1-1 By: Duncan, Lindsay S.B. No. 512
1-2 (In the Senate - Filed February 1, 2001; February 5, 2001,
1-3 read first time and referred to Committee on Education;
1-4 March 13, 2001, rereferred to Committee on Finance; April 4, 2001,
1-5 reported favorably by the following vote: Yeas 8, Nays 2;
1-6 April 4, 2001, sent to printer.)
1-7 A BILL TO BE ENTITLED
1-8 AN ACT
1-9 relating to the investment and management of the permanent school
1-10 fund.
1-11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-12 SECTION 1. Chapter 43, Education Code, is amended by adding
1-13 Section 43.0011 to read as follows:
1-14 Sec. 43.0011. PERMANENT SCHOOL FUND INVESTMENT BOARD.
1-15 (a) The Permanent School Fund Investment Board consists of:
1-16 (1) the persons appointed as provided by Section 5(d),
1-17 Article VII, Texas Constitution; and
1-18 (2) the commissioner, who serves as a nonvoting ex
1-19 officio member.
1-20 (b) The governor shall designate the presiding officer of
1-21 the board from among the appointed members. The presiding officer
1-22 serves in that capacity at the will of the governor.
1-23 (c) The board may:
1-24 (1) employ an executive director and other employees;
1-25 and
1-26 (2) direct the agency in managing and investing the
1-27 permanent school fund.
1-28 SECTION 2. Subsections (a) and (b), Section 43.0031,
1-29 Education Code, are amended to read as follows:
1-30 (a) In addition to any other requirements provided by law,
1-31 the Permanent School Fund Investment Board [State Board of
1-32 Education] shall adopt and enforce an ethics policy that provides
1-33 standards of conduct relating to the management and investment of
1-34 the permanent school fund. The ethics policy must include
1-35 provisions that address the following issues as they apply to the
1-36 management and investment of the permanent school fund and to
1-37 persons responsible for managing and investing the fund:
1-38 (1) general ethical standards;
1-39 (2) conflicts of interest;
1-40 (3) prohibited transactions and interests;
1-41 (4) the acceptance of gifts and entertainment;
1-42 (5) compliance with applicable professional standards;
1-43 (6) ethics training; and
1-44 (7) compliance with and enforcement of the ethics
1-45 policy.
1-46 (b) The ethics policy must include provisions applicable to:
1-47 (1) members of the Permanent School Fund Investment
1-48 Board [State Board of Education];
1-49 (2) the executive director and other employees of the
1-50 board;
1-51 (3) the commissioner;
1-52 (4) [(3)] employees of the agency; and
1-53 (5) [(4)] any person who provides services to the
1-54 board relating to the management or investment of the permanent
1-55 school fund.
1-56 SECTION 3. Section 43.0032, Education Code, is amended to
1-57 read as follows:
1-58 Sec. 43.0032. CONFLICTS OF INTEREST. (a) This section
1-59 applies to:
1-60 (1) a [A] member of the Permanent School Fund
1-61 Investment Board;
1-62 (2) [State Board of Education,] the commissioner;
1-63 (3) [,] an employee of the agency; and
1-64 (4) [, or] a person who provides services to the board
2-1 that relate to the management or investment of the permanent school
2-2 fund.
2-3 (b) A person to whom this section applies who has a
2-4 business, commercial, or other relationship that could reasonably
2-5 be expected to diminish the person's independence of judgment in
2-6 the performance of the person's responsibilities relating to the
2-7 management or investment of the fund shall disclose the
2-8 relationship in writing to the board.
2-9 (c) [(b)] The board or the board's designee shall, in the
2-10 ethics policy adopted under Section 43.0031, define the kinds of
2-11 relationships that may create a possible conflict of interest.
2-12 (d) [(c)] A person who files a statement under Subsection
2-13 (b) [(a)] disclosing a possible conflict of interest may not give
2-14 advice or make decisions about a matter affected by the possible
2-15 conflict of interest unless the board, after consultation with the
2-16 general counsel of the agency, expressly waives this prohibition.
2-17 The board may delegate the authority to waive the prohibition
2-18 established by this subsection.
