BILL ANALYSIS Senate Research Center S.B. 604 89R2266 KJE-D By: West Education K-16 4/4/2025 As Filed AUTHOR'S / SPONSOR'S STATEMENT OF INTENT Currently, the Texas Permanent School Fund Corporation and Texas Education Agency administer the Bond Guarantee Program (BGP), under which they guarantee bonds for over 900 school and charter districts, worth over $117 billion. If a school or charter district were to default on a payment, then the State would pay on their behalf, then deduct the amount from the next year's state allocation. These bonds are required to be rated as "investment grade" to qualify for the BGP, because they are backed by public tax dollars. However, if the rating of a bond falls to speculative "junk" status based on the financial health of a school or charter district, the BGP is still obligated to back the bond. In FY2024, over $100 million in bonds backed by the BGP had been downgraded to "junk" status, which can be an indicator of financial issues at a school or charter district. S.B. 604 would provide much-needed transparency to the BGP by requiring the Permanent School Fund Corporation to track and publicize the amounts and holders of bonds downgraded to speculative status backed by the BGP. This information could be a critical warning sign of the financial health of a school or charter district, and allow intervention earlier. S.B. 604 would require the Permanent School Fund Corporation to post on their website each fiscal quarter a list of each existing bond backed by the BGP that has been downgraded to a speculative rating. This list must include the name of the bond holder and the amount outstanding of the bond. As proposed, S.B. 604 amends current law relating to the posting of information regarding certain bonds guaranteed by the permanent school fund. RULEMAKING AUTHORITY This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subchapter C, Chapter 45, Education Code, by adding Section 45.0625, as follows: Sec. 45.0625. POSTING OF DOWNGRADED RATINGS. (a) Requires the Texas Permanent School Fund Corporation (corporation), not later than the first day of each quarter of the state fiscal year, to post on the corporation's Internet website a list of each existing bond guaranteed under Subchapter C (Guaranteed Bonds), Chapter 45, that has been downgraded to a speculative bond rating. (b) Requires that the list include the name of the school district or charter district that issued the bond and the bond's outstanding balance. SECTION 2. Requires the corporation, not later than December 1, 2025, to post the initial list required by Section 45.0625, Education Code, as added by this Act. SECTION 3. Effective date: September 1, 2025.
BILL ANALYSIS
Senate Research Center S.B. 604
89R2266 KJE-D By: West
Education K-16
4/4/2025
As Filed
Senate Research Center
S.B. 604
89R2266 KJE-D
By: West
Education K-16
4/4/2025
As Filed
AUTHOR'S / SPONSOR'S STATEMENT OF INTENT
Currently, the Texas Permanent School Fund Corporation and Texas Education Agency administer the Bond Guarantee Program (BGP), under which they guarantee bonds for over 900 school and charter districts, worth over $117 billion. If a school or charter district were to default on a payment, then the State would pay on their behalf, then deduct the amount from the next year's state allocation.
These bonds are required to be rated as "investment grade" to qualify for the BGP, because they are backed by public tax dollars. However, if the rating of a bond falls to speculative "junk" status based on the financial health of a school or charter district, the BGP is still obligated to back the bond. In FY2024, over $100 million in bonds backed by the BGP had been downgraded to "junk" status, which can be an indicator of financial issues at a school or charter district.
S.B. 604 would provide much-needed transparency to the BGP by requiring the Permanent School Fund Corporation to track and publicize the amounts and holders of bonds downgraded to speculative status backed by the BGP. This information could be a critical warning sign of the financial health of a school or charter district, and allow intervention earlier.
S.B. 604 would require the Permanent School Fund Corporation to post on their website each fiscal quarter a list of each existing bond backed by the BGP that has been downgraded to a speculative rating. This list must include the name of the bond holder and the amount outstanding of the bond.
As proposed, S.B. 604 amends current law relating to the posting of information regarding certain bonds guaranteed by the permanent school fund.
RULEMAKING AUTHORITY
This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Subchapter C, Chapter 45, Education Code, by adding Section 45.0625, as follows:
Sec. 45.0625. POSTING OF DOWNGRADED RATINGS. (a) Requires the Texas Permanent School Fund Corporation (corporation), not later than the first day of each quarter of the state fiscal year, to post on the corporation's Internet website a list of each existing bond guaranteed under Subchapter C (Guaranteed Bonds), Chapter 45, that has been downgraded to a speculative bond rating.
(b) Requires that the list include the name of the school district or charter district that issued the bond and the bond's outstanding balance.
SECTION 2. Requires the corporation, not later than December 1, 2025, to post the initial list required by Section 45.0625, Education Code, as added by this Act.
SECTION 3. Effective date: September 1, 2025.