By: Hochberg, et al. (Senate Sponsor - Shapiro) H.B. No. 3646

(In the Senate - Received from the House May 13, 2009; May 14, 2009, read first time and referred to Committee on Education; May 23, 2009, reported adversely, with favorable Committee Substitute by the following vote: Yeas 8, Nays 0; May 23, 2009, sent to printer.)

COMMITTEE SUBSTITUTE FOR H.B. No. 3646 By: Shapiro

A BILL TO BE ENTITLED

AN ACT

relating to public school finance.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

ARTICLE 1. PUBLIC SCHOOL FINANCE

SECTION 1.01. Subchapter D, Chapter 12, Education Code, is amended by adding Section 12.1331 to read as follows:

Sec. 12.1331. SALARY INCREASE FOR CERTAIN PROFESSIONAL STAFF. (a) This section applies to a charter holder that on January 1, 2009, operated an open-enrollment charter school.

(b) Beginning with the 2009-2010 school year, each charter holder shall use at least the amount specified in Subsection (c) to increase the salaries of classroom teachers, full-time librarians, full-time counselors, and full-time school nurses employed by the charter holder who would be entitled to the minimum salary under Section 21.402 if employed by a school district.

(c) The amount required to be used in accordance with Subsection (b) is the greater of:

(1) the product of $65 multiplied by the number of students in weighted average daily attendance in the school during the 2009-2010 school year; or

(2) the product of $800 multiplied by the number of classroom teachers, full-time librarians, full-time counselors, and full-time school nurses employed by the charter holder during the 2009-2010 school year who would be entitled to the minimum salary under Section 21.402 if employed by a school district.

(d) A payment under Subsection (b) is in addition to salary the charter holder would otherwise pay the employees during the school year.

SECTION 1.02. Section 19.007, Education Code, is amended by adding Subsection (g) to read as follows:

(g) In addition to other amounts received by the district under this section, the district is entitled to state aid in an amount equal to the greater of:

(1) the product of $65 multiplied by the number of students in weighted average daily attendance in the district during the 2009-2010 school year; or

(2) the product of $800 multiplied by the number of classroom teachers, full-time librarians, full-time counselors certified under Subchapter B, Chapter 21, and full-time school nurses who are employed by the district during the 2009-2010 school year and who would be entitled to a minimum salary under Section 21.402 if employed by a school district operating under Chapter 11.

SECTION 1.03. Section 19.009, Education Code, is amended by adding Subsection (d-2) to read as follows:

(d-2) Beginning with the 2009-2010 school year, the district shall use the amount received by the district under Section 19.007(g) to increase the salaries of classroom teachers, full-time librarians, full-time counselors certified under Subchapter B, Chapter 21, and full-time school nurses who are employed by the district and who would be entitled to a minimum salary under Section 21.402 if employed by a school district operating under Chapter 11. A payment under this subsection is in addition to salary the district would otherwise pay the employees during the school year.

SECTION 1.04. Section 21.402, Education Code, is amended by amending Subsections (a) and (d) and adding Subsections (c-1), (c-2), (c-3), and (c-4) to read as follows:

(a) Except as provided by Subsection (d), (e), or (f), a school district must pay each classroom teacher, full-time librarian, full-time counselor certified under Subchapter B, or full-time school nurse not less than the minimum monthly salary, based on the employee's level of experience in addition to other factors, as determined by commissioner rule, determined by the following formula:

MS = SF x FS

where:

"MS" is the minimum monthly salary;

"SF" is the applicable salary factor specified by Subsection (c); and

"FS" is the amount, as determined by the commissioner under Subsection (b), of state and local funds per weighted student, including funds provided under Section 42.2516 [42.2516(b)(1)(B), but not funds provided under Section 42.2516(b)(1)(A), (b)(1)(C), (b)(2), or (b)(3)], available to a district eligible to receive state assistance under Section 42.302 with a maintenance and operations tax rate per $100 of taxable value equal to the product of the state compression percentage, as determined under Section 42.2516, multiplied by $1.50, except that the amount of state and local funds per weighted student does not include the amount attributable to the increase in the guaranteed level made by Chapter 1187, Acts of the 77th Legislature, Regular Session, 2001.

(c-1) Beginning with the 2009-2010 school year, each school district shall use at least the amount specified in Subsection (c-2) to increase the salaries of classroom teachers, full-time librarians, full-time counselors certified under Subchapter B, and full-time school nurses employed by the district.

(c-2) The amount required to be used in accordance with Subsection (c-1) is the greater of:

(1) the product of $65 multiplied by the number of students in weighted average daily attendance in the district during the 2009-2010 school year; or

(2) the product of $800 multiplied by the number of classroom teachers, full-time librarians, full-time counselors certified under Subchapter B, and full-time school nurses employed by the district during the 2009-2010 school year.

(c-3) An increase in salary under Subsection (c-1) does not include:

(1) any amount an employee would have received for the 2009-2010 school year under the district's salary schedule for the 2008-2009 school year, if that schedule had been in effect for the 2009-2010 school year, including any local supplement the employee would have received in the 2009-2010 school year; or

(2) any part of the salary to which an employee is entitled under Subsection (a).

(c-4) Subsections (c-1), (c-2), and (c-3) and this subsection expire September 1, 2010.

(d) A classroom teacher, full-time librarian, full-time counselor certified under Subchapter B, or full-time school nurse employed by a school district in the 2009-2010 [2006-2007] school year is, as long as the employee is employed by the same district, entitled to a salary that is at least equal to the salary the employee received for the 2009-2010 [2006-2007] school year.

SECTION 1.05. Section 21.415(a), Education Code, is amended to read as follows:

(a) A school district shall provide in employment contracts that qualifying employees may receive an incentive payment under an awards program established under Subchapter [N or] O if the district participates in the program.

SECTION 1.06. Section 21.703(a), Education Code, is amended to read as follows:

(a) Each state fiscal year, the commissioner shall deposit the sum of $1,000 multiplied by the number of classroom teachers in this state to the credit of the educator excellence fund in the general revenue fund. Each state fiscal year, the agency shall use the[:

[(1) not more than $100 million of the funds in the educator excellence fund to provide grant awards under the awards for student achievement program established under Subchapter N; and

[(2) any remaining] funds in the educator excellence fund to provide a qualifying school district a grant in an amount determined by:

(1) [(A)] dividing the amount of [remaining] money available for distribution in the educator excellence fund by the total number of students in average daily attendance in qualifying districts for that fiscal year; and

(2) [(B)] multiplying the amount determined under Subdivision (1) [Paragraph (A)] by the number of students in average daily attendance in the district.

