CHAPTER 43. PERMANENT SCHOOL FUND AND AVAILABLE SCHOOL FUND - Texas Statutes

EDUCATION CODE

TITLE 2. PUBLIC EDUCATION

SUBTITLE I. SCHOOL FINANCE AND FISCAL MANAGEMENT

CHAPTER 43. PERMANENT SCHOOL FUND AND AVAILABLE SCHOOL FUND

Sec. 43.001. COMPOSITION OF PERMANENT SCHOOL FUND AND AVAILABLE

SCHOOL FUND. (a) Except as provided by Subsection (b), the

permanent school fund, which is a perpetual endowment for the

public schools of this state, consists of:

(1) all land appropriated for the public schools by the

constitution and laws of this state;

(2) all of the unappropriated public domain remaining in this

state, including all land recovered by the state by suit or

otherwise except pine forest land as defined by Section 88.111;

(3) all proceeds from the authorized sale of permanent school

fund land;

(4) all proceeds from the lawful sale of any other properties

belonging to the permanent school fund;

(5) all investments authorized by Section 43.003 of properties

belonging to the permanent school fund; and

(6) all income from the mineral development of permanent school

fund land, including income from mineral development of riverbeds

and other submerged land.

Text of subsec. (b) as amended by Acts 2003, 78th Leg., ch. 201,

Sec. 36

(b) The available school fund, which shall be apportioned

annually to each county according to its scholastic population,

consists of:

(1) the interest and dividends arising from any securities or

funds belonging to the permanent school fund, as determined in

accordance with the accrual basis of accounting;

(2) all interest derivable from the proceeds of the sale of land

set apart for the permanent school fund;

(3) all money derived from the lease of land belonging to the

permanent school fund;

(4) one-fourth of all revenue derived from all state occupation

taxes, exclusive of delinquencies and cost of collection;

(5) one-fourth of revenue derived from state gasoline and

special fuels excise taxes as provided by law; and

(6) all other appropriations to the available school fund made

by the legislature for public school purposes.

Text of subsec. (b) as amended by Acts 2003, 78th Leg., ch. 328,

Sec. 2

(b) The available school fund, which shall be apportioned

annually to each county according to its scholastic population,

consists of:

(1) the distributions to the fund from the permanent school fund

as provided by Section 5(a), Article VII, Texas Constitution;

(2) one-fourth of all revenue derived from all state occupation

taxes, exclusive of delinquencies and cost of collection;

(3) one-fourth of revenue derived from state gasoline and

special fuels excise taxes as provided by law; and

(4) all other appropriations to the available school fund made

by the legislature for public school purposes.

(c) The term "scholastic population" in Subsection (b) or any

other law governing the apportionment, distribution, and transfer

of the available school fund means all students of school age

enrolled in average daily attendance the preceding school year in

the public elementary and high school grades of school districts

within or under the jurisdiction of a county of this state.

Added by Acts 1995, 74th Leg., ch. 260, Sec. 1, eff. May 30,

1995. Amended by Acts 2003, 78th Leg., ch. 201, Sec. 36, eff.

June 10, 2003; Acts 2003, 78th Leg., ch. 328, Sec. 2.

Sec. 43.002. TRANSFERS FROM PERMANENT SCHOOL FUND AND GENERAL

REVENUE FUND TO AVAILABLE SCHOOL FUND. (a) On the first working

day of each month in a state fiscal year, the comptroller shall

transfer from the permanent school fund to the available school

fund an amount equal to one-twelfth of the annual distribution

from the permanent school fund to the available school fund as

provided by Section 5(a), Article VII, Texas Constitution, for

the fiscal year.

(b) Of the amounts available for transfer from the general

revenue fund to the available school fund for the months of

January and February of each fiscal year, no more than the amount

necessary to enable the comptroller to distribute from the

available school fund an amount equal to 9-1/2 percent of the

estimated annual available school fund apportionment to category

1 school districts, as defined by Section 42.259, and 3-1/2

percent of the estimated annual available school fund

apportionment to category 2 school districts, as defined by

Section 42.259, may be transferred from the general revenue fund

to the available school fund. Any remaining amount that would

otherwise be available for transfer for the months of January and

February shall be transferred from the general revenue fund to

the available school fund in equal amounts in June and in August

of the same fiscal year.

