By Ellis S.B. No. 582
76R676 KKA-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the authority of the State Board of Education to manage
1-3 the permanent school fund.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 43.003, Education Code, is amended to
1-6 read as follows:
1-7 Sec. 43.003. INVESTMENT OF PERMANENT SCHOOL FUND. In
1-8 compliance with this section, the State Board of Education may
1-9 invest the permanent school fund in the types of securities, which
1-10 must be carefully examined by the State Board of Education and be
1-11 found to be safe and proper investments for the fund as specified
1-12 below:
1-13 (1) securities, bonds, or other obligations issued,
1-14 insured, or guaranteed in any manner by the United States
1-15 Government or any of its agencies and in bonds issued by this
1-16 state;
1-17 (2) obligations and pledges of The University of
1-18 Texas;
1-19 (3) corporate bonds, debentures, or obligations of
1-20 United States corporations of at least "A" rating;
1-21 (4) obligations of United States corporations that
1-22 mature in less than one year and are of the highest rating
1-23 available at the time of investment;
1-24 (5) bonds issued, assumed, or guaranteed by the
2-1 Inter-American Development Bank, the International Bank of
2-2 Reconstruction and Development (the World Bank), the African
2-3 Development Bank, the Asian Development Bank, and the International
2-4 Finance Corporation;
2-5 (6) bonds of counties, school districts,
2-6 municipalities, road precincts, drainage, irrigation, navigation,
2-7 and levee districts in this state, subject to the following
2-8 requirements:
2-9 (A) the securities, before purchase, must have
2-10 been diligently investigated by the attorney general both as to
2-11 form and as to legal compliance with applicable laws;
2-12 (B) the attorney general's certificate of
2-13 validity procured by the party offering the bonds, obligations, or
2-14 pledges must accompany the securities when they are submitted for
2-15 registration to the comptroller, who must preserve the
2-16 certificates;
2-17 (C) the public securities, if purchased, and
2-18 when certified and registered as specified under Paragraph (B), are
2-19 incontestable unless issued fraudulently or in violation of a
2-20 constitutional limitation, and the certificates of the attorney
2-21 general are prima facie evidence of the validity of the bonds and
2-22 bond coupons; and
2-23 (D) after the issuing political subdivision has
2-24 received the proceeds from the sales of the securities, the issuing
2-25 agency is estopped to deny their validity, and the securities are
2-26 valid and binding obligations;
2-27 (7) preferred stocks and common stocks that the State
3-1 Board of Education considers proper investments for the permanent
3-2 school fund, subject to the following requirements:
3-3 (A) in making all of those investments, the
3-4 State Board of Education:
3-5 (i) shall exercise the judgment and care
3-6 under the circumstances then prevailing that persons of ordinary
3-7 prudence, discretion, and intelligence exercise in the management
3-8 of their own affairs, not in regard to speculation but in regard to
3-9 the permanent disposition of their funds, considering the probable
3-10 income as well as the probable safety of their capital; and
3-11 (ii) in compliance with the standard set
3-12 out in Subparagraph (i), shall consider only factors that directly
3-13 relate to the financial soundness of an investment and may not
3-14 consider subjective evaluations of the social value of the
3-15 investment;
3-16 (B) the company issuing the stock must be
3-17 incorporated in the United States, and the stocks must have paid
3-18 dividends for five consecutive years or longer immediately before
3-19 the date of purchase and the stocks, except for bank stocks and
3-20 insurance stocks, must be listed on an exchange registered with the
3-21 Securities and Exchange Commission or its successors; and
3-22 (C) not more than one percent of the permanent
3-23 school fund may be invested in stock issued by one corporation and
3-24 not more than five percent of the voting stock of any one
3-25 corporation will be owned; and
3-26 (8) notwithstanding any other law or provision of this
3-27 code, first lien real estate mortgage securities insured by the
4-1 Federal Housing Administration under the National Housing Act of
4-2 the United States, or in any other first lien real estate mortgage
4-3 securities guaranteed in whole or in part by the United States.
4-4 SECTION 2. Section 43.004(a), Education Code, is amended to
4-5 read as follows:
4-6 (a) The State Board of Education shall develop written
4-7 investment objectives concerning the investment of the permanent
4-8 school fund. The objectives may address desired rates of return,
4-9 risks involved, investment time frames, and any other relevant
4-10 financial considerations.
4-11 SECTION 3. Section 43.007(b), Education Code, is amended to
4-12 read as follows:
4-13 (b) In making purchases, sales, exchanges, and reissues, the
4-14 State Board of Education:
4-15 (1) shall exercise the judgment and care under the
4-16 circumstances then prevailing that persons of ordinary prudence,
4-17 discretion, and intelligence exercise in the management of their
4-18 own affairs not in regard to speculation but in regard to the
4-19 permanent disposition of their funds, considering the probable
4-20 income as well as the probable safety of their capital; and
4-21 (2) in compliance with the standard set out in
4-22 Subdivision (1), shall consider only factors that directly relate
4-23 to the financial soundness of an investment and may not consider
4-24 subjective evaluations of the social value of the investment.
4-25 SECTION 4. The importance of this legislation and the
4-26 crowded condition of the calendars in both houses create an
4-27 emergency and an imperative public necessity that the
5-1 constitutional rule requiring bills to be read on three several
5-2 days in each house be suspended, and this rule is hereby suspended,
5-3 and that this Act take effect and be in force from and after its
5-4 passage, and it is so enacted.