By:  Duncan, Lindsay                                   S.B. No. 512
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to the investment and management of the permanent school
 1-3     fund; providing penalties.
 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-5           SECTION 1.  Chapter 43, Education Code, is amended by adding
 1-6     Section 43.0011 to read as follows:
 1-7           Sec. 43.0011.  PERMANENT SCHOOL FUND INVESTMENT ADVISORY
 1-8     COMMITTEE. (a)  The permanent school fund investment advisory
 1-9     committee shall advise the State Board of Education regarding
1-10     management and investment of the permanent school fund.
1-11           (b)  The committee is composed of:
1-12                 (1)  two members appointed by the governor, who are not
1-13     subject to confirmation by the senate;
1-14                 (2)  one member appointed by the lieutenant governor;
1-15                 (3)  one member appointed by the speaker of the house
1-16     of representatives; and
1-17                 (4)  one member appointed by the State Board of
1-18     Education.
1-19           (c)  A person appointed to the committee must have
1-20     appropriate expertise in investing institutional funds, as
1-21     determined by the appointing entity.
1-22           (d)  Members of the committee serve staggered terms of six
1-23     years, with the terms of one or two members expiring February 1 of
1-24     each odd-numbered year, except that a member may be removed by the
1-25     appointing entity for good cause.
 2-1           (e)  For purposes of this section, "good cause" means:
 2-2                 (1)  a serious violation of a law relating to the
 2-3     member's official duties as a committee member or to the conduct of
 2-4     public officials generally;
 2-5                 (2)  gross or persistent failure to perform the
 2-6     committee member's duties as a committee member;
 2-7                 (3)  conduct that is reasonably likely to undermine the
 2-8     public's trust in the committee member; or
 2-9                 (4)  conduct that constitutes a felony or a crime of
2-10     moral turpitude, if the committee member is charged with or
2-11     convicted of a criminal offense.
2-12           (f)  For purposes of Subsection (e), failure to attend any
2-13     meetings of the committee over a period of six months, if more than
2-14     one meeting is held during that period, constitutes persistent
2-15     failure to perform the member's duties as a committee member.
2-16           (g)  The committee shall meet regularly to advise the State
2-17     Board of Education regarding the management and investment of the
2-18     permanent school fund.
2-19           (h)  A committee member may not receive compensation for
2-20     performing duties as a committee member but is entitled to
2-21     reimbursement for travel expenses incurred by the member while
2-22     conducting the business of the committee as provided by the General
2-23     Appropriations Act.
2-24           (i)  The committee is not subject to Chapter 2110, Government
2-25     Code.
2-26           SECTION 2.  Subsection (b), Section 43.0031, Education Code,
 3-1     is amended to read as follows:
 3-2           (b)  The ethics policy must include provisions applicable to:
 3-3                 (1)  members of the State Board of Education;
 3-4                 (2)  members of the permanent school fund investment
 3-5     advisory committee;
 3-6                 (3)  the commissioner;
 3-7                 (4) [(3)]  employees of the agency; and
 3-8                 (5) [(4)]  any person who provides services to the
 3-9     board relating to the management or investment of the permanent
3-10     school fund.
3-11           SECTION 3.  Section 43.0032, Education Code, is amended to
3-12     read as follows:
3-13           Sec. 43.0032.  CONFLICTS OF INTEREST. (a)  This section
3-14     applies to:
3-15                 (1)  a  [A] member of the State Board of Education;
3-16                 (2)  a member of the permanent school fund investment
3-17     advisory committee;
3-18                 (3)  [,] the commissioner;
3-19                 (4)  [,] an employee of the agency; and
3-20                 (5)  [, or] a person who provides services to the board
3-21     that relate to the management or investment of the permanent school
3-22     fund.
3-23           (b)  A person to whom this section applies who has a
3-24     business, commercial, or other relationship that a reasonable
3-25     person would find likely [could reasonably be expected] to diminish
3-26     the person's independence of judgment in the performance of the
 4-1     person's responsibilities relating to the management or investment
 4-2     of the fund shall disclose the relationship in writing to the
 4-3     board.
