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A BILL TO BE ENTITLED
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AN ACT
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relating to the management of public school land and the investment |
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of the permanent school fund. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Sections 51.011(a) and (a-1), Natural Resources |
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Code, are amended to read as follows: |
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(a) Any land, mineral or royalty interest, real estate |
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investment, or other interest, including revenue received from |
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those sources, that is set apart to the permanent school fund under |
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the constitution and laws of this state together with the mineral |
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estate in riverbeds, channels, and the tidelands, including |
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islands, shall be subject to the sole and exclusive management and |
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control of the school land board and the commissioner under the |
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provisions of this chapter and other applicable law. |
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(a-1) The board may acquire, sell, lease, trade, improve, |
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maintain, protect, or otherwise manage, control, or use land, |
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mineral and royalty interests, real estate investments, or other |
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interests, including revenue received from those sources, that are |
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[is] set apart to the permanent school fund in any manner, at such |
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prices, and under such terms and conditions as the board finds to be |
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in the best interest of the fund. |
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SECTION 2. The heading to Section 51.401, Natural Resources |
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Code, is amended to read as follows: |
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Sec. 51.401. REAL ESTATE SPECIAL FUND ACCOUNT. |
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SECTION 3. Sections 51.401(a) and (b), Natural Resources |
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Code, are amended to read as follows: |
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(a) The board may designate funds received from any land, |
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mineral or royalty interest, real estate investment, or other |
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interest, including revenue received from those sources, that is |
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set apart to the permanent school fund under the constitution and |
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laws of this state together with the mineral estate in riverbeds, |
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channels, and the tidelands, including islands, [the sale of
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permanent school fund land under this chapter and the proceeds of
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future mineral leases and royalties generated from existing and
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future leases of permanent school fund mineral interests received
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under Chapters 52 and 53] for deposit in the real estate [a] special |
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fund account of the permanent school fund in the State Treasury to |
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be used by the board as provided by this subchapter. |
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(b) The real estate special fund account must be an |
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interest-bearing account, and the interest received on the account |
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shall be deposited in the State Treasury to the credit of the real |
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estate special fund account of the permanent school fund. |
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SECTION 4. Subchapter I, Chapter 51, Natural Resources |
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Code, is amended by adding Section 51.4011 to read as follows: |
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Sec. 51.4011. DESIGNATION OF BOARD AS MANAGER OF REAL |
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ESTATE SPECIAL FUND ACCOUNT. The board shall manage and control the |
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real estate special fund account for purposes of Section 4, Article |
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VII, Texas Constitution. |
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SECTION 5. Section 51.402, Natural Resources Code, is |
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amended by amending Subsections (a) and (b) and adding Subsection |
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(b-1) to read as follows: |
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(a) The board may use the money designated under Section |
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51.401 for any of the following purposes: |
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(1) to add to a tract of public school land to form a |
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tract of sufficient size to be manageable; |
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(2) to add contiguous land to public school land; |
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(3) to acquire, as public school land, interests in |
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real property for biological, commercial, geological, cultural, or |
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recreational purposes; |
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(4) to acquire mineral and royalty interests for the |
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use and benefit of the permanent school fund; |
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(5) to protect, maintain, or enhance the value of |
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public school land; |
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(6) to acquire interests in real estate; [or] |
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(7) to pay reasonable fees for professional services |
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related to a permanent school fund investment; or |
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(8) to acquire, sell, lease, trade, improve, maintain, |
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protect, or use land, mineral or royalty interests, real estate |
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investments, or other interests at prices and under terms the board |
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determines to be in the best interest of the permanent school fund. |
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(b) Before using funds under Subsection (a), the board must |
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determine, using the prudent investor standard, that the use of the |
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funds for the intended purpose is authorized by Subsection (a) and |
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in the best interest of the permanent school fund. A determination |
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by the board on the use of funds under this section is conclusive |
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unless the determination was made as a result of fraud or obvious |
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error. |
