H.B. No. 2706
AN ACT
relating to authorized investments for governmental entities and a
study of the investment and management of funds by public schools.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Sections 2256.011(a) and (b), Government Code,
are amended to read as follows:
(a) A fully collateralized repurchase agreement is an
authorized investment under this subchapter if the repurchase
agreement:
(1) has a defined termination date;
(2) is secured by a combination of cash and
obligations described by Section 2256.009(a)(1) or 2256.013 or, if
applicable, Section 2256.0204; [and]
(3) requires the securities being purchased by the
entity or cash held by the entity to be pledged to the entity, held
in the entity's name, and deposited at the time the investment is
made with the entity or with a third party selected and approved by
the entity; and
(4) is placed through a primary government securities
dealer, as defined by the Federal Reserve, or a financial
institution doing business in this state.
(b) In this section, "repurchase agreement" means a
simultaneous agreement to buy, hold for a specified time, and sell
back at a future date obligations described by Section
2256.009(a)(1) or 2256.013 or, if applicable, Section 2256.0204, at
a market value at the time the funds are disbursed of not less than
the principal amount of the funds disbursed. The term includes a
direct security repurchase agreement and a reverse security
repurchase agreement.
SECTION 2. Section 2256.013, Government Code, is amended to
read as follows:
Sec. 2256.013. AUTHORIZED INVESTMENTS: COMMERCIAL PAPER.
Commercial paper is an authorized investment under this subchapter
if the commercial paper:
(1) has a stated maturity of 365 [270] days or fewer
from the date of its issuance; and
(2) is rated not less than A-1 or P-1 or an equivalent
rating by at least:
(A) two nationally recognized credit rating
agencies; or
(B) one nationally recognized credit rating
agency and is fully secured by an irrevocable letter of credit
issued by a bank organized and existing under the laws of the United
States or any state.
SECTION 3. Sections 2256.016(e) and (f), Government Code,
are amended to read as follows:
(e) In this section, for purposes of an investment pool for
which a $1.00 net asset value is maintained, "yield" shall be
calculated in accordance with regulations governing the
registration of open-end management investment companies under the
Investment Company Act of 1940, as promulgated from time to time by
the federal Securities and Exchange Commission.
(f) To be eligible to receive funds from and invest funds on
behalf of an entity under this chapter:
(1) [,] a public funds investment pool that uses
amortized cost or fair value accounting must mark its portfolio to
market daily; [,] and
(2) if the investment pool uses amortized cost:
(A) the investment pool must, to the extent
reasonably possible, stabilize at a $1.00 net asset value, when
rounded and expressed to two decimal places;
(B) the governing body of the investment pool
must, if [. If] the ratio of the market value of the portfolio
divided by the book value of the portfolio is less than 0.995 or
greater than 1.005, [the governing body of the public funds
investment pool shall] take action as the body determines necessary
to eliminate or reduce to the extent reasonably practicable any
dilution or unfair result to existing participants, including a
sale of portfolio holdings to attempt to maintain the ratio between
0.995 and 1.005; and
(C) the investment pool must, in [. In] addition
to the requirements of its investment policy and any other forms of
reporting, [a public funds investment pool that uses amortized cost
shall] report yield to its investors in accordance with regulations
of the federal Securities and Exchange Commission applicable to
reporting by money market funds.
SECTION 4. Subchapter A, Chapter 2256, Government Code, is
amended by adding Section 2256.0208 to read as follows:
Sec. 2256.0208. LOCAL GOVERNMENT INVESTMENT OF BOND
PROCEEDS AND PLEDGED REVENUE. (a) In this section, "pledged
revenue" means money pledged to the payment of or as security for:
(1) bonds or other indebtedness issued by a local
government;
(2) obligations under a lease, installment sale, or
other agreement of a local government; or
(3) certificates of participation in a debt or
obligation described by Subdivision (1) or (2).
(b) The investment officer of a local government may invest
bond proceeds or pledged revenue only to the extent permitted by
this chapter, in accordance with:
(1) statutory provisions governing the debt issuance
or the agreement, as applicable; and
(2) the local government's investment policy regarding
the debt issuance or the agreement, as applicable.
SECTION 5. Section 2256.0204(g), Government Code, is
repealed.
SECTION 6. (a) The Texas Education Agency shall conduct a
study regarding the investment and management of funds by school
districts and open-enrollment charter schools. On request of the
agency, a district or school or the entity that invests or manages
funds for the district or school, as appropriate, shall provide the
agency information regarding:
(1) the district's or school's investments, including
asset allocations, fees, and risks; and
(2) the district's or school's cash flow, fund
balances, and other revenue sources.
(b) Not later than June 1, 2020, the Texas Education Agency
shall deliver a report to the governor, the lieutenant governor,
the speaker of the house of representatives, and each standing
committee of the legislature having primary jurisdiction over
primary and secondary education that includes:
(1) the findings of the study; and
(2) any recommendations for legislative action based
on the findings of the study.
(c) This section expires September 1, 2021.
SECTION 7. This Act takes effect September 1, 2019.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 2706 was passed by the House on April
25, 2019, by the following vote: Yeas 132, Nays 4, 1 present, not
voting; and that the House concurred in Senate amendments to H.B.
No. 2706 on May 23, 2019, by the following vote: Yeas 142, Nays 2,
2 present, not voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 2706 was passed by the Senate, with
amendments, on May 21, 2019, by the following vote: Yeas 31, Nays
0.
______________________________
Secretary of the Senate
APPROVED: __________________
Date
__________________
Governor