H.B. No. 4388
 
 
 
 
AN ACT
  relating to the management of the permanent school fund by the
  School Land Board and the State Board of Education and a study
  regarding distributions from the permanent school fund to the
  available school fund.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Chapter 43, Education Code, is amended by adding
  Section 43.0052 to read as follows:
         Sec. 43.0052.  QUARTERLY REPORTS. Each quarter, the State
  Board of Education shall provide to the School Land Board a
  financial report on the portion of the permanent school fund assets
  and funds for which the State Board of Education is responsible.  
  The report must include:
               (1)  target and actual asset allocations, by asset
  type, based on fair market value or net asset value;
               (2)  investment performance by asset type;
               (3)  benchmarks and benchmark performances; and
               (4)  costs of implementing and administering the
  permanent school fund liquid account under Section 51.414, Natural
  Resources Code, including costs associated with contracts for:
                     (A)  professional investment management;
                     (B)  investment advisory services; and
                     (C)  custodial services for the account.
 
         SECTION 2.  Subchapter C, Chapter 32, Natural Resources
  Code, is amended by adding Section 32.068 to read as follows:
         Sec. 32.068.  QUARTERLY REPORTS. Each quarter, the board
  shall provide to the State Board of Education a financial report on
  the portion of the permanent school fund assets and funds for which
  the board is responsible.  The report must include:
               (1)  target and actual asset allocations, by asset
  type, based on fair market value or net asset value;
               (2)  investment performance by asset type; and
               (3)  benchmarks and benchmark performances.
         SECTION 3.  Section 51.402(c), Natural Resources Code, is
  amended to read as follows:
         (c)  Notwithstanding Subsection (a), on January 1 of each
  even-numbered year, the market value of the investments [in real
  estate] under Subsections (a)(6) and (8) [this section on January 1
  of each even-numbered year] may not exceed an amount that is equal
  to 15 percent of the market value of the permanent school fund on
  that date.
         SECTION 4.  Subchapter I, Chapter 51, Natural Resources
  Code, is amended by adding Section 51.414 to read as follows:
         Sec. 51.414.  PERMANENT SCHOOL FUND LIQUID ACCOUNT. (a)  The
  permanent school fund liquid account is established as an account
  in the permanent school fund in the State Treasury to be used by the
  board and the State Board of Education as provided by this section.
         (b)  Each quarter, the board shall hold a meeting and adopt a
  resolution to release from the real estate special fund account
  funds designated under Section 51.401 that are not being used for a
  purpose listed in Section 51.402(a) and are not required for the
  board's anticipated cash needs for the 90-day period following the
  date of the meeting, to be deposited to the credit of the permanent
  school fund liquid account in the State Treasury.
         (c)  The State Board of Education may invest funds in the
  permanent school fund liquid account.  The investments may be made
  only in liquid assets, in the same manner that the permanent school
  fund is managed by the State Board of Education.
         (d)  Investment income and realized capital gains derived
  from funds in the permanent school fund liquid account shall be
  deposited in the State Treasury to the credit of the State Board of
  Education for investment in the permanent school fund.  This
  subsection does not require a deposit if the market value of the
  assets held in the permanent school fund liquid account is below
  cost.
         (e)  The State Board of Education may use funds in the
  permanent school fund liquid account to pay for administrative
  costs associated with implementing this section, including costs
  associated with contracts for professional investment management,
  investment advisory services, or custodial services.
         (f)  The board shall provide to the State Board of Education
  in each quarterly report required by Section 32.068 the board's
  anticipated cash needs for the six-month period following the date
  of the report, to allow the State Board of Education to ensure that
  the board's cash needs may be met as provided by Subsection (g).
         (g)  Not later than the fifth business day after the date of a
  request of the board, the State Board of Education shall release
  from the permanent school fund liquid account funds to be deposited
  to the credit of the real estate special fund account in the State
  Treasury in an amount requested by the board.
         SECTION 5.  (a) The legislature finds that the periodic
  examination of distributions made from the permanent school fund to
  the available school fund is necessary for the effective management
  of permanent school fund investments.
         (b)  The Texas Education Agency, in consultation with the
  General Land Office, shall conduct a study regarding distributions
  from the permanent school fund to the available school fund. The
  study must:
               (1)  examine historical patterns in the real value of
  distributions made from all assets and revenues of the permanent
  school fund and historical patterns in the real value of permanent
  school fund assets relative to the number of students enrolled in
  the public education system;
               (2)  analyze the impact of underlying data and
  methodological assumptions on actual and projected distributions
  from the permanent school fund;
               (3)  seek input from state government officials
  involved in public education policy or in the appropriation of
  state funds to support the public education system;
               (4)  examine current and alternative approaches to
  balance the needs and interests of present and future beneficiaries
  of the permanent school fund and the available school fund;
               (5)  develop options to maximize available revenue
  distributions for the education of students enrolled in the public
  education system while preserving the permanent school fund for
  future generations; and
               (6)  consider any other subjects relevant to the
  purpose of the study.
         (c)  The Texas Education Agency may contract for investment
  management expertise for the purpose of implementing this section.
         (d)  Not later than June 1, 2020, the Texas Education Agency
  shall prepare and submit a report regarding the results of the study
  to the governor, the State Board of Education, the Legislative
  Budget Board, the lieutenant governor, the speaker of the house of
  representatives, and each legislative standing committee with
  primary jurisdiction over public education.
         (e)  This section expires January 1, 2021.
         SECTION 6.  This Act takes effect September 1, 2019.
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
 
         I certify that H.B. No. 4388 was passed by the House on May 7,
  2019, by the following vote:  Yeas 142, Nays 4, 1 present, not
  voting; and that the House concurred in Senate amendments to H.B.
  No. 4388 on May 24, 2019, by the following vote:  Yeas 141, Nays 0,
  1 present, not voting.
 
  ______________________________
  Chief Clerk of the House   
 
         I certify that H.B. No. 4388 was passed by the Senate, with
  amendments, on May 22, 2019, by the following vote:  Yeas 31, Nays
  0.
 
  ______________________________
  Secretary of the Senate   
  APPROVED: __________________
                  Date       
   
           __________________
                Governor