2-19 SECTION 4. Section 43.0033, Education Code, is amended to
2-20 read as follows:
2-21 Sec. 43.0033. REPORTS OF EXPENDITURES. A consultant,
2-22 advisor, broker, or other person providing services to the
2-23 Permanent School Fund Investment Board [State Board of Education]
2-24 relating to the management and investment of the permanent school
2-25 fund shall file with the board regularly, as determined by the
2-26 board, a report that describes in detail any expenditure of more
2-27 than $50 made by the person on behalf of:
2-28 (1) a member of the board;
2-29 (2) the executive director or another employee of the
2-30 board;
2-31 (3) the commissioner; or
2-32 (4) [(3)] an employee of the agency or of a nonprofit
2-33 corporation created under Section 43.006.
2-34 SECTION 5. Subsection (a), Section 43.0034, Education Code,
2-35 is amended to read as follows:
2-36 (a) The Permanent School Fund Investment Board [board] shall
2-37 prescribe forms for:
2-38 (1) statements of possible conflicts of interest and
2-39 waivers of possible conflicts of interest under Section 43.0032;
2-40 and
2-41 (2) reports of expenditures under Section 43.0033.
2-42 SECTION 6. Subsection (a), Section 43.004, Education Code,
2-43 is amended to read as follows:
2-44 (a) The Permanent School Fund Investment Board [State Board
2-45 of Education] shall develop written investment objectives
2-46 concerning the investment of the permanent school fund. The
2-47 objectives may address desired rates of return, risks involved,
2-48 investment time frames, and any other relevant considerations.
2-49 SECTION 7. Section 43.005, Education Code, is amended to
2-50 read as follows:
2-51 Sec. 43.005. EXTERNAL INVESTMENT MANAGERS. (a) The
2-52 Permanent School Fund Investment Board [State Board of Education]
2-53 may contract with private professional investment managers to
2-54 assist the board in making investments of the permanent school
2-55 fund. A contract under this subsection must be approved by the
2-56 board or otherwise entered into in accordance with board rules
2-57 relating to contracting authority.
2-58 (b) The Permanent School Fund Investment Board [State Board
2-59 of Education] by rule may delegate a power or duty relating to the
2-60 investment of the permanent school fund to a committee, officer,
2-61 employee, or other agent of the board.
2-62 SECTION 8. Subsections (a), (d), (e), and (f), Section
2-63 43.006, Education Code, are amended to read as follows:
2-64 (a) The Permanent School Fund Investment Board [State Board
2-65 of Education] may delegate investment authority and contract for
2-66 the investment of the permanent school fund to the same extent as
2-67 the governing board of an institution of higher education with
2-68 respect to an institutional fund under Chapter 163, Property Code.
2-69 (d) The board of directors of the corporation must be
3-1 members of the Permanent School Fund Investment Board [State Board
3-2 of Education].
3-3 (e) If an investment contract entered into under Subsection
3-4 (b) includes the permanent school fund within the scope of funds
3-5 under the control and management of the Permanent School Fund
3-6 Investment Board [State Board of Education] to be invested by the
3-7 corporation, the board shall provide for an annual financial audit
3-8 of the permanent school fund. The audit shall be performed by the
3-9 state auditor.
3-10 (f) The corporation shall file quarterly reports with the
3-11 Permanent School Fund Investment Board [State Board of Education]
3-12 concerning matters required by the board.
3-13 SECTION 9. Section 43.007, Education Code, is amended to
3-14 read as follows:
3-15 Sec. 43.007. PURCHASE AND SALE OR EXCHANGE OF SECURITIES.
3-16 (a) The Permanent School Fund Investment Board [State Board of
3-17 Education] may authorize the purchase of all of the types of
3-18 securities in which it is authorized by law to invest the permanent
3-19 school fund in either registered or negotiable form. The board may
3-20 authorize the reissue of those securities held at any time for the
3-21 account of the permanent school fund in either registered or
3-22 negotiable form. The board [State Board of Education] may
3-23 authorize the sale of any of the securities held for the account of
3-24 the permanent school fund and reinvest the proceeds of sale for the
3-25 fund and may authorize the exchange of any of the securities held
3-26 for the account of the permanent school fund.
