S.B. 1624 78(R)    BILL ANALYSIS


S.B. 1624
By: Bivins
Public Education
Committee Report (Amended)



BACKGROUND AND PURPOSE 

Currently, the Government Code allows banks to collateralize public funds
through the use of declining value mortgage obligations as long as these
are backed by the full faith and credit of the United States government or
the State of Texas. A change to permit banks to collateralize school
district accounts was made in the Government Code, however, the Education
Code was never changed.  S.B. 1624 amends the Education Code to reflect
the change made for other public entities' accounts. This bill clarifies a
conflict between the Government Code and the Education Code in relation to
the types of investment instruments that banks can use to collateralize
public funds.  


RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any
additional rulemaking authority to a state officer, department,
institution, or agency. 


ANALYSIS

S.B. 1624 amends the Education Code to modify the definition of "approved
securities." 

S.B. 1624 amends the Government Code to provide that Subsection
2257.022(b) is an exception to the requirement that the total value of
eligible security to secure a deposit of public funds be in a certain
amount.   

The bill requires the total value of eligible security described by
Section 45.201(4)(D), Education Code, to secure a deposit of public funds
of a school district to be in an amount not less than 110 percent of the
amount of the deposit. The bill requires the total market value of the
eligible security to be reported at least once each month to the school
district. 


EFFECTIVE DATE

September 1, 2003.


EXPLANATION OF AMENDMENTS

Committee Amendment No. 1 requires that the total value of an investment
security described by Section 45.201(4)(D), Education Code, that is
provided as collateral to secure a deposit of school district funds and
that has a principal balance that by its terms reduces periodically, be in
an amount not less than 102 percent of the amount of the deposit as
determined under 2257.022(a), Government Code. Committee Amendment No. 1
requires, at least once each month, a depository to report the total value
of such an investment security to the school district whose deposit is
secured by the security.