Overall Vote Recommendation

Yes

Principle Criteria

Free Enterprise

Property Rights

Personal Responsibility

Limited Government

Individual Liberty

Digest

SB 667 establishes a new chapter—Chapter 809A—in Subtitle A, Title 8 of the Texas Government Code. The bill prohibits state governmental entities from investing in certain Chinese-affiliated entities. These entities are defined as publicly traded companies that are either (1) incorporated or headquartered in the People’s Republic of China (including the Hong Kong Special Administrative Region) and publicly confirmed to be under the control of the Chinese government or the Chinese Communist Party, or (2) subject to China’s National Intelligence Law, which obligates cooperation with Chinese state intelligence operations.

The legislation distinguishes between “direct holdings”—where a state entity owns securities outright—and “indirect holdings”—where investments are made through third-party-managed funds like mutual funds. While the bill targets both forms of holdings, its primary aim is to restrict direct financial entanglement between Texas state resources and foreign entities with known or potential ties to hostile foreign intelligence operations.

SB 667 reflects heightened concerns about the influence of the Chinese Communist Party in global financial markets and national security risks posed by entanglements with CCP-controlled firms. By barring state investment in such entities, Texas aims to align its financial strategy with broader national security and economic sovereignty objectives. The bill also signals a proactive stance in ensuring taxpayer money is not used in ways that may conflict with the state's values or geopolitical interests.

The originally filed version of SB 667 and the Committee Substitute version differ primarily in the scope of the prohibition and the entities affected. The filed version narrowly targets state retirement systems, explicitly naming five systems (e.g., TRS, ERS, TMRS), and restricts their ability to invest in "Chinese-affiliated entities" and related restricted entities tied to national security concerns. It includes a detailed framework for identification, notification, divestment schedules, exceptions based on fiduciary duty, indemnification of officials, and exemption from private legal action.

In contrast, the Committee Substitute significantly broadens the bill’s application. Rather than limiting the prohibition to retirement systems, it applies to all state governmental entities, encompassing a broader array of funds and agencies that manage state investments. The committee substitute version also simplifies definitions and removes some of the procedural and protective mechanisms (like indemnity and fiduciary-duty exceptions) included in the filed bill. For instance, the substitute eliminates detailed provisions on divestment schedules and benchmark deviation thresholds, opting instead for a broader mandate against investing in certain Chinese-controlled companies.

In summary, while the original bill provided a comprehensive and structured divestment approach specifically for retirement systems with protective and compliance mechanisms, the Committee Substitute streamlines the policy, expands its applicability to all state entities, and removes much of the fiduciary and legal insulation, likely for administrative simplicity and broader deterrence.

Author (1)

Bryan Hughes

Co-Author (1)

Tan Parker

Sponsor (1)

Jeffrey Barry

Contact the Author

Sen. Bryan Hughes

Capitol Phone:

(512) 463-0101

Capitol Office:

CAP 3E8

E-Mail:

[email protected]

Visit Official Website

Fiscal Notes

According to the Legislative Budget Board (LBB), SB 667 would have no significant fiscal implication to the State. The measure requires the Texas Comptroller to maintain a list of Chinese-affiliated entities and authorizes the Attorney General to enforce compliance, but these responsibilities are expected to be absorbed within the existing resources of their respective agencies.

State investment entities, such as the Employees Retirement System (ERS) and the Texas Permanent School Fund Corporation, reported no anticipated significant financial impact from the bill. However, the Teacher Retirement System (TRS) stated that the potential impact on investment returns is indeterminable—suggesting that while no immediate cost is projected, long-term effects on portfolio performance due to divestment restrictions are uncertain.

At the local level, the Texas County and District Retirement System also expects no major fiscal effects. The Texas Municipal Retirement System noted that affected investments represent only a small part of their holdings but similarly could not quantify potential changes in expected returns.

Overall, while the administrative costs are expected to be minimal, the true financial implications depend on how the investment landscape evolves, particularly if restricted entities grow in influence or if divestment leads to reduced investment flexibility or returns over time.

Vote Recommendation Notes

The bill’s primary intent is to align state governmental investments with Texas’s strategic and ethical interests by prohibiting investment in entities tied to the Chinese Communist Party or otherwise flagged by federal agencies for national security concerns. This approach is consistent with safeguarding taxpayer resources from potential manipulation or compromise by foreign adversaries. The legislative analysis outlines the rationale through five core themes: national security, economic risk management, fiduciary responsibility, transparency, and a strong legal framework. The bill is crafted to allow divestment flexibility where necessary to protect fund performance, indicating that it does not sacrifice financial prudence for political posture.

From a fiscal standpoint, as outlined in the fiscal note, there are no significant costs anticipated at the state or local level. While agencies such as the Teacher Retirement System noted the financial impact on investment returns is indeterminate, the bill includes a safety valve: if full divestment would harm returns or breach fiduciary standards, entities may delay or halt divestment with proper justification. This protects both retirees and taxpayers from undue financial risk.

The bill’s broader application to all state governmental entities—not just retirement systems—shows a robust, principled stance on economic sovereignty, one that resonates with conservative priorities of limiting dependency on adversarial foreign powers. At the same time, it incorporates procedural safeguards and reporting duties that promote transparency and accountability in public investment practices. Thus, Texas Policy Research recommends that lawmakers vote YES on SB 667 as it offers a balanced response to a complex issue and is consistent with the liberty principles of limited government, economic independence, and responsible governance.

View Bill Text and Status