81R31089 CAS-F
By: Shapiro S.B. No. 1255
Substitute the following for S.B. No. 1255:
By: Aycock C.S.S.B. No. 1255
A BILL TO BE ENTITLED
AN ACT
relating to a state intercept credit enhancement program for
certain bonds issued by school districts.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 45, Education Code, is amended by adding
Subchapter I to read as follows:
SUBCHAPTER I. INTERCEPT PROGRAM TO PROVIDE CREDIT ENHANCEMENT FOR
BONDS
Sec. 45.251. DEFINITIONS. In this subchapter:
(1) "Board" means the State Board of Education.
(2) "Foundation School Program" means the program
established under Chapters 41, 42, and 46, or any successor program
of state appropriated funding for school districts in this state.
(3) "Paying agent" means the financial institution
that is designated by a school district as the district's agent for
the payment of the principal of and interest on bonds for which
credit enhancement is provided under this subchapter.
Sec. 45.252. INTERCEPT CREDIT ENHANCEMENT PROGRAM. (a) If
a school district's application for guarantee of district bonds by
the corpus and income of the permanent school fund as provided by
Subchapter C is rejected, the district may apply under this
subchapter for credit enhancement of bonds described by Section
45.054 by money appropriated for the Foundation School Program,
other than money that is appropriated to school districts
specifically:
(1) as required under the Texas Constitution; or
(2) for assistance in paying debt service.
(b) The same school district bonds may not benefit under
both Subchapter C and this subchapter.
(c) Notwithstanding any amendment of this subchapter or
other law, the credit enhancement provided under this subchapter
for school district bonds remains in effect until the date those
bonds mature or are defeased in accordance with state law.
Sec. 45.253. LIMITATION ON INTERCEPT CREDIT ENHANCEMENT.
(a) In each month of each fiscal year, the commissioner shall
determine the amount of funds available to make payments under this
subchapter from the Foundation School Program through the end of
the fiscal year and the amounts due under this code to public
schools from the Foundation School Program through the end of the
fiscal year. The commissioner may revise a determination under
this subsection during the fiscal year as appropriate.
(b) The commissioner may not endorse particular bonds for
credit enhancement under this subchapter until the commissioner
has:
(1) made the determinations required under Subsection
(a); and
(2) determined that the endorsement will not cause the
projected debt service coming due during the remainder of the
fiscal year for bonds provided credit enhancement under this
subchapter to exceed the lesser of:
(A) one-half of the amount of funds due to public
schools from the Foundation School Program for the remainder of the
fiscal year; or
(B) one-half of the amount of funds anticipated
to be on hand in the Foundation School Program to make payments for
the remainder of the fiscal year.
(c) The commissioner may not endorse particular bonds for
credit enhancement under this subchapter unless the commissioner
has determined that the maximum annual debt service on the bonds
during any state fiscal year will not exceed the lesser of:
(1) one-half of the amount of funds due to public
schools from the Foundation School Program for the current fiscal
year; or
(2) one-half of the amount of funds anticipated to be
on hand in the Foundation School Program to make payments for the
current fiscal year.
Sec. 45.254. ELIGIBILITY. To be eligible for approval by
the commissioner for credit enhancement under this subchapter:
(1) bonds must be issued in the manner provided by
Section 45.054; and
(2) payments of all of the principal of the bonds must
be scheduled during the first six months of the state fiscal year.
Sec. 45.2541. INTERCEPT OF FOUNDATION SCHOOL PROGRAM
APPROPRIATIONS AS CREDIT ENHANCEMENT. (a) Money appropriated for
the Foundation School Program that may be used for the purpose under
this subchapter and under any other law, rule, or regulation shall
be used to provide credit enhancement for eligible bonds as
provided by this subchapter, the General Appropriations Act, and
board rule if using the permanent school fund to guarantee
particular bonds would result in:
(1) a total amount of outstanding bonds guaranteed by
the permanent school fund exceeding the amount authorized under:
(A) Section 45.053; or
(B) federal law or regulations; or
(2) the use of a portion of the cost value of the
permanent school fund reserved under Section 45.0531, as determined
by the board.
