Bill Text: TX SB1659 | 2019-2020 | 86th Legislature | Engrossed
Bill Title: Relating to the management of the permanent school fund by the School Land Board and the State Board of Education and a study regarding distributions from the permanent school fund to the available school fund.
Spectrum: Slight Partisan Bill (Republican 5-2)
Status: (Engrossed - Dead) 2019-05-07 - Referred to Public Education [SB1659 Detail]
Download: Texas-2019-SB1659-Engrossed.html
By: Watson, et al. | S.B. No. 1659 |
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relating to the management of the permanent school fund by the | ||
School Land Board and the State Board of Education and a study | ||
regarding distributions from the permanent school fund to the | ||
available school fund. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Chapter 43, Education Code, is amended by adding | ||
Section 43.0052 to read as follows: | ||
Sec. 43.0052. QUARTERLY REPORTS. Each quarter, the State | ||
Board of Education shall provide to the School Land Board a | ||
financial report on the portion of the permanent school fund assets | ||
and funds for which the State Board of Education is responsible. | ||
The report must include: | ||
(1) target and actual asset allocations, by asset | ||
type, based on fair market value or net asset value; | ||
(2) investment performance by asset type; and | ||
(3) benchmarks and benchmark performances. | ||
SECTION 2. Subchapter C, Chapter 32, Natural Resources | ||
Code, is amended by adding Section 32.068 to read as follows: | ||
Sec. 32.068. QUARTERLY REPORTS. Each quarter, the board | ||
shall provide to the State Board of Education a financial report on | ||
the portion of the permanent school fund assets and funds for which | ||
the board is responsible. The report must include: | ||
(1) target and actual asset allocations, by asset | ||
type, based on fair market value or net asset value; | ||
(2) investment performance by asset type; and | ||
(3) benchmarks and benchmark performances. | ||
SECTION 3. Section 51.011, Natural Resources Code, is | ||
amended by amending Subsections (a) and (a-1) and adding Subsection | ||
(a-3) to read as follows: | ||
(a) Any land, [ |
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investment, or other interest, including revenue received from | ||
those sources, and any mineral or royalty interest that is set apart | ||
to the permanent school fund under the constitution and laws of this | ||
state together with the mineral estate in riverbeds, channels, and | ||
the tidelands, including islands, shall be subject to the sole and | ||
exclusive management and control of the [ |
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commissioner under the provisions of this chapter and other | ||
applicable law. | ||
(a-1) The board may acquire, sell, lease, trade, improve, | ||
maintain, protect, or otherwise manage, control, or use land, | ||
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interests, including revenue received from those sources, and any | ||
mineral or royalty interests that are set apart to the permanent | ||
school fund in any manner, at such prices, and under such terms and | ||
conditions as the board finds to be in the best interest of the | ||
fund. | ||
(a-3) During the state fiscal biennium that begins | ||
September 1, 2019, half of all revenue received from mineral or | ||
royalty interests described by Subsection (a), including bonus | ||
payments, surface lease revenues, royalties, and any other type of | ||
revenue received from those interests, shall be transferred each | ||
month to the State Board of Education for investment in the | ||
permanent school fund, and the remainder may be designated for | ||
deposit in the real estate special fund account under Section | ||
51.401(a). This subsection expires September 1, 2021. | ||
SECTION 4. Section 51.401, Natural Resources Code, is | ||
amended by amending Subsection (a) and adding Subsections (c) and | ||
(d) to read as follows: | ||
(a) The board may designate money [ |
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land, mineral or royalty interest, real estate investment, or other | ||
interest, including revenue received from those sources, that is | ||
set apart to the permanent school fund under the constitution and | ||
laws of this state together with the mineral estate in riverbeds, | ||
channels, and the tidelands, including islands, for deposit in the | ||
real estate special fund account of the permanent school fund in the | ||
State Treasury to be used by the board as provided by this | ||
subchapter. | ||
(c) Each quarter, the board shall provide a cashflow report | ||
to the State Board of Education that specifies the source and uses | ||
of all money designated under Subsection (a) and the amount of time | ||
that money from each specific source has remained in the real estate | ||
special fund account. | ||
(d) Notwithstanding Subsection (a), during the state fiscal | ||
biennium that begins September 1, 2019, the board shall transfer | ||
half of all revenue received from mineral or royalty interests to | ||
the State Board of Education, as provided by Section 51.011(a-3). | ||
