April 2018 Committee on School Finance/Permanent School Fund Item 9
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, §33.15, Objectives, and §33.20, Responsible Parties and Their Duties
(Second Reading and Final Adoption)
April 13, 2018
COMMITTEE ON SCHOOL FINANCE/PERMANENT SCHOOL FUND: ACTION
STATE BOARD OF EDUCATION: ACTION
SUMMARY: This item presents for second reading and final adoption 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, §33.15, Objectives, and §33.20, Responsible Parties and Their Duties. The proposed amendments would update the rate of return objective of the Permanent School Fund (PSF) and clarify roles and responsibilities for providing advice to the State Board of Education (SBOE) on benchmark and performance reporting. No changes are recommended since approved for first reading.
STATUTORY AUTHORITY: Texas Education Code (TEC), §§7.102(c)(31) and (33), 43.0031, 43.0033, and 43.004; Texas Government Code, §2263.004; and the Texas Constitution, Article VII, §5(d), and (f).
TEC, §7.102(c)(31), states that the SBOE may invest the PSF within the limits of the authority granted by the Texas Constitution, Article VII, §5, and the TEC, Chapter 43.
TEC, §7.102(c)(33), authorizes the SBOE to adopt an annual report on the status of the guaranteed bond program and states that the SBOE may adopt rules as necessary to administer the guaranteed bond program as provided under the TEC, Chapter 45, Subchapter C.
TEC, §43.0031, requires the SBOE to adopt and enforce an ethics policy regarding management and investment of the PSF.
TEC, §43.0033, requires certain persons providing services to the SBOE regarding management and investment of the PSF to file expenditure reports.
TEC, §43.004, requires the SBOE to adopt written investment objectives for the PSF and employ a service to analyze the performance of the PSF.
Texas Government Code, §2263.004, requires the SBOE to adopt by rule standards of conduct applicable to certain financial advisors or service providers.
Texas Constitution, Article VII, §5, describes the PSF, the limit on distributions to the Available School Fund, the setting of spending rates by the SBOE, and the ten-year distribution test; authorizes a bond guarantee utilizing the PSF; and describes the management of the PSF by the SBOE.
EFFECTIVE DATE: The proposed effective date of the proposed amendments is 20 days after filing as adopted with the Texas Register in order to implement the latest policy in a timely manner. 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 2018-2019 school year.
PREVIOUS BOARD ACTION: The SBOE adopted 19 TAC §33.15, Objectives, and §33.20, Responsible Parties and Their Duties, effective September 1, 1997. The sections were last amended effective August 21, 2016. The SBOE approved the proposed amendments for first reading and filing authorization at the January-February 2018 meeting.
BACKGROUND INFORMATION AND SIGNIFICANT ISSUES: In accordance with statute, the rules in 19 TAC Chapter 33 establish investment objectives, policies, and guidelines for the Texas PSF.
Section 33.15 establishes the investment objectives, PSF goal and objectives, investment rate of return and risk objectives, and the asset allocation policy. The proposed amendment to 19 TAC §33.15 would update the rate of return objective of the PSF.
Section 33.20 addresses responsible parties and the duties related to the PSF. The proposed amendment to 19 TAC §33.20 would clarify roles and responsibilities for providing advice to the SBOE on benchmark and performance reporting.
Attachment II reflects the 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, §33.15, Objectives, and §33.20, Responsible Parties and Their Duties.
No changes are recommended since approved first reading.
FISCAL IMPACT: The Texas Education Agency (TEA) has determined that there are no additional costs to persons or entities required to comply with the proposed amendments. In addition, there is 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. There is no effect on local economy for the first five years that the proposed amendments are in effect; therefore, no local employment impact statement is required under Texas Government Code, §2001.022. The proposed amendments do not impose a cost on regulated persons and, therefore, are not subject to Texas Government Code, §2001.0045.
GOVERNMENT GROWTH IMPACT: TEA staff has determined that the proposed amendments do not have a government growth impact pursuant to Texas Government Code, §2001.0221.
PUBLIC AND STUDENT BENEFIT: The distribution of the PSF will flow to the school districts and reduce the tax burden to the public and the state of Texas. The proposed amendments would update and clarify provisions supporting the management and investment of the PSF.
PROCEDURAL AND REPORTING IMPLICATIONS: The proposed amendments would have no procedural and reporting implications.
LOCALLY MAINTAINED PAPERWORK REQUIREMENTS: The proposed amendments would have no locally maintained paperwork requirements.
PUBLIC COMMENTS: Following the January-February 2018 SBOE meeting, notice of the proposed amendments was filed with the Texas Register, initiating the public comment period. No public comments had been received at the time this item was prepared. A summary of any public comments received regarding the proposal will be provided to the SBOE during the April 2018 meeting.
ALTERNATIVES: None.
OTHER COMMENTS AND RELATED ISSUES: None.
MOTION TO BE CONSIDERED: The State Board of Education:
By affirmative vote of two-thirds of the members of the board, approve for second reading and final adoption the 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, §33.15, Objectives, and §33.20, Responsible Parties and Their Duties, with an effective date of 20 days after filing as adopted with the Texas Register.
