April 2017 Committee on School Finance Permanent School Fund
THURSDAY
April 20, 2017
9 a.m.
COMMITTEE ON SCHOOL FINANCE/PERMANENT SCHOOL FUND - Room 1-104
Members: David Bradley, Chair; Tom Maynard, Vice Chair; Lawrence A. Allen, Jr.;
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 second reading and final adoption a proposed amendment to 19 TAC Chapter 109, Budgeting, Accounting, and Auditing, Subchapter D, Uniform Bank Bid or Request for Proposal and Depository Contract, §109.51, Uniform Depository Bank Bid or Proposal Form. The proposed amendment would facilitate the acquisition of a depository contract that is in compliance with current banking standards. No changes to the rule or figures are recommended since approved for first reading. Statutory authority for this action is the Texas Education Code (TEC), §§7.102(c)(34), 45.206, and 45.208.
COMMITTEE - ACTION
SBOE - ACTION
2. Adoption of Review of 19 TAC Chapter 109, Budgeting, Accounting, and Auditing
(Adoption of Review)
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 adoption of the 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. 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. The statutory authority for the rule review is Texas Government Code, §2001.039. The 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), 42.152, 44.001, 44.007, 44.008, and 44.010, for Subchapter B; TEC, §§7.055(b)(4), (36), and (37), 7.102(c)(32), 44.001, 44.007, and 44.008, for Subchapter C; and TEC, §§7.102(c)(34), 45.206, and 45.208, for Subchapter D.
COMMITTEE - ACTION
SBOE - CONSENT
3. Review of Permanent School Fund Securities Transactions and the Investment Portfolio
Investment staff will report on the transactions executed during the months of December 2016, January and February 2017 in the investment portfolio of the Texas Permanent School Fund.
COMMITTEE - DISCUSSION
SBOE - NO ACTION
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 December 2016, January and February 2017. Statutory authority for this action is the Texas Constitution, Article VII, §5(f).
COMMITTEE - ACTION
SBOE - CONSENT
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, 2016
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 Bond Guarantee Program for the Fiscal Year Ending August 31, 2016.
COMMITTEE - DISCUSSION
SBOE - NO ACTION
6. 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 for this action is the Texas Constitution, Article VII, §5(f).
COMMITTEE - ACTION
SBOE - CONSENT
7. Fourth Quarter 2016 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 fourth calendar quarter 2016 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.
COMMITTEE - DISCUSSION
SBOE - NO ACTION
8. Decision on Real Estate Investments
This item provides an opportunity for the committee and board to review and consider possible real estate investments. Statutory authority for this action is the Texas Constitution, Article VII, §5(f).
COMMITTEE - ACTION
SBOE - CONSENT
9. Approval of the Selection of a Firm to Provide Investment Management Services for Long-Only Passive International Developed and Emerging Market Equity for the Texas Permanent School Fund and Authorization for Contract Execution by the Commissioner of Education
This item provides an opportunity for the committee and board to review and approve the selection of a firm to provide investment management services for long-only passive international developed and emerging market equity for the Texas Permanent School Fund and authorization for contract execution by the commissioner of education. Statutory authority for this action is the Texas Constitution, Article VII, §5(f).
COMMITTEE - ACTION
SBOE - CONSENT
10. Review of the Fixed Income Asset Class
This item provides an opportunity for the committee to review the fixed income asset class.
COMMITTEE - DISCUSSION
SBOE - NO ACTION
11. Review of the Permanent School Fund Administrative Budget
This item provides an opportunity for the committee to receive an update on the Permanent School Fund Administrative Budget as appropriated in the General Appropriations Act (GAA).
COMMITTEE - DISCUSSION
SBOE - NO ACTION
12. Report of the Permanent School Fund Executive 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. The report will 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 will 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 will provide an analysis of current and future investment market conditions, focusing upon the impact on the holdings of the Permanent School Fund.
COMMITTEE - DISCUSSION
SBOE - NO ACTION
This item provides the opportunity for the committee to discuss a proposed amendment to 19 TAC Chapter 105, Foundation School Program, Subchapter A, Definitions, §105.1, Rules for the Definition of Tax Levy and Tax Collection. The proposed amendment would ensure that the definition of tax collections for purposes of the Texas Education Code (TEC), §42.004, and as used in issuing additional state aid for ad valorem tax credits under the TEC, §42.2515, complies with Texas Tax Code, Chapter 313. Statutory authority is the TEC, §42.004.
COMMITTEE - DISCUSSION
SBOE - NO ACTION
14. Discussion of Pending Litigation
The State Board of Education or the Committee on School Finance/Permanent School Fund may enter executive session in accordance with the Texas Government Code, §551.071(1)(A), to discuss pending and contemplated litigation with the general counsel, legal staff, and, if necessary, attorney(s) from the Attorney General's Office. The Committee of the Full Board or the Committee on School Finance/Permanent School Fund will meet in Room 1-103 to discuss this item.
Cases to be discussed may include:
Lyondell Chemical Company, No. 09-10023; Edward S. Weisfelner, as Trustee of the LB Creditor Trust v. Morgan Stanley, Adv. Pro. No. 10-04609 (Bankr. S.D.N.Y.) and Edward S. Weisfelner, as Trustee of the LB Litigation Trust v. Holmes, Adv. Pro. No. 10-05525 (Bankr. S.D.N.Y.);
Tribune Company, No. 08-13141; The Official Committee of Unsecured Creditors of Tribune Company v. Fitzsimmons, Adv. Pro. No. 10-54010 (Bankr. D. Del);
Deutsche Bank v Bank of America, No. 3:11-CV-01175-F (N. D. Tex., Dallas Div.) and Deutsche Bank v. Employees Retirement Fund of the City of Dallas, No. 3:11-CV-1167-F; ( N. D. Tex. Dallas Div. ) CONSOLIDATED in: In re: Tribune Company Fraudulent Conveyance Litigation; No. 11-MD-2296 Consolidated Multidistrict Action (S.D.N.Y.); and
any other litigation arising after the date of posting or reasonably contemplated as of the date of the board meeting.
COMMITTEE - DISCUSSION
SBOE - NO ACTION