1-1     By:  Dunnam, et al. (Senate Sponsor - Bivins)            H.B. No. 6
 1-2           (In the Senate - Received from the House April 9, 2001;
 1-3     April 9, 2001, read first time and referred to Committee on
 1-4     Education; May 11, 2001, reported adversely, with favorable
 1-5     Committee Substitute by the following vote:  Yeas 6, Nays 0;
 1-6     May 11, 2001, sent to printer.)
 1-7     COMMITTEE SUBSTITUTE FOR H.B. No. 6                     By:  Bivins
 1-8                            A BILL TO BE ENTITLED
 1-9                                   AN ACT
1-10     relating to open-enrollment charter schools.
1-11           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-12           SECTION 1. Section 12.104, Education Code, is amended by
1-13     adding Subsection (c) to read as follows:
1-14           (c)  An open-enrollment charter school is subject to a
1-15     prohibition, restriction, or requirement, as applicable, imposed by
1-16     state law or by a rule adopted under state law, relating to:
1-17                 (1)  nepotism under Chapter 573, Government Code; or
1-18                 (2)  conflict of interest under Chapter 171, Local
1-19     Government Code, except that an employee of an open-enrollment
1-20     charter school may serve as a member of the governing body of the
1-21     entity that is granted a charter under this subchapter or the
1-22     governing body of the school if the employees do not constitute a
1-23     quorum of the governing body or any committee of the governing
1-24     body.
1-25           SECTION 2. Subchapter D, Chapter 12, Education Code, is
1-26     amended by adding Sections 12.1071 and 12.121-12.124 to read as
1-27     follows:
1-28           Sec. 12.1071.  STATUS AND USE OF FUNDS. (a)  Funds received
1-29     under Section 12.106 or 12.107 after September 1, 2001, by an
1-30     entity to which a charter for an open-enrollment charter school is
1-31     granted:
1-32                 (1)  are considered to be public funds for all purposes
1-33     under state law;
1-34                 (2)  are held in trust by the entity for the benefit of
1-35     the students of the open-enrollment charter school;
1-36                 (3)  may be used only for a purpose for which a school
1-37     may use local funds under Section 45.105(c); and
1-38                 (4)  pending their use, must be deposited into a bank,
1-39     as defined by Section 45.201, with which the entity has entered
1-40     into a depository contract.
1-41           (b)  An entity to which a charter for an open-enrollment
1-42     charter school is granted shall deliver to the agency a copy of the
1-43     depository contract between the entity and any bank into which
1-44     state funds are deposited.
1-45           Sec. 12.121.  SANCTIONS BY COMMISSIONER. (a)  The
1-46     commissioner shall take any of the actions described by Subsection
1-47     (b) or by Section 39.131(a), to the extent the commissioner
1-48     determines necessary, if an open-enrollment charter school:
1-49                 (1)  commits a material violation of the school's
1-50     charter;
1-51                 (2)  fails to satisfy generally accepted accounting
1-52     standards of fiscal management; or
1-53                 (3)  fails to comply with this subchapter or another
1-54     applicable rule or law, as determined by a report issued under
1-55     Section 39.076(b).
1-56           (b)  The commissioner may temporarily withhold funding,
1-57     suspend the authority of an open-enrollment charter school to
1-58     operate, or take any other reasonable action the commissioner
1-59     determines necessary to prevent material harm to the health,
1-60     safety, or welfare of students at the school.
1-61           (c)  After the commissioner acts under Subsection (b), the
1-62     open-enrollment charter school may not receive funding and may not
1-63     resume operating until a determination is made that:
1-64                 (1)  despite initial evidence, the conditions at the
 2-1     school do not present a danger of material harm to the health,
 2-2     safety, or welfare of students; or
 2-3                 (2)  the conditions at the school that presented a
 2-4     danger of material harm to the health, safety, or welfare of
 2-5     students have been corrected.
 2-6           (d)  Not later than the third business day after the date the
 2-7     commissioner acts under Subsection (b), the commissioner shall
 2-8     provide the person granted the charter for the open-enrollment
 2-9     charter school an opportunity for a hearing.
2-10           (e)  Immediately after a hearing under Subsection (d), the
2-11     commissioner must cease the action under Subsection (b) or initiate
2-12     action under Section 12.116.
