1-1 By: Armbrister S.B. No. 701
1-2 (In the Senate - Filed February 21, 1997; February 25, 1997,
1-3 read first time and referred to Committee on Finance;
1-4 March 10, 1997, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 10, Nays 0; March 10, 1997,
1-6 sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 701 By: Armbrister
1-8 AN ACT
1-9 relating to certain responsibilities of the comptroller relating to
1-10 investment and management of funds.
1-11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-12 SECTION 1. Section 66.02, Education Code, is amended to read
1-13 as follows:
1-14 Sec. 66.02. AVAILABLE UNIVERSITY FUND. The dividends,
1-15 interest, and other income from the permanent university fund,
1-16 including the net income attributable to the surface of permanent
1-17 university fund land, but excluding administrative expenses, shall
1-18 constitute the available university fund. All interest, dividends,
1-19 and other income accruing and earned from the investments of
1-20 [derived from] the permanent university fund shall be deposited in
1-21 the State Treasury to the credit of the available university fund
1-22 at least once a month by the board of regents of The University of
1-23 Texas System or by the custodian or custodians of the permanent
1-24 university fund's securities [within five days after receipt by any
1-25 state officer, agent, or employee]. The University of Texas System
1-26 shall provide the information necessary for the comptroller to
1-27 accurately account for income from the permanent university fund
1-28 and to protect state revenues. The system shall provide the
1-29 information using the method, format, and frequency required by the
1-30 comptroller.
1-31 SECTION 2. Subchapter A, Chapter 66, Education Code, is
1-32 amended by adding Section 66.07 to read as follows:
1-33 Sec. 66.07. CUSTODY AND INVESTMENT OF ASSETS PENDING
1-34 TRANSACTIONS. With the approval of the comptroller, the board of
1-35 regents of The University of Texas System may appoint one or more
1-36 commercial banks, depository trust companies, or other entities, in
1-37 or outside this state, to serve as a custodian or custodians of the
1-38 permanent university fund's securities with authority to hold the
1-39 money realized from those securities pending completion of an
1-40 investment transaction if the money held is reinvested within one
1-41 business day of receipt in investments determined by the board of
1-42 regents. Money not reinvested within one business day of receipt
1-43 shall be deposited in the state treasury not later than the fifth
1-44 day after the date of receipt.
1-45 SECTION 3. Subsections (a), (b), (f), (g), (h), and (i),
1-46 Section 404.024, Government Code, are amended to read as follows:
1-47 (a) The board may determine and designate the amount of
1-48 state funds to be deposited in time deposits in state depositories.
1-49 The comptroller [treasurer] shall recommend to the board a maximum
1-50 limit for state funds deposited by the comptroller [treasurer] at
1-51 approved state depositories. The percentage of state funds to be
1-52 deposited in state depositories shall be based on the interest
1-53 rates available in competing investments, the demand for funds from
1-54 Texas banks, and the state's liquidity requirements. The
1-55 comptroller [treasurer] shall provide periodic investment reports
1-56 to the board.
1-57 (b) State funds not deposited in state depositories shall be
1-58 invested by the comptroller [treasurer] in:
1-59 (1) direct security repurchase agreements;
1-60 (2) reverse security repurchase agreements;
1-61 (3) direct obligations of or obligations the principal
1-62 and interest of which are guaranteed by the United States;
1-63 (4) direct obligations of or obligations guaranteed by
1-64 agencies or instrumentalities of the United States government;
2-1 (5) bankers' acceptances that:
2-2 (A) are eligible for purchase by the Federal
2-3 Reserve System;
2-4 (B) do not exceed 270 days to maturity; and
2-5 (C) are issued by a bank that has received the
2-6 highest short-term credit rating by a nationally recognized
2-7 investment rating firm;
2-8 (6) commercial paper that:
2-9 (A) does not exceed 270 days to maturity; and
2-10 (B) except as provided by Subsection (i), has
2-11 received the highest short-term credit rating by a nationally
2-12 recognized investment rating firm;
2-13 (7) contracts written by the treasury in which the
2-14 treasury grants the purchaser the right to purchase securities in
2-15 the treasury's marketable securities portfolio at a specified price
2-16 over a specified period and for which the treasury is paid a fee
2-17 and specifically prohibits naked-option or uncovered option
2-18 trading;
2-19 (8) direct obligations of or obligations guaranteed by
2-20 the Inter-American Development Bank, the International Bank for
2-21 Reconstruction and Development (the World Bank), the African
2-22 Development Bank, the Asian Development Bank, and the International
2-23 Finance Corporation that have received the highest credit rating by
2-24 a nationally recognized investment rating firm;
2-25 (9) bonds issued, assumed, or guaranteed by the State
2-26 of Israel;
2-27 (10) obligations of a state or an agency, county,
2-28 city, or other political subdivision of a state; [and]
2-29 (11) mutual funds secured by obligations that are
2-30 described by Subdivisions (1) through (6); and
2-31 (12) foreign currency for the sole purpose of
2-32 facilitating investment by state agencies that have the authority
2-33 to invest in foreign securities.