SECTION 1.07. Section 21.706(a), Education Code, is amended to read as follows:

(a) Using funds from the educator excellence fund created under Section 21.703, the agency shall conduct or contract with another entity to conduct a comprehensive evaluation of the [awards for student achievement program established under Subchapter N and the educator excellence awards] program [established under this subchapter]. The evaluation must include:

(1) a descriptive analysis of the design and implementation of the [awards for student achievement program and the educator excellence awards] program at participating campuses or school districts, including detailed descriptions of the models and approaches used by the campuses or districts in distributing incentive awards to classroom teachers;

(2) detailed information regarding the distribution of incentive awards to classroom teachers under the [awards for student achievement program and the educator excellence awards] program, including the measurements used by the campuses or districts in determining the amounts of incentive awards to distribute to classroom teachers;

(3) a comprehensive, quantitative analysis of the impact of the [awards for student achievement program and the educator excellence awards] program at participating campuses or districts, including the impact of the various incentive award distribution models used by the campuses or districts on key outcomes in the program [programs]; and

(4) a summary of the approaches used by participating campuses or districts in distributing grant funds that are not specifically designated for distribution as incentive awards for classroom teachers and an assessment of whether those funds are used effectively by the participating campuses or districts.

SECTION 1.08. The heading to Section 39.114, Education Code, is amended to read as follows:

Sec. 39.114. USE OF HIGH SCHOOL ALLOTMENT.

SECTION 1.09. Sections 39.114(a), (b), and (d), Education Code, are amended to read as follows:

(a) Except as provided by Subsection (b), a school district or campus must use funds allocated under Section 42.160 [42.2516(b)(3)] to:

(1) implement or administer a college readiness program that provides academic support and instruction to prepare underachieving students for entrance into an institution of higher education;

(2) implement or administer a program that encourages students to pursue advanced academic opportunities, including early college high school programs and dual credit, advanced placement, and international baccalaureate courses;

(3) implement or administer a program that provides opportunities for students to take academically rigorous course work, including four years of mathematics and four years of science at the high school level;

(4) implement or administer a program, including online course support and professional development, that aligns the curriculum for grades six through 12 with postsecondary curriculum and expectations; or

(5) implement or administer other high school completion and success initiatives in grades six through 12 approved by the commissioner.

(b) A school district may use funds allocated under Section 42.160 [42.2516(b)(3)] on any instructional program in grades six through 12 other than an athletic program if:

(1) the district is recognized as exceptional by the commissioner under the academic accountability indicator adopted under Section 39.051(b)(13); and

(2) the district's completion rates for grades nine through 12 meet or exceed completion rate standards required by the commissioner to achieve a rating of exemplary under Section 39.072.

(d) The commissioner shall adopt rules to administer this section[, including rules related to the permissible use of funds allocated under this section to an open-enrollment charter school].

SECTION 1.10. Section 41.002(a), Education Code, is amended to read as follows:

(a) A school district may not have a wealth per student that exceeds:

(1) $470,000 [the wealth per student that generates the amount of maintenance and operations tax revenue per weighted student available to a district at the 88th percentile in wealth per student], for the district's maintenance and operations tax effort equal to or less than the rate equal to the product of the state compression percentage, as determined under Section 42.2516, multiplied by the maintenance and operations tax rate adopted by the district for the 2005 tax year;

(2) the wealth per student that generates the amount of maintenance and operations tax revenue per weighted student available to the Austin Independent School District, as determined by the commissioner in cooperation with the Legislative Budget Board, for the first six cents by which the district's maintenance and operations tax rate exceeds the rate equal to the product of the state compression percentage, as determined under Section 42.2516, multiplied by the maintenance and operations tax rate adopted by the district for the 2005 tax year, subject to Section 41.093(b-1); or

(3) $319,500, for the district's maintenance and operations tax effort that exceeds the first six cents by which the district's maintenance and operations tax effort exceeds the rate equal to the product of the state compression percentage, as determined under Section 42.2516, multiplied by the maintenance and operations tax rate adopted by the district for the 2005 tax year.

SECTION 1.11. Section 41.093(b-1), Education Code, is amended to read as follows:

(b-1) If the guaranteed level of state and local funds per weighted student per cent of tax effort under Section 42.302(a-1)(1) [42.302(a-1)(2)] for which state funds are appropriated for a school year is an amount at least equal to the amount of revenue per weighted student per cent of tax effort available to the Austin Independent School District, as determined by the commissioner in cooperation with the Legislative Budget Board, the commissioner, in computing the amounts described by Subsections (a)(1) and (2) and determining the cost of an attendance credit, shall exclude maintenance and operations tax revenue resulting from the first six cents by which a district's maintenance and operations tax rate exceeds the rate equal to the product of the state compression percentage, as determined under Section 42.2516, multiplied by the maintenance and operations tax rate adopted by the district for the 2005 tax year.

SECTION 1.12. Subchapter A, Chapter 42, Education Code, is amended by adding Section 42.008 to read as follows:

Sec. 42.008. LIMITATION ON REVENUE INCREASES. (a) Notwithstanding any other provision of this title, a school district is not entitled in any school year to receive an amount of state and local maintenance and operations revenue per student in weighted average daily attendance that exceeds by more than six percent the amount of state and local maintenance and operations revenue per student in weighted average daily attendance received by the district during the preceding school year.

(a-1) Subsection (a) applies beginning with the 2010-2011 school year. For the 2009-2010 school year, a school district is not entitled to receive an amount of state and local maintenance and operations revenue per student in weighted average daily attendance that exceeds by more than six percent the amount of state and local maintenance and operations revenue per student in weighted average daily attendance that the district would have received during that year under Chapter 41 and this chapter, as those chapters existed on January 1, 2009, at a maintenance and operations tax rate equal to the product of the state compression percentage for that year, as determined under Section 42.2516, multiplied by the maintenance and operations tax rate adopted by the district for the 2005 tax year. This subsection expires September 1, 2010.

(b) Enrichment revenue to which a school district is entitled under Section 42.302 is not included for purposes of determining the limitation imposed by this section.

(c) The commissioner shall make adjustments to amounts due to a school district under this chapter or amounts required for a district to comply with Chapter 41 as necessary to comply with the limitation imposed by this section.

(d) A determination by the commissioner under this section is final and may not be appealed.

SECTION 1.13. Section 42.101, Education Code, is amended to read as follows:

Sec. 42.101. BASIC ALLOTMENT. (a) For each student in average daily attendance, not including the time students spend each day in special education programs in an instructional arrangement other than mainstream or career and technology education programs, for which an additional allotment is made under Subchapter C, a district is entitled to an allotment [in an amount] equal to the lesser of $4,700 or the amount that results from the following formula:

A = $4,700 X (DCR/MCR)

where:

"A" is the allotment to which a district is entitled;

"DCR" is the district's compressed tax rate, which is the product of the state compression percentage, as determined under Section 42.2516, multiplied by the maintenance and operations tax rate adopted by the district for the 2005 tax year; and

"MCR" is the state maximum compressed tax rate, which is the product of the state compression percentage, as determined under Section 42.2516, multiplied by $1.50 [product of the amount per student per cent of tax effort available to a district at the percentile in wealth per student specified by Section 42.302(a-1)(1), multiplied by 86].

(b) A greater amount for any school year may be provided by appropriation.

