January 2021 Committee on School Finance/Permanent School Fund

THURSDAY
January 28, 2021

9:00 a.m.

COMMITTEE ON SCHOOL FINANCE/PERMANENT SCHOOL FUND – Room 1-104

Members: Tom Maynard, chair; Lawrence A. Allen, Jr., vice chair; Rebecca Bell-Metereau; Patricia Hardy; Will Hickman. A quorum of the State Board of Education may attend the committee meeting and discuss items on the committee agenda. A quorum of the Committee of Investment Advisors to the Permanent School Fund may attend the committee meeting and discuss items on the committee agenda.

Public testimony – Individual testimony will be taken at the time the related item comes up for committee discussion or action. The procedures for registering and taking public testimony at State Board of Education committee meetings and general board meetings are provided online.

1. Election of Chair

State Board of Education (SBOE) operating rules call for each committee to elect a chair from among its members. This item provides an opportunity the Committee on School Finance/Permanent School Fund to elect a chair at this meeting if the SBOE retains the existing committee structure. The chair may then appoint a vice chair. If the board changes the committee structure, the committee may elect a member to preside over this first meeting only. Statutory authority for this action is the Texas Education Code, §7.107(b).

COMMITTEE - ACTION
SBOE - NO ACTION

2. Proposed Amendment to 19 TAC Chapter 109, Budgeting, Accounting, and Auditing, Subchapter C, Adoptions By Reference, §109.41, Financial Accountability System Resource Guide
(First Reading and Filing Authorization)

This item presents for first reading and filing authorization a proposed amendment to 19 Texas Administrative Code (TAC) Chapter 109, Budgeting, Accounting, and Auditing, Subchapter C, Adoptions By Reference, §109.41, Financial Accountability System Resource Guide. The proposed amendment would adopt by reference the updated Financial Accountability System Resource Guide (FASRG). Statutory authority for this action is the Texas Education Code (TEC), §§7.055(b)(32), 7.102(c)(32), 44.001(a) and (b), 44.007(a)-(d), and 44.008(b).

COMMITTEE - ACTION
SBOE - ACTION

3. Rule Review of 19 TAC Chapter 109, Budgeting, Accounting, and Auditing, Subchapter A, Budgeting, Accounting, Financial Reporting, and Auditing for School Districts, Subchapter B, Texas Education Agency Audit Functions, Subchapter C, Adoptions by Reference, and Subchapter D, Uniform Bank Bid or Request for Proposal and Depository Contract

Texas Government Code (TGC), §2001.039, establishes a four-year rule review cycle for all state agency rules, including State Board of Education (SBOE) rules. This item presents the review of 19 Texas Administrative Code (TAC) Chapter 109, Budgeting, Accounting, and Auditing, Subchapter A, Budgeting, Accounting, Financial Reporting, and Auditing for School Districts, Subchapter B, Texas Education Agency Audit Functions, Subchapter C, Adoptions by Reference, and Subchapter D, Uniform Bank Bid or Request for Proposal and Depository Contract. The rules being reviewed provide requirements for school districts relating to budgeting, accounting, financial reporting, and auditing; Texas Education Agency (TEA) financial review functions; adoption by reference of the Financial Accountability System Resource Guide (FASRG); and the bank bid and proposal forms and the depository contract and surety bond forms. The statutory authority for the rule review is TGC, §2001.039. The statutory authority for 19 TAC Chapter 109 is Texas Education Code (TEC), §§7.102(c)(32), 44.001, 44.002, 44.007, and 44.008, for Subchapter A; TEC, §§7.102(c)(32), 44.001, 44.007, 44.008, 44.010, and 48.104, for Subchapter B; TEC, §§7.055(b)(32), (36), and (37); 7.102(c)(32); 44.001; 44.007(a)-(d); and 44.008(b), for Subchapter C; and TEC, §§7.102(c)(34), 45.206, and 45.208, for Subchapter D.

COMMITTEE – DISCUSSION
SBOE – NO ACTION

4. Adoption of Review of 19 TAC Chapter 30, Administration, Subchapter B, State Board of Education: Purchasing and Contracts
(Adoption of Review)

Texas Government Code (TGC), §2001.039, establishes a four-year rule review cycle for all state agency rules, including State Board of Education (SBOE) rules. This item presents the adoption of review of 19 Texas Administrative Code (TAC) Chapter 30, Administration, Subchapter B, State Board of Education: Purchasing and Contracts. The rules in Subchapter B address the historically underutilized business (HUB) program and procedures relating to protest for purchasing issues and dispute resolution, in accordance with TGC requirements. The statutory authority for the rule review is TGC, §2001.039. The statutory authority for 19 TAC Chapter 30, Subchapter B, is TGC, §§2161.003, 2155.076, and 2260.052.

COMMITTEE - ACTION
SBOE - ACTION

5. Review of Permanent School Fund Securities Transactions and the Investment Portfolio

Investment staff will report on the transactions executed during the months of October and November 2020 in the investment portfolio of the Texas Permanent School Fund. Statutory authority for this item is the Texas Constitution, Article VII, §2 and §5; and 19 Texas Administrative Code (TAC), Chapter 33.

