Texas 2019 - 86th Regular

Texas House Bill HB3467 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	86R15231 GCB-D
2	2	By: King of Hemphill H.B. No. 3467
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the acquisition and management of certain real property
8	8	assets by the School Land Board for the use and benefit of the
9	9	permanent school fund and the transfer of certain permanent school
10	10	fund assets from the control of the School Land Board to the State
11	11	Board of Education.
12	12	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
13	13	SECTION 1. Section 51.011, Natural Resources Code, is
14	14	amended by amending Subsection (a) and adding Subsections (a-3) and
15	15	(a-4) to read as follows:
16	16	(a) Any land or[,] mineral or royalty interest[, real estate
17	17	investment, or other interest, including revenue received from
18	18	those sources,] that is set apart to the permanent school fund under
19	19	the constitution and laws of this state together with the mineral
20	20	estate in riverbeds, channels, and the tidelands, including
21	21	islands, shall be controlled, sold, and leased by [subject to the
22	22	sole and exclusive management and control of] the school land board
23	23	and the commissioner under the provisions of this chapter and other
24	24	applicable law.
25	25	(a-3) All revenue received from mineral or royalty
26	26	interests described by Subsection (a), including bonus payments,
27	27	surface lease revenues, royalties, and any other type of revenue
28	28	received from those interests, shall be transferred each month to
29	29	the State Board of Education for investment in the permanent school
30	30	fund.
31	31	(a-4) Revenue received from land described by Subsection
32	32	(a) that is not required to be transferred under Subsection (a-3)
33	33	shall remain with the board.
34	34	SECTION 2. Section 51.401, Natural Resources Code, is
35	35	amended by amending Subsection (a) and adding Subsections (c), (d),
36	36	and (d-1) to read as follows:
37	37	(a) The board may designate money [funds] received from the
38	38	sale of real property or [any land,] mineral or royalty interests
39	39	[interest, real estate investment, or other interest, including
40	40	revenue received from those sources, that is] set apart to the
41	41	permanent school fund under the constitution and laws of this state
42	42	together with the mineral estate in riverbeds, channels, and the
43	43	tidelands, including islands, for deposit in the real estate
44	44	special fund account of the permanent school fund in the State
45	45	Treasury to be used by the board to acquire fee or lesser interests
46	46	in real property, including mineral or royalty interests, for the
47	47	use and benefit of the permanent school fund, as provided by Section
48	48	51.402 [this subchapter].
49	49	(c) Money received from the sale of real property, including
50	50	mineral or royalty interests, and designated under this subchapter
51	51	for the acquisition of real property, including mineral or royalty
52	52	interests, must be used by the board not later than two years after
53	53	the date of the sale from which the money is derived.
54	54	(d) Any money from a specific sale that remains in the real
55	55	estate special fund account for longer than two years shall be
56	56	immediately deposited in the State Treasury to the credit of the
57	57	State Board of Education for investment in the permanent school
58	58	fund.
59	59	(d-1) Each quarter, the board shall provide a cashflow
60	60	report to the State Board of Education that specifies the use of all
61	61	funds designated under Subsection (a) and the amount of time that
62	62	money from each specific sale has remained in the real estate
63	63	special fund account.
64	64	SECTION 3. Section 51.402, Natural Resources Code, is
65	65	amended by amending Subsections (a) and (b) and adding Subsection
66	66	(a-1) to read as follows:
67	67	(a) The board may use the money designated under Section
68	68	51.401 for any of the following purposes:
69	69	(1) to add to a tract of public school land to form a
70	70	tract of sufficient size to be manageable;
71	71	(2) to add contiguous land to public school land;
72	72	(3) to acquire, as public school land, interests in
73	73	real property for biological, commercial, geological, cultural, or
74	74	recreational purposes;
75	75	(4) to acquire mineral or [and] royalty interests for
76	76	the use and benefit of the permanent school fund; or
77	77	(5) to prudently manage any internally managed
78	78	commercial real estate held or acquired by the board on or before
79	79	August 31, 2019, subject to Subsection (a-1) [to protect, maintain,
80	80	or enhance the value of public school land;
81	81	[(6) to acquire interests in real estate;
82	82	[(7) to pay reasonable fees for professional services
83	83	related to a permanent school fund investment; or
84	84	[(8) to acquire, sell, lease, trade, improve,
85	85	maintain, protect, or use land, mineral and royalty interests, or
86	86	real estate investments, an investment or interest in public
87	87	infrastructure, or other interests, at such prices and under such
88	88	terms and conditions the board determines to be in the best interest
89	89	of the permanent school fund].
90	90	(a-1) Not later than September 1, 2023, the board shall
91	91	divest itself of all interests in assets described by Subsection
92	92	(a)(5), except any asset for which divestment by that date would
93	93	cause substantial loss to the permanent school fund. The board
94	94	shall divest itself of an asset described by Subsection (a)(5) that
95	95	is not divested on or before September 1, 2023, as soon as prudently
96	96	practicable, and the board shall take direction from the State
97	97	Board of Education regarding the timing of the divestment of that
98	98	asset with respect to the best interest of the permanent school
99	99	fund.
