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78R5486 JJT-F
By: Wentworth S.B. No. 1696
A BILL TO BE ENTITLED
AN ACT
relating to the issuance of obligations by political subdivisions
of the state to pay unfunded liabilities to public pension funds.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle C, Title 4, Local Government Code, is
amended by adding Chapter 139 to read as follows:
CHAPTER 139. OBLIGATIONS FOR CERTAIN LIABILITIES
TO PUBLIC PENSION FUNDS
Sec. 139.001. DEFINITIONS. In this chapter:
(1) "Obligation" includes a bond, certificate, note,
or book entry obligation.
(2) "Political subdivision" includes a combination of
political subdivisions, including a combination created under
Chapter 791, Government Code. The term does not include a school
district.
(3) "Unfunded liability" means an unfunded, accrued
liability of a political subdivision to a public pension fund as
determined by actuarial analysis.
Sec. 139.002. DEFINITION OF "PUBLIC PENSION FUND." In this
chapter, "public pension fund":
(1) means a continuing, organized program or plan of
service retirement, disability retirement, or death benefits for
officers or employees of a political subdivision;
(2) includes a plan qualified under Section 401(a),
Internal Revenue Code of 1986, as amended; and
(3) does not include:
(A) a program that provides only workers'
compensation benefits;
(B) a program administered by the federal
government;
(C) a plan described by Section 401(d), Internal
Revenue Code of 1986, as amended;
(D) an individual retirement account consisting
of an annuity contract described by Section 403(b), Internal
Revenue Code of 1986, as amended;
(E) an individual retirement account as defined
by Section 408(a), Internal Revenue Code of 1986, as amended;
(F) an individual retirement annuity as defined
by Section 408(b), Internal Revenue Code of 1986, as amended;
(G) an eligible deferred compensation plan as
defined by Section 457(b), Internal Revenue Code of 1986, as
amended; or
(H) a program for which benefits are administered
by a life insurance company or for which the only funding agency is
a life insurance company.
Sec. 139.003. PENSION FUND OBLIGATIONS AUTHORIZED. (a) A
political subdivision may issue obligations to fund all or any part
of an unfunded liability.
(b) Before authorizing issuance and delivery of an
obligation under this section, the governing body of the political
subdivision must enter into a written agreement with the governing
body of the public retirement system that:
(1) has fiduciary responsibility for assets of the
public pension fund or public pension funds that are to receive the
net proceeds of the obligations to be issued; and
(2) has the duty to oversee the investment and
expenditure of the assets of the public pension fund.
(c) The written agreement must state the amount of the
unfunded liability and the date or dates on which the public pension
fund will accept the net proceeds of the obligations to be issued in
payment of all or a portion of the unfunded liability.
Sec. 139.004. PROCEEDS OF OBLIGATIONS ISSUED. The
political subdivision shall deposit the net proceeds of obligations
issued under Section 139.003 to the credit of the public pension
fund. The amount deposited under this section becomes part of the
public pension fund's assets.
Sec. 139.005. OBLIGATIONS PAYABLE FROM REVENUE. (a) An
obligation issued under Section 139.003 must be made payable from
any source of revenue available to the political subdivision for
payment of its contributions to the public pension fund.
(b) Unless otherwise provided by the political subdivision,
the political subdivision shall pay debt service on obligations
issued under Section 139.003 from:
(1) the fund from which compensation is paid to its
officers and employees; or
(2) its general fund.
Sec. 139.006. OBLIGATION AS REFINANCING. An obligation
issued under Section 139.003 is a complete or partial refinancing
of a commitment of the political subdivision to fund its unfunded
liability. When an obligation is issued under Section 139.003, a
commitment of the political subdivision to fund its unfunded
liability being refinanced by the obligations is transferred to
those obligations.
Sec. 139.007. SALE OF OBLIGATIONS; MATURITY. Obligations
issued under Section 139.003 may be sold at private or public sale
and must mature not later than the 30th anniversary of the date of
issuance.
Sec. 139.008. ADDITIONAL AUTHORITY; CREDIT AGREEMENTS. (a)
In this section, "credit agreement" and "obligation" have the
meanings assigned by Section 1371.001, Government Code.
(b) The governing body of a political subdivision that
issues obligations under Section 139.003 may exercise any of the
rights or powers of the governing body of an issuer under Chapter
1371, Government Code, and may enter into a credit agreement under
that chapter. An obligation issued under Section 139.003 is an
obligation under Chapter 1371, Government Code, but is not required
to be rated as required by that chapter.
Sec. 139.009. CHAPTER CONTROLLING. This chapter prevails
over any conflict between this chapter and:
(1) another law respecting the issuance of obligations
of political subdivisions; or
(2) a municipal home-rule charter.
SECTION 2. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2003.