2-13           (f)  The commissioner shall adopt rules implementing this
2-14     section.  Chapter 2001, Government Code, does not apply to a
2-15     hearing under this section.
2-16           Sec. 12.122.  AUDIT BY COMMISSIONER. (a)  To the extent
2-17     consistent with Subsection (b), the commissioner may audit the
2-18     records of:
2-19                 (1)  an open-enrollment charter school;
2-20                 (2)  an entity to which a charter for an
2-21     open-enrollment charter school is granted; and
2-22                 (3)  a company that contracts with an open-enrollment
2-23     charter school to provide management services, as determined by the
2-24     commissioner.
2-25           (b)  An audit under Subsection (a)  must be limited to
2-26     matters directly related to the management or operation of an
2-27     open-enrollment charter school, including any financial and
2-28     administrative records.
2-29           Sec. 12.123.  CONTRACT FOR MANAGEMENT SERVICES. (a)  In this
2-30     section:
2-31                 (1)  "Management company" means a person who provides
2-32     management services for an open-enrollment charter school.
2-33                 (2)  "Management services" means services related to
2-34     the management or operation of an open-enrollment charter school.
2-35           (b)  Any contract, including a contract renewal, between an
2-36     open-enrollment charter school and a management company proposing
2-37     to provide management services to the school must require the
2-38     management company to maintain all records related to the
2-39     management services separately from any other records of the
2-40     management company.
2-41           Sec. 12.124. GOVERNOR'S COMMISSION ON OPEN-ENROLLMENT CHARTER
2-42     SCHOOLS. (a)  The Governor's Commission on Open-Enrollment Charter
2-43     Schools consists of:
2-44                 (1)  two members of the house of representatives,
2-45     appointed by the speaker of the house of representatives;
2-46                 (2)  two members of the senate, appointed by the
2-47     lieutenant governor;
2-48                 (3)  two members of the public, appointed by the
2-49     governor; and
2-50                 (4)  the commissioner.
2-51           (b)  The commission shall prepare a report on the performance
2-52     of open-enrollment charter schools.  The report must include:
2-53                 (1)  a review of the following issues related to
2-54     open-enrollment charter schools:
2-55                       (A)  student performance;
2-56                       (B)  financial issues, including financial
2-57     practices, funding sources, and costs related to opening a school;
2-58                       (C)  school facilities;
2-59                       (D)  governance; and
2-60                       (E)  applicable regulations; and
2-61                 (2)  the commission's recommendations on the continued
2-62     operation of open-enrollment charter schools, including any
2-63     recommended reporting requirements and other regulations necessary
2-64     to improve student performance and increase accountability in the
2-65     use of public funds.
2-66           (c)  Not later than November 1, 2002, the commissioner shall
2-67     submit the report to the governor, the lieutenant governor, the
2-68     speaker of the house of representatives, the Legislative Budget
2-69     Board, and the clerk of each standing committee of the house of
 3-1     representatives and the senate with primary jurisdiction over
 3-2     public schools.
 3-3           (d)  This section expires January 1, 2003.
 3-4           SECTION 3. Chapter 12, Education Code, is amended by adding
 3-5     Subchapter E to read as follows:
 3-6             SUBCHAPTER E.  GOVERNMENTAL ENTITY CHARTER SCHOOLS
 3-7           Sec. 12.151. DEFINITIONS.  In this subchapter:
 3-8                 (1)  "Governing board" means:
 3-9                       (A)  the body charged with policy direction of a
3-10     public senior college or university; or
3-11                       (B)  the governing body of a municipality or
3-12     county.
3-13                 (2)  "Public senior college or university" has the
3-14     meaning assigned by Section 61.003.
3-15           Sec. 12.152. AUTHORIZATION.  In accordance with this
3-16     subchapter, a governing board may grant a charter on application of
3-17     an organization that is exempt from taxation under Section
3-18     501(c)(3), Internal Revenue Code of 1986, for a governmental entity
3-19     charter school to operate in a facility of:
3-20                 (1)  a public senior college or university;
3-21                 (2)  a commercial or nonprofit entity; or
3-22                 (3)  a school district, including a home-rule school
3-23     district.
