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  H.B. No. 2365
 
 
 
 
AN ACT
  relating to financial accounting and reporting for this state and
  political subdivisions of this state.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  (a)  The legislature finds that:
               (1)  state and local governments provide essential
  services funded by statutorily authorized taxes and fees and not by
  cost recovery-based rate or price models;
               (2)  state and local government operations derive
  authority from and are regulated by the Texas and federal
  constitutions and statutes; and
               (3)  financial accounting and reporting should
  accurately reflect government activities and not mislead or
  misinform the public.
         (b)  The legislature further finds that:
               (1)  state and local governments cannot provide certain
  postemployment benefits that exceed existing statutory,
  constitutional, or other legal requirements, including
  requirements that limit the duration for which benefits are legally
  obligated such as Section 6, Article VIII, Texas Constitution,
  which limits appropriations to two years or less, and other
  requirements that limit expenditures to one year or less or some
  other term; and
               (2)  it is in the interest of state and local
  governments to communicate the requirements of Subdivision (1) of
  this subsection to persons who receive or may receive
  postemployment benefits from state or local governments.
         SECTION 2.  Subtitle F, Title 10, Government Code, is
  amended by adding Chapter 2264 to read as follows:
  CHAPTER 2264. FINANCIAL ACCOUNTING AND REPORTING
  SUBCHAPTER A. GENERAL PROVISIONS
         Sec. 2264.001.  APPLICABILITY. This chapter applies to this
  state and to each political subdivision of this state.
         Sec. 2264.002.  APPLICABILITY TO COMPONENT UNITS. To the
  extent an entity is reported on the financial statement of the state
  or a political subdivision as a component unit, the statutory
  accounting principles and reporting standards in this chapter apply
  to that entity.
  [Sections 2264.003-2264.050 reserved for expansion]
  SUBCHAPTER B. FINANCIAL ACCOUNTING AND REPORTING STANDARDS
         Sec. 2264.051.  REQUIREMENTS FOR SYSTEM OF ACCOUNTING AND
  REPORTING. The system of accounting for and reporting the
  financial activities of this state and its political subdivisions:
               (1)  must be consistent with state financial laws;
               (2)  may not misrepresent the nature, scope, or
  duration of the financial activities of the state or political
  subdivision; and
               (3)  may follow the statutory standards in this chapter
  when other accounting bases conflict with state law.
         Sec. 2264.052.  STATUTORY MODIFIED ACCRUAL BASIS. (a)  In
  this state, a statutory modified accrual basis qualifies as an
  other comprehensive basis of accounting that recognizes revenue
  when it is measurable and available to finance current expenditures
  and recognizes expenditures when they are normally expected to be
  liquidated with current financial resources regardless of when they
  mature.
         (b)  This state and its political subdivisions may account
  for and report selected types of financial activities on a
  statutory modified accrual basis for government-wide and
  fund-level internal and external financial statement reporting.
         Sec. 2264.053.  COMPLIANCE WITH ACCOUNTING PRINCIPLES.
  Compliance with the statutory accounting principles of this chapter
  by this state or a political subdivision satisfies any other law
  that requires accounting and reporting according to generally
  accepted accounting principles, including Section 403.013 or
  2101.012.
  [Sections 2264.054-2264.100 reserved for expansion]
  SUBCHAPTER C. OTHER POSTEMPLOYMENT BENEFITS
         Sec. 2264.101.  DEFINITIONS. In this subchapter:
               (1)  "Other postemployment benefits" means employee
  benefit programs for which coverage or eligibility extends to
  retired employees. The term does not include pension benefits.
               (2)  "Pay-as-you-go" means benefit plan financing
  generally made at or about the same time and in or about the same
  amount as benefit payments and expenditures become due.
               (3)  "State system" means:
                     (A)  the Employees Retirement System of Texas;
                     (B)  the Teacher Retirement System of Texas;
                     (C)  The Texas A&M University System; or
                     (D)  The University of Texas System.
               (4)  "Substantive plan" means a plan providing other
  postemployment benefits approved by the governing body of the plan
  provider according to the laws and constitution of this state.
         Sec. 2264.102.  ACCOUNTING FOR OTHER POSTEMPLOYMENT
  BENEFITS. To the extent that generally accepted accounting
  principles require accounting or reporting of other postemployment
  benefits at the government-wide or fund level on any basis other
  than pay-as-you-go, this state and its political subdivisions may
  account for or report those other postemployment benefits in
  accordance with the statutory accounting principles in this
  chapter.
         Sec. 2264.103.  COMMUNICATION OF STATE SYSTEM'S OBLIGATIONS
  TO PROVIDE OTHER POSTEMPLOYMENT BENEFITS. (a)  In this section,
  "member" means a person to whom a state system provides, or has
  promised to provide, other postemployment benefits, including:
               (1)  a retiree, annuitant, or employee; or
               (2)  a spouse, surviving spouse, or other dependent.
         (b)  A state system shall fully disclose to its members that
  the system is not obligated to provide benefits beyond existing
  statutory, constitutional, or other legal requirements. This
  includes requirements that limit the duration for which benefits
  are legally obligated such as Section 6, Article VIII, Texas