(b) If Foundation School Program appropriations are not
sufficient in any year to pay principal or interest that becomes due
on bonds for which credit enhancement is provided under this
subchapter, the payment shall be made from the following year's
Foundation School Program appropriations that may be used for the
purpose under this subchapter before those appropriations are used
for any other Foundation School Program purpose.
Sec. 45.255. APPLICATION FOR CREDIT ENHANCEMENT. (a) A
school district seeking credit enhancement of eligible bonds under
this subchapter shall apply to the commissioner using a form
adopted by the commissioner for the purpose. The commissioner may
adopt a single form on which a district seeking guarantee or credit
enhancement of eligible bonds may apply simultaneously first for a
guarantee under Subchapter C and then, if that guarantee is
rejected, for credit enhancement under this subchapter.
(b) An application under Subsection (a) must:
(1) include the information required by Section
45.055(b); and
(2) be accompanied by a fee set by board rule in an
amount designed to cover the costs of administering the programs to
provide the guarantee or credit enhancement of eligible bonds.
Sec. 45.256. INVESTIGATION. (a) Following receipt of an
application under Section 45.255, the commissioner shall conduct an
investigation of the applicant school district as provided for an
investigation under Section 45.056(a).
(b) If following the investigation under Subsection (a) the
commissioner is satisfied that the school district's bonds should
be guaranteed under Subchapter C or provided credit enhancement
under this subchapter, as applicable, the commissioner shall
endorse the bonds.
Sec. 45.257. CREDIT ENHANCEMENT ENDORSEMENT. (a) The
commissioner shall endorse bonds approved for credit enhancement
under this subchapter in substantially the same manner provided
under Section 45.057 for endorsing bonds approved under Subchapter
C.
(b) The credit enhancement is not effective unless the
attorney general approves the bonds under Section 45.005.
Sec. 45.258. NOTICE OF FAILURE OR INABILITY TO PAY.
Immediately following a determination that a school district will
be or is unable to pay maturing or matured principal or interest on
a bond for which credit enhancement is provided under this
subchapter, but not later than the 10th day before maturity date,
the school district shall notify the commissioner.
Sec. 45.259. PAYMENT FROM INTERCEPTED FUNDS.
(a) Immediately following receipt of notice under Section 45.258,
the commissioner shall instruct the comptroller to transfer to the
district's paying agent from appropriations to the Foundation
School Program that may be used for the purpose under Section 45.252
and other law the amount necessary to pay the maturing or matured
principal or interest.
(b) Immediately following receipt of the funds for payment
of the principal or interest, the paying agent shall pay the amount
due.
(c) The procedures prescribed by Subsections (a) and (b)
apply to each payment of principal or interest on bonds as the
payment becomes due until the bonds mature or are defeased in
accordance with state law.
(d) If money appropriated for the Foundation School Program
is used for purposes of this subchapter and as a result there is
insufficient money to fully fund the Foundation School Program, the
commissioner shall, to the extent necessary, reduce each school
district's foundation school fund allocations, other than any
portion appropriated from the available school fund, in the same
manner provided by Section 42.253(h) for a case in which school
district entitlements exceed the amount appropriated. The
following fiscal year, a district's entitlement under Section
42.253 is increased by an amount equal to the reduction under this
subsection.
(e) A payment made under this section by the state on behalf
of a school district of funds the district owes on bonds for which
credit enhancement is provided under this subchapter creates a
repayment obligation of the district to the state regardless of the
maturity date of, or any payment of interest on, the bonds.
(f) This section does not create a debt of the state under
the Texas Constitution or, except to the extent provided by this
subchapter, create a payment obligation.
Sec. 45.260. BONDS NOT ACCELERATED ON FAILURE TO PAY. If a
school district fails to pay principal or interest on a bond for
which credit enhancement is provided under this subchapter when the
amount matures, other amounts not yet mature are not accelerated
and do not become due by virtue of the district's failure to pay
amounts matured.
Sec. 45.261. REIMBURSEMENT OF FOUNDATION SCHOOL PROGRAM.