Added by Acts 1995, 74th Leg., ch. 260, Sec. 1, eff. May 30,

1995. Amended by Acts 2003, 78th Leg., ch. 328, Sec. 3, eff. Jan.

1, 2004.

Sec. 43.003. INVESTMENT OF PERMANENT SCHOOL FUND. In compliance

with this section, the State Board of Education may invest the

permanent school fund in the types of securities, which must be

carefully examined by the State Board of Education and be found

to be safe and proper investments for the fund as specified

below:

(1) securities, bonds, or other obligations issued, insured, or

guaranteed in any manner by the United States Government or any

of its agencies and in bonds issued by this state;

(2) obligations and pledges of The University of Texas;

(3) corporate bonds, debentures, or obligations of United States

corporations of at least "A" rating;

(4) obligations of United States corporations that mature in

less than one year and are of the highest rating available at the

time of investment;

(5) bonds issued, assumed, or guaranteed by the Inter-American

Development Bank, the International Bank of Reconstruction and

Development (the World Bank), the African Development Bank, the

Asian Development Bank, and the International Finance

Corporation;

(6) bonds of counties, school districts, municipalities, road

precincts, drainage, irrigation, navigation, and levee districts

in this state, subject to the following requirements:

(A) the securities, before purchase, must have been diligently

investigated by the attorney general both as to form and as to

legal compliance with applicable laws;

(B) the attorney general's certificate of validity procured by

the party offering the bonds, obligations, or pledges must

accompany the securities when they are submitted for registration

to the comptroller, who must preserve the certificates;

(C) the public securities, if purchased, and when certified and

registered as specified under Paragraph (B), are incontestable

unless issued fraudulently or in violation of a constitutional

limitation, and the certificates of the attorney general are

prima facie evidence of the validity of the bonds and bond

coupons; and

(D) after the issuing political subdivision has received the

proceeds from the sales of the securities, the issuing agency is

estopped to deny their validity, and the securities are valid and

binding obligations;

(7) preferred stocks and common stocks that the State Board of

Education considers proper investments for the permanent school

fund, subject to the following requirements:

(A) in making all of those investments, the State Board of

Education shall exercise the judgment and care under the

circumstances then prevailing that persons of ordinary prudence,

discretion, and intelligence exercise in the management of their

own affairs, not in regard to speculation but in regard to the

permanent disposition of their funds, considering the probable

income as well as the probable safety of their capital;

(B) the company issuing the stock must be incorporated in the

United States, and the stocks must have paid dividends for five

consecutive years or longer immediately before the date of

purchase and the stocks, except for bank stocks and insurance

stocks, must be listed on an exchange registered with the

Securities and Exchange Commission or its successors; and

(C) not more than one percent of the permanent school fund may

be invested in stock issued by one corporation and not more than

five percent of the voting stock of any one corporation will be

owned; and

(8) notwithstanding any other law or provision of this code,

first lien real estate mortgage securities insured by the Federal

Housing Administration under the National Housing Act of the

United States, or in any other first lien real estate mortgage

securities guaranteed in whole or in part by the United States.

Added by Acts 1995, 74th Leg., ch. 260, Sec. 1, eff. May 30,

1995.

Sec. 43.0031. PERMANENT SCHOOL FUND ETHICS POLICY. (a) In

addition to any other requirements provided by law, the State

Board of Education shall adopt and enforce an ethics policy that

provides standards of conduct relating to the management and

investment of the permanent school fund. The ethics policy must

include provisions that address the following issues as they

apply to the management and investment of the permanent school

fund and to persons responsible for managing and investing the

fund:

(1) general ethical standards;

(2) conflicts of interest;

(3) prohibited transactions and interests;

(4) the acceptance of gifts and entertainment;

(5) compliance with applicable professional standards;

(6) ethics training; and

(7) compliance with and enforcement of the ethics policy.

(b) The ethics policy must include provisions applicable to:

(1) members of the State Board of Education;

(2) the commissioner;

(3) employees of the agency; and

(4) any person who provides services to the board relating to

the management or investment of the permanent school fund.

(c) Not later than the 45th day before the date on which the

board intends to adopt a proposed ethics policy or an amendment

to or revision of an adopted ethics policy, the board shall

submit a copy of the proposed policy, amendment, or revision to

the Texas Ethics Commission and the state auditor for review and

comments. The board shall consider any comments from the

commission or state auditor before adopting the proposed policy.