3-24           Sec. 12.153. APPLICABILITY OF CERTAIN PROVISIONS.  Sections
3-25     12.101(c) and (d), 12.102-12.109, 12.111, 12.117, and 12.121-12.123
3-26     apply to a governmental entity charter school as though the
3-27     governmental entity charter school were an open-enrollment charter
3-28     school. Sections 12.110, 12.113-12.116, 12.118, and 12.119 apply to
3-29     a governmental entity charter school as though the governmental
3-30     entity charter school were an open-enrollment charter school,
3-31     except the governing board granting the charter shall assume the
3-32     powers and duties assigned to the State Board of Education under
3-33     those sections.
3-34           Sec. 12.154. FORM OF CHARTER.  A charter for a governmental
3-35     entity charter school must be in the form of a written contract
3-36     signed by the presiding officer of the governing board and the
3-37     chief operating officer of the school.
3-38           Sec. 12.155. CERTAIN FUNDING. (a)  Except as provided by
3-39     Section 12.156, to cover the costs of administration and
3-40     supervision under this subchapter, a public senior college or
3-41     university or municipality or county is entitled to three percent
3-42     of the state funding that is received under Section 12.106 by each
3-43     school to which the college or university or municipality or county
3-44     has granted a charter under this subchapter.
3-45           (b)  The commissioner shall adopt rules as necessary to
3-46     administer this section.
3-47           Sec. 12.156.  SUPERVISION OF GOVERNMENTAL ENTITY CHARTER
3-48     SCHOOLS. (a)  Except as provided by Subsection (b), a governing
3-49     board that grants a charter under this subchapter to a governmental
3-50     entity charter school shall supervise the school and ensure
3-51     compliance with this subchapter in a manner approved by the
3-52     commissioner and the State Board of Education.
3-53           (b)  A governing board that grants a charter under this
3-54     subchapter to a governmental entity charter school may enter into a
3-55     written agreement with the commissioner providing that the
3-56     commissioner must supervise the school and ensure compliance with
3-57     this subchapter.  On signing a written agreement under this
3-58     subsection, the commissioner is entitled to receive any funds under
3-59     Section 12.155 that the public senior college or university or
3-60     municipality or county would otherwise receive for costs related to
3-61     supervising the school and ensuring the school's compliance with
3-62     this subchapter.
3-63           Sec. 12.157. AUTHORITY TO GRANT CHARTER. Notwithstanding
3-64     Section 12.101, a charter for an open-enrollment charter school may
3-65     only be issued under this subchapter.  This section expires
3-66     September 1, 2003.
3-67           SECTION 4. Sections 39.131(a) and (d), Education Code, are
3-68     amended to read as follows:
3-69           (a)  If a district does not satisfy the accreditation
 4-1     criteria, the commissioner shall take any of the following actions,
 4-2     listed in order of severity, to the extent the commissioner
 4-3     determines necessary:
 4-4                 (1)  issue public notice of the deficiency to the board
 4-5     of trustees;
 4-6                 (2)  order a hearing conducted by the board of trustees
 4-7     of the district for the purpose of notifying the public of the
 4-8     unacceptable performance, the improvements in performance expected
 4-9     by the agency, and the sanctions that may be imposed under this
4-10     section if the performance does not improve;
4-11                 (3)  order the preparation of a student achievement
4-12     improvement plan that addresses each academic excellence indicator
4-13     for which the district's performance is unacceptable, the
4-14     submission of the plan to the commissioner for approval, and
4-15     implementation of the plan;
4-16                 (4)  order a hearing to be held before the commissioner
4-17     or the commissioner's designee at which the president of the board
4-18     of trustees of the district and the superintendent shall appear and
4-19     explain the district's low performance, lack of improvement, and
4-20     plans for improvement;
4-21                 (5)  arrange an on-site investigation of the district;
4-22                 (6)  appoint an agency monitor to participate in and
4-23     report to the agency on the activities of the board of trustees or
4-24     the superintendent;
4-25                 (7)  appoint a master to oversee the operations of the
4-26     district;
4-27                 (8)  appoint a management team to direct the operations
4-28     of the district in areas of unacceptable performance or require the
4-29     district to obtain certain services under a contract with another
4-30     person;
4-31                 (9)  if a district has been rated as academically
4-32     unacceptable for a period of one year or more, appoint a board of
4-33     managers [composed of residents of the district] to exercise the
4-34     powers and duties of the board of trustees; or
4-35                 (10)  if a district has been rated as academically
4-36     unacceptable for a period of two years or more:
4-37                       (A)[,]  annex the district to one or more
4-38     adjoining districts under Section 13.054; or
4-39                       (B)  in the case of a home-rule school district
4-40     or open-enrollment charter school, order closure of all programs
4-41     operated under the district's or school's [request the State Board
4-42     of Education to revoke the district's home-rule school district]
4-43     charter.