100	100	(b) Before acquiring real property, including mineral or
101	101	royalty interests, [using funds] under Subsection (a), the board
102	102	must determine, using the prudent investor standard, that the
103	103	acquisition is [use of the funds for the intended purpose is
104	104	authorized by Subsection (a) and] in the best interest of the
105	105	permanent school fund. [A determination by the board on the use of
106	106	funds under this section is conclusive unless the determination was
107	107	made as a result of fraud or obvious error.]
108	108	SECTION 4. Sections 51.4021(a) and (b), Natural Resources
109	109	Code, are amended to read as follows:
110	110	(a) The board may appoint investment managers, consultants,
111	111	or advisors to invest or assist the board in investing the money
112	112	designated under Section 51.401, to the extent the investment of
113	113	the money is authorized under this chapter, by contracting for
114	114	professional investment management or investment advisory services
115	115	with one or more organizations that are in the business of managing
116	116	or advising on the management of real estate investments.
117	117	(b) To be eligible for appointment under this section, an
118	118	investment manager, consultant, or advisor shall agree to abide by
119	119	the policies, requirements, or restrictions, including ethical
120	120	standards and disclosure policies and criteria for determining the
121	121	quality of investments and for the use of standard rating services,
122	122	that the board adopts for real estate investments of the permanent
123	123	school fund. Money designated under Section 51.401 may only be
124	124	invested to the extent the board has the authority under this
125	125	chapter to make the investment, and may not be invested in a real
126	126	estate investment trust, as defined by Section 200.001, Business
127	127	Organizations Code, or otherwise invested in a manner not
128	128	authorized under this chapter.
129	129	SECTION 5. Sections 51.408(a), (b), (d), and (e), Natural
130	130	Resources Code, are amended to read as follows:
131	131	(a) In addition to any other requirements provided by law,
132	132	the board shall adopt and enforce an ethics policy that provides
133	133	standards of conduct relating to the management and investment of
134	134	the funds designated for that purpose under Section 51.401. The
135	135	ethics policy must include provisions that address the following
136	136	issues as they apply to the management and investment of the funds
137	137	and to persons responsible for acquiring or managing real property
138	138	or mineral or royalty interests of the permanent school fund or
139	139	[and] investing the funds to the extent authorized by this chapter:
140	140	(1) general ethical standards;
141	141	(2) conflicts of interest;
142	142	(3) prohibited transactions and interests;
143	143	(4) the acceptance of gifts and entertainment;
144	144	(5) compliance with applicable professional
145	145	standards;
146	146	(6) ethics training; and
147	147	(7) compliance with and enforcement of the ethics
148	148	policy.
149	149	(b) The ethics policy must include provisions applicable
150	150	to:
151	151	(1) members of the board;
152	152	(2) the commissioner;
153	153	(3) employees of the board; and
154	154	(4) any person who provides services to the board
155	155	relating to the management [or investment] of the funds designated
156	156	under Section 51.401 or the investment of funds to the extent
157	157	authorized by this chapter.
158	158	(d) The provisions of the ethics policy that apply to a
159	159	person who provides services to the board relating to the
160	160	management [or investment] of the funds designated under Section
161	161	51.401 or the investment of those funds to the extent authorized by
162	162	this chapter must be based on the Code of Ethics and the Standards
163	163	of Professional Conduct prescribed by the Association for
164	164	Investment Management and Research or other ethics standards
165	165	adopted by another appropriate professionally recognized entity.
166	166	(e) The board shall ensure that applicable provisions of the
167	167	ethics policy are included in any contract under which a person
168	168	provides services to the board relating to the management [and
169	169	investment] of the funds designated under Section 51.401 or the
170	170	investment of those funds to the extent authorized by this chapter.
171	171	SECTION 6. Section 51.409(a), Natural Resources Code, is
172	172	amended to read as follows:
173	173	(a) A member of the board, the commissioner, an employee of
174	174	the board, or a person who provides services to the board that
175	175	relate to the management [or investment] of the funds designated
176	176	under Section 51.401 or the investment of those funds to the extent
177	177	authorized under this chapter who has a business, commercial, or
178	178	other relationship that could reasonably be expected to diminish
179	179	the person's independence of judgment in the performance of the
180	180	person's responsibilities relating to the management of public
181	181	school lands or investment of the funds shall disclose the
182	182	relationship in writing to the board.
183	183	SECTION 7. Section 51.410, Natural Resources Code, is
184	184	amended to read as follows:
185	185	Sec. 51.410. REPORTS OF EXPENDITURES. A consultant,
186	186	advisor, broker, or other person providing services to the board
187	187	relating to the management [and investment] of the funds designated
188	188	under Section 51.401 or the investment of those funds to the extent
189	189	authorized by this chapter shall file with the board regularly, as
190	190	determined by the board, a report that describes in detail any
191	191	expenditure of more than $50 made by the person on behalf of:
192	192	(1) a member of the board;
193	193	(2) the commissioner; or
194	194	(3) an employee of the board.