(d) The provisions of the ethics policy that apply to a person

who provides services to the board relating to the management or

investment of the permanent school fund must be based on the Code

of Ethics and the Standards of Professional Conduct prescribed by

the Association for Investment Management and Research or other

ethics standards adopted by another appropriate professionally

recognized entity.

(e) The board shall ensure that applicable provisions of the

ethics policy are included in any contract under which a person

provides services to the board relating to the management and

investment of the permanent school fund.

Added by Acts 1999, 76th Leg., ch. 1488, Sec. 1, eff. Sept. 1,

1999.

Sec. 43.0032. CONFLICTS OF INTEREST. (a) A member of the State

Board of Education, the commissioner, an employee of the agency,

or a person who provides services to the board that relate to the

management or investment of the permanent school fund who has a

business, commercial, or other relationship that could reasonably

be expected to diminish the person's independence of judgment in

the performance of the person's responsibilities relating to the

management or investment of the fund shall disclose the

relationship in writing to the board.

(b) The board or the board's designee shall, in the ethics

policy adopted under Section 43.0031, define the kinds of

relationships that may create a possible conflict of interest.

(c) A person who files a statement under Subsection (a)

disclosing a possible conflict of interest may not give advice or

make decisions about a matter affected by the possible conflict

of interest unless the board, after consultation with the general

counsel of the agency, expressly waives this prohibition. The

board may delegate the authority to waive the prohibition

established by this subsection.

Added by Acts 1999, 76th Leg., ch. 1488, Sec. 1, eff. Sept. 1,

1999.

Sec. 43.0033. REPORTS OF EXPENDITURES. A consultant, advisor,

broker, or other person providing services to the State Board of

Education relating to the management and investment of the

permanent school fund shall file with the board regularly, as

determined by the board, a report that describes in detail any

expenditure of more than $50 made by the person on behalf of:

(1) a member of the board;

(2) the commissioner; or

(3) an employee of the agency or of a nonprofit corporation

created under Section 43.006.

Added by Acts 1999, 76th Leg., ch. 1488, Sec. 1, eff. Sept. 1,

1999.

Sec. 43.0034. FORMS; PUBLIC INFORMATION. (a) The board shall

prescribe forms for:

(1) statements of possible conflicts of interest and waivers of

possible conflicts of interest under Section 43.0032; and

(2) reports of expenditures under Section 43.0033.

(b) A statement, waiver, or report described by Subsection (a)

is public information.

(c) The board shall designate an employee of the agency to act

as custodian of statements, waivers, and reports described by

Subsection (a) for purposes of public disclosure.

Added by Acts 1999, 76th Leg., ch. 1488, Sec. 1, eff. Sept. 1,

1999.

Sec. 43.004. WRITTEN INVESTMENT OBJECTIVES; PERFORMANCE

EVALUATION. (a) The State Board of Education shall develop

written investment objectives concerning the investment of the

permanent school fund. The objectives may address desired rates

of return, risks involved, investment time frames, and any other

relevant considerations.

(b) The board shall employ a well-recognized performance

measurement service to evaluate and analyze the investment

results of the permanent school fund. The service shall compare

investment results with the written investment objectives

developed by the board, and shall also compare the investment of

the permanent school fund with the investment of other public and

private funds.

Added by Acts 1995, 74th Leg., ch. 260, Sec. 1, eff. May 30,

1995.

Sec. 43.005. EXTERNAL INVESTMENT MANAGERS. (a) The State Board

of Education may contract with private professional investment

managers to assist the board in making investments of the

permanent school fund. A contract under this subsection must be

approved by the board or otherwise entered into in accordance

with board rules relating to contracting authority.

(b) The State Board of Education by rule may delegate a power or

duty relating to the investment of the permanent school fund to a

committee, officer, employee, or other agent of the board.

Added by Acts 1995, 74th Leg., ch. 260, Sec. 1, eff. May 30,

1995.

Sec. 43.0051. TRANSFERS TO REAL ESTATE SPECIAL FUND ACCOUNT OF

THE PERMANENT SCHOOL FUND. The State Board of Education may

transfer funds from the portion of the permanent school fund

managed by the State Board of Education to the real estate

special fund account of the permanent school fund if the State

Board of Education determines, using the standard of care set

forth in Subsection (f), Section 5, Article VII, Texas

Constitution, that such transfer is in the best interest of the

permanent school fund.