4-44           (d)  The costs of providing a monitor, master, management
4-45     team, or special campus intervention team shall be paid by the
4-46     district.  If the district fails or refuses to pay the costs in a
4-47     timely manner, the commissioner may:
4-48                 (1)  pay the costs using amounts withheld from any
4-49     funds to which the district is otherwise entitled; or
4-50                 (2)  recover the amount of the costs in the manner
4-51     provided for recovery of an overallocation of state funds under
4-52     Section 42.258.
4-53           SECTION 5. Subchapter C, Chapter 53, Education Code, is
4-54     amended by adding Section 53.351 to read as follows:
4-55           Sec. 53.351.  BONDS FOR OPEN-ENROLLMENT CHARTER SCHOOL
4-56     FACILITIES.  (a)  The Texas Public Finance Authority shall
4-57     establish a nonprofit corporation to issue revenue bonds on behalf
4-58     of authorized open-enrollment charter schools for the acquisition,
4-59     construction, repair, or renovation of educational facilities of
4-60     those schools.
4-61           (b)  The Texas Public Finance Authority shall appoint the
4-62     directors of the corporation in consultation with the commissioner
4-63     of education.  Directors serve without compensation but are
4-64     entitled to reimbursement for travel expenses incurred in attending
4-65     board meetings.  The board shall meet at least once a year.
4-66           (c)  The corporation has all powers granted under the Texas
4-67     Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's
4-68     Texas Civil Statutes) for the purpose of aiding authorized
4-69     open-enrollment charter schools in providing educational
 5-1     facilities.  In addition, Sections 53.131, 53.15, 53.31, 53.32,
 5-2     53.331, 53.34, 53.35, 53.36(a), and 53.37-53.42  apply to and
 5-3     govern the corporation and its procedures and bonds.
 5-4           (d)  The corporation shall adopt rules governing the issuance
 5-5     of bonds on behalf of an authorized open-enrollment charter school.
 5-6           (e)  The comptroller shall establish a fund dedicated to the
 5-7     credit enhancement of bonds issued under this section.  The fund
 5-8     may receive donations.  The obligation of the fund is limited to an
 5-9     amount equal to the balance of the fund.
5-10           (f)  A revenue bond issued under this section is not a debt
5-11     of the state or any state agency, political corporation, or
5-12     political subdivision of the state and is not a pledge of the faith
5-13     and credit of any of these entities.  A revenue bond is payable
5-14     solely from the revenue of the authorized open-enrollment charter
5-15     school on whose behalf the bond is issued.  A revenue bond issued
5-16     under this section must contain on its face a statement to the
5-17     effect that:
5-18                 (1)  neither the state nor a state agency, political
5-19     corporation, or political subdivision of the state is obligated to
5-20     pay the principal of or interest on the bond; and
5-21                 (2)  neither the faith and credit nor the taxing power
5-22     of the state or any state agency, political corporation, or
5-23     political subdivision of the state is pledged to the payment of the
5-24     principal of or interest on the bond.
5-25           SECTION 6. (a)  Section 12.1011, Education Code, is repealed.
5-26           (b)  A charter for an open-enrollment charter school granted
5-27     under the authority of Section 12.1011, Education Code, as that
5-28     section existed before repeal by this Act, is considered to have
5-29     been granted under the authority of Section 12.101, Education Code.
5-30           SECTION 7. This Act prevails over any conflicting Act of the
5-31     77th Legislature, Regular Session, 2001, that amends or repeals a
5-32     provision of Title 2, Education Code, as amended by this Act,
5-33     regardless of the relative dates of enactment.
5-34           SECTION 8. This Act takes effect September 1, 2001.
5-35                                  * * * * *