Staff Member Responsible:
Holland Timmins, Executive Administrator
and Chief Investment Officer of the
Texas Permanent School Fund
Attachments:
I. Statutory Citations (PDF, 31 KB)
II. Text 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, §33.15, Objectives, and §33.20, Responsible Parties and Their Duties (PDF, 31 KB)
(Second Reading and Final Adoption)
April 13, 2018
COMMITTEE ON SCHOOL FINANCE/PERMANENT SCHOOL FUND: ACTION
STATE BOARD OF EDUCATION: ACTION
SUMMARY: This item presents for second reading and final adoption 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, §33.15, Objectives, and §33.20, Responsible Parties and Their Duties. The proposed amendments would update the rate of return objective of the Permanent School Fund (PSF) and clarify roles and responsibilities for providing advice to the State Board of Education (SBOE) on benchmark and performance reporting. No changes are recommended since approved for first reading.
STATUTORY AUTHORITY: Texas Education Code (TEC), §§7.102(c)(31) and (33), 43.0031, 43.0033, and 43.004; Texas Government Code, §2263.004; and the Texas Constitution, Article VII, §5(d), and (f).
TEC, §7.102(c)(31), states that the SBOE may invest the PSF within the limits of the authority granted by the Texas Constitution, Article VII, §5, and the TEC, Chapter 43.
TEC, §7.102(c)(33), authorizes the SBOE to adopt an annual report on the status of the guaranteed bond program and states that the SBOE may adopt rules as necessary to administer the guaranteed bond program as provided under the TEC, Chapter 45, Subchapter C.
TEC, §43.0031, requires the SBOE to adopt and enforce an ethics policy regarding management and investment of the PSF.
TEC, §43.0033, requires certain persons providing services to the SBOE regarding management and investment of the PSF to file expenditure reports.
TEC, §43.004, requires the SBOE to adopt written investment objectives for the PSF and employ a service to analyze the performance of the PSF.
Texas Government Code, §2263.004, requires the SBOE to adopt by rule standards of conduct applicable to certain financial advisors or service providers.
Texas Constitution, Article VII, §5, describes the PSF, the limit on distributions to the Available School Fund, the setting of spending rates by the SBOE, and the ten-year distribution test; authorizes a bond guarantee utilizing the PSF; and describes the management of the PSF by the SBOE.
EFFECTIVE DATE: The proposed effective date of the proposed amendments is 20 days after filing as adopted with the Texas Register in order to implement the latest policy in a timely manner. 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 2018-2019 school year.
PREVIOUS BOARD ACTION: The SBOE adopted 19 TAC §33.15, Objectives, and §33.20, Responsible Parties and Their Duties, effective September 1, 1997. The sections were last amended effective August 21, 2016. The SBOE approved the proposed amendments for first reading and filing authorization at the January-February 2018 meeting.
BACKGROUND INFORMATION AND SIGNIFICANT ISSUES: In accordance with statute, the rules in 19 TAC Chapter 33 establish investment objectives, policies, and guidelines for the Texas PSF.
Section 33.15 establishes the investment objectives, PSF goal and objectives, investment rate of return and risk objectives, and the asset allocation policy. The proposed amendment to 19 TAC §33.15 would update the rate of return objective of the PSF.
Section 33.20 addresses responsible parties and the duties related to the PSF. The proposed amendment to 19 TAC §33.20 would clarify roles and responsibilities for providing advice to the SBOE on benchmark and performance reporting.
Attachment II reflects the 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, §33.15, Objectives, and §33.20, Responsible Parties and Their Duties.
No changes are recommended since approved first reading.
FISCAL IMPACT: The Texas Education Agency (TEA) has determined that there are no additional costs to persons or entities required to comply with the proposed amendments. In addition, there is 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. There is no effect on local economy for the first five years that the proposed amendments are in effect; therefore, no local employment impact statement is required under Texas Government Code, §2001.022. The proposed amendments do not impose a cost on regulated persons and, therefore, are not subject to Texas Government Code, §2001.0045.
GOVERNMENT GROWTH IMPACT: TEA staff has determined that the proposed amendments do not have a government growth impact pursuant to Texas Government Code, §2001.0221.
PUBLIC AND STUDENT BENEFIT: The distribution of the PSF will flow to the school districts and reduce the tax burden to the public and the state of Texas. The proposed amendments would update and clarify provisions supporting the management and investment of the PSF.
PROCEDURAL AND REPORTING IMPLICATIONS: The proposed amendments would have no procedural and reporting implications.
LOCALLY MAINTAINED PAPERWORK REQUIREMENTS: The proposed amendments would have no locally maintained paperwork requirements.
PUBLIC COMMENTS: Following the January-February 2018 SBOE meeting, notice of the proposed amendments was filed with the Texas Register, initiating the public comment period. No public comments had been received at the time this item was prepared. A summary of any public comments received regarding the proposal will be provided to the SBOE during the April 2018 meeting.
ALTERNATIVES: None.
OTHER COMMENTS AND RELATED ISSUES: None.
MOTION TO BE CONSIDERED: The State Board of Education:
By affirmative vote of two-thirds of the members of the board, approve for second reading and final adoption the 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, §33.15, Objectives, and §33.20, Responsible Parties and Their Duties, with an effective date of 20 days after filing as adopted with the Texas Register.
Staff Member Responsible:
Holland Timmins, Executive Administrator
and Chief Investment Officer of the
Texas Permanent School Fund
Attachments:
I. Statutory Citations (PDF, 31 KB)
II. Text 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, §33.15, Objectives, and §33.20, Responsible Parties and Their Duties (PDF, 31 KB)