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."