AMENDED IN ASSEMBLY APRIL 13, 2026
CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION
98
Introduced by Assembly Member Jackson
February 19, 2026
An act to amend Sections 16521 and 16611 of, and to add Section 16429.5 to 16481.5 to, the Government Code, relating to government finance, and making an appropriation therefor.
Vote: 2/3 Appropriation: yes Fiscal committee: yes Local program: no
LEGISLATIVE COUNSEL’S DIGEST
Existing law requires the Treasurer to invest, or deposit into banks and other financial institutions, specified state moneys designated as surplus as a part of the Pooled Money Investment Account and determined to be available for that purpose by the Pooled Money Investment Board.
Existing law, for purposes of a savings and loan association or credit union being eligible to receive deposits of state funds, specifies which securities may be accepted as collateral, and includes within that
list of eligible securities a letter of credit issued by the Federal Home Loan Bank of San Francisco that, notwithstanding requirements that a savings and loan association or credit union law generally requires banks and other financial institutions to deposit with the Treasurer securities in a value at least 10% in excess of the amount deposited with the savings and loan association or credit union, shall be in an amount in value of at least 100% of the amount deposited with the savings and loan association or credit union. institution to be eligible to receive deposits of state funds, except as specified.
This bill would create within the Local Agency Investment
Fund Pooled Money Investment Account the Community Reinvestment Account from which deposits shall be made to institutions that meet specified performance standards including verified small business lending in underserved census tracts and first-time or first-generation home buyer lending. The bill would require the Treasurer to establish the percentage of funds, not less than 5% and not exceeding 10%, in the Local Agency Investment Fund that shall be transferred transfer $4 billion from the Pooled Money Investment Account to the Community Reinvestment Account. Because the fund is
moneys invested and reinvested as part of the Pooled Money Investment Account are continuously appropriated, this bill would make an appropriation. Notwithstanding the provisions described above applicable to savings and loan associations and credit unions, the bill would authorize a letter of credit issued by the Federal Home Loan Bank of San Francisco accepted as collateral
above-described securities requirement, this bill would instead require securities, for a deposit from the Community Reinvestment Account or under the Small Business Lending Time Deposit Program, to be in an amount in value of at least 90% of the amount deposited with the institution. The bill would require the Treasurer to deposit moneys from the Community Reinvestment Account with qualified institutions that have committed to specified lending activities, including, among other things, that at least 50% of the moneys from the account are used for affordable housing lending, as defined and specified. The bill would require institutions that receive deposits from the Community Reinvestment Account to submit quarterly, nonidentifying, performance reports to the
Treasurer and the Treasurer to publish the data it receives in a publicly available report.
The people of the State of California do enact as follows:
SECTION 1.
The Legislature finds and declares that this measure is intended to utilize the Local Agency Investment Fund (LAIF) Pooled Money Investment Account as a catalyst for small business lending, first-time home ownership, affordable housing lending, and community reinvestment connected to measurable community lending performance while prioritizing safety, liquidity, and yield.
Section 16429.5 is added to the Government Code, immediately following Section 16429.4, to read:
16429.5.
SEC. 2.
Section 16481.5 is added to the Government Code, immediately following Section 16481.2, to read:
16481.5.
(a) There is within the Local Agency Investment Fund the Community Reinvestment Account from which deposits shall be made to institutions that meet the performance standards described in this section.
(b) For purposes of this section, the following definitions apply:
(1) “Affordable housing” means housing affordable to persons or families of low or moderate income as that term is defined in Section 50093 of the Health and Safety Code.
(2) “Underserved census tracts” means a qualified opportunity zone, as defined in Section 1400Z-1(a) of Title 26 of the United States Code, that has received a designation pursuant to that section.
(c) The Treasurer shall establish the percentage of funds, not less than 5 percent and not exceeding 10 percent, in the Local Agency Investment Fund that shall be transferred
transfer four billion dollars ($4,000,000,000) from the Pooled Money Investment Account to the Community Reinvestment Account.
(d) As determined by the Treasurer and provided in this section, the account Community Reinvestment Account shall operate with separate risk controls and liquidity thresholds than the fund,
thresholds, provided the account maintains the security of the principle, maintains daily liquidity access, and provides competitive market yield.
(e) (1) The Treasurer shall determine those institutions that are qualified to receive deposits from the account Community Reinvestment Account pursuant to the requirements described in this subdivision.
(2) A qualified institution shall demonstrate at least one of the following:
(A) Verified small business lending in underserved census tracts.
(B) First-time or first-generation home buyer lending.
(C) Affordable housing lending.
(D) Verified status as, or a
formal partnership with
with, any of the following:
(i) A community development financial institution (CDFI).
(ii) A Small Business Development Center (SBDC).
(iii) A state-approved nonprofit financial coach.
(E) Verified brokerage of financing products, such as silent second lien disaster mortgages, for homeowners facing displacement and loss of home ownership seeking to rebuild their home following disaster.
(3) Priority for qualification to receive deposits from the account shall be given to all of the following institutions:
(A) Minority Depository Institutions (MDIs).
(B) Community banks serving rural and urban low-wealth areas.
(C) Community Development Financial Institutions (CDFIs) with a California lending footprint.
(4) A qualified institution shall commit to extending or issuing at least three lines of credit or loans with the deposits received pursuant to this section.
(5) An institution qualified based on a formal partnership under subparagraph (D) of paragraph (2) shall commit to investing at least 25 percent of any deposits received under this section with that partner.