3-27 (b) In making purchases, sales, exchanges, and reissues, the
3-28 Permanent School Fund Investment Board [State Board of Education]
3-29 shall exercise the judgment and care under the circumstances then
3-30 prevailing that persons of ordinary prudence, discretion, and
3-31 intelligence exercise in the management of their own affairs not in
3-32 regard to speculation but in regard to the permanent disposition of
3-33 their funds, considering the probable income as well as the
3-34 probable safety of their capital.
3-35 (c) When any securities are sold, reissued, or exchanged as
3-36 provided by Subsection (a), the custodian of the securities shall
3-37 deliver the securities sold, reissued, or exchanged in accordance
3-38 with the directions of the Permanent School Fund Investment Board
3-39 [State Board of Education].
3-40 SECTION 10. Subsections (a) and (b), Section 43.008,
3-41 Education Code, are amended to read as follows:
3-42 (a) If the Permanent School Fund Investment Board [State
3-43 Board of Education] authorizes the payment of a premium out of the
3-44 permanent school fund for purchasing any fixed-income security as
3-45 an investment for that fund, the principal of the security and a
3-46 portion of the interest accruing from the security equal to the
3-47 premium shall be treated as principal in the investment as provided
3-48 by Subsection (c) and shall be returned to the permanent school
3-49 fund.
3-50 (b) If the Permanent School Fund Investment Board [State
3-51 Board of Education] authorizes the purchase of a fixed-income
3-52 security at less than par, the discount received in the purchase
3-53 shall be paid to the available school fund as additional interest
3-54 revenue as provided by Subsection (c).
3-55 SECTION 11. Subsections (a), (b), and (c), Section 43.009,
3-56 Education Code, are amended to read as follows:
3-57 (a) The Permanent School Fund Investment Board [State Board
3-58 of Education] may authorize the governing body of any political
3-59 subdivision in this state to pay off and discharge, at any interest
3-60 paying date whether the bonds are matured or not, all or any part
3-61 of any outstanding bond indebtedness owned by the permanent school
3-62 fund.
3-63 (b) The governing body of a political subdivision desiring
3-64 to pay off and discharge any bonded indebtedness owned by the fund
3-65 shall apply in writing to the Permanent School Fund Investment
3-66 Board [State Board of Education], not later than the 30th day
3-67 before any interest paying date on the bonds, describing the bonds
3-68 or part of the bonds it desires to pay off and discharge. The
3-69 application must be accompanied by an affidavit stating that only
4-1 tax money collected from a tax levy made for the specific purpose
4-2 of providing a sinking fund and paying interest on the particular
4-3 bonds to be redeemed will be spent in redeeming, taking up, or
4-4 paying off the bonds.
4-5 (c) The Permanent School Fund Investment Board [State Board
4-6 of Education], on receiving the application and affidavit, shall
4-7 take action on them in the manner it considers best and shall
4-8 notify the applicant whether the application is refused or granted
4-9 in whole or in part.
4-10 SECTION 12. Subsections (a), (c), and (d), Section 43.010,
4-11 Education Code, are amended to read as follows:
4-12 (a) If interest or principal has not been paid for two years
4-13 or more on any bonds issued by any school district and held by the
4-14 permanent school fund, the Permanent School Fund Investment Board
4-15 [State Board of Education] may:
4-16 (1) compel the district to levy a tax sufficient to
4-17 meet the interest and principal payments then or later due; or
4-18 (2) if the district furnishes to the Permanent School
4-19 Fund Investment Board [State Board of Education] satisfactory proof
4-20 that the district's taxing ability is insufficient, require the
4-21 district to:
4-22 (A) exhaust all legal remedies in collecting
4-23 delinquent taxes; and
4-24 (B) levy a tax at the maximum lawful rate on the
4-25 bona fide valuation of taxable property located in the district.
4-26 (c) As long as any school district is delinquent in its
4-27 payments of principal or interest on any of its bonds owned by the
4-28 permanent school fund, the Permanent School Fund Investment Board
4-29 [State Board of Education] may specify the method of crediting
4-30 payments to the state made by the district as to principal and
4-31 interest.
4-32 (d) The comptroller may not issue any warrant from the
4-33 foundation school fund to or for the benefit of any district that
4-34 has been for as long as two years in default in the payment of
4-35 principal or interest on any security owned by the permanent school
4-36 fund until the Permanent School Fund Investment Board [State Board
4-37 of Education] certifies that the district has satisfactorily
4-38 complied with the appropriate provisions of this section, in which
4-39 event the comptroller shall resume making payments to or for the
4-40 benefit of the district, including the making of pretermitted
4-41 payments.
