TX
Texas Senate Bill SB13

Texas 2021 - 87th Regular

Texas Senate Bill SB13 Compare Versions

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1-S.B. No. 13
1+By: Birdwell, et al. S.B. No. 13
2+ (King of Parker, Craddick, Price, King of Hemphill,
3+ Bell of Montgomery)
24
35
6+ A BILL TO BE ENTITLED
47 AN ACT
58 relating to state contracts with and investments in certain
69 companies that boycott energy companies.
710 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
811 SECTION 1. Subtitle A, Title 8, Government Code, is amended
912 by adding Chapter 809 to read as follows:
1013 CHAPTER 809. PROHIBITION ON INVESTMENT IN FINANCIAL COMPANIES THAT
1114 BOYCOTT CERTAIN ENERGY COMPANIES
1215 SUBCHAPTER A. GENERAL PROVISIONS
1316 Sec. 809.001. DEFINITIONS. In this chapter:
14- (1) "Boycott energy company" means, without an
15- ordinary business purpose, refusing to deal with, terminating
16- business activities with, or otherwise taking any action that is
17- intended to penalize, inflict economic harm on, or limit commercial
18- relations with a company because the company:
17+ (1) "Boycott energy company" means refusing to deal
18+ with, terminating business activities with, or otherwise taking any
19+ action that is, solely or primarily, intended to penalize, inflict
20+ economic harm on, or limit commercial relations with a company
21+ because the company:
1922 (A) engages in the exploration, production,
2023 utilization, transportation, sale, or manufacturing of fossil
2124 fuel-based energy and does not commit or pledge to meet
2225 environmental standards beyond applicable federal and state law; or
2326 (B) does business with a company described by
2427 Paragraph (A).
2528 (2) "Company" means a for-profit sole proprietorship,
2629 organization, association, corporation, partnership, joint
2730 venture, limited partnership, limited liability partnership, or
2831 limited liability company, including a wholly owned subsidiary,
2932 majority-owned subsidiary, parent company, or affiliate of those
3033 entities or business associations, that exists to make a profit.
3134 (3) "Direct holdings" means, with respect to a
3235 financial company, all securities of that financial company held
3336 directly by a state governmental entity in an account or fund in
3437 which a state governmental entity owns all shares or interests.
3538 (4) "Financial company" means a publicly traded
3639 financial services, banking, or investment company.
3740 (5) "Indirect holdings" means, with respect to a
3841 financial company, all securities of that financial company held in
3942 an account or fund, such as a mutual fund, managed by one or more
4043 persons not employed by a state governmental entity, in which the
4144 state governmental entity owns shares or interests together with
4245 other investors not subject to the provisions of this chapter. The
4346 term does not include money invested under a plan described by
4447 Section 401(k) or 457 of the Internal Revenue Code of 1986.
4548 (6) "Listed financial company" means a financial
4649 company listed by the comptroller under Section 809.051.
4750 (7) "State governmental entity" means:
4851 (A) the Employees Retirement System of Texas,
4952 including a retirement system administered by that system;
5053 (B) the Teacher Retirement System of Texas;
5154 (C) the Texas Municipal Retirement System;
5255 (D) the Texas County and District Retirement
5356 System;
5457 (E) the Texas Emergency Services Retirement
5558 System; and
5659 (F) the permanent school fund.
5760 Sec. 809.002. OTHER LEGAL OBLIGATIONS. With respect to
5861 actions taken in compliance with this chapter, including all good
5962 faith determinations regarding financial companies as required by
6063 this chapter, a state governmental entity and the comptroller are
6164 exempt from any conflicting statutory or common law obligations,
6265 including any obligations with respect to making investments,
6366 divesting from any investment, preparing or maintaining any list of
6467 financial companies, or choosing asset managers, investment funds,
6568 or investments for the state governmental entity's securities
6669 portfolios.
6770 Sec. 809.003. INDEMNIFICATION OF STATE GOVERNMENTAL
6871 ENTITIES, EMPLOYEES, AND OTHERS. In a cause of action based on an
6972 action, inaction, decision, divestment, investment, financial
7073 company communication, report, or other determination made or taken
7174 in connection with this chapter, the state shall, without regard to
7275 whether the person performed services for compensation, indemnify
7376 and hold harmless for actual damages, court costs, and attorney's
7477 fees adjudged against, and defend:
7578 (1) an employee, a member of the governing body, or any
7679 other officer of a state governmental entity;
7780 (2) a contractor of a state governmental entity;
7881 (3) a former employee, a former member of the
7982 governing body, or any other former officer of a state governmental
8083 entity who was an employee, member of the governing body, or other
8184 officer when the act or omission on which the damages are based
8285 occurred;
8386 (4) a former contractor of a state governmental entity
8487 who was a contractor when the act or omission on which the damages
8588 are based occurred; and
8689 (5) a state governmental entity.
