1. (a) The Tobacco Settlement Permanent Trust Account (trust account) shall balance the present needs and interests of the political subdivisions with those of the future. The trust account spending policy objectives shall be to:

   1. (1) provide a predictable, stable stream of distributions over time;
   2. (2) ensure that the inflation-adjusted value of distributions is maintained over the long-term;
   3. (3) ensure that the inflation-adjusted value of the corpus after distributions are maintained over the long-term.
2. (b) In order to preserve the purchasing power of future trust account distributions and of the underlying corpus, the actual distribution amount should not over time exceed the adjusted net earnings over time.

3. (c) Unless otherwise established by the comptroller and approved by the Tobacco Settlement Permanent Trust Account Investment Advisory Committee (investment advisory committee), each actual distribution amount shall be based on the following formula:

   1. (1) deduct investment expenses from total earnings to determine net earnings;
   2. (2) multiply the inflation adjustment factor by the market value of the corpus to determine the amount to deduct from net earnings to determine adjusted net earnings;
   3. (3) to the extent that adjusted net earnings exceed the actual distribution amount, the excess will be accumulated in the distribution stabilization account to stabilize distributions during future years that adjusted net earnings are less than the actual distribution amount unless otherwise directed by the investment advisory committee.

Source Note:The provisions of this §18.2 adopted to be effective November 16, 2000, 25 TexReg 11292.