85R12195 CAE-D
By: Shine H.B. No. 3604
A BILL TO BE ENTITLED
AN ACT
relating to the guarantee by the permanent school fund of bonds
issued by a charter district on the approval of the Bond Review
Board.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 12.135(a), Education Code, is amended to
read as follows:
(a) On the application of the charter holder, the
commissioner may grant designation as a charter district to an
open-enrollment charter school that meets financial standards
adopted by the Bond Review Board [commissioner]. The financial
standards must require an open-enrollment charter school to have an
investment grade credit rating as specified by Section 45.0541.
SECTION 2. Section 45.052, Education Code, is amended by
amending Subsection (a) and adding Subsection (a-1) to read as
follows:
(a) On approval by the commissioner, bonds issued under
Subchapter A by a school district [or Chapter 53 for a charter
district], including refunding and refinanced bonds, are
guaranteed by the corpus and income of the permanent school fund.
(a-1) On approval by the Bond Review Board, bonds issued
under Chapter 53 for a charter district, including refunding and
refinanced bonds, are guaranteed by the corpus and income of the
permanent school fund. The Bond Review Board must impose an
appropriate debt limit for a charter district seeking the guarantee
of bonds under this section. A bond may not be guaranteed under
this section unless:
(1) the charter district produces an independent
feasibility study documenting the student demand and corresponding
revenues of the open-enrollment charter school that will benefit
from the bond proceeds;
(2) the charter district demonstrates the manner in
which the open-enrollment charter school will benefit from the bond
proceeds;
(3) the charter district demonstrates that the
open-enrollment charter school attained a minimum student
retention rate in each of the last three school years, as determined
by the Bond Review Board; and
(4) the charter district establishes that the
open-enrollment charter school will maintain an acceptable
academic accountability rating under Chapter 39.
SECTION 3. Sections 45.053(a), (c), and (d), Education
Code, are amended to read as follows:
(a) Except as provided by Subsection (d), the commissioner
and the Bond Review Board 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.
(c) The commissioner, with assistance from the Bond Review
Board, shall prepare and the board shall adopt an annual report on
the status of the guaranteed bond program under this subchapter.
(d) The board by rule may increase the limit prescribed by
Subsection (a) to an amount not to exceed five times the cost value
of the permanent school fund, provided that the increased limit is
consistent with federal law and regulations and does not prevent
the bonds to be guaranteed from receiving the highest available
credit rating, as determined by the board. The board shall at least
annually consider whether to change any limit in accordance with
this subsection. This subsection may not be construed in a manner
that impairs, limits, or removes the guarantee of bonds that have
been approved by the commissioner or the Bond Review Board.
SECTION 4. Sections 45.0532(a), (a-1), (c), and (d),
Education Code, are amended to read as follows:
(a) In addition to the general limitation under Section
45.053, the Bond Review Board [commissioner] may not approve
charter district bonds for guarantee under this subchapter in a
total amount that exceeds the percentage of the total available
capacity of the guaranteed bond program that is equal to the
percentage of the number of students enrolled in open-enrollment
charter schools in this state compared to the total number of
students enrolled in all public schools in this state, as
determined by the Bond Review Board [commissioner].
(a-1) The Bond Review Board [commissioner] may not approve
charter district refunding or refinanced bonds for guarantee under
this subchapter in a total amount that exceeds one-half of the total
amount available for the guarantee of charter district bonds under
Subsection (a).
(c) Notwithstanding Subsections (a) and (b), the Bond
Review Board [commissioner] may not approve charter district bonds
for guarantee under this subchapter if the guarantee will result in
lower bond ratings for school district bonds for which a guarantee
is requested under this subchapter.
(d) The Bond Review Board [commissioner] may request that
the comptroller place the portion of the permanent school fund
committed to the guarantee of charter district bonds in a
segregated account if the Bond Review Board [commissioner]
determines that a separate account is needed to avoid any negative
impact on the bond ratings of school district bonds for which a
guarantee is requested under this subchapter.
SECTION 5. Section 45.0541, Education Code, is amended to
read as follows:
Sec. 45.0541. ELIGIBILITY OF CHARTER DISTRICT BONDS. (a)
To be eligible for approval by the Bond Review Board
[commissioner], charter district bonds must:
(1) without the guarantee, be rated as investment
grade by a nationally recognized investment rating firm; and
(2) be issued under Chapter 53.
(b) For purposes of Subsection (a)(1), a bond is rated as
investment grade if it receives a rating of at least BBB- or the
equivalent.
SECTION 6. Section 45.055, Education Code, is amended by
amending Subsections (a) and (b) and adding Subsections (a-1) and
(d) to read as follows:
(a) A school district [or charter district] seeking
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 school
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.
(a-1) A charter district seeking guarantee of eligible
bonds under this subchapter shall apply to the Bond Review Board
using a form adopted by the Bond Review Board for that purpose.
(b) An application under Subsection (a) or (a-1) must
include:
(1) the name of the school district or charter
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.
(d) An application under Subsection (a-1) must be
accompanied by a fee set by rule of the Bond Review Board in an
amount designed to cover the costs of administering the program to
provide the guarantee of eligible bonds.
SECTION 7. Section 45.056, Education Code, is amended to
read as follows:
Sec. 45.056. INVESTIGATION. (a) Following receipt of an
application for the guarantee of bonds, the commissioner shall
conduct an investigation of the applicant school district [or
charter district] in regard to:
(1) the status of the district's accreditation; and
(2) the total amount of outstanding guaranteed bonds.
