Bill Text: TX HB1003 | 2017-2018 | 85th Legislature | Introduced
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Relating to investment of public funds, including certain expenditures by public institutions of higher education and university systems that are eligible for certain tax credits.
Spectrum: Moderate Partisan Bill (Republican 5-1)
Status: (Passed) 2017-06-14 - See remarks for effective date [HB1003 Detail]
Download: Texas-2017-HB1003-Introduced.html
Bill Title: Relating to investment of public funds, including certain expenditures by public institutions of higher education and university systems that are eligible for certain tax credits.
Spectrum: Moderate Partisan Bill (Republican 5-1)
Status: (Passed) 2017-06-14 - See remarks for effective date [HB1003 Detail]
Download: Texas-2017-HB1003-Introduced.html
85R1969 KLA-F | ||
By: Capriglione | H.B. No. 1003 |
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relating to investment of public funds. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Section 2256.009(a), Government Code, is amended | ||
to read as follows: | ||
(a) Except as provided by Subsection (b), the following are | ||
authorized investments under this subchapter: | ||
(1) obligations, including letters of credit, of the | ||
United States or its agencies and instrumentalities; | ||
(2) direct obligations of this state or its agencies | ||
and instrumentalities; | ||
(3) collateralized mortgage obligations directly | ||
issued by a federal agency or instrumentality of the United States, | ||
the underlying security for which is guaranteed by an agency or | ||
instrumentality of the United States; | ||
(4) other obligations, the principal and interest of | ||
which are unconditionally guaranteed or insured by, or backed by | ||
the full faith and credit of, this state or the United States or | ||
their respective agencies and instrumentalities, including | ||
obligations that are fully guaranteed or insured by the Federal | ||
Deposit Insurance Corporation or by the explicit full faith and | ||
credit of the United States; | ||
(5) obligations of states, agencies, counties, | ||
cities, and other political subdivisions of any state rated as to | ||
investment quality by a nationally recognized investment rating | ||
firm not less than A or its equivalent; [ |
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(6) bonds issued, assumed, or guaranteed by the State | ||
of Israel; and | ||
(7) interest-bearing banking deposits that are | ||
guaranteed or insured by: | ||
(A) the Federal Deposit Insurance Corporation or | ||
its successor; or | ||
(B) the National Credit Union Share Insurance | ||
Fund or its successor. | ||
SECTION 2. Section 2256.010, Government Code, is amended by | ||
adding Subsection (c) to read as follows: | ||
(c) An investment in negotiable certificates of deposit | ||
issued by a bank that has a certificate of deposit rating of at | ||
least 1 or the equivalent by a nationally recognized credit rating | ||
agency, or that is associated with a holding company having a | ||
commercial paper rating of at least A-1, P-1, or the equivalent by a | ||
nationally recognized credit rating agency, is an authorized | ||
investment under this subchapter. | ||
SECTION 3. Section 2256.011, Government Code, is amended by | ||
adding Subsection (e) to read as follows: | ||
(e) Section 1371.059(c) applies to the execution of a | ||
repurchase agreement by an investing entity. | ||
SECTION 4. Section 2256.014(a), Government Code, is amended | ||
to read as follows: | ||
(a) A no-load money market mutual fund is an authorized | ||
investment under this subchapter if the mutual fund: | ||
(1) is registered with and regulated by the Securities | ||
and Exchange Commission; | ||
(2) provides the investing entity with a prospectus | ||
and other information required by the Securities Exchange Act of | ||
1934 (15 U.S.C. Section 78a et seq.) or the Investment Company Act | ||
of 1940 (15 U.S.C. Section 80a-1 et seq.); and | ||
(3) complies with federal Securities and Exchange | ||
Commission Rule 2a-7 (17 C.F.R. Section 270.2a-7), promulgated | ||
under the Investment Company Act of 1940 (15 U.S.C. Section 80a-1 et | ||
seq.) [ |
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SECTION 5. Section 2256.014(b), Government Code, is amended | ||
to read as follows: | ||
(b) In addition to a no-load money market mutual fund | ||
permitted as an authorized investment in Subsection (a), a no-load | ||
mutual fund is an authorized investment under this subchapter if | ||
the mutual fund: | ||
(1) is registered with the Securities and Exchange | ||
Commission; | ||
(2) has an average weighted maturity of less than two | ||
years; | ||
(3) is invested exclusively in obligations approved by | ||
this subchapter; | ||
(4) is continuously rated as to investment quality by | ||
at least one nationally recognized investment rating firm of not | ||
less than the highest liquidity rating given to United States | ||
Treasury obligations [ |
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(5) conforms to the requirements set forth in Sections | ||
2256.016(b) and (c) relating to the eligibility of investment pools | ||
to receive and invest funds of investing entities. | ||
SECTION 6. Section 2256.015, Government Code, is amended by | ||
adding Subsection (d) to read as follows: | ||
(d) Section 1371.059(c) applies to the execution of a | ||
guaranteed investment contract by an investing entity. | ||
SECTION 7. Sections 2256.016(b), (f), and (h), Government | ||
Code, are amended to read as follows: | ||
(b) To be eligible to receive funds from and invest funds on | ||
behalf of an entity under this chapter, an investment pool must | ||
furnish to the investment officer or other authorized | ||
representative of the entity an offering circular or other similar | ||
disclosure instrument that contains, at a minimum, the following | ||
information: | ||
