SBW H.B. 2358 75(R)BILL ANALYSIS PENSIONS & INVESTMENTS H.B. 2358 By: Counts 4-10-97 Committee Report (Unamended) BACKGROUND Currently in Texas, veterans receive nursing home care in either nursing home care units at VA hospitals or in contracted community nursing homes. Based on findings of the Needs Analysis/Feasibility Study - State Veterans Homes (April 29, 1996) the State of Texas can achieve significant savings in the Texas Medicaid nursing Facility program by establishing one or more state veterans homes to provide nursing care for the state's veteran population. For example: three 150 bed facilities at 90% occupancy can save the state $30 million over a ten year period by providing nursing home care in a state veterans home compared to the state's cost to serve the same number of veterans in Texas nursing homes under the Medicaid program. This bill also involves the management of the assets of the Veterans Land, Housing and Financial Assistance Programs, the authority to act on behalf of the Veterans Land Board. PURPOSE This legislation will enhance the Veterans Land Board authority with respect to management of the assets (funds and securities) of the Land and Housing Funds, as well as those of any Financial Assistance programs developed by the Board. The Board may chose an entity other than the Comptroller to act as custodian of the funds and securities, and may choose a commercial bank or other entity to serve as custodian of the securities. One or more employees may act on behalf of the Board to enter into and delivery of Bond Enhancement Agreements. Also, the Board is authorized to fund, operate, furnish, and equip Veterans Assistance Centers. RULEMAKING AUTHORITY Rulemaking authority is granted to the board of trustees in (SECTION 2 of the bill,) Natural Resources Code, Subchapter E, Chapter 161, Section 161.1732, LENDING SECURITIES: Subsection (a)(2) Code; and (SECTION 4 in the bill,) Subchapter A, Chapter 162, Section 162.0042, LENDING SECURITIES: Subdivision (a)(2), Natural Resources Code; and (SECTION 11 of the bill) Section 164.011, FUNDS: Subdivision (g), Natural Resources Code. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 161.171(b), Natural Resources Code to add the phrase, "Except as otherwise provided by law, money . . . " in the place of "Money." SECTION 2. Amends Subchapter E, Chapter 161, Natural Resources Code, by adding Sections 161.1731 and 161.1732 (a) and (b). Sec. 161.1731. CUSTODY AND INVESTMENT OF ASSETS PENDING TRANSACTIONS: is amended by the addition of the language to allow the board managing the assets of the fund to select one or more commercial banks, depository trust companies, or any other entity able to serve as a custodian of the cash or securities of the fund and give authorization to the custodian to invest cash under Subdivision (1) in the board's determined investments once the completion of an investment transaction is pending. Sec. 161.1732. LENDING SECURITIES: (a) is amended by the addition of the language to allow the board managing the assets of the fund to select one or more commercial banks, depository trust companies, or any other entity able to serve as custodian to the fund's securities and allows the board to authorize the custodian to lend the securities as provided by Subdivision (1) by the rules adopted by the board and provided by this section. (b) is amended by the addition of the language to provide the definition of a custodian eligible to lend securities as being experienced in the operation of a fully secured securities loan. This also includes maintaining adequate capital to assure the safety of securities, executing an indemnification agreement which is satisfactory in form and content to protect the board against loss due to the custodian's operation of a securities loan program for the securities of the fund, and requiring the broker or dealer who lends securities of the fund to deliver to and maintain with the custodian collateral in the form of cash or United States government securities equal to or at least 100% of the market value of the loaned securities. SECTION 3. Amends Section 162.002(b), Natural Resources Code to add the phrase, "Except as otherwise provided by law" to the term, "Money" for the deposit in the State Treasury. SECTION 4. Amends Subchapter A, Chapter 162, Natural Resources Code, by adding Sections 162.0041 and 162.0042 (a) and (b). Sec. 162.0041. CUSTODY AND INVESTMENT OF ASSETS PENDING TRANSACTIONS: is amended by the addition of the language to allow the board managing the assets of the fund to select one or more commercial banks, depository trust companies, or any other entity able to serve as a custodian of the cash or securities of the fund and give authorization to the custodian to invest cash under Subdivision (1) in the board's determined investments once the completion of an investment transaction is pending. Sec. 162.0042. LENDING SECURITIES: (a) is amended by the addition of the language to allow the board managing the assets of the fund to select one or more commercial banks, depository trust companies, or any other entity able to serve as custodian to the fund's securities and allows the board to authorize the custodian to lend the securities as provided by Subdivision (1) by the rules adopted by the board and provided by this section. (b) is amended by the addition of the language to provide the definition of a custodian eligible to lend securities as being experienced in the operation of a fully secured securities loan. This also includes maintaining adequate capital to assure the safety of