 4-4           (c) [(b)]  The board or the board's designee shall, in the
 4-5     ethics policy adopted under Section 43.0031, define the kinds of
 4-6     relationships that may create a possible conflict of interest.
 4-7           (d) [(c)]  A person who files a statement under Subsection
 4-8     (b) [(a)] disclosing a possible conflict of interest may not give
 4-9     advice or make decisions about a matter affected by the possible
4-10     conflict of interest unless the board, after consultation with the
4-11     general counsel of the agency, expressly waives this prohibition.
4-12     The board may delegate the authority to waive the prohibition
4-13     established by this subsection.
4-14           SECTION 4.  Section 43.0033, Education Code, is amended to
4-15     read as follows:
4-16           Sec. 43.0033.  REPORTS OF EXPENDITURES. A consultant,
4-17     advisor, broker, or other person providing services to the State
4-18     Board of Education relating to the management and investment of the
4-19     permanent school fund shall file with the board regularly, as
4-20     determined by the board, a report that describes in detail any
4-21     expenditure of more than $50 made by the person on behalf of:
4-22                 (1)  a member of the board;
4-23                 (2)  a member of the permanent school fund investment
4-24     advisory committee;
4-25                 (3)  the commissioner; or
4-26                 (4) [(3)]  an employee of the agency or of a nonprofit
 5-1     corporation created under Section 43.006.
 5-2           SECTION 5.  Chapter 43, Education Code, is amended by adding
 5-3     Section 43.0035 to read as follows:
 5-4           Sec. 43.0035.  EMPLOYMENT OR COMPENSATION OF LOBBYIST
 5-5     PROHIBITED. (a)  A person who serves as a money manager, advisor,
 5-6     consultant, or broker regarding the permanent school fund may not
 5-7     knowingly employ or compensate a person who is or would be required
 5-8     to register under Chapter 305, Government Code, to communicate
 5-9     directly with a member of the legislative branch, the State Board
5-10     of Education, or the permanent school fund investment advisory
5-11     committee on a matter relating to the permanent school fund.
5-12           (b)  If the State Board of Education determines that a person
5-13     has violated this section, the board shall terminate the person's
5-14     contract to provide services regarding the permanent school fund.
5-15           (c)  A person who violates Subsection (a) commits an offense.
5-16     An offense under this subsection is a Class B misdemeanor.
5-17           (d)  In this section, "communicate directly with" and "member
5-18     of the legislative branch" have the meanings assigned by Section
5-19     305.002, Government Code.
5-20           SECTION 6. Chapter 43, Education Code, is amended by adding
5-21     Section 43.0061 to read as follows:
5-22           Sec. 43.0061.  BOARD ACTION ON INVESTMENT DECISIONS. In
5-23     considering and making investment decisions relating to the
5-24     permanent school fund, the State Board of Education must meet and
5-25     act as a body corporate.  The board may not create a committee or
5-26     subcommittee to consider or make such investment decisions.
 6-1           SECTION 7.  Section 43.005, Education Code, is repealed.
 6-2           SECTION 8.  Not later than November 1, 2001, the governor,
 6-3     lieutenant governor, speaker of the house of representatives, and
 6-4     State Board of Education shall each appoint the initial members of
 6-5     the permanent school fund investment advisory committee, as
 6-6     required by Section 43.0011, Education Code, as added by this Act.
 6-7     The governor shall appoint one person for a term expiring February
 6-8     1, 2003, and one person for a term expiring February 1, 2007.  The
 6-9     person appointed by the lieutenant governor serves a term expiring
6-10     February 1, 2007.  The persons appointed by the speaker of the
6-11     house of representatives and the State Board of Education serve
6-12     terms expiring February 1, 2005.
6-13           SECTION 9.  This Act takes effect September 1, 2001.