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(b-1) The board may confer with one or more employees of the |
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board or with a third party regarding an investment or potential |
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investment in real estate, including the acquisition or potential |
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acquisition of interests in real estate, to the extent permitted to |
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the board of trustees of the Texas growth fund under Section |
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551.075, Government Code. |
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SECTION 6. Section 51.4021, Natural Resources Code, is |
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amended to read as follows: |
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Sec. 51.4021. APPOINTMENT OF REAL ESTATE SPECIAL FUND |
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MANAGERS, INVESTMENT CONSULTANTS, OR ADVISORS. (a) The board may |
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appoint investment managers, consultants, or advisors to invest or |
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assist the board in investing the money designated under Section |
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51.401 by contracting for professional investment management or |
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investment advisory services with one or more organizations that |
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are in the business of managing or advising on the management of |
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real estate investments. |
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(b) To be eligible for appointment under this section, an |
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investment manager, consultant, or advisor shall agree to abide by |
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the [must be:
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[(1)
registered under the Investment Advisers Act of
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1940 (15 U.S.C. Section 80b-1 et seq.);
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[(2) a bank as defined by that Act; or
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[(3)
an insurance company qualified to perform real
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estate investment services under the laws of more than one state.
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[(c)
In a contract under this section, the board shall
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specify any] policies, requirements, or restrictions, including |
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ethical standards and disclosure policies and criteria for |
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determining the quality of investments and for the use of standard |
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rating services, that the board adopts for real estate investments |
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of the permanent school fund. Money designated under Section 51.401 |
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may not be invested in a real estate investment trust, as defined by |
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Section 200.001, Business Organizations Code. |
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(c) [(d)] Compensation paid to an investment manager, |
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consultant, or advisor by the board must be consistent with the |
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compensation standards of the investment industry and compensation |
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paid by similarly situated institutional investors. |
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(d) [(e)] Chapter 2263, Government Code, applies to |
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investment managers, consultants, or advisors appointed under this |
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section. The board by rule shall adopt standards of conduct for |
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investment managers, consultants, or advisors appointed under this |
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section as required by Section 2263.004, Government Code, and shall |
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implement the disclosure requirements of Section 2263.005 of that |
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code. |
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SECTION 7. Section 51.412(a), Natural Resources Code, is |
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amended to read as follows: |
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(a) Not later than September 1 of each even-numbered year, |
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the board shall submit to the legislature a report that, |
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specifically and in detail, assesses the direct and indirect |
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economic impact, as anticipated by the board, of the investment of |
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funds designated under Section 51.401 for deposit in the real |
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estate special fund account of the permanent school fund. The board |
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may not disclose information under this section that is |
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confidential under applicable state or federal law. The report |
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must include the following information: |
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(1) the total amount of money designated by Section |
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51.401 for deposit in the real estate special fund account of the |
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permanent school fund that the board intends to invest; |
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(2) the rate of return the board expects to attain on |
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the investment; |
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(3) the amount of money the board expects to |
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distribute to the available school fund or the investment special |
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fund account of the permanent school fund after making the |
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investments; |
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(4) the distribution of the board's investments by |
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county; |
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(5) the effect of the board's investments on the level |
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of employment, personal income, and capital investment in the |
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state; and |
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(6) any other information the board considers |
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necessary to include in the report. |
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SECTION 8. Subchapter I, Chapter 51, Natural Resources |
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Code, is amended by adding Section 51.413 to read as follows: |
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Sec. 51.413. TRANSFERS FROM REAL ESTATE SPECIAL FUND |
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ACCOUNT TO AVAILABLE SCHOOL FUND. On the first working day of each |
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month in a state fiscal year, the comptroller shall transfer from |
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the real estate special fund account of the permanent school fund to |
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the available school fund an amount equal to one-twelfth of the |
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annual distribution from the real estate special fund account of |
