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  80R15147 MXM-F
 
  By: Truitt H.B. No. 2365
 
Substitute the following for H.B. No. 2365:
 
  By:  Rodriguez C.S.H.B. No. 2365
 
A BILL TO BE ENTITLED
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 which 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 another
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 which 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.  (a)  This state or a political subdivision
of this state shall disclose in its notes to the financial
statement:
             (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.
       (b)  If other postemployment benefits have been
advance-funded on an actuarially determined basis, this state or a
political subdivision of this state shall also disclose in its
notes to the financial statement:
             (1)  the actuarial cost method and significant
actuarial assumptions used to determine funding requirements, and
the method used to value plan assets;
             (2)  the number of active plan members;
             (3)  the actuarially required contributions for the
period;
             (4)  the actual contributions net of member
contributions for the period;
             (5)  the amount of net assets available for other
postemployment benefits; and
             (6)  the actuarial accrued liability and unfunded
actuarial accrued liability for other postemployment benefits
according to the actuarial cost method in use.
       Sec. 2264.105. ADDITIONAL FINANCIAL DISCLOSURE REQUIREMENTS
FOR THE STATE.  (a)  If this state does not intend for other
postemployment benefits to be guaranteed benefits in future years,
the state shall present the financial statements and schedules in a
manner consistent with this subchapter.
       (b)  If the state intends that other postemployment benefits
be a potential benefit in future years as funding is made available
by the state in accordance with state constitutional and statutory
provisions, this state shall, in a manner consistent with this
subchapter:
             (1)  report its basic financial statement;
             (2)  disclose its intention in the notes to the
financial statement; and
             (3)  add supplemental information as additional
schedules presenting the government-wide financial statements.
       (c)  The schedules required under Subsection (b)(3) must
disclose, for informational purposes only, the expense and
liability that would exist if other postemployment benefits had
been guaranteed and earned by employees.
       Sec. 2264.106.  ADDITIONAL OPTIONAL FINANCIAL DISCLOSURE
FOR POLITICAL SUBDIVISIONS.  (a)  A political subdivision of this
state may disclose, for informational and planning purposes only,
the expense and liability that would exist if other postemployment
benefits had been guaranteed to members.
       (b)  The 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. 2264.107.  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. 2264.108.  COMPTROLLER ADVICE AND REPORTING
REQUIREMENTS. (a) The comptroller shall issue reporting
requirements for state retirement systems, including state systems
under Section 2264.103, 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.
       Sec. 2264.109.  OTHER POSTEMPLOYMENT BENEFITS TRUST FUND.  
(a)  The comptroller may establish and administer an other
postemployment benefits trust fund for state systems to aggregate
other postemployment benefits as considered appropriate by the
comptroller and the governing bodies of the contributing state
systems.
       (b)  The comptroller may, subject to the consent of the
governing body of the appropriate state system, transfer money to
and from a fund of that state system into and out of the trust fund.  
Funds held in trust by a state system and transferred to the other
postemployment benefits trust fund under this section continue to
be held in trust for the same persons and purposes.
       (c)  The comptroller shall account separately for each state
system's contributions, including investment income for the
contributions.
       (d)  The comptroller may adopt rules to implement this
section.
       (e)  To the extent of a conflict between this section and
another law, this section controls.
       SECTION 3.  Section 112.002(c), Local Government Code, is
amended to read as follows:
       (c)  Except as provided by Chapter 2264, Government Code, a
[A] regulation adopted under this section may not be inconsistent
with generally accepted accounting principles [as established by
the Governmental Accounting Standards Board].
       SECTION 4.  (a)  Except as provided by Subsection (b) of this
section, 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.
       (b)  Not later than December 1, 2007, each state system to
which Section 2264.103, Government Code, as added by this Act,
applies shall comply with that section.
       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.