September 2021 Committee on School Finance/Permanent School Fund Item 12

Discussion of Proposed Amendments 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

September 2, 2021

COMMITTEE ON SCHOOL FINANCE/PERMANENT SCHOOL FUND: DISCUSSION
STATE BOARD OF EDUCATION: NO ACTION

SUMMARY: This item provides an opportunity for the committee to discuss potential 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 update the rules based on changes made by Senate Bill (SB) 1232, 87th Texas Legislature, Regular Session, 2021.

STATUTORY AUTHORITY: Texas Constitution, Article VII, §2 and §5, and Texas Education Code (TEC), Chapter 43, Subchapter B, as added by SB 1232, 87th Texas Legislature, Regular Session, 2021.

The Texas Constitution, Article VII, §2 and §5, establish the permanent school fund, the assets that comprise the permanent school fund, the bond guarantee program, and the available school fund and authorize the State Board of Education (SBOE) to manage and invest the permanent school fund in accordance with the prudent person standard.

TEC, Chapter 43, Subchapter B, authorizes the SBOE to create the Texas Permanent School Fund Corporation and delegate to the corporation the SBOE's authority to manage and invest the permanent school fund and the charter district bond guarantee reserve fund. The board of directors of the corporation would be comprised of the following: five members of the SBOE appointed by the SBOE; the commissioner of the General Land Office (GLO); one member appointed by the GLO commissioner who has substantial background and expertise in investments and asset management; and two members appointed by the governor who have substantial background and expertise in investments and asset management. The corporation would be a special-purpose governmental corporation and instrumentality of the state with necessary and implied powers to accomplish its purpose. The corporation could engage in any activity necessary to manage PSF investments, including entering into any contract, to the extent the activity complied with applicable fiduciary duties.

The full text of statutory citations can be found in the statutory authority section of this agenda.

FUTURE ACTION EXPECTED: Any proposed amendments to Chapter 33, Subchapter A, will be presented for first reading and filing authorization at the November 2021 SBOE meeting.

BACKGROUND INFORMATION AND JUSTIFICATION: In accordance with statute, the rules in Chapter 33, Subchapter A, establish investment objectives, policies, and guidelines for the Texas Permanent School Fund (PSF).

SB 1232, 87th Texas Legislature, Regular Session, 2021, allows the SBOE to create the Texas Permanent School Fund Corporation and delegate its authority to manage the PSF to the corporation.

Staff Member Responsible:
Holland Timmins, Executive Administrator and Chief Investment Officer, Texas Permanent School Fund

Attachment:
Text 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