SECTION 1.14. Section 42.106, Education Code, is amended to read as follows:

Sec. 42.106. TUITION ALLOTMENT [ADJUSTED PROPERTY VALUE] FOR DISTRICTS NOT OFFERING ALL GRADE LEVELS. A [For purposes of this chapter, the taxable value of property of a] school district that contracts for students residing in the district to be educated in another district under Section 25.039(a) is entitled to receive an allotment equal to [adjusted by applying the formula:

[ADPV = DPV - (TN/.015)

[where:

["ADPV" is the district's adjusted taxable value of property;

["DPV" is the taxable value of property in the district for the preceding tax year determined under Subchapter M, Chapter 403, Government Code; and

["TN" is] the total amount of tuition required to be paid by the district under Section 25.039 [for the school year for which the adjustment is made], not to exceed the amount specified by commissioner rule under Section 25.039(b).

SECTION 1.15. Section 42.152(c), Education Code, is amended to read as follows:

(c) Funds allocated under this section shall be used to fund supplemental programs and services designed to eliminate any disparity in performance on assessment instruments administered under Subchapter B, Chapter 39, or disparity in the rates of high school completion between students at risk of dropping out of school, as defined by Section 29.081, and all other students. Specifically, the funds, other than an indirect cost allotment established under State Board of Education rule, which may not exceed 45 [15] percent, may be used to meet the costs of providing a compensatory, intensive, or accelerated instruction program under Section 29.081 or an alternative education program established under Section 37.008 or to support a program eligible under Title I of the Elementary and Secondary Education Act of 1965, as provided by Pub. L. No. 103-382 and its subsequent amendments, and by federal regulations implementing that Act, at a campus at which at least 40 percent of the students are educationally disadvantaged. In meeting the costs of providing a compensatory, intensive, or accelerated instruction program under Section 29.081, a district's compensatory education allotment shall be used for costs supplementary to the regular education program, such as costs for program and student evaluation, instructional materials and equipment and other supplies required for quality instruction, supplemental staff expenses, salary for teachers of at-risk students, smaller class size, and individualized instruction. A home-rule school district or an open-enrollment charter school must use funds allocated under Subsection (a) for a purpose authorized in this subsection but is not otherwise subject to Subchapter C, Chapter 29. Notwithstanding any other provisions of this section:

(1) to ensure that a sufficient amount of the funds allotted under this section are available to supplement instructional programs and services, no more than 18 percent of the funds allotted under this section may be used to fund disciplinary alternative education programs established under Section 37.008;

(2) the commissioner may waive the limitations of Subdivision (1) upon an annual petition, by a district's board and a district's site-based decision making committee, presenting the reason for the need to spend supplemental compensatory education funds on disciplinary alternative education programs under Section 37.008, provided that:

(A) the district in its petition reports the number of students in each grade level, by demographic subgroup, not making satisfactory progress under the state's assessment system; and

(B) the commissioner makes the waiver request information available annually to the public on the agency's website; and

(3) for purposes of this subsection, a program specifically designed to serve students at risk of dropping out of school, as defined by Section 29.081, is considered to be a program supplemental to the regular education program, and a district may use its compensatory education allotment for such a program.

SECTION 1.16. Section 42.154(a), Education Code, is amended to read as follows:

(a) For each full-time equivalent student in average daily attendance in an approved career and technology education program in grades nine through 12 or in career and technology education programs for students with disabilities in grades seven through 12, a district is entitled to:

(1) an annual allotment equal to the adjusted basic allotment multiplied by a weight of 1.35; and

(2) $50, if the student is enrolled in:

(A) two or more advanced career and technology education classes for a total of three or more credits; or

(B) an advanced course as part of a tech-prep program under Subchapter T, Chapter 61.

SECTION 1.17. Subchapter C, Chapter 42, Education Code, is amended by adding Section 42.1541 to read as follows:

Sec. 42.1541. INDIRECT COST ALLOTMENTS. (a) The State Board of Education shall by rule increase the indirect cost allotments established under Sections 42.151(h), 42.152(c), 42.153(b), and 42.154(a-1) and (c) and in effect for the 2008-2009 school year as necessary to reflect the increased percentage of total maintenance and operations funding represented by the basic allotment under Section 42.101 as a result of amendment of that section by H.B. No. 3646, Acts of the 81st Legislature, Regular Session, 2009.

(b) The board shall take the action required by Subsection (a) not later than the date that permits the increased indirect cost allotments to apply beginning with the 2009-2010 school year.

(c) This section expires September 1, 2010.

SECTION 1.18. Subchapter C, Chapter 42, Education Code, is amended by adding Section 42.160 to read as follows:

Sec. 42.160. HIGH SCHOOL ALLOTMENT. (a) A school district is entitled to an annual allotment of $275 for each student in average daily attendance in grades 9 through 12 in the district.

(b) A school district that is required to take action under Chapter 41 to reduce its wealth per student to the equalized wealth level is entitled to a credit, in the amount of the allotments to which the district is entitled under this section, against the total amount required under Section 41.093 for the district to purchase attendance credits. A school district that is otherwise ineligible for state aid under this chapter is entitled to receive allotments under this section.

(c) An open-enrollment charter school is entitled to an allotment under this section in the same manner as a school district.

(d) The commissioner shall adopt rules to administer this section, including rules related to the permissible use of funds allocated under this section to an open-enrollment charter school.

SECTION 1.19. Section 42.2516, Education Code, is amended to read as follows:

Sec. 42.2516. ADDITIONAL STATE AID FOR TAX REDUCTION. (a) In this section, "state compression percentage" means the percentage, as determined by the commissioner, of a school district's adopted maintenance and operations tax rate for the 2005 tax year that serves as the basis for state funding for tax rate reduction under this section. The commissioner shall determine the state compression percentage for each school year based on the percentage by which a district is able to reduce the district's maintenance and operations tax rate for that year, as compared to the district's adopted maintenance and operations tax rate for the 2005 tax year, as a result of state funds appropriated for distribution under this section for that year from the property tax relief fund established under Section 403.109, Government Code, or from another funding source available for school district property tax relief.

(b) Notwithstanding any other provision of this title, a school district that imposes a maintenance and operations tax at a rate at least equal to the product of the state compression percentage multiplied by the maintenance and operations tax rate adopted by the district for the 2005 tax year is entitled to at least the amount of state revenue necessary to provide the district with the sum of:

(1) as calculated under Subsection (e), the amount of state and local revenue per student in weighted average daily attendance for maintenance and operations that the district would have received during the 2009-2010 school year under Chapter 41 and this chapter, as those chapters existed on January 1, 2009, at a maintenance and operations tax rate equal to the product of the state compression percentage for that year multiplied by the maintenance and operations tax rate adopted by the district for the 2005 tax year;

(2) an amount equal to the product of $135 multiplied by the number of students in weighted average daily attendance in the district;

(3) an amount equal to the amount the district is required to pay into the tax increment fund for a reinvestment zone under Section 311.013(n), Tax Code, in the current tax year; and

(4) any amount to which the district is entitled under Section 42.106.

(c) Enrichment revenue to which a school district is entitled under Section 42.302 is not included for purposes of determining the amount to which a district is entitled under this section.

