By Duncan S.B. No. 512
77R2256 ESH-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the investment and management of the permanent school
1-3 fund.
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 BOARD.
1-8 (a) The Permanent School Fund Investment Board consists of:
1-9 (1) the persons appointed as provided by Section 5(d),
1-10 Article VII, Texas Constitution; and
1-11 (2) the commissioner, who serves as a nonvoting ex
1-12 officio member.
1-13 (b) The governor shall designate the presiding officer of
1-14 the board from among the appointed members. The presiding officer
1-15 serves in that capacity at the will of the governor.
1-16 (c) The board may:
1-17 (1) employ an executive director and other employees;
1-18 and
1-19 (2) direct the agency in managing and investing the
1-20 permanent school fund.
1-21 SECTION 2. Sections 43.0031(a) and (b), Education Code, are
1-22 amended to read as follows:
1-23 (a) In addition to any other requirements provided by law,
1-24 the Permanent School Fund Investment Board [State Board of
2-1 Education] shall adopt and enforce an ethics policy that provides
2-2 standards of conduct relating to the management and investment of
2-3 the permanent school fund. The ethics policy must include
2-4 provisions that address the following issues as they apply to the
2-5 management and investment of the permanent school fund and to
2-6 persons responsible for managing and investing the fund:
2-7 (1) general ethical standards;
2-8 (2) conflicts of interest;
2-9 (3) prohibited transactions and interests;
2-10 (4) the acceptance of gifts and entertainment;
2-11 (5) compliance with applicable professional standards;
2-12 (6) ethics training; and
2-13 (7) compliance with and enforcement of the ethics
2-14 policy.
2-15 (b) The ethics policy must include provisions applicable to:
2-16 (1) members of the Permanent School Fund Investment
2-17 Board [State Board of Education];
2-18 (2) the executive director and other employees of the
2-19 board;
2-20 (3) the commissioner;
2-21 (4) [(3)] employees of the agency; and
2-22 (5) [(4)] any person who provides services to the
2-23 board relating to the management or investment of the permanent
2-24 school fund.
2-25 SECTION 3. Section 43.0032, Education Code, is amended to
2-26 read as follows:
2-27 Sec. 43.0032. CONFLICTS OF INTEREST. (a) This section
3-1 applies to:
3-2 (1) a [A] member of the Permanent School Fund
3-3 Investment Board;
3-4 (2) [State Board of Education,] the commissioner;
3-5 (3)[,] an employee of the agency; and
3-6 (4)[, or] a person who provides services to the board
3-7 that relate to the management or investment of the permanent school
3-8 fund.
3-9 (b) A person to whom this section applies who has a
3-10 business, commercial, or other relationship that could reasonably
3-11 be expected to diminish the person's independence of judgment in
3-12 the performance of the person's responsibilities relating to the
3-13 management or investment of the fund shall disclose the
3-14 relationship in writing to the board.
3-15 (c) [(b)] The board or the board's designee shall, in the
3-16 ethics policy adopted under Section 43.0031, define the kinds of
3-17 relationships that may create a possible conflict of interest.
3-18 (d) [(c)] A person who files a statement under Subsection
3-19 (b) [(a)] disclosing a possible conflict of interest may not give
3-20 advice or make decisions about a matter affected by the possible
3-21 conflict of interest unless the board, after consultation with the
3-22 general counsel of the agency, expressly waives this prohibition.
3-23 The board may delegate the authority to waive the prohibition
3-24 established by this subsection.
3-25 SECTION 4. Section 43.0033, Education Code, is amended to
3-26 read as follows:
3-27 Sec. 43.0033. REPORTS OF EXPENDITURES. A consultant,
4-1 advisor, broker, or other person providing services to the
4-2 Permanent School Fund Investment Board [State Board of Education]
4-3 relating to the management and investment of the permanent school
4-4 fund shall file with the board regularly, as determined by the
4-5 board, a report that describes in detail any expenditure of more
4-6 than $50 made by the person on behalf of:
4-7 (1) a member of the board;
4-8 (2) the executive director or another employee of the
4-9 board;
4-10 (3) the commissioner; or
4-11 (4) [(3)] an employee of the agency or of a nonprofit
4-12 corporation created under Section 43.006.
