1-1     By:  Greenberg (Senate Sponsor - West)                H.B. No. 3739
 1-2           (In the Senate - Received from the House May 3, 1999;
 1-3     May 4, 1999, read first time and referred to Committee on
 1-4     Education; May 14, 1999, reported favorably by the following vote:
 1-5     Yeas 8, Nays 0; May 14, 1999, sent to printer.)
 1-6                            A BILL TO BE ENTITLED
 1-7                                   AN ACT
 1-8     relating to ethics requirements in regard to management and
 1-9     investment of the permanent school fund.
1-10           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-11           SECTION 1.  Chapter 43, Education Code, is amended by adding
1-12     Sections 43.0031-43.0034 to read as follows:
1-13           Sec. 43.0031.  PERMANENT SCHOOL FUND ETHICS POLICY.  (a)  In
1-14     addition to any other requirements provided by law, the State Board
1-15     of Education shall adopt and enforce an ethics policy that provides
1-16     standards of conduct relating to the management and investment of
1-17     the permanent school fund.  The ethics policy must include
1-18     provisions that address the following issues as they apply to the
1-19     management and investment of the permanent school fund and to
1-20     persons responsible for managing and investing the fund:
1-21                 (1)  general ethical standards;
1-22                 (2)  conflicts of interest;
1-23                 (3)  prohibited transactions and interests;
1-24                 (4)  the acceptance of gifts and entertainment;
1-25                 (5)  compliance with applicable professional standards;
1-26                 (6)  ethics training; and
1-27                 (7)  compliance with and enforcement of the ethics
1-28     policy.
1-29           (b)  The ethics policy must include provisions applicable to:
1-30                 (1)  members of the State Board of Education;
1-31                 (2)  the commissioner;
1-32                 (3)  employees of the agency; and
1-33                 (4)  any person who provides services to the board
1-34     relating to the management or investment of the permanent school
1-35     fund.
1-36           (c)  Not later than the 45th day before the date on which the
1-37     board intends to adopt a proposed ethics policy or an amendment to
1-38     or revision of an adopted ethics policy, the board shall submit a
1-39     copy of the proposed policy, amendment, or revision to the Texas
1-40     Ethics Commission and the state auditor for review and comments.
1-41     The board shall consider any comments from the commission or state
1-42     auditor before adopting the proposed policy.
1-43           (d)  The provisions of the ethics policy that apply to a
1-44     person who provides services to the board relating to the
1-45     management or investment of the permanent school fund must be based
1-46     on the Code of Ethics and the Standards of Professional Conduct
1-47     prescribed by the Association for Investment Management and
1-48     Research or other ethics standards adopted by another appropriate
1-49     professionally recognized entity.
1-50           (e)  The board shall ensure that applicable provisions of the
1-51     ethics policy are included in any contract under which a person
1-52     provides services to the board relating to the management and
1-53     investment of the permanent school fund.
1-54           Sec.  43.0032.  CONFLICTS OF INTEREST.  (a)  A member of the
1-55     State Board of Education, the commissioner, an employee of the
1-56     agency, or a person who provides services to the board that relate
1-57     to the management or investment of the permanent school fund who
1-58     has a business, commercial, or other relationship that could
1-59     reasonably be expected to diminish the person's independence of
1-60     judgment in the performance of the person's responsibilities
1-61     relating to the management or investment of the fund shall disclose
1-62     the relationship in writing to the board.
1-63           (b)  The board or the board's designee shall, in the ethics
1-64     policy adopted under Section 43.0031, define the kinds of
 2-1     relationships that may create a possible conflict of interest.
 2-2           (c)  A person who files a statement under Subsection (a)
 2-3     disclosing a possible conflict of interest may not give advice or
 2-4     make decisions about a matter affected by the possible conflict of
 2-5     interest unless the board, after consultation with the general
 2-6     counsel of the agency, expressly waives this prohibition.  The
 2-7     board may delegate the authority to waive the prohibition
 2-8     established by this subsection.
 2-9           Sec. 43.0033.  REPORTS OF EXPENDITURES.  A consultant,
2-10     advisor, broker, or other person providing services to the State
2-11     Board of Education relating to the management and investment of the
2-12     permanent school fund shall file with the board regularly, as
2-13     determined by the board, a report that describes in detail any
2-14     expenditure of more than $50 made by the person on behalf of:
2-15                 (1)  a member of the board;
2-16                 (2)  the commissioner; or
2-17                 (3)  an employee of the agency or of a nonprofit
2-18     corporation created under Section 43.006.
2-19           Sec. 43.0034.  FORMS; PUBLIC INFORMATION.  (a)  The board
2-20     shall prescribe forms for:
2-21                 (1)  statements of possible conflicts of interest and
2-22     waivers of possible conflicts of interest under Section 43.0032;
2-23     and
2-24                 (2)  reports of expenditures under Section 43.0033.
2-25           (b)  A statement, waiver, or report described by Subsection
2-26     (a) is public information.
2-27           (c)  The board shall designate an employee of the agency to
2-28     act as custodian of statements, waivers, and reports described by
2-29     Subsection (a) for purposes of public disclosure.
2-30           SECTION 2.  This Act takes effect September 1, 1999.
2-31           SECTION 3.  Not later than January 1, 2000, the State Board
2-32     of Education shall adopt an ethics policy as required by Section
2-33     43.0031, Education Code, as added by this Act, and each form for a
2-34     statement, waiver, or report described by Section 43.0034,
2-35     Education Code, as added by this Act.
2-36           SECTION 4.  The importance of this legislation and the
2-37     crowded condition of the calendars in both houses create an
2-38     emergency and an imperative public necessity that the
2-39     constitutional rule requiring bills to be read on three several
2-40     days in each house be suspended, and this rule is hereby suspended.
2-41                                  * * * * *