HBA-MPM H.J.R. 45 76(R)    BILL ANALYSIS


Office of House Bill AnalysisH.J.R. 45
By: Hochberg
Public Education
4/19/1999
Introduced



BACKGROUND AND PURPOSE 

According to the Texas Constitution, the state may only transfer interest
and dividends from the Permanent School Fund to pay into the Available
School Fund.  The Available School Fund pays 100 percent of the cost of
student textbooks and funds a per-student allotment for all school
districts. The stock market in recent times has been yielding much higher
returns than securities, yet, because the state is precluded from
transferring capital gains from stocks to the Available School Fund, the
state must give up higher yields in capital gains to generate required cash
flow.  H.J.R. 45 allows the state to follow generally accepted standards
used by private endowments for allowing the Permanent School Fund to grow
while providing a necessary cash flow. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Section 5(a), Article VII, Texas Constitution, to
provide that the principal of all bonds and other funds, and the principal
arising from the sale of the lands previously set apart to the school fund,
shall be the permanent school fund; and the distribution as provided in
Subsection (e) and (f) of this section, rather than all the interest
derivable and the taxes authorized and levied, shall be the available
school fund. 

SECTION 2.  Amends Section 5, Article VII, Texas Constitution, by adding
Subsections (e), (f), and (g), as follows: 

(e)  Requires the State Board of Education (board) to annually determine
the total return on the permanent school fund, including income and net
appreciation. Provides that the annual distribution of the available school
fund is the lesser of the total return on the permanent school fund or an
amount computed by multiplying the permanent school fund's market value at
the end of the fiscal year by the adjusted average return on the permanent
school fund, despite any other provision of this constitution, except
Subsection (f) of this section. 

(f)  Stipulates that the annual distribution from the available school fund
may not be less than two percent of the average of the market value of the
permanent school fund at the end of each of the five preceding years. 

(g)  Requires the board to modify the distribution of the available school
fund as necessary only to comply with Internal Revenue Service rulings
regarding the use of the permanent school fund and income from the
permanent school fund to guarantee bonds provided under Subsection (b) of
this section (regarding the use of the permanent school fund and the income
from the permanent school fund to guarantee bonds issued by school
districts or the state for the purpose of making loans to or purchasing the
bonds of school districts for acquisition, construction, or improvement of
instructional facilities).  

SECTION 3.  Requires this proposed constitutional amendment to be submitted
to the voters at an election to be held November 2, 1999.  Sets forth the
required language for the ballot.