4-13 SECTION 5. Section 43.0034(a), Education Code, is amended to
4-14 read as follows:
4-15 (a) The Permanent School Fund Investment Board [board] shall
4-16 prescribe forms for:
4-17 (1) statements of possible conflicts of interest and
4-18 waivers of possible conflicts of interest under Section 43.0032;
4-19 and
4-20 (2) reports of expenditures under Section 43.0033.
4-21 SECTION 6. Section 43.004(a), Education Code, is amended to
4-22 read as follows:
4-23 (a) The Permanent School Fund Investment Board [State Board
4-24 of Education] shall develop written investment objectives
4-25 concerning the investment of the permanent school fund. The
4-26 objectives may address desired rates of return, risks involved,
4-27 investment time frames, and any other relevant considerations.
5-1 SECTION 7. Section 43.005, Education Code, is amended to
5-2 read as follows:
5-3 Sec. 43.005. EXTERNAL INVESTMENT MANAGERS. (a) The
5-4 Permanent School Fund Investment Board [State Board of Education]
5-5 may contract with private professional investment managers to
5-6 assist the board in making investments of the permanent school
5-7 fund. A contract under this subsection must be approved by the
5-8 board or otherwise entered into in accordance with board rules
5-9 relating to contracting authority.
5-10 (b) The Permanent School Fund Investment Board [State Board
5-11 of Education] by rule may delegate a power or duty relating to the
5-12 investment of the permanent school fund to a committee, officer,
5-13 employee, or other agent of the board.
5-14 SECTION 8. Sections 43.006(a) and (d)-(f), Education Code,
5-15 are amended to read as follows:
5-16 (a) The Permanent School Fund Investment Board [State Board
5-17 of Education] may delegate investment authority and contract for
5-18 the investment of the permanent school fund to the same extent as
5-19 the governing board of an institution of higher education with
5-20 respect to an institutional fund under Chapter 163, Property Code.
5-21 (d) The board of directors of the corporation must be
5-22 members of the Permanent School Fund Investment Board [State Board
5-23 of Education].
5-24 (e) If an investment contract entered into under Subsection
5-25 (b) includes the permanent school fund within the scope of funds
5-26 under the control and management of the Permanent School Fund
5-27 Investment Board [State Board of Education] to be invested by the
6-1 corporation, the board shall provide for an annual financial audit
6-2 of the permanent school fund. The audit shall be performed by the
6-3 state auditor.
6-4 (f) The corporation shall file quarterly reports with the
6-5 Permanent School Fund Investment Board [State Board of Education]
6-6 concerning matters required by the board.
6-7 SECTION 9. Section 43.007, Education Code, is amended to
6-8 read as follows:
6-9 Sec. 43.007. PURCHASE AND SALE OR EXCHANGE OF SECURITIES.
6-10 (a) The Permanent School Fund Investment Board [State Board of
6-11 Education] may authorize the purchase of all of the types of
6-12 securities in which it is authorized by law to invest the permanent
6-13 school fund in either registered or negotiable form. The board may
6-14 authorize the reissue of those securities held at any time for the
6-15 account of the permanent school fund in either registered or
6-16 negotiable form. The board [State Board of Education] may
6-17 authorize the sale of any of the securities held for the account of
6-18 the permanent school fund and reinvest the proceeds of sale for the
6-19 fund and may authorize the exchange of any of the securities held
6-20 for the account of the permanent school fund.
6-21 (b) In making purchases, sales, exchanges, and reissues, the
6-22 Permanent School Fund Investment Board [State Board of Education]
6-23 shall exercise the judgment and care under the circumstances then
6-24 prevailing that persons of ordinary prudence, discretion, and
6-25 intelligence exercise in the management of their own affairs not in
6-26 regard to speculation but in regard to the permanent disposition of
6-27 their funds, considering the probable income as well as the
7-1 probable safety of their capital.
7-2 (c) When any securities are sold, reissued, or exchanged as
7-3 provided by Subsection (a), the custodian of the securities shall
7-4 deliver the securities sold, reissued, or exchanged in accordance
7-5 with the directions of the Permanent School Fund Investment Board
7-6 [State Board of Education].
