Texas 2017 - 85th Regular

Texas Senate Bill SB1658 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
1		-	By: Taylor of Galveston~~, et al.~~ S.B. No. 1658
2		-	~~(Huberty)~~
	1	+	By: Taylor of Galveston S.B. No. 1658
	2	+	Lucio, West
3	3
4	4
5	5		A BILL TO BE ENTITLED
6	6		AN ACT
7	7		relating to the ownership, sale, lease, and disposition of property
8	8		and management of assets of an open-enrollment charter school.
9	9		BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10		SECTION 1. Section 12.1012, Education Code, is amended by
11	11		adding Subdivisions (7) and (8) to read as follows:
12	12		(7) "Payable obligation" means a contractually
13	13		obligated expenditure that was reasonably incurred for the benefit
14	14		of students enrolled at an open-enrollment charter school before
15	15		the open-enrollment charter school ceased operations, including a
16	16		debt described by Section 12.128(e). The term does not include any
17	17		amount owed to a former charter holder or officer or director of the
18	18		school.
19	19		(8) "Remaining funds" means funds that are held by a
20	20		former charter holder after satisfaction of all payable obligations
21	21		and that were received:
22	22		(A) under Section 12.106; or
23	23		(B) from the disposition of property.
24	24		SECTION 2. Subchapter D, Chapter 12, Education Code, is
25	25		amended by adding Section 12.10125 to read as follows:
26	26		Sec. 12.10125. OPEN-ENROLLMENT CHARTER SCHOOL NOT IN
27	27		OPERATION. An open-enrollment charter school ceases to operate if:
28	28		(1) the school's charter:
29	29		(A) has been revoked;
30	30		(B) has expired;
31	31		(C) has been surrendered; or
32	32		(D) has been abandoned; or
33	33		(2) the school has otherwise ceased operation as a
34	34		public school.
35	35		SECTION 3. Section 12.106, Education Code, is amended by
36	36		adding Subsections (d), (e), and (f) to read as follows:
37	37		(d) Except as provided by Subsection (e), all remaining
38	38		funds of a charter holder for an open-enrollment charter school
39	39		that ceases to operate must be returned to the agency and deposited
40	40		in the charter school liquidation fund.
41	41		(e) The agency may approve a transfer of a charter holder's
42	42		remaining funds to another charter holder if the charter holder
43	43		receiving the funds has not received notice of the expiration or
44	44		revocation of the charter holder's charter for an open-enrollment
45	45		charter school or notice of a reconstitution of the governing body
46	46		of the charter holder under Section 12.1141 or 12.115.
47	47		(f) The commissioner may adopt rules specifying:
48	48		(1) the time during which a former charter holder must
49	49		return remaining funds under Subsection (d); and
50	50		(2) the qualifications required for a charter holder
51	51		to receive a transfer of remaining funds under Subsection (e).
52	52		SECTION 4. Section 12.107(a), Education Code, is amended to
53	53		read as follows:
54	54		(a) Funds received under Section 12.106 after September 1,
55	55		2001, by a charter holder:
56	56		(1) are considered to be public funds for all purposes
57	57		under state law;
58	58		(2) are held in trust by the charter holder for the
59	59		benefit of the students of the open-enrollment charter school;
60	60		(3) may be used only for a purpose for which a school
61	61		may use local funds under Section 45.105(c); [and]
62	62		(4) pending their use, must be deposited into a bank,
63	63		as defined by Section 45.201, with which the charter holder has
64	64		entered into a depository contract; and
65	65		(5) may not:
66	66		(A) be pledged or used to secure loans or bonds
67	67		for any other organization, including a non-charter operation or
68	68		out-of-state operation conducted by the charter holder or a related
69	69		party; or
70	70		(B) be used to support an operation or activity
71	71		not related to the educational activities of the charter holder.
