AB427 - Revises provisions relating to public financial administration. (BDR 31-739)

(Reprinted with amendments adopted on April 16, 2025) FIRST REPRINT A.B. 427 - *AB427_R1* ASSEMBLY BILL NO. 427–ASSEMBLYMEMBERS YEAGER; AND DELONG MARCH 13, 2025 ____________ Referred to Committee on Government Affairs SUMMARY—Revises provisions relating to public financial administration. (BDR 31-739) FISCAL NOTE: Effect on Local Government: No. Effect on the State: Yes. ~ EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted. AN ACT relating to public financial administration; revising provisions governing the program administered by a corporation for public benefit to provide private equity funding and venture capital investments to certain businesses; revising provisions relating to certain financing information that is required to be provided to certain small businesses by the Office of Economic Development; and providing other matters properly relating thereto. Legislative Counsel’s Digest: Under existing law, the State of Nevada is prohibited from donating or loaning 1 state money or credit, or subscribing to or being interested in the stock of any 2 company, association or corporation, except a corporation that is formed for 3 educational or charitable purposes. (Nev. Const. Art. 8, § 9) Existing law requires 4 the State Treasurer to form an independent corporation for public benefit, the 5 purpose of which is to act as a limited partner of limited partnerships or a 6 shareholder or member of limited-liability companies that provide private equity 7 funding to businesses that are located in this State or seeking to locate to this State 8 and engage primarily in certain industries. (NRS 355.270) Under existing law, the 9 State Treasurer is prohibited from making certain investments of money in the State 10 Permanent School Fund unless the State Treasurer obtains a judicial determination 11 that such an investment does not violate the prohibition in the Nevada Constitution 12 against the State of Nevada donating or loaning state money or credit, or 13 subscribing to or being interested in the stock of any company, association or 14 corporation, except a corporation that is formed for educational or charitable 15 purposes. (Nev. Const. Art. 8, § 9; NRS 355.060) Upon obtaining a judicial 16 determination that an investment does not violate the Nevada Constitution, existing 17 law authorizes the State Treasurer to transfer up to $75,000,000 from the State 18 – 2 – - *AB427_R1* Permanent School Fund to the corporation for public benefit and requires the 19 corporation by agreement to provide more than 50 percent of all private equity 20 funding to businesses engaged in specified industries that are located or seeking to 21 locate in Nevada. (NRS 355.280) Existing law authorizes the money transferred 22 from the State Permanent School Fund to the corporation for public benefit to be 23 used to make venture capital investments. (NRS 355.275) 24 Sections 2 and 4 of this bill eliminate the restriction that the businesses in 25 which the corporation for public benefit is authorized to invest engage primarily in 26 certain industries. Section 1 of this bill instead requires that the business be 27 engaged in an industry that is consistent with the State Plan for Economic 28 Development, which the Executive Director of the Office of Economic 29 Development within the Office of the Governor is required to develop under 30 existing law. (NRS 231.053) Section 1 also: (1) clarifies the circumstances in 31 which a business is located or seeking to locate in Nevada; and (2) requires that the 32 businesses be seeking early-stage or middle-stage investments to commence or 33 expand operations. Section 5 of this bill makes a conforming change relating to the 34 revised criteria for eligible businesses. Section 2 also provides that, in addition to 35 the money transferred from the State Permanent School Fund, any other money 36 received by the corporation for public benefit is authorized to be used for venture 37 capital investments. 38 Existing law establishes the board of directors of the corporation for public 39 benefit and requires the board to consist of the Chancellor of the Nevada System of 40 Higher Education, the State Treasurer, five members from the private sector who 41 have at least 10 years of experience in certain fields appointed by the Governor and 42 legislative leadership and certain additional members who are required to be 43 approved by a majority of certain board members. (NRS 355.270) Section 2: (1) 44 replaces the Chancellor of the Nevada System of Higher Education on the board 45 with the Executive Director of the Office of Economic Development; and (2) 46 changes the experience required for the five appointed members from at least 10 47 years of experience in certain fields to demonstrated experience in those fields. 