7-7 SECTION 10. Sections 43.008(a) and (b), Education Code, are
7-8 amended to read as follows:
7-9 (a) If the Permanent School Fund Investment Board [State
7-10 Board of Education] authorizes the payment of a premium out of the
7-11 permanent school fund for purchasing any fixed-income security as
7-12 an investment for that fund, the principal of the security and a
7-13 portion of the interest accruing from the security equal to the
7-14 premium shall be treated as principal in the investment as provided
7-15 by Subsection (c) and shall be returned to the permanent school
7-16 fund.
7-17 (b) If the Permanent School Fund Investment Board [State
7-18 Board of Education] authorizes the purchase of a fixed-income
7-19 security at less than par, the discount received in the purchase
7-20 shall be paid to the available school fund as additional interest
7-21 revenue as provided by Subsection (c).
7-22 SECTION 11. Sections 43.009(a)-(c), Education Code, are
7-23 amended to read as follows:
7-24 (a) The Permanent School Fund Investment Board [State Board
7-25 of Education] may authorize the governing body of any political
7-26 subdivision in this state to pay off and discharge, at any interest
7-27 paying date whether the bonds are matured or not, all or any part
8-1 of any outstanding bond indebtedness owned by the permanent school
8-2 fund.
8-3 (b) The governing body of a political subdivision desiring
8-4 to pay off and discharge any bonded indebtedness owned by the fund
8-5 shall apply in writing to the Permanent School Fund Investment
8-6 Board [State Board of Education], not later than the 30th day
8-7 before any interest paying date on the bonds, describing the bonds
8-8 or part of the bonds it desires to pay off and discharge. The
8-9 application must be accompanied by an affidavit stating that only
8-10 tax money collected from a tax levy made for the specific purpose
8-11 of providing a sinking fund and paying interest on the particular
8-12 bonds to be redeemed will be spent in redeeming, taking up, or
8-13 paying off the bonds.
8-14 (c) The Permanent School Fund Investment Board [State Board
8-15 of Education], on receiving the application and affidavit, shall
8-16 take action on them in the manner it considers best and shall
8-17 notify the applicant whether the application is refused or granted
8-18 in whole or in part.
8-19 SECTION 12. Sections 43.010(a), (c), and (d), Education
8-20 Code, are amended to read as follows:
8-21 (a) If interest or principal has not been paid for two years
8-22 or more on any bonds issued by any school district and held by the
8-23 permanent school fund, the Permanent School Fund Investment Board
8-24 [State Board of Education] may:
8-25 (1) compel the district to levy a tax sufficient to
8-26 meet the interest and principal payments then or later due; or
8-27 (2) if the district furnishes to the Permanent School
9-1 Fund Investment Board [State Board of Education] satisfactory proof
9-2 that the district's taxing ability is insufficient, require the
9-3 district to:
9-4 (A) exhaust all legal remedies in collecting
9-5 delinquent taxes; and
9-6 (B) levy a tax at the maximum lawful rate on the
9-7 bona fide valuation of taxable property located in the district.
9-8 (c) As long as any school district is delinquent in its
9-9 payments of principal or interest on any of its bonds owned by the
9-10 permanent school fund, the Permanent School Fund Investment Board
9-11 [State Board of Education] may specify the method of crediting
9-12 payments to the state made by the district as to principal and
9-13 interest.
9-14 (d) The comptroller may not issue any warrant from the
9-15 foundation school fund to or for the benefit of any district that
9-16 has been for as long as two years in default in the payment of
9-17 principal or interest on any security owned by the permanent school
9-18 fund until the Permanent School Fund Investment Board [State Board
9-19 of Education] certifies that the district has satisfactorily
9-20 complied with the appropriate provisions of this section, in which
9-21 event the comptroller shall resume making payments to or for the
9-22 benefit of the district, including the making of pretermitted
9-23 payments.
9-24 SECTION 13. Sections 43.011(a)-(e), Education Code, are
9-25 amended to read as follows:
9-26 (a) In compliance with this section, the Permanent School
9-27 Fund Investment Board [State Board of Education] may revise,
10-1 readjust, modify, refinance, or refund defaulted bonds issued by
10-2 any school district in this state and owned by either the permanent
10-3 school fund or the available school fund.
