of that equipment by |
11 | forces actively participating in armed conflict, for |
12 | example, through post-sale tracking of such equipment by |
13 | the company, certification from a reputable and objective |
14 | third party that such equipment is not being used by a |
15 | party participating in armed conflict in Sudan, or sale |
16 | of such equipment solely to the regional government of |
17 | southern Sudan or any internationally recognized |
18 | peacekeeping force or humanitarian organization. |
19 | The term does not include a foreign company that is a social |
20 | development company. |
21 | "Social development company." A company whose primary |
22 | purpose in Iran or Sudan is to provide humanitarian goods or |
23 | services, including medicine or medical equipment, agricultural |
24 | supplies or infrastructure; educational opportunities; |
25 | journalism-related activities; information or information |
26 | materials; spiritual-related activities; services of a purely |
27 | clerical or reporting nature; food, clothing or general consumer |
28 | goods. |
29 | "Substantial action specific to Iran." Adopting, publicizing |
30 | and implementing a formal plan to cease scrutinized business |
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1 | activities within one year and to refrain from any such new |
2 | business activities in Iran. |
3 | "Substantial action specific to Sudan." Adopting, |
4 | publicizing and implementing a formal plan to cease scrutinized |
5 | business activities within one year and to refrain from any such |
6 | new business activities; undertaking significant humanitarian |
7 | efforts in conjunction with an international organization, the |
8 | government of Sudan, the regional government of southern Sudan |
9 | or a nonprofit entity and evaluated and certified by an |
10 | independent third party to be substantial in relationship to the |
11 | company's Sudan business activities and of benefit to one or |
12 | more marginalized populations of Sudan; or through engagement |
13 | with the government of Sudan, materially improving conditions |
14 | for the genocidally victimized population in Darfur. |
15 | "Sudan." The Democratic Republic of Sudan. |
16 | Section 3. Identification of companies. |
17 | (a) Best effort.--Within 90 days after the effective date of |
18 | this section, a public fund shall make its best effort to |
19 | identify all scrutinized companies in which the public fund has |
20 | direct holdings. A public fund shall review, as appropriate in |
21 | the public fund's judgment, publicly available information |
22 | regarding foreign companies that have scrutinized business |
23 | activities, including information provided by nonprofit |
24 | organizations, research firms, international organizations and |
25 | government entities. |
26 | (b) Assembly.--By the first meeting of a public fund |
27 | following the time period under subsection (a), the public fund |
28 | shall assemble all scrutinized companies that fit the criteria |
29 | specified in paragraph (1) of the definition of "scrutinized |
30 | company" into a Scrutinized Companies with Activities in Iran |
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1 | List and shall assemble all scrutinized companies that fit |
2 | criteria specified in paragraph (2) of the definition of |
3 | "scrutinized company" into a Scrutinized Companies with |
4 | Activities in Sudan List. |
5 | Section 4. Required actions. |
6 | (a) Procedure.--A public fund shall adhere to the procedures |
7 | under this section for determining companies on its Scrutinized |
8 | Companies with Activities in Iran List and Scrutinized Companies |
9 | with Activities in Sudan List that qualify for divestment. |
10 | (b) Engagement.-- |
11 | (1) For each company on a public fund's Scrutinized |
12 | Companies with Activities in Iran List or Scrutinized |
13 | Companies with Activities in Sudan List in which the public |
14 | fund has direct holdings, the public fund shall send a |
15 | written notice informing the company of its scrutinized |
16 | company status and specify the business activities which have |
17 | resulted in this determination and that it may become subject |
18 | to divestment by the public fund. The notice must inform the |
19 | company of the opportunity to clarify its scrutinized |
20 | business activities and encourage the company, within 90 days |
21 | of the date of receipt of the notice, to cease its |
22 | scrutinized business activities in Iran, Sudan or both, or |
23 | convert the activities to inactive business activities in |
24 | order to avoid qualifying for divestment by the public fund. |
25 | The notice shall be sent no later than 120 days after the |
26 | effective date of this section. |
27 | (2) If, within 90 days of the date of receipt of a |
28 | notice under paragraph (1), a company announces by public |
29 | disclosure substantial action specific to Iran or substantial |
30 | action specific to Sudan, the public fund may maintain its |
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1 | holdings, but the company shall remain on the Scrutinized |
2 | Companies with Activities in Iran List or Scrutinized |
3 | Companies with Activities in Sudan List pending completion of |
4 | the companies' cessation of scrutinized business activities. |
5 | Following completion of a company's cessation of scrutinized |
6 | business activities, the public fund shall remove the company |
7 | from its Scrutinized Companies with Activities in Iran List |
8 | or Scrutinized Companies with Activities in Sudan List. |
9 | (c) Divestment.-- |
10 | (1) If, after 90 days following the effective date of |
