BILL ANALYSIS


                                                    C.S.S.B. 1577
                                                     By: Montford
                                                          Finance
                                                         04-11-95
                                   Committee Report (Substituted)
BACKGROUND

Current law does not allow the board of regents of the University
of Texas System to delegate powers granted to other governing
boards. Although the law authorizes institutions to contract with
investment professionals and corporations outside of the
institution for the performance of certain duties, it does not
apply to the Permanent University Fund.  Furthermore, some current
controversy surrounds the investment activities of various
governmental entities which are not granted the authority to seek
the best public or private investment counsel available and to
simultaneously create the best structure for investment management.

PURPOSE

As proposed, C.S.S.B. 1577 authorizes the board of regents of the
University of Texas System to delegate certain powers and duties of
the board, including the ability to contract with nonprofit
corporations for the investment of funds under the control and
management of the board.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not grant any
additional rulemaking authority to a state officer, institution, or
agency.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 65.31(c), Education Code, to provide that
the board of regents (board) of the University of Texas System
(system) has the authority to promulgate and enforce such other
rules and regulations for the operation, control and management of
the system and the component institutions thereof as the board may
deem either necessary or desirable, including authorizing a
committee, officer, employee, or other agent of the board to
perform such duties and powers as may be designated by the board.

SECTION 2. Amends Section 65.34(a), Education Code, to require all
contracts with architects, plan makers, landscapers, or draftsmen,
or with any other person, firm, or corporation of whatever name or
designation to be unenforceable unless approved by the board or in
accordance with rules and regulations of the board.  Deletes
reference to a signal written vote of a majority in a regular or
called meeting.

SECTION 3. Amends Chapter 66C, Education Code, by adding Section
66.081, as follows:

     Sec.  66.081.  CERTAIN INVESTMENT CONTRACTS.  (a)  Authorizes
     the board to enter into a contract with a nonprofit
     corporation for the corporation to invest funds under the
     control and management of the board, including the permanent
     university fund, as designated by the board.  Prohibits the
     corporation from engaging in any business other than investing
     funds designated by the board under the contract.
     
     (b)  Provides that a contract with a nonprofit corporation
       to invest funds is subject to the provisions of this section
       and any rules and regulations adopted by the board in
       furtherance of this section.
       
       (c)  Requires the board to adopt the investment policies for
       any funds to be invested by the corporation and to review at
       least quarterly the investments of the corporation.
       
       (d)  Requires the board to approve certain information.
       
       
       (e)  Requires the board to appoint all members of the board
       of directors of the corporation, who shall serve at the
       pleasure of the board.
       
       (f)  Requires the corporation to file quarterly reports with
       the board concerning investment activities and other matters
       required by the board.
       
       (g)  Provides that the corporation is subject to Article
       1396-1.01, V.T.C.S. (Texas Non-Profit Corporation Act).
       
       (h)  Prohibits a corporation from entering into any
       agreement or transaction with certain persons or business
       entities.
       
       (i)  Provides that an agreement or transaction entered into
       in violation of Subsection 
       (h) of this section is void.
       
       (j)  Provides that a person has an interest in a business
       entity, for purposes of this section, if the person owns
       five percent or more of the voting stock or shares of the
       business entity; owns five percent or more of the entity's
       fair market value; or money received by the person from the
       business entity exceeds five percent of the person's gross
       income for the previous calendar year.
       
       (k)  Defines "board," "governing board," and "institution of
       higher education."
     SECTION 4.     Emergency clause.
           Effective date:  upon passage.