10-4 (b) Application must be made to the Permanent School Fund
10-5 Investment Board [State Board of Education] by the district that
10-6 issued the bonds and must show that:
10-7 (1) delinquent interest totals at least 50 percent of
10-8 the principal amount of the bonds; and
10-9 (2) taxable valuation has decreased to such an extent
10-10 that a full application of the proceeds of the voted authorized tax
10-11 authorized to be levied on the $100 taxable property valuation will
10-12 not meet interest and principal annually maturing on the bonds.
10-13 (c) The Permanent School Fund Investment Board [State Board
10-14 of Education] may effect a refunding of the debt due and to become
10-15 due only if the board finds that:
10-16 (1) the district is unable to pay the sums already
10-17 matured and the sums contracted to be paid as they mature by paying
10-18 annually to the Permanent School Fund Investment Board [State Board
10-19 of Education] the full proceeds of a 50-cent tax levy on the $100
10-20 of all taxable valuation of property in the district;
10-21 (2) the taxable valuation of property in the district
10-22 has decreased at least 75 percent since the bonds were issued and
10-23 that the decrease was not caused by the district or any of its
10-24 officials;
10-25 (3) the district for a period of at least five years
10-26 before applying to the Permanent School Fund Investment Board
10-27 [State Board of Education] for refunding has levied a tax of 50
11-1 cents on the $100 of taxable valuation of property in the district,
11-2 and that despite such levies, the aggregate amount due the
11-3 Permanent School Fund Investment Board [State Board of Education]
11-4 exceeds the aggregate amount due at the beginning of the period;
11-5 (4) the district has not authorized and sold
11-6 additional bonds during the five-year period immediately preceding
11-7 the application; and
11-8 (5) the district has in good faith endeavored to pay
11-9 its debt in accordance with the contract evidenced by the bonds
11-10 held for the account of the permanent school fund or the available
11-11 school fund.
11-12 (d) If the conditions specified by Subsection (c) are found
11-13 to exist, the district is, for purposes of this section, insolvent,
11-14 and the Permanent School Fund Investment Board [State Board of
11-15 Education] may exchange the bonds, interest coupons, and other
11-16 evidences of indebtedness for new refunding bonds of the district
11-17 issued in compliance with the following:
11-18 (1) the principal amount of the refunding bonds may
11-19 not be less than the total amount of the bonds, matured interest
11-20 coupons, accrued interest, and interest on delinquent interest then
11-21 actually due to the permanent school fund or the available school
11-22 fund; and
11-23 (2) the rate of interest to be borne by the refunding
11-24 bonds may be lower than that borne by the bonds to be refunded if
11-25 in consideration of the interest reduction the district agrees to
11-26 levy a tax each year for a period of 40 years at a rate sufficient
11-27 to produce annually a sum equal to 90 percent of the amount that
12-1 can be calculated by the levy of a tax at the rate of 50 cents on
12-2 the $100 of taxable valuation of property as determined by the
12-3 latest approved tax roll of the district, and in determining the
12-4 rate of interest to be borne by the refunding bonds, the Permanent
12-5 School Fund Investment Board [State Board of Education] shall be
12-6 governed by the following:
12-7 (A) the Permanent School Fund Investment Board
12-8 [State Board of Education] may require the rate to be an annual [a]
12-9 percent [per annum] as in its judgment will represent the maximum
12-10 rate that can be paid by the district and still permit an orderly
12-11 and certain retirement of the refunding bonds within 40 years from
12-12 their date;
12-13 (B) the interest rate of refunding bonds to be
12-14 received in exchange for bonds owned by the permanent school fund
12-15 may not be less than the minimum rate at which bonds may then be
12-16 purchased as investments for the permanent school fund; and
12-17 (C) the rate of interest of refunding bonds to
12-18 be received in exchange for bonds owned by the available school
12-19 fund may be set by the Permanent School Fund Investment Board
12-20 [State Board of Education] at any rate the board considers
12-21 feasible, and the refunding bonds may, at the discretion of the
12-22 board [State Board of Education], be made non-interest bearing to a
12-23 date fixed by the board.
