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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 by a local government in |
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investment pools. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 2256.016, Government Code, is amended by |
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amending Subsection (a) and adding Subsection (l) to read as |
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follows: |
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(a) Except as provided by Subsection (l), an [An] entity may |
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invest its funds and funds under its control through an eligible |
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investment pool if the governing body of the entity by rule, order, |
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ordinance, or resolution, as appropriate, authorizes investment in |
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the particular pool. An investment pool shall invest the funds it |
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receives from entities in authorized investments permitted by this |
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subchapter. An investment pool may invest its funds in money market |
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mutual funds to the extent permitted by and consistent with this |
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subchapter and the investment policies and objectives adopted by |
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the investment pool. |
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(l) A local government may invest funds in an investment |
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pool only if the investment pool is managed by the comptroller or |
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the Texas Treasury Safekeeping Trust Company. |
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SECTION 2. Subchapter A, Chapter 2256, Government Code, is |
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amended by adding Section 2256.0175 to read as follows: |
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Sec. 2256.0175. DIVESTMENT OF CERTAIN FUNDS BY LOCAL |
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GOVERNMENTS. (a) In this section, "restricted investment pool" |
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means an investment pool that is not managed by the comptroller or |
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the Texas Treasury Safekeeping Trust Company. |
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(b) Notwithstanding Section 2256.017, a local government |
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shall sell, redeem, divest, or withdraw all of its funds and funds |
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under its control that are invested in a restricted investment pool |
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in compliance with the following schedule: |
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(1) at least 50 percent of those funds must be removed |
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from a restricted investment pool not later than the 180th day after |
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the date the local government discovers that the funds are invested |
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in a restricted investment pool, unless the local government |
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determines, based on a good faith exercise of its fiduciary |
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discretion and subject to Subdivision (2), that a later date is more |
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prudent; and |
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(2) 100 percent of those funds must be removed from the |
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restricted investment pool not later than the 360th day after the |
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date the local government discovers that the funds are invested in a |
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restricted investment pool. |
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(c) Except as provided by Subsection (b), a local government |
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may delay the schedule for divestment under that subsection or |
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otherwise cease divesting from a restricted investment pool only to |
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the extent that the local government determines, in the local |
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government's good faith judgment, and consistent with the local |
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government's fiduciary duty, that divestment from the restricted |
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investment pool will likely result in a loss in value or a benchmark |
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deviation described by Subsection (d). If a local government |
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delays the schedule for divestment or otherwise ceases to divest, |
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the local government shall submit a report to the presiding officer |
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of each house of the legislature, the attorney general, and the |
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comptroller stating the reasons and justification, supported by |
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clear and convincing evidence, for the local government's delay in |
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divestment from the restricted investment pool. The report must |
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include documentation supporting the local government's |
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determination that the divestment would result in a loss in value or |
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a benchmark deviation described by Subsection (d), including |
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objective numerical estimates. The local government shall update |
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the report every six months. |
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(d) A local government may delay the schedule of divestment |
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under Subsection (b) or otherwise cease divesting from one or more |
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restricted investment pools under Subsection (c) only if clear and |
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convincing evidence shows that divesting from the restricted |
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investment pool will likely result in: |
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(1) the local government suffering a loss in the |
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hypothetical value of all funds under management by the local |
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government as a result of having to divest from restricted |
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investment pools under this section; or |
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(2) an individual portfolio that uses a |
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benchmark-aware strategy being subject to an aggregate expected |
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deviation from its benchmark as a result of having to divest from |
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restricted investment pools under this section. |
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SECTION 3. The changes in law made by this Act apply only to |
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a contract entered into on or after the effective date of this Act. |
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A contract entered into before that date is governed by the law in |
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effect on the date the contract was entered into, and the former law |
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is continued in effect for that purpose. |
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SECTION 4. This Act takes effect September 1, 2025. |