8790 Sec. 809.004. NO PRIVATE CAUSE OF ACTION. (a) A person,
8891 including a member, retiree, or beneficiary of a retirement system
8992 to which this chapter applies, an association, a research firm, a
9093 financial company, or any other person may not sue or pursue a
9194 private cause of action against the state, a state governmental
9295 entity, a current or former employee, a member of the governing
9396 body, or any other officer of a state governmental entity, or a
9497 contractor of a state governmental entity, for any claim or cause of
9598 action, including breach of fiduciary duty, or for violation of any
9699 constitutional, statutory, or regulatory requirement in connection
97100 with any action, inaction, decision, divestment, investment,
98101 financial company communication, report, or other determination
99102 made or taken in connection with this chapter.
100103 (b) A person who files suit against the state, a state
101104 governmental entity, an employee, a member of the governing body,
102105 or any other officer of a state governmental entity, or a contractor
103106 of a state governmental entity, is liable for paying the costs and
104107 attorney's fees of a person sued in violation of this section.
105108 Sec. 809.005. INAPPLICABILITY OF REQUIREMENTS INCONSISTENT
106109 WITH FIDUCIARY RESPONSIBILITIES AND RELATED DUTIES. A state
107110 governmental entity is not subject to a requirement of this chapter
108111 if the state governmental entity determines that the requirement
109112 would be inconsistent with its fiduciary responsibility with
110113 respect to the investment of entity assets or other duties imposed
111114 by law relating to the investment of entity assets, including the
112115 duty of care established under Section 67, Article XVI, Texas
113116 Constitution.
114117 Sec. 809.006. RELIANCE ON FINANCIAL COMPANY RESPONSE. The
115118 comptroller and a state governmental entity may rely on a financial
116119 company's response to a notice or communication made under this
117120 chapter without conducting any further investigation, research, or
118121 inquiry.
119122 SUBCHAPTER B. DUTIES REGARDING INVESTMENTS
120123 Sec. 809.051. LISTED FINANCIAL COMPANIES. (a) The
121124 comptroller shall prepare and maintain, and provide to each state
122125 governmental entity, a list of all financial companies that boycott
123126 energy companies. In maintaining the list, the comptroller may:
124127 (1) review and rely, as appropriate in the
125128 comptroller's judgment, on publicly available information
126129 regarding financial companies, including information provided by
127130 the state, nonprofit organizations, research firms, international
128131 organizations, and governmental entities; and
129132 (2) request written verification from a financial
130133 company that it does not boycott energy companies and rely, as
131134 appropriate in the comptroller's judgment and without conducting
132135 further investigation, research, or inquiry, on a financial
133136 company's written response to the request.
134137 (b) A financial company that fails to provide to the
135138 comptroller a written verification under Subsection (a)(2) before
136139 the 61st day after receiving the request from the comptroller is
137140 presumed to be boycotting energy companies.
138141 (c) The comptroller shall update the list annually or more
139142 often as the comptroller considers necessary, but not more often
140143 than quarterly, based on information from, among other sources,
141144 those listed in Subsection (a).
142145 (d) Not later than the 30th day after the date the list of
143146 financial companies that boycott energy companies is first provided
144147 or updated, the comptroller shall file the list with the presiding
145148 officer of each house of the legislature and the attorney general
146149 and post the list on a publicly available Internet website.
147150 Sec. 809.052. IDENTIFICATION OF INVESTMENT IN LISTED
148151 FINANCIAL COMPANIES. Not later than the 30th day after the date a
149152 state governmental entity receives the list provided under Section
150153 809.051, the state governmental entity shall notify the comptroller
151154 of the listed financial companies in which the state governmental
152155 entity owns direct holdings or indirect holdings.
153156 Sec. 809.053. ACTIONS RELATING TO LISTED FINANCIAL COMPANY.
154157 (a) For each listed financial company identified under Section
155158 809.052, the state governmental entity shall send a written notice:
156159 (1) informing the financial company of its status as a
157160 listed financial company;
158161 (2) warning the financial company that it may become
159162 subject to divestment by state governmental entities after the
160163 expiration of the period described by Subsection (b); and
161164 (3) offering the financial company the opportunity to
162165 clarify its activities related to companies described by Sections
163166 809.001(1)(A) and (B).
164167 (b) Not later than the 90th day after the date the financial
165168 company receives notice under Subsection (a), the financial company
166169 must cease boycotting energy companies in order to avoid qualifying
167170 for divestment by state governmental entities.
168171 (c) If, during the time provided by Subsection (b), the
169172 financial company ceases boycotting energy companies, the
170173 comptroller shall remove the financial company from the list
171174 maintained under Section 809.051 and this chapter will no longer
172175 apply to the financial company unless it resumes boycotting energy
173176 companies.