Added by Acts 2007, 80th Leg., R.S., Ch.

1368, Sec. 9, eff. June 15, 2007.

Sec. 43.006. INVESTMENT MANAGEMENT. (a) The State Board of

Education may delegate investment authority for the investment of

the permanent school fund to the same extent as an institution

with respect to an institutional fund under Chapter 163, Property

Code.

(b) The board may enter into a contract with a nonprofit

corporation for the corporation to invest funds under the control

and management of the board, including the permanent school fund,

as designated by the board. The corporation may not engage in any

business other than investing funds designated by the board under

the contract.

(c) The board must approve the:

(1) articles of incorporation and bylaws of the corporation and

any amendment to the articles of incorporation or bylaws;

(2) investment policies of the corporation, including changes to

those policies;

(3) audit and ethics committee of the corporation; and

(4) code of ethics of the corporation.

(d) The board of directors of the corporation must be members of

the State Board of Education.

(e) If an investment contract entered into under Subsection (b)

includes the permanent school fund within the scope of funds

under the control and management of the State Board of Education

to be invested by the corporation, the board shall provide for an

annual financial audit of the permanent school fund. Subject to

the legislative audit committee's approval of including the audit

in the audit plan under Section 321.013(c), Government Code, the

audit shall be performed by the state auditor.

(f) The corporation shall file quarterly reports with the State

Board of Education concerning matters required by the board.

(g) The corporation is subject to the Texas Non-Profit

Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil

Statutes).

(h) The corporation may not enter into an agreement or

transaction with a:

(1) director, officer, or employee of the corporation acting in

other than an official capacity on behalf of the corporation;

(2) business entity in which a director, officer, or employee of

the corporation has an interest;

(3) former director, officer, or employee of the corporation on

or before the second anniversary of the date the person ceased to

be a director, officer, or employee of the corporation; or

(4) business entity in which a former director, officer, or

employee of the corporation has an interest on or before the

second anniversary of the date the person ceased to be a

director, officer, or employee of the corporation.

(i) An agreement or transaction entered into in violation of

Subsection (h) is void.

(j) For purposes of this section, a person has an interest in a

business entity if:

(1) the person owns five percent or more of the voting stock or

shares of the business entity;

(2) the person owns five percent or more of the fair market

value of the business entity; or

(3) money received by the person from the business entity

exceeds five percent of the person's gross income for the

preceding calendar year.

(k) In this section, "institution" and "institutional fund" have

the meanings assigned by Chapter 163, Property Code.

Added by Acts 1995, 74th Leg., ch. 260, Sec. 1, eff. May 30,

1995. Amended by Acts 2003, 78th Leg., ch. 785, Sec. 58, eff.

Sept. 1, 2003.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

834, Sec. 2, eff. September 1, 2007.

Sec. 43.007. PURCHASE AND SALE OR EXCHANGE OF SECURITIES. (a)

The State Board of Education may authorize the purchase of all of

the types of securities in which it is authorized by law to

invest the permanent school fund in either registered or

negotiable form. The board may authorize the reissue of those

securities held at any time for the account of the permanent

school fund in either registered or negotiable form. The State

Board of Education may authorize the sale of any of the

securities held for the account of the permanent school fund and

reinvest the proceeds of sale for the fund and may authorize the

exchange of any of the securities held for the account of the

permanent school fund.

(b) In making purchases, sales, exchanges, and reissues, the

State Board of Education shall exercise the judgment and care

under the circumstances then prevailing that persons of ordinary

prudence, discretion, and intelligence exercise in the management

of their own affairs not in regard to speculation but in regard

to the permanent disposition of their funds, considering the

probable income as well as the probable safety of their capital.

(c) When any securities are sold, reissued, or exchanged as

provided by Subsection (a), the custodian of the securities shall

deliver the securities sold, reissued, or exchanged in accordance

with the directions of the State Board of Education.

Added by Acts 1995, 74th Leg., ch. 260, Sec. 1, eff. May 30,

1995.

