Bill Text: TX SB1232 | 2021-2022 | 87th Legislature | Enrolled

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Bill Title: Relating to the management and investment of the permanent school fund, including authorizing the creation of the Texas Permanent School Fund Corporation to manage and invest the fund and limiting the authority of the School Land Board to manage and invest the fund if the corporation is created.

Spectrum: Partisan Bill (Republican 2-0)

Status: (Passed) 2021-06-16 - See remarks for effective date [SB1232 Detail]

Download: Texas-2021-SB1232-Enrolled.html

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S.B. No. 1232

AN ACT
relating to the management and investment of the permanent school
fund, including authorizing the creation of the Texas Permanent
School Fund Corporation to manage and invest the fund and limiting
the authority of the School Land Board to manage and invest the fund
if the corporation is created.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
ARTICLE 1. STATE BOARD OF EDUCATION'S MANAGEMENT OF PERMANENT
SCHOOL FUND
SECTION 1.01. Sections 43.001, 43.002, 43.003, 43.0031,
43.0032, 43.0033, 43.0034, 43.004, 43.005, 43.0051, 43.006,
43.007, 43.009, 43.010, 43.011, 43.012, 43.013, 43.014, 43.015,
43.016, 43.017, 43.018, 43.019, and 43.020, Education Code, are
redesignated as Subchapter A, Chapter 43, Education Code, and a
heading for Subchapter A is added to read as follows:
SUBCHAPTER A. GENERAL PROVISIONS
SECTION 1.02. Section 43.001(a), Education Code, is amended
to read as follows:
(a) Except as provided by Subsection (b), the permanent
school fund, which is a perpetual endowment for the public schools
of this state, consists of:
(1) all land appropriated for the public schools by
the constitution and laws of this state;
(2) all of the unappropriated public domain remaining
in this state, including all land recovered by the state by suit or
otherwise except pine forest land as described [defined] by Section
88.111 and property described by Section 12.128;
(3) all proceeds from the authorized sale of permanent
school fund land;
(4) all proceeds from the lawful sale of any other
properties belonging to the permanent school fund;
(5) all investments authorized by Section 43.003 of
assets [properties] belonging to the permanent school fund; and
(6) all income from the mineral development of
permanent school fund land, including income from mineral
development of riverbeds and other submerged land.
SECTION 1.03. Section 43.003, Education Code, is amended to
read as follows:
Sec. 43.003. INVESTMENT OF PERMANENT SCHOOL FUND. The [In
compliance with this section, the] State Board of Education may
invest the permanent school fund as authorized by Section 5(f),
Article VII, Texas Constitution [in the types of securities, which
must be carefully examined by the State Board of Education and be
found to be safe and proper investments for the fund as specified
below:
[(1) securities, bonds, or other obligations issued,
insured, or guaranteed in any manner by the United States
Government or any of its agencies and in bonds issued by this state;
[(2) obligations and pledges of The University of
Texas;
[(3) corporate bonds, debentures, or obligations of
United States corporations of at least "A" rating;
[(4) obligations of United States corporations that
mature in less than one year and are of the highest rating available
at the time of investment;
[(5) bonds issued, assumed, or guaranteed by the
Inter-American Development Bank, the International Bank of
Reconstruction and Development (the World Bank), the African
Development Bank, the Asian Development Bank, and the International
Finance Corporation;
[(6) bonds of counties, school districts,
municipalities, road precincts, drainage, irrigation, navigation,
and levee districts in this state, subject to the following
requirements:
[(A) the securities, before purchase, must have
been diligently investigated by the attorney general both as to
form and as to legal compliance with applicable laws;
[(B) the attorney general's certificate of
validity procured by the party offering the bonds, obligations, or
pledges must accompany the securities when they are submitted for
registration to the comptroller, who must preserve the
certificates;
[(C) the public securities, if purchased, and
when certified and registered as specified under Paragraph (B), are
incontestable unless issued fraudulently or in violation of a
constitutional limitation, and the certificates of the attorney
general are prima facie evidence of the validity of the bonds and
bond coupons; and
[(D) after the issuing political subdivision has
received the proceeds from the sales of the securities, the issuing
agency is estopped to deny their validity, and the securities are
valid and binding obligations;
[(7) preferred stocks and common stocks that the State
Board of Education considers proper investments for the permanent
school fund, subject to the following requirements:
[(A) in making all of those investments, the
State Board of Education shall exercise the judgment and care under
the circumstances then prevailing that persons of ordinary
prudence, discretion, and intelligence exercise in the management
of their own affairs, not in regard to speculation but in regard to
the permanent disposition of their funds, considering the probable
income as well as the probable safety of their capital;
[(B) the company issuing the stock must be
incorporated in the United States, and the stocks must have paid
dividends for five consecutive years or longer immediately before
the date of purchase and the stocks, except for bank stocks and
insurance stocks, must be listed on an exchange registered with the
Securities and Exchange Commission or its successors; and
[(C) not more than one percent of the permanent
school fund may be invested in stock issued by one corporation and
not more than five percent of the voting stock of any one
corporation will be owned; and
[(8) notwithstanding any other law or provision of
this code, first lien real estate mortgage securities insured by
the Federal Housing Administration under the National Housing Act
of the United States, or in any other first lien real estate
mortgage securities guaranteed in whole or in part by the United
States].