72	72		SECTION 5. Section 12.1163, Education Code, is amended by
73	73		adding Subsection (d) to read as follows:
74	74		(d) An audit under Subsection (a) may include the review of
75	75		any real property transactions between the charter holder and a
76	76		related party, as defined by commissioner rule adopted under
77	77		Section 12.1166. If the commissioner determines that a transaction
78	78		with a related party using funds received under Section 12.106 was
79	79		structured in a manner that did not benefit the open-enrollment
80	80		charter school or that the transaction was in excess of fair market
81	81		value as determined under Section 12.1167, the commissioner may
82	82		order that the transaction be reclassified or that other action be
83	83		taken as necessary to protect the school's interests. Failure to
84	84		comply with the commissioner's order is a material violation of the
85	85		charter.
86	86		SECTION 6. Subchapter D, Chapter 12, Education Code, is
87	87		amended by adding Sections 12.1166, 12.1167, and 12.1168 to read as
88	88		follows:
89	89		Sec. 12.1166. RELATED PARTY TRANSACTIONS. (a) The
90	90		commissioner shall adopt a rule defining "related party" for
91	91		purposes of this subchapter. The definition of "related party"
92	92		must include:
93	93		(1) a party with a current or former board member,
94	94		administrator, or officer who is:
95	95		(A) a board member, administrator, or officer of
96	96		an open-enrollment charter school; or
97	97		(B) related within the third degree of
98	98		consanguinity or affinity, as determined under Chapter 573,
99	99		Government Code, to a board member, administrator, or officer of an
100	100		open-enrollment charter school;
101	101		(2) a charter holder's related organizations, joint
102	102		ventures, and jointly governed organizations;
103	103		(3) an open-enrollment charter school's board members,
104	104		administrators, or officers or a person related to a board member,
105	105		administrator, or officer within the third degree of consanguinity
106	106		or affinity, as determined under Chapter 573, Government Code; and
107	107		(4) any other disqualified person, as that term is
108	108		defined by 26 U.S.C. Section 4958(f).
109	109		(b) For purposes of Subsection (a)(1), a person is a former
110	110		board member, administrator, or officer if the person served in
111	111		that capacity within one year of the date on which a financial
112	112		transaction between the charter holder and a related party
113	113		occurred.
114	114		(c) In a charter holder's annual audit filed under Section
115	115		44.008, the charter holder must include a list of all transactions
116	116		with a related party.
117	117		Sec. 12.1167. APPRAISAL OF CERTAIN PROPERTY. The
118	118		commissioner may adopt rules to require an open-enrollment charter
119	119		school to:
120	120		(1) notify the commissioner that the school intends to
121	121		enter into a transaction with a related party; and
122	122		(2) provide an appraisal from a certified appraiser to
123	123		the agency.
124	124		Sec. 12.1168. FINANCIAL REPORT OF CERTAIN SCHOOLS. (a) In
125	125		this section, "related party" has the meaning adopted by
126	126		commissioner rule under Section 12.1166.
127	127		(b) A financial report filed under Section 44.008 by an
128	128		open-enrollment charter school must separately disclose:
129	129		(1) all financial transactions between the
130	130		open-enrollment charter school and any related party, separately
131	131		stating the principal, interest, and lease payments; and
132	132		(2) the total compensation and benefits provided by
133	133		the school and any related party for each member of the governing
134	134		body and each officer and administrator of the school and the
135	135		related party.
136	136		(c) The commissioner may adopt rules to implement this
137	137		section.
138	138		SECTION 7. Section 12.128, Education Code, is amended by
139	139		amending Subsections (a) and (c) and adding Subsections (a-1),
140	140		(b-1), (b-2), (c-1), (c-2), and (f) to read as follows:
141	141		(a) Property purchased [or leased] with funds received by a
142	142		charter holder under Section 12.106 after September 1, 2001:
143	143		(1) is considered to be public property for all
144	144		purposes under state law;
145	145		(2) is property of this state held in trust by the
146	146		charter holder for the benefit of the students of the
147	147		open-enrollment charter school; and
148	148		(3) may be used only for a purpose for which a school
149	149		district may use school district property.
150	150		(a-1) Property leased with funds received by a charter
151	151		holder under Section 12.106 after September 1, 2001:
152	152		(1) is considered to be public property for all
153	153		purposes under state law;
154	154		(2) is property of this state held in trust by the
155	155		charter holder for the benefit of the students of the
156	156		open-enrollment charter school; and
157	157		(3) may be used only for a purpose for which a school
158	158		district may use school district property.