Sec. 43.009. PREPAYMENT OF CERTAIN BONDS HELD BY THE PERMANENT

SCHOOL FUND. (a) The State Board of Education may authorize the

governing body of any political subdivision in this state to pay

off and discharge, at any interest paying date whether the bonds

are matured or not, all or any part of any outstanding bond

indebtedness owned by the permanent school fund.

(b) The governing body of a political subdivision desiring to

pay off and discharge any bonded indebtedness owned by the fund

shall apply in writing to the State Board of Education, not later

than the 30th day before any interest paying date on the bonds,

describing the bonds or part of the bonds it desires to pay off

and discharge. The application must be accompanied by an

affidavit stating that only tax money collected from a tax levy

made for the specific purpose of providing a sinking fund and

paying interest on the particular bonds to be redeemed will be

spent in redeeming, taking up, or paying off the bonds.

(c) The State Board of Education, on receiving the application

and affidavit, shall take action on them in the manner it

considers best and shall notify the applicant whether the

application is refused or granted in whole or in part.

(d) A person who has a duty under this section may not give or

receive any commission, premium, or compensation for the

performance of that duty.

(e) Only tax money collected from tax levies made for the

specific purpose of providing a sinking fund and paying interest

on the particular bonds to be redeemed may be spent in redeeming,

taking up, or paying off of bonds as provided by this section,

unless the bonds are being redeemed for the purpose of being

refunded.

Added by Acts 1995, 74th Leg., ch. 260, Sec. 1, eff. May 30,

1995.

Sec. 43.010. DEFAULT OF SCHOOL DISTRICT SECURITIES HELD BY THE

PERMANENT SCHOOL FUND. (a) If interest or principal has not

been paid for two years or more on any bonds issued by any school

district and held by the permanent school fund, the State Board

of Education may:

(1) compel the district to levy a tax sufficient to meet the

interest and principal payments then or later due; or

(2) if the district furnishes to the State Board of Education

satisfactory proof that the district's taxing ability is

insufficient, require the district to:

(A) exhaust all legal remedies in collecting delinquent taxes;

and

(B) levy a tax at the maximum lawful rate on the bona fide

valuation of taxable property located in the district.

(b) Revenue collected by either method specified by Subsection

(a) shall be distributed proportionately to all owners of the

defaulted securities in compliance with the following:

(1) the proportionate share for each owner is based on the

interest and principal requirements of the original security

before authorized refunding; and

(2) prior acceptance of refunding securities does not reduce an

owner's proportionate share.

(c) As long as any school district is delinquent in its payments

of principal or interest on any of its bonds owned by the

permanent school fund, the State Board of Education may specify

the method of crediting payments to the state made by the

district as to principal and interest.

(d) The comptroller may not issue any warrant from the

foundation school fund to or for the benefit of any district that

has been for as long as two years in default in the payment of

principal or interest on any security owned by the permanent

school fund until the State Board of Education certifies that the

district has satisfactorily complied with the appropriate

provisions of this section, in which event the comptroller shall

resume making payments to or for the benefit of the district,

including the making of pretermitted payments.

Added by Acts 1995, 74th Leg., ch. 260, Sec. 1, eff. May 30,

1995.

Sec. 43.011. AUTHORIZED REFUNDING OF DEFAULTED SCHOOL BONDS.

(a) In compliance with this section, the State Board of

Education may revise, readjust, modify, refinance, or refund

defaulted bonds issued by any school district in this state and

owned by either the permanent school fund or the available school

fund.

(b) Application must be made to the State Board of Education by

the district that issued the bonds and must show that:

(1) delinquent interest totals at least 50 percent of the

principal amount of the bonds; and

(2) taxable valuation has decreased to such an extent that a

full application of the proceeds of the voted authorized tax

authorized to be levied on the $100 taxable property valuation

will not meet interest and principal annually maturing on the

bonds.

(c) The State Board of Education may effect a refunding of the

debt due and to become due only if the board finds that:

(1) the district is unable to pay the sums already matured and

the sums contracted to be paid as they mature by paying annually

to the State Board of Education the full proceeds of a 50-cent

tax levy on the $100 of all taxable valuation of property in the

district;

(2) the taxable valuation of property in the district has

decreased at least 75 percent since the bonds were issued and

that the decrease was not caused by the district or any of its

officials;

(3) the district for a period of at least five years before

applying to the State Board of Education for refunding has levied

a tax of 50 cents on the $100 of taxable valuation of property in

the district, and that despite such levies, the aggregate amount

due the State Board of Education exceeds the aggregate amount due

at the beginning of the period;

(4) the district has not authorized and sold additional bonds

during the five-year period immediately preceding the

application; and

(5) the district has in good faith endeavored to pay its debt in

accordance with the contract evidenced by the bonds held for the

account of the permanent school fund or the available school

fund.