securities, executing an indemnification agreement which is satisfactory in form and content to protect the board against loss due to the custodian's operation of a securities loan program for the securities of the fund, and requiring the broker or dealer who lends securities of the fund to deliver to and maintain with the custodian collateral in the form of cash or United States government securities equal to or at least 100% of the market value of the loaned securities. SECTION 5. Amends Section 164.002, Natural Resources Code, by adding Subdivision (7). (7) is amended by the addition of the language to define the "Veterans assistance center" as a life care facility, retirement home or village, home for the aging, or any other facility that furnishes shelter, food, medical attention, nursing or medical services, social activities, or any other personal services or attention to veterans. SECTION 6. Amends 164.003. FINANCIAL ASSISTANCE PROGRAMS: Natural Resources Code to add that providing one or more veteran assistance centers may be a purpose of a program designed to provide financial assistance to veterans. SECTION 7. Amends 164.004. RULES: Natural Resources Code to include that the construction, acquisition, ownership, operation, maintenance, enlargement, improvement, or furnishing or equipping of veterans assistance centers are to be regulated for the administration of its financial assistance programs. SECTION 8. Amends Section 164.005, Natural Resources Code, by amending (a) and adding (b) and (c). Sec. 164.005. RIGHTS AND POWERS OF BOARD: (a) is amended by redesignating the previous Section 164.005 as 164.005(a). (b) is amended by the addition of the language to allow the board, or the state and federal agencies in conjunction with the board, to acquire by purchase, gift, devise, lease, or any combination of those to construct, operate, enlarge, improve, furnish, or equip one or more veterans assistance centers in the administration of the financial assistance programs. (c) is amended by the addition of the language to allow the board to make an agreement for the management or operation of all or part of a veterans assistance center. The manager may manage the center and employ or discharge employees upon delegation by the board. SECTION 9. Amends Section 164.009. SECURITY FOR THE BONDS: (a), Natural Resources Code, to allow for bonds issued to provide funds to purchase and sell land to veterans, or for the purpose to make home mortgage loans to veterans. This section also includes the term "payments" as well as "repayments" and clarifies that financial assistance to be provided is through the board. SECTION 10. Amends Section 164.010, Natural Resources Code, by amending (a) and adding (b) and (c). Sec. 164.010. BOND ENHANCEMENT AGREEMENTS: (a) is amended by redesignating the previous Section 164.010 as 164.010(a). (b) is amended by the addition of the language to provide for a resolution, used to authorize a bond enhancement agreement, to have the power to authorize one or more designated board officers or employees to enter into and deliver a bond enhancement agreement on behalf of the board. The designated persons also determine or set the counterpart and terms of the agreement as the resolution specifies, but the resolution must set the maximum amount and term of the agreement. (c) is amended by the addition of the language to clarify that the bond enhancement agreement is not a credit agreement for the purposes of Chapter 656, Acts of the 68th Legislature, Regular Session, 1983 (Article 717q, Vernon's Texas Civil Statutes), unless the board elects the agreement to be otherwise. This section also disregards whether the bonds relating to the agreement were issued in part under that law listed by this section. SECTION 11. Amends Section 164.011, Natural Resources Code by amending (f) and (i), adding (g) and (h). Sec. 164.011. FUNDS: (f) is amended to allow the board to select a custodian of the cash or securities of the fund and authorize the custodian, if the board chooses, to invest the cash in investments as the board determines. The custodian shall be selected from the comptroller, one or more commercial banks, depository trust companies, or other entities. (g) is amended by the addition of the language to allow the board, due to asset management, to permit the custodian of the fund's securities to lend the securities as this section provides and upon rules adopted by the board. (h) is amended by the addition of the language to provide the duties of a custodian in order to be eligible to lend securities under this section. This section requires that the custodian be selected under Subsection (f), be experienced in the operation of fully secured securities loan programs, assure the safety of securities by maintaining adequate capital as judged by the board, execute an indemnification agreement which is satisfactory in form and content to protect the board against loss due to the custodian's operation of a securities loan program for the securities of the fund, and require the broker or dealer lending securities of the fund to deliver to and maintain with the custodian collateral in the form of cash or United States government securities equal to or at least 100% of the market value of the loaned securities. (i) is amended by redesignating the previous (f) as (i) and strikes the state treasurer as the custodian to replace with the term of "custodians" to carry out the functions of this subsection as provided by the board. SECTION 12. Effective date is September 1, 1997. SECTION 13. Emergency Clause.