September 2020 Committee on School Finance/Permanent School Fund Item 7

Discussion of 19 TAC Chapter 33, Statement of Investment Objectives, Policies, and Guidelines of the Texas Permanent School Fund, Subchapter A, State Board of Education Rules

September 1, 2020

COMMITTEE ON SCHOOL FINANCE/PERMANENT SCHOOL FUND: DISCUSSION
STATE BOARD OF EDUCATION: NO ACTION

SUMMARY: This item provides the opportunity for the committee to discuss a potential amendment to 19 TAC Chapter 33, Statement of Investment Objectives, Policies, and Guidelines of the Texas Permanent School Fund, Subchapter A, State Board of Education Rules.

STATUTORY AUTHORITY: The Texas Constitution, Article VII, §5(a) and (f); Texas Education Code (TEC), §43.001 and §43.0052, as added by House Bill (HB) 4388, 86th Texas Legislature, 2019; and Texas Natural Resources Code (TNRC), §32.012, as amended by Senate Bill (SB) 608, 86th Texas Legislature, 2019; TNRC, §32.0161, as added by SB 608, 86th Texas Legislature, 2019; and TNRC, §32.068 and §51.414, as added by HB 4388, 86th Texas Legislature, 2019.

Texas Constitution, Article VII, §5(a), authorizes the State Board of Education (SBOE) to make distributions from the Permanent School Fund (PSF) to the available school fund with certain limits.

Texas Constitution, Article VII, §5(f), authorizes the SBOE to manage and invest the PSF according to the prudent person standard and make investments it deems appropriate.

TEC, §43.001, describes the PSF as a perpetual endowment.

TEC, §43.0052, and TNRC, §32.068 and §51.414, as added by HB 4388, 86th Texas Legislature, 2019, created the Liquid Account within the PSF to be managed by the SBOE and require the SBOE and School Land Board (SLB) to send quarterly investment and financial reports to the other.

TNRC, §32.012, as amended by SB 608, 86th Texas Legislature, 2019, and §32.0161, as added by SB 608, require the SBOE to submit to the governor a list of six nominees for each of two positions on the SLB and requires the SBOE and the SLB to hold a joint annual public meeting to discuss the PSF.

The full text of statutory citations can be found in the statutory authority section of this agenda.

FUTURE ACTION EXPECTED: A proposed amendment to 19 TAC Chapter 33, Statement of Investment Objectives, Policies, and Guidelines of the Texas Permanent School Fund, Subchapter A, State Board of Education Rules, may be presented for first reading and filing authorization at the November 2020 SBOE meeting.

BACKGROUND INFORMATION AND JUSTIFICATION: In accordance with statute, the rules in 19 TAC Chapter 33 establish investment objectives, policies, and guidelines for the PSF.

Staff Members Responsible:
Holland Timmins, Executive Administrator and Chief Investment Officer, Texas Permanent School Fund

Attachment:
Text of Current 19 TAC Chapter 33, Statement of Investment Objectives, Policies, and Guidelines of the Texas Permanent School Fund, Subchapter A, State Board of Education Rules