1-1     By:  Ellis                                            S.B. No. 1416

 1-2           (In the Senate - Filed March 13, 1997; March 19, 1997, read

 1-3     first time and referred to Committee on Finance; April 28, 1997,

 1-4     reported adversely, with favorable Committee Substitute by the

 1-5     following vote:  Yeas 11, Nays 1; April 28, 1997, sent to printer.)

 1-6     COMMITTEE SUBSTITUTE FOR S.B. No. 1416               By:  Zaffirini

 1-7                                   AN ACT

 1-8     relating to deposit of certain public funds in certain financial

 1-9     institutions.

1-10           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

1-11           SECTION 1.  Subtitle F, Title 10, Government Code, is amended

1-12     by adding Chapter 2259 to read as follows:

1-13         CHAPTER 2259.  DEPOSITORY INSTITUTIONS ELIGIBLE FOR DEPOSIT

1-14                               OF PUBLIC FUNDS

1-15           Sec. 2259.001.  DEFINITIONS.  In this chapter:

1-16                 (1)  "Political subdivision" means any political

1-17     subdivision of this state, including a  county, municipality,

1-18     special purpose district, or authority.

1-19                 (2)  "Public agency" means a state agency, political

1-20     subdivision, or publicly owned utility.

1-21                 (3)  "Regulated financial institution" has the meaning

1-22     assigned by 12 U.S.C. Section 2902.

1-23                 (4)  "State agency" means any institution, agency, or

1-24     organ of state government established by the constitution or laws

1-25     of this state, including any department, bureau, board, commission,

1-26     office, or council of this state.

1-27           Sec. 2259.002.  SCOPE OF CHAPTER.  (a)  Except as provided by

1-28     Subsection (b), this chapter applies to funds deposited in a

1-29     regulated financial institution by a public agency, including funds

1-30     deposited under Chapter 116, Local Government Code, or any other

1-31     law.

1-32           (b)  This chapter does not apply to funds deposited by the

1-33     comptroller under Chapter 404.

1-34           Sec. 2259.003.  COMPTROLLER REPORT.  (a)  The comptroller

1-35     shall publish and make available for public inspection a report

1-36     that shows the rating assigned under 12 U.S.C. Section 2906 to each

1-37     regulated financial institution in this state.

1-38           (b)  The comptroller shall make the report required by this

1-39     section not later than August 1 of each year.

1-40           Sec. 2259.004.  PROHIBITED DEPOSITS.  (a)  A public agency

1-41     may not select as a depository a regulated financial institution

1-42     that has been assigned two consecutive ratings below "outstanding

1-43     record of meeting community credit needs" or "satisfactory record

1-44     of meeting community credit needs" under 12 U.S.C. Section 2906.

1-45           (b)  If the rating of a financial institution is changed to a

1-46     rating below that required by this section, a public agency shall

1-47     take immediate action to transfer all public funds on deposit with

1-48     the institution to a qualified financial institution.

1-49           Sec. 2259.005.  WITHDRAWAL WITHOUT PENALTY.  The depository

1-50     contract between a regulated financial institution and a public

1-51     agency must authorize the withdrawal without penalty of the public

1-52     funds on deposit in the event that the rating of the institution is

1-53     changed to a rating below that required by Section 2259.004.

1-54           SECTION 2.  Section 404.0212, Government Code, is amended by

1-55     adding Subsection (g) to read as follows:

1-56           (g)  The comptroller shall publish and make available for

1-57     public inspection a report that shows the rating assigned under 12

1-58     U.S.C. Section 2906 to each regulated financial institution in this

1-59     state.  The comptroller shall make the report required by this

1-60     section not later than August 1 of each year.

1-61           SECTION 3.  (a)  Except as provided by Subsection (b) of this

1-62     section, the state and each state agency, political subdivision,

1-63     and publicly owned utility to which Chapter 2259, Government Code,

1-64     as added by this Act, applies shall ensure that funds deposited by

 2-1     the entity are deposited in compliance with Chapter 2259,

 2-2     Government Code, not later than January 1, 1998.

 2-3           (b)  A regulated financial institution that is acting as a

 2-4     depository of funds subject to Chapter 2259, Government Code, as

 2-5     added by this Act, on the effective date of this Act and that does

 2-6     not have an assigned rating under 12 U.S.C. Section 2906 that

 2-7     satisfies the requirement of Section 2259.004, Government Code, as

 2-8     added by this Act, may continue to hold the funds only for the

 2-9     period necessary to avoid the imposition of a penalty on the

2-10     depositing entity.

2-11           (c)  Section 2259.005, Government Code, as added by this Act,

2-12     applies only to depository contracts executed on or after the

2-13     effective date of this Act.

2-14           SECTION 4.  The importance of this legislation and the

2-15     crowded condition of the calendars in both houses create an

2-16     emergency and an imperative public necessity that the

2-17     constitutional rule requiring bills to be read on three several

2-18     days in each house be suspended, and this rule is hereby suspended,

2-19     and that this Act take effect and be in force from and after its

2-20     passage, and it is so enacted.

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