November 2016 Committee on School Finance Permanent School Fund Item 11
Proposed Amendment to 19 TAC Chapter 33, Statement of Investment Objectives, Policies, and Guidelines of the Texas Permanent School Fund, Subchapter A, State Board of Education Rules, §33.67, Bond Guarantee Program for Charter Schools
(First Reading and Filing Authorization)
November 18, 2016
COMMITTEE ON SCHOOL FINANCE/PERMANENT SCHOOL FUND: ACTION
STATE BOARD OF EDUCATION: ACTION
SUMMARY: This item presents for first reading and filing authorization a proposed amendment to 19 TAC Chapter 33, Statement of Investment Objectives, Policies, and Guidelines of the Texas Permanent School Fund, Subchapter A, State Board of Education Rules, §33.67, Bond Guarantee Program for Charter Schools. The proposed amendment would add language to require charter schools accessing the Permanent School Fund (PSF) Bond Guarantee Program (BGP) to have attained a certain level of student academic proficiency and specify how applications will be prioritized if the available capacity is insufficient to guarantee the total value of the bonds for all applicant charter districts.
STATUTORY AUTHORITY: Texas Education Code (TEC), §§7.102(c)(33), 45.0532, and 45.063, and the Texas Constitution, Article VII, §5(d).
TEC, §7.102(c)(33), requires the State Board of Education (SBOE) to adopt an annual report on the status of the guaranteed bond program and authorizes the SBOE to adopt rules as necessary to administer the bond guarantee program.
TEC, §45.0532, limits the amount of charter district bond guarantees.
TEC, §45.063, authorizes the SBOE to adopt rules necessary for the administration of the bond guarantee program.
Texas Constitution, Article VII, §5(d), authorizes the legislature to use the permanent school fund to establish a bond guarantee program that has been enacted under the TEC, Chapter 45, Subchapter C.
EFFECTIVE DATE: The proposed effective date of the proposed amendment is 20 days after filing as adopted with the Texas Register. Under TEC, §7.102(f), the SBOE must approve the rule action at second reading and final adoption by a vote of two-thirds of its members to specify an effective date earlier than the beginning of the 2017-2018 school year. The earlier effective date will facilitate an orderly prioritization of competing claims for bond guarantees under the PSF BGP if additional capacity becomes available under an amendment to 19 TAC §33.65, Bond Guarantee Program for School Districts, which is presented as a separate item in this agenda for first reading and filing authorization.
PREVIOUS BOARD ACTION: Section 33.67 was adopted effective March 3, 2014, and last amended effective October 19, 2015.
BACKGROUND INFORMATION AND SIGNIFICANT ISSUES: Section 33.67 is the rule the SBOE adopted to implement the Bond Guarantee Program for Charter Schools.
Section 33.67 sets out the statutory provisions for the Bond Guarantee Program for Charter Schools, provides definitions, specifies bond eligibility requirements, and explains the requirements of and policies related to the program's application process. The rule also describes how PSF capacity to guarantee bonds is determined, provides limitations on access to the program, and allows for the commissioner to allocate specific holdings of the PSF under certain conditions. In addition, the rule provides requirements specific to districts that have declared financial exigency, explains what effect defeasance has on guaranteed bonds, and sets out specific program conditions for bonds issued or guaranteed on certain specified dates. The rule also explains program payment conditions and guarantee restrictions.
The TEC, §45.0532, limits the amount of charter district bonds that can receive the guarantee to a percentage of the fund's overall capacity for guaranteeing bonds reflective of the number of charter students in the total public school student population. The capacity available to charter schools is a function of the total capacity available under the program.
The proposed amendment to 19 TAC §33.67 would address the limitation on charter district bonds by requiring charter schools accessing the BGP to be in the top 50th percentile of scores based on student proficiency or the top 25th percentile of scores based on student growth in the current accountability system. In addition, the proposal would create a priority ranking for charter schools accessing the BGP in situations when total requests for bond guarantees from charter schools exceed program capacity. This would assist in allocating the BGP capacity for charter schools to the best charters and provide protection to the BGP as academic failure could contribute to non-renewal or revocation of a charter holder.
The proposed amendment was not presented as a discussion item. The SBOE, however, may wish to consider this item for first reading and filing authorization as authorized under its operating procedures. Therefore, this item is presented for first reading and filing authorization consideration at this meeting.
FISCAL IMPACT: The Texas Education Agency (TEA) has determined that there are no additional costs to persons or entities required to comply with the proposed rule action. In addition, there is no direct adverse economic impact for small businesses and microbusinesses; therefore, no regulatory flexibility analysis, specified in Texas Government Code, §2006.002, is required. There is no effect on local economy for the first five years that the proposed amendment is in effect; therefore, no local employment impact statement is required under Texas Government Code, §2001.022.
PUBLIC AND STUDENT BENEFIT: The orderly prioritization of charter school bond guarantee awards under the PSF BGP will support the most academically successful open-enrollment charter schools and reduce the default risk to the PSF.
PROCEDURAL AND REPORTING IMPLICATIONS: The proposed amendment would have no procedural and reporting implications.
LOCALLY MAINTAINED PAPERWORK REQUIREMENTS: The proposed amendment would have no locally maintained paperwork requirements.
PUBLIC COMMENTS: The official public comment period will begin when the proposal, approved for first reading and filing authorization by the SBOE, is published in the Texas Register.
ALTERNATIVES: None.
OTHER COMMENTS AND RELATED ISSUES: A request for a public hearing on the proposal submitted under the Administrative Procedure Act must be received by the commissioner of education not more than 14 calendar days after notice of the proposal has been published in the Texas Register.
MOTION TO BE CONSIDERED: The State Board of Education:
Suspend the board operating procedures in accordance with §5.2(a) to allow consideration at first reading and filing authorization; and
Approve for first reading and filing authorization proposed amendment to 19 TAC Chapter 33, Statement of Investment Objectives, Policies, and Guidelines of the Texas Permanent School Fund, Subchapter A, State Board of Education Rules, §33.67, Bond Guarantee Program for Charter Schools.
Staff Member Responsible:
Leo Lopez, Associate Commissioner
School Finance / Chief School Finance Officer
Attachments:
I. Statutory Citations (PDF, 26KB)
II. Text of Proposed Amendment to 19 TAC Chapter 33, Statement of Investment Objectives, Policies, and Guidelines of the Texas Permanent School Fund, Subchapter A, State Board of Education Rules, §33.67, Bond Guarantee Program for Charter Schools (PDF, 80KB)
Attachment II. Substitute Text 11/10/16 (PDF, 80KB)