COMMITTEE – DISCUSSION
SBOE – NO ACTION

6. Ratification of the Purchases and Sales of the Investment Portfolio of the Permanent School Fund for the Months of October and November 2020

This item provides an opportunity for the committee and board to consider approval of the purchases and sales of investments executed in the portfolio of the Permanent School Fund for the months of October and November 2020. Statutory authority for this action is the Texas Constitution, Article VII, §2 and §5; and 19 Texas Administrative Code (TAC), Chapter 33.

COMMITTEE – ACTION
SBOE – CONSENT

7. Report on the Permanent School Fund Liquid Account

This item provides an opportunity for the committee and board to receive a status update on the liquid account and take action to ratify transactions. Statutory authority for this action is the Texas Constitution, Article VII, §5 and §2; Natural Resources Code (NRC), §51.414, as added by HB 4388, 86th Texas Legislature, 2019; and 19 Texas Administrative Code (TAC), Chapter 33.

COMMITTEE – ACTION
SBOE – CONSENT

8. Annual Reporting of the Internally Managed Permanent School Fund Investment Portfolio

This item provides an opportunity for the Executive Administrator and Chief Investment Officer of the Permanent School Fund to report on various items required by 19 TAC Chapter 33, Statement of Investment Objectives, Policies, and Guidelines of the Texas Permanent School Fund. Statutory authority for this item is Texas Constitution, Article VII, §2 and §5, and 19 Texas Administrative Code (TAC) Chapter 33.

COMMITTEE – DISCUSSION
SBOE – NO ACTION

9. Third Quarter 2020 Permanent School Fund Performance Report

The performance measurement consultant to the Permanent School Fund, BNY Mellon Asset Servicing, will report on the investment performance during the third calendar quarter 2020 and cumulative investment performance of the various portfolios of the Fund. This item provides the opportunity for the committee to discuss in depth various issues related to portfolio management such as risk characteristics of portfolios and portfolio attributes. Statutory authority for this item is the Texas Constitution, Article VII, §2 and §5; 19 Texas Administrative Code (TAC), Chapter 33.

COMMITTEE – DISCUSSION
SBOE – NO ACTION

10. Approval of an Extension of the Standard Contract with BNY Mellon and Authorization for Contract Execution by the Commissioner of Education

This item provides an opportunity for the committee and board to extend the standard contract with BNY Mellon, and authorize contract execution by the commissioner of education. Statutory authority for this action is the Texas Constitution, Article VII, §2 and §5; Natural Resources Code (NRC), §51.414; 19 Texas Administrative Code (TAC), Chapter 33.

COMMITTEE – ACTION
SBOE – CONSENT

11. Proposed Amendments 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
(Second Reading and Final Adoption)

This item presents for second reading and final adoption proposed amendments to 19 Texas Administrative Code (TAC) Chapter 33, Statement of Investment Objectives, Policies, and Guidelines of the Texas Permanent School Fund, Subchapter A, State Board of Education Rules. The proposed amendments would amend the asset allocation of the Permanent School Fund (PSF), update transactions and restrictions that apply to the PSF, and update cross references and a section title. No changes are recommended since approved for first reading. Statutory authority for this action is the Texas Constitution, Article VII, §5(a) and (f); Texas Education Code (TEC), §43.001; §43.0052, as added by House Bill (HB) 4388, 86th Texas Legislature, 2019; and Texas Natural Resources Code (NRC), §32.012, as amended by Senate Bill (SB) 608, 86th Texas Legislature, 2019; NRC, §32.0161, as added by SB 608, 86th Texas Legislature, 2019; and NRC, §32.068 and §51.414, as added by HB 4388, 86th Texas Legislature, 2019.

COMMITTEE – ACTION
SBOE – CONSENT

12. Review of the Private Equity Asset Class for the Permanent School Fund

This item provides an opportunity for the board to review the private equity asset class. Statutory authority for this item is the Texas Constitution, Article VII, §5 and §2; and 19 Texas Administrative Code (TAC), Chapter 33.

COMMITTEE – DISCUSSION
SBOE – NO ACTION

13. Review of Real Return Asset Class for the Permanent School Fund

This item provides an opportunity for the committee and board to review the real return asset class for the Permanent School Fund (PSF). Statutory authority for this action is the Texas Constitution, Article VII, §5 and §2; and 19 Texas Administrative Code (TAC), Chapter 33.

COMMITTEE – ACTION
SBOE – CONSENT

14. Report of the Permanent School Fund Executive Administrator and Chief Investment Officer

The Permanent School Fund (PSF) executive administrator will report to the committee on matters relating to the management of the PSF and the Charter District Reserve Fund. The report may present information on historical and current status of Fund holdings, current and proposed investment policies and procedures, and historical and current Fund performance and compliance. The administrator may update the board on the bond guarantee program, the status of requests for proposal or for qualifications and current contracts for services and other administrative activities undertaken on behalf of the board. The administrator may provide an update on the PSF distribution or on the effect of legislation impacting the PSF. The administrator may provide an analysis of current and future investment market conditions, focusing upon the impact on the holdings of the PSF. Statutory authority for this item is the Texas Constitution, Article VII, §5 and §2; and 19 Texas Administrative Code (TAC), Chapter 33.

COMMITTEE – DISCUSSION
SBOE – NO ACTION