11 | receipt of the notice under subsection (b)(1), a company has |
12 | not announced by public disclosure substantial action |
13 | specific to Iran, substantial action specific to Sudan or |
14 | both as specified in the notice, or the public fund |
15 | determines or becomes aware that the company continues to |
16 | have scrutinized business activities, the public fund, within |
17 | 15 months after the 90-day period, shall sell, redeem, divest |
18 | or withdraw from its direct holdings all securities of the |
19 | company. |
20 | (2) If a public fund determines or becomes aware that a |
21 | company that ceased scrutinized business activities following |
22 | engagement under subsection (b) has resumed the activities, |
23 | the public fund shall send a written notice to the company |
24 | under subsection (b), and the company shall be immediately |
25 | placed onto the public fund's Scrutinized Companies with |
26 | Activities in Iran List or Scrutinized Companies with |
27 | Activities in Sudan List. |
28 | (3) A public fund shall monitor a scrutinized company |
29 | that has announced by public disclosure substantial action |
30 | specific to Iran, substantial action specific to Sudan or |
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1 | both. If after one year the public fund determines or becomes |
2 | aware that the company has not implemented the plan, within |
3 | 15 months after the expiration of the one-year period, the |
4 | public fund shall sell, redeem, divest or withdraw from its |
5 | direct holdings all securities of the company. |
6 | (d) Prohibition.--A public fund may not acquire securities |
7 | of a company on its Scrutinized Companies with Activities in |
8 | Iran List or Scrutinized Companies with Activities in Sudan |
9 | List. |
10 | (e) Excluded securities.--Nothing in this act shall apply to |
11 | the public fund's holdings in alternative investments or |
12 | indirect holdings. |
13 | Section 5. Reporting. |
14 | (a) Report to United States Attorney General.--Within 30 |
15 | days of the passage of this act, administrators of the public |
16 | fund shall file a written report to the United States Attorney |
17 | General detailing the requirements contained in this act. |
18 | (b) Duty of public fund.--A public fund shall, within one |
19 | year of assembly of its Scrutinized Companies with Activities in |
20 | Iran List and Scrutinized Companies with Activities in Sudan |
21 | List, provide a report to the Governor; the President pro |
22 | tempore of the Senate; the Speaker of the House of |
23 | Representatives; and each member of the boards of the |
24 | Pennsylvania Municipal Retirement System, the State Employees' |
25 | Retirement System and Public School Employees' Retirement |
26 | System. The report shall include the items required under |
27 | subsection (c). The report shall be made available to the |
28 | public. |
29 | (c) Contents.--The report under subsection (b) shall include |
30 | the most recent Scrutinized Companies with Activities in Iran |
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1 | List and Scrutinized Companies with Activities in Sudan List and |
2 | all of the following: |
3 | (1) A summary of correspondence with companies engaged |
4 | by the public fund under section 4. |
5 | (2) All investments sold, redeemed, divested or |
6 | withdrawn in compliance with section 4(c), the costs and |
7 | expenses of such transfers, and a determination of net gain |
8 | or loss on account of such transactions incurred in |
9 | compliance with the provisions of this act. |
10 | (3) All prohibited investments under section 4(d). |
11 | (4) A list of all publicly traded securities held by the |
12 | public fund. |
13 | (d) Update.--A public fund shall do all of the following: |
14 | (1) Annually update, based on evolving information under |
15 | subsection (c), and make publicly available its Scrutinized |
16 | Companies with Activities in Iran List and Scrutinized |
17 | Companies with Activities in Sudan List. |
18 | (2) Provide a copy of the lists under paragraph (1), |
19 | including updates, to all other public funds. |
20 | Section 6. Expiration. |
21 | (a) Recurrence of investment in Iran.--A public fund shall |
22 | have no obligations under this act with respect to a company |
23 | engaged in business activities in Iran upon the occurrence of |
24 | any of the following: |
25 | (1) Iran does not appear on the List of State Sponsors |
26 | of Terrorism. |
27 | (2) The President or Congress of the United States, |
28 | through legislation or executive order, declares that |
29 | mandatory divestment of the type provided for in this act |
30 | interferes with the conduct of United States foreign policy. |
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1 | (b) Recurrence of investment in Sudan.--A public fund shall |
2 | have no obligations under this act with respect to a company |
3 | engaged in business activities in Sudan upon the occurrence of |
4 | any of the following: |
5 | (1) The President or Congress of the United States |
6 | declares Darfur genocide has been halted for at least 12 |
7 | months. |
8 | (2) Sudan does not appear on the list of State Sponsors |
9 | of Terrorism. |
10 | (3) The President or Congress of the United States |
11 | declares that the government of Sudan has honored its |
12 | commitments to cease attacks on civilians, demobilize and |
13 | demilitarize the Janjaweed and associated militias, grant |
14 | free and unfettered access for deliveries of humanitarian |
15 | assistance and allow for the safe and voluntary return of |
16 | refugees and internally displaced persons under the Sudan |
