July 2014 Committee on School Finance Permanent School Fund

THURSDAY
July 17, 2014

10 a.m.

COMMITTEE ON SCHOOL FINANCE/PERMANENT SCHOOL FUND - Room 1-100
Members: Patricia Hardy, Chair; Lawrence A. Allen, Jr., Vice Chair; David Bradley; Ken Mercer; Thomas Ratliff. 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 at http://www.tea.state.tx.us/index4.aspx?id=25769804094.

1. Adoption of Review of 19 TAC Chapter 109, Budgeting, Accounting, and Auditing
(Adoption of Review)
 

Texas Government Code, §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 the review of SBOE rules in 19 TAC Chapter 109, Budgeting, Accounting, and Auditing, Subchapters A-D. 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 Texas Government Code, §2001.039. The statutory authority for 19 TAC Chapter 109 is the 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), 42.152(q), 44.001, 44.008, and 44.010, for Subchapter B; TEC, §§7.055(b), 7.102(c)(32), 44.001, 44.007, and 44.008, for Subchapter C; and TEC, §§7.102(c)(34), 45.206, and 45.208, for Subchapter D.

COMMITTEE - ACTION
SBOE - CONSENT

2. Per Capita Apportionment Rate for the 2013-2014 School Year 

The board is responsible for setting a per capita apportionment rate for each school year based on an estimate of the amount available for expenditures from the Available School Fund. The board adopted a preliminary 2013-2014 per capita apportionment rate of $256.125 in September 2013. Agency staff members will propose a recommended revised rate for the 2013-2014 school year at the July meeting of the Committee on School Finance/Permanent School Fund. Statutory authority for this action is the Texas Education Code (TEC), §42.004 and §43.001(b).

COMMITTEE - ACTION
SBOE - ACTION

3. Discussion of Proposed Amendment to 19 TAC Chapter 129, Student Attendance, Subchapter B, Student Attendance Accounting, §129.21, Requirements for Student Attendance Accounting for State Funding Purposes 

This item presents proposed amendment to 19 TAC Chapter 129, Student Attendance, Subchapter B, Student Attendance Accounting, §129.21, Requirements for Student Attendance Accounting for State Funding Purposes, for discussion. The proposed amendment would update statutory references in the rule text to reflect changes from the 83rd Texas Legislature, Regular Session, 2013. Statutory authority is the Texas Education Code (TEC), §25.087 and §42.004.

COMMITTEE - DISCUSSION
SBOE - NO ACTION

4. Report by the State Auditor’s Office on the Certification of the Bond Guarantee Program for Fiscal Year Ending August 31, 2013 

This item provides an opportunity for representatives of the State Auditor’s Office (SAO) to make a presentation regarding the Bond Guarantee Program.

COMMITTEE - DISCUSSION
SBOE - NO ACTION

5. Adoption of an Annual Report on the Status of the Bond Guarantee Program 

This item provides an opportunity for the committee and board to adopt an annual report on the status of the Bond Guarantee Program. Statutory authority for this action is the Texas Constitution, Article VII, §5(f).

COMMITTEE - ACTION
SBOE - CONSENT

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

Investment staff will report on the transactions executed during the months of March, April and May 2014 in the investment portfolio of the Texas Permanent School Fund.

COMMITTEE - DISCUSSION
SBOE - NO ACTION

7. Ratification of the Purchases and Sales of the Investment Portfolio of the Permanent School Fund for the Months of March, April and May 2014 

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 March, April and May 2014. Statutory authority for this action is the Texas Constitution, Article VII, §5(f).

COMMITTEE - ACTION
SBOE - CONSENT

8. First Quarter 2014 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 first calendar quarter 2014 and cumulative investment performance of the various portfolios of the Fund. This item will allow the committee to discuss in depth various issues related to portfolio management such as risk characteristics of portfolios and portfolio attributes.

COMMITTEE - DISCUSSION
SBOE - NO ACTION

9. Decision on Real Estate Investments 

This item provides an opportunity for the committee and board to review and consider possible real estate investments. Statutory authority for this action is the Texas Constitution, Article VII, §5(f).

COMMITTEE - ACTION
SBOE - CONSENT

10. Decision on Private Markets Benchmarks 

This item provides an opportunity for the committee and board to review and approve the private markets benchmarks for real estate and private equity.  The board may amend the Permanent School Fund Investment Procedures Manual to reflect any changes. Statutory authority for this action is the Texas Constitution, Article VII, §5(f).

COMMITTEE - ACTION
SBOE - CONSENT

11. Decision on Absolute Return Investments 

This item provides an opportunity for the committee and board to review the absolute return portfolios managed for the Permanent School Fund.  The board will consider contract extensions where appropriate and possible termination of absolute return fund of fund managers. Statutory authority for this action is the Texas Constitution, Article VII, §5(f).

COMMITTEE - ACTION
SBOE - CONSENT

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

The Permanent School Fund executive administrator will report to the committee on matters relating to the management of the Permanent School Fund. The report will 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 will 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 will provide an analysis of current and future investment market conditions, focusing upon the impact on the holdings of the Permanent School Fund. The committee will direct investment staff regarding future agenda items.

COMMITTEE - DISCUSSION
SBOE - NO ACTION