48 Existing law authorizes the corporation for public benefit to place investments 49 through the use or assistance of external asset managers or private equity 50 investment firms. (NRS 355.275) Existing law also references the board contracting 51 with venture capital investment firms. (NRS 355.270) Section 3 of this bill: (1) 52 authorizes a corporation for public benefit to invest directly in eligible businesses; 53 and (2) clarifies that the board is authorized to place investments though the use or 54 assistance of venture capital investment firms. Section 3 also requires the 55 corporation for public benefit to ensure that private equity money and venture 56 capital investments made directly by the corporation or by external asset managers 57 and private equity or venture capital investment firms are provided in a manner 58 that: (1) ensures diversification among the recipient businesses; (2) gives priority to 59 eligible businesses that meet specified criteria; (3) allows businesses to create new 60 job opportunities; and (4) supports new, emerging and expanding businesses in this 61 State. 62 Existing law authorizes the State Treasurer to adopt regulations which include 63 criteria for determining eligibility for and use of private equity funding, subject to 64 certain limitations. (NRS 355.285) Section 5 of this bill expands that specific 65 regulatory authority to also address such criteria for venture capital investments. 66 Sections 6-9 of this bill revise obsolete references to the provisions governing 67 the program administered by the corporation for public benefit to provide private 68 equity funding and venture capital investments to specified businesses. 69 Existing law: (1) provides for the certification of eligible businesses as local 70 emerging small businesses by the Office of Economic Development; and (2) 71 requires the Office to provide to such businesses certain information concerning 72 public and private programs to provide financing to small businesses and the 73 – 3 – - *AB427_R1* criteria for obtaining financing through such programs. (NRS 231.14055) Section 8 74 of this bill revises the scope of the financing programs concerning which the Office 75 is required to provide information to local emerging small businesses to public and 76 private programs that are active or funded, or both, at the time the application for 77 certification of a business is received by the Office. 78 THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS: Section 1. Chapter 355 of NRS is hereby amended by adding 1 thereto a new section to read as follows: 2 1. To be eligible to receive private equity funding or a venture 3 capital investment from the corporation for public benefit 4 pursuant to this section and NRS 355.250 to 355.285, inclusive, a 5 business must: 6 (a) Have a presence in this State as evidenced by: 7 (1) Being domiciled in this State; 8 (2) Having a headquarters in this State; 9 (3) Having a significant percentage of employees residing 10 in this State; or 11 (4) Being in the process of expanding in this State or 12 locating to this State; 13 (b) Be seeking early-stage investment or middle-stage 14 investment, or both; and 15 (c) Be engaged in an industry that is consistent with the State 16 Plan for Economic Development developed pursuant to 17 NRS 231.053. 18 2. As used in this section: 19 (a) “Early-stage investment” means any investment that is 20 made directly to or on behalf of a business to enable the business 21 to commence operation, including, without limitation, seed 22 funding, start-up funding, accelerator funding or early-growth 23 funding. 24 (b) “Middle-stage investment” means any investment that is 25 made directly to or on behalf of a business to enable the business 26 to expand its operations. 27 Sec. 2. NRS 355.270 is hereby amended to read as follows: 28 355.270 1. The State Treasurer shall cause to be formed in 29 this State an independent corporation for public benefit, the general 30 purpose of which is to act as a limited partner of limited 31 partnerships or a shareholder or member of limited-liability 32 companies that provide private equity funding or venture capital 33 investments, or both, to businesses [: 34 (a) Located in this State or seeking to locate in this State; and 35 – 4 – - *AB427_R1* (b) Engaged primarily in one or more of the following 1 industries: 2 (1) Health care and life sciences. 3 (2) Cyber security. 4 (3) Homeland security and defense. 5 (4) Alternative energy. 6 (5) Advanced materials and manufacturing. 7 (6) Information technology. 