SECTION 1.04. Section 43.0033, Education Code, is amended
to read as follows:
Sec. 43.0033. REPORTS OF EXPENDITURES. A consultant,
advisor, broker, or other person providing services to the State
Board of Education relating to the management and investment of the
permanent school fund shall file with the board regularly, as
determined by the board, a report that describes in detail any
expenditure of more than $50 made by the person on behalf of:
(1) a member of the board;
(2) the commissioner; or
(3) an employee of the agency [or of a nonprofit
corporation created under Section 43.006].
SECTION 1.05. Section 43.006(a), Education Code, is amended
to read as follows:
(a) The State Board of Education may delegate investment
authority for the investment of the permanent school fund to the
Texas Permanent School Fund Corporation as provided by Subchapter B
[same extent as an institution with respect to an institutional
fund under Chapter 163, Property Code].
SECTION 1.06. Chapter 43, Education Code, is amended by
adding Subchapter B to read as follows:
SUBCHAPTER B. TEXAS PERMANENT SCHOOL FUND CORPORATION
Sec. 43.051. DEFINITIONS. In this subchapter:
(1) "Board of directors" means the board of directors
of the corporation.
(2) "Chief executive officer" means the chief
executive officer of the corporation employed under Section 43.054.
(3) "Corporation" means the Texas Permanent School
Fund Corporation.
Sec. 43.052. CREATION OF CORPORATION. (a) The State Board
of Education may incorporate the Texas Permanent School Fund
Corporation and delegate to the corporation the board's authority
to manage and invest:
(1) the permanent school fund under Section 43.003;
and
(2) the charter district bond guarantee reserve fund
under Section 45.0571.
(b) The State Board of Education shall adopt the initial
articles of incorporation for the corporation.
(c) The corporation is a special-purpose governmental
corporation and instrumentality of the state with necessary and
implied powers to accomplish its purpose. The corporation is
subject to regulation and limitation only as provided by this
subchapter.
Sec. 43.053. BOARD OF DIRECTORS; MEETINGS. (a) The board
of directors is composed of the following nine members:
(1) five members of the State Board of Education,
appointed by the board in accordance with board policy;
(2) the commissioner of the General Land Office;
(3) one member appointed by the commissioner of the
General Land Office who has substantial background and expertise in
investments and asset management; and
(4) two members appointed by the governor, with the
advice and consent of the senate, each of whom must have substantial
background and expertise in investments and asset management and
may not be members of the State Board of Education or the School
Land Board.
(b) The State Board of Education by rule shall establish the
terms of members of the board of directors appointed under
Subsection (a)(1).
(c) Members of the board of directors appointed under
Subsections (a)(3) and (4) serve staggered six-year terms, with the
term of one member expiring on January 1 of each odd-numbered year.
(d) The initial members described by Subsection (c) shall
determine by lot which one of the initial members will serve a term
expiring January 1 of the first odd-numbered year following the
establishment of the corporation, which one of the initial members
will serve a term expiring January 1 of the second odd-numbered year
following the establishment of the corporation, and which one of
the initial members will serve a term expiring January 1 of the
third odd-numbered year following the establishment of the
corporation.
(e) Appointments to the board of directors must be made
without regard to the race, color, disability, sex, religion, age,
or national origin of the appointees.
(f) The board of directors shall elect officers of the board
in accordance with the corporation's bylaws.
(g) The board of directors shall meet at least three times
per year.
Sec. 43.054. CHIEF EXECUTIVE OFFICER. (a) The corporation
shall employ a chief executive officer to manage and carry out the
policies of the corporation. The board of directors shall
determine the process for hiring the chief executive officer.
(b) The chief executive officer serves at the will of the
board of directors.
Sec. 43.055. EMPLOYEES. (a) The chief executive officer
is responsible for hiring all employees of the corporation.
(b) Employees of the corporation serve at the will of the
chief executive officer.
(c) The chief executive officer or the chief executive
officer's designee shall develop a system of compensation for
employees of the corporation as necessary to retain qualified
staff.
(d) The chief executive officer or the chief executive
officer's designee shall develop a system of annual performance
evaluations. Merit pay for corporation employees must be based on
the system established under this subsection.
