LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
75th Regular Session
April 7, 1997
TO: Honorable Bill Ratliff, Chair IN RE: House Bill No. 138, As Engrossed
Committee on Finance By: Woolley/et al.
Senate
Austin, Texas
FROM: John Keel, Director
In response to your request for a Fiscal Note on HB138 ( Relating
to authorization of the creation of Texas growth fund II.) this
office has detemined the following:
Biennial Net Impact to General Revenue Funds by HB138-As Engrossed
Implementing the provisions of the bill would result in a net
impact of $0 to General Revenue Related Funds through the biennium
ending August 31, 1999.
The bill would authorize creation the Texas Growth Fund II (TGFII)
as provided by Section 70(m), Article XVI, Texas Constitution.
The Permanent University Fund, Teacher Retirement System,
Permanent School Fund, Employee Retirement System and other
pension systems created under the Texas Constitution or state
statute could invest in TGF II. TGFII would replace the current
Texas Growth Fund (TGF) which must be liquidated after November
1, 1998. A portion of TGFII could be placed in venture capital
investments.
The fund would be managed by a nine-member board
consisting of four public members appointed by the governor
and one member from each of the following: the University of
Texas Board of Regents, the Texas A&M Board of Regents, the
Teacher Retirement System, the Employee Retirement System, and
the State Board of Education.
The TGF board has created TGF
Management Corporation to manage its investments. The original
contract with the management firm paid the firm the lesser of
1 1/2% of endowment and pension funds invested or $750,000.
In
addition, the management firm will receive deferred payments
of 10% of the return to the fund in excess of the annual rate
of return on U.S. Treasury notes if the return on treasury notes
is between 5% and 8%. If the return on treasury notes is above
8% the firm receives 10% of the TGF return above 8%. If the
treasury note return is below 5%, the firm receives 10% of TGF
returns above 5%.
TGF Management reported expenditures of $625,000
in calendar year 1994, $643,000 in 1995, and $888,000 in 1996.
It requested a budget of $1,250,000 for 1997. Of the $1,250,000
in the proposed 1997 budget, $700,000 is budgeted for salaries
for six employees. The TGF Management budgets through 1997 reflect
no deferred payments.
In addition to payments to the management
firm, the TGF pays for the following: expenses related to meeting
of the TGF board including travel and expenses of the board
members; brokerage, registration, legal, accounting and other
professional fees. These costs were $45,000 in 1996, including
$1,400 in travel expenses for TGF board members.
The Permanent
University Fund, Teacher Retirement System and the Fire and
Police Pension Fund of San Antonio have invested in the TGF.
The Teacher Retirement System and the Fire and Police Pension
Fund of San Antonio have indicated that they are likely to participate
in TGFII. The Employee Retirement System, the Permanent University
Fund, and Texas Education Agency have indicated that they currently
have no plans to participate in the TGFII.
No appropriation
of state funds would be required to finance the TGFII. Participation
in the TGF and TGFII is voluntary. Operating costs would be
apportioned among the participating pension funds and endowments.
No direct fiscal implication to units of local government is
anticipated. However, local government pension systems would
be eligible to participate in the fund.
Source: Agencies: 304 Comptroller of Public Accounts
323 Teacher Retirement System and Optional Retirement Program
327 Employees Retirement System
701 Texas Education Agency - Administration
710 Texas A&M University System
720 University of Texas System Administration
LBB Staff: JK ,PE ,RS