Texas 2019 - 86th Regular

Texas Senate Bill SB1659 Compare Versions

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Version 2 (New)

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1	1		By: Watson, et al. S.B. No. 1659
	2	+	(In the Senate - Filed March 6, 2019; March 14, 2019, read
	3	+	first time and referred to Committee on Education; April 29, 2019,
	4	+	reported adversely, with favorable Committee Substitute by the
	5	+	following vote: Yeas 9, Nays 0; April 29, 2019, sent to printer.)
	6	+	Click here to see the committee vote
	7	+	COMMITTEE SUBSTITUTE FOR S.B. No. 1659 By: Watson
2	8
3	9
4	10		A BILL TO BE ENTITLED
5	11		AN ACT
6	12		relating to the management of the permanent school fund by the
7	13		School Land Board and the State Board of Education and a study
8	14		regarding distributions from the permanent school fund to the
9	15		available school fund.
10	16		BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	17		SECTION 1. Chapter 43, Education Code, is amended by adding
12	18		Section 43.0052 to read as follows:
13	19		Sec. 43.0052. QUARTERLY REPORTS. Each quarter, the State
14	20		Board of Education shall provide to the School Land Board a
15	21		financial report on the portion of the permanent school fund assets
16	22		and funds for which the State Board of Education is responsible.
17	23		The report must include:
18		-	(1) ~~target~~ and ~~actual asset allocations,~~ ~~by asset~~
19		-	~~type, based on fair market value or net asset value~~;
20		-	(2) ~~investment~~ performance ~~by asset type~~; and
21		-	(3) ~~benchmarks and~~ benchmark ~~performances~~.
	24	+	(1) actual allocation and target allocation of assets;
	25	+	(2) a summary of investment types;
	26	+	(3) asset and sector performance; and
	27	+	(4) benchmark performance.
22	28		SECTION 2. Subchapter C, Chapter 32, Natural Resources
23	29		Code, is amended by adding Section 32.068 to read as follows:
24	30		Sec. 32.068. QUARTERLY REPORTS. Each quarter, the board
25	31		shall provide to the State Board of Education a financial report on
26	32		the portion of the permanent school fund assets and funds for which
27	33		the board is responsible. The report must include:
28		-	(1) ~~target~~ and ~~actual asset allocations,~~ ~~by asset~~
29		-	~~type, based on fair market value or net asset value~~;
30		-	(2) ~~investment~~ performance ~~by asset type~~; and
31		-	(3) ~~benchmarks and~~ benchmark ~~performances~~.
	34	+	(1) actual allocation and target allocation of assets;
	35	+	(2) a summary of investment types;
	36	+	(3) asset and sector performance; and
	37	+	(4) benchmark performance.
32	38		SECTION 3. Section 51.011, Natural Resources Code, is
33	39		amended by amending Subsections (a) and (a-1) and adding Subsection
34	40		(a-3) to read as follows:
35	41		(a) Any land, [mineral or royalty interest,] real estate
36	42		investment, or other interest, including revenue received from
37	43		those sources, and any mineral or royalty interest that is set apart
38	44		to the permanent school fund under the constitution and laws of this
39	45		state together with the mineral estate in riverbeds, channels, and
40	46		the tidelands, including islands, shall be subject to the sole and
41	47		exclusive management and control of the [school land] board and the
42	48		commissioner under the provisions of this chapter and other
43	49		applicable law.
44	50		(a-1) The board may acquire, sell, lease, trade, improve,
45	51		maintain, protect, or otherwise manage, control, or use land,
46	52		[mineral and royalty interests,] real estate investments, or other
47	53		interests, including revenue received from those sources, and any
48	54		mineral or royalty interests that are set apart to the permanent
49	55		school fund in any manner, at such prices, and under such terms and
50	56		conditions as the board finds to be in the best interest of the
51	57		fund.
52		-	(a-3) During the state fiscal biennium that begins
53		-	September 1, 2019, half of all revenue received from mineral or
54		-	royalty interests described by Subsection (a), including bonus
55		-	payments, surface lease revenues, royalties, and any other type of
56		-	revenue received from those interests, shall be transferred each
57		-	month to the State Board of Education for investment in the
58		-	permanent school fund, and the remainder may be designated for
59		-	deposit in the real estate special fund account under Section
60		-	51.401(a). This subsection expires September 1, 2021.
