April 2021 Committee on School Finance/Permanent School Fund

THURSDAY
April 15, 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; Keven Ellis; Patricia Hardy; Marisa Perez-Diaz. 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 109, Budgeting, Accounting, and Auditing,  Subchapter C, Adoptions By Reference, §109.41, Financial Accountability System Resource Guide
(Second Reading and Final Adoption)

This item presents for second reading and final adoption 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 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

2. Discussion of Proposed Amendment to 19 TAC Chapter 109, Budgeting, Accounting, and Auditing, Subchapter B, Texas Education Agency Audit Functions, §109.25, State Compensatory Education Program Reporting and Auditing System

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, §109.25, State Compensatory Education Program Reporting and Auditing System. The proposed amendment would update references to statutory citations that were renumbered by House Bill (HB) 3, 86th Texas Legislature, 2019. Statutory authority is the Texas Education Code (TEC), §48.104, as redesignated and amended by HB 3, 86th Texas Legislature, 2019.

COMMITTEE – DISCUSSION
SBOE – NO ACTION

3. Adoption of 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
(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 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. Statutory authority for the rule review is TGC, §2001.039. 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 - ACTION
SBOE - ACTION

4Proposed Repeal of 19 TAC Chapter 105, Foundation School Program, Subchapter A, Definitions, §105.1, Rules for the Definition of Tax Levy and Tax Collection
(First Reading and Filing Authorization)

This item presents for first reading and filing authorization the proposed repeal of 19 Texas Administrative Code (TAC) Chapter 105, Foundation School Program, Subchapter A, Definitions, §105.1, Rules for the Definition of Tax Levy and Tax Collection. 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 the definitions of tax levy and tax collection for the Foundation School Program (FSP). Statutory authority is the Texas Education Code (TEC), §48.004, as transferred, redesignated, and amended by HB 3, 86th Texas Legislature, 2019.

COMMITTEE - ACTION
SBOE - ACTION

5. Report by the State Auditor’s Office on the Audit of the Permanent School Fund’s Financial Statements and Certification of the Bond Guarantee Program for the Fiscal Year Ending August 31, 2020

This item provides an opportunity for representatives of the State Auditor’s Office (SAO) to make a presentation regarding the Audit of the Permanent School Fund’s Financial Statements and the certification of the Bond Guarantee Program for the Fiscal Year Ending August 31, 2020. Statutory authority is the Texas Constitution, Article VII, §2 and §5; and Texas Education Code (TEC) §45.053(b).

COMMITTEE – DISCUSSION
SBOE – NO ACTION

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

Investment staff will report on the transactions executed during the months of December 2020, January 2021, and February 2021 in the investment portfolio of the Texas Permanent School Fund. Statutory authority is the Texas Constitution, Article VII, §2 and §5; and 19 Texas Administrative Code (TAC), Chapter 33.

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 December 2020, January 2021, and February 2021

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 (PSF) for the months of December 2020, January 2021, and February 2021. Statutory authority is the Texas Constitution, Article VII, §2 and §5; and 19 Texas Administrative Code (TAC), Chapter 33.

COMMITTEE – ACTION
SBOE – CONSENT

8. Report on the Permanent School Fund Liquid Account

This item provides an opportunity for the committee and board to receive a status update report on the liquid account and ratify transactions. Statutory authority is the Texas Constitution, Article VII, §5 and §2; Natural Resources Code (NRC), §51.414; and 19 Texas Administrative Code (TAC), Chapter 33.

COMMITTEE – ACTION
SBOE – CONSENT

9. 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 is the Texas Constitution, Article VII, §2 and §5; Texas Education Code (TEC), §45.053(c).

COMMITTEE – ACTION
SBOE – CONSENT

10. Fourth Quarter 2020 Permanent School Fund Performance Report

The performance measurement consultant to the Permanent School Fund (PSF), BNY Mellon Asset Servicing, will report on the investment performance during the fourth calendar quarter 2020 and cumulative investment performance of the various portfolios of the PSF. 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 is the Texas Constitution, Article VII, §5 and §2; and 19 Texas Administrative Code (TAC), Chapter 33.

COMMITTEE – DISCUSSION
SBOE – NO ACTION

11. Review of the Core Fixed Income Asset Class for the Permanent School Fund

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

COMMITTEE – DISCUSSION
SBOE – NO ACTION

12. Approval of the Selection of a Firm(s) to Provide Investment Management for a Private Equity Emerging Manager Program and a Private Real Estate Emerging Manager Program for the Texas Permanent School Fund and the State Board of Education as outlined in Request for Proposal 701-21-001 and Authorization for Contract Execution by the Commissioner of Education

This item provides an opportunity for the committee and board to approve the selection of a firm(s) to provide investment management for a Private Equity Emerging Manager Program and a Private Real Estate Emerging Manager Program for the Texas Permanent School Fund and the State Board of Education as outlined in RFP 701-21-001 and authorization for contract execution by the Commissioner of Education. Statutory authority is the Texas Constitution, Article VII, §2 and §5; and Texas Administrative Code (TAC), Chapter 33.

COMMITTEE – ACTION
SBOE – CONSENT

13. Review the Processes which Consider Board Member Nominees for State Board Positions

This item provides an opportunity for the committee and board to Review the Processes which Consider Board Member Nominees for State Board Positions. Statutory authority is the Texas Constitution, Article VII, §5 and §2; and the Texas Education Code (TEC), §45.053(c).

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 cur rent 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 is the Texas Constitution, Article VII, §5 and §2; and 19 Texas Administrative Code (TAC), Chapter 33.

COMMITTEE – DISCUSSION
SBOE – NO ACTION