12-24 (e) The Permanent School Fund Investment Board [State Board
12-25 of Education] may not make a revision, readjustment, modification,
12-26 refinancing, or refunding that will release or extinguish any debt
12-27 or obligation then due and payable to the permanent school fund or
13-1 to the available school fund.
13-2 SECTION 14. Sections 43.012(a) and (c)-(f), Education Code,
13-3 are amended to read as follows:
13-4 (a) Defaulted obligations, other than bonds of school
13-5 districts as provided by Section 43.011, due the available school
13-6 fund may be refinanced or refunded with the approval of the
13-7 Permanent School Fund Investment Board [State Board of Education]
13-8 in compliance with this section.
13-9 (c) The obligor must apply to the Permanent School Fund
13-10 Investment Board [State Board of Education] and show:
13-11 (1) that the obligations due the available school fund
13-12 have been in default in whole or in part for a continuous period of
13-13 at least 15 years; and
13-14 (2) that the obligor is not in default in the payment
13-15 of the principal of any bonds owned by the permanent school fund.
13-16 (d) If the Permanent School Fund Investment Board [State
13-17 Board of Education] finds that the requirements provided by
13-18 Subsection (c) have been met, it may approve a refinancing or the
13-19 issuance of refunding bonds on the conditions:
13-20 (1) that the refunding bonds must mature serially in
13-21 not exceeding 40 years from the date of issuance;
13-22 (2) that the principal amount of the refunding bonds
13-23 may be not less than the total amount of the obligations then in
13-24 default and due the available school fund; and
13-25 (3) that the refunding bonds must bear interest at a
13-26 rate or rates determined by the Permanent School Fund Investment
13-27 Board [State Board of Education] to be for the best interest of the
14-1 available school fund.
14-2 (e) The Permanent School Fund Investment Board [State Board
14-3 of Education] may accept refunding bonds in lieu of either matured
14-4 or unmatured bonds held for the benefit of the permanent school
14-5 fund if the rate of interest on the new refunding bonds is at least
14-6 the same rate as that of the bonds being refunded.
14-7 (f) Refunding bonds issued with the approval or pursuant to
14-8 a refunding agreement with the Permanent School Fund Investment
14-9 Board [State Board of Education] in compliance with either this
14-10 section or Section 43.011 shall, on the order of the board [State
14-11 Board of Education], be exchanged by the comptroller for the
14-12 defaulted obligations they have been issued to refund.
14-13 SECTION 15. The heading to Section 43.014, Education Code,
14-14 is amended to read as follows:
14-15 Sec. 43.014. DUTIES OF COMPTROLLER RELATING TO AVAILABLE
14-16 SCHOOL FUND.
14-17 SECTION 16. Section 43.014(a), Education Code, is amended to
14-18 read as follows:
14-19 (a) On or before July 1 of each year, the comptroller shall
14-20 estimate the amount of the available school fund receivable from
14-21 every source during the following school year and report the
14-22 estimate to the Permanent School Fund Investment Board [State Board
14-23 of Education].
14-24 SECTION 17. The heading to Section 43.015, Education Code,
14-25 is amended to read as follows:
14-26 Sec. 43.015. ADDITIONAL DUTIES OF COMPTROLLER.
14-27 SECTION 18. Sections 43.015(b), (e), and (f), Education
15-1 Code, are amended to read as follows:
15-2 (b) The comptroller shall provide the Permanent School Fund
15-3 Investment Board [State Board of Education] with the reports
15-4 specified by Subsection (a) and with additional reports concerning
15-5 those funds requested by the board [State Board of Education].
15-6 (e) On order of the Permanent School Fund Investment Board
15-7 [State Board of Education], the comptroller shall exchange or
15-8 accept refunding bonds in lieu of:
15-9 (1) either matured or unmatured bonds held for the
15-10 benefit of the permanent school fund, which are being refunded
15-11 under this chapter;
15-12 (2) defaulted obligations held for the benefit of the
15-13 available school fund if the refunding bonds are issued in
15-14 compliance with Section 43.012;
15-15 (3) defaulted obligations of any school district of
15-16 this state held for the benefit of the permanent school fund or the
15-17 available school fund if the refunding bonds are issued in
15-18 compliance with Section 43.011; or
15-19 (4) refunding bonds of any school district of this
15-20 state for school bonds not matured held by the comptroller for the
15-21 permanent school fund if the new refunding bonds are issued by the
15-22 school district in compliance with this code.