This subsection expires September 1, 2021. | ||
SECTION 5. Section 51.402(b), Natural Resources Code, is | ||
amended to read as follows: | ||
(b) Before using funds under Subsection (a), the board must | ||
determine, using the prudent investor standard, that the use of the | ||
funds for the intended purpose is authorized by Subsection (a) and | ||
in the best interest of the permanent school fund. [ |
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SECTION 6. Section 51.412, Natural Resources Code, is | ||
amended to read as follows: | ||
Sec. 51.412. REPORTS TO LEGISLATURE. [ |
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October [ |
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submit to the legislature a report that includes[ |
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following information for the most recent state fiscal year: | ||
(1) the total amount of money received under this | ||
chapter, the sources of that money, and the amount designated under | ||
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account of the permanent school fund that the board intends to use | ||
for each purpose authorized under that section [ |
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(2) [ |
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distribute to the available school fund or the State Board of | ||
Education for investment in the permanent school fund under Section | ||
51.413 [ |
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(3) [ |
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investments, including the actual or expected revenues from the | ||
investments, that were acquired by the board for the use and benefit | ||
of the permanent school fund in the most recent state fiscal year | ||
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(4) [ |
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necessary to include in the report. | ||
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SECTION 7. Section 51.413, Natural Resources Code, is | ||
amended to read as follows: | ||
Sec. 51.413. TRANSFERS FROM THE REAL ESTATE SPECIAL FUND | ||
ACCOUNT TO THE AVAILABLE SCHOOL FUND AND THE PERMANENT SCHOOL FUND. | ||
(a) The board shall [ |
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this section and adopted at a regular meeting, release from the real | ||
estate special fund account funds previously designated under | ||
Section 51.401 or managed, used, or encumbered under Section 51.402 | ||
or Section 51.4021 to be deposited in the State Treasury to the | ||
credit of: | ||
(1) the available school fund; or | ||
(2) the State Board of Education for investment in the | ||
permanent school fund. | ||
(b) The board shall adopt rules to establish the procedure | ||
that will be used by the board to determine the dates that transfers | ||
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Education for investment in the permanent school fund from the real | ||
estate special fund account as provided by this section [ |
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(c) On the dates established by rules adopted under | ||
Subsection (b), the board shall release from the real estate | ||
special fund account a total amount for the state fiscal biennium | ||
that equals the amount determined under Subsection (d)(3). The | ||
board may release a higher amount if authorized under the Texas | ||
Constitution. | ||
(d) Not later than July 31 of each even-numbered year, the | ||
chief investment officer of the land office, or other land office | ||
employee designated by the commissioner, shall determine the | ||
following: | ||
(1) an amount based on the average market value, for a | ||
16-calendar-quarter measurement period ending on March 31 of that | ||
year, of the permanent school fund discretionary real assets | ||
investments and cash derived from property belonging to the fund | ||
and managed by the board that is determined by averaging the market | ||
value of those investments and cash on the last day of each of the | ||
calendar quarters in that 16-calendar-quarter measurement period, | ||
multiplying that average market value by 0.06, and rounding the | ||
result up or down to the nearest $5 million increment; | ||
(2) an amount based on the average quarterly change of | ||
the investments and cash described by Subdivision (1), for the | ||
16-calendar-quarter measurement period ending on March 31 of that | ||
year, that is determined by averaging the change in market value | ||
from the last day of a calendar quarter to the last day of the | ||
subsequent calendar quarter, multiplying that average quarterly | ||
change by four, and rounding the result up or down to the nearest $5 | ||
million increment; and | ||
(3) the sum of the amounts determined under | ||
Subdivisions (1) and (2). | ||
SECTION 8. Section 51.4131, Natural Resources Code, is | ||
amended to read as follows: | ||
Sec. 51.4131. REPORT ON ANTICIPATED TRANSFER OF FUNDS; | ||
DEADLINE. (a) Not later than September 1 of each even-numbered | ||
year, the board shall submit to the legislature, comptroller, State | ||
Board of Education, and Legislative Budget Board a report that, | ||
specifically and in detail, states the date a transfer will be made | ||