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the permanent school fund to the available school fund as provided |
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by Section 4, Article VII, Texas Constitution, for the fiscal year. |
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SECTION 9. Section 43.001(b), Education Code, as amended by |
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Chapters 201 and 328, Acts of the 78th Legislature, Regular |
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Session, 2003, is reenacted and amended to read as follows: |
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(b) The available school fund, which shall be apportioned |
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annually to each county according to its scholastic population, |
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consists of: |
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(1) the distributions to the fund from the investment |
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special fund account of the permanent school fund as provided by |
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Section 5(a), Article VII, Texas Constitution; |
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(2) the distributions to the fund from the real estate |
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special fund account of the permanent school fund as provided by |
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Section 4(a), Article VII, Texas Constitution; |
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(3) one-fourth of all revenue derived from all state |
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occupation taxes, exclusive of delinquencies and cost of |
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collection; |
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(4) [(3)] one-fourth of revenue derived from state |
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gasoline and special fuels excise taxes as provided by law; and |
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(5) [(4)] all other appropriations to the available |
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school fund made by the legislature for public school purposes. |
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SECTION 10. The heading to Section 43.002, Education Code, |
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is amended to read as follows: |
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Sec. 43.002. TRANSFERS FROM INVESTMENT SPECIAL FUND ACCOUNT |
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OF PERMANENT SCHOOL FUND AND GENERAL REVENUE FUND TO AVAILABLE |
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SCHOOL FUND. |
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SECTION 11. Section 43.002(a), Education Code, is amended |
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to read as follows: |
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(a) On the first working day of each month in a state fiscal |
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year, the comptroller shall transfer from the investment special |
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fund account of the permanent school fund to the available school |
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fund an amount equal to one-twelfth of the annual distribution from |
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the investment special fund account of the permanent school fund to |
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the available school fund as provided by Section 5(a), Article VII, |
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Texas Constitution, for the fiscal year. |
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SECTION 12. Sections 43.0031(a), (b), (d), and (e), |
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Education Code, are amended to read as follows: |
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(a) In addition to any other requirements provided by law, |
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the State Board of Education shall adopt and enforce an ethics |
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policy that provides standards of conduct relating to the |
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management and investment of the investment special fund account of |
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the permanent school fund. The ethics policy must include |
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provisions that address the following issues as they apply to the |
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management and investment of the investment special fund account of |
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the permanent school fund and to persons responsible for managing |
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and investing the special fund account: |
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(1) general ethical standards; |
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(2) conflicts of interest; |
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(3) prohibited transactions and interests; |
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(4) the acceptance of gifts and entertainment; |
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(5) compliance with applicable professional |
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standards; |
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(6) ethics training; and |
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(7) compliance with and enforcement of the ethics |
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policy. |
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(b) The ethics policy must include provisions applicable |
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to: |
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(1) members of the State Board of Education; |
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(2) the commissioner; |
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(3) employees of the agency; and |
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(4) any person who provides services to the board |
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relating to the management or investment of the investment special |
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fund account of the permanent school fund. |
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(d) The provisions of the ethics policy that apply to a |
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person who provides services to the board relating to the |
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management or investment of the investment special fund account of |
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the permanent school fund must be based on the Code of Ethics and |
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the Standards of Professional Conduct prescribed by the Association |
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for Investment Management and Research or other ethics standards |
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adopted by another appropriate professionally recognized entity. |
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(e) The board shall ensure that applicable provisions of the |
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ethics policy are included in any contract under which a person |
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provides services to the board relating to the management and |
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investment of the investment special fund account of the permanent |
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school fund. |
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SECTION 13. Section 43.0032(a), Education Code, is amended |
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to read as follows: |
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(a) A member of the State Board of Education, the |
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commissioner, an employee of the agency, or a person who provides |