159	159		(b-1) Subject to Subsection (b-2), while an open-enrollment
160	160		charter school is in operation, the charter holder holds title to
161	161		any property described by Subsection (a) or (b) and may exercise
162	162		complete control over the property as permitted under the law.
163	163		(b-2) A charter holder may not transfer, sell, or otherwise
164	164		dispose of any property described by this section without the prior
165	165		written consent of the agency if:
166	166		(1) the charter holder has received notice of:
167	167		(A) the expiration of the charter holder's
168	168		charter under Section 12.1141 and the charter has not been renewed;
169	169		or
170	170		(B) the charter's revocation under Section
171	171		12.115(c);
172	172		(2) the charter holder has received notice that the
173	173		open-enrollment charter school is under discretionary review by the
174	174		commissioner, which may result in the revocation of the charter or a
175	175		reconstitution of the governing body of the charter holder under
176	176		Section 12.115; or
177	177		(3) the open-enrollment charter school for which the
178	178		charter is held has otherwise ceased to operate.
179	179		(c) The commissioner shall:
180	180		(1) take possession and assume control of the property
181	181		described by Subsection (a) of an open-enrollment charter school
182	182		that ceases to operate; and
183	183		(2) supervise the disposition of the property in
184	184		accordance with this subchapter [law].
185	185		(c-1) Notwithstanding Subsection (c), if an open-enrollment
186	186		charter school ceases to operate, the agency:
187	187		(1) for property purchased with state funds, shall
188	188		direct the charter holder to dispose of the property through one of
189	189		the following methods:
190	190		(A) retain or liquidate the property and provide
191	191		reimbursement to the state as provided by Section 12.1281;
192	192		(B) transfer the property to:
193	193		(i) the agency under Section 12.1281(h); or
194	194		(ii) a school district or open-enrollment
195	195		charter school under Section 12.1282;
196	196		(C) close the operations of the open-enrollment
197	197		charter school under Section 12.1284; or
198	198		(D) take any combination of the actions described
199	199		by Paragraphs (A), (B), and (C); and
200	200		(2) for property leased with state funds, may direct
201	201		the charter holder to assign the charter holder's interest in the
202	202		lease to the agency.
203	203		(c-2) The agency may approve an expenditure of remaining
204	204		funds by a former charter holder for insurance or utilities for or
205	205		maintenance, repairs, or improvements to property described by this
206	206		section if the agency determines that the expenditure is reasonably
207	207		necessary to dispose of the property or preserve the property's
208	208		value.
209	209		(f) A decision by the agency under this section is final and
210	210		may not be appealed.
211	211		SECTION 8. Subchapter D, Chapter 12, Education Code, is
212	212		amended by adding Sections 12.1281, 12.1282, 12.1283, and 12.1284
213	213		to read as follows:
214	214		Sec. 12.1281. DISPOSITION OF PROPERTY PURCHASED WITH STATE
215	215		FUNDS. (a) A former charter holder of an open-enrollment charter
216	216		school that has ceased to operate may retain property described by
217	217		Section 12.128 if the former charter holder reimburses the state
218	218		with non-state funds and the former charter holder:
219	219		(1) provides written assurance that the requirements
220	220		of Section 12.1284 will be met; and
221	221		(2) receives approval from the agency.
222	222		(b) On receiving consent from the agency under Section
223	223		12.128(b-2) and a written agreement from any creditor with a
224	224		security interest described by Section 12.128(e), the former
225	225		charter holder may:
226	226		(1) sell property for fair market value; or
227	227		(2) transfer property to an open-enrollment charter
228	228		school or a school district as provided under Section 12.1282.
229	229		(c) The amount of funds the state is entitled to as
230	230		reimbursement for property of a former charter holder is:
231	231		(1) for property retained by the former charter
232	232		holder, the current fair market value less the amount of any debt
233	233		subject to a security interest or lien described by Section
234	234		12.128(e), multiplied by the percentage of state funds used to
235	235		purchase the property; or
236	236		(2) for property sold by the former charter holder,
237	237		the net sales proceeds of the property multiplied by the percentage
238	238		of state funds used to purchase the property.