4-42 SECTION 13. Subsections (a) through (e), Section 43.011,
4-43 Education Code, are amended to read as follows:
4-44 (a) In compliance with this section, the Permanent School
4-45 Fund Investment Board [State Board of Education] may revise,
4-46 readjust, modify, refinance, or refund defaulted bonds issued by
4-47 any school district in this state and owned by either the permanent
4-48 school fund or the available school fund.
4-49 (b) Application must be made to the Permanent School Fund
4-50 Investment Board [State Board of Education] by the district that
4-51 issued the bonds and must show that:
4-52 (1) delinquent interest totals at least 50 percent of
4-53 the principal amount of the bonds; and
4-54 (2) taxable valuation has decreased to such an extent
4-55 that a full application of the proceeds of the voted authorized tax
4-56 authorized to be levied on the $100 taxable property valuation will
4-57 not meet interest and principal annually maturing on the bonds.
4-58 (c) The Permanent School Fund Investment Board [State Board
4-59 of Education] may effect a refunding of the debt due and to become
4-60 due only if the board finds that:
4-61 (1) the district is unable to pay the sums already
4-62 matured and the sums contracted to be paid as they mature by paying
4-63 annually to the Permanent School Fund Investment Board [State Board
4-64 of Education] the full proceeds of a 50-cent tax levy on the $100
4-65 of all taxable valuation of property in the district;
4-66 (2) the taxable valuation of property in the district
4-67 has decreased at least 75 percent since the bonds were issued and
4-68 that the decrease was not caused by the district or any of its
4-69 officials;
5-1 (3) the district for a period of at least five years
5-2 before applying to the Permanent School Fund Investment Board
5-3 [State Board of Education] for refunding has levied a tax of 50
5-4 cents on the $100 of taxable valuation of property in the district,
5-5 and that despite such levies, the aggregate amount due the
5-6 Permanent School Fund Investment Board [State Board of Education]
5-7 exceeds the aggregate amount due at the beginning of the period;
5-8 (4) the district has not authorized and sold
5-9 additional bonds during the five-year period immediately preceding
5-10 the application; and
5-11 (5) the district has in good faith endeavored to pay
5-12 its debt in accordance with the contract evidenced by the bonds
5-13 held for the account of the permanent school fund or the available
5-14 school fund.
5-15 (d) If the conditions specified by Subsection (c) are found
5-16 to exist, the district is, for purposes of this section, insolvent,
5-17 and the Permanent School Fund Investment Board [State Board of
5-18 Education] may exchange the bonds, interest coupons, and other
5-19 evidences of indebtedness for new refunding bonds of the district
5-20 issued in compliance with the following:
5-21 (1) the principal amount of the refunding bonds may
5-22 not be less than the total amount of the bonds, matured interest
5-23 coupons, accrued interest, and interest on delinquent interest then
5-24 actually due to the permanent school fund or the available school
5-25 fund; and
5-26 (2) the rate of interest to be borne by the refunding
5-27 bonds may be lower than that borne by the bonds to be refunded if
5-28 in consideration of the interest reduction the district agrees to
5-29 levy a tax each year for a period of 40 years at a rate sufficient
5-30 to produce annually a sum equal to 90 percent of the amount that
5-31 can be calculated by the levy of a tax at the rate of 50 cents on
5-32 the $100 of taxable valuation of property as determined by the
5-33 latest approved tax roll of the district, and in determining the
5-34 rate of interest to be borne by the refunding bonds, the Permanent
5-35 School Fund Investment Board [State Board of Education] shall be
5-36 governed by the following:
5-37 (A) the Permanent School Fund Investment Board
5-38 [State Board of Education] may require the rate to be an annual [a]
5-39 percent [per annum] as in its judgment will represent the maximum
5-40 rate that can be paid by the district and still permit an orderly
5-41 and certain retirement of the refunding bonds within 40 years from
5-42 their date;
5-43 (B) the interest rate of refunding bonds to be
5-44 received in exchange for bonds owned by the permanent school fund
5-45 may not be less than the minimum rate at which bonds may then be
5-46 purchased as investments for the permanent school fund; and
5-47 (C) the rate of interest of refunding bonds to
5-48 be received in exchange for bonds owned by the available school
5-49 fund may be set by the Permanent School Fund Investment Board
5-50 [State Board of Education] at any rate the board considers
5-51 feasible, and the refunding bonds may, at the discretion of the
5-52 board [State Board of Education], be made non-interest bearing to a
5-53 date fixed by the board.
