LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
75th Regular Session
February 17, 1997
TO: Honorable Barry Telford, Chair IN RE: House Bill No. 138
Committee on Pensions and Investments By: Woolley/et al.
House
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 Introduced
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