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A BILL TO BE ENTITLED
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AN ACT
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relating to the investment of public funds, including making |
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investments in ways that benefit the state and local economies, and |
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to the selection of local financial institutions for the deposit of |
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public funds. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subchapter B, Chapter 2256, Government Code, is |
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amended by adding Sections 2256.056 and 2256.057 to read as |
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follows: |
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Sec. 2256.056. INVESTMENTS TO BENEFIT STATE OR LOCAL |
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ECONOMY. (a) To the extent allowed under the constitution of this |
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state, each investing entity and each person investing funds on |
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behalf of an investing entity shall determine, for each investment |
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of funds, whether it is reasonably possible to make an investment |
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that will probably provide a benefit to the state economy and that |
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is an equally prudent investment, under the standard of care |
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applicable to the investment decision, in comparison to alternative |
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investments that would probably provide no benefit or insignificant |
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benefits to the state economy. If the person making the investment |
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decision determines that it is reasonably possible to make the |
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equally prudent investment that will probably provide a benefit to |
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the state economy, the person shall invest the funds in that manner. |
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(b) Each investing entity that is a local government and |
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each person investing funds on behalf of the local government shall |
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also determine, for each investment of funds and to the extent |
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allowed under the constitution of this state, whether it is |
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reasonably possible to make an investment that will probably |
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provide a benefit to the local economy and that is an equally |
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prudent investment, under the standard of care applicable to the |
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investment decision, in comparison to alternative investments that |
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would probably provide no benefit or insignificant benefits to the |
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local economy. If the person making the investment decision |
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determines that it is reasonably possible to make the equally |
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prudent investment that will probably provide a benefit to the |
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local economy, the person shall invest the funds in that manner. |
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Sec. 2256.057. ACHIEVING HIGHER YIELD WHEN LIQUIDITY NEEDS |
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ALLOW; APPLICABILITY OF SUBCHAPTER A TO EXEMPT ENTITIES IN CERTAIN |
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CIRCUMSTANCES. (a) In this section, "state or local governmental |
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entity" includes a district or county clerk responsible for |
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registry funds and other state or local governmental entities that |
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hold funds in trust for the benefit of another person. |
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(b) The comptroller by rule shall establish liquidity |
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requirements applying to funds held by state and local governmental |
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entities and adapted to the different types, sizes, and missions of |
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those entities. |
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(c) To the extent a state or local governmental entity holds |
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funds in amounts that exceed the amounts needed to satisfy |
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applicable liquidity requirements, the state or local governmental |
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entity shall invest the excess funds in a manner designed to achieve |
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a higher yield than depository interest. |
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(d) When the entity needs greater liquidity than provided |
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under applicable liquidity requirements, a state or local |
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governmental entity may hold funds in a depository, for a defined |
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period, in amounts that exceed the applicable liquidity requirement |
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established under Subsection (b). The entity must state in writing |
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the reason the entity needs greater liquidity during the defined |
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period. |
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(e) The state or local governmental entity shall invest the |
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amount of funds that exceed liquidity requirements in investments |
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that the entity is authorized to make: |
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(1) under Subchapter A or other law; and |
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(2) under the investment standard of care applicable |
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to the entity. |
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(f) If the state or local governmental entity is not |
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authorized by other law to invest any of its funds in a manner other |
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than to deposit the funds in a depository or in the state treasury, |
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the entity shall invest the funds in an investment authorized by |
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Subchapter A under the standard of care prescribed by Section |
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2256.006, without regard to whether the entity is otherwise |
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authorized to invest funds under Subchapter A or is specifically |
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exempted from the application of Subchapter A. |
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SECTION 2. Section 404.024, Government Code, is amended by |
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adding Subsection (m) to read as follows: |
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(m) In making investments under Subsection (b), the |
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comptroller shall determine, for each investment of state funds, |
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whether it is reasonably possible to make an investment that will |
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probably provide a benefit to the state economy and that is an |
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equally prudent investment in comparison to alternative |
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investments allowed under Subsection (b) that would probably |
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provide no benefit or insignificant benefits to the state economy. |
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If the comptroller determines that it is reasonably possible to |
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make such an equally prudent investment that will probably provide |
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a benefit to the state economy, the comptroller shall invest the |
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state funds in that manner. |
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SECTION 3. Subchapter Z, Chapter 131, Local Government |
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Code, is amended by adding Section 131.904 to read as follows: |
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Sec. 131.904. LOCAL FINANCIAL INSTITUTIONS. Each political |
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subdivision, including a county, municipality, school district, or |
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other district, shall adopt procedures to ensure that local |
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financial institutions that are eligible to be selected as a |
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depository for funds under the political subdivision's control: |
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(1) have: |
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(A) a reasonable opportunity to learn before the |
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selection decision is made that the political subdivision will be |
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selecting a depository; and |
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(B) sufficient time after learning of the |
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selection process to prepare and file a valid application for |
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selection as a depository; and |
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(2) can obtain timely, correct information from the |
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political subdivision about any requirements for making the |
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application. |
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SECTION 4. This Act takes effect September 1, 2007. |