HB5260 - Relating to the investment of public funds by a local government in investment pools.

  89R2090 MP-D     By: Curry H.B. No. 5260       A BILL TO BE ENTITLED   AN ACT   relating to the investment of public funds by a local government in   investment pools.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Section 2256.016, Government Code, is amended by   amending Subsection (a) and adding Subsection (l) to read as   follows:          (a)   Except as provided by Subsection (l), an [ An ] entity may   invest its funds and funds under its control through an eligible   investment pool if the governing body of the entity by rule, order,   ordinance, or resolution, as appropriate, authorizes investment in   the particular pool. An investment pool shall invest the funds it   receives from entities in authorized investments permitted by this   subchapter. An investment pool may invest its funds in money market   mutual funds to the extent permitted by and consistent with this   subchapter and the investment policies and objectives adopted by   the investment pool.           (l)     A local government may invest funds in an investment   pool only if the investment pool is managed by the comptroller or   the Texas Treasury Safekeeping Trust Company.          SECTION 2.  Subchapter A, Chapter 2256, Government Code, is   amended by adding Section 2256.0175 to read as follows:           Sec.   2256.0175.     DIVESTMENT OF CERTAIN FUNDS BY LOCAL   GOVERNMENTS. (a)   In this section, "restricted investment pool"   means an investment pool that is not managed by the comptroller or   the Texas Treasury Safekeeping Trust Company.           (b)     Notwithstanding Section 2256.017, a local government   shall sell, redeem, divest, or withdraw all of its funds and funds   under its control that are invested in a restricted investment pool   in compliance with the following schedule:                 (1)     at least 50 percent of those funds must be removed   from a restricted investment pool not later than the 180th day after   the date the local government discovers that the funds are invested   in a restricted investment pool, unless the local government   determines, based on a good faith exercise of its fiduciary   discretion and subject to Subdivision (2), that a later date is more   prudent; and                 (2)     100 percent of those funds must be removed from the   restricted investment pool not later than the 360th day after the   date the local government discovers that the funds are invested in a   restricted investment pool.           (c)     Except as provided by Subsection (b), a local government   may delay the schedule for divestment under that subsection or   otherwise cease divesting from a restricted investment pool only to   the extent that the local government determines, in the local   government's good faith judgment, and consistent with the local   government's fiduciary duty, that divestment from the restricted   investment pool will likely result in a loss in value or a benchmark   deviation described by Subsection (d). If a local government   delays the schedule for divestment or otherwise ceases to divest,   the local government shall submit a report to the presiding officer   of each house of the legislature, the attorney general, and the   comptroller stating the reasons and justification, supported by   clear and convincing evidence, for the local government's delay in   divestment from the restricted investment pool. The report must   include documentation supporting the local government's   determination that the divestment would result in a loss in value or   a benchmark deviation described by Subsection (d), including   objective numerical estimates. The local government shall update   the report every six months.           (d)     A local government may delay the schedule of divestment   under Subsection (b) or otherwise cease divesting from one or more   restricted investment pools under Subsection (c) only if clear and   convincing evidence shows that divesting from the restricted   investment pool will likely result in:                 (1)     the local government suffering a loss in the   hypothetical value of all funds under management by the local   government as a result of having to divest from restricted   investment pools under this section; or                 (2)     an individual portfolio that uses a   benchmark-aware strategy being subject to an aggregate expected   deviation from its benchmark as a result of having to divest from   restricted investment pools under this section.          SECTION 3.  The changes in law made by this Act apply only to   a contract entered into on or after the effective date of this Act.   A contract entered into before that date is governed by the law in   effect on the date the contract was entered into, and the former law   is continued in effect for that purpose.          SECTION 4.  This Act takes effect September 1, 2025.