HB 224 - SB 593
FISCAL NOTE
Fiscal Review Committee
Tennessee General Assembly
February 15, 2025
Fiscal Analyst: Alan Hampton | Email: alan.hampton@capitol.tn.gov | Phone: 615-741-2564
HB 224 - SB 593
SUMMARY OF BILL: Enacts the School District Capital Improvements Investment Trust Act.
Authorizes a local board of education to establish an investment trust for the purpose of
prospectively funding capital improvements for the benefit of the local board of education's local
education agency (LEA). Authorizes the Department of Treasury (Treasury) to establish investment
guidelines for the trusts.
Empowers a local board of education to: (1) invest funds of the trust; (2) contract for the provision
of services necessary for the management or operation of the trust; (3) contract with financial
consultants, auditors, and other consultants; (4) prepare annual financial reports, including financial
statements, at the close of each fiscal year; and (5) file the annual report and financial statements
with the Chair of the State Funding Board (SFB), upon request of the SFB.
Subjects to audit by the Comptroller of the Treasury (COT) a local board of education's annual
report and financial statements of a trust. Authorizes an LEA that maintains a trust to engage
licensed independent public accountants (accountants) to perform any required audits, with the prior
approval of the COT. Requires the LEA to reimburse the costs of audits prepared by the COT and
to pay the fees for audits prepared by accountants.
FISCAL IMPACT:
OTHER FISCAL IMPACT
If a local board of education establishes an investment trust, a permissive increase in local revenue
and expenditures will occur. However, due to multiple unknown factors, the extent and timing of
any permissive local fiscal impact cannot be determined with certainty.
Assumptions:
• In order to establish and maintain an investment trust, a local board of education is required
to:
o Adopt a capital improvement plan and investment policy;
o Maintain a public school fund balance that is no less than two months of
expenditures from the LEA's general purpose budget;
o Ensure that the trust conforms to all applicable laws, rules, and regulations of the
Internal Revenue Service and the capital improvement plan is reviewed by a third
party; and
o Submit the trust document to the SFB for approval.
HB 224 - SB 593 2
• The proposed legislation requires that the assets of the trust must be preserved, invested,
and expended solely for the purposes of capital improvements and to pay the costs of
administering the trust.
• The Treasury will absorb the additional responsibility of establishing investment guidelines
for trusts by utilizing existing staff and resources without an increase in state expenditures.
• A local board of education is vested with the power to prepare annual financial reports,
including financial statements, at the close of each fiscal year relative to the activities of the
trust, and may file the report with the SFB, upon request of the SFB.
• The SFB is staffed by the COT’s Division of State Government Finance, and the annual
report, financial statements, books, accounts and financial records of a trust are subject to
audit by the COT’s Division of Local Government Audit.
• Any impact to the COT relative to the SFB’s approval of investment trusts and requests for
annual reports and financial statements of such trust can be absorbed utilizing existing SFB
staff and resources.
• Each LEA is responsible for the reimbursement of the costs of audits prepared by the COT
and for the payment of fees for audits prepared by accountants. Therefore, any impact to
the COT relative to audit costs is not significant.
• It is unknown if a local board of education will elect to establish an investment trust for the
purpose of funding capital improvements. If a local board of education establishes a trust,
then a permissive increase in local revenue and expenditures may occur, beginning in FY25-
26.
• Due to multiple unknown factors, including: the amount of funds initially transferred to a
trust, the return on investment of those funds, the scope of any capital improvement
projects, the specific terms of any contracts for services or consultants, and the
reimbursement and payment of audit costs, the extent and timing of any permissive local
fiscal impact cannot be determined with certainty.
CERTIFICATION:
The information contained herein is true and correct to the best of my knowledge.
Bojan Savic, Executive Director