(d) In determining the amount to which a district is entitled under Subsection (b)(1), the commissioner shall:

(1) include any amounts received by the district during the 2008-2009 school year under Rider 86, page III-23, Chapter 1428 (H.B. 1), Acts of the 80th Legislature, Regular Session, 2007 (the General Appropriations Act); and

(2) for a school district that paid tuition under Section 25.039 during the 2008-2009 school year, reduce the amount to which the district is entitled by the amount of tuition paid during that school year.

(e) For purposes of determining the total amount of state and local revenue to which a district is entitled under Subsection (b)(1), the commissioner shall determine the amount of state and local revenue per student in weighted average daily attendance to which the district would have been entitled during the 2009-2010 school year under Chapter 41 and this chapter, as they existed on January 1, 2009, and multiply that amount by the number of students in weighted average daily attendance as determined in accordance with the changes to Chapter 41 and this chapter, including the repeal of former Section 42.103(e), made by H.B. No. 3646, Acts of the 81st Legislature, Regular Session, 2009.

(f) A school district that is required to take action under Chapter 41 to reduce its wealth per student to the equalized wealth level and that is entitled to state revenue under this section may receive that revenue through an adjustment against the total amount of attendance credits required to be purchased under Subchapter D, Chapter 41, or the total number of nonresident students required to be educated under Subchapter E, Chapter 41, as determined by the commissioner.

(g) The commissioner may adopt rules necessary to implement this section.

(h) A determination by the commissioner under this section is final and may not be appealed.

[(a-1) Subsection (a) applies beginning with the state fiscal year ending August 31, 2009. For the state fiscal year ending August 31, 2007, the state compression percentage is 88.67 percent. For the state fiscal year ending August 31, 2008, the state compression percentage is 66.67 percent. This subsection expires September 1, 2009.

[(b) Subject to Subsections (b-1), (b-2), (f-1), (g), and (h), but notwithstanding any other provision of this title, a school district is entitled to state revenue necessary to provide the district with the sum of:

[(1) the amount of state revenue necessary to maintain state and local revenue per student in weighted average daily attendance in the amount equal to the greater of:

[(A) the amount of state and local revenue per student in weighted average daily attendance for the maintenance and operations of the district available to the district for the 2005-2006 school year;

[(B) the amount of state and local revenue per student in weighted average daily attendance for the maintenance and operations of the district to which the district would have been entitled for the 2006-2007 school year under this chapter, as it existed on January 1, 2006, or, if the district would have been subject to Chapter 41, as that chapter existed on January 1, 2006, the amount to which the district would have been entitled under that chapter, based on the funding elements in effect for the 2005-2006 school year, if the district imposed a maintenance and operations tax at the rate adopted by the district for the 2005 tax year; or

[(C) the amount of state and local revenue per student in weighted average daily attendance for the maintenance and operations of the district to which the district would have been entitled for the 2006-2007 school year under this chapter, as it existed on January 1, 2006, or, if the district would have been subject to Chapter 41, as that chapter existed on January 1, 2006, the amount to which the district would have been entitled under that chapter, based on the funding elements in effect for the 2005-2006 school year, if the district imposed a maintenance and operations tax at the rate equal to the rate described by Section 26.08(i) or (k)(1), Tax Code, as applicable, for the 2006 tax year;

[(2) an amount equal to the product of $2,500 multiplied by the number of classroom teachers, full-time librarians, full-time counselors certified under Subchapter B, Chapter 21, and full-time school nurses employed by the district and entitled to a minimum salary under Section 21.402; and

[(3) an amount equal to the product of $275 multiplied by the number of students in average daily attendance in grades nine through 12 in the district.

[(b-1) The amount determined for a school district under Subsection (b) is increased or reduced as follows:

[(1) if for any school year the district is entitled to a greater allotment under Section 42.158 than the allotment to which the district was entitled under that section for the school year on which the district's entitlement under Subsection (b) is based, the district's entitlement under Subsection (b) is increased by an amount equal to the difference between the amount to which the district is entitled under Section 42.158 for that school year and the amount to which the district was entitled under that section for:

[(A) the 2005-2006 school year, if the amount determined for the district under Subsection (b) is determined under Subsection (b)(1)(A); or

[(B) the 2006-2007 school year, if the amount determined for the district under Subsection (b) is determined under Subsection (b)(1)(B) or (C); and

[(2) if for any school year the district is not entitled to an allotment under Section 42.158 or is entitled to a lesser allotment under that section than the allotment to which the district was entitled under that section for the school year on which the district's entitlement under Subsection (b) is based, the district's entitlement under Subsection (b) is reduced by an amount equal to the difference between the amount to which the district was entitled under Section 42.158 for the 2005-2006 or 2006-2007 school year, as appropriate based on whether the district's entitlement under Subsection (b) is determined under Subsection (b)(1)(A), (B), or (C), and the amount to which the district is entitled under Section 42.158 for the current school year.

[(b-2) The amount determined for a school district under Subsection (b) is increased or reduced as follows:

[(1) if for any school year the district is entitled to a greater allotment under Section 42.155 or greater additional state aid under Section 42.2515 than the allotment or additional state aid to which the district was entitled under Section 42.155 or 42.2515, as applicable, for the school year on which the district's entitlement under Subsection (b) is based, the district's entitlement under Subsection (b) is increased by an amount equal to the difference between the amount to which the district is entitled under Section 42.155 or 42.2515, as applicable, for that school year and the amount to which the district was entitled under the applicable section, as applicable for:

[(A) the 2005-2006 school year, if the amount determined for the district under Subsection (b) is determined under Subsection (b)(1)(A); or

[(B) the 2006-2007 school year, if the amount determined for the district under Subsection (b) is determined under Subsection (b)(1)(B) or (C); and

[(2) if for any school year the district is not entitled to an allotment under Section 42.155 or additional state aid under Section 42.2515 or is entitled to a lesser allotment or less additional state aid under the applicable section than the allotment or additional state aid to which the district was entitled under the applicable section for the school year on which the district's entitlement under Subsection (b) is based, the district's entitlement under Subsection (b) is reduced by an amount equal to the difference between the amount to which the district was entitled under Section 42.155 or 42.2515, as applicable, for the 2005-2006 or 2006-2007 school year, as appropriate based on whether the district's entitlement under Subsection (b) is determined under Subsection (b)(1)(A), (B), or (C), and the amount to which the district is entitled under the applicable section for the current school year.

