81R8487 CAS-D

By: Hochberg H.B. No. 2894

A BILL TO BE ENTITLED

AN ACT

relating to additional guarantees 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. ADDITIONAL GUARANTEE FOR BONDS

Sec. 45.251. DEFINITIONS. In this subchapter:

(1) "Board" means the State Board of Education.

(2) "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 guaranteed bonds.

Sec. 45.252. GUARANTEE. (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 guarantee of bonds issued under Subchapter A, including refunding bonds, by money appropriated for the Foundation School Program that may be used for the purpose, other than money that:

(1) is appropriated for the school facilities assistance program under Chapter 46;

(2) is necessary for purposes of Section 46.009(b)(1) or 46.035; or

(3) is appropriated from the available school fund.

(b) School district bonds may not be guaranteed under both Subchapter C and this subchapter.

Sec. 45.253. ELIGIBILITY. To be eligible for approval by the commissioner under this subchapter, bonds must be:

(1) issued in the manner provided by Section 45.054; and

(2) payable from an ad valorem tax under Section 45.003.

Sec. 45.254. USE OF FOUNDATION SCHOOL PROGRAM APPROPRIATIONS AS GUARANTEE. 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 guarantee 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 and certified by the state auditor.

Sec. 45.255. APPLICATION FOR GUARANTEE. (a) A school district seeking the guarantee of eligible bonds 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 the guarantee of eligible bonds may apply simultaneously for a guarantee first under Subchapter C, and then, if that guarantee is rejected, for a guarantee 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 guarantee of the bonds.

Sec. 45.256. INVESTIGATION. (a) Following receipt of an application for the guarantee of bonds, 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 this subchapter, as applicable, the commissioner shall endorse the bonds.

Sec. 45.257. GUARANTEE ENDORSEMENT. (a) The commissioner shall endorse bonds approved for guarantee under this subchapter in the manner provided under Section 45.057 for endorsing bonds approved under Subchapter C.

(b) The guarantee is not effective unless the attorney general approves the bonds under Section 45.005.

Sec. 45.258. NOTICE OF DEFAULT. Immediately following a determination that a school 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, the school district shall notify the commissioner.

Sec. 45.259. PAYMENT FROM GUARANTEE 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 and forward the canceled bond or coupon to the comptroller. The comptroller shall hold the canceled bond or coupon on behalf of the Foundation School Program.

(c) Following full reimbursement to the Foundation School Program, with interest, the comptroller shall further cancel the bond or coupon and forward it to the school district for which payment was made.

(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 in the same manner provided by Section 42.253(h) for a case in which school district entitlements exceed the amount appropriated.

Sec. 45.260. BONDS NOT ACCELERATED ON DEFAULT. If a school district fails to pay principal or interest on a guaranteed bond when the bond matures, other amounts not yet mature are not accelerated and do not become due by virtue of the district's default.

Sec. 45.261. REIMBURSEMENT OF FOUNDATION SCHOOL FUND. (a) If the commissioner orders payment from the money appropriated to the Foundation School Program on behalf of a school district, the commissioner shall direct the comptroller to withhold the amount paid, plus interest, from the first state money payable to the district. The amount withheld shall be deposited to the credit of the foundation school fund.

(b) In accordance with commissioner rules, the commissioner may authorize reimbursement to the foundation school fund with interest 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):

(1) is not considered part of the district's tax rate for purposes of the tax rate limit under Section 45.0031; and

(2) is considered part of the district's:

(A) current debt rate for purposes of computing a rollback tax rate under Section 26.08, Tax Code; and

(B) interest and sinking fund tax rate.

Sec. 45.262. REPEATED DEFAULTS. (a) If a total of two or more payments are made under Subchapter C or this subchapter on the guaranteed bonds of a school district and the commissioner determines that the district is acting in bad faith under the guarantee, 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. The commissioner may adopt rules necessary for the administration of the bond guarantee program under this subchapter.

SECTION 2. Sections 45.053(a), (b), and (c), 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 3. 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 4. Section 45.054, Education Code, is amended to read as follows:

Sec. 45.054. ELIGIBILITY. To be eligible for approval by the commissioner, bonds must be:

(1) issued under Subchapter A of this chapter or under Subchapter A, Chapter 1207, Government Code, to make a deposit under Subchapter B or C of that chapter, by an accredited school district; and

(2) payable from an ad valorem tax under Section 45.003.

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 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 the guarantee of eligible bonds may apply simultaneously first for a guarantee under this subchapter and then, if that guarantee is rejected, for a guarantee 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 guarantee of the bonds [program].

SECTION 6. Section 45.056(b), 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 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. Section 45.062(a), 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, 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 45.001(a), Education Code, is amended to read as follows:

(a) The governing board of an independent school district, including the city council or commission that has jurisdiction over a municipally controlled independent school district, the governing board of a rural high school district, and the commissioners court of a county, on behalf of each common school district under its jurisdiction, may:

(1) issue bonds for:

(A) the construction, acquisition, and equipment of school buildings in the district;

(B) the acquisition of property or the refinancing of property financed under a contract entered under Subchapter A, Chapter 271, Local Government Code, regardless of whether payment obligations under the contract are due in the current year or a future year;

(C) the purchase of the necessary sites for school buildings; and

(D) the purchase of new school buses; and

(2) may levy, pledge, assess, and collect annual ad valorem taxes sufficient to pay:

(A) the principal of and interest on the bonds as the principal and interest become due, subject to Section 45.003; and

(B) any reimbursement under Section 45.061 or 45.261.

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.