The bill amends Section 2256.016 of the Government Code to specify that local governments may only invest in eligible investment pools managed by the comptroller or the Texas Treasury Safekeeping Trust Company. This change is introduced through the addition of Subsection (l), which clarifies the conditions under which local governments can invest their funds in these pools. Additionally, the bill introduces a new Section 2256.0175, which mandates that local governments must divest from any investment pools not managed by the comptroller or the Texas Treasury Safekeeping Trust Company, referred to as "restricted investment pools." The divestment must occur according to a specified timeline, requiring at least 50% of the funds to be removed within 180 days and 100% within 360 days of discovering the investment in a restricted pool.

Furthermore, the bill outlines provisions for local governments to delay divestment if they can demonstrate, with clear and convincing evidence, that divesting would likely result in a loss of value or significant benchmark deviation. In such cases, local governments are required to report their justifications and supporting documentation to legislative leaders and the comptroller every six months. The changes enacted by this bill will apply only to contracts entered into after its effective date of September 1, 2025, ensuring that existing contracts remain governed by the previous law.

Statutes affected:
Introduced: Government Code 2256.016 (Government Code 2256)