[(c) In determining the amount to which a district is entitled under Subsection (b)(1), the commissioner shall include:

[(1) any amounts described by Rider 69, page III-19, Chapter 1369, Acts of the 79th Legislature, Regular Session, 2005 (the General Appropriations Act);

[(2) for a school district that received additional revenue for the 2005-2006 school year as a result of an agreement under Subchapter E, Chapter 41:

[(A) if the amount of state revenue to which the district is entitled under Subsection (b) is computed based on the amount described by Subsection (b)(1)(A), the amount of that additional revenue retained by the district for the 2005-2006 school year, which is the amount by which the total maintenance and operations revenue available to the district for that school year exceeded the total maintenance and operations revenue that would have been available to the district for that school year if the district had not entered into the agreement, less any amount the district paid to another entity under the agreement; or

[(B) if the amount of state revenue to which the district is entitled under Subsection (b) is computed based on the amount described by Subsection (b)(1)(B) or (C), the amount of the additional revenue that would have been retained by the district for the 2006-2007 school year if the district had entered into the agreement on the same terms as under the agreement for the 2005-2006 school year, which is the amount by which the total maintenance and operations revenue that would have been available to the district for the 2006-2007 school year if the district had entered into the agreement exceeds the total maintenance and operations revenue that would have been available to the district for that school year if the district had not entered into the agreement and had imposed a maintenance and operations tax at the rate of $1.50 on the $100 valuation of taxable property, less any amount the district would have paid to another entity under the agreement;

[(3) any amount necessary to reflect an adjustment made by the commissioner under Section 42.005;

[(4) any amount necessary to reflect an adjustment made by the commissioner under Section 42.2521; and

[(5) any amount necessary to reflect an adjustment made by the commissioner under Section 42.2531.

[(d) If, for the 2006-2007 or a subsequent school year, a school district enters into an agreement under Subchapter E, Chapter 41, the commissioner shall reduce the amount of state revenue to which the district is entitled under Subsection (b) for that school year by an amount equal to any additional revenue for that school year that the district receives and retains as a result of that agreement, which is the amount by which the total maintenance and operations revenue available to the district exceeds the total maintenance and operations revenue that would have been available to the district if the district had not entered into the agreement and had imposed a maintenance and operations tax at the maximum rate permitted under Section 45.003(d), less any amount the district pays to another entity under the agreement.

[(e) The amount of revenue to which a school district is entitled because of the technology allotment under Section 32.005 is not included in making a determination under Subsection (b)(1).

[(f) For purposes of determining the amount of revenue to which a school district is entitled under this section, the commissioner shall use the average tax collection rate for the district for the 2003, 2004, and 2005 tax years.

[(f-1) The commissioner shall, in accordance with rules adopted by the commissioner, adjust the amount of a school district's local revenue derived from maintenance and operations tax collections, as calculated for purposes of determining the amount of state revenue to which the district is entitled under this section, if the district, for the 2007 tax year or a subsequent tax year:

[(1) adopts an exemption under Section 11.13(n), Tax Code, that was not in effect for the 2005 or 2006 tax year, or eliminates an exemption under Section 11.13(n), Tax Code, that was in effect for the 2005 or 2006 tax year;

[(2) adopts an exemption under Section 11.13(n), Tax Code, at a greater or lesser percentage than the percentage in effect for the district for the 2005 or 2006 tax year;

[(3) grants an exemption under an agreement authorized by Chapter 312, Tax Code, that was not in effect for the 2005 or 2006 tax year, or ceases to grant an exemption authorized by that chapter that was in effect for the 2005 or 2006 tax year; or

[(4) agrees to deposit taxes into a tax increment fund created under Chapter 311, Tax Code, under a reinvestment zone financing plan that was not in effect for the 2005 or 2006 tax year, or ceases depositing taxes into a tax increment fund created under that chapter under a reinvestment zone financing plan that was in effect for the 2005 or 2006 tax year.

[(f-2) The rules adopted by the commissioner under Subsection (f-1) must:

[(1) require the commissioner to determine, as if this section did not exist, the effect under Chapter 41 and this chapter of a school district's action described by Subsection (f-1)(1), (2), (3), or (4) on the total state revenue to which the district would be entitled or the cost to the district of purchasing sufficient attendance credits to reduce the district's wealth per student to the equalized wealth level; and

[(2) require an increase or reduction in the amount of state revenue to which a school district is entitled under Subsection (b) that is substantially equivalent to any change in total state revenue or the cost of purchasing attendance credits that would apply to the district if this section did not exist.

[(f-3) An adjustment made by the commissioner under the rules adopted under Subsection (f-1) is final and may not be appealed.

[(g) If a school district adopts a maintenance and operations tax rate that is below the rate equal to the product of the state compression percentage multiplied by the maintenance and operations tax rate adopted by the district for the 2005 tax year, the commissioner shall reduce the district's entitlement under this section in proportion to the amount by which the adopted rate is less than the rate equal to the product of the state compression percentage multiplied by the rate adopted by the district for the 2005 tax year.

[(h) Notwithstanding any other provision of this title, if the amount of state and local revenue per student in weighted average daily attendance for the maintenance and operations of the district available to the district in a school year as a result of increases to the equalized wealth level under Section 41.002, the basic allotment under Section 42.101, and the guaranteed level under Section 42.302 made by H.B. No. 1, Acts of the 79th Legislature, 3rd Called Session, 2006, exceeds the amount to which a district is entitled under Subsection (b) for that school year, the commissioner must:

[(1) reduce the amount of state aid provided to the district for that school year by an amount equal to the excess revenue, as determined by the commissioner; or

[(2) for a district with a wealth per student greater than the applicable amount described by Section 41.002(a), require the district to purchase a number of attendance credits for that school year at a cost equal to the amount of excess revenue, as determined by the commissioner.

[(i) A school district that is required to take action under Chapter 41 to reduce its wealth per student to the equalized wealth level and that is entitled to state revenue under this section may receive that revenue through an adjustment against the total amount of attendance credits required to be purchased under Subchapter D, Chapter 41, or the total number of nonresident students required to be educated under Subchapter E, Chapter 41, as determined by the commissioner.

[(j) If a school district reduces its maintenance and operations tax rate by an amount less than the rate equal to the product of the difference between the state compression percentage for the preceding year and the state compression percentage for the year of the reduction, multiplied by the maintenance and operations tax rate adopted by the district for the 2005 tax year, the commissioner may not reduce the amount to which the district is entitled under this section on the basis of the additional revenue collected by the district.

[(k) The commissioner may adopt rules necessary to administer this section.

[(l) A determination by the commissioner under this section is final and may not be appealed.]

SECTION 1.20. Section 42.252(a), Education Code, is amended to read as follows:

(a) Each school district's share of the Foundation School Program is determined by the following formula:

LFA = TR X DPV

where:

"LFA" is the school district's local share;

"TR" is a tax rate which for each hundred dollars of valuation is an effective tax rate of the amount equal to the product of the state compression percentage, as determined under Section 42.2516, multiplied by the lesser of:

(1) $1.50; or

(2) the maintenance and operations tax rate adopted by the district for the 2005 tax year [$0.86]; and

"DPV" is the taxable value of property in the school district for the preceding tax year determined under Subchapter M, Chapter 403, Government Code.

SECTION 1.21. Section 42.253, Education Code, is amended by adding Subsection (c-1) to read as follows:

(c-1) The amounts to be paid under Section 42.2516(b)(3) shall be paid at the same time as other state revenue is paid to the district. Payments shall be based on amounts paid under Section 42.2516(b)(3) for the preceding year. Any deficiency shall be paid to the district at the same time the final amount to be paid to the district is determined, and any overpayment shall be deducted from the payments the district would otherwise receive in the following year.

SECTION 1.22. Section 42.260(a), Education Code, is amended to read as follows:

(a) In this section, "participating charter school" means an open-enrollment charter school that participates in the uniform group coverage program established under Chapter 1579, Insurance Code [has the meaning assigned by Section 42.2514].

