HBA-JEK S.B. 512 77(R) BILL ANALYSIS Office of House Bill AnalysisS.B. 512 By: Duncan Public Education 5/6/2001 Engrossed BACKGROUND AND PURPOSE Under current law, the State Board of Education (SBOE) is responsible for the investments of the Permanent School Fund (PSF). The members of SBOE are not required to possess any investment expertise, which makes it more difficult to manage the fund with prudence and to avoid conflicts of interest. A committee of persons with expertise in institutional fund investments would be better qualified to manage the investments of the PSF. Senate Bill 512 establishes a permanent school fund investment advisory committee to advise SBOE regarding the management of the PSF. 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. ANALYSIS Senate Bill 512 amends the Education Code to establish a five-member permanent school fund investment advisory committee (committee) to advise the State Board of Education (SBOE) regarding the management and investment of the permanent school fund (PSF). The bill provides that the committee is composed of two members appointed by the governor who are not subject to senate confirmation, and one member each appointed by the lieutenant governor, the speaker of the house of representatives, and the SBOE. The bill requires the initial appointments to be made not later than November 1, 2001, and provides that a person appointed to the committee must have appropriate expertise in investing institutional funds. The bill sets forth provisions related to the administration and operation of the committee. S.B. 512 applies provisions regarding conflicts of interest, the PSF ethics policy, and the reporting of expenditures to the members of the committee. The bill prohibits a person who serves as a money manager, advisor, consultant, or broker regarding the PSF from knowingly employing or compensating a lobbyist to communicate directly with a member of the legislature, SBOE, or the committee. The bill provides that a violation of this provision is a Class B misdemeanor and requires SBOE to terminate the contract of a person who commits such an offense. The bill provides that SBOE must meet and act as a body corporate when considering and making investment decisions relating to the PSF. The bill prohibits SBOE from creating a committee or subcommittee to consider or make such investment decisions. EFFECTIVE DATE September 1, 2001.