(f) (1) Collateralization may be tiered, risk weighted, and partially credit enhanced using loan guarantees, federal State Small Business Credit Initiative (SSBCI) funds, or state loss reserves.
(A) The Treasurer shall be the beneficiary of the letter of credit.
(B) The letter of credit shall be clean and irrevocable, and shall provide that the Treasurer may draw upon it up to the total amount in the event of the failure of the institution or if the institution refuses to permit the withdrawal of funds by the Treasurer or any other authorized state officer or employee.
(C) Notwithstanding Section 16611, the letter of credit shall at all times be in an amount in value of at least 90 percent of the amount deposited with the institution.
(2) Notwithstanding Section 16521 or 16611, to be eligible to receive and retain deposits under this section, an institution shall deposit with the Treasurer as security for those deposits, securities listed in Section 16522 or 16612 and approved by the Treasurer, in an amount in value of at least 90 percent of the amount deposited with the institution.
(g) The Treasurer shall deposit moneys from the account with qualified institutions that have committed to lending activities in the compliance with the following requirements:
(1) Not less than 50 percent of moneys from the account shall be utilized for affordable housing lending activities for affordable housing projects located in underserved census tracts. Investments made for affordable housing may have a term of up to five years and shall accrue interest at a rate equal to the yield on United States Treasury securities of comparable maturity plus 50 basis points (0.05 percent).
(2) Not less than 10 percent of moneys from the account shall be utilized for lending for homeowners facing displacement and loss of home ownership seeking to rebuild their home in underserved census tracts following disaster, including silent second lien disaster mortgages.
(3) The remaining moneys from the account shall be utilized for the following types of lending activities:
(A) Down payment assistance for first time homebuyers buying a home located in an underserved census tract.
(B) Lines of credit to the following types of small businesses located in underserved census tracts:
(i) Early-stage, innovation-driven businesses, including software startups, application developers, artificial intelligence and machine learning ventures, biotech prerevenue companies, and clean technology prototypes.
(ii) Small construction companies, including residential subcontractors, independent general contractors, specialty trades, and renovation companies.
(iii) Hospitality and food service businesses, including independent restaurants, food trucks, bars and nightclubs, small catering companies, and boutique hotels.
(iv) Independent, brick-and-mortar retail businesses, including small apparel stores, specialty gift shops, independent bookstores, convenience stores, and seasonal, pop-up retailers.
(v) Agricultural and seasonal businesses, including small farms, organic produce companies, fishing operations, landscaping companies, and snow removal services.
(vi) Personal services businesses, including hair salons and barbershops, nail salons, daycare centers, cleaning services, and fitness studios.
(vii) Small transportation businesses, including independent trucking companies, owner-operator freight carriers, and small logistics brokers.
(viii) Businesses owned by historically underbanked communities, including small grocery stores and corner markets, ethnic restaurants, auto repair shops, and beauty supply stores.
(h) Using federal State Small Business Credit Initiative (SSBCI) funds or a General Fund appropriation, the Treasurer may do any of the following:
(1) Buy down interest rates for qualifying entities.
(2) Provide loan loss reserves for higher risk but creditworthy entities.
(3) Stabilize lending during economic downturns.
(i) Institutions that receive deposits from the Community Reinvestment Account shall submit quarterly, nonidentifying, performance reports to the Treasurer that include all of the following: information for each of the three categories described
in subdivision (g):
(1) The number and dollar value of all small business loans it issued. loans or lines of credit issued or extended.
(3)
(2) The geographic distribution of borrowers who
received loans described in paragraphs (1) and (2). or lines of credit.
(3) The interest rates and terms at which the loans described in paragraphs (1) and (2) were issued.
or lines of credit were issued or extended.
(4) The outcome or status of the loans described in paragraphs (1) and (2).
or lines of credit.
(j) The Treasurer shall publish the data received from recipient institutions pursuant to subdivision (g) (i) in a publicly available report entitled “Local Agency Investment Fund “The Community Reinvestment
Dashboard.”
SEC. 3.
Section 16521 of the Government Code is amended to read:
16521.
(a) To be eligible to receive and retain demand or time deposits, a bank shall deposit with the Treasurer as security for such deposits, securities specified in Section 16522, and approved by the Treasurer, in an amount in value at least 10 percent in excess of the amount deposited with the bank. Uncollected funds shall be excluded from the amount deposited in a demand account with a bank when determining the security requirements for such deposits.
(b) Notwithstanding subdivision (a), to be eligible to receive and retain demand or time deposits under the Small Business Lending Time Deposit Program established by the State Treasurer, a bank shall deposit with the Treasurer as security for such deposits, securities specified in Section 16522, and approved by the Treasurer, in an amount in value at least 90 percent of the amount deposited with the bank. Uncollected funds shall be excluded from the amount deposited in a demand account with a bank when determining the security requirements for such deposits.
SEC. 4.
Section 16611 of the Government Code is amended to read:
16611.
(a) To be eligible to receive and retain deposits, a savings and loan association and credit union shall deposit with the Treasurer as security for deposits, securities specified in Section 16612, and approved by the Treasurer, in an amount in value at least 10 percent in excess of the amount deposited with the savings and loan association or credit union.
(b) Notwithstanding subdivision (a), to be eligible to receive and retain deposits under the Small Business Lending Time Deposit Program established by the State Treasurer, a savings and loan association and credit union shall deposit with the Treasurer as security for deposits, securities specified in Section 16612, and approved by the Treasurer, in an amount in value at least 90 percent of the amount deposited with the savings and loan association or credit union.