SECTION 1.23. Sections 42.302(a), (a-1), and (a-2), Education Code, are amended to read as follows:

(a) Each school district is guaranteed a specified amount per weighted student in state and local funds for each cent of tax effort over that required for the district's local fund assignment up to the maximum level specified in this subchapter. The amount of state support, subject only to the maximum amount under Section 42.303, is determined by the formula:

GYA = (GL X WADA X DTR X 100) - LR

where:

"GYA" is the guaranteed yield amount of state funds to be allocated to the district;

"GL" is the dollar amount guaranteed level of state and local funds per weighted student per cent of tax effort, which is an amount described by Subsection (a-1) or a greater amount for any year provided by appropriation;

"WADA" is the number of students in weighted average daily attendance, which is calculated by dividing the sum of the school district's allotments under Subchapters B and C, less any allotment to the district for transportation, any allotment under Section 42.158 or 42.160, and 50 percent of the adjustment under Section 42.102, by the basic allotment for the applicable year;

"DTR" is the district enrichment tax rate of the school district, which is determined by subtracting the amounts specified by Subsection (b) from the total amount of maintenance and operations taxes collected by the school district for the applicable school year and dividing the difference by the quotient of the district's taxable value of property as determined under Subchapter M, Chapter 403, Government Code, or, if applicable, under Section 42.2521, divided by 100; and

"LR" is the local revenue, which is determined by multiplying "DTR" by the quotient of the district's taxable value of property as determined under Subchapter M, Chapter 403, Government Code, or, if applicable, under Section 42.2521, divided by 100.

(a-1) In this section, "wealth per student" has the meaning assigned by Section 41.001. For purposes of Subsection (a), the dollar amount guaranteed level of state and local funds per weighted student per cent of tax effort ("GL") for a school district is:

(1) the greater of [the amount of district tax revenue per weighted student per cent of tax effort available to a district at the 88th percentile in wealth per student, as determined by the commissioner in cooperation with the Legislative Budget Board, for the district's maintenance and operations tax effort equal to or less than the rate equal to the product of the state compression percentage, as determined under Section 42.2516, multiplied by the maintenance and operations tax rate adopted by the district for the 2005 tax year;

[(2)] the amount of district tax revenue per weighted student per cent of tax effort that would be available to the Austin Independent School District, as determined by the commissioner in cooperation with the Legislative Budget Board, if the reduction of the limitation on tax increases as provided by Section 11.26(a-1), (a-2), or (a-3), Tax Code, did not apply, or the amount of district tax revenue per weighted student per cent of tax effort used for purposes of this subdivision in the preceding school year, for the first six cents by which the district's maintenance and operations tax rate exceeds the rate equal to the product of the state compression percentage, as determined under Section 42.2516 [and notwithstanding the limitation on district enrichment tax rate ("DTR") under Section 42.303], multiplied by the maintenance and operations tax rate adopted by the district for the 2005 tax year; and

(2) [(3)] $31.95, for the district's maintenance and operations tax effort that exceeds the amount of tax effort described by Subdivision (1) [(2)].

(a-2) The limitation on district enrichment tax rate ("DTR") under Section 42.303 does not apply to the district's maintenance and operations tax effort described by Subsection (a-1)(1) [(a-1)(2)].

SECTION 1.24. Section 42.303, Education Code, is amended to read as follows:

Sec. 42.303. LIMITATION ON ENRICHMENT TAX RATE. The district enrichment tax rate ("DTR") under Section 42.302 may not exceed the amount per $100 of valuation by which the maximum rate permitted under Section 45.003 exceeds the rate used to determine the district's local share under Section 42.252 [of $0.86], or a greater amount for any year provided by appropriation.

SECTION 1.25. Chapter 42, Education Code, is amended by adding Subchapter I to read as follows:

SUBCHAPTER I. COMPREHENSIVE REVIEW OF PUBLIC SCHOOL FINANCE

WEIGHTS AND ADJUSTMENTS

Sec. 42.451. SELECT COMMITTEE ON PUBLIC SCHOOL FINANCE WEIGHTS AND ADJUSTMENTS. (a) The Select Committee on Public School Finance Weights and Adjustments is established to conduct a comprehensive review of weights and adjustments under the public school finance system.

(b) The committee is composed of 15 members appointed as follows:

(1) two members of the senate, appointed by the lieutenant governor;

(2) two members of the house of representatives, appointed by the speaker of the house of representatives;

(3) the commissioner of education;

(4) one public school teacher, one public school principal, and one public school district superintendent, each currently employed in this state and each appointed jointly by the lieutenant governor and the speaker of the house of representatives;

(5) two persons, each of whom is currently employed as an educator in a public school in this state and each appointed jointly by the lieutenant governor and the speaker of the house of representatives;

(6) one representative from the business community or the public, appointed by the lieutenant governor;

(7) one representative from the business community or the public, appointed by the speaker of the house of representatives; and

(8) three representatives from the business community or the public, at least one of whom has one or more children who currently attend public school in this state, appointed by the governor.

(c) The governor, lieutenant governor, and speaker of the house of representatives shall make the appointments required by Subsection (b) in a timely fashion to permit the committee to comply with Section 42.452(a).

Sec. 42.452. COMMITTEE MEETINGS. (a) Not later than October 1, 2009, the committee shall hold an organizational meeting.

(b) The lieutenant governor and speaker of the house of representatives shall each appoint a committee member to serve as co-chair.

(c) Committee meetings shall be held at the call of the co-chairs.

Sec. 42.453. COMPENSATION AND REIMBURSEMENT. (a) A member of the committee is entitled to reimbursement for actual and necessary expenses incurred in performing committee duties.

(b) A legislative member of the committee is entitled to reimbursement from the appropriate fund of the house of the legislature in which the member serves.

(c) A member other than a legislative member is entitled to reimbursement from funds appropriated to the committee.

Sec. 42.454. COMMITTEE STAFF. (a) The co-chairs of the committee may appoint a committee director and staff to support the work of the committee.

(b) The director and staff members are employees of the Texas Legislative Council and shall be paid from funds appropriated to the council for the committee's operations.

(c) The committee may contract with one or more consultants if necessary to enable the committee to perform its duties under this subchapter.

Sec. 42.455. CONDUCT OF REVIEW. (a) The committee shall conduct public hearings throughout the state and solicit testimony about the weights and adjustments under the finance system from parents of public school children and other interested persons. At least one public hearing must be held at a public school during a time that public school students are able to attend the hearing.

(b) The commissioner shall ensure that the committee has access to any documentation and agency personnel the committee requests.

(c) The Legislative Budget Board, the comptroller, the state auditor, and any other state agency, official, or personnel shall cooperate with the committee in carrying out its duties under this subchapter.

(d) The committee may coordinate the review under this subchapter with any other legislative study, as appropriate.

Sec. 42.456. REPORT. (a) Not later than December 1, 2010, the committee shall provide a report that:

(1) states the findings of the review conducted under this subchapter; and

(2) includes any recommendations for statutory changes.