174177 (d) If, after the time provided by Subsection (b) expires,
175178 the financial company continues to boycott energy companies, the
176179 state governmental entity shall sell, redeem, divest, or withdraw
177180 all publicly traded securities of the financial company, except
178181 securities described by Section 809.055, according to the schedule
179182 provided by Section 809.054.
180183 Sec. 809.054. DIVESTMENT OF ASSETS. (a) A state
181184 governmental entity required to sell, redeem, divest, or withdraw
182185 all publicly traded securities of a listed financial company shall
183186 comply with the following schedule:
184187 (1) at least 50 percent of those assets must be removed
185188 from the state governmental entity's assets under management not
186189 later than the 180th day after the date the financial company
187190 receives notice under Section 809.053 or Subsection (b) unless the
188191 state governmental entity determines, based on a good faith
189192 exercise of its fiduciary discretion and subject to Subdivision
190193 (2), that a later date is more prudent; and
191194 (2) 100 percent of those assets must be removed from
192195 the state governmental entity's assets under management not later
193196 than the 360th day after the date the financial company receives
194197 notice under Section 809.053 or Subsection (b).
195198 (b) If a financial company that ceased boycotting energy
196199 companies after receiving notice under Section 809.053 resumes its
197200 boycott, the state governmental entity shall send a written notice
198201 to the financial company informing it that the state governmental
199202 entity will sell, redeem, divest, or withdraw all publicly traded
200203 securities of the financial company according to the schedule in
201204 Subsection (a).
202205 (c) Except as provided by Subsection (a), a state
203206 governmental entity may delay the schedule for divestment under
204207 that subsection only to the extent that the state governmental
205208 entity determines, in the state governmental entity's good faith
206209 judgment, and consistent with the entity's fiduciary duty, that
207210 divestment from listed financial companies will likely result in a
208211 loss in value or a benchmark deviation described by Section
209212 809.056(a). If a state governmental entity delays the schedule for
210213 divestment, the state governmental entity shall submit a report to
211214 the presiding officer of each house of the legislature and the
212215 attorney general stating the reasons and justification for the
213216 state governmental entity's delay in divestment from listed
214217 financial companies. The report must include documentation
215218 supporting its determination that the divestment would result in a
216219 loss in value or a benchmark deviation described by Section
217220 809.056(a), including objective numerical estimates. The state
218221 governmental entity shall update the report every six months.
219222 Sec. 809.055. INVESTMENTS EXEMPTED FROM DIVESTMENT. A
220223 state governmental entity is not required to divest from any
221224 indirect holdings in actively or passively managed investment funds
222225 or private equity funds. The state governmental entity shall
223226 submit letters to the managers of each investment fund containing
224227 listed financial companies requesting that they remove those
225228 financial companies from the fund or create a similar actively or
226229 passively managed fund with indirect holdings devoid of listed
227230 financial companies. If a manager creates a similar fund with
228231 substantially the same management fees and same level of investment
229232 risk and anticipated return, the state governmental entity may
230233 replace all applicable investments with investments in the similar
231234 fund in a time frame consistent with prudent fiduciary standards
232235 but not later than the 450th day after the date the fund is created.
233236 Sec. 809.056. AUTHORIZED INVESTMENT IN LISTED FINANCIAL
234237 COMPANIES. (a) A state governmental entity may cease divesting
235238 from one or more listed financial companies only if clear and
236239 convincing evidence shows that:
237240 (1) the state governmental entity has suffered or will
238241 suffer a loss in the hypothetical value of all assets under
239242 management by the state governmental entity as a result of having to
240243 divest from listed financial companies under this chapter; or
241244 (2) an individual portfolio that uses a
242245 benchmark-aware strategy would be subject to an aggregate expected
243246 deviation from its benchmark as a result of having to divest from
244247 listed financial companies under this chapter.
245248 (b) A state governmental entity may cease divesting from a
246249 listed financial company as provided by this section only to the
247250 extent necessary to ensure that the state governmental entity does
248251 not suffer a loss in value or deviate from its benchmark as
249252 described by Subsection (a).
250253 (c) Before a state governmental entity may cease divesting
251254 from a listed financial company under this section, the state
252255 governmental entity must provide a written report to the
253256 comptroller, the presiding officer of each house of the
254257 legislature, and the attorney general setting forth the reason and
255258 justification, supported by clear and convincing evidence, for
256259 deciding to cease divestment or to remain invested in a listed
257260 financial company.
258261 (d) The state governmental entity shall update the report
259262 required by Subsection (c) semiannually, as applicable.
260263 (e) This section does not apply to reinvestment in a
261264 financial company that is no longer a listed financial company.
262265 Sec. 809.057. PROHIBITED INVESTMENTS. Except as provided
263266 by Section 809.056, a state governmental entity may not acquire
264267 securities of a listed financial company.
