November 2021 Committee on School Finance/Permanent School Fund Item 8
Proposed New 19 TAC Chapter 33, Statement of Investment Objectives, Policies, and Guidelines of the Texas Permanent School Fund, Subchapter A, State Board of Education Rules, §33.21, Texas Permanent School Fund Corporation
(First Reading and Filing Authorization)
November 19, 2021
COMMITTEE ON SCHOOL FINANCE/PERMANENT SCHOOL FUND: ACTION
STATE BOARD OF EDUCATION: CONSENT
SUMMARY: This item presents for first reading and filing authorization proposed new 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, §33.21, Texas Permanent School Fund Corporation. The proposed new section would address the term length of State Board of Education (SBOE) members on the board of directors of the Texas Permanent School Fund (PSF) Corporation as required by Senate Bill (SB) 1232, 87th Texas Legislature, Regular Session, 2021.
STATUTORY AUTHORITY: Texas Constitution, Article VII, §5(a) and (f), and Texas Education Code (TEC), §43.001 and §43.053, as added by SB 1232, 87th Legislature, Regular Session, 2021.
Texas Constitution, Article VII, §5(a), authorizes the SBOE to make distributions from the PSF to the available school fund with certain limits.
Texas Constitution, Article VII, §5(f), authorizes the SBOE to manage and invest the PSF according to the prudent investor standard and make investments it deems appropriate.
TEC, §43.001, describes the PSF as a perpetual endowment.
TEC, §43.053, as added by SB 1232, 87th Texas Legislature, Regular Session, 2021, establishes the composition of the board of directors of the Texas PSF Corporation and requires the SBOE to establish by rule the terms of SBOE members of the board of directors. SB 1232 allows the SBOE to create the Texas PSF Corporation and delegate its authority to manage the PSF and the charter district bond guarantee reserve fund to the corporation.
The full text of statutory citations can be found in the statutory authority section of this agenda.
EFFECTIVE DATE: The proposed effective date of the proposed new section is 20 days after filing as adopted with the Texas Register. Under TEC, §7.102(f), the SBOE must approve the rule action at second reading and final adoption by a vote of two-thirds of its members to specify an effective date earlier than the beginning of the 2022-2023 school year. The earlier effective date would allow the rule to align with statute as soon as possible.
PREVIOUS BOARD ACTION: The SBOE initially adopted rules in Chapter 33 effective September 1, 1996. At the September 2021 SBOE meeting, the Committee on School Finance/Permanent School Fund discussed SB 1232, 87th Texas Legislature, Regular Session, 2021, and the possible need to update rules in 19 TAC Chapter 33.
BACKGROUND INFORMATION AND JUSTIFICATION: In accordance with statute, the rules in 19 TAC Chapter 33 establish investment objectives, policies, and guidelines for the Texas PSF.
SB 1232, 87th Texas Legislature, Regular Session, 2021, allows the SBOE to create the Texas PSF Corporation and delegate its authority to manage the PSF to the corporation. Specifically, SB 1232 added new TEC, §43.053, which establishes the composition of the board of directors of the Texas PSF Corporation and requires the SBOE to establish by rule the terms of SBOE members of the board of directors.
Proposed new §33.21 would specify that the term of office for an SBOE member who serves on the Texas PSF Corporation board of directors will end when that member no longer serves on the SBOE Committee on School Finance/Permanent School Fund.
FISCAL IMPACT: The Texas Education Agency (TEA) has determined that there are no additional costs to state or local government required to comply with the proposal.
LOCAL EMPLOYMENT IMPACT: The proposal has no effect on local economy; therefore, no local employment impact statement is required under Texas Government Code, §2001.022.
SMALL BUSINESS, MICROBUSINESS, AND RURAL COMMUNITY IMPACT: The proposal has no direct adverse economic impact for small businesses, microbusinesses, or rural communities; therefore, no regulatory flexibility analysis specified in Texas Government Code, §2006.002, is required.
COST INCREASE TO REGULATED PERSONS: The proposal does not impose a cost on regulated persons, another state agency, a special district, or a local government and, therefore, is not subject to Texas Government Code, §2001.0045.
TAKINGS IMPACT ASSESSMENT: The proposal does not impose a burden on private real property and, therefore, does not constitute a taking under Texas Government Code, §2007.043.
GOVERNMENT GROWTH IMPACT: TEA staff prepared a Government Growth Impact Statement assessment for this proposed rulemaking. During the first five years the proposed rulemaking would be in effect, it would create a new regulation by adding provisions in alignment with recent statutory changes. The new provisions address the SBOE's responsibilities in relation to the PSF.
The proposed rulemaking would not create or eliminate a government program; would not require the creation of new employee positions or elimination of existing employee positions; would not require an increase or decrease in future legislative appropriations to the agency; would not require an increase or decrease in fees paid to the agency; would not expand, limit, or repeal an existing regulation; would not increase or decrease the number of individuals subject to its applicability; and would not positively or adversely affect the state's economy.
PUBLIC BENEFIT AND COST TO PERSONS: The proposal would align with statute and clarify provisions supporting the management and investment of the PSF. There is no anticipated economic cost to persons who are required to comply with the proposal.
DATA AND REPORTING IMPACT: The proposal would have no data and reporting impact.
PRINCIPAL AND CLASSROOM TEACHER PAPERWORK REQUIREMENTS: TEA has determined that the proposal would not require a written report or other paperwork to be completed by a principal or classroom teacher.
PUBLIC COMMENTS: The public comment period on the proposal begins December 17, 2021, and ends at 5:00 p.m. on January 21, 2022. The SBOE will take registered oral and written comments on the proposal at the appropriate committee meeting in January 2022 in accordance with the SBOE board operating policies and procedures. A request for a public hearing on the proposal submitted under the Administrative Procedure Act must be received by the commissioner of education not more than 14 calendar days after notice of the proposal has been published in the Texas Register on December 17, 2021.
MOTION TO BE CONSIDERED: The State Board of Education:
Approve for first reading and filing authorization proposed new 19 TAC Chapter 33, Statement of Investment Objectives, Policies, and Guidelines of the Texas Permanent School Fund, Subchapter A, State Board of Education Rules, §33.21, Texas Permanent School Fund Corporation.
Staff Member Responsible:
Holland Timmins, Executive Administrator and Chief Investment Officer, Texas Permanent School Fund
Attachment:
Text of Proposed New 19 TAC Chapter 33, Statement of Investment Objectives, Policies, and Guidelines of the Texas Permanent School Fund, Subchapter A, State Board of Education Rules, §33.21, Texas Permanent School Fund Corporation