(e) The chief executive officer or the chief executive
officer's designee shall prepare and maintain a written policy
statement to assure implementation of a program of equal employment
opportunity under which all personnel decisions are made without
regard to race, color, disability, sex, religion, age, or national
origin.
(f) The chief executive officer may appoint an internal
auditor for the corporation, who may be an employee of the
corporation. The appointment of the internal auditor must be
approved by the board of directors. The board of directors may
require the internal auditor to submit specified reports directly
to the board of directors.
(g) Except as otherwise provided by this subchapter,
employees of the corporation are state employees for all purposes,
including:
(1) accrual of leave time, insurance benefits, and
retirement benefits;
(2) Chapter 104, Civil Practice and Remedies Code; and
(3) Chapter 501, Labor Code.
Sec. 43.056. SOVEREIGN IMMUNITY. (a) The corporation, the
board of directors, and the officers and employees of the
corporation are entitled to sovereign immunity to the same extent
as any other state agency or officer or employee of a state agency.
(b) No action taken by the corporation, including the
acceptance of benefits under a contract, may be construed to waive
the corporation's sovereign immunity, including immunity from suit
or from liability.
(c) Subchapter C, Chapter 2260, Government Code, does not
apply to the corporation.
Sec. 43.057. LIABILITY INSURANCE FOR BOARD MEMBERS AND
EMPLOYEES. (a) The corporation may purchase or otherwise acquire
insurance to protect members of the board of directors and
employees of the corporation, subject to Subsection (c).
(b) Insurance purchased or acquired by the corporation
under this section may:
(1) protect against any type of liability to third
persons that might be incurred while conducting corporation
business; and
(2) provide for all costs of defending a cause of
action for such liability, including court costs and attorney's
fees.
(c) This section does not authorize the purchase or
acquisition of insurance to protect against liability not described
in Subsection (b).
Sec. 43.058. ETHICS POLICY; CONFLICTS OF INTEREST.
(a) The board of directors shall adopt an ethics policy that
provides standards of conduct relating to the management and
investment of the permanent school fund in accordance with Section
43.0031(a). The ethics policy must include provisions applicable
to:
(1) members of the board of directors;
(2) employees of the corporation; and
(3) any person who provides services to the
corporation relating to the management or investment of the
permanent school fund.
(b) A member of the board of directors, an employee of the
corporation, and a person who provides services to the corporation
relating to the management or investment of the permanent school
fund shall disclose in writing to the corporation any business,
commercial, or other relationship that could reasonably be expected
to diminish the person's independence of judgment in the
performance of the person's responsibilities relating to the
management or investment of the permanent school fund.
(c) The board of directors shall define in the ethics policy
adopted under Subsection (a) the types of relationships that may
create a possible conflict of interest.
(d) A person who makes a written disclosure under Subsection
(b) stating a possible conflict of interest may not give advice or
make decisions about a matter affected by the possible conflict of
interest unless the board of directors expressly waives this
prohibition. The board of directors may delegate the authority to
waive the prohibition established by this subsection.
Sec. 43.059. APPLICABILITY OF CERTAIN LAWS. (a) Except as
otherwise provided by and to the extent consistent with this
subchapter, Title 1, Business Organizations Code, and Chapter 22,
Business Organizations Code, apply to the corporation.
(b) Subject to Section 43.060, the corporation is a
governmental body for purposes of Chapter 551, Government Code.
(c) The corporation is exempt from:
(1) Chapters 654 and 660, Government Code, and
Subchapter K, Chapter 659, Government Code, to the extent the board
of directors determines that an exemption from those provisions is
necessary for the corporation to perform the board's fiduciary
duties under this subchapter;
(2) all state laws regulating or limiting purchasing
by state agencies, including Subtitle D, Title 10, Government Code,
and Chapters 2254, 2261, and 2262, Government Code;
(3) the franchise tax under Chapter 171, Tax Code; and
(4) any filing costs or other fees imposed by the state
on a corporation.
Sec. 43.060. EXCEPTION TO OPEN MEETING REQUIREMENTS FOR
CERTAIN CONSULTATIONS CONCERNING INVESTMENTS. (a) In this
section, "private investment fund," "reinvestment," and
"restricted securities" have the meanings assigned by Section
552.143, Government Code.
(b) The board of directors may conduct a closed meeting in
accordance with Subchapter E, Chapter 551, Government Code, to
deliberate or confer with one or more employees, consultants, or
legal counsel of the corporation or with a third party if the only
purpose of the meeting is to receive information from or question
the employees, consultants, or legal counsel or third party
relating to:
(1) investment transactions or potential investment
transactions if, before conducting the closed meeting, a majority
of the board of directors in an open meeting vote that deliberating
or conferring in an open meeting would have a detrimental effect on
the corporation's position in negotiations with third parties or
put the corporation at a competitive disadvantage in the market;
(2) the purchase, holding, or disposal of restricted
securities or a private investment fund's investment in restricted
securities if, under Section 552.143, Government Code, the
information discussed would be confidential and excepted from the
requirements of Section 552.021, Government Code, if the
information were included in the records of a governmental body; or
(3) a procurement proposed to be awarded by the board
of directors if, before conducting the closed meeting, a majority
of the board of directors in an open meeting vote that deliberating
or conferring in an open meeting would have a detrimental effect on
the corporation's position in negotiations with third parties.