239	239		(d) To determine the amount of state funds a former charter
240	240		holder used to purchase property, the agency shall calculate:
241	241		(1) an estimated state reimbursement amount based on
242	242		the last annual financial report filed under Section 44.008
243	243		available at the time the former charter holder retains or sells the
244	244		property; and
245	245		(2) a final state reimbursement amount using the
246	246		former charter holder's final financial audit filed under Section
247	247		44.008.
248	248		(e) A former charter holder retaining property under
249	249		Subsection (a) or selling the property under Subsection (b)(1)
250	250		shall:
251	251		(1) file an affidavit in the real property records of
252	252		the county in which the property is located disclosing the state
253	253		interest in the property;
254	254		(2) place in escrow with the state comptroller an
255	255		amount of non-state funds equal to 110 percent of the estimated
256	256		state reimbursement amount not later than:
257	257		(A) the closing date of the sale of the property
258	258		if the charter holder is selling the property; or
259	259		(B) the 90th day after the charter school's last
260	260		day of instruction if the charter holder is retaining the property;
261	261		and
262	262		(3) not later than two weeks after the date the charter
263	263		holder's final financial audit is filed under Section 44.008,
264	264		submit to the state the final state reimbursement amount using the
265	265		funds in escrow in addition to any other funds necessary to pay the
266	266		full amount of state reimbursement.
267	267		(f) A former charter holder may retain any funds remaining
268	268		after complying with this section.
269	269		(g) As soon as the agency is satisfied that the former
270	270		charter holder complied with Subsection (e), the agency shall file
271	271		written notice of the release of the state interest in property the
272	272		former charter holder retains under this section and authorize the
273	273		return of any funds not used for state reimbursement to the former
274	274		charter holder.
275	275		(h) Subject to the satisfaction of any security interest or
276	276		lien described by Section 12.128(e), if a former charter holder
277	277		does not dispose of property under Subsection (a) or (b), the former
278	278		charter holder shall transfer the property, including a conveyance
279	279		of title, to the agency in accordance with the procedures and time
280	280		requirements established by the agency.
281	281		(i) Subject to the satisfaction of any security interest or
282	282		lien described by Section 12.128(e), if the agency determines a
283	283		former charter holder failed to comply with this section or Section
284	284		12.1282, on request of the agency, the attorney general shall take
285	285		any appropriate legal action to compel the former charter holder to
286	286		convey title to the agency or other governmental entity authorized
287	287		by the agency to maintain or dispose of property.
288	288		(j) A decision by the agency under this section is final and
289	289		may not be appealed.
290	290		(k) The commissioner may adopt rules necessary to
291	291		administer this section.
292	292		Sec. 12.1282. TRANSFER OF PROPERTY PURCHASED WITH STATE
293	293		FUNDS. (a) The agency may approve the transfer of property
294	294		described by Section 12.128 from an open-enrollment charter school
295	295		that has ceased to operate, or may transfer property conveyed to the
296	296		agency by the former charter holder under Section 12.1281, to a
297	297		school district or an open-enrollment charter school if:
298	298		(1) the open-enrollment charter school or school
299	299		district receiving the property:
300	300		(A) agrees to the transfer; and
301	301		(B) agrees to identify the property as purchased
302	302		wholly or partly using state funds on the school's annual financial
303	303		report filed under Section 44.008;
304	304		(2) any creditor with a security interest in or lien on
305	305		the property described by Section 12.128(e) agrees to the transfer;
306	306		and
307	307		(3) the transfer of the property does not make the
308	308		open-enrollment charter school or school district receiving the
309	309		property insolvent.
310	310		(b) Property received by an open-enrollment charter school
311	311		or school district under this section is considered to be state
312	312		property under Section 12.128(a).
313	313		(c) The commissioner may adopt rules necessary to
314	314		administer this section, including rules establishing
315	315		qualifications and priority for a school district or
316	316		open-enrollment charter school to receive a transfer of property
317	317		under this section.