5-54 (e) The Permanent School Fund Investment Board [State Board
5-55 of Education] may not make a revision, readjustment, modification,
5-56 refinancing, or refunding that will release or extinguish any debt
5-57 or obligation then due and payable to the permanent school fund or
5-58 to the available school fund.
5-59 SECTION 14. Subsections (a) and (c) through (f), Section
5-60 43.012, Education Code, are amended to read as follows:
5-61 (a) Defaulted obligations, other than bonds of school
5-62 districts as provided by Section 43.011, due the available school
5-63 fund may be refinanced or refunded with the approval of the
5-64 Permanent School Fund Investment Board [State Board of Education]
5-65 in compliance with this section.
5-66 (c) The obligor must apply to the Permanent School Fund
5-67 Investment Board [State Board of Education] and show:
5-68 (1) that the obligations due the available school fund
5-69 have been in default in whole or in part for a continuous period of
6-1 at least 15 years; and
6-2 (2) that the obligor is not in default in the payment
6-3 of the principal of any bonds owned by the permanent school fund.
6-4 (d) If the Permanent School Fund Investment Board [State
6-5 Board of Education] finds that the requirements provided by
6-6 Subsection (c) have been met, it may approve a refinancing or the
6-7 issuance of refunding bonds on the conditions:
6-8 (1) that the refunding bonds must mature serially in
6-9 not exceeding 40 years from the date of issuance;
6-10 (2) that the principal amount of the refunding bonds
6-11 may be not less than the total amount of the obligations then in
6-12 default and due the available school fund; and
6-13 (3) that the refunding bonds must bear interest at a
6-14 rate or rates determined by the Permanent School Fund Investment
6-15 Board [State Board of Education] to be for the best interest of the
6-16 available school fund.
6-17 (e) The Permanent School Fund Investment Board [State Board
6-18 of Education] may accept refunding bonds in lieu of either matured
6-19 or unmatured bonds held for the benefit of the permanent school
6-20 fund if the rate of interest on the new refunding bonds is at least
6-21 the same rate as that of the bonds being refunded.
6-22 (f) Refunding bonds issued with the approval or pursuant to
6-23 a refunding agreement with the Permanent School Fund Investment
6-24 Board [State Board of Education] in compliance with either this
6-25 section or Section 43.011 shall, on the order of the board [State
6-26 Board of Education], be exchanged by the comptroller for the
6-27 defaulted obligations they have been issued to refund.
6-28 SECTION 15. The heading to Section 43.014, Education Code,
6-29 is amended to read as follows:
6-30 Sec. 43.014. DUTIES OF COMPTROLLER RELATING TO AVAILABLE
6-31 SCHOOL FUND.
6-32 SECTION 16. Subsection (a), Section 43.014, Education Code,
6-33 is amended to read as follows:
6-34 (a) On or before July 1 of each year, the comptroller shall
6-35 estimate the amount of the available school fund receivable from
6-36 every source during the following school year and report the
6-37 estimate to the Permanent School Fund Investment Board [State Board
6-38 of Education].
6-39 SECTION 17. The heading to Section 43.015, Education Code,
6-40 is amended to read as follows:
6-41 Sec. 43.015. ADDITIONAL DUTIES OF COMPTROLLER.
6-42 SECTION 18. Subsections (b), (e), and (f), Section 43.015,
6-43 Education Code, are amended to read as follows:
6-44 (b) The comptroller shall provide the Permanent School Fund
6-45 Investment Board [State Board of Education] with the reports
6-46 specified by Subsection (a) and with additional reports concerning
6-47 those funds requested by the board [State Board of Education].
