AN ACT
 1-1     relating to the financing and administration of a program for
 1-2     public library development.
 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-4           SECTION 1.  Chapter 441, Government Code, is amended by
 1-5     adding Subchapter E to read as follows:
 1-6         SUBCHAPTER E.  PUBLIC LIBRARY ENDOWMENT AND OPERATING FUNDS
 1-7           Sec. 441.071.  TEXAS PUBLIC LIBRARY ENDOWMENT FUND.  (a)  The
 1-8     Texas public library endowment fund is a trust fund outside the
 1-9     state treasury held by a bank or depository trust company and
1-10     administered by the commission for the benefit of the public as
1-11     provided by this section.
1-12           (b)  The fund consists of donations accepted by the
1-13     commission under Section 441.074.
1-14           (c)  The corpus of the endowment fund may not be spent for
1-15     any purpose.
1-16           (d)  Not later than September 1 of each year, the commission
1-17     shall remit all or part of the interest and income earned on money
1-18     in the endowment fund to the comptroller for deposit in the state
1-19     treasury to the credit of the Texas public library fund.  The
1-20     commission shall credit to the corpus of the endowment fund any
1-21     portion of the interest and income not credited to the public
1-22     library fund in the treasury.
1-23           Sec.  441.072.  INVESTMENT AND MANAGEMENT OF ENDOWMENT FUND.
1-24     (a)  The commission shall appoint investment managers for the
 2-1     management and investment of the Texas public library endowment
 2-2     fund by contracting for professional investment management services
 2-3     with one or more organizations that are in the business of managing
 2-4     investments.
 2-5           (b)  In choosing and contracting for professional investment
 2-6     management services and in continuing the use of an investment
 2-7     manager, the commission shall act prudently and in the interest of
 2-8     the beneficiaries of the endowment fund.
 2-9           (c)  In making and supervising investments of the endowment
2-10     fund, an investment manager and the commission shall discharge
2-11     their respective duties solely in the interest of the beneficiaries
2-12     of the fund:
2-13                 (1)  for the exclusive purposes of providing benefits
2-14     for the beneficiaries of the fund and defraying reasonable expenses
2-15     of administering this chapter;
2-16                 (2)  with the care, skill, prudence, and diligence
2-17     under the prevailing circumstances that a prudent person acting in
2-18     a similar capacity and familiar with matters of the type would use
2-19     in the conduct of an enterprise with a similar character and aims;
2-20                 (3)  by diversifying the investments of the fund to
2-21     minimize the risk of large losses, unless under the circumstances
2-22     it is clearly prudent not to do so; and
2-23                 (4)  in accordance with the documents and instruments
2-24     governing the fund to the extent that the documents and instruments
2-25     are consistent with this section.
2-26           (d)  To be eligible for appointment under this section, an
 3-1     investment manager must be:
 3-2                 (1)  registered under the Investment Advisers Act of
 3-3     1940 (15 U.S.C. Section 80b-1 et seq.), as amended;
 3-4                 (2)  a bank as defined by that Act that has a trust
 3-5     department; or
 3-6                 (3)  an insurance company qualified to perform
 3-7     investment services under the laws of more than one state.
 3-8           (e)  In a contract made under this section, the commission
 3-9     shall specify any policies, requirements, or restrictions,
3-10     including criteria for determining the quality of investments and
3-11     for  the use of standard rating services, that the commission
3-12     adopts for investments of the endowment fund.
3-13           (f)  A member of the commission is not liable for the acts or
3-14     omissions of an investment manager appointed under Subsection (a).
3-15     A member of the commission is not permitted or obligated to invest
3-16     or otherwise to manage any asset of the fund subject to management
3-17     by the investment manager.
3-18           (g)  An investment manager appointed under Subsection
3-19     (a)  shall acknowledge in writing the manager's fiduciary
3-20     responsibilities to the endowment fund.
3-21           (h)  The commission may at any time and shall frequently
3-22     monitor the investments made by each investment manager for the
3-23     endowment fund.  The commission may contract for professional
3-24     evaluation services to fulfill this requirement.
3-25           (i)  The commission shall enter into an investment custody
3-26     account agreement designating a bank or a depository trust company
 4-1     to serve as custodian for all assets allocated to or generated
 4-2     under a contract for professional investment management services.
 4-3           (j)  Under a custody account agreement, the commission shall
 4-4     require the designated custodian to perform the duties and assume
 4-5     the responsibilities for the endowment fund that are performed and
 4-6     assumed, in the absence of a contract, by the custodian of the
 4-7     endowment fund.  The custodian shall furnish to the commission,
 4-8     annually or more frequently if required by commission rule, a sworn
 4-9     statement of the amount of the endowment fund assets in the
4-10     custodian's custody.
4-11           (k)  For purposes of this section, the beneficiaries of the
4-12     Texas public library endowment fund are the persons who use public
4-13     libraries, public library facilities, and public library
4-14     collections and the public libraries that benefit from the
4-15     performance of the commission's powers and duties under this
4-16     chapter.
4-17           Sec. 441.073.  TEXAS PUBLIC LIBRARY FUND.  (a)  The Texas
4-18     public library fund is a special fund in the state treasury outside
4-19     the general revenue fund.