318	318		(d) If the agency determines that the cost of disposing of
319	319		personal property described by Section 12.128 transferred to the
320	320		agency by an open-enrollment charter school that ceases to operate
321	321		exceeds the return of value from the sale of the property, the
322	322		agency may distribute the personal property to open-enrollment
323	323		charter schools and school districts in a manner determined by the
324	324		commissioner.
325	325		(e) A determination by the agency under this section is
326	326		final and may not be appealed.
327	327		Sec. 12.1283. SALE OF PROPERTY PURCHASED WITH STATE FUNDS.
328	328		(a) After the agency receives title to property described by
329	329		Section 12.128, the agency may sell the property at any price
330	330		acceptable to the agency.
331	331		(b) On request of the agency, the following state agencies
332	332		shall enter into a memorandum of understanding to sell property for
333	333		the agency:
334	334		(1) for real property, the General Land Office; and
335	335		(2) for personal property, the Texas Facilities
336	336		Commission.
337	337		(c) A memorandum of understanding entered into as provided
338	338		by Subsection (b) may allow the General Land Office or Texas
339	339		Facilities Commission to recover from the sale proceeds any cost
340	340		incurred by the agency in the sale of the property.
341	341		(d) Subject to the satisfaction of any security interest or
342	342		lien described by Section 12.128(e), proceeds from the sale of
343	343		property under this section shall be deposited in the charter
344	344		school liquidation fund.
345	345		(e) The commissioner may adopt rules as necessary to
346	346		administer this section.
347	347		Sec. 12.1284. CLOSURE OF CHARTER SCHOOL OPERATIONS.
348	348		(a) After extinguishing all payable obligations owed by an
349	349		open-enrollment charter school that ceases to operate, including a
350	350		debt described by Section 12.128(e), a former charter holder shall:
351	351		(1) remit to the agency:
352	352		(A) any remaining funds described by Section
353	353		12.106(d); and
354	354		(B) any state reimbursement amounts from the sale
355	355		of property described by Section 12.128; or
356	356		(2) transfer the remaining funds to another charter
357	357		holder under Section 12.106(e).
358	358		(b) The agency shall deposit any funds received under
359	359		Subsection (a)(1) in the charter school liquidation fund.
360	360		(c) The commissioner may adopt rules necessary to
361	361		administer this section.
362	362		SECTION 9. Subchapter D, Chapter 12, Education Code, is
363	363		amended by adding Section 12.141 to read as follows:
364	364		Sec. 12.141. RECLAIMED FUNDS. (a) The agency shall
365	365		deposit funds received under Sections 12.106, 12.128, 12.1281,
366	366		12.1283, and 12.1284 into the charter school liquidation fund and
367	367		may use the funds to:
368	368		(1) pay expenses relating to managing and closing an
369	369		open-enrollment charter school that ceases to operate, including:
370	370		(A) maintenance of the school's student and other
371	371		records; and
372	372		(B) the agency's personnel costs associated with
373	373		managing and closing the school;
374	374		(2) dispose of property described by Section 12.128;
375	375		and
376	376		(3) maintain property described by Section 12.128,
377	377		including expenses for insurance, utilities, maintenance, and
378	378		repairs.
379	379		(b) The agency may not use funds under this section until
380	380		the commissioner determines if the open-enrollment charter school
381	381		that ceases to operate received an overallocation of funds under
382	382		Section 12.106 that must be recovered for the foundation school
383	383		program.
384	384		(c) The agency shall annually review the amount of funds in
385	385		the charter school liquidation fund and transfer any funds
386	386		exceeding $2 million:
387	387		(1) for use in funding a high-quality educational
388	388		grant program established by the commissioner; or
389	389		(2) to the comptroller to deposit in the charter
390	390		district bond guarantee reserve fund under Section 45.0571.
391	391		(d) The agency may delay a transfer of funds under
392	392		Subsection (c) if the excess is less than $100,000. Funds set aside
393	393		for an overallocation of funds from the foundation school program
394	394		are not included in determining whether the amount of funds exceeds
395	395		$2 million.
