SBW C.S.H.B. 1429 75(R)BILL ANALYSIS PENSIONS & INVESTMENTS C.S.H.B. 1429 By: Stiles 3-4-97 Committee Report (Substituted) BACKGROUND Section 66.08 of the Texas Education Code, amended in 1995, authorizes the board of regents of the University of Texas System to contract with a nonprofit corporation to invest funds under the control and management of the board. The primary purpose of Section 66.08 was to allow the board to delegate investment authority of the permanent university fund, worth approximately $9.0 billion, to a nonprofit corporation which would be better suited to compete with the private sector in generating higher returns on the fund's investments. The board contracted with The University of Texas Investment Management Company ("UTIMCO") on March 1, 1996 to manage the investments of the permanent university fund. However, a restrictive provision governing the standard of conduct by UTIMCO directors, officers and employees have hindered the ability of UTIMCO to retain top-quality senior personnel and management. The provision prohibits an employee from going to work for a private invest company for two years after leaving UTIMPCO. This, in turn, has inhibited UTIMCO's ability to recruit employees. This legislation seeks to amend Section 66.08's "revolving-door" provisions to conform with other state governmental regulatory agencies. Section 572.054, Government Code, allows a person to go to work with a company doing business with the state, but prohibits the employee from contacting his or her former employer for two years. PURPOSE This legislation makes the standard of conduct for former directors, officers, and employees of a nonprofit corporation under contract with the board of regents of the University of Texas System to invest the permanent university fund or certain other university funds compatible to those standards of conduct required of other governmental regulatory agencies. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 66.08, Education Code, by amending Subsection (i), adding Subsections (l)-(n), and redesignating the existing Subsection (l) as Subsection (o). (i) is amended by striking (3) and (4) which broadens the definition of whom the corporation may enter into an agreement or transaction. (l) is amended by the addition of the language which specifies that a former director of the corporation cannot, before the second anniversary of the last day he was director, speak with a director, officer, or employee of the corporation to give influence and on behalf of any person seeking action with the corporation. (m) is amended by the addition of the language to clarify that a person may not be represented by or give compensation to a former officer or employee of the corporation for services rendered that correspond to a matter in which the former employee participated in while employed whether through personal matters or job-related responsibility. (n) is amended by the addition of the language to define any violation of Subsection (l) or (m) as a Class A misdemeanor. (o) is amended by the redesignation of the original Subsection (l) as (o) and by the addition of the language to define the term "Participated", which describes the term as taking action through "decision, approval, disapproval, recommendation, giving advice, investigation, os similar action" as an officer or employee. Also, the section adds the definition of the phrase, "Particular matter" which describes the term as "a specific investigation, application, request for a ruling or determination, rulemaking proceeding, contract, claim, charge, accusation, arrest, or judicial or other proceeding." SECTION 2. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE In the substitute, the definitions for "participated" and "particular matter" use the language for those definitions as found in the Government Code rather than referencing the Government Code. The substitute allows for immediate effect instead of the September 1, 1997 effective date provided for in HB 1429.