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services to the board that relate to the management or investment of |
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the investment special fund account of the permanent school fund |
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who has a business, commercial, or other relationship that could |
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reasonably be expected to diminish the person's independence of |
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judgment in the performance of the person's responsibilities |
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relating to the management or investment of the fund shall disclose |
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the relationship in writing to the board. |
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SECTION 14. Sections 43.0033, 43.004, and 43.005, Education |
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Code, are amended to read as follows: |
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Sec. 43.0033. REPORTS OF EXPENDITURES. A consultant, |
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advisor, broker, or other person providing services to the State |
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Board of Education relating to the management and investment of the |
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investment special fund account of the permanent school fund shall |
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file with the board regularly, as determined by the board, a report |
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that describes in detail any expenditure of more than $50 made by |
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the person on behalf of: |
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(1) a member of the board; |
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(2) the commissioner; or |
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(3) an employee of the agency or of a nonprofit |
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corporation created under Section 43.006. |
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Sec. 43.004. WRITTEN INVESTMENT OBJECTIVES; PERFORMANCE |
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EVALUATION. (a) The State Board of Education shall develop written |
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investment objectives concerning the investment of the investment |
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special fund account of the permanent school fund. The objectives |
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may address desired rates of return, risks involved, investment |
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time frames, and any other relevant considerations. |
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(b) The board shall employ a well-recognized performance |
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measurement service to evaluate and analyze the investment results |
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of the investment special fund account of the permanent school |
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fund. The service shall compare investment results with the |
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written investment objectives developed by the board, and shall |
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also compare the investment of the investment special fund account |
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of the permanent school fund with the investment of other public and |
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private funds. |
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Sec. 43.005. EXTERNAL INVESTMENT MANAGERS. (a) The State |
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Board of Education may contract with private professional |
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investment managers to assist the board in making investments of |
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the investment special fund account of the permanent school fund. A |
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contract under this subsection must be approved by the board or |
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otherwise entered into in accordance with board rules relating to |
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contracting authority. |
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(b) The State Board of Education by rule may delegate a |
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power or duty relating to the investment of the investment special |
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fund account of the permanent school fund to a committee, officer, |
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employee, or other agent of the board. |
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SECTION 15. Sections 43.006(a), (b), and (e), Education |
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Code, are amended to read as follows: |
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(a) The State Board of Education may delegate investment |
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authority and contract for the investment of the investment special |
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fund account of the permanent school fund to the same extent as the |
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governing board of an institution of higher education with respect |
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to an institutional fund under Chapter 163, Property Code. |
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(b) The board may enter into a contract with a nonprofit |
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corporation for the corporation to invest funds under the control |
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and management of the board, including the investment special fund |
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account of the permanent school fund, as designated by the board. |
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The corporation may not engage in any business other than investing |
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funds designated by the board under the contract. |
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(e) If an investment contract entered into under Subsection |
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(b) includes the investment special fund account of the permanent |
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school fund within the scope of funds under the control and |
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management of the State Board of Education to be invested by the |
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corporation, the board shall provide for an annual financial audit |
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of the investment special fund account of the permanent school |
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fund. Subject to the legislative audit committee's approval of |
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including the audit in the audit plan under Section 321.013(c), |
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Government Code, the audit shall be performed by the state auditor. |
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SECTION 16. Section 43.007(a), Education Code, is amended |
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to read as follows: |
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(a) The State Board of Education may authorize the purchase |
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[of all of the types] of securities for the investment special fund |
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account of [in which it is authorized by law to invest] the |
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permanent school fund in either registered or negotiable form. The |
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board may authorize the reissue of those securities held at any time |
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for the investment special fund account of the permanent school |
