By Woolley H.J.R. No. 65
75R4288 DWS-F
A JOINT RESOLUTION
1-1 proposing a constitutional amendment to continue the existence of
1-2 the Texas growth fund.
1-3 BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 70, Article XVI, Texas Constitution, is
1-5 amended to read as follows:
1-6 Sec. 70. (a) In this section:
1-7 (1) "Board of trustees" means the board of trustees of
1-8 the Texas growth fund.
1-9 (2) "Fund" means the Texas growth fund.
1-10 (3) "Venture capital investment" means an investment
1-11 in debt, equity, or a combination of debt and equity that possesses
1-12 the potential for substantial investment returns, and includes
1-13 investments in new or small businesses[, investments in businesses
1-14 with rapid growth potential,] or investments in applied research
1-15 and organizational activities leading to business formation and
1-16 opportunities involving new or improved processes or products.
1-17 (b) The Texas growth fund is created as a trust fund.
1-18 Except as otherwise provided by this section, the fund is subject
1-19 to the general laws of this state governing private sector trusts.
1-20 The governing boards of the permanent university fund, the
1-21 permanent school fund, the Teacher Retirement System of Texas, the
1-22 Employees Retirement System of Texas, and any other pension system
1-23 created under this constitution or by statute of this state in
1-24 their sole discretion may make investments in the fund.
2-1 (c) The fund is managed by a board of trustees consisting of
2-2 four public members appointed by the governor and one member from
2-3 and elected by the membership of each of the following:
2-4 (1) the Board of Regents of The University of Texas
2-5 System;
2-6 (2) the Board of Regents of The Texas A&M University
2-7 System;
2-8 (3) the Board of Trustees of the Teacher Retirement
2-9 System of Texas;
2-10 (4) the Board of Trustees of the Employees Retirement
2-11 System of Texas; and
2-12 (5) the State Board of Education.
2-13 (d) Each public member of the board must have demonstrated
2-14 substantial investment expertise. A public member serves for a
2-15 six-year term expiring February 1 of an odd-numbered year.
2-16 (e) A person filling an elected position on the board of
2-17 trustees ceases to be a member of the board of trustees when the
2-18 person ceases to be a member of the board the person represents or
2-19 as otherwise provided by procedures adopted by the board the person
2-20 represents. The governor shall designate a chairman from among the
2-21 members of the board of trustees who serves a term of two years
2-22 expiring February 1 of each odd-numbered year. A member may serve
2-23 more than one term as chairman.
2-24 (f) The board of trustees shall manage the investment of the
2-25 fund, and may:
2-26 (1) employ and retain staff, including a chief
2-27 executive officer;
3-1 (2) analyze and structure investments;
3-2 (3) set investment policy of the fund;
3-3 (4) take any action necessary for the creation,
3-4 administration, and protection of the fund;
3-5 (5) enter into investment contracts with the
3-6 participating funds or systems;
3-7 (6) adopt rules regarding the operation of the fund;
3-8 (7) pay expenses of the fund based on an assessment on
3-9 investor contributions; and
3-10 (8) alternatively, or in combination with its own
3-11 staff, contract for the management of investments under this
3-12 section with a private investment management firm or with an
3-13 investing fund or system electing a member of the board of
3-14 trustees.
3-15 (g) In making investments, including venture capital
3-16 investments, the board of trustees shall exercise the judgment and
3-17 care under the circumstances then prevailing that persons of
3-18 ordinary prudence, discretion, and intelligence exercise in the
3-19 management of their own affairs, not in regard to speculation but
3-20 in regard to the permanent disposition of their funds, considering
3-21 the probable income as well as the probable safety of the capital
3-22 of the fund. All investments of the fund shall be directly related
3-23 to the creation, retention, or expansion of employment opportunity
3-24 and economic growth in Texas. In making venture capital
3-25 investments, all other material matters being equal, the board of
3-26 trustees shall invest in technological advances that could be
3-27 expected to result in the greatest increase in employment
4-1 opportunity and economic growth in Texas.
4-2 (h) The board of trustees shall establish and operate the
4-3 fund to the extent practical under the generally accepted business
4-4 procedures relating to an equity [a] mutual fund and shall value
4-5 the investments for determining the purchase or sales price of
4-6 participating shares of investing funds or systems participating in
4-7 the fund consistent with investment contracts. Evidences of
4-8 participation in the fund shall be held by the comptroller of
4-9 public accounts in keeping with the custodial responsibilities of
4-10 that office.