6-48 (e) On order of the Permanent School Fund Investment Board
6-49 [State Board of Education], the comptroller shall exchange or
6-50 accept refunding bonds in lieu of:
6-51 (1) either matured or unmatured bonds held for the
6-52 benefit of the permanent school fund, which are being refunded
6-53 under this chapter;
6-54 (2) defaulted obligations held for the benefit of the
6-55 available school fund if the refunding bonds are issued in
6-56 compliance with Section 43.012;
6-57 (3) defaulted obligations of any school district of
6-58 this state held for the benefit of the permanent school fund or the
6-59 available school fund if the refunding bonds are issued in
6-60 compliance with Section 43.011; or
6-61 (4) refunding bonds of any school district of this
6-62 state for school bonds not matured held by the comptroller for the
6-63 permanent school fund if the new refunding bonds are issued by the
6-64 school district in compliance with this code.
6-65 (f) The comptroller shall be the custodian of all securities
6-66 [enumerated in Section 43.003(6) and of other securities as]
6-67 designated by the Permanent School Fund Investment Board [State
6-68 Board of Education] in which the school funds of the state are
6-69 invested. The comptroller shall keep those securities in the
7-1 comptroller's custody until paid off, discharged, delivered as
7-2 required by the Permanent School Fund Investment Board [State Board
7-3 of Education], or otherwise disposed of by the proper authorities
7-4 of the state, and on the proper installment of any interest or
7-5 dividend, shall see that the proper credit is given, and the
7-6 coupons on bonds, when paid, shall be separated from the bonds and
7-7 cancelled by the comptroller.
7-8 SECTION 19. Sections 43.017, 43.018, and 43.019, Education
7-9 Code, are amended to read as follows:
7-10 Sec. 43.017. USE OF COMMERCIAL BANKS AS AGENTS FOR
7-11 COLLECTION OF INCOME FROM PERMANENT SCHOOL FUND INVESTMENTS.
7-12 (a) The Permanent School Fund Investment Board [State Board of
7-13 Education] may contract with one or more commercial banks to
7-14 receive payments of dividends and interest on securities in which
7-15 the state permanent school funds are invested and transmit that
7-16 money with identification of its source to the comptroller for the
7-17 account of the available school fund by the fastest available
7-18 means.
7-19 (b) In choosing each commercial bank with which to contract
7-20 as authorized by Subsection (a), the Permanent School Fund
7-21 Investment Board [State Board of Education] shall assure itself of:
7-22 (1) the financial stability of the bank;
7-23 (2) the location of the bank with respect to its
7-24 proximity to the banks on which checks are drawn in payment of
7-25 dividends and interest on securities of the permanent school fund;
7-26 (3) the experience and reliability of the bank in
7-27 acting as agent for others in the similar collection and
7-28 expeditious remittance of money; and
7-29 (4) the reasonableness of the bank's charges for the
7-30 services, both in amount of the charges and in relation to the
7-31 increased investment earnings of the available school fund that
7-32 will result from speedier receipt by the comptroller of the money.
7-33 Sec. 43.018. PARTICIPATION IN FULLY SECURED SECURITIES LOAN
7-34 PROGRAMS. (a) The Permanent School Fund Investment Board [State
7-35 Board of Education] may contract with a commercial bank to serve
7-36 both as a custodian of securities in which the state permanent
7-37 school funds are invested and to lend those securities, under the
7-38 conditions prescribed by Subsection (b), to securities brokers and
7-39 dealers on short-term loan.
7-40 (b) The Permanent School Fund Investment Board [State Board
7-41 of Education] may contract with a commercial bank pursuant to this
7-42 section only if:
7-43 (1) the bank is located in a city having a major stock
7-44 exchange;
7-45 (2) the bank is experienced in the operation of a
7-46 fully secured securities loan program;
7-47 (3) the bank has adequate capital in the prudent
7-48 judgment of the Permanent School Fund Investment Board [State Board
7-49 of Education] to assure the safety of the securities entrusted to
7-50 it as a custodian;
7-51 (4) the bank will require of any securities broker or
7-52 dealer to which it lends securities owned by the state permanent
7-53 school fund that the broker or dealer deliver to it cash collateral
7-54 for the loan of securities, and that the cash collateral will at
7-55 all times be not less than 100 percent of the market value of the
7-56 securities lent;
7-57 (5) the bank executes an indemnification agreement,
7-58 satisfactory in form and content to the Permanent School Fund
7-59 Investment Board [State Board of Education], fully indemnifying the
7-60 permanent and available school funds against loss resulting from
7-61 the bank's service as custodian of securities of the permanent
7-62 school fund and its operation of a securities loan program using
7-63 securities of the permanent school fund;
7-64 (6) the bank will speedily collect and remit on the
7-65 day of collection by the fastest available means to the comptroller
7-66 any dividends and interest collectible by it on securities held by
7-67 it as custodian, together with identification as to the source of
7-68 the dividends or interest; and
7-69 (7) the bank is the bank agreeing to pay to the
8-1 available school fund the largest sum or highest percentage of the
8-2 income derived by the bank from use of the securities of the
8-3 permanent school fund in the operation of a securities loan
8-4 program.