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fund in either registered or negotiable form. The State Board of |
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Education may authorize the sale of any of the securities held for |
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the investment special fund account of the permanent school fund |
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and reinvest the proceeds of sale for the fund and may authorize the |
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exchange of any of the securities held for the investment special |
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fund account of the permanent school fund. |
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SECTION 17. Section 45.052, Education Code, is amended to |
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read as follows: |
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Sec. 45.052. GUARANTEE. On approval by the commissioner, |
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bonds issued under Subchapter A, including refunding bonds, are |
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guaranteed by the investment special fund account [corpus and
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income] of the permanent school fund. |
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SECTION 18. Sections 45.053(a) and (b), Education Code, are |
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amended to read as follows: |
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(a) The commissioner may not approve bonds for guarantee if |
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the approval would result in the total amount of outstanding |
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guaranteed bonds exceeding an amount equal to 2-1/2 times the cost |
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value or market value, whichever is less, of the investment special |
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fund account of the permanent school fund, as estimated by the board |
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and certified by the state auditor. |
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(b) Each year, the state auditor shall analyze the status of |
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guaranteed bonds as compared to the cost value and market value of |
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the investment special fund account of the permanent school fund. |
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Based on that analysis, the state auditor shall certify whether the |
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amount of bonds guaranteed is within the limit prescribed by this |
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section. |
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SECTION 19. Sections 45.059 and 45.061, Education Code, are |
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amended to read as follows: |
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Sec. 45.059. PAYMENT FROM PERMANENT SCHOOL FUND. (a) |
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Immediately following receipt of notice under Section 45.058, the |
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commissioner shall instruct the comptroller to transfer from the |
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appropriate account in the investment special fund account of the |
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permanent school fund to the school district's paying agent the |
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amount necessary to pay the maturing or matured principal or |
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interest. |
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(b) Immediately following receipt of the funds for payment |
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of the principal or interest, the paying agent shall pay the amount |
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due and forward the canceled bond or coupon to the comptroller. The |
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comptroller shall hold the canceled bond or coupon on behalf of the |
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investment special fund account of the permanent school fund. |
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(c) Following full reimbursement to the investment special |
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fund account of the permanent school fund with interest, the |
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comptroller shall further cancel the bond or coupon and forward it |
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to the school district for which payment was made. |
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Sec. 45.061. REIMBURSEMENT OF PERMANENT SCHOOL FUND. (a) |
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If the commissioner orders payment from the permanent school fund |
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on behalf of a school district, the commissioner shall direct the |
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comptroller to withhold the amount paid, plus interest, from the |
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first state money payable to the [school] district. The amount |
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withheld shall be deposited to the credit of the investment special |
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fund account of the permanent school fund. |
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(b) In accordance with the rules of the board, the |
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commissioner may authorize reimbursement to the investment special |
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fund account of the permanent school fund with interest in a manner |
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other than that provided by this section. |
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SECTION 20. Section 45.062(a), Education Code, is amended |
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to read as follows: |
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(a) If two or more payments from the investment special fund |
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account of the permanent school fund are made on the guaranteed |
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bonds of a school district and the commissioner determines that the |
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[school] district is acting in bad faith under the guarantee, the |
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commissioner may request the attorney general to institute |
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appropriate legal action to compel the [school] district and its |
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officers, agents, and employees to comply with the duties required |
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of them by law in regard to the bonds. |
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SECTION 21. (a) Sections 51.401(c) and (d), Natural |
|
Resources Code, are repealed. |
|
(b) The following sections of the Education Code are |
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repealed: |
|
(1) Section 43.003; |
|
(2) Section 43.007(b); and |
|
(3) Section 43.020. |
|
SECTION 22. (a) Except as provided by Subsection (b) of this |
|
section, this Act takes effect immediately if this Act 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, 2007, except as provided by |
|
Subsection (b) of this section. |
|
(b) Sections 4 and 7 through 20 of this Act take effect |
|
January 1, 2008, but only if the constitutional amendment to create |
|
real estate and investment special fund accounts within the |
|
permanent school fund and to allow the returns from permanent |
|
school fund real estate portfolio investments to be added to the |
|
available school fund for the support of public schools is approved |
|
by the voters. If the proposed constitutional amendment is not |
|
approved by the voters, Sections 4 and 7 through 20 of this Act have |
|
no effect. |