(a-1) Following receipt of an application for the guarantee
of bonds, the Bond Review Board shall conduct an investigation of
the applicant charter district in regard to:
(1) the status of the charter district's
accreditation; and
(2) the total amount of outstanding guaranteed bonds.
(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, [or the charter district's bonds
should be guaranteed under this subchapter,] the commissioner shall
endorse the bonds.
(c) If following the investigation the Bond Review Board is
satisfied that the charter district's bonds should be guaranteed
under this subchapter, the Bond Review Board shall endorse the
bonds.
SECTION 8. Section 45.057, Education Code, is amended by
adding Subsection (a-1) to read as follows:
(a-1) The Bond Review Board shall endorse bonds approved for
guarantee with:
(1) the Bond Review Board stamp; and
(2) a statement relating the Bond Review Board's
statutory authority for the guarantee.
SECTION 9. Sections 45.0571(b), (c), (d), and (e),
Education Code, are amended to read as follows:
(b) A charter district that has a bond guaranteed as
provided by this subchapter must annually remit to the Bond Review
Board [commissioner], for deposit in the charter district bond
guarantee reserve fund, an amount equal to 10 percent of the savings
to the charter district that is a result of the lower interest rate
on the bond due to the guarantee by the permanent school fund. The
amount due under this section shall be amortized and paid over the
duration of the bond. Each payment is due on the anniversary of the
date the bond was issued. The Bond Review Board [commissioner]
shall adopt rules to determine the total and annual amounts due
under this section.
(c) The Bond Review Board [commissioner] may direct the
comptroller to annually withhold the amount due to the charter
district bond guarantee reserve fund under Subsection (b) for that
year from the state funds otherwise payable to the charter
district.
(d) Each year, the Bond Review Board [commissioner] shall:
(1) review the condition of the bond guarantee program
and the amount that must be deposited in the charter district bond
guarantee reserve fund from charter districts; and
(2) determine if charter districts should be required
to submit a greater percentage of the savings resulting from the
guarantee.
(e) The Bond Review Board [commissioner] shall make
recommendations to the legislature based on the review under
Subsection (d).
SECTION 10. Section 45.058, Education Code, is amended to
read as follows:
Sec. 45.058. NOTICE OF DEFAULT. Immediately following a
determination that a school district or charter district will be or
is unable to pay maturing or matured principal or interest on a
guaranteed bond, but not later than the fifth day before maturity
date:
(1)[,] the school district [or charter district] shall
notify the commissioner; and
(2) the charter district shall notify the Bond Review
Board.
SECTION 11. Sections 45.0591(a), (b), and (d), Education
Code, are amended to read as follows:
(a) Immediately following receipt of notice under Section
45.058 that a charter district will be or is unable to pay maturing
or matured principal or interest on a guaranteed bond, the Bond
Review Board [commissioner] shall instruct the comptroller to
transfer from the charter district bond guarantee reserve fund
created under Section 45.0571 to the district's paying agent the
amount necessary to pay the maturing or matured principal or
interest.
(b) If money in the charter district bond guarantee reserve
fund is insufficient to pay the amount due on a bond under
Subsection (a), the Bond Review Board [commissioner] shall instruct
the comptroller to transfer from the appropriate account in the
permanent school fund to the district's paying agent the amount
necessary to pay the balance of the unpaid maturing or matured
principal or interest.
(d) Following full reimbursement to the charter district
bond guarantee reserve fund and the permanent school fund, if
applicable, with interest, the Bond Review Board [comptroller]
shall further cancel the bond or coupon and forward it to the
charter district for which payment was made.
SECTION 12. Section 45.061, Education Code, is amended by
amending Subsections (a) and (b) and adding Subsections (a-2) and
(b-1) to read as follows:
(a) If the commissioner orders payment from the permanent
school fund [or the charter district bond guarantee reserve fund]
on behalf of a school district [or charter district], the
commissioner shall direct the comptroller to withhold the amount
paid, plus interest, from the first state money payable to the
school district [or charter district]. The [Except as provided by
Subsection (a-1), the] amount withheld shall be deposited to the
credit of the permanent school fund.
(a-2) If the Bond Review Board orders payment from the
permanent school fund or the charter district bond guarantee
reserve fund on behalf of a charter district, the Bond Review Board
shall direct the comptroller to withhold the amount paid, plus
interest, from the first state money payable to the charter
district. Except as provided by Subsection (a-1), the amount
withheld shall be deposited to the credit of the permanent school
fund.
(b) In accordance with the rules of the board, the
commissioner may authorize reimbursement to the permanent school
fund [or charter district bond guarantee reserve fund] with
interest in a manner other than that provided by this section.
(b-1) In accordance with the rules of the Bond Review Board,
the Bond Review Board may authorize reimbursement to the permanent
school fund or charter district bond guarantee reserve fund with
interest in a manner other than that provided by this section.
SECTION 13. Section 45.062(a-1), Education Code, is amended
to read as follows:
(a-1) If a total of two or more payments are made under this
subchapter on charter district bonds and the Bond Review Board
[commissioner] determines that the charter district is acting in
bad faith under the guarantee program under this subchapter, the
Bond Review Board [commissioner] may request the attorney general
to institute appropriate legal action to compel the charter
district and its officers, agents, and employees to comply with the
duties required of them by law in regard to the bonds.
SECTION 14. Section 45.063, Education Code, is amended to
read as follows:
Sec. 45.063. RULES. (a) The board may adopt rules
necessary for the administration of the bond guarantee program.
(b) The Bond Review Board may adopt rules necessary for the
administration of the bond guarantee program for charter districts.
SECTION 15. This Act takes effect September 1, 2017.