15-23 (f) The comptroller shall be the custodian of all securities
15-24 [enumerated in Section 43.003(6) and of other securities as]
15-25 designated by the Permanent School Fund Investment Board [State
15-26 Board of Education] in which the school funds of the state are
15-27 invested. The comptroller shall keep those securities in the
16-1 comptroller's custody until paid off, discharged, delivered as
16-2 required by the Permanent School Fund Investment Board [State Board
16-3 of Education], or otherwise disposed of by the proper authorities
16-4 of the state, and on the proper installment of any interest or
16-5 dividend, shall see that the proper credit is given, and the
16-6 coupons on bonds, when paid, shall be separated from the bonds and
16-7 cancelled by the comptroller.
16-8 SECTION 19. Sections 43.017-43.019, Education Code, are
16-9 amended to read as follows:
16-10 Sec. 43.017. USE OF COMMERCIAL BANKS AS AGENTS FOR
16-11 COLLECTION OF INCOME FROM PERMANENT SCHOOL FUND INVESTMENTS. (a)
16-12 The Permanent School Fund Investment Board [State Board of
16-13 Education] may contract with one or more commercial banks to
16-14 receive payments of dividends and interest on securities in which
16-15 the state permanent school funds are invested and transmit that
16-16 money with identification of its source to the comptroller for the
16-17 account of the available school fund by the fastest available
16-18 means.
16-19 (b) In choosing each commercial bank with which to contract
16-20 as authorized by Subsection (a), the Permanent School Fund
16-21 Investment Board [State Board of Education] shall assure itself of:
16-22 (1) the financial stability of the bank;
16-23 (2) the location of the bank with respect to its
16-24 proximity to the banks on which checks are drawn in payment of
16-25 dividends and interest on securities of the permanent school fund;
16-26 (3) the experience and reliability of the bank in
16-27 acting as agent for others in the similar collection and
17-1 expeditious remittance of money; and
17-2 (4) the reasonableness of the bank's charges for the
17-3 services, both in amount of the charges and in relation to the
17-4 increased investment earnings of the available school fund that
17-5 will result from speedier receipt by the comptroller of the money.
17-6 Sec. 43.018. PARTICIPATION IN FULLY SECURED SECURITIES LOAN
17-7 PROGRAMS. (a) The Permanent School Fund Investment Board [State
17-8 Board of Education] may contract with a commercial bank to serve
17-9 both as a custodian of securities in which the state permanent
17-10 school funds are invested and to lend those securities, under the
17-11 conditions prescribed by Subsection (b), to securities brokers and
17-12 dealers on short-term loan.
17-13 (b) The Permanent School Fund Investment Board [State Board
17-14 of Education] may contract with a commercial bank pursuant to this
17-15 section only if:
17-16 (1) the bank is located in a city having a major stock
17-17 exchange;
17-18 (2) the bank is experienced in the operation of a
17-19 fully secured securities loan program;
17-20 (3) the bank has adequate capital in the prudent
17-21 judgment of the Permanent School Fund Investment Board [State Board
17-22 of Education] to assure the safety of the securities entrusted to
17-23 it as a custodian;
17-24 (4) the bank will require of any securities broker or
17-25 dealer to which it lends securities owned by the state permanent
17-26 school fund that the broker or dealer deliver to it cash collateral
17-27 for the loan of securities, and that the cash collateral will at
18-1 all times be not less than 100 percent of the market value of the
18-2 securities lent;
18-3 (5) the bank executes an indemnification agreement,
18-4 satisfactory in form and content to the Permanent School Fund
18-5 Investment Board [State Board of Education], fully indemnifying the
18-6 permanent and available school funds against loss resulting from
18-7 the bank's service as custodian of securities of the permanent
18-8 school fund and its operation of a securities loan program using
18-9 securities of the permanent school fund;
18-10 (6) the bank will speedily collect and remit on the
18-11 day of collection by the fastest available means to the comptroller
18-12 any dividends and interest collectible by it on securities held by
18-13 it as custodian, together with identification as to the source of
18-14 the dividends or interest; and
18-15 (7) the bank is the bank agreeing to pay to the
18-16 available school fund the largest sum or highest percentage of the
18-17 income derived by the bank from use of the securities of the
18-18 permanent school fund in the operation of a securities loan
18-19 program.