(b) The report must be approved by a majority of the committee members. A member who disagrees with any part of the report may attach a dissenting statement to the report.

Sec. 42.457. EXPIRATION. This subchapter expires January 11, 2011.

SECTION 1.26. Section 46.033, Education Code, is amended to read as follows:

Sec. 46.033. ELIGIBLE BONDS. Bonds, including bonds issued under Section 45.006, are eligible to be paid with state and local funds under this subchapter if:

(1) the district made payments on the bonds during the final [2006-2007] school year of the preceding state fiscal biennium or taxes levied to pay the principal of and interest on the bonds were included in the district's audited debt service collections for that school year; and

(2) the district does not receive state assistance under Subchapter A for payment of the principal and interest on the bonds.

SECTION 1.27. Section 46.034(c), Education Code, is amended to read as follows:

(c) If the amount required to pay the principal of and interest on eligible bonds in a school year is less than the amount of payments made by the district on the bonds during the final [2006-2007] school year of the preceding state fiscal biennium or the district's audited debt service collections for that school year, the district may not receive aid in excess of the amount that, when added to the district's local revenue for the school year, equals the amount required to pay the principal of and interest on the bonds.

SECTION 1.28. Sections 403.302(d), (i), and (j), Government Code, are amended to read as follows:

(d) For the purposes of this section, "taxable value" means the market value of all taxable property less:

(1) the total dollar amount of any residence homestead exemptions lawfully granted under Section 11.13(b) or (c), Tax Code, in the year that is the subject of the study for each school district;

(2) one-half of the total dollar amount of any residence homestead exemptions granted under Section 11.13(n), Tax Code, in the year that is the subject of the study for each school district;

(3) the total dollar amount of any exemptions granted before May 31, 1993, within a reinvestment zone under agreements authorized by Chapter 312, Tax Code;

(4) subject to Subsection (e), the total dollar amount of any captured appraised value of property that:

(A) is within a reinvestment zone created on or before May 31, 1999, or is proposed to be included within the boundaries of a reinvestment zone as the boundaries of the zone and the proposed portion of tax increment paid into the tax increment fund by a school district are described in a written notification provided by the municipality or the board of directors of the zone to the governing bodies of the other taxing units in the manner provided by Section 311.003(e), Tax Code, before May 31, 1999, and within the boundaries of the zone as those boundaries existed on September 1, 1999, including subsequent improvements to the property regardless of when made;

(B) generates taxes paid into a tax increment fund created under Chapter 311, Tax Code, under a reinvestment zone financing plan approved under Section 311.011(d), Tax Code, on or before September 1, 1999; and

(C) is eligible for tax increment financing under Chapter 311, Tax Code;

(5) [for a school district for which a deduction from taxable value is made under Subdivision (4), an amount equal to the taxable value required to generate revenue when taxed at the school district's current tax rate in an amount that, when added to the taxes of the district paid into a tax increment fund as described by Subdivision (4)(B), is equal to the total amount of taxes the district would have paid into the tax increment fund if the district levied taxes at the rate the district levied in 2005;

[(6)] the total dollar amount of any captured appraised value of property that:

(A) is within a reinvestment zone:

(i) created on or before December 31, 2008, by a municipality with a population of less than 18,000; and

(ii) the project plan for which includes the alteration, remodeling, repair, or reconstruction of a structure that is included on the National Register of Historic Places and requires that a portion of the tax increment of the zone be used for the improvement or construction of related facilities or for affordable housing;

(B) generates school district taxes that are paid into a tax increment fund created under Chapter 311, Tax Code; and

(C) is eligible for tax increment financing under Chapter 311, Tax Code;

(6) [(7)] the total dollar amount of any exemptions granted under Section 11.251 or 11.253, Tax Code;

(7) [(8)] the difference between the comptroller's estimate of the market value and the productivity value of land that qualifies for appraisal on the basis of its productive capacity, except that the productivity value estimated by the comptroller may not exceed the fair market value of the land;

(8) [(9)] the portion of the appraised value of residence homesteads of individuals who receive a tax limitation under Section 11.26, Tax Code, on which school district taxes are not imposed in the year that is the subject of the study, calculated as if the residence homesteads were appraised at the full value required by law;

(9) [(10)] a portion of the market value of property not otherwise fully taxable by the district at market value because of:

(A) action required by statute or the constitution of this state that, if the tax rate adopted by the district is applied to it, produces an amount equal to the difference between the tax that the district would have imposed on the property if the property were fully taxable at market value and the tax that the district is actually authorized to impose on the property, if this subsection does not otherwise require that portion to be deducted; or

(B) action taken by the district under Subchapter B or C, Chapter 313, Tax Code;

(10) [(11)] the market value of all tangible personal property, other than manufactured homes, owned by a family or individual and not held or used for the production of income;

(11) [(12)] the appraised value of property the collection of delinquent taxes on which is deferred under Section 33.06, Tax Code;

(12) [(13)] the portion of the appraised value of property the collection of delinquent taxes on which is deferred under Section 33.065, Tax Code; and

(13) [(14)] the amount by which the market value of a residence homestead to which Section 23.23, Tax Code, applies exceeds the appraised value of that property as calculated under that section.

(i) If the comptroller determines in the annual study that the market value of property in a school district as determined by the appraisal district that appraises property for the school district, less the total of the amounts and values listed in Subsection (d) as determined by that appraisal district, is valid, the comptroller, in determining the taxable value of property in the school district under Subsection (d), shall for purposes of Subsection (d)(13) [(d)(14)] subtract from the market value as determined by the appraisal district of residence homesteads to which Section 23.23, Tax Code, applies the amount by which that amount exceeds the appraised value of those properties as calculated by the appraisal district under Section 23.23, Tax Code. If the comptroller determines in the annual study that the market value of property in a school district as determined by the appraisal district that appraises property for the school district, less the total of the amounts and values listed in Subsection (d) as determined by that appraisal district, is not valid, the comptroller, in determining the taxable value of property in the school district under Subsection (d), shall for purposes of Subsection (d)(13) [(d)(14)] subtract from the market value as estimated by the comptroller of residence homesteads to which Section 23.23, Tax Code, applies the amount by which that amount exceeds the appraised value of those properties as calculated by the appraisal district under Section 23.23, Tax Code.

(j) For purposes of Chapter 42 [Section 42.2511], Education Code, the comptroller shall certify to the commissioner of education:

(1) a final value for each school district computed on a residence homestead exemption under Section 1-b(c), Article VIII, Texas Constitution, of $5,000;

(2) a final value for each school district computed on:

(A) a residence homestead exemption under Section 1-b(c), Article VIII, Texas Constitution, of $15,000; and

(B) the effect of the additional limitation on tax increases under Section 1-b(d), Article VIII, Texas Constitution, as proposed by H.J.R. No. 4, 75th Legislature, Regular Session, 1997; and

(3) a final value for each school district computed on the effect of the reduction of the limitation on tax increases to reflect any reduction in the school district tax rate as provided by Section 11.26(a-1), (a-2), or (a-3), Tax Code, as applicable.