(d) If the conditions specified by Subsection (c) are found to

exist, the district is, for purposes of this section, insolvent,

and the State Board of Education may exchange the bonds, interest

coupons, and other evidences of indebtedness for new refunding

bonds of the district issued in compliance with the following:

(1) the principal amount of the refunding bonds may not be less

than the total amount of the bonds, matured interest coupons,

accrued interest, and interest on delinquent interest then

actually due to the permanent school fund or the available school

fund; and

(2) the rate of interest to be borne by the refunding bonds may

be lower than that borne by the bonds to be refunded if in

consideration of the interest reduction the district agrees to

levy a tax each year for a period of 40 years at a rate

sufficient to produce annually a sum equal to 90 percent of the

amount that can be calculated by the levy of a tax at the rate of

50 cents on the $100 of taxable valuation of property as

determined by the latest approved tax roll of the district, and

in determining the rate of interest to be borne by the refunding

bonds, the State Board of Education shall be governed by the

following:

(A) the State Board of Education may require the rate to be a

percent per annum as in its judgment will represent the maximum

rate that can be paid by the district and still permit an orderly

and certain retirement of the refunding bonds within 40 years

from their date;

(B) the interest rate of refunding bonds to be received in

exchange for bonds owned by the permanent school fund may not be

less than the minimum rate at which bonds may then be purchased

as investments for the permanent school fund; and

(C) the rate of interest of refunding bonds to be received in

exchange for bonds owned by the available school fund may be set

by the State Board of Education at any rate the board considers

feasible, and the refunding bonds may, at the discretion of the

State Board of Education, be made non-interest bearing to a date

fixed by the board.

(e) The State Board of Education may not make a revision,

readjustment, modification, refinancing, or refunding that will

release or extinguish any debt or obligation then due and payable

to the permanent school fund or to the available school fund.

(f) Except as otherwise provided or permitted by this section,

the refunding of the bonds of school districts authorized by this

section must be in compliance with the general provisions with

regard to the refunding of school district bonds.

Added by Acts 1995, 74th Leg., ch. 260, Sec. 1, eff. May 30,

1995.

Sec. 43.012. REFUNDING OTHER DEFAULTED OBLIGATIONS. (a)

Defaulted obligations, other than bonds of school districts as

provided by Section 43.011, due the available school fund may be

refinanced or refunded with the approval of the State Board of

Education in compliance with this section.

(b) In this section, "defaulted obligations" includes delinquent

interest whether represented by coupons or not, interest on

delinquent interest, and any other form of obligation due the

available school fund.

(c) The obligor must apply to the State Board of Education and

show:

(1) that the obligations due the available school fund have been

in default in whole or in part for a continuous period of at

least 15 years; and

(2) that the obligor is not in default in the payment of the

principal of any bonds owned by the permanent school fund.

(d) If the State Board of Education finds that the requirements

provided by Subsection (c) have been met, it may approve a

refinancing or the issuance of refunding bonds on the conditions:

(1) that the refunding bonds must mature serially in not

exceeding 40 years from the date of issuance;

(2) that the principal amount of the refunding bonds may be not

less than the total amount of the obligations then in default and

due the available school fund; and

(3) that the refunding bonds must bear interest at a rate or

rates determined by the State Board of Education to be for the

best interest of the available school fund.

(e) The State Board of Education may accept refunding bonds in

lieu of either matured or unmatured bonds held for the benefit of

the permanent school fund if the rate of interest on the new

refunding bonds is at least the same rate as that of the bonds

being refunded.

(f) Refunding bonds issued with the approval or pursuant to a

refunding agreement with the State Board of Education in

compliance with either this section or Section 43.011 shall, on

the order of the State Board of Education, be exchanged by the

comptroller for the defaulted obligations they have been issued

to refund.