(c) Any vote or final action taken on a procurement
described by Subsection (b)(3) must be conducted in an open
meeting.
Sec. 43.061. RECORD RETENTION. (a) Subchapter L, Chapter
441, Government Code, does not apply to the corporation.
(b) The corporation may establish record retention policies
for the corporation. In establishing the policies under this
section, the corporation may consider relevant rules and guidelines
adopted by the Texas State Library and Archives Commission.
Sec. 43.062. INFORMATION TECHNOLOGY AND ASSOCIATED
RESOURCES. (a) Chapters 2054 and 2055, Government Code, do not
apply to the corporation or to any state agency with respect to a
contract entered into between the agency and the corporation for
information technology or associated resources.
(b) The corporation shall control all aspects of, and may
contract with third parties for, the corporation's information
technology and associated resources, including:
(1) computer, data management, and telecommunications
operations;
(2) procurement of hardware, software, and middleware
and telecommunications equipment and systems;
(3) location, operation, and replacement of
computers, computer systems, software provided as a service, and
telecommunications systems;
(4) data processing;
(5) security;
(6) disaster recovery; and
(7) storage.
(c) The Department of Information Resources shall assist
the corporation at the request of the corporation and must consider
the corporation a customer of the department. Notwithstanding any
other law, the corporation may:
(1) purchase any item through the department; and
(2) contract with the department for and use any
service available through the department.
Sec. 43.063. GENERAL POWERS AND DUTIES OF CORPORATION. (a)
The corporation may amend the articles of incorporation adopted by
the State Board of Education when the corporation was established,
subject to board approval.
(b) The corporation may adopt and amend:
(1) subject to State Board of Education approval,
bylaws for the corporation;
(2) resolutions and policies of the corporation; and
(3) any other document necessary to carry out the
corporation's purpose.
(c) The corporation may engage in any activity necessary to
manage the investments of the permanent school fund, including
entering into any contract in connection with the investment of the
permanent school fund, to the extent the activity complies with
applicable fiduciary duties.
(d) The corporation shall make all purchases of goods and
services in accordance with applicable fiduciary duties and may use
purchasing methods that ensure the best value to the corporation.
In determining best value, the corporation may consider the best
value standards applicable to state agencies under Section
2155.074, Government Code.
(e) The corporation may:
(1) delegate investment authority for the investment
of the permanent school fund to one or more private professional
investment managers; or
(2) contract with one or more private professional
investment managers to assist the corporation in making investments
of the permanent school fund.
(f) The corporation may receive, transfer, and disburse
money and securities of the fund as provided by statute or the Texas
Constitution, except that the corporation may not distribute money
from the permanent school fund to the available school fund except
as authorized under Section 43.066.
(g) The corporation may enter into a contract with a state
agency, a governmental body, or another entity to manage or invest
funds on behalf of the agency, body, or entity.
Sec. 43.064. CONTRACTING FOR FACILITIES AND NECESSARY
SUPPORT. The corporation may contract with a state agency or
another entity to provide operational support, facilities,
information and data technology, staff, or other support for the
corporation. The corporation may but is not required to request
allocation of space to the corporation under Subchapter C, Chapter
2165, Government Code.
Sec. 43.065. WRITTEN INVESTMENT OBJECTIVES; PERFORMANCE
EVALUATION. In accordance with Section 43.004, the board of
directors shall:
(1) develop written investment objectives concerning
the investment of the permanent school fund; and
(2) employ a well-recognized performance measurement
service to evaluate and analyze the investment results of the
permanent school fund.
Sec. 43.066. DISTRIBUTIONS BY CORPORATION FROM PERMANENT
SCHOOL FUND TO AVAILABLE SCHOOL FUND. (a) The corporation may
distribute from the permanent school fund to the available school
fund under Section 5(g), Article VII, Texas Constitution, an amount
not to exceed the limitation under that section that is determined
in accordance with rules established by the corporation.
(b) In developing the rules for distributions under
Subsection (a), the corporation shall develop and establish an
annual minimum distribution rate that the corporation will use in
making a distribution from the permanent school fund to the
available school fund each state fiscal year. In developing the
annual minimum distribution rate under this subsection, the
corporation may consider:
(1) transfers made from the permanent school fund to
the available school fund under Section 43.002 in accordance with
Section 5(a), Article VII, Texas Constitution;
(2) factors that relate to the current and future
public school students in the state; and
(3) any other factors the corporation determines
relevant.
