S.B. No. 409
                                        AN ACT
    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.
    1-5        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.