September 2019 Committee on School Finance/Permanent School Fund

THURSDAY
September 12, 2019

9 a.m.

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

Members: Tom Maynard, chair; Lawrence A. Allen, Jr., vice chair; Donna Bahorich; Patricia Hardy; Ken Mercer. 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.    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
(First Reading and Filing Authorization)
 

This item presents for first reading and filing authorization proposed amendment to 19 Texas Administrative Code (TAC) Chapter 129, Student Attendance, Subchapter B, Student Attendance Accounting, §129.21, Requirements for Student Attendance Accounting for State Funding Purposes. The proposed amendment would update the rule to allow districts and charter schools flexibility for selecting an official attendance-taking time during the campus' instructional day. Statutory authority for this action is the Texas Education Code (TEC), §48.004 and §12.106.    

COMMITTEE – ACTION
SBOE – ACTION

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

Investment staff will report on the transactions executed during the months of May, June and July 2019 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

3.    Ratification of the Purchases and Sales of the Investment Portfolio of the Permanent School Fund for the Months of May, June and July 2019
 

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 May, June and July 2019.
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

4.    Second Quarter 2019 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 second calendar quarter 2019 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. 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

5.    Determination as to Whether Transfers May be Made from the Permanent School Fund to the Available School Fund 

This item provides an opportunity for the committee and board to review the requirement in Article VII, §5(a)(2) that the total amount distributed over ten years cannot exceed the total return on all investment assets of the PSF over the same ten-year period.  The board will determine whether transfers may be made from the Permanent School Fund to the Available School Fund in fiscal year 2020. Statutory authority for this action is Texas Constitution, Article VII, §2 and §5, and 19 Texas Administrative Code (TAC) Chapter 33.    

COMMITTEE – ACTION
SBOE - CONSENT
 

6.    Proposed Amendments to the Investment Procedures Manual 

This item provides an opportunity for the committee and board to review and adopt proposed amendments to the Investment Procedures Manual. 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.    Review 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

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 review 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. The rules being reviewed establish definitions, requirements, and procedures for the investment of the Permanent School Fund (PSF). Statutory authority for the rule review is the Texas Government Code (TGC), §2001.039. The statutory authority for 19 TAC Chapter 33 is the Texas Education Code (TEC), §§7.102(c)(31) and (33), 43.0031-43.004, and 45.051-45.063; the TGC, §2263.004; and the Texas Constitution, Article VII, §5(f). TGC, §2001.039, requires all state agencies to review their rules at least once every four years.    

COMMITTEE – DISCUSSION
SBOE – NO ACTION

8.    Review of the Permanent School Fund Liquid Account

This item provides an opportunity for the committee and board to review the bill requirements contained in House Bill (HB) 4388, 86th Texas Legislature, 2019.  The committee will discuss implementation of the liquid account. Statutory authority for this action is the Texas Constitution, Article VII, §2 and §5, House Bill 4388, 86th Texas Legislature, 2019; and 19 Texas Administrative Code (TAC) Chapter 33.    

COMMITTEE – ACTION
SBOE - CONSENT

9.    Discussion of Emerging and Diverse Investment Management in Alternative Asset Classes
 

This item provides an opportunity for the committee to review the emerging market manager programs in alternative asset classes. 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

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

The Permanent School Fund executive administrator will report to the committee on matters relating to the management of the Permanent School Fund 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 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

11.    Per Capita Apportionment Rate for the 2019-2020 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. Agency staff members will propose a recommended rate for the 2019-2020 school year at the September meeting of the Committee on School Finance/ Permanent School Fund. Statutory authority for this action is the Texas Education Code (TEC), §43.001(b) and §48.004.    

COMMITTEE – ACTION
SBOE – CONSENT