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January-February 2024 Committee on School Finance/Permanent School Fund Item 1

Proposed Amendment to 19 TAC Chapter 33, Statement of Investment Objectives, Policies, and Guidelines of the Texas Permanent School Fund, Subchapter A, State Board of Education Rules, §33.2, Distributions to the Available School Fund
(Second Reading and Final Adoption)

February 2, 2024

COMMITTEE ON SCHOOL FINANCE/PERMANENT SCHOOL FUND: ACTION
STATE BOARD OF EDUCATION: CONSENT

SUMMARY: This item presents for second reading and final adoption a proposed amendment to 19 Texas Administrative Code (TAC) Chapter 33, Statement of Investment Objectives, Policies, and Guidelines of the Texas Permanent School Fund, Subchapter A, State Board of Education Rules, §33.2, Distributions to the Available School Fund. The proposed amendment would reinsert information related to the Permanent School Fund (PSF) distribution policy that was mistakenly repealed when 19 TAC Chapter 33 was revised to implement Senate Bill (SB) 1232, 87th Texas Legislature, Regular Session, 2021. No changes are recommended since approved at first reading.

STATUTORY AUTHORITY: Texas Constitution, Article VII, §5(a)(2) and (f).

Texas Constitution, Article VII, §5(a)(2), authorizes the State Board of Education (SBOE) to make distributions from the PSF to the Available School Fund (ASF) with certain limits.

Texas Constitution, Article VII, §5(f), authorizes the SBOE to manage and invest the PSF according to the prudent investor standard and make investments it deems appropriate.

The full text of statutory citations can be found in the statutory authority section of this agenda.

EFFECTIVE DATE: The proposed effective date of the proposed amendment is 20 days after filing as adopted with the Texas Register. Under TEC, §7.102(f), the 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 2024-2025 school year. The earlier effective date will ensure the reinstated provisions become effective as soon as possible.

PREVIOUS BOARD ACTION: Section 33.2 was adopted effective April 21, 2010. Effective March 1, 2023, significant changes to Chapter 33 were made to implement SB 1232, 87th Texas Legislature, Regular Session, 2021. At the November 2023 SBOE meeting, the board approved the proposed amendment for first reading and filing authorization.

BACKGROUND INFORMATION AND JUSTIFICATION: Senate Bill 1232, 87th Texas Legislature, Regular Session, 2021, established the Texas PSF Corporation and transferred responsibilities to manage and invest the fund to the Texas PSF Corporation. As a result, SBOE rules in Chapter 33 were significantly revised and reorganized effective March 1, 2023.

The proposed amendment would reinstate mistakenly repealed language in §33.2 that addresses the SBOE's responsibilities to determine a rate for PSF distributions to the ASF.

FISCAL IMPACT: No changes have been made to this section since published as proposed.

Texas Education Agency (TEA) has determined that there are no additional costs to state or local government required to comply with the proposal.

LOCAL EMPLOYMENT IMPACT: No changes have been made to this section since published as proposed.

The proposal has no effect on local economy; therefore, no local employment impact statement is required under Texas Government Code, §2001.022.

SMALL BUSINESS, MICROBUSINESS, AND RURAL COMMUNITY IMPACT: No changes have been made to this section since published as proposed.

The proposal has no direct adverse economic impact for small businesses, microbusinesses, or rural communities; therefore, no regulatory flexibility analysis specified in Texas Government Code, §2006.002, is required.

COST INCREASE TO REGULATED PERSONS: No changes have been made to this section since published as proposed.

The proposal does not impose a cost on regulated persons, another state agency, a special district, or a local government and, therefore, is not subject to Texas Government Code, §2001.0045.

TAKINGS IMPACT ASSESSMENT: No changes have been made to this section since published as proposed.

The proposal does not impose a burden on private real property and, therefore, does not constitute a taking under Texas Government Code, §2007.043.

GOVERNMENT GROWTH IMPACT: No changes have been made to this section since published as proposed.

TEA staff prepared a Government Growth Impact Statement assessment for this proposed rulemaking. During the first five years the proposed rulemaking would be in effect, it would expand an existing regulation by reestablishing mistakenly repealed provisions to align with SB 1232, 87th Texas Legislature, Regular Session, 2021. The provisions would address the SBOE's responsibilities to determine a rate for PSF distributions to the ASF.

The proposed rulemaking would not create or eliminate a government program; would not require the creation of new employee positions or elimination of existing employee positions; would not require an increase or decrease in future legislative appropriations to the agency; would not require an increase or decrease in fees paid to the agency; would not create a new regulation; would not limit or repeal an existing regulation; would not increase or decrease the number of individuals subject to its applicability; and would not positively or adversely affect the state's economy.

PUBLIC BENEFIT AND COST TO PERSONS: No changes have been made to this section since published as proposed.

The proposal would clarify provisions related to distributions to the ASF required by the Texas Constitution, Article VII, §5(a)(1), that were mistakenly repealed when Chapter 33 was revised to implement SB 1232, 87th Texas Legislature, Regular Session, 2021. There is no anticipated economic cost to persons who are required to comply with the proposal.

DATA AND REPORTING IMPACT: No changes have been made to this section since published as proposed.

The proposal would have no data and reporting impact.

PRINCIPAL AND CLASSROOM TEACHER PAPERWORK REQUIREMENTS: No changes have been made to this section since published as proposed.

TEA has determined that the proposal would not require a written report or other paperwork to be completed by a principal or classroom teacher.

PUBLIC COMMENTS: Following the November 2023 SBOE meeting, notice of the proposed amendment to §33.2 was filed with the Texas Register, initiating the public comment period.  The public comment period on the proposal began December 22, 2023, and ended at 5:00 p.m. on January 22, 2024. At the time this item was prepared, no public comments had been received. Any comments received will be provided to the board at the January-February 2024 meeting. The SBOE will take registered oral and written comments on the proposal at the appropriate committee meeting in January-February 2024 in accordance with the SBOE board operating policies and procedures.

MOTION TO BE CONSIDERED: The State Board of Education:

Approve for second reading and final adoption the proposed amendment to 19 TAC Chapter 33, Statement of Investment Objectives, Policies, and Guidelines of the Texas Permanent School Fund, Subchapter A, State Board of Education Rules, §33.2, Distributions to the Available School Fund; and

Make an affirmative finding that immediate adoption of the proposed amendment to 19 TAC Chapter 33, Statement of Investment Objectives, Policies, and Guidelines of the Texas Permanent School Fund, Subchapter A, State Board of Education Rules, §33.2, Distributions to the Available School Fund, is necessary and shall have an effective date of 20 days after filing with the Texas Register. (Per TEC, §7.102(f), a vote of two-thirds of the members of the board is necessary for an earlier effective date.)

Staff Members Responsible:
Mike Meyer, Deputy Commissioner, Finance
Amy Copeland, Director, State Funding
Kristi McCorquodale, Bond Guarantee Program Analyst, State Funding

Attachment:
Text of Proposed Amendment to 19 TAC Chapter 33, Statement of Investment Objectives, Policies, and Guidelines of the Texas Permanent School Fund, Subchapter A, State Board of Education Rules, §33.2, Distributions to the Available School Fund