  Constitution, which limits appropriations to two years or less, and
  other requirements that limit expenditures to one year or less or
  some other term.
         (c)  A state system shall inform its members about the extent
  of the system's commitments regarding other postemployment
  benefits, including whether the other postemployment benefits are
  limited by funding obligations or whether the funding obligations
  extend throughout the life of the member.
         (d)  A state system shall disclose on the entity's website
  the information required by this section.
         (e)  Other governmental entities of this state or its
  political subdivisions may comply with this section.
         Sec. 2264.104.  DISCLOSURE OF INFORMATION ON FINANCIAL
  STATEMENTS; GENERALLY. This state or a political subdivision of
  this state shall disclose in its notes to the financial statement in
  a manner consistent with this subchapter:
               (1)  other postemployment benefits that it provides in
  its substantive plan, including:
                     (A)  the covered employee groups;
                     (B)  eligibility requirements; and
                     (C)  the amount, described in an appropriate
  manner, of obligations that it and the member contribute;
               (2)  the statutory, contractual, or other authority
  under which other postemployment benefits are provided under
  Subdivision (1);
               (3)  the accounting, financing, and funding policies
  that it follows;
               (4)  the amount of other postemployment benefits
  expenditures that it recognizes during the period, net of member
  contributions;
               (5)  the number of members currently eligible to
  receive other postemployment benefits;
               (6)  any significant matters that affect the
  comparability of the disclosures required by this section with
  those for the previous period; and
               (7)  any additional information that it believes will
  assist in explaining the nature and cost of its commitment to
  provide other postemployment benefits.
         Sec. 2264.105.  ADDITIONAL OPTIONAL FINANCIAL DISCLOSURES.
  (a)  This state or a political subdivision of this state may
  disclose, for informational and planning purposes only and in a
  manner consistent with this subchapter, the expense and liability
  that would exist if other postemployment benefits had been
  guaranteed to members.
         (b)  This state or a political subdivision may make this
  supplemental disclosure in its other supplemental statistical
  information to the financial statements by disclosing:
               (1)  its actuarial methods and assumptions or other
  estimation methodology;
               (2)  its net other postemployment benefits obligation;
               (3)  its funding status and funding progress;
               (4)  that the supplemental disclosure is for
  informational purposes only and is not an obligation or other
  promise to provide benefits beyond that approved by its governing
  body; and
               (5)  any additional information that it believes will
  help explain the nature and cost of a potential commitment to
  provide other postemployment benefits.
         Sec. 2264.106.  COMPTROLLER WEBSITE. (a)  The comptroller
  shall maintain a website to provide guidance to the state and its
  political subdivisions in implementing the requirements and goals
  of this subchapter.
         (b)  The site must include information that makes the site a
  resource tool for the state and its political subdivisions to
  consistently manage other postemployment benefits to conform to
  statutory, constitutional, and other legal requirements.
         Sec. 2264.107.  COMPTROLLER ADVICE AND REPORTING
  REQUIREMENTS. (a)  The comptroller shall issue reporting
  requirements for state retirement systems, including state
  systems, to provide guidance on how to comply with accounting
  principles in a manner consistent with this subchapter.
         (b)  The comptroller shall provide advice to a political
  subdivision of this state that requests advice on how to apply
  accounting principles in a manner consistent with this subchapter.
         SECTION 3.  Section 112.002(c), Local Government Code, is
  repealed.
         SECTION 4.  (a)  The changes in law made by this Act apply to
  financial accounting and reporting by a governmental entity subject
  to Chapter 2264, Government Code, as added by this Act, beginning
  with fiscal year 2007 including the Teacher Retirement System of
  Texas, and beginning with fiscal year 2008 for the Employees
  Retirement System of Texas, The Texas A&M University System, and
  The University of Texas System.
         (b)  Not later than December 1, 2007, the Teacher Retirement
  System of Texas shall comply with Section 2264.103, Government
  Code, as added by this Act. Not later than December 1, 2008, the
  Employees Retirement System of Texas, The Texas A&M University
  System, and The University of Texas System shall comply with
  Section 2264.103, Government Code, as added by this Act.
         SECTION 5.  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 August 27, 2007.
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
 
         I certify that H.B. No. 2365 was passed by the House on May
  10, 2007, by the following vote:  Yeas 142, Nays 0, 1 present, not
  voting; and that the House concurred in Senate amendments to H.B.
  No. 2365 on May 24, 2007, by the following vote:  Yeas 142, Nays 0,
  2 present, not voting.
 
  ______________________________
  Chief Clerk of the House   
 
         I certify that H.B. No. 2365 was passed by the Senate, with
  amendments, on May 22, 2007, by the following vote:  Yeas 28, Nays
  3.
 
  ______________________________
  Secretary of the Senate   
  APPROVED: __________________
                  Date       
   
           __________________
                Governor