January 2020 Committee on School Finance/Permanent School Fund
THURSDAY
January 30, 2020
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.
This item presents for first reading and filing authorization the proposed repeal of 19 Texas Administrative Code (TAC) Chapter 105, Foundation School Program, Subchapter B, Use of State Funds, §105.11, Maximum Allowable Indirect Cost, and §105.12, Basic Allotment. The proposed repeal would implement House Bill (HB) 3, 86th Texas Legislature, 2019, which removed the State Board of Education's (SBOE's) rulemaking authority related to maximum allowable indirect costs and the basic allotment for the Foundation School Program (FSP). Statutory authority for this action is the Texas Education Code (TEC), §48.004.
COMMITTEE – ACTION
SBOE – ACTION
2. Discussion of Proposed Amendment to 19 TAC Chapter 109, Budgeting, Accounting, and Auditing, Subchapter B, Texas Education Agency Audit Functions, §109.23, School District Independent Audits and Agreed-Upon Procedures
This item provides an opportunity for the committee to discuss a proposed amendment to 19 Texas Administrative Code (TAC) Chapter 109, Budgeting, Accounting, and Auditing, Subchapter B, Texas Education Agency Audit Functions, §109.23, School District Independent Audits and Agreed-Upon Procedures. The proposed amendment would reflect changes by House Bill (HB) 1520, 86th Texas Legislature, 2019, that eliminated the requirement for out-of-state certified public accountancy (CPA) firms to be licensed in Texas. Statutory authority for this item is the Texas Education Code, §§7.102(c)(32), 44.001, 44.007, 44.008, and 44.010.
COMMITTEE – DISCUSSION
SBOE – NO ACTION
3. 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 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
4. Ratification of the Purchases and Sales of the Investment Portfolio of the Permanent School Fund for the Months of October and November 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 October and November 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
5. Annual Reporting Requirement 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 the Texas Constitution, Article VII, §2 and §5, and 19 Texas Administrative Code (TAC) Chapter 33.
COMMITTEE – DISCUSSION
SBOE – NO ACTION
This item provides an opportunity for the board to discuss the study on the Permanent School Fund (PSF) Distributions as defined in House Bill (HB) 4388, 86th Legislature, 2019. Statutory authority for this item is House Bill 4388, Section 5(b), 86th Legislature, Regular Session 2019.
COMMITTEE – DISCUSSION
SBOE – NO ACTION
7. Third 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 third 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
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 reorganize references to the Permanent School Fund (PSF) distribution policy, include references to new authority and duties assigned by the 86th Texas Legislature, 2019, and address permissible fixed income investments. 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; TEC, §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; §32.0161, as added by SB 608, 86th Texas Legislature, 2019; and §32.068 and §51.414, as added by HB 4388, 86th Texas Legislature, 2019.
COMMITTEE – ACTION
SBOE - ACTION
9. Discussion of 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, §33.25, Permissible and Restricted Investments and General Guidelines for Investment Managers
This item provides an opportunity for the committee to discuss a proposed amendment 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, §33.25, Permissible and Restricted Investments and General Guidelines for Investment Managers. The proposed amendment would address guidelines for investment managers related to permissible fixed income investments. Statutory authority for this item is the Texas Constitution, Article VII, §5(a) and (f), and the Texas Education Code (TEC), §43.001.
COMMITTEE – DISCUSSION
SBOE – NO ACTION
10. Review of the Private Equity Asset Class for the Permanent School Fund
This item provides an opportunity for the committee to review the private equity asset class. Statutory authority for this item is the Texas Constitution, Article VII, §2 and §5, and 19 Texas Administrative Code, Chapter 33.
COMMITTEE – DISCUSSION
SBOE – NO ACTION
11. Report of the Permanent School Fund 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 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, 19 Texas Administrative Code (TAC) Chapter 33.
COMMITTEE – DISCUSSION
SBOE – NO ACTION