C.S.S.B. 1318 78(R)    BILL ANALYSIS


C.S.S.B. 1318
By: Van de Putte
Pensions & Investments
Committee Report (Substituted)



BACKGROUND AND PURPOSE 

Currently, the Texas Public Fund Investment Act is silent on securities
lending, although it does allow for similar investment programs such as
repurchase and reverse purchase programs.  Major retirement systems of the
state, including the Employees Retirement System, use securities lending,
and municipalities may be able to add substantial income to their revenue
with securities lending. C.S.S.B. 1318 amends the Texas Public Fund
Investment Act to specifically allow municipalities and others operating
under the Act to utilize a securities lending program. 


RULEMAKING AUTHORITY

This bill does not expressly grant any additional rulemaking authority to
a state officer, institution, or agency. 


ANALYSIS

SECTION 1.  Amends Subchapter A, Chapter 2256, Government Code, by adding
Section 2256.0115, as follows: 

Sec.  2256.0115.  AUTHORIZED INVESTMENTS:  SECURITIES LENDING PROGRAM.
Provides that a fully collateralized securities lending program is an
authorized investment under this subchapter if certain conditions are met. 

SECTION 2.  Effective date:  September 1, 2003.


EFFECTIVE DATE

September 1, 2003.


COMPARISON OF ORIGINAL TO SUBSTITUTE

In Section 2256.0115(b)(3)(a), provides that the loan may be secured by
authorized pledged securities permitted by Section 2256.009 instead of
only United States securities. 

Adds in Section 2256.0115(b)(3)(B)(ii), that irrevocable letters of
credit, used to secure a loan, must be pledged, and be issued by a bank
that is organized and existing under the laws of the United States of any
state that is continuously rated by at least one nationlly-recognized
investment rating firm at not less than A or its equivalent. 

Adds Subsection (b)(6) to added Section 2256.0115, which requires that
agreements to lend securities executed under authority of Section
2256.0115 have a term of one year or less.