S.B. No. 1543
AN ACT
relating to the authority of an independent school district to
invest in corporate bonds.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter A, Chapter 2256, Government Code, is
amended by adding Section 2256.0204 to read as follows:
Sec. 2256.0204. AUTHORIZED INVESTMENTS: INDEPENDENT
SCHOOL DISTRICTS. (a) In this section, "corporate bond" means a
senior secured debt obligation issued by a domestic business entity
and rated not lower than "AA-" or the equivalent by a nationally
recognized investment rating firm. The term does not include a debt
obligation that:
(1) on conversion, would result in the holder becoming
a stockholder or shareholder in the entity, or any affiliate or
subsidiary of the entity, that issued the debt obligation; or
(2) is an unsecured debt obligation.
(b) This section applies only to an independent school
district that qualifies as an issuer as defined by Section
1371.001.
(c) In addition to authorized investments permitted by this
subchapter, an independent school district subject to this section
may purchase, sell, and invest its funds and funds under its control
in corporate bonds that, at the time of purchase, are rated by a
nationally recognized investment rating firm "AA-" or the
equivalent and have a stated final maturity that is not later than
the third anniversary of the date the corporate bonds were
purchased.
(d) An independent school district subject to this section
is not authorized by this section to:
(1) invest in the aggregate more than 15 percent of its
monthly average fund balance, excluding bond proceeds, reserves,
and other funds held for the payment of debt service, in corporate
bonds; or
(2) invest more than 25 percent of the funds invested
in corporate bonds in any one domestic business entity, including
subsidiaries and affiliates of the entity.
(e) An independent school district subject to this section
may purchase, sell, and invest its funds and funds under its control
in corporate bonds if the governing body of the district:
(1) amends its investment policy to authorize
corporate bonds as an eligible investment;
(2) adopts procedures to provide for:
(A) monitoring rating changes in corporate bonds
acquired with public funds; and
(B) liquidating the investment in corporate
bonds; and
(3) identifies the funds eligible to be invested in
corporate bonds.
(f) The investment officer of an independent school
district, acting on behalf of the district, shall sell corporate
bonds in which the district has invested its funds not later than
the seventh day after the date a nationally recognized investment
rating firm:
(1) issues a release that places the corporate bonds
or the domestic business entity that issued the corporate bonds on
negative credit watch or the equivalent, if the corporate bonds are
rated "AA-" or the equivalent at the time the release is issued; or
(2) changes the rating on the corporate bonds to a
rating lower than "AA-" or the equivalent.
(g) Corporate bonds are not an eligible investment for a
public funds investment pool.
SECTION 2. This Act takes effect immediately if it 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, 2011.
______________________________ ______________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 1543 passed the Senate on
May 6, 2011, by the following vote: Yeas 27, Nays 3;
May 25, 2011, Senate refused to concur in House amendments and
requested appointment of Conference Committee; May 27, 2011, House
granted request of the Senate; May 29, 2011, Senate adopted
Conference Committee Report by the following vote: Yeas 27,
Nays 4.
______________________________
Secretary of the Senate
I hereby certify that S.B. No. 1543 passed the House, with
amendments, on May 24, 2011, by the following vote: Yeas 126,
Nays 20, two present not voting; May 27, 2011, House granted
request of the Senate for appointment of Conference Committee;
May 29, 2011, House adopted Conference Committee Report by the
following vote: Yeas 140, Nays 6, one present not voting.
______________________________
Chief Clerk of the House
Approved:
______________________________
Date
______________________________
Governor