Bill Text: TX SB404 | 2025-2026 | 89th Legislature | Introduced
Bill Title: Relating to the investment of public funds by a local government in investment pools.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced) 2024-11-21 - Filed [SB404 Detail]
Download: Texas-2025-SB404-Introduced.html
| 89R2090 MP-D | ||
| By: Middleton | S.B. No. 404 | |
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| relating to the investment of public funds by a local government in | ||
| investment pools. | ||
| BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
| SECTION 1. Section 2256.016, Government Code, is amended by | ||
| amending Subsection (a) and adding Subsection (l) to read as | ||
| follows: | ||
| (a) Except as provided by Subsection (l), an [ |
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| invest its funds and funds under its control through an eligible | ||
| investment pool if the governing body of the entity by rule, order, | ||
| ordinance, or resolution, as appropriate, authorizes investment in | ||
| the particular pool. An investment pool shall invest the funds it | ||
| receives from entities in authorized investments permitted by this | ||
| subchapter. An investment pool may invest its funds in money market | ||
| mutual funds to the extent permitted by and consistent with this | ||
| subchapter and the investment policies and objectives adopted by | ||
| the investment pool. | ||
| (l) A local government may invest funds in an investment | ||
| pool only if the investment pool is managed by the comptroller or | ||
| the Texas Treasury Safekeeping Trust Company. | ||
| SECTION 2. Subchapter A, Chapter 2256, Government Code, is | ||
| amended by adding Section 2256.0175 to read as follows: | ||
| Sec. 2256.0175. DIVESTMENT OF CERTAIN FUNDS BY LOCAL | ||
| GOVERNMENTS. (a) In this section, "restricted investment pool" | ||
| means an investment pool that is not managed by the comptroller or | ||
| the Texas Treasury Safekeeping Trust Company. | ||
| (b) Notwithstanding Section 2256.017, a local government | ||
| shall sell, redeem, divest, or withdraw all of its funds and funds | ||
| under its control that are invested in a restricted investment pool | ||
| in compliance with the following schedule: | ||
| (1) at least 50 percent of those funds must be removed | ||
| from a restricted investment pool not later than the 180th day after | ||
| the date the local government discovers that the funds are invested | ||
| in a restricted investment pool, unless the local government | ||
| determines, based on a good faith exercise of its fiduciary | ||
| discretion and subject to Subdivision (2), that a later date is more | ||
| prudent; and | ||
| (2) 100 percent of those funds must be removed from the | ||
| restricted investment pool not later than the 360th day after the | ||
| date the local government discovers that the funds are invested in a | ||
| restricted investment pool. | ||
| (c) Except as provided by Subsection (b), a local government | ||
| may delay the schedule for divestment under that subsection or | ||
| otherwise cease divesting from a restricted investment pool only to | ||
| the extent that the local government determines, in the local | ||
| government's good faith judgment, and consistent with the local | ||
| government's fiduciary duty, that divestment from the restricted | ||
| investment pool will likely result in a loss in value or a benchmark | ||
| deviation described by Subsection (d). If a local government | ||
| delays the schedule for divestment or otherwise ceases to divest, | ||
| the local government shall submit a report to the presiding officer | ||
| of each house of the legislature, the attorney general, and the | ||
| comptroller stating the reasons and justification, supported by | ||
| clear and convincing evidence, for the local government's delay in | ||
| divestment from the restricted investment pool. The report must | ||
| include documentation supporting the local government's | ||
| determination that the divestment would result in a loss in value or | ||
| a benchmark deviation described by Subsection (d), including | ||
| objective numerical estimates. The local government shall update | ||
| the report every six months. | ||
| (d) A local government may delay the schedule of divestment | ||
| under Subsection (b) or otherwise cease divesting from one or more | ||
| restricted investment pools under Subsection (c) only if clear and | ||
| convincing evidence shows that divesting from the restricted | ||
| investment pool will likely result in: | ||
| (1) the local government suffering a loss in the | ||
| hypothetical value of all funds under management by the local | ||
| government as a result of having to divest from restricted | ||
| investment pools under this section; or | ||
| (2) an individual portfolio that uses a | ||
| benchmark-aware strategy being subject to an aggregate expected | ||
| deviation from its benchmark as a result of having to divest from | ||
| restricted investment pools under this section. | ||
| SECTION 3. The changes in law made by this Act apply only to | ||
| a contract entered into on or after the effective date of this Act. | ||
| A contract entered into before that date is governed by the law in | ||
| effect on the date the contract was entered into, and the former law | ||
| is continued in effect for that purpose. | ||
| SECTION 4. This Act takes effect September 1, 2025. | ||