8-5 Sec. 43.019. ACCOUNTING TREATMENT OF CERTAIN EXCHANGES. The
8-6 Permanent School Fund Investment Board [State Board of Education]
8-7 may account for the exchange of permanent school fund securities in
8-8 a closely related sale and purchase transaction in a manner in
8-9 which the gain or loss on the sale is deferred as an adjustment to
8-10 the book value of the security purchased, if:
8-11 (1) the security sold and the security purchased have
8-12 a fixed maturity value;
8-13 (2) the board is authorized by law to invest the
8-14 permanent school fund in the security purchased;
8-15 (3) the sale is made in clear contemplation of
8-16 reinvesting substantially all of the proceeds;
8-17 (4) substantially all of the proceeds are reinvested;
8-18 (5) the transaction is completed within a reasonable
8-19 time after the sale, not to exceed 30 business days; and
8-20 (6) the transaction results in an improvement in
8-21 effective income yield, taking into consideration the deferral of
8-22 any gain or loss on the sale.
8-23 SECTION 20. Subdivision (1), Section 45.051, Education Code,
8-24 is amended to read as follows:
8-25 (1) "Board" means the Permanent School Fund Investment
8-26 Board [State Board of Education].
8-27 SECTION 21. Subsection (a), Section 7.108, Education Code,
8-28 is amended to read as follows:
8-29 (a) A [person interested in selling bonds of any type or a]
8-30 person engaged in manufacturing, shipping, selling, or advertising
8-31 textbooks or otherwise connected with the textbook business commits
8-32 an offense if the person makes or authorizes a political
8-33 contribution to or takes part in, directly or indirectly, the
8-34 campaign of any person seeking election to or serving on the board.
8-35 SECTION 22. Subdivision (31), Subsection (c), Section 7.102,
8-36 and Section 43.003, Education Code, are repealed.
8-37 SECTION 23. (a) The ethics policy adopted by the State
8-38 Board of Education under Section 43.0031, Education Code, as that
8-39 section existed before amendment by this Act, remains in effect
8-40 until altered by the Permanent School Fund Investment Board. A
8-41 complaint regarding a violation of the ethics policy pending before
8-42 the State Board of Education is transferred without change in
8-43 status to the Permanent School Fund Investment Board.
8-44 (b) A form prescribed by the State Board of Education under
8-45 Section 43.0034, Education Code, as that section existed before
8-46 amendment by this Act, remains in effect as a form of the Permanent
8-47 School Fund Investment Board until altered by that board.
8-48 (c) Written investment objectives developed by the State
8-49 Board of Education under Section 43.004, Education Code, as that
8-50 section existed before amendment by this Act, remain in effect as
8-51 written investment objectives of the Permanent School Fund
8-52 Investment Board until altered by that board.
8-53 (d) All contracts of the State Board of Education relating
8-54 to management and investment of the permanent school fund are
8-55 transferred to the Permanent School Fund Investment Board on the
8-56 date of the first meeting of the Permanent School Fund Investment
8-57 Board.
8-58 SECTION 24. A reference in law to the State Board of
8-59 Education that relates to management or investment of the permanent
8-60 school fund means the Permanent School Fund Investment Board.
8-61 SECTION 25. This Act takes effect January 1, 2002, but only
8-62 if the constitutional amendment proposed by the 77th Legislature,
8-63 Regular Session, 2001, providing for the transfer of authority to
8-64 invest and manage the permanent school fund from the State Board of
8-65 Education to the Permanent School Fund Investment Board, is
8-66 approved by the voters. If the proposed constitutional amendment
8-67 is not approved by the voters, this Act has no effect.
8-68 * * * * *