Sec. 43.067. BOND GUARANTEE PROGRAM. The corporation, the
State Board of Education, and the agency shall coordinate to
determine the corporation's role in the operation and management of
the permanent school fund in connection with the bond guarantee
program under Subchapter C, Chapter 45, to ensure the proper and
efficient operation of the program, including the handling of any
associated reimbursements, transfers, and disbursements.
Sec. 43.068. ANNUAL AUDIT. (a) Not less than once each
year, the board of directors shall submit to the Legislative Budget
Board an audit report regarding the operations of the corporation.
(b) The corporation may contract with a certified public
accountant or the state auditor to conduct an independent audit of
the operations of the corporation.
(c) This section does not affect the state auditor's
authority to conduct an audit of the corporation in accordance with
Chapter 321, Government Code.
Sec. 43.069. ANNUAL INVESTMENT REPORT. The corporation
shall annually submit to the State Board of Education and the
General Land Office a report on the allocation of assets and
investment performance of the portion of the permanent school fund
for which the corporation is responsible.
Sec. 43.070. REPORT ON ANTICIPATED TRANSFER TO AVAILABLE
SCHOOL FUND. Not later than November 1 of each even-numbered year,
the corporation shall submit to the legislature, comptroller, State
Board of Education, and Legislative Budget Board a report that in
detail specifically states the date a transfer will be made and the
amount the corporation will transfer during the subsequent state
fiscal biennium from the permanent school fund to the available
school fund under Section 43.066.
Sec. 43.071. GIFTS, GRANTS, AND DONATIONS. The corporation
may accept, and establish a nonprofit corporation or other entity
for the purpose of accepting, a gift, grant, donation, or bequest of
money, securities, property, or any other assets from any public or
private source for the permanent school fund.
SECTION 1.07. Section 2157.068(j), Government Code, is
amended to read as follows:
(j) The following entities may purchase commodity items
through the department, and be charged a reasonable administrative
fee, as provided by this section:
(1) the Electric Reliability Council of Texas;
(2) the Lower Colorado River Authority;
(3) a private school, as defined by Section 5.001,
Education Code;
(4) a private or independent institution of higher
education, as defined by Section 61.003, Education Code;
(5) a volunteer fire department, as defined by Section
152.001, Tax Code;
(6) subject to Section 418.193, a public safety
entity, as defined by 47 U.S.C. Section 1401; [or]
(7) subject to Section 418.193, a county hospital,
public hospital, or hospital district; or
(8) the Texas Permanent School Fund Corporation, if
incorporated under Section 43.052, Education Code.
SECTION 1.08. Sections 43.006(b), (c), (d), (e), (f), (g),
(h), (i), (j), and (k), Education Code, are repealed.
ARTICLE 2. SCHOOL LAND BOARD'S MANAGEMENT OF PERMANENT SCHOOL FUND
SECTION 2.01. Section 51.001, Natural Resources Code, is
amended by adding Subdivisions (13) and (14) to read as follows:
(13) "Real property holding" means any direct or
indirect interest in real property located in the state or any
interest in a joint venture whose primary purpose is the
acquisition, development, holding, and disposing of real property
located in the state. The term does not include an interest in an
investment vehicle.
(14) "Investment vehicle" means:
(A) a multi-investment separately managed
account or similar investment fund;
(B) a multi-asset closed-end or open-end
investment fund sponsored and managed by a third party;
(C) a real estate investment trust;
(D) an investment managed by a third party
alongside a multi-asset closed-end or open-end investment fund that
is also managed by the third party or by any of the third party's
related persons or affiliates; or
(E) a corporation, partnership, limited
liability company, or other entity whose primary purpose is to:
(i) sponsor and manage investments on
behalf of third parties, including institutional investors; or
(ii) operate assets or provide brokerage or
other services to third parties under circumstances in which the
entity does not directly or indirectly own the underlying assets.
SECTION 2.02. 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, mineral or royalty interest, or real property
holding, and [estate investment, or other interest, including]
revenue received from any land or real property holding [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, shall be subject to the sole and exclusive management and
control of the School Land Board [school land board] and the
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,
mineral and royalty interests, or real property holdings, and
[estate investments, or other interests, including] revenue
received from land or real property holdings [those sources], 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) All revenue received from mineral or royalty
interests described by Subsection (a), including bonus payments,
mineral lease rental revenues, royalties, and any other type of
revenue received from those interests, less any amount specified by
appropriation to be retained by the board under this subsection,
shall be transferred each month to the Texas Permanent School Fund
Corporation for investment in the permanent school fund.
