Proposed Amendment to 19 TAC Chapter 33, Statement of Investment Objectives, Policies, and Guidelines of the Texas Permanent School Fund, §33.5, Code of Ethics
(Second Reading and Final Adoption)
May 21, 2010
COMMITTEE ON SCHOOL FINANCE/PERMANENT SCHOOL FUND: ACTION
STATE BOARD OF EDUCATION: ACTION
SUMMARY: This item presents for second reading and final adoption proposed amendment to 19 TAC Chapter 33, Statement of Investment Objectives, Policies, and Guidelines of the Texas Permanent School Fund, §33.5, Code of Ethics. The proposed amendment would clarify and update the code of ethics policy.
STATUTORY AUTHORITY: Texas Education Code (TEC), §43.0031, and the Texas Constitution, Article VII, §5(f).
EFFECTIVE DATE: The proposed effective date of the proposed amendment to 19 TAC §33.5 would be 20 days after filing as adopted with the Texas Register in order to implement the latest policy in a timely manner. Under TEC, §7.102(f), the State Board of Education (SBOE) must approve the rule action at second reading and final adoption by a vote of two-thirds of its members to specify an effective date earlier than the beginning of the 2010-2011 school year.
PREVIOUS BOARD ACTION: The SBOE adopted 19 TAC §33.5, Code of Ethics, to be effective September 1996. Section 33.5 was last amended to be effective August 24, 2008. A discussion item regarding the code of ethics contained in 19 TAC §33.5 was included on the agenda for the October 16, 2009 meeting of the Committee on School Finance/Permanent School Fund, and on the agenda for the November 18, 2009 meeting of the Committee of the Full Board. The SBOE approved the proposed amendment for first reading and filing authorization at its January 2010 meeting. At the March 2010 meeting, the SBOE postponed action on the proposed amendment in order to provide sufficient time for agency staff to review comments received from the Texas Ethics Commission and the State Auditor's Office for SBOE consideration at second reading and final adoption.
BACKGROUND INFORMATION AND SIGNIFICANT ISSUES: The rules in 19 TAC Chapter 33 establish provisions supporting the management and investment of the Permanent School Fund. Section 33.5 establishes procedures and requirements for a code of ethics policy relating to the Texas Permanent School Fund.
In October and November 2009, the Texas Education Agency (TEA) ethics advisor and general counsel and the fiduciary counsel for the SBOE presented possible changes to the code of ethics policy. Members of the Committee on School Finance/Permanent School Fund and the Committee of the Full Board discussed and made suggestions regarding the possible changes. At the January 2010 meeting, the SBOE approved the proposed amendment to 19 TAC §33.5 for first reading and filing authorization. The SBOE postponed action on the proposed amendment for second reading and final adoption at the March 2010 meeting.
The proposed amendment to 19 TAC §33.5 reflects proposed changes that would clarify and update the code of ethics policy. The proposed changes include clarification of definitions of SBOE member and Permanent School Fund Service Providers and provisions relating to ethical standards and conflicts of interest, parties responding to requests for proposals or requests for qualifications, prohibited transactions and interests, and limits on the value of gifts and entertainment. Other technical corrections and updates would be made throughout the section.
In accordance with the TEC, §43.0031(c), a copy of the proposed amendment approved by the SBOE for first reading and filing authorization was submitted to the Texas Ethics Commission and the State Auditor's Office for review and comment following the January 2010 meeting. The SBOE is to consider any comments from the commission or state auditor received prior to final adoption. In response to comments from the Texas Ethics Commission and the State Auditor's Office, the following modifications are recommended at adoption.
Subsection (d)(1) would be modified to remove a redundant phrase.
Subsections (d)(2)(F) and (f)(3) would be modified to include reference to solicitations similar to requests for proposals and requests for qualifications.
Subsection (g) would be modified to remove reference to written consent of the SBOE chair for disclosure of submission materials. The subsection would also be modified by adding language to avoid confusion regarding public disclosure of conflicts of interest.
In subsection (i), paragraph (1) would be modified to clarify the statute requiring public disclosure and correct grammar usage. Paragraph (3) would be modified to indicate that a PSF Service Provider who wishes to seek a waiver or determination of a possible conflict of interest should also request an opinion from the Texas Ethics Commission, to clarify that the submission of an opinion to the SBOE chair and the commissioner is required only when a waiver is sought, and to add an alternative procedure in the event a waiver cannot be achieved with sufficient expedition. Paragraph (4) would be modified to track statutory language more precisely.
In subsection (j), paragraph (5)(B)(i) would be modified to specify that disclosure concerning a placement agent should be in writing. New paragraph (6) would be added to make explicit that SBOE approval of a placement agent is only for use of the placement agent as described. New paragraph (7) would be added to specify that a placement agent must report campaign contributions in the same manner as a PSF Service Provider. In addition, technical edits would be made in paragraph (5).
In subsection (n), a technical edit would be made in paragraph (2)(J).
FISCAL IMPACT: The TEA has determined that there are no additional costs to the state or persons required to comply with the proposed rule action. In addition, there is no direct adverse economic impact for small businesses and microbusinesses; therefore, no regulatory flexibility analysis, specified in Texas Government Code, §2006.002, is required.
PUBLIC AND STUDENT BENEFIT: The proposed amendment would update and clarify provisions supporting the management and investment of the Permanent School Fund. The distribution of the Permanent School Fund will flow to the school districts and reduce the tax burden to the public and the state of Texas.
PROCEDURAL AND REPORTING IMPLICATIONS: The proposed amendment would have no procedural and reporting requirements.
LOCALLY MAINTAINED PAPERWORK REQUIREMENTS: The proposed amendment would have no locally maintained paperwork requirements.
PUBLIC COMMENTS: Following the January 2010 SBOE meeting, notice of the proposed amendment to 19 TAC §33.5 was filed with the Texas Register, initiating the official public comment period. A summary of comments received at the time this item was prepared and corresponding agency responses can be found in Attachment III. Any additional public comments received and corresponding agency responses will be provided to the SBOE during the May 2010 meeting.
ALTERNATIVES: None.
OTHER COMMENTS AND RELATED ISSUES: The meeting of the Committee on School Finance/Permanent School Fund held in conjunction with the May 2010 SBOE meeting will be held earlier on April 30, 2010. In accordance with SBOE operating rule §2.10(d)(1), no oral public testimony will be taken on this item before the SBOE at its May 21, 2010 general meeting. Oral public testimony on this item will be taken at the April 30, 2010, Committee on School Finance/Permanent School Fund meeting.
COMMISSIONER'S RECOMMENDATION: I recommend that the State Board of Education:
By an affirmative vote of two-thirds of the members of the board, approve for second reading and final adoption proposed amendment to 19 TAC Chapter 33, Statement of Investment Objectives, Policies, and Guidelines of the Texas Permanent School Fund, §33.5, Code of Ethics, with an effective date of 20 days after filing as adopted with the Texas Register.
Respectfully submitted,
Robert Scott
Commissioner of Education
Staff Members Responsible:
Holland Timmins, Executive Administrator
and Chief Investment Officer of the
Texas Permanent School Fund
Christopher Maska, TEA Ethics Advisor and Legal Counsel
Legal Services
Attachments:
I. Statutory Citations
II. Text of Proposed Amendment to 19 TAC Chapter 33, Statement of Investment Objectives, Policies, and Guidelines of the Texas Permanent School Fund, §33.5, Code of Ethics
III. Summary of Public Comments and Corresponding Responses to Proposed Amendment to 19 TAC §33.5, Code of Ethics