and the amount of money the board will transfer during the | ||
subsequent state fiscal biennium from the real estate special fund | ||
account of the permanent school fund established under Section | ||
51.401 to the available school fund or the State Board of Education | ||
for investment in the permanent school fund. | ||
(b) The board shall make any transfer described in a report | ||
under Subsection (a) not later than September 1 of the next | ||
even-numbered year. | ||
SECTION 9. Subchapter I, Chapter 51, Natural Resources | ||
Code, is amended by adding Section 51.414 to read as follows: | ||
Sec. 51.414. PERMANENT SCHOOL FUND LIQUID ACCOUNT. | ||
(a) The permanent school fund liquid account is established as an | ||
account in the permanent school fund in the State Treasury to be | ||
used by the board and the State Board of Education as provided by | ||
this section. | ||
(b) Each quarter, the board shall hold a meeting and adopt a | ||
resolution to release from the real estate special fund account | ||
funds designated under Section 51.401 that are not being used for a | ||
purpose listed in Section 51.402(a) and are not required for the | ||
board's anticipated cash needs for the 90-day period following the | ||
date of the meeting, to be deposited to the credit of the permanent | ||
school fund liquid account in the State Treasury. | ||
(c) The State Board of Education may invest funds in the | ||
permanent school fund liquid account. The investments may be made | ||
only in liquid assets in the same manner that the permanent school | ||
fund is managed by the State Board of Education. | ||
(d) Investment income and realized capital gains derived | ||
from funds in the permanent school fund liquid account shall be | ||
deposited in the State Treasury to the credit of the State Board of | ||
Education for investment in the permanent school fund. This | ||
subsection does not require a deposit if the market value of the | ||
assets held in the permanent school fund liquid account is below | ||
cost. | ||
(e) The State Board of Education may use funds in the | ||
permanent school fund liquid account to pay for administrative | ||
costs associated with implementing this section, including costs | ||
associated with contracts for professional investment management, | ||
investment advisory services, or custodial services. | ||
(f) The board shall provide to the State Board of Education | ||
in each quarterly report required by Section 32.068 the board's | ||
anticipated cash needs for the six-month period following the date | ||
of the report, to allow the State Board of Education to ensure that | ||
the board's cash needs may be met as provided by Subsection (g). | ||
(g) Not later than the fifth business day after the date of a | ||
request of the board, the State Board of Education shall release | ||
from the permanent school fund liquid account funds to be deposited | ||
to the credit of the real estate special fund account in the State | ||
Treasury in an amount requested by the board. | ||
SECTION 10. (a) The legislature finds that the periodic | ||
examination of distributions made from the permanent school fund to | ||
the available school fund is necessary for the effective management | ||
of permanent school fund investments. | ||
(b) The Texas Education Agency shall conduct a study | ||
regarding distributions from the permanent school fund to the | ||
available school fund. The study must: | ||
(1) examine historical patterns in the real value of | ||
distributions made from all assets and revenues of the permanent | ||
school fund and historical patterns in the real value of permanent | ||
school fund assets relative to the number of students enrolled in | ||
the public education system; | ||
(2) analyze the impact of underlying data and | ||
methodological assumptions on actual and projected distributions | ||
from the permanent school fund; | ||
(3) seek input from state government officials | ||
involved in public education policy or in the appropriation of | ||
state funds to support the public education system; | ||
(4) examine current and alternative approaches to | ||
balance the needs and interests of present and future beneficiaries | ||
of the permanent school fund and the available school fund; | ||
(5) develop options to maximize available revenue | ||
distributions for the education of students enrolled in the public | ||
education system while preserving the permanent school fund for | ||
future generations; and | ||
(6) consider any other subjects relevant to the | ||
purpose of the study. | ||
(c) The Texas Education Agency may contract for investment | ||
management expertise for the purpose of implementing this section. | ||
(d) Not later than June 1, 2020, the Texas Education Agency | ||
shall prepare and submit a report regarding the results of the study | ||
to the governor, the State Board of Education, the Legislative | ||
Budget Board, the lieutenant governor, the speaker of the house of | ||
representatives, and each legislative standing committee with | ||
primary jurisdiction over public education. | ||
(e) This section expires January 1, 2021. | ||
SECTION 11. This Act takes effect September 1, 2019. |