2-34 (f) The comptroller [treasurer] by rule may define
2-35 derivative investments other than those described by Subsection
2-36 (e). The treasury may not purchase investments defined by rule
2-37 adopted under this subsection in an amount that at the time of
2-38 purchase will cause the aggregate value of the investments to
2-39 exceed five percent of the treasury's total investments.
2-40 (g) To the extent practicable, the comptroller [treasurer]
2-41 shall give first consideration to Texas banks when investing in
2-42 direct security repurchase agreements.
2-43 (h) The comptroller [treasurer] may not use state funds to
2-44 invest in or purchase obligations of a private corporation or other
2-45 private business entity doing business in Northern Ireland unless
2-46 the corporation or other entity:
2-47 (1) adheres to fair employment practices; and
2-48 (2) does not discriminate on the basis of race, color,
2-49 religion, sex, national origin, or disability.
2-50 (i) Notwithstanding Subsection (b)(6)(B), the comptroller
2-51 [treasurer] may purchase commercial paper with a rating lower than
2-52 the rating required by that paragraph to provide liquidity for
2-53 commercial paper issued by the comptroller [treasurer] or an agency
2-54 of the state.
2-55 SECTION 4. Section 404.094, Government Code, is amended by
2-56 adding Subsection (d) to read as follows:
2-57 (d) A state agency that receives funds from the sale of
2-58 securities under applicable law, including Chapter 815 or 825,
2-59 Government Code, and Chapter 43, Education Code, with the
2-60 comptroller's approval may, as an alternative to the deposit of the
2-61 funds as provided by Subsection (a), net sales and purchases of
2-62 securities occurring within one business day. Any proceeds
2-63 received and available for reinvestment that are not reinvested
2-64 within one business day of receipt shall be deposited in the state
2-65 treasury as provided by Subsection (a). An agency authorized to
2-66 net sales and purchases of securities under this section is subject
2-67 to the accounting and reporting procedures established by the
2-68 comptroller.
2-69 SECTION 5. Subsection (b), Section 404.103, Government Code,
3-1 is amended to read as follows:
3-2 (b) The trust company may enter into contracts and trust
3-3 agreements or other fiduciary instruments with the comptroller
3-4 [treasurer], the Federal Reserve System, a depository trust
3-5 company, and other third parties. The trust company shall be
3-6 liable under those contracts in accordance with the terms contained
3-7 in the contracts. Notwithstanding any other statute to the
3-8 contrary, to the extent permitted by the Texas Constitution and the
3-9 contracts, trust agreements, or other fiduciary instruments between
3-10 the trust company, [and] the Federal Reserve System, and a
3-11 depository trust company, the trust company's obligations shall be
3-12 guaranteed by the state, and the state expressly waives all
3-13 defenses of governmental immunity by and on behalf of the trust
3-14 company, the comptroller [treasurer], and the state and expressly
3-15 consents to sue and be sued in federal court or in any court of
3-16 competent jurisdiction. However, this provision does not alter or
3-17 affect the immunity accorded to state officials and employees under
3-18 state law. The trust company may enter into contracts with the
3-19 comptroller [treasurer] and the Federal Reserve System to provide
3-20 any services that the Federal Reserve System makes available,
3-21 including:
3-22 (1) safekeeping book-entry United States Treasury and
3-23 agency securities owned by the state and its agencies;
3-24 (2) using the federal reserve wire transfer system to
3-25 transfer money and book-entry securities and to settle securities
3-26 transactions involving book-entry United States Treasury and agency
3-27 securities owned by the state and its agencies;
3-28 (3) collecting, through the Federal Reserve System,
3-29 checks deposited with the treasury;
3-30 (4) receiving payments from and making payments to the
3-31 federal government on behalf of the state and its agencies;
3-32 (5) originating automated clearinghouse transactions
3-33 or other electronic transfers to make payments on behalf of the
3-34 state and its agencies, collecting revenues due the state and its
3-35 agencies, and transferring money between state depositories;
3-36 (6) paying warrants drawn on the treasury and
3-37 presented through the Federal Reserve System for payment; and
3-38 (7) safekeeping collateral pledged to secure deposits
3-39 of public funds.
3-40 SECTION 6. Subsection (b), Section 2.07, Article 5.76-2,
3-41 Insurance Code, is amended to read as follows:
3-42 (b) The facility shall invest its funds only in investments
3-43 authorized by law for the investment of state funds as provided in
3-44 Chapter 404, Government Code. The governing committee shall
3-45 develop an investment policy and submit the policy to the
3-46 commissioner [state treasurer] for review and approval.
3-47 SECTION 7. Subsection (d), Section 13, Article 5.76-3,
3-48 Insurance Code, is amended to read as follows:
3-49 (d) Money in the fund shall be invested, subject to a policy
3-50 developed by the board and approved by the commissioner [state
3-51 treasurer], in the types of investments authorized by law for an
3-52 insurer authorized to write workers' compensation insurance
3-53 coverage in this state.
3-54 SECTION 8. This Act takes effect September 1, 1997.
3-55 SECTION 9. The importance of this legislation and the
3-56 crowded condition of the calendars in both houses create an
3-57 emergency and an imperative public necessity that the
3-58 constitutional rule requiring bills to be read on three several
3-59 days in each house be suspended, and this rule is hereby suspended.
3-60 * * * * *