Added by Acts 1995, 74th Leg., ch. 260, Sec. 1, eff. May 30,

1995. Amended by Acts 1997, 75th Leg., ch. 1423, Sec. 5.02, eff.

Sept. 1, 1997.

Sec. 43.013. JURISDICTION. The district courts of Travis County

have jurisdiction of any suit on bonds or obligations belonging

to the permanent school fund, or purchased therewith, concurrent

with that of any other court having jurisdiction in the case.

Added by Acts 1995, 74th Leg., ch. 260, Sec. 1, eff. May 30,

1995.

Sec. 43.014. DUTIES OF COMPTROLLER. (a) On or before July 1 of

each year, the comptroller shall estimate the amount of the

available school fund receivable from every source during the

following school year and report the estimate to the State Board

of Education.

(b) On or before the meeting of each regular session of the

legislature, the comptroller shall report to the legislature an

estimate of the amount of the available school fund that is to be

received for the following two years, and the sources from which

that amount accrues, and that is subject to appropriation for the

establishment and support of public schools.

(c) On or before the first working day of each month, the

comptroller shall certify to the commissioner the total amount of

money collected from every source during the preceding month and

on hand to the credit of the available school fund.

(d) On receipt of certificates issued to the comptroller by the

commissioner, the comptroller shall draw warrants in favor of the

treasurer of the available school fund of each school district

for the amounts stated in the certificates. All such warrants

shall be registered.

Added by Acts 1995, 74th Leg., ch. 260, Sec. 1, eff. May 30,

1995. Amended by Acts 1997, 75th Leg., ch. 1423, Sec. 5.03, eff.

Sept. 1, 1997.

Sec. 43.015. DUTIES OF COMPTROLLER. (a) Not later than the

30th day before the first day of each regular session of the

legislature and not later than the 10th day before the first day

of any special session at which there can be legislation

respecting the public schools, the comptroller shall report to

the governor the condition of the permanent school fund and the

available school fund, the amount of each fund, and the manner of

its disbursement.

(b) The comptroller shall provide the State Board of Education

with the reports specified by Subsection (a) and with additional

reports concerning those funds requested by the State Board of

Education.

(c) The comptroller shall ensure that no portion of either the

permanent school fund or the available school fund is used to pay

any warrant drawn against any other fund.

(d) The comptroller shall receive and hold in a special deposit

and account for all properties belonging to the available school

fund. All warrants drawn on that fund by the comptroller pursuant

to a certificate of the commissioner must be registered by the

comptroller and then transmitted to the commissioner, and when

properly endorsed shall be paid by the comptroller in the order

of their presentation.

(e) On order of the State Board of Education, the comptroller

shall exchange or accept refunding bonds in lieu of:

(1) either matured or unmatured bonds held for the benefit of

the permanent school fund, which are being refunded under this

chapter;

(2) defaulted obligations held for the benefit of the available

school fund if the refunding bonds are issued in compliance with

Section 43.012;

(3) defaulted obligations of any school district of this state

held for the benefit of the permanent school fund or the

available school fund if the refunding bonds are issued in

compliance with Section 43.011; or

(4) refunding bonds of any school district of this state for

school bonds not matured held by the comptroller for the

permanent school fund if the new refunding bonds are issued by

the school district in compliance with this code.

(f) The comptroller shall be the custodian of all securities

enumerated in Section 43.003(6) and of other securities as

designated by the State Board of Education in which the school

funds of the state are invested. The comptroller shall keep those

securities in the comptroller's custody until paid off,

discharged, delivered as required by the State Board of

Education, or otherwise disposed of by the proper authorities of

the state, and on the proper installment of any interest or

dividend, shall see that the proper credit is given, and the

coupons on bonds, when paid, shall be separated from the bonds

and cancelled by the comptroller.

Added by Acts 1995, 74th Leg., ch. 260, Sec. 1, eff. May 30,

1995. Amended by Acts 1997, 75th Leg., ch. 1423, Sec. 5.04, eff.

Sept. 1, 1997.

Sec. 43.016. USE OF AVAILABLE SCHOOL FUND. All available school

funds shall be appropriated in each county for the education of

its children.

Added by Acts 1995, 74th Leg., ch. 260, Sec. 1, eff. May 30,

1995.