396	396		(e) The commissioner may adopt rules necessary to implement
397	397		this section.
398	398		SECTION 10. Section 39.1121, Education Code, is amended by
399	399		adding Subsection (c-1) to read as follows:
400	400		(c-1) A board of managers appointed for the final closure of
401	401		a former open-enrollment charter school under Subsection (c) has
402	402		the authority to:
403	403		(1) access and manage any former charter holder's bank
404	404		account that contains funds received under Section 12.106; and
405	405		(2) subject to approval by a creditor with a security
406	406		interest in or lien on property described by Section 12.128 and in
407	407		accordance with Sections 12.1281 and 12.1282, sell or transfer to
408	408		another charter holder or school district any property titled to
409	409		the former charter holder that is identified in the former
410	410		open-enrollment charter school's annual financial report filed
411	411		under Section 44.008 as being acquired, wholly or partly, with
412	412		funds received under Section 12.106.
413	413		SECTION 11. Section 39.1122(c), Education Code, is amended
414	414		to read as follows:
415	415		(c) The agency [commissioner] shall use funds received by or
416	416		due to the former charter holder under Section 12.106 or funds
417	417		returned to the state from liquidation of [state] property
418	418		described by Section 12.128 and held by a former charter holder for
419	419		compensation of a member of a board of managers for an
420	420		open-enrollment charter school or a campus of an open-enrollment
421	421		charter school or a superintendent.
422	422		SECTION 12. Section 43.001(a), Education Code, is amended
423	423		to read as follows:
424	424		(a) Except as provided by Subsection (b), the permanent
425	425		school fund, which is a perpetual endowment for the public schools
426	426		of this state, consists of:
427	427		(1) all land appropriated for the public schools by
428	428		the constitution and laws of this state;
429	429		(2) all of the unappropriated public domain remaining
430	430		in this state, including all land recovered by the state by suit or
431	431		otherwise except pine forest land as defined by Section 88.111 and
432	432		property described by Section 12.128;
433	433		(3) all proceeds from the authorized sale of permanent
434	434		school fund land;
435	435		(4) all proceeds from the lawful sale of any other
436	436		properties belonging to the permanent school fund;
437	437		(5) all investments authorized by Section 43.003 of
438	438		properties belonging to the permanent school fund; and
439	439		(6) all income from the mineral development of
440	440		permanent school fund land, including income from mineral
441	441		development of riverbeds and other submerged land.
442	442		SECTION 13. Section 44.008, Education Code, is amended by
443	443		adding Subsections (f), (g), and (h) to read as follows:
444	444		(f) An open-enrollment charter school shall provide an
445	445		accounting of each parcel of the school's real property, including
446	446		identifying the amount of local, state, and federal funds used to
447	447		purchase or improve each parcel of property.
448	448		(g) An open-enrollment charter school for which the charter
449	449		has expired, been revoked, or been surrendered or an
450	450		open-enrollment charter school that otherwise ceases to operate
451	451		shall submit a final annual financial report to the agency. The
452	452		report must verify that all state property held by the charter
453	453		holder has been returned or disposed of in accordance with Section
454	454		12.128.
455	455		(h) The commissioner may adopt rules necessary to implement
456	456		this section, including rules defining local funds.
457	457		SECTION 14. A transfer of property from an open-enrollment
458	458		charter school that ceases to operate to another open-enrollment
459	459		charter school that occurred before the effective date of this Act
460	460		is ratified if both open-enrollment charter schools classified the
461	461		property as purchased with state funds on each school's annual
462	462		financial report under Section 44.008, Education Code.
463	463		SECTION 15. This Act takes effect only if a specific
464	464		appropriation for the implementation of the Act is provided in a
465	465		general appropriations act of the 85th Legislature.
466	466		SECTION 16. This Act takes effect immediately if it
467	467		receives a vote of two-thirds of all the members elected to each
468	468		house, as provided by Section 39, Article III, Texas Constitution.
469	469		If this Act does not receive the vote necessary for immediate
470	470		effect, this Act takes effect September 1, 2017.