265268 SUBCHAPTER C. REPORT; ENFORCEMENT
266269 Sec. 809.101. REPORT. Not later than January 5 of each
267270 year, each state governmental entity shall file a publicly
268271 available report with the presiding officer of each house of the
269272 legislature and the attorney general that:
270273 (1) identifies all securities sold, redeemed,
271274 divested, or withdrawn in compliance with Section 809.054;
272275 (2) identifies all prohibited investments under
273276 Section 809.057; and
274277 (3) summarizes any changes made under Section 809.055.
275278 Sec. 809.102. ENFORCEMENT. The attorney general may bring
276279 any action necessary to enforce this chapter.
277280 SECTION 2. Subtitle F, Title 10, Government Code, is
278281 amended by adding Chapter 2274 to read as follows:
279282 CHAPTER 2274. PROHIBITION ON CONTRACTS WITH COMPANIES BOYCOTTING
280283 CERTAIN ENERGY COMPANIES
281284 Sec. 2274.001. DEFINITIONS. In this chapter:
282285 (1) "Boycott energy company" has the meaning assigned
283286 by Section 809.001.
284287 (2) "Company" has the meaning assigned by Section
285288 809.001, except that the term does not include a sole
286289 proprietorship.
287290 (3) "Governmental entity" has the meaning assigned by
288291 Section 2251.001.
289292 Sec. 2274.002. PROVISION REQUIRED IN CONTRACT. (a) This
290293 section applies only to a contract that:
291294 (1) is between a governmental entity and a company
292295 with 10 or more full-time employees; and
293296 (2) has a value of $100,000 or more that is to be paid
294297 wholly or partly from public funds of the governmental entity.
295- (b) Except as provided by Subsection (c), a governmental
298+ (b) Except as provided by Section 2274.003, a governmental
296299 entity may not enter into a contract with a company for goods or
297300 services unless the contract contains a written verification from
298301 the company that it:
299302 (1) does not boycott energy companies; and
300303 (2) will not boycott energy companies during the term
301304 of the contract.
302- (c) Subsection (b) does not apply to a governmental entity
303- that determines the requirements of Subsection (b) are inconsistent
304- with the governmental entity's constitutional or statutory duties
305- related to the issuance, incurrence, or management of debt
306- obligations or the deposit, custody, management, borrowing, or
307- investment of funds.
305+ Sec. 2274.003. CERTAIN CONTRACTS EXEMPTED. (a) A contract
306+ entered into in connection with or relating to the issuance, sale,
307+ or delivery of notes under Subchapter H, Chapter 404, or the
308+ administration of matters related to the notes, including the
309+ investment of note proceeds, is exempt from this chapter if, in the
310+ comptroller's sole discretion, the comptroller determines that
311+ compliance with Section 2274.002 is likely to prevent:
312+ (1) an issuance, sale, or delivery that is sufficient
313+ to address the general revenue cash flow shortfall forecast; or
314+ (2) the administration of matters related to the
315+ notes.
316+ (b) Before making a determination under Subsection (a), the
317+ comptroller must:
318+ (1) survey potential respondents or bidders to a
319+ solicitation for a contract described by Subsection (a) to
320+ determine the number of qualified potential respondents or bidders
321+ that are able to provide the written verification required by
322+ Section 2274.002; and
323+ (2) evaluate the historical bidding performance of
324+ qualified potential bidders.
308325 SECTION 3. Chapter 2274, Government Code, as added by this
309326 Act, applies only to a contract entered into on or after the
310327 effective date of this Act. A contract entered into before that
311328 date is governed by the law in effect on the date the contract was
312329 entered into, and the former law is continued in effect for that
313330 purpose.
314331 SECTION 4. This Act takes effect September 1, 2021.
315- ______________________________ ______________________________
316- President of the Senate Speaker of the House
317- I hereby certify that S.B. No. 13 passed the Senate on
318- April 15, 2021, by the following vote: Yeas 26, Nays 4;
319- May 12, 2021, Senate refused to concur in House amendments and
320- requested appointment of Conference Committee; May 14, 2021, House
321- granted request of the Senate; May 28, 2021, Senate adopted
322- Conference Committee Report by the following vote: Yeas 28,
323- Nays 3.
324- ______________________________
325- Secretary of the Senate
326- I hereby certify that S.B. No. 13 passed the House, with
327- amendments, on May 4, 2021, by the following vote: Yeas 105,
328- Nays 40, two present not voting; May 14, 2021, House granted
329- request of the Senate for appointment of Conference Committee;
330- May 28, 2021, House adopted Conference Committee Report by the
331- following vote: Yeas 121, Nays 26, one present not voting.
332- ______________________________
333- Chief Clerk of the House
334- Approved:
335- ______________________________
336- Date
337- ______________________________
338- Governor