18-20 Sec. 43.019. ACCOUNTING TREATMENT OF CERTAIN EXCHANGES. The
18-21 Permanent School Fund Investment Board [State Board of Education]
18-22 may account for the exchange of permanent school fund securities in
18-23 a closely related sale and purchase transaction in a manner in
18-24 which the gain or loss on the sale is deferred as an adjustment to
18-25 the book value of the security purchased, if:
18-26 (1) the security sold and the security purchased have
18-27 a fixed maturity value;
19-1 (2) the board is authorized by law to invest the
19-2 permanent school fund in the security purchased;
19-3 (3) the sale is made in clear contemplation of
19-4 reinvesting substantially all of the proceeds;
19-5 (4) substantially all of the proceeds are reinvested;
19-6 (5) the transaction is completed within a reasonable
19-7 time after the sale, not to exceed 30 business days; and
19-8 (6) the transaction results in an improvement in
19-9 effective income yield, taking into consideration the deferral of
19-10 any gain or loss on the sale.
19-11 SECTION 20. Section 45.051(1), Education Code, is amended to
19-12 read as follows:
19-13 (1) "Board" means the Permanent School Fund Investment
19-14 Board [State Board of Education].
19-15 SECTION 21. Section 7.108(a), Education Code, is amended to
19-16 read as follows:
19-17 (a) A [person interested in selling bonds of any type or a]
19-18 person engaged in manufacturing, shipping, selling, or advertising
19-19 textbooks or otherwise connected with the textbook business commits
19-20 an offense if the person makes or authorizes a political
19-21 contribution to or takes part in, directly or indirectly, the
19-22 campaign of any person seeking election to or serving on the board.
19-23 SECTION 22. Sections 7.102(c)(31) and 43.003, Education
19-24 Code, are repealed.
19-25 SECTION 23. (a) The ethics policy adopted by the State
19-26 Board of Education under Section 43.0031, Education Code, as that
19-27 section existed before amendment by this Act, remains in effect
20-1 until altered by the Permanent School Fund Investment Board. A
20-2 complaint regarding a violation of the ethics policy pending before
20-3 the State Board of Education is transferred without change in
20-4 status to the Permanent School Fund Investment Board.
20-5 (b) A form prescribed by the State Board of Education under
20-6 Section 43.0034, Education Code, as that section existed before
20-7 amendment by this Act, remains in effect as a form of the Permanent
20-8 School Fund Investment Board until altered by that board.
20-9 (c) Written investment objectives developed by the State
20-10 Board of Education under Section 43.004, Education Code, as that
20-11 section existed before amendment by this Act, remain in effect as
20-12 written investment objectives of the Permanent School Fund
20-13 Investment Board until altered by that board.
20-14 (d) All contracts of the State Board of Education relating
20-15 to management and investment of the permanent school fund are
20-16 transferred to the Permanent School Fund Investment Board on the
20-17 date of the first meeting of the Permanent School Fund Investment
20-18 Board.
20-19 SECTION 24. A reference in law to the State Board of
20-20 Education that relates to management or investment of the permanent
20-21 school fund means the Permanent School Fund Investment Board.
20-22 SECTION 25. This Act takes effect January 1, 2002, but only
20-23 if the constitutional amendment proposed by the 77th Legislature,
20-24 Regular Session, 2001, providing for the transfer of authority to
20-25 invest and manage the permanent school fund from the State Board of
20-26 Education to the Permanent School Fund Investment Board, is
20-27 approved by the voters. If the proposed constitutional amendment
21-1 is not approved by the voters, this Act has no effect.