HBA-LJP C.S.S.B. 1611 77(R) BILL ANALYSIS Office of House Bill AnalysisC.S.S.B. 1611 By: Fraser Financial Institutions 5/11/2001 Committee Report (Substituted) BACKGROUND AND PURPOSE The Texas Treasury Safekeeping Trust Company (trust company) is a special purpose trust company currently managing accounts outside the state treasury for 22 agencies and managing about $7 billion in short term cash deposits of state dollars. The purpose of the trust company is to provide a means for the comptroller to obtain direct access to services provided by the Federal Reserve System and to enable the comptroller to manage, disburse, transfer, safe-keep, and invest funds and securities more economically and efficiently. C.S.S.B. 1611 authorizes the trust company to hire employees and authorizes the creation of an investment advisory committee to advise the comptroller with respect to the trust company. 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 C.S.S.B. 1611 amends the Government Code to authorize the Texas Treasury Safekeeping Trust Company (trust company) to hire employees, fix the compensation of employees, and prescribe the duties of employees, or contract with the comptroller's office for staff support. The bill requires the trust company to develop a fee schedule in the amount necessary to recover costs of service and to retain adequate reserves to support the operations of the trust company (Sec. 404.103). The bill requires agencies and local political subdivisions of the state and nonprofit corporations, foundations, and other charitable organizations created on behalf of certain political entities that are authorized or required to deposit money and securities with the trust company to pay the fees established on the fee schedule of the trust company (Sec. 404.107). The bill provides that the trust company is exempt from state laws regulating or limiting state purchases or a purchasing decision if the trust company determines that the purchase or decision relates to the fiduciary duties of the trust company. The bill also sets forth provisions regarding purchasing methods, including best value standards and the plan of operation for the purchase of goods or services (Sec. 404.103). The bill authorizes a trust company to contract with a certified public accountant or the state auditor to conduct an independent audit of the operations of the trust company and provides that the contract audit provision does not affect the authority of the state auditor to conduct an audit of the trust company (Sec. 404.104). The bill specifies that the requirement of the trust company to hold capital stock and reserve balances outside the treasury is for participation in a depository trust company, as necessary to achieve its purposes (Sec. 404.105). The bill specifies that the capital or investments to which the net earnings of the trust company are attributable to, for credit and allocation purposes, are capital stock or investments of capital stock. The bill also authorizes the trust company to hold reserve balances or securities as required by the Federal Reserve System or as required for participation in a depository trust company (Sec. 404.106). The bill authorizes the comptroller of public accounts (comptroller) to appoint an investment advisory board composed of seven members to advise the comptroller with respect to managing the assets held by the trust company. The bill sets forth provisions regarding the appointment, removal, composition, qualifications, eligibility, compensation, and meetings of the board members. The bill provides that a member of the advisory board must complete at least one course of a training program related to the trust company before the person may assume the duties of a member. The bill requires the advisory board to provide the comptroller guidance on the investment philosophy that should be pursued in managing the assets under the trust company's control (Secs. 404.108-404.113). The bill authorizes the comptroller to delegate investment authority and to contract with private professional investment managers to manage or assist in managing assets held by the trust company. The bill also authorizes the comptroller to delegate a power or duty relating to the investment of assets held by the trust company to an employee or agent of the comptroller, including professional investment managers (Sec. 404.114). The bill authorizes the comptroller to appoint a person to serve as chief executive officer in managing the trust company and carrying out the policies of the trust company and authorizes the comptroller to delegate any of the duties of the comptroller to the chief executive officer and trust company employees. The bill also sets forth the duties of the chief executive officer or the chief executive officer's designee. The bill provides that trust company employees are state employees for all purposes, including accrual leave time, insurance benefits, retirement benefits, and travel regulations (Sec. 404.115). The bill authorizes the trust company to purchase or otherwise acquire insurance to protect members of the advisory board and the trust company staff to protect against any type of liability to third persons that might be incurred while conducting business of the trust company or to provide for all the costs of defending against such liability (Sec. 404.116). EFFECTIVE DATE September 1, 2001. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.S.B. 1611 differs from the original by removing the authority of a trust company to contract with the comptroller of public accounts (comptroller) to conduct an independent audit of the operations of the trust company. The substitute provides that the contract audit provision does not affect the authority of the state auditor to conduct an audit of the trust company(Sec. 404.104). The substitute authorizes the comptroller to remove from the advisory board of the trust company an advisory board member at will or for deficiency in qualifications or ineligibility at time of appointment to the board, inability to maintain qualifications or becoming ineligible for appointment, the inability to discharge the duties of an advisory board member, or unexcused absences from more than one-third of the regularly scheduled board meetings (Sec. 404.110).