(1) the types of investments in which money is allowed | ||
to be invested; | ||
(2) the maximum average dollar-weighted maturity | ||
allowed, based on the stated maturity date, of the pool; | ||
(3) the maximum stated maturity date any investment | ||
security within the portfolio has; | ||
(4) the objectives of the pool; | ||
(5) the size of the pool; | ||
(6) the names of the members of the advisory board of | ||
the pool and the dates their terms expire; | ||
(7) the custodian bank that will safekeep the pool's | ||
assets; | ||
(8) whether the intent of the pool is to maintain a net | ||
asset value of one dollar and the risk of market price fluctuation; | ||
(9) whether the only source of payment is the assets of | ||
the pool at market value or whether there is a secondary source of | ||
payment, such as insurance or guarantees, and a description of the | ||
secondary source of payment; | ||
(10) the name and address of the independent auditor | ||
of the pool; | ||
(11) the requirements to be satisfied for an entity to | ||
deposit funds in and withdraw funds from the pool and any deadlines | ||
or other operating policies required for the entity to invest funds | ||
in and withdraw funds from the pool; [ |
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(12) the performance history of the pool, including | ||
yield, average dollar-weighted maturities, and expense ratios; and | ||
(13) the pool's policy regarding holding deposits in | ||
cash. | ||
(f) To be eligible to receive funds from and invest funds on | ||
behalf of an entity under this chapter, a public funds investment | ||
pool created to function as a money market mutual fund must mark its | ||
portfolio to market daily, and, to the extent reasonably possible, | ||
stabilize at a $1 net asset value. If the ratio of the market value | ||
of the portfolio divided by the book value of the portfolio is less | ||
than 0.995 or greater than 1.005, the governing body of the public | ||
funds investment pool shall take action as the body determines | ||
necessary to eliminate or reduce to the extent reasonably | ||
practicable any dilution or unfair result to existing participants, | ||
including a sale of portfolio holdings to attempt [ |
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addition to the requirements of its investment policy and any other | ||
forms of reporting, a public funds investment pool created to | ||
function as a money market mutual fund shall report yield to its | ||
investors in accordance with regulations of the federal Securities | ||
and Exchange Commission applicable to reporting by money market | ||
funds. | ||
(h) To maintain eligibility to receive funds from and invest | ||
funds on behalf of an entity under this chapter, an investment pool | ||
must be continuously rated no lower than the highest liquidity | ||
rating given to United States Treasury obligations [ |
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rating service. | ||
SECTION 8. Section 2256.019, Government Code, is amended to | ||
read as follows: | ||
Sec. 2256.019. RATING OF CERTAIN INVESTMENT POOLS. A | ||
public funds investment pool must be continuously rated no lower | ||
than the highest liquidity rating given to United States Treasury | ||
obligations [ |
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one nationally recognized rating service. | ||
SECTION 9. Subchapter A, Chapter 2256, Government Code, is | ||
amended by adding Section 2256.0206 to read as follows: | ||
Sec. 2256.0206. AUTHORIZED INVESTMENTS: HEDGING | ||
TRANSACTIONS. (a) In this section: | ||
(1) "Eligible entity" means a state agency or | ||
political subdivision that is an issuer as defined by Section | ||
1371.001. | ||
(2) "Hedging" means acting to protect against economic | ||
loss due to price fluctuation of an investment, debt obligation, or | ||
commodity by entering into an offsetting position in a related | ||
security or by using a financial agreement or producer price | ||
agreement. | ||
(b) This section prevails to the extent of any conflict | ||
between this section and an eligible entity's municipal charter, if | ||
applicable. | ||
(c) The governing body of an eligible entity shall establish | ||
its policy regarding hedging transactions. | ||
(d) An eligible entity may enter into hedging contracts and | ||
related security and insurance agreements related to commodities | ||
used in the general operations of an eligible entity or used in | ||
connection with the acquisition or construction of a capital | ||
project by the eligible entity. A hedging transaction must comply | ||
with the regulations of the federal Commodity Futures Trading | ||
Commission and the federal Securities and Exchange Commission. | ||
(e) An eligible entity may credit any amount the entity | ||
receives under a hedging contract or agreement against expenses | ||
associated with a commodity purchase. | ||
(f) An eligible entity's payment under a hedging contract or | ||
agreement may be considered: | ||
(1) an operation and maintenance expense of the | ||
eligible entity; | ||
(2) an acquisition expense of the eligible entity; or | ||
(3) a construction expense of the eligible entity. | ||
SECTION 10. The changes in law made by this Act apply only | ||
to authorized investments of public funds governed by Chapter 2256, | ||
Government Code, as amended by this Act, that are made on or after | ||
the effective date of this Act. An authorized investment of public | ||
funds made before the effective date of this Act is governed by the | ||
law in effect immediately before that date, and that law is | ||
continued in effect for that purpose. | ||
SECTION 11. This Act takes effect immediately if it | ||
receives a vote of two-thirds of all the members elected to each | ||
house, as provided by Section 39, Article III, Texas Constitution. | ||
If this Act does not receive the vote necessary for immediate | ||
effect, this Act takes effect September 1, 2017. |