HBA-DMD S.B. 691 76(R) BILL ANALYSIS Office of House Bill AnalysisS.B. 691 By: Lucio State, Federal, & International Relations 4/23/1999 Engrossed BACKGROUND AND PURPOSE Currently, approximately 75 percent of Texas public libraries are in facilities that are inadequate by nationally recognized standards. In addition, there are no state or federal resources available to assist local governments with public library construction projects. Texas public libraries rank 46th in public library expenditures and 43rd in public library materials expenditures in the United States. S.B. 691 creates the Texas public library endowment fund (endowment fund) as a trust fund outside the state treasury held by a bank or depository trust company and administered by the Texas State Library and Archives Commission (commission). This bill requires the commission to remit all or part of the interest and income earned on money in the endowment fund to the comptroller for deposit in the state treasury to the credit of the Texas public library fund. This bill also requires the commission to appoint investment managers for the management and investment of the endowment fund. It establishes the Texas public library fund as a special fund in the state treasury outside the general revenue fund. S.B. 691 authorizes money in the fund to be appropriated only to the commission in order to perform the commission's powers and duties concerning public library development and to pay the commission's expenses. In addition, this bill authorizes the commission to solicit and accept on behalf of the state donations of money, securities, and other property as it determines best further the order of development of public library resources of the state. This bill also requires the commission to make grants to public libraries from the Texas public library fund under certain conditions. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Texas State Library and Archives Commission in SECTION 1 (Sections 441.074 and 441.075, Government Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Chapter 441, Government Code, by adding Subchapter E, as follows: SUBCHAPTER E. PUBLIC LIBRARY ENDOWMENT AND OPERATING FUNDS Sec. 441.071. TEXAS PUBLIC LIBRARY ENDOWMENT FUND. (a) Establishes the Texas public library endowment fund (endowment fund) as a trust fund outside the state treasury held by a bank or depository trust company and administered by the Texas State Library and Archives Commission (commission) for the benefit of the public as provided by this section. (b) Provides that the fund consists of donations accepted by the commission under Section 441.074, Government Code. (c) Prohibits the corpus of the endowment fund from being spent for any purpose. (d) Requires the commission to remit all or part of the interest and income earned on money in the endowment fund, no later than September 1 of each year, to the comptroller for deposit in the state treasury to the credit of the Texas public library fund. Requires the commission to credit to the corpus of the endowment fund any portion of the interest and income not credited to the public library fund in the treasury. Sec. 441.072. INVESTMENT AND MANAGEMENT OF ENDOWMENT FUND. Requires the commission to appoint investment managers for the management and investment of the endowment fund by contracting for professional investment management services with one or more organizations that are in the business of managing investments. (b) Requires the commission to act prudently and in the interest of the beneficiaries of the endowment fund when choosing and contracting for professional investment management services and in continuing the use of an investment manager. (c) Requires an investment manager and the commission, when making and supervising investments of the endowment fund, to discharge their respective duties solely in the interest of the beneficiaries of the fund providing certain conditions. (d) Sets forth requirements for eligibility for appointment of an investment manager. (e) Requires the commission to specify, in a contract made under this section, certain criteria for determining the quality of investments and for the use of standard rating services, that the commission adopts for investments of the endowment fund. (f) Provides that a member of the commission is not liable for the acts or omissions of an investment manager appointed under Subsection (a). Provides that a member of the commission is not permitted or obligated to invest or otherwise to manage any asset of the fund subject to management by the investment manager. (g) Requires an investment manager to acknowledge in writing the manager's fiduciary responsibility to the endowment fund. (h) Authorizes the commission at any time and frequently to monitor the investments made by each investment manager for the endowment fund. Authorizes the commission to contract for professional evaluation services in order to fulfill this requirement. (i) Requires the commission to enter into an investment custody account agreement designating a bank or a depository trust company to serve as custodian for all assets allocated to or generated under a contract for professional investment management services. (j) Requires the commission, under a custody account agreement, to require the designated custodian to perform the duties and assume responsibility for the endowment fund, in the absence of a contract. Requires the custodian to furnish to the commission annually or as required by commission rule, a sworn statement of the amount of the endowment fund assets in the custodian's custody. (k) Sets forth the beneficiaries of the endowment fund, for the purposes of this section. Sec. 441.073. TEXAS PUBLIC LIBRARY FUND. (a) Establishes that the Texas public library fund is a special fund in the state treasury outside the general revenue fund. (b) Provides that the fund consists of certain money credited to the fund under Section 441.071(d) and proceeds from sales under Section 441.074(d). (c) Authorizes money in the fund to be appropriated only to the commission in order to perform the commission's powers and duties concerning public library development under this chapter and to pay the commission's expenses incurred under this subchapter. (d) Provides that the public library fund is exempt from the application of Sections 403.095 (Use of Dedicated Revenue) and 404.071 (Disposition of Interest on Investments), Government Code. Requires interest and income from deposit and investment of money in the fund to be allocated to the fund monthly. Sec. 441.074. DONATIONS, APPROPRIATIONS, AND SALES. (a) Authorizes the commission to solicit and accept on behalf of the state donations of money, securities, and other property as it determines best further the order of development of public library resources of the state. Requires money paid to the commission under this subsection to be deposited in the endowment fund. (b) Requires the commission, by rule, to establish an acquisition policy for accepting donations of money, securities, and other property. (c) Authorizes the legislature to make appropriations to the commission to carry out the purpose of this chapter. (d) Authorizes the commission to purchase and resell items it determines appropriate for the promotion of public libraries in Texas. Prohibits the value of the commission inventory, as determined by generally accepted accounting principles, from exceeding $50,000 at the end of any fiscal year. Requires the net profit from those sales to be deposited in the Texas public library fund. Sec. 441.075. PUBLIC LIBRARY FUND GRANT PROGRAM. Requires the commission to make grants to public libraries from the Texas public library fund for certain purposes. Requires the commission to allocate amounts from the fund to direct and matching grant programs. Requires the commission to adopt rules regarding participation in a matching grant program and the allocation of funds. Provides that a public library must maintain a level of local public library funding, in order to participate in a grant program under this section, equal to or greater than the average funding for the three years preceding participation. Requires the commission to adopt rules to implement the requirement. SECTION 2. Amends Section 404.093(b), Government Code, to provide that this subchapter does not apply to certain funds given in trust to the commission for the establishment of regional historical resource depositories and libraries in accordance with Section 441.154 (Regional Research Centers), rather than 441.074. SECTION 3. Effective date: September 1, 1999. SECTION 4. Emergency clause.