(a) If the commissioner orders payment from the money appropriated
to the Foundation School Program on behalf of a school district that
is not required to reduce its wealth per student under Chapter 41,
the commissioner shall direct the comptroller to withhold the
amount paid from the first state money payable to the district. If
the commissioner orders payment from the money appropriated to the
Foundation School Program on behalf of a school district that is
required to reduce its wealth per student under Chapter 41, the
commissioner shall increase amounts due from the district under
that chapter in a total amount equal to the amount of payments made
on behalf of the district under this subchapter. Amounts withheld
or received under this subsection shall be used for the Foundation
School Program.
(b) In accordance with commissioner rules, the commissioner
may authorize reimbursement of the Foundation School Program in a
manner other than that provided by this section.
(c) The commissioner may order a school district to set an
ad valorem tax rate capable of producing an amount of revenue
sufficient to enable the district to:
(1) provide reimbursement under this section; and
(2) pay the remaining principal of and interest on the
bonds as the principal and interest become due.
(d) If a school district fails to comply with the
commissioner's order under Subsection (c), the commissioner may
impose any sanction on the district authorized to be imposed on a
district under Subchapter G, Chapter 39, including appointment of a
board of managers or annexation to another district, regardless of
the district's accreditation status or the duration of a particular
accreditation status.
(e) Any part of a school district's tax rate attributable to
producing revenue for purposes of Subsection (c)(1) is considered
part of the district's:
(1) current debt rate for purposes of computing a
rollback tax rate under Section 26.08, Tax Code; and
(2) interest and sinking fund tax rate.
(f) On reimbursement by a school district as required by
this section, the commissioner shall pay to the district any amount
withheld under this section.
Sec. 45.262. REPEATED FAILURE TO PAY. (a) If a total of
two or more payments are made under Subchapter C or this subchapter
on the bonds of a school district and the commissioner determines
that the district is acting in bad faith under the guarantee program
under Subchapter C or the credit enhancement program under this
subchapter, the commissioner may request the attorney general to
institute appropriate legal action to compel the district and the
district's officers, agents, and employees to comply with the
duties required of them by law in regard to the bonds.
(b) Jurisdiction of proceedings under this section is in
district court in Travis County.
Sec. 45.263. RULES. (a) The commissioner shall adopt
rules necessary for the administration of the bond credit
enhancement program under this subchapter.
(b) In adopting rules under Subsection (a), the
commissioner shall establish an annual deadline by which a school
district must pay the debt service on bonds for which credit
enhancement is provided under this subchapter. The deadline
established may not be later than the 10th day before the date
specified under Section 42.259 for payment to school districts of
the final Foundation School Program installment for a state fiscal
year.
SECTION 2. Section 45.052, Education Code, is amended to
read as follows:
Sec. 45.052. GUARANTEE. (a) On approval by the
commissioner, bonds issued under Subchapter A, including refunding
bonds, are guaranteed by the corpus and income of the permanent
school fund.
(b) Notwithstanding any amendment of this subchapter or
other law, the guarantee under this subchapter of school district
bonds remains in effect until the date those bonds mature or are
defeased in accordance with state law.
SECTION 3. Subsections (a), (b), and (c), Section 45.053,
Education Code, are amended to read as follows:
(a) Except as provided by Subsection (d), the commissioner
may not approve bonds for guarantee under this subchapter if the
approval would result in the total amount of outstanding guaranteed
bonds under this subchapter exceeding an amount equal to 2-1/2
times the cost value of the permanent school fund, as estimated by
the board and certified by the state auditor.
(b) Each year, the state auditor shall analyze the status of
guaranteed bonds under this subchapter as compared to the cost
value of the permanent school fund. Based on that analysis, the
state auditor shall certify whether the amount of bonds guaranteed
under this subchapter is within the limit prescribed by this
section.
(c) The commissioner shall prepare and the board shall adopt
an annual report on the status of the guaranteed bond program under
this subchapter.
SECTION 4. Subchapter C, Chapter 45, Education Code, is
amended by adding Section 45.0531 to read as follows:
Sec. 45.0531. ADDITIONAL LIMITATION: RESERVATION OF
PERCENTAGE OF PERMANENT SCHOOL FUND VALUE. (a) In addition to the
limitation on the approval of bonds for guarantee under Section
45.053, the board by rule may establish a percentage of the cost
value of the permanent school fund to be reserved from use in
guaranteeing bonds under this subchapter.
