By: Howard of Travis, Anchia, Eissler, H.J.R. No. 77

Chisum, Dutton, et al.

A JOINT RESOLUTION

proposing a constitutional amendment to create the Permanent School Fund Management Council to assume the duty of the State Board of Education to manage the permanent school fund and to allow the School Land Board to transfer funds from the permanent school fund to the available school fund.

BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 49-b(h), Article III, Texas Constitution, is amended to read as follows:

(h) Lands purchased and comprising a part of the Veterans' Land Fund are declared to be held for a governmental purpose, but the individual purchasers of those lands shall be subject to taxation to the same extent and in the same manner as are purchasers of lands dedicated to the Permanent [Free Public] School Fund. The lands shall be sold to veterans in quantities, on terms, at prices, and at fixed, variable, floating, or other rates of interest, determined by the Board and in accordance with rules of the Board. Notwithstanding any provisions of this section to the contrary, lands in the Veterans' Land Fund that are offered for sale to veterans and that are not sold may be sold or resold to the purchasers in quantities, on terms, at prices, and at rates of interest determined by the Board and in accordance with rules of the Board.

SECTION 2. Sections 2 and 4, Article VII, Texas Constitution, are amended to read as follows:

Sec. 2. All funds, lands and other property heretofore set apart and appropriated for the support of public schools; all the alternate sections of land reserved by the State out of grants heretofore made or that may hereafter be made to railroads or other corporations of any nature whatsoever; one half of the public domain of the State; and all sums of money that may come to the State from the sale of any portion of the same, shall constitute a permanent [perpetual public] school fund.

Sec. 4. The lands herein set apart to the Permanent [Public Free] School fund, shall be sold under such regulations, at such times, and on such terms as may be prescribed by law; and the Legislature shall not have power to grant any relief to purchasers thereof. The proceeds of such sales must be used to acquire other land for the Permanent [Public Free] School fund as provided by law or the proceeds shall be invested by the comptroller of public accounts, as may be directed by the Permanent School Fund Management Council [Board of Education] herein provided for, in the bonds of the United States, the State of Texas, or counties in said State, or in such other securities, and under such restrictions as may be prescribed by law; and the State shall be responsible for all investments.

SECTION 3. Section 5, Article VII, Texas Constitution, is amended by amending Subsections (a) and (f) and adding Subsection (a-1) to read as follows:

(a) The permanent school fund consists of all land appropriated for public schools by this constitution or the other laws of this state, other properties belonging to the permanent school fund, and all revenue derived from the land or other properties. The available school fund consists of the distributions made to it from the total return on all investment assets of the permanent school fund, the taxes authorized by this constitution or general law to be part of the available school fund, funds described by Subsection (a-1), and appropriations made to the available school fund by the legislature. The total amount distributed from the permanent school fund to the available school fund:

(1) in each year of a state fiscal biennium must be an amount that is not more than six percent of the average of the market value of the permanent school fund, excluding real property belonging to the fund that is managed, sold, or acquired under Section 4 of this article, on the last day of each of the 16 state fiscal quarters preceding the regular session of the legislature that begins before that state fiscal biennium, in accordance with the rate adopted by:

(A) a vote of two-thirds of the total membership of the Permanent School Fund Management Council, with the approval of a majority vote of the total membership of the State Board of Education, taken before the regular session of the legislature convenes; or

(B) the legislature by general law or appropriation, if the Permanent School Fund Management Council [State Board of Education] does not adopt a rate or the State Board of Education does not approve a rate as provided by Paragraph (A) of this subdivision; and

(2) over the 10-year period consisting of the current state fiscal year and the nine preceding state fiscal years may not exceed the total return on all investment assets of the permanent school fund over the same 10-year period.

(a-1) If the permanent school fund is not able to make a distribution for a fiscal year under Subsection (a)(1) or (2), the School Land Board may distribute to the available school fund for the fiscal year an amount not to exceed the five-year annual average of funds released by the School Land Board for use by the permanent school fund. A vote to transfer funds to the available school fund by the School Land Board under this section must be unanimous.

(f) Notwithstanding any other provision of this constitution, in managing the assets of the permanent school fund, the Permanent School Fund Management Council [State Board of Education] may acquire, exchange, sell, supervise, manage, or retain, through procedures and subject to restrictions it establishes and in amounts it considers appropriate, any kind of investment, including investments in the Texas growth fund created by Article XVI, Section 70, of this constitution, that persons of ordinary prudence, discretion, and intelligence, exercising the judgment and care under the circumstances then prevailing, acquire or retain for their own account in the management of their affairs, not in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income as well as the probable safety of their capital.

SECTION 4. Article VII, Texas Constitution, is amended by adding Section 5a to read as follows:

Sec. 5a. The legislature shall provide by law for a Permanent School Fund Management Council to manage the permanent school fund. Members of the council must have substantial institutional investment expertise or institutional financial management experience. Members of the council are appointed or elected as provided by the legislature for terms determined by the legislature. The council shall perform the duties prescribed by law.

SECTION 5. This proposed constitutional amendment shall be submitted to the voters at an election to be held November 3, 2009. The ballot shall be printed to permit voting for or against the proposition: "The constitutional amendment to create the Permanent School Fund Management Council, composed of members with substantial institutional investment expertise or institutional financial management experience, to assume the duty of the State Board of Education to manage the permanent school fund."