4-20           (b)  The public library fund consists of money credited to
4-21     the fund under Section 441.071(d) and proceeds from sales under
4-22     Section 441.074(d).
4-23           (c)  Money in the public library fund may be appropriated
4-24     only to the commission to perform the commission's powers and
4-25     duties concerning public library development under this chapter and
4-26     to pay the commission's expenses incurred under this subchapter.
 5-1           (d)  The public library fund is exempt from the application
 5-2     of Sections 403.095 and 404.071.  Interest and income from deposit
 5-3     and investment of money in the fund shall be allocated to the fund
 5-4     monthly.
 5-5           Sec. 441.074.  DONATIONS, APPROPRIATIONS, AND SALES.
 5-6     (a)  The commission may solicit and accept on behalf of the state
 5-7     donations of money, securities, and other property as it determines
 5-8     best further the orderly development of public library resources of
 5-9     the state.  Money paid to the commission under this subsection
5-10     shall be deposited in the Texas public library endowment fund.
5-11           (b)  The commission by rule shall establish an acquisition
5-12     policy for accepting donations of money, securities, and other
5-13     property.
5-14           (c)  The legislature may make appropriations to the
5-15     commission to carry out the purposes of this chapter.
5-16           (d)  The commission may purchase and resell items it
5-17     determines appropriate for the promotion of public libraries in
5-18     Texas.  The value of commission inventory, as determined by
5-19     generally accepted accounting principles, may not exceed $50,000 at
5-20     the end of any fiscal year.  The net profits from those sales shall
5-21     be deposited in the Texas public library fund.
5-22           Sec. 441.075.  PUBLIC LIBRARY FUND GRANT PROGRAM.  (a)  The
5-23     commission shall make grants to public libraries from the Texas
5-24     public library fund for facility construction projects, acquisition
5-25     of books and other collection development materials, and payment of
5-26     actual and reasonable general and administrative expenses.  The
 6-1     commission shall allocate amounts from the fund to direct and
 6-2     matching grant programs.
 6-3           (b)  The commission shall adopt rules:
 6-4                 (1)  establishing methods for participation by local
 6-5     governments in a matching grant program for facility construction
 6-6     projects; and
 6-7                 (2)  providing allocations for a direct grant program
 6-8     for acquisition of books and other collection development materials
 6-9     according to a formula that allocates a base grant to each
6-10     participating public library plus an amount that is proportional to
6-11     the size of the population served.
6-12           (c)  To participate in a grant program under this section, a
6-13     public library must maintain a level of local public library
6-14     funding equal to or greater than the average funding for the three
6-15     years preceding participation.  The commission shall adopt rules to
6-16     implement this requirement.
6-17           SECTION 2.  Subsection (b), Section 404.093, Government Code,
6-18     is amended to read as follows:
6-19           (b)  This subchapter does not apply to:
6-20                 (1)  funds pledged to the payment of bonds, notes, or
6-21     other debts if the funds are not otherwise required to be deposited
6-22     in the treasury;
6-23                 (2)  funds held in trust or escrow for the benefit of a
6-24     person or entity other than a state agency;
6-25                 (3)  funds set apart out of earnings derived from
6-26     investment of funds held in trust for others, as administrative
 7-1     expenses of the trustee agency;
 7-2                 (4)  funds, grants, donations, and proceeds from funds,
 7-3     grants, and donations, given in trust to the Texas State Library
 7-4     and Archives Commission for the establishment and maintenance of
 7-5     regional historical resource depositories and libraries in
 7-6     accordance with Section 441.154 [441.074]; or
 7-7                 (5)  funds under the management of the
 7-8     secretary-treasurer of the Anatomical Board of the State of Texas,
 7-9     as provided by Section 691.008, Health and Safety Code.
7-10           SECTION 3.  Subchapter D, Chapter 326, Local Government Code,
7-11     is amended by adding Section 326.072 to read as follows:
7-12           Sec. 326.072.  GIFTS, GRANTS, AND DONATIONS.  A district may
7-13     accept and administer a gift, grant, or donation from any source to
7-14     carry out the purposes of this chapter.
7-15           SECTION 4.  This Act takes effect September 1, 1999.
7-16           SECTION 5.  The importance of this legislation and the
7-17     crowded condition of the calendars in both houses create an
7-18     emergency and an imperative public necessity that the
7-19     constitutional rule requiring bills to be read on three several
7-20     days in each house be suspended, and this rule is hereby suspended.
         _______________________________     _______________________________
             President of the Senate              Speaker of the House
               I hereby certify that S.B. No. 691 passed the Senate on
         April 15, 1999, by the following vote:  Yeas 30, Nays 0; and that
         the Senate concurred in House amendment on May 6, 1999, by the
         following vote:  Yeas 30, Nays 0.
                                             _______________________________
                                                 Secretary of the Senate
               I hereby certify that S.B. No. 691 passed the House, with
         amendment, on May 3, 1999, by a non-record vote.
                                             _______________________________
                                                 Chief Clerk of the House
         Approved:
         _______________________________
                     Date
         _______________________________
                   Governor