SECTION 2.03. Section 51.017, Natural Resources Code, is
amended to read as follows:
Sec. 51.017. FURNISHING DATA TO TEXAS PERMANENT SCHOOL FUND
CORPORATION [BOARD OF EDUCATION]. On request, the commissioner
shall furnish to the Texas Permanent School Fund Corporation [State
Board of Education] all available data.
SECTION 2.04. Section 51.401(a), Natural Resources Code, is
amended to read as follows:
(a) The board may designate funds or revenue received from
any land or real property holdings, and any proceeds received from
the sale of any 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.
SECTION 2.05. Section 51.402(a), Natural Resources Code, is
amended to read as follows:
(a) The [Except as provided by Subsection (c), the] board
may use funds designated under Section 51.401 for any of the
following purposes:
(1) to add to a tract of public school land to form a
tract of sufficient size to be manageable;
(2) to add contiguous land to public school land;
(3) to acquire, as public school land, interests in
real property for biological, residential, commercial, geological,
cultural, or recreational purposes;
(4) to acquire mineral and royalty interests for the
use and benefit of the permanent school fund;
(5) to protect, maintain, or enhance the value of
public school land and mineral or royalty interests on that land;
(6) to acquire real property holdings [interests in
real estate];
(7) to pay reasonable fees for professional services
related to a permanent school fund investment; or
(8) to acquire, sell, lease, trade, improve, maintain,
protect, or use land, mineral and royalty interests, or real
property holdings [estate investments, an investment or interest in
public infrastructure, or other interests], at such prices and
under such terms and conditions the board determines to be in the
best interest of the permanent school fund.
SECTION 2.06. Section 51.4021, Natural Resources Code, is
amended to read as follows:
Sec. 51.4021. APPOINTMENT OF [SPECIAL FUND MANAGERS,]
INVESTMENT CONSULTANTS[,] OR ADVISORS. (a) The board may appoint
investment [managers,] consultants[,] or advisors to [invest or]
assist the board in using [investing] funds designated under
Section 51.401 in a manner authorized under Section 51.402 by
contracting for professional [investment management or] investment
advisory services with one or more organizations that are in the
business of [managing or] advising on the management of real estate
investments.
(b) To be eligible for appointment under this section, an
investment [manager,] consultant[,] or advisor shall agree to abide
by the policies, requirements, or restrictions, including ethical
standards and disclosure policies and criteria for determining the
quality of investments and for the use of standard rating services,
that the board adopts for real estate investments of the permanent
school fund. Funds designated under Section 51.401 may not be
invested in a real estate investment trust, as defined by Section
200.001, Business Organizations Code.
(c) Compensation paid to an investment [manager,]
consultant[,] or advisor by the board must be consistent with the
compensation standards of the investment industry and compensation
paid by similarly situated institutional investors.
(d) Chapter 2263, Government Code, applies to investment
[managers,] consultants and[, or] advisors appointed under this
section. The board by rule shall adopt standards of conduct for
investment [managers,] consultants and[, or] advisors appointed
under this section as required by Section 2263.004, Government
Code, and shall implement the disclosure requirements of Section
2263.005 of that code.
SECTION 2.07. The heading to Section 51.412, Natural
Resources Code, is amended to read as follows:
Sec. 51.412. REPORT ON USE OF CERTAIN MONEY [REPORTS TO
LEGISLATURE].
SECTION 2.08. Sections 51.412(a) and (c), Natural Resources
Code, are amended to read as follows:
(a) Not later than September 1 of each even-numbered year,
the board shall submit to the legislature, the Texas Permanent
School Fund Corporation, and the Legislative Budget Board a report
that, specifically and in detail, assesses the direct and indirect
economic impact, as anticipated by the board, of the use
[investment] of funds:
(1) retained by the board as provided by Section
51.011(a-3); or
(2) designated under Section 51.401 for deposit in the
real estate special fund account of the permanent school fund.
(c) The report must include the following information:
(1) the total amount of the funds designated by
Section 51.401 for deposit in the real estate special fund account
of the permanent school fund that the board intends to use in a
manner authorized under Section 51.402 [invest];
(2) the amount of funds retained by [rate of return]
the board as provided by Section 51.011(a-3) and the purposes for
which the board intends to use those funds [expects to attain on the
investment];
(3) the amount of the funds the board expects to
distribute to the available school fund or the Texas Permanent
School Fund Corporation [State Board of Education] for investment
in the permanent school fund under Section 51.413 [after making the
investments];
(4) [the distribution of the board's investments by
county;
[(5) the effect of the board's investments on the level
of employment, personal income, and capital investment in the
state;
[(6)] the amounts of all fees or other compensation
paid by the board to investment [managers,] consultants and[, or]
advisors appointed or organizations contracted with under Section
51.4021; and
(5) [(7)] any other information the board considers
necessary to include in the report.