17 | Accountability and Divestment Act of 2007 (P.L. 110-174, 121 |
18 | Stat. 2516). |
19 | (4) The President or Congress of the United States, |
20 | through legislation or executive order, declares that |
21 | mandatory divestment of the type provided for in this act |
22 | interferes with the conduct of United States foreign policy. |
23 | Section 7. Conflict with other laws. |
24 | A public fund may perform any action necessary to comply with |
25 | this act, notwithstanding the provisions of any other law, |
26 | including, but not limited to, any fiduciary or prudent |
27 | investing responsibilities as prescribed in 24 Pa.C.S. § 8521 |
28 | (relating to management of fund and accounts) and 71 Pa.C.S. § |
29 | 5931 (relating to management of fund and accounts) and any |
30 | obligations of a public fund with respect to choice of asset |
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1 | managers, investment funds or investments for the public fund's |
2 | securities portfolios. |
3 | Section 8. Indemnification. |
4 | (a) General rule.--Each indemnitee shall be indemnified and |
5 | held harmless by the Commonwealth for all good faith actions |
6 | taken by the indemnitee and for all good faith failures to take |
7 | action, regardless of the date of any such action or failure to |
8 | take action, in connection with attempts to comply with any |
9 | investment limitations imposed by statute against all expense, |
10 | liability and loss, including, without limitation, attorney |
11 | fees, judgments, fines, taxes, penalties and amounts paid or to |
12 | be paid in settlements reasonably incurred or suffered by the |
13 | indemnitee in connection with any proceeding. |
14 | (b) Advance payment.--The right to indemnification provided |
15 | in this section shall include the right to have the expenses |
16 | reasonably incurred by the indemnitee in defending any |
17 | proceeding paid by the Commonwealth in advance of the final |
18 | disposition of the proceeding upon the receipt by the |
19 | Commonwealth of a written undertaking by the indemnitee to |
20 | refund the amounts so advanced if it is ultimately determined |
21 | that the indemnitee is not entitled to indemnification under |
22 | this section. |
23 | (c) Persons entitled.--Indemnification pursuant to this |
24 | section shall continue as to an indemnitee who has ceased to be |
25 | a board member, designee of a board member, officer or employee |
26 | of a public fund and shall inure to the benefit of such person's |
27 | legal representatives, heirs, executors and administrators. |
28 | (d) Reimbursement to public funds.--To the extent that the |
29 | Commonwealth does not make any indemnification payments, |
30 | including any advancement of legal fees and expenses, within 30 |
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1 | days of demand therefor, a public fund shall make such payment |
2 | and the Commonwealth shall reimburse the public fund. |
3 | (e) Construction.--The repeal, expiration or amendment of |
4 | any provision of this section shall not limit the rights of any |
5 | indemnitee to indemnification, including advancement of |
6 | expenses, with respect to any action or failure to act occurring |
7 | prior to the effective date of such repeal or amendment. |
8 | Section 9. Fund reimbursement. |
9 | The Commonwealth shall reimburse each public fund for their |
10 | net losses, costs and expenses incurred as a result of |
11 | compliance with the provisions of this act. The reimbursements |
12 | shall occur in the following manner: |
13 | (1) The public fund shall submit to the Secretary of the |
14 | Budget an itemization of the amount necessary to be |
15 | appropriated by the General Assembly to reimburse the public |
16 | fund for their net losses, costs and expenses incurred as a |
17 | result of compliance with the provisions of this act in the |
18 | previous fiscal year. To the extent the public fund |
19 | experiences net gains as a result of compliance with the |
20 | provisions of this act in a fiscal year, the net gains shall |
21 | be used to offset any reported costs or expenses incurred by |
22 | the public fund. |
23 | (2) In consultation with each public fund, the Secretary |
24 | of the Budget shall annually establish a uniform method for |
25 | the determination of gains and losses. The method shall be |
26 | used by each public fund in making a claim for reimbursement |
27 | under this section. The budget submission shall be on a form |
28 | and in a manner determined by the secretary of the budget, |
29 | including net losses, along with an itemized accounting of |
30 | all costs and expenses claimed by the public fund. Budget |
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1 | submission shall occur no later than November 1 following the |
2 | fiscal year in which the net losses, costs and expenses were |
3 | incurred. |
4 | (3) Upon appropriation by the General Assembly to |
5 | provide for the obligations of the Commonwealth, the amount |
6 | shall be paid by the State Treasurer through the Department |
7 | of Revenue into the public fund within 90 days of receipt of |
8 | the requisition presented by the public fund. |
9 | Section 10. Severability. |
10 | If any provision of this act or its application to any person |
11 | or circumstances is held invalid, the invalidity shall not |
12 | affect other provisions or applications of this act that can be |
13 | given effect without the invalid provision or application. |
14 | Section 30. Effective date. |
15 | This act shall take effect immediately. |
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