	58	+	(a-3) All revenue received from mineral or royalty
	59	+	interests described by Subsection (a), including bonus payments,
	60	+	surface lease revenues, royalties, and any other type of revenue
	61	+	received from those interests, shall be transferred each month to
	62	+	the State Board of Education for investment in the permanent school
	63	+	fund.
61	64		SECTION 4. Section 51.401, Natural Resources Code, is
62		-	amended by amending Subsection (a) and adding ~~Subsections~~ (c) ~~and~~
63		-	~~(d) to~~ read as follows:
	65	+	amended by amending Subsection (a) and adding Subsection (c) to
	66	+	read as follows:
64	67		(a) The board may designate money [funds] received from any
65		-	land, mineral or royalty interest, real estate investment, or ~~other~~
66		-	interest, including revenue received from those sources, that is
67		-	set apart to the permanent school fund under the constitution and
	68	+	land, [mineral or royalty interest,] real estate investment, or
	69	+	other interest, including revenue received from those sources, that
	70	+	is set apart to the permanent school fund under the constitution and
68	71		laws of this state together with the mineral estate in riverbeds,
69	72		channels, and the tidelands, including islands, for deposit in the
70	73		real estate special fund account of the permanent school fund in the
71	74		State Treasury to be used by the board as provided by this
72	75		subchapter.
73	76		(c) Each quarter, the board shall provide a cashflow report
74	77		to the State Board of Education that specifies the source and uses
75	78		of all money designated under Subsection (a) and the amount of time
76	79		that money from each specific source has remained in the real estate
77	80		special fund account.
78		-	(d) Notwithstanding Subsection (a), during the state fiscal
79		-	biennium that begins September 1, 2019, the board shall transfer
80		-	half of all revenue received from mineral or royalty interests to
81		-	the State Board of Education, as provided by Section 51.011(a-3).
82		-	This subsection expires September 1, 2021.
83	81		SECTION 5. Section 51.402(b), Natural Resources Code, is
84	82		amended to read as follows:
85	83		(b) Before using funds under Subsection (a), the board must
86	84		determine, using the prudent investor standard, that the use of the
87	85		funds for the intended purpose is authorized by Subsection (a) and
88	86		in the best interest of the permanent school fund. [A determination
89	87		by the board on the use of funds under this section is conclusive
90	88		unless the determination was made as a result of fraud or obvious
91	89		error.]
92	90		SECTION 6. Section 51.412, Natural Resources Code, is
93	91		amended to read as follows:
94	92		Sec. 51.412. REPORTS TO LEGISLATURE. [(a)] Not later than
95	93		October [September] 1 of each [even-numbered] year, the board shall
96	94		submit to the legislature a report that includes[, specifically and
97	95		in detail, assesses the direct and indirect economic impact, as
98	96		anticipated by the board, of the investment of funds designated
99	97		under Section 51.401 for deposit in the real estate special fund
100	98		account of the permanent school fund. The board may not disclose
101	99		information under this section that is confidential under
102	100		applicable state or federal law. The report must include] the
103	101		following information for the most recent state fiscal year:
104	102		(1) the total amount of money received under this
105	103		chapter, the sources of that money, and the amount designated under
106	104		[by] Section 51.401 for deposit in the real estate special fund
107	105		account of the permanent school fund that the board intends to use
108	106		for each purpose authorized under that section [invest];
109	107		(2) [the rate of return the board expects to attain on
110	108		the investment;
111	109		[(3)] the amount of money the board expects to
112	110		distribute to the available school fund or the State Board of
113	111		Education for investment in the permanent school fund under Section
114	112		51.413 [after making the investments];
115	113		(3) [(4)] the distribution by location of
116	114		investments, including the actual or expected revenues from the
117	115		investments, that were acquired by the board for the use and benefit
118	116		of the permanent school fund in the most recent state fiscal year
119	117		[of the board's investments by county];
120	118		[(5) the effect of the board's investments on the level
121	119		of employment, personal income, and capital investment in the
122	120		state;] and
123	121		(4) [(6)] any other information the board considers
124	122		necessary to include in the report.
125	123		[(b) Not later than January 1 of each odd-numbered year, the
126	124		board shall submit to the legislature a report that assesses the
127	125		return and economic impact of the investments reported to the
128	126		legislature before the preceding regular legislative session.]
129	127		SECTION 7. Section 51.413, Natural Resources Code, is
130	128		amended to read as follows:
131	129		Sec. 51.413. TRANSFERS FROM THE REAL ESTATE SPECIAL FUND
132	130		ACCOUNT TO THE AVAILABLE SCHOOL FUND AND THE PERMANENT SCHOOL FUND.