SECTION 2.09. 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 may, by a resolution 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 Texas Permanent School Fund Corporation [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 date a transfer will
be made and the amount of the funds that will be transferred to the
available school fund or to the Texas Permanent School Fund
Corporation [State Board of Education] for investment in the
permanent school fund from the real estate special fund account as
provided by Subsection (a).
SECTION 2.10. The following provisions are repealed:
(1) Section 43.0052, Education Code;
(2) Sections 32.0161 and 32.068, Natural Resources
Code;
(3) Section 51.402(c), Natural Resources Code, as
amended by Chapters 493 (H.B. 4388) and 524 (S.B. 608), Acts of the
86th Legislature, Regular Session, 2019; and
(4) Sections 51.4131 and 51.414, Natural Resources
Code.
SECTION 2.11. (a) Subject to Subsection (b) of this
section, as soon as practicable after the effective date of this
article and on the date agreed to by the State Board of Education,
the Texas Education Agency, the School Land Board, and the Texas
Permanent School Fund Corporation, as applicable:
(1) all powers, duties, functions, programs, and
activities of the State Board of Education and the Texas Education
Agency relating to the management and investment of the permanent
school fund transfer to the Texas Permanent School Fund Corporation
by operation of law; and
(2) all powers, duties, functions, programs, and
activities of the School Land Board relating to assets or
investments of the permanent school fund described by Section
2.15(a)(1) of this article transfer to the Texas Permanent School
Fund Corporation by operation of law.
(b) The Texas Permanent School Fund Corporation may delay
the transfer of any power, duty, function, program, or activity
under Subsection (a) of this section if the corporation determines
that the transfer would have an adverse impact on or is not in the
best interest of the permanent school fund.
(c) All rules, policies, and procedures relating to the
management and investment of the permanent school fund adopted by
the State Board of Education or the School Land Board before the
transfer under this section remain in effect until the Texas
Permanent School Fund Corporation adopts substitute rules,
policies, or procedures. In the event of a conflict between rules,
policies, or procedures adopted by the State Board of Education and
rules, policies, or procedures adopted by the School Land Board,
the corporation shall determine which rules, policies, or
procedures control.
SECTION 2.12. On the date the transfers under Section
2.11(a) of this article occur:
(1) an employee of the permanent school fund division
of the Texas Education Agency or the investment management division
of the General Land Office becomes an employee of the Texas
Permanent School Fund Corporation; and
(2) any employee compensation plan, program,
agreement, or arrangement, including any incentive compensation
plan and outstanding balance or award, relating to each employee
described by Subdivision (1) of this section transfers from the
Texas Education Agency or the General Land Office, as applicable,
to the Texas Permanent School Fund Corporation.
SECTION 2.13. (a) As soon as practicable after the
effective date of this article but not later than the date the
transfers under Section 2.11(a) of this article occur, the State
Board of Education shall enter into a memorandum of understanding
with any state agency the board determines necessary to provide for
the transfer to or continued use by the Texas Permanent School Fund
Corporation for a period determined by the board of any property,
facilities, information and data technology, services, and support
staff of the state agency used in connection with operations
relating to the management or investment of the permanent school
fund.
(b) On the date the transfers under Section 2.11(a) of this
article occur, the unexpended and unobligated balance of any money
appropriated to a state agency relating to the powers, duties,
programs, functions, and activities that are transferred to the
Texas Permanent School Fund Corporation is transferred to that
corporation.
SECTION 2.14. (a) Not later than March 30, 2023, the State
Board of Education and the Texas Education Agency shall provide to
the Texas Permanent School Fund Corporation all financial,
contract, and investment records and documents maintained by the
board, the agency, or a service provider of the board or agency
relating to the management or investment of the permanent school
fund.
(b) Except as provided by Subsection (c) or (d) of this
section, as soon as practicable after the effective date of this
article and not later than the date the transfers under Section
2.11(a) of this article occur, all assets and investments of the
permanent school fund held by the State Board of Education or the
Texas Education Agency and any related contracts are transferred to
the Texas Permanent School Fund Corporation by operation of law in
accordance with applicable law and any governing documentation
applicable to those assets, investments, or contracts, including
any applicable limited partnership agreement, limited liability
company agreement, subscription agreement, letter agreement, or
side letter.
(c) The State Board of Education and the Texas Education
Agency shall retain any assets or investments that would otherwise
be transferred to the Texas Permanent School Fund Corporation under
Subsection (b) of this section if the corporation determines that:
(1) the asset or investment cannot be transferred to
the corporation, either because the corporation cannot properly
hold custody of the asset or investment or for some other reason; or
(2) the transfer of the asset or investment:
(A) would have an adverse effect on the permanent
school fund or on any asset or investment set apart to the permanent
school fund; or
(B) is not in the best interest of the permanent
school fund.