4-11 (i) During the decennium ending August 31, 1998, and each
4-12 subsequent decennium, an [An] investing fund or system, without
4-13 liability at law or in equity to members of the governing board of
4-14 the fund or system in their personal or official capacities, may
4-15 cumulatively invest in the Texas growth fund not more than one
4-16 percent of the book or cost value of the investing fund or system,
4-17 as determined at the end of each fiscal year.
4-18 (j) The board of trustees shall establish criteria for the
4-19 investment of not more than 10 percent of the fund in venture
4-20 capital investments. Not more than 25 percent of the funds
4-21 available for venture capital investments may be used for
4-22 unilateral investment. Investments of the remainder of the funds
4-23 available for venture capital investments must be matched at least
4-24 equally by funds from sources other than the fund, with matching
4-25 amounts established by the board of trustees. The board of
4-26 trustees shall also establish criteria for the investment of not
4-27 less than 50 percent of the fund in equity or debt securities
5-1 [security], or a combination of equity and debt securities
5-2 [security], for the initial construction, expansion, or
5-3 modernization of business or industrial facilities in Texas or
5-4 working capital in support of those facilities. The board of
5-5 trustees may invest in money funds whose underlying investments are
5-6 consistent and acceptable under the investment policy of the fund.
5-7 (k) On a quarterly basis, the amount of income realized on
5-8 investments under this section shall be distributed to each of the
5-9 systems and funds investing in the Texas growth fund in proportion
5-10 to the number of participating shares of each investing system and
5-11 fund. Capital appreciation becomes a part of the corpus of the
5-12 Texas growth fund and shall be distributed in accordance with the
5-13 investment contracts.
5-14 (l) [The board of trustees shall make arrangements to begin
5-15 liquidation, phase out investments, and return the principal and
5-16 capital gains on investments to the investors in the fund not later
5-17 than the 10th anniversary of the date of the adoption of this
5-18 section. Except under unusual circumstances where it may be
5-19 necessary to protect investments previously made, further
5-20 investments may not be made in or by the fund after the 10th
5-21 anniversary of the date of the adoption of this section.]
5-22 [(m) At the regular legislative session next preceding the
5-23 10th anniversary of the date of the adoption of this section, the
5-24 legislature, by two-thirds vote of each house, may authorize the
5-25 creation of Texas growth fund II, which shall operate under this
5-26 section and under the board of trustees created by this section in
5-27 the same manner as the Texas growth fund. Funds in Texas growth
6-1 fund II may not be commingled with funds in the Texas growth fund.]
6-2 [(n)] The board of trustees may purchase liability insurance
6-3 for the coverage of the trustees, employees, and agents of the
6-4 board.
6-5 (m) [(o)] The legislature shall provide by law for the
6-6 periodic review of the board of trustees in the same manner and at
6-7 the same intervals as it provides for review of [other] state
6-8 agencies, except that the legislature shall provide that the board
6-9 of trustees is not subject to abolishment as part of the review
6-10 process.
6-11 (n) [(p) This section expires September 1, 1998, except that
6-12 if the legislature authorizes the creation of Texas growth fund II
6-13 as provided by Subsection (m) of this section, this section expires
6-14 September 1, 2008.]
6-15 [(q)] This section is self-executing and takes effect on its
6-16 adoption by the voters. All state officials named in this section
6-17 and the comptroller of public accounts shall take all necessary
6-18 actions for the implementation of this section. The legislature
6-19 shall provide by law for full disclosure of all details concerning
6-20 investments authorized by this section.
6-21 [(r) The board of trustees may not invest money from the
6-22 Texas growth fund in a business unless the business has submitted
6-23 to the board of trustees an affidavit disclosing whether the
6-24 business has any direct financial investment in or with South
6-25 Africa or Namibia.]
6-26 SECTION 2. This proposed constitutional amendment shall be
6-27 submitted to the voters at an election to be held November 4, 1997.
7-1 The ballot shall be printed to permit voting for or against the
7-2 proposition: "The constitutional amendment to continue the
7-3 existence of the Texas growth fund."