S.B. No. 409
1-1 relating to the accounting treatment of premium and discount
1-2 associated with the purchase of certain securities for the
1-3 permanent school fund.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 15.04, Education Code, is amended to read
1-6 as follows:
1-7 Sec. 15.04. Treatment of Premium and Discount. (a) If the
1-8 State Board of Education authorizes the payment of a premium out of
1-9 the permanent school fund in the purchase of any fixed-income
1-10 security <
bond, obligation, or pledge> as an investment for that
1-11 fund, then the principal of the security < such securities> and a
1-12 portion < an amount> of the interest < first> accruing thereon equal
1-13 to the premium < so paid> shall be treated as principal in such
1-14 investment as provided by Subsection (c)< ,> and < when the first
1-15 interest is collected, the amount of the premium> shall be returned
1-16 to the permanent school fund.
1-17 (b) If the State Board of Education authorizes the purchase
1-18 of a fixed-income < public> security at less than par, the discount
1-19 received in the purchase shall be paid to the available school fund
1-20 as additional interest revenue as provided by Subsection (c) < when
1-21 the bonds, obligations, or pledges are paid off and discharged>.
1-22 (c) The amount of an interest payment treated as principal
1-23 under Subsection (a) or the amount of a discount treated as
1-24 additional revenue under Subsection (b) shall be determined at the
2-1 end of a period using an interest method that produces a periodic
2-2 interest revenue or expenditure, including amortization, that
2-3 represents a level effective interest rate on the sum of the
2-4 maturity value of the fixed-income security and its unamortized
2-5 premium or discount at the beginning of the period. The difference
2-6 between the amount computed and the stated interest revenue on the
2-7 outstanding amount of the fixed-income security is the amount of
2-8 the periodic amortization.
2-9 (d) In this section:
2-10 (1) "Effective interest rate" means the interest rate
2-11 that, when used to discount debt service payments, produces a
2-12 present value equal to the debt proceeds.
2-13 (2) "Fixed-income security" means a government or
2-14 corporate obligation with a specified maturity date, interest rate,
2-15 and interest payment dates.
2-16 (3) "Stated interest revenue" means the face value or
2-17 coupon interest rate multiplied by the maturity value of the
2-18 fixed-income security.
2-19 SECTION 2. This Act takes effect September 1, 1995.
2-20 SECTION 3. This Act applies to each fixed-income security
2-21 purchased as an investment for the permanent school fund regardless
2-22 of the date of purchase.
2-23 SECTION 4. Notwithstanding Section 311.025, Government Code,
2-24 this Act prevails over any revision, recodification, or reenactment
2-25 of Titles 1 and 2, Education Code, by the 74th Legislature, Regular
2-26 Session, 1995, including S.B. No. 1, regardless of the relative
2-27 dates of enactment.
3-1 SECTION 5. The importance of this legislation and the
3-2 crowded condition of the calendars in both houses create an
3-3 emergency and an imperative public necessity that the
3-4 constitutional rule requiring bills to be read on three several
3-5 days in each house be suspended, and this rule is hereby suspended.