1-1  By:  Ratliff                                           S.B. No. 409
    1-2        (In the Senate - Filed February 23, 1995; February 27, 1995,
    1-3  read first time and referred to Committee on Education;
    1-4  March 8, 1995, rereferred to Committee on Finance; March 16, 1995,
    1-5  reported adversely, with favorable Committee Substitute by the
    1-6  following vote:  Yeas 10, Nays 0; March 16, 1995, sent to printer.)
    1-7  COMMITTEE SUBSTITUTE FOR S.B. No. 409                  By:  Ratliff
    1-8                         A BILL TO BE ENTITLED
    1-9                                AN ACT
   1-10  relating to the accounting treatment of premium and discount
   1-11  associated with the purchase of certain securities for the
   1-12  permanent school fund.
   1-14        SECTION 1.  Chapter 2256, Government Code, is amended by
   1-15  adding Subchapter D to read as follows:
   1-17        Sec. 2256.151.  TREATMENT OF PREMIUM AND DISCOUNT.  (a)  If
   1-18  the State Board of Education authorizes the payment of a premium
   1-19  out of the permanent school fund in the purchase of any
   1-20  fixed-income security as an investment for that fund, then the
   1-21  principal of the security and a portion of the interest accruing
   1-22  thereon equal to the premium shall be treated as principal in such
   1-23  investment as provided by Subsection (c) and shall be returned to
   1-24  the permanent school fund.
   1-25        (b)  If the State Board of Education authorizes the purchase
   1-26  of a fixed-income security at less than par, the discount received
   1-27  in the purchase shall be paid to the available school fund as
   1-28  additional interest revenue as provided by Subsection (c).
   1-29        (c)  The amount of an interest payment treated as principal
   1-30  under Subsection (a) or the amount of a discount treated as
   1-31  additional revenue under Subsection (b) shall be determined at the
   1-32  end of a period using an interest method that produces a periodic
   1-33  interest revenue or expenditure, including amortization, that
   1-34  represents a level effective interest rate on the sum of the
   1-35  maturity value of the fixed-income security and its unamortized
   1-36  premium or discount at the beginning of the period.  The difference
   1-37  between the amount computed and the stated interest revenue on the
   1-38  outstanding amount of the fixed-income security is the amount of
   1-39  the periodic amortization.
   1-40        (d)  In this section:
   1-41              (1)  "Effective interest rate" means the interest rate
   1-42  that, when used to discount debt service payments, produces a
   1-43  present value equal to the debt proceeds.
   1-44              (2)  "Fixed-income security" means a government or
   1-45  corporate obligation with a specified maturity date, interest rate,
   1-46  and interest payment dates.
   1-47              (3)  "Stated interest revenue" means the face value or
   1-48  coupon interest rate multiplied by the maturity value of the
   1-49  fixed-income security.
   1-50        SECTION 2.  This Act takes effect September 1, 1995.
   1-51        SECTION 3.  This Act applies to each fixed-income security
   1-52  purchased as an investment for the permanent school fund regardless
   1-53  of the date of purchase.
   1-54        SECTION 4.  To the extent this Act conflicts with any other
   1-55  Act of the 74th Legislature, including S.B. No. 1, Acts of the 74th
   1-56  Legislature, Regular Session, 1995, this Act prevails.
   1-57        SECTION 5.  The importance of this legislation and the
   1-58  crowded condition of the calendars in both houses create an
   1-59  emergency and an imperative public necessity that the
   1-60  constitutional rule requiring bills to be read on three several
   1-61  days in each house be suspended, and this rule is hereby suspended.
   1-62                               * * * * *