Austin, Texas
                    FISCAL NOTE, 77th Regular Session
                              March 13, 2001
          TO:  Honorable Paul Sadler, Chair, House Committee on Public
        FROM:  John Keel, Director, Legislative Budget Board
       IN RE:  HB2414  by Keel (Relating to the investment and
               management of the permanent school fund.), As Introduced
*  No significant fiscal implication to the State is anticipated.        *
The bill proposes two scenarios for revisions in the management of the
Permanent School Fund (PSF).

The first scenario assumes passage of a constitutional amendment (HJR 74)
creating a Permanent School Fund Investment Board (PSFIB).  The second
scenario occurs, if the HJR does not pass.  In the second scenario,  the
Permanent School Fund Advisory Committee is created to advise the State
Board of Education regarding the management and investment of the PSF.

The Permanent School Fund Investment Board would undertake the investment
duties, presently given to the State Board of Education (SBOE).  The
bill allows the PSFIB to hire an executive director and other staff.
PSFIB would assume the Permanent School Fund investment responsibilities
of the SBOE.  The Texas Education Agency (TEA) estimates that each of the
nine members will require $5,000 per year in travel expense, based on
the experience of State Board of Education members. While the legislation
authorizes the employment of an executive director and staff, it is
assumed that such costs would be not significantly more than the cost
currently incurred by the PSF's investment staff.

The bill institutes a number of ethics and disclosure policies applicable
either to the PSFIB or the advisory committee.  The bill requires either
entity to contract with the state auditor to perform investigations
related to allegations of violations of law, rules, or policies having to
do with the PSF.  Costs for such investigations presumably would be paid
from the Available School Fund.  Information related to "interested
persons" as defined in the legislation would be listed on an Internet
website as part of a disclosure of relationships between persons with
responsibilities for investment of the Permanent School Fund (PSF) and
persons who might expect to benefit from those activities.

Certain persons could be barred from conducting business with the PSFIB
or, if HJR 74 does not pass, with the SBOE.  Any contested cases relating
to those bars would be heard by the State Office of Administrative

The legislative audit committee is charged with conducting management and
performance audits related to the permanent school fund to be paid from
the available school fund.

There may be costs to the available school fund for investigation
services performed by the state auditor, management and performance
audits performed at the request of the legislative audit committee, or
hearing services performed by the state office of administrative
hearings.  These activities do not have precedent, but TEA estimates that
these costs will be about $50,000 each year.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies:   701   Texas Education Agency, 308   State Auditor's
LBB Staff:         JK, CT, UP