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 * * * * *