133	131		(a) The board shall [may], by a resolution made in accordance with
134	132		this section and adopted at a regular meeting, release from the real
135	133		estate special fund account funds previously designated under
136	134		Section 51.401 or managed, used, or encumbered under Section 51.402
137	135		or Section 51.4021 to be deposited in the State Treasury to the
138	136		credit of:
139	137		(1) the available school fund; or
140	138		(2) the State Board of Education for investment in the
141	139		permanent school fund.
142	140		(b) The board shall adopt rules to establish the procedure
143	141		that will be used by the board to determine the dates that transfers
144	142		[date a transfer] will be made [and the amount of money that will be
145	143		transferred] to the available school fund or to the State Board of
146	144		Education for investment in the permanent school fund from the real
147	145		estate special fund account as provided by this section [Subsection
148	146		(a)].
149	147		(c) On the dates established by rules adopted under
150	148		Subsection (b), the board shall release from the real estate
151	149		special fund account a total amount for the state fiscal biennium
152	150		that equals the amount determined under Subsection (d)(3). The
153	151		board may release a higher amount if authorized under the Texas
154	152		Constitution.
155	153		(d) Not later than July 31 of each even-numbered year, the
156	154		chief investment officer of the land office, or other land office
157	155		employee designated by the commissioner, shall determine the
158	156		following:
159	157		(1) an amount based on the average market value, for a
160	158		16-calendar-quarter measurement period ending on March 31 of that
161	159		year, of the permanent school fund discretionary real assets
162	160		investments and cash derived from property belonging to the fund
163	161		and managed by the board that is determined by averaging the market
164	162		value of those investments and cash on the last day of each of the
165	163		calendar quarters in that 16-calendar-quarter measurement period,
166	164		multiplying that average market value by 0.06, and rounding the
167	165		result up or down to the nearest $5 million increment;
168	166		(2) an amount based on the average quarterly change of
169	167		the investments and cash described by Subdivision (1), for the
170	168		16-calendar-quarter measurement period ending on March 31 of that
171	169		year, that is determined by averaging the change in market value
172	170		from the last day of a calendar quarter to the last day of the
173	171		subsequent calendar quarter, multiplying that average quarterly
174	172		change by four, and rounding the result up or down to the nearest $5
175	173		million increment; and
176	174		(3) the sum of the amounts determined under
177	175		Subdivisions (1) and (2).
178	176		SECTION 8. Section 51.4131, Natural Resources Code, is
179	177		amended to read as follows:
180	178		Sec. 51.4131. REPORT ON ANTICIPATED TRANSFER OF FUNDS;
181	179		DEADLINE. (a) Not later than September 1 of each even-numbered
182	180		year, the board shall submit to the legislature, comptroller, State
183	181		Board of Education, and Legislative Budget Board a report that,
184	182		specifically and in detail, states the date a transfer will be made
185	183		and the amount of money the board will transfer during the
186	184		subsequent state fiscal biennium from the real estate special fund
187	185		account of the permanent school fund established under Section
188	186		51.401 to the available school fund or the State Board of Education
189	187		for investment in the permanent school fund.
190	188		(b) The board shall make any transfer described in a report
191	189		under Subsection (a) not later than September 1 of the next
192	190		even-numbered year.
193	191		SECTION 9. Subchapter I, Chapter 51, Natural Resources
194	192		Code, is amended by adding Section 51.414 to read as follows:
195		-	Sec. 51.414. PERMANENT SCHOOL FUND LIQUID ACCOUNT.
196		-	(a) The permanent school fund liquid account is established as an
197		-	account in the permanent school fund in the State Treasury to be
198		-	used by the board and the State Board of Education as provided by
199		-	this section.
	193	+	Sec. 51.414. PERMANENT SCHOOL FUND LIQUID ACCOUNT. (a) The
	194	+	permanent school fund liquid account is established as an account
	195	+	in the permanent school fund in the State Treasury to be used by the
	196	+	board and the State Board of Education as provided by this section.
200	197		(b) Each quarter, the board shall hold a meeting and adopt a
201	198		resolution to release from the real estate special fund account
202	199		funds designated under Section 51.401 that are not being used for a
203	200		purpose listed in Section 51.402(a) and are not required for the
204		-	board's ~~anticipated~~ cash needs for the 90-day period following the
205		-	~~date of the~~ meeting, to be deposited to the credit of the permanent
206		-	~~school fund~~ liquid account in the State Treasury.