(d) If an asset or investment required to be transferred to
the Texas Permanent School Fund Corporation under Subsection (b) of
this section cannot be transferred to the corporation in a timely
manner, the State Board of Education, the Texas Education Agency,
and the corporation shall coordinate concerning the appropriate
timing of the transfer or other disposition of the asset or
investment.
(e) The State Board of Education and the Texas Permanent
School Fund Corporation shall coordinate the ongoing management or
other disposition of any assets or investments retained by the
board or the Texas Education Agency under Subsection (c) or (d) of
this section, including:
(1) providing direction to the Texas Education Agency
regarding the asset or investment;
(2) the funding of any outstanding commitments related
to the asset or investment;
(3) the handling of any distributions, income, or
revenues from the asset or investment; and
(4) the making of any decisions required with respect
to the asset or investment.
SECTION 2.15. (a) Not later than January 31, 2023, the
School Land Board shall provide to:
(1) the Texas Permanent School Fund Corporation a list
of each asset and investment acquired on or after September 1, 2001,
and held by the board on January 31, 2023, other than sovereign or
other state lands, mineral or royalty interests, or real property
holdings, as that term is defined by Section 51.001, Natural
Resources Code, as amended by this article, and information on
unfunded commitments and funding obligations related to the asset
or investment; and
(2) the general partner or other managing entity of
each asset or investment identified under Subdivision (1) of this
subsection notice of the transfer of the asset or investment to the
Texas Permanent School Fund Corporation under this section.
(b) Not later than March 30, 2023, the School Land Board
shall provide to the Texas Permanent School Fund Corporation all
financial, contract, and investment records and documents
maintained by the board, the General Land Office, or a service
provider of the board or office relating to the operations
associated with or the management of an asset or investment
identified under Subsection (a)(1) of this section.
(c) Except as provided by Subsection (d) or (e) of this
section, not later than December 31, 2023, all assets and
investments identified under Subsection (a)(1) of this section and
any related contracts are transferred from the School Land Board to
the Texas Permanent School Fund Corporation by operation of law in
accordance with applicable law and any governing documentation
applicable to those assets, investments, or contracts, such as any
applicable limited partnership agreement, limited liability
company agreement, subscription agreement, letter agreement, or
side letter.
(d) The School Land Board shall retain any assets or
investments that would otherwise be transferred to the Texas
Permanent School Fund Corporation under Subsection (c) of this
section if the corporation determines that:
(1) the asset or investment cannot be transferred to
the corporation, either because the corporation cannot properly
hold custody of the asset or investment or for some other reason; or
(2) the transfer of the asset or investment:
(A) would have an adverse effect on the permanent
school fund or on any asset or investment set apart to the permanent
school fund; or
(B) is not in the best interest of the permanent
school fund.
(e) If an asset or investment required to be transferred to
the Texas Permanent School Fund Corporation under Subsection (c) of
this section cannot be transferred to the corporation by December
31, 2023, the School Land Board and the corporation shall
coordinate concerning the appropriate timing of the transfer or
other disposition of the asset or investment.
(f) The School Land Board and the Texas Permanent School
Fund Corporation shall coordinate the ongoing management or other
disposition of any assets or investments retained by the board
under Subsection (d) or (e) of this section, including:
(1) the funding of any outstanding commitments related
to the asset or investment;
(2) the handling of any distributions, income, or
revenues from the asset or investment; and
(3) the making of any decisions required with respect
to the asset or investment.
(g) Not later than December 31, 2023, all cash holdings
related to or derived from permanent school fund assets held by the
School Land Board shall be transferred to the Texas Permanent
School Fund Corporation for deposit to the credit of the permanent
school fund.
(h) On the date on which the Texas Permanent School Fund
Corporation determines that all outstanding commitments required
to be paid from the permanent school fund liquid account have been
fully resolved, the account is abolished and the balance of that
account is transferred to the permanent school fund.
SECTION 2.16. This article takes effect December 31, 2022,
but only if the State Board of Education incorporates the Texas
Permanent School Fund Corporation under Subchapter B, Chapter 43,
Education Code, as added by this Act, on or before that date. If the
State Board of Education does not incorporate the Texas Permanent
School Fund Corporation on or before December 31, 2022, this
article has no effect.
ARTICLE 3. EFFECTIVE DATE
SECTION 3.01. Except as otherwise provided by this Act,
this Act takes effect September 1, 2021.
______________________________ ______________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 1232 passed the Senate on
May 6, 2021, by the following vote: Yeas 30, Nays 0; and that the
Senate concurred in House amendments on May 29, 2021, by the
following vote: Yeas 31, Nays 0.
______________________________
Secretary of the Senate
I hereby certify that S.B. No. 1232 passed the House, with
amendments, on May 26, 2021, by the following vote: Yeas 140,
Nays 5, one present not voting.
______________________________
Chief Clerk of the House
Approved:
______________________________
Date
______________________________
Governor