SRC-JBJ H.J.R. 58 76(R)   BILL ANALYSIS


Senate Research Center   H.J.R. 58
76R13292 JSA-FBy: Junell (Ratliff)
Finance
5/7/1999
Engrossed


DIGEST 

Currently, the board of regents of The University of Texas System maintains
financial control of the permanent university fund (PUF).  Total returns
from investments of the PUF produce the available university funds, which
helps finance higher education in Texas.  The board of regents must
exercise certain controls over the investment decision of the PUF, as
required by the Texas Constitution.  H.J.R. 58 requires the submission to
the voters of a constitutional amendment authorizing the board of regents
to manage any kind of investment of the permanent university fund in
accordance with the standards of a prudent investor. 

PURPOSE

As proposed, H.J.R. 58 requires the submission to the voters of a
constitutional amendment authorizing the board of regents of The University
of Texas System to manage any kind of investment of the permanent
university fund in accordance with the standards of a prudent investor. 

RULEMAKING AUTHORITY

This bill does not grant any additional rulemaking authority to a state
officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Section 11b, Article VII, Texas Constitution, to
authorize the board of regents of The University of Texas System (board) to
exercise certain financial controls over the assets of the permanent
university fund (PUF) that prudent investors would exercise.  Deletes
provisions that the investment decisions must be exercised according to
certain judgments that exclude speculation and other financial options and
that state this section does not affect certain custodial responsibilities
of the comptroller. 

SECTION 2.  Amends Section 18, Article VII, Texas Constitution, by amending
Subsection (e) and by adding Subsection (f), to provide that the available
university fund (fund) consists of the distributions made to it from the
total return on all investment assets of the PUF, rather than dividends,
interests, and other income of the PUF less administrative expenses.
Requires the amounts of the distributions to be determined by the board in
a manner intended to provide the fund with a stable and predictable stream
of annual distributions, and to maintain the purchasing power of the PUF
investments and fund distributions.  Requires the fund distributions in a
fiscal year to be not less than an amount to pay the principal and interest
of that fiscal year on bonds and notes issued under this section.
Prohibits the board from increasing annual distributions to the fund until
the purchasing power of the PUF for any rolling 10-year period is restored,
except to pay certain debts.  Prohibits the annual distributions from
exceeding seven percent of the average net fair market value of the PUF's
investment assets, except to pay off certain debts.  Requires the expenses
of managing the land and investments of the PUF to be paid by the PUF.
Requires certain payments to be made out of the annual distribution from
the PUF.  Makes conforming changes.   

SECTION 3.  TEMPORARY PROVISION.  Makes application of this amendment
prospective to January 1, 2000.  Sets forth certain distributions to be
made from the PUF to the fund in order to ensure that the amendment does
not impair certain current obligations.  Provides that this section expires
January 1, 2003. 

SECTION 4.  Requires the submission to the voters of this constitutional
amendment at an election to be held November 2, 1999.  Sets forth required
language for the ballot.