	201	+	board's cash needs for the 90-day period following the date of the
	202	+	meeting, to be deposited to the credit of the permanent school fund
	203	+	liquid account in the State Treasury.
207	204		(c) The State Board of Education may invest funds in the
208	205		permanent school fund liquid account. The investments may be made
209		-	only in liquid assets in the ~~same manner that the permanent school~~
210		-	fund is managed by the State ~~Board of Education.~~
211		-	~~(d) Investment income and realized capital gains derived~~
212		-	from funds ~~in the permanent school fund liquid account shall be~~
213		-	~~deposited~~ in the ~~State Treasury to the credit of the State Board of~~
214		-	Education for ~~investment in the permanent school fund. This~~
215		-	subsection does not ~~require a deposit if the market value of the~~
216		-	assets held in the permanent ~~school fund liquid account is below~~
217		-	cost.
	206	+	only in liquid assets or markets, and the account is managed in the
	207	+	same manner that the permanent school fund is managed by the State
	208	+	Board of Education.
	209	+	(d) Investment income and capital gains derived from funds
	210	+	in the permanent school fund liquid account shall be deposited in
	211	+	the State Treasury to the credit of the State Board of Education for
	212	+	investment in the permanent school fund. This subsection does not
	213	+	require a deposit if the value of the assets held in the permanent
	214	+	school fund liquid account is below cost value.
218	215		(e) The State Board of Education may use funds in the
219	216		permanent school fund liquid account to pay for administrative
220	217		costs associated with implementing this section, including costs
221	218		associated with contracts for professional investment management,
222	219		investment advisory services, or custodial services.
223	220		(f) The board shall provide to the State Board of Education
224	221		in each quarterly report required by Section 32.068 the board's
225	222		anticipated cash needs for the six-month period following the date
226	223		of the report, to allow the State Board of Education to ensure that
227	224		the board's cash needs may be met as provided by Subsection (g).
228		-	(g) Not later than the fifth business day after the date of a
	225	+	The board or land office must provide notice to the State Board of
	226	+	Education of a revision to the board's anticipated cash needs
	227	+	provided in the most recent report not later than the next business
	228	+	day following the date the board or land office determines a
	229	+	revision is necessary.
	230	+	(g) Not later than the 10th business day after the date of a
229	231		request of the board, the State Board of Education shall release
230	232		from the permanent school fund liquid account funds to be deposited
231	233		to the credit of the real estate special fund account in the State
232		-	Treasury in an amount requested by the board.
	234	+	Treasury in an amount requested by the board that is consistent with
	235	+	the reports provided under Subsection (f).
233	236		SECTION 10. (a) The legislature finds that the periodic
234	237		examination of distributions made from the permanent school fund to
235	238		the available school fund is necessary for the effective management
236	239		of permanent school fund investments.
237	240		(b) The Texas Education Agency shall conduct a study
238	241		regarding distributions from the permanent school fund to the
239	242		available school fund. The study must:
240	243		(1) examine historical patterns in the real value of
241	244		distributions made from all assets and revenues of the permanent
242	245		school fund and historical patterns in the real value of permanent
243	246		school fund assets relative to the number of students enrolled in
244	247		the public education system;
245	248		(2) analyze the impact of underlying data and
246	249		methodological assumptions on actual and projected distributions
247	250		from the permanent school fund;
248	251		(3) seek input from state government officials
249	252		involved in public education policy or in the appropriation of
250	253		state funds to support the public education system;
251	254		(4) examine current and alternative approaches to
252	255		balance the needs and interests of present and future beneficiaries
253	256		of the permanent school fund and the available school fund;
254	257		(5) develop options to maximize available revenue
255	258		distributions for the education of students enrolled in the public
256	259		education system while preserving the permanent school fund for
257	260		future generations; and
258	261		(6) consider any other subjects relevant to the
259	262		purpose of the study.
260	263		(c) The Texas Education Agency may contract for investment
261	264		management expertise for the purpose of implementing this section.
262	265		(d) Not later than June 1, 2020, the Texas Education Agency
263	266		shall prepare and submit a report regarding the results of the study
264	267		to the governor, the State Board of Education, the Legislative
265	268		Budget Board, the lieutenant governor, the speaker of the house of
266	269		representatives, and each legislative standing committee with
267	270		primary jurisdiction over public education.
268	271		(e) This section expires January 1, 2021.
269	272		SECTION 11. This Act takes effect September 1, 2019.
	273	+	* * * * *