Sec. 43.017. USE OF COMMERCIAL BANKS AS AGENTS FOR COLLECTION OF

INCOME FROM PERMANENT SCHOOL FUND INVESTMENTS. (a) The State

Board of Education may contract with one or more commercial banks

to receive payments of dividends and interest on securities in

which the state permanent school funds are invested and transmit

that money with identification of its source to the comptroller

for the account of the available school fund by the fastest

available means.

(b) In choosing each commercial bank with which to contract as

authorized by Subsection (a), the State Board of Education shall

assure itself of:

(1) the financial stability of the bank;

(2) the location of the bank with respect to its proximity to

the banks on which checks are drawn in payment of dividends and

interest on securities of the permanent school fund;

(3) the experience and reliability of the bank in acting as

agent for others in the similar collection and expeditious

remittance of money; and

(4) the reasonableness of the bank's charges for the services,

both in amount of the charges and in relation to the increased

investment earnings of the available school fund that will result

from speedier receipt by the comptroller of the money.

Added by Acts 1995, 74th Leg., ch. 260, Sec. 1, eff. May 30,

1995. Amended by Acts 1997, 75th Leg., ch. 1423, Sec. 5.05, eff.

Sept. 1, 1997.

Sec. 43.018. PARTICIPATION IN FULLY SECURED SECURITIES LOAN

PROGRAMS. (a) The State Board of Education may contract with a

commercial bank to serve both as a custodian of securities in

which the state permanent school funds are invested and to lend

those securities, under the conditions prescribed by Subsection

(b), to securities brokers and dealers on short-term loan.

(b) The State Board of Education may contract with a commercial

bank pursuant to this section only if:

(1) the bank is located in a city having a major stock exchange;

(2) the bank is experienced in the operation of a fully secured

securities loan program;

(3) the bank has adequate capital in the prudent judgment of the

State Board of Education to assure the safety of the securities

entrusted to it as a custodian;

(4) the bank will require of any securities broker or dealer to

which it lends securities owned by the state permanent school

fund that the broker or dealer deliver to it cash collateral for

the loan of securities, and that the cash collateral will at all

times be not less than 100 percent of the market value of the

securities lent;

(5) the bank executes an indemnification agreement, satisfactory

in form and content to the State Board of Education, fully

indemnifying the permanent and available school funds against

loss resulting from the bank's service as custodian of securities

of the permanent school fund and its operation of a securities

loan program using securities of the permanent school fund;

(6) the bank will speedily collect and remit on the day of

collection by the fastest available means to the comptroller any

dividends and interest collectible by it on securities held by it

as custodian, together with identification as to the source of

the dividends or interest; and

(7) the bank is the bank agreeing to pay to the available school

fund the largest sum or highest percentage of the income derived

by the bank from use of the securities of the permanent school

fund in the operation of a securities loan program.

Added by Acts 1995, 74th Leg., ch. 260, Sec. 1, eff. May 30,

1995. Amended by Acts 1997, 75th Leg., ch. 1423, Sec. 5.06, eff.

Sept. 1, 1997.

Sec. 43.019. ACCOUNTING TREATMENT OF CERTAIN EXCHANGES. The

State Board of Education may account for the exchange of

permanent school fund securities in a closely related sale and

purchase transaction in a manner in which the gain or loss on the

sale is deferred as an adjustment to the book value of the

security purchased, if:

(1) the security sold and the security purchased have a fixed

maturity value;

(2) the board is authorized by law to invest the permanent

school fund in the security purchased;

(3) the sale is made in clear contemplation of reinvesting

substantially all of the proceeds;

(4) substantially all of the proceeds are reinvested;

(5) the transaction is completed within a reasonable time after

the sale, not to exceed 30 business days; and

(6) the transaction results in an improvement in effective

income yield, taking into consideration the deferral of any gain

or loss on the sale.

Added by Acts 1995, 74th Leg., ch. 260, Sec. 1, eff. May 30,

1995.

Sec. 43.020. TREATMENT OF ACCRUED INCOME. All interest and

dividends accruing from the investments of the permanent school

fund shall be deposited to the credit of the available school

fund in accordance with the accrual basis of accounting. Funds

recognized under this section are considered part of the

available school fund and may be appropriated as provided by

Section 5, Article VII, Texas Constitution.

Added by Acts 2003, 78th Leg., ch. 201, Sec. 37, eff. June 10,

2003.