SECTION 1.29. Section 311.013(n), Tax Code, is amended to read as follows:

(n) This subsection applies only to a school district whose taxable value computed under Section 403.302(d), Government Code, is reduced in accordance with Subdivision (4) [(5)] of that subsection. In addition to the amount otherwise required to be paid into the tax increment fund, the district shall pay into the fund an amount equal to the amount by which the amount of taxes the district would have been required to pay into the fund in the current year if the district levied taxes at the rate the district levied in 2005 exceeds the amount the district is otherwise required to pay into the fund in the year of the reduction[, not to exceed the amount the school district realizes from the reduction in the school district's taxable value under Section 403.302(d)(5), Government Code].

ARTICLE 2. CONFORMING AMENDMENTS

SECTION 2.01. Section 29.097(g), Education Code, is amended to read as follows:

(g) For purposes of Subsection (f)(2), a school district is encouraged to use funds allocated under Section 42.160 [42.2516(b)(3)].

SECTION 2.02. Section 29.098(h), Education Code, is amended to read as follows:

(h) For purposes of Subsection (g)(2), a school district is encouraged to use funds allocated under Section 42.160 [42.2516(b)(3)].

SECTION 2.03. Section 29.918(a), Education Code, is amended to read as follows:

(a) Notwithstanding Section 39.114 or 42.152, a school district or open-enrollment charter school with a high dropout rate, as determined by the commissioner, must submit a plan to the commissioner describing the manner in which the district or charter school intends to use the compensatory education allotment under Section 42.152 and the high school allotment under Section 42.160 [42.2516(b)(3)] for developing and implementing research-based strategies for dropout prevention. The district or charter school shall submit the plan not later than December 1 of each school year preceding the school year in which the district or charter school will receive the compensatory education allotment or high school allotment to which the plan applies.

SECTION 2.04. Section 29.919(e), Education Code, is amended to read as follows:

(e) As a condition of receiving a state grant, a campus must contribute additional funding for activities provided at the campus through the program, in an amount equal to at least $100 each school year for each student in an eligible grade level served through the program. The additional funding required by this subsection may consist of local funds, private funds, or state funds other than grant funds provided under this section. For program activities provided at the high school level, the high school allotment provided under Section 42.160 [42.2516(b)(3)] may be used to meet the additional funding requirement prescribed by this subsection.

SECTION 2.05. Section 822.201(b), Government Code, is amended to read as follows:

(b) "Salary and wages" as used in Subsection (a) means:

(1) normal periodic payments of money for service the right to which accrues on a regular basis in proportion to the service performed;

(2) amounts by which the member's salary is reduced under a salary reduction agreement authorized by Chapter 610;

(3) amounts that would otherwise qualify as salary and wages under Subdivision (1) but are not received directly by the member pursuant to a good faith, voluntary written salary reduction agreement in order to finance payments to a deferred compensation or tax sheltered annuity program specifically authorized by state law or to finance benefit options under a cafeteria plan qualifying under Section 125 of the Internal Revenue Code of 1986, if:

(A) the program or benefit options are made available to all employees of the employer; and

(B) the benefit options in the cafeteria plan are limited to one or more options that provide deferred compensation, group health and disability insurance, group term life insurance, dependent care assistance programs, or group legal services plans;

(4) performance pay awarded to an employee by a school district as part of a total compensation plan approved by the board of trustees of the district and meeting the requirements of Subsection (e);

(5) the benefit replacement pay a person earns under Subchapter H, Chapter 659, except as provided by Subsection (c);

(6) stipends paid to teachers in accordance with Section 21.410, 21.411, 21.412, or 21.413, Education Code;

(7) amounts by which the member's salary is reduced or that are deducted from the member's salary as authorized by Subchapter J, Chapter 659;

(8) a merit salary increase made under Section 51.962, Education Code;

(9) amounts received under the relevant parts of the [awards for student achievement program under Subchapter N, Chapter 21, Education Code, the] educator excellence awards program under Subchapter O, Chapter 21, Education Code, or a mentoring program under Section 21.458, Education Code, that authorize [authorized] compensation for service; and

(10) salary amounts designated as health care supplementation by an employee under Subchapter D, Chapter 22, Education Code.

SECTION 2.06. Section 1579.251(a), Insurance Code, is amended to read as follows:

(a) The state shall assist employees of participating school districts and charter schools in the purchase of group health coverage under this chapter by providing for each covered employee the amount of $900 each state fiscal year or a greater amount as provided by the General Appropriations Act. The state contribution shall be distributed through the school finance formulas under Chapters 41 and 42, Education Code, and used by school districts and charter schools as provided by Section [Sections 42.2514 and] 42.260, Education Code.

SECTION 2.07. Section 1581.053(b), Insurance Code, is amended to read as follows:

(b) Notwithstanding Subsection (a), amounts a district or school is required to use to pay contributions under a group health coverage plan for district or school employees under Section [42.2514 or] 42.260, Education Code, other than amounts described by Section 42.260(c)(2)(B), are not used in computing whether the district or school complies with Section 1581.052.

ARTICLE 3. REPEALER; MISCELLANEOUS; EFFECTIVE DATE

SECTION 3.01. (a) The following provisions of the Education Code are repealed:

(1) Subchapter N, Chapter 21;

(2) Section 21.704(b);

(3) Section 39.114(c); and

(4) Sections 42.103(e), 42.2511, 42.2512, and 42.2514.

(b) Subchapter C, Chapter 1581, Insurance Code, is repealed.

(c) Section 2, Chapter 1191 (H.B. 828), Acts of the 80th Legislature, Regular Session, 2007, is repealed.

SECTION 3.02. To the extent of any conflict, this Act prevails over S.B. No. 1969, Acts of the 81st Legislature, Regular Session, 2009.

SECTION 3.03. (a) Notwithstanding any other provision of this Act, Sections 12.1331, 19.007(g), 19.009(d-2), and 21.402(c-1), Education Code, as added by this Act, are expressly contingent on a determination by the commissioner of education that payment of salary increases required by or associated with those sections are allowable uses of federal funds received by school districts and open-enrollment charter schools under the American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5) and appropriated as part of the Foundation School Program. The commissioner may not make a determination under this subsection until the state's application to spend funds under the American Recovery and Reinvestment Act of 2009 has been approved by the United States government. The commissioner shall promptly notify school districts and open-enrollment charter schools of that determination. A determination by the commissioner under this subsection is final and may not be appealed.

(b) A school district or open-enrollment charter school may enter into an employment contract or agreement that is contingent on a determination of the commissioner of education under Subsection (a) of this section.

SECTION 3.04. Section 42.2516(b)(3), Education Code, as amended by this Act, applies as if that subdivision were in effect in the state fiscal year beginning September 1, 2006, and any amounts due a school district under that subdivision for the state fiscal years beginning September 1, 2006, September 1, 2007, and September 1, 2008, shall be paid to the district in the state fiscal year beginning September 1, 2009, at the time payments are made to the district under Section 42.259(f), Education Code.

SECTION 3.05. This Act takes effect September 1, 2009, except that Section 1.14 of this Act takes effect immediately if this Act 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, Section 1.14 takes effect September 1, 2009.

* * * * *