8 (7) Any other industry that the board of directors of the 9 corporation for public benefit determines will likely meet the targets 10 for investment returns established by the corporation for public 11 benefit for investments authorized by NRS 355.250 to 355.285, 12 inclusive, and comply with sound fiduciary principles.] that meet 13 the eligibility requirements set forth in section 1 of this act. 14 2. The corporation for public benefit created pursuant to 15 subsection 1 must have a board of directors consisting of: 16 (a) Five members from the private sector who have [at least 10 17 years of] demonstrated experience in the field of investment, 18 finance or banking and who are appointed for a term of 4 years as 19 follows: 20 (1) One member appointed by the Governor; 21 (2) One member appointed by the Senate Majority Leader; 22 (3) One member appointed by the Speaker of the Assembly; 23 (4) One member appointed by the Senate Minority Leader; 24 and 25 (5) One member appointed by the Assembly Minority 26 Leader; 27 (b) The [Chancellor of the Nevada System of Higher Education] 28 Executive Director of the Office of Economic Development within 29 the Office of the Governor or his or her designee; 30 (c) The State Treasurer; and 31 (d) With the approval of a majority of the members of the board 32 of directors described in subparagraphs (1), (2) and (3) of paragraph 33 (a), up to 5 additional members who are direct investors in the 34 corporation for public benefit. 35 3. Vacancies in the appointed positions on the board of 36 directors of the corporation for public benefit created pursuant to 37 subsection 1 must be filled by the appointing authority for the 38 unexpired term. 39 4. The State Treasurer shall serve as chair of the board of 40 directors of the corporation for public benefit created pursuant to 41 subsection 1. 42 5. The members of the board of directors of the corporation for 43 public benefit must serve without compensation but are entitled to 44 be reimbursed for actual and necessary expenses incurred in the 45 – 5 – - *AB427_R1* performance of their duties, including, without limitation, travel 1 expenses. 2 6. A member of the board of directors of the corporation for 3 public benefit created pursuant to subsection 1 must not have an 4 equity interest in any: 5 (a) External asset manager or venture capital or private equity 6 investment firm contracting with the board pursuant to NRS 7 355.275; or 8 (b) Business which receives private equity funding or a venture 9 capital investment pursuant to NRS 355.250 to 355.285, inclusive 10 [.] , and section 1 of this act. 11 7. The board of directors of the corporation for public benefit 12 created pursuant to subsection 1 shall: 13 (a) Comply with the provisions of chapter 281A of NRS. 14 (b) Meet at least quarterly and conduct any meetings of the 15 board of directors in accordance with chapter 241 of NRS. 16 (c) Review the performance of all external asset managers and 17 venture capital and private equity investment firms contracting with 18 the corporation for public benefit pursuant to NRS 355.275. 19 (d) On or before December 1 of each year, provide an annual 20 report to the Governor and the Director of the Legislative Counsel 21 Bureau for transmission to the next session of the Legislature, if the 22 report is submitted in an even-numbered year or to the Legislative 23 Commission, if the report is submitted in an odd-numbered year. 24 The report must include, without limitation: 25 (1) An accounting of all money received and expended by 26 the corporation for public benefit, including, without limitation, any 27 matching grant funds, gifts or donations; and 28 (2) The name and a brief description of all businesses 29 receiving [an] private equity funding or a venture capital 30 investment [of money] pursuant to the provisions of NRS 355.250 31 to 355.285, inclusive [.] , and section 1 of this act. 32 Sec. 3. NRS 355.275 is hereby amended to read as follows: 33 355.275 1. The corporation for public benefit may [place] 34 provide private equity funding or venture capital investments 35 [through the use or assistance of:] pursuant to NRS 355.250 to 36 355.285, inclusive, and section 1 of this act: 37 (a) Directly to eligible businesses. 38 (b) Pursuant to a contract entered into with: 39 [(a)] (1) External asset managers; [or 40 (b)] (2) Private equity investment firms [.] ; or 41 (3) Venture capital investment firms. 42 2. [Money received pursuant to NRS 355.280 by the] The 43 corporation for public benefit [may be used to make] shall ensure 44 – 6 – - *AB427_R1* that private equity funding and venture capital investments [.] are 1 provided pursuant to subsection 1 in a manner that: 2 (a) Ensures diversification among the [Text truncated for display. Full text available on LegiScan.]