195	195	SECTION 8. Section 51.412, Natural Resources Code, is
196	196	amended to read as follows:
197	197	Sec. 51.412. REPORTS TO LEGISLATURE. [(a)] Not later than
198	198	September 1 of each [even-numbered] year, the board shall submit to
199	199	the legislature a report that includes [, specifically and in
200	200	detail, assesses the direct and indirect economic impact, as
201	201	anticipated by the board, of the investment of funds designated
202	202	under Section 51.401 for deposit in the real estate special fund
203	203	account of the permanent school fund. The board may not disclose
204	204	information under this section that is confidential under
205	205	applicable state or federal law. The report must include] the
206	206	following information:
207	207	(1) the total amount of money received under this
208	208	chapter and designated under [by] Section 51.401 for deposit in the
209	209	real estate special fund account of the permanent school fund that
210	210	the board intends to use for a purpose authorized under that section
211	211	[invest];
212	212	(2) [the rate of return the board expects to attain on
213	213	the investment;
214	214	[(3)] the amount of money the board expects to
215	215	distribute to the available school fund or the State Board of
216	216	Education for investment in the permanent school fund under Section
217	217	51.413 [after making the investments];
218	218	(3) [(4)] the distribution [of the board's
219	219	investments] by county of real property interests, including
220	220	mineral or royalty interests, and including the actual or expected
221	221	revenues from the interests, that were acquired by the board for the
222	222	use and benefit of the permanent school fund since the most recently
223	223	submitted report under this section;
224	224	(4) the market value of all investments and assets
225	225	managed by the board and the total market value of the permanent
226	226	school fund;
227	227	[(5) the effect of the board's investments on the level
228	228	of employment, personal income, and capital investment in the
229	229	state;] and
230	230	(5) [(6)] any other information the board considers
231	231	necessary to include in the report.
232	232	[(b) Not later than January 1 of each odd-numbered year, the
233	233	board shall submit to the legislature a report that assesses the
234	234	return and economic impact of the investments reported to the
235	235	legislature before the preceding regular legislative session.]
236	236	SECTION 9. Section 51.413(a), Natural Resources Code, is
237	237	amended to read as follows:
238	238	(a) The board may, by a resolution adopted at a regular
239	239	meeting, release from the real estate special fund account funds
240	240	previously designated under Section 51.401 or used under Section
241	241	51.402 to acquire real property, including mineral or royalty
242	242	interests, [managed, used, or encumbered under Section 51.402 or
243	243	Section 51.4021] to be deposited in the State Treasury to the credit
244	244	of:
245	245	(1) the available school fund; or
246	246	(2) the State Board of Education for investment in the
247	247	permanent school fund.
248	248	SECTION 10. The following provisions of the Natural
249	249	Resources Code are repealed:
250	250	(1) Sections 51.011(a-1) and (a-2); and
251	251	(2) Section 51.402(c).
252	252	SECTION 11. The School Land Board shall:
253	253	(1) not later than September 30, 2019:
254	254	(A) provide the State Board of Education with a
255	255	list of every investment held by the School Land Board that was
256	256	acquired on or after September 1, 2001, other than sovereign lands,
257	257	other state lands, mineral or royalty interests, and commercial
258	258	real estate that is owned and internally managed by the School Land
259	259	Board, including information on unfunded commitments and funding
260	260	obligations related to every investment;
261	261	(B) provide to the State Board of Education a
262	262	balance of the cash holdings as of the most recent month end; and
263	263	(C) provide notice of the enactment of this Act
264	264	to the general partner or other managing entity of every investment
265	265	described by Paragraph (A) of this subdivision;
266	266	(2) not later than November 30, 2019, provide to the
267	267	State Board of Education all financial, contract, investment and
268	268	related records and documents in the possession of the School Land
269	269	Board, the General Land Office, or a service provider to the School
270	270	Land Board or General Land Office relating to an asset described by
271	271	Subdivision (1)(A) of this section;
272	272	(3) not later than July 31, 2020, transfer, at the
273	273	direction of the State Board of Education:
274	274	(A) all assets described by Subdivision (1)(A) of
275	275	this section, provided that if the State Board of Education
276	276	determines in its discretion that it cannot receive an asset, the
277	277	School Land Board shall coordinate with the State Board of
278	278	Education concerning the appropriate timing of a transfer of the
279	279	asset that is in the best interest of the permanent school fund; and
280	280	(B) all cash holdings related to or derived from
281	281	permanent school fund assets, except for an amount necessary to
282	282	make distributions to the available school fund in fiscal years
283	283	2020 and 2021, as directed by previously adopted School Land Board
284	284	resolutions; and
285	285	(4) not later than September 1, 2020, submit to the
286	286	legislature and the State Board of Education a report accounting
287	287	for every investment and all cash holdings transferred to the State
288	288	Board of Education or retained by the School Land Board in
289	289	accordance with this Act.
290	290	SECTION 12. An asset transferred in accordance with this
291	291	Act shall be managed by the State Board of Education in accordance
292	292	with applicable laws, and any investment agreement, contract, or
293	293	similar document related to the asset is assigned to the Texas
294	294	Education Agency as of the date of the transfer of the asset.
295	295	SECTION 13. This Act takes effect September 1, 2019.