Jan-Feb Committee on School Finance Permanent School Fund Item 13
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, §33.65, Bond Guarantee Program for School Districts
(Second Reading and Final Adoption)
February 3, 2017
COMMITTEE ON SCHOOL FINANCE/PERMANENT SCHOOL FUND: ACTION
STATE BOARD OF EDUCATION: ACTION
SUMMARY: This item presents for second reading and final adoption 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, §33.65, Bond Guarantee Program for School Districts. The proposed amendment would increase the multiplier used in calculating the capacity of the Permanent School Fund (PSF).
STATUTORY AUTHORITY: Texas Education Code (TEC), §§7.102(c)(33), 45.053(d), 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, §45.053(d), grants the SBOE the authority to increase by rule the multiplier used in calculating the capacity of the fund.
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 enable the Bond Guarantee Program (BGP) to recommence providing guarantees to open-enrollment charter schools. This part of the guarantee program is currently frozen due to a lack of available capacity.
PREVIOUS BOARD ACTION: Section 33.65 was adopted effective September 1, 1996, and last amended effective February 1, 2016. The SBOE approved the amendment to 19 TAC §33.65 for first reading and filing authorization at the November 2016 meeting.
BACKGROUND INFORMATION AND SIGNIFICANT ISSUES: The TEC, §7.102(c)(33), authorizes the SBOE to adopt rules for the implementation of the PSF BGP as authorized in the TEC, Chapter 45, School District Funds, Subchapter C, Guaranteed Bonds. The TEC, §45.063, authorizes the SBOE to adopt rules necessary for the administration of the program. Section 33.65 is the rule the SBOE adopted to implement the program.
Section 33.65 sets out the statutory provisions for the BGP, 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.
Under the TEC, §45.053, the board has authority to increase the multiplier used in the calculation of the PSF capacity to guarantee bonds. The proposed amendment to 19 TAC §33.65, shown as Attachment II, would increase the multiplier in subsection (e)(1) to three and one-half times the cost value of the PSF effective March 1, 2017, and three and three-fourths times the cost value of the PSF effective September 1, 2017. A change is being recommended since approved for first reading. A clarification would be added in subsection (e)(1) that under no circumstances could the capacity of the fund exceed the limits set by federal regulation.
FISCAL IMPACT: The Texas Education Agency 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 proposed amendment would enable the BGP to recommence providing guarantees to open-enrollment charter schools. This part of the guarantee program is currently frozen due to a lack of available capacity. The program is very beneficial to these schools and their students as they have extensive needs to build new facilities and the BGP provides for significantly lower interest rates on financing.
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: Following the November 2016 SBOE meeting, notice of the proposed amendment was filed with the Texas Register, initiating the official public comment period. No public comments had been received at the time this item was prepared. Any public comments received and corresponding agency responses regarding the proposal will be provided to the SBOE during the January/February 2017 meeting.
ALTERNATIVES: None.
OTHER COMMENTS AND RELATED ISSUES: None.
MOTION TO BE CONSIDERED: The State Board of Education:
By an affirmative vote of two-thirds of the members of the board, approve for second reading and final adoption the 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, §33.65, Bond Guarantee Program for School Districts, with an effective date of 20 days after filing as adopted with the Texas Register.
Staff Member Responsible:
Leo Lopez, Associate Commissioner
School Finance / Chief School Finance Officer
Attachments:
I. Statutory Citations (PDF, 19KB)
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, §33.65, Bond Guarantee Program for School Districts (PDF, 68KB)