(b) If the board has reserved a portion of the permanent
school fund under Subsection (a), each year, the state auditor
shall analyze the status of the reserved portion compared to the
cost value of the permanent school fund. Based on that analysis,
the state auditor shall certify whether the portion of the
permanent school fund reserved from use in guaranteeing bonds under
this subchapter satisfies the reserve percentage established.
(c) If the board has reserved a portion of the permanent
school fund under Subsection (a), the board shall at least annually
consider whether to change the reserve percentage established to
ensure that the reserve percentage allows compliance with federal
law and regulations and serves to enable bonds guaranteed under
this subchapter to receive the highest available credit rating, as
determined by the board.
(d) This section may not be construed in a manner that
impairs, limits, or removes the guarantee of bonds that have been
approved by the commissioner.
SECTION 5. Section 45.055, Education Code, is amended to
read as follows:
Sec. 45.055. APPLICATION FOR GUARANTEE. (a) A school
district seeking [the] guarantee of eligible bonds under this
subchapter shall apply to the commissioner using a form adopted by
the commissioner for the purpose. The commissioner may adopt a
single form on which a district seeking guarantee or credit
enhancement of eligible bonds may apply simultaneously first for
guarantee under this subchapter and then, if that guarantee is
rejected, for credit enhancement under Subchapter I.
(b) An [The] application under Subsection (a) must include:
(1) the name of the school district and the principal
amount of the bonds to be issued;
(2) the name and address of the district's paying agent
for those bonds; and
(3) the maturity schedule, estimated interest rate,
and date of the bonds.
(c) An [The] application under Subsection (a) must be
accompanied by a fee set by rule of the board in an amount designed
to cover the costs of administering the programs to provide the
guarantee or credit enhancement of eligible bonds [program].
SECTION 6. Subsection (b), Section 45.056, Education Code,
is amended to read as follows:
(b) If following the investigation the commissioner is
satisfied that the school district's bonds should be guaranteed
under this subchapter or provided credit enhancement under
Subchapter I, as applicable, the commissioner shall endorse the
bonds.
SECTION 7. Section 45.061, Education Code, is amended by
adding Subsections (c) and (d) to read as follows:
(c) The commissioner may order a school district to set an
ad valorem tax rate capable of producing an amount of revenue
sufficient to enable the district to:
(1) provide reimbursement under this section; and
(2) pay the principal of and interest on district
bonds as the principal and interest become due.
(d) If a school district fails to comply with the
commissioner's order under Subsection (c), the commissioner may
impose any sanction on the district authorized to be imposed on a
district under Subchapter G, Chapter 39, including appointment of a
board of managers or annexation to another district, regardless of
the district's accreditation status or the duration of a particular
accreditation status.
SECTION 8. Subsection (a), Section 45.062, Education Code,
is amended to read as follows:
(a) If a total of two or more payments [from the permanent
school fund] are made under this subchapter or Subchapter I on the
[guaranteed] bonds of a school district and the commissioner
determines that the school district is acting in bad faith under the
guarantee program under this subchapter or the credit enhancement
program under Subchapter I, the commissioner may request the
attorney general to institute appropriate legal action to compel
the school district and its officers, agents, and employees to
comply with the duties required of them by law in regard to the
bonds.
SECTION 9. Section 42.259, Education Code, is amended by
adding Subsection (g) to read as follows:
(g) The commissioner shall make all annual Foundation
School Program payments under this section for purposes described
by Sections 45.252(a)(1) and (2) before the deadline established
under Section 45.263(b) for payment of debt service on bonds.
Notwithstanding any other provision of this section, the
commissioner may make Foundation School Program payments under this
section after the deadline established under Section 45.263(b) only
if the commissioner has not received notice under Section 45.258
concerning a district's failure or inability to pay matured
principal or interest on bonds.
SECTION 10. This Act takes effect immediately if it
receives a vote of two-thirds of all the members elected to each
house, as provided by Section 39, Article III, Texas Constitution.
If this Act does not receive the vote necessary for immediate
effect, this Act takes effect September 1, 2009.