By: Shapiro S.B. No. 1255
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to a state intercept credit enhancement program 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.  INTERCEPT PROGRAM TO PROVIDE CREDIT ENHANCEMENT FOR
  BONDS
         Sec. 45.251.  DEFINITIONS.  In this subchapter:
               (1)  "Board" means the State Board of Education.
               (2)  "Foundation School Program" means the program
  established under Chapters 41, 42, and 46, or any successor program
  of state appropriated funding for school districts in this state.
               (3)  "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 bonds for which
  credit enhancement is provided under this subchapter.
         Sec. 45.252.  INTERCEPT CREDIT ENHANCEMENT PROGRAM.  (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 credit enhancement of bonds described by Section
  45.054 by money appropriated for the Foundation School Program,
  other than money that is appropriated to school districts
  specifically:
               (1)  as required under the Texas Constitution; or
               (2)  for assistance in paying debt service.
         (b)  The same school district bonds may not benefit under
  both Subchapter C and this subchapter.
         (c)  Notwithstanding any amendment of this subchapter or
  other law, the credit enhancement provided under this subchapter
  for school district bonds remains in effect until the date those
  bonds mature or are defeased in accordance with state law.
         Sec. 45.253.  ELIGIBILITY.  To be eligible for approval by
  the commissioner under this subchapter, bonds must be issued in the
  manner provided by Section 45.054.
         Sec. 45.254.  INTERCEPT OF FOUNDATION SCHOOL PROGRAM
  APPROPRIATIONS AS CREDIT ENHANCEMENT. (a)  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 provide credit enhancement for 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.
         (b)  If Foundation School Program appropriations are not
  sufficient in any year to pay principal or interest that becomes due
  on bonds for which credit enhancement is provided under this
  subchapter, the payment shall be made from the following year's
  Foundation School Program appropriations that may be used for the
  purpose under this subchapter before those appropriations are used
  for any other Foundation School Program purpose.
         Sec. 45.255.  APPLICATION FOR CREDIT ENHANCEMENT.  (a)  A
  school district seeking credit enhancement of eligible bonds under
  this subchapter 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 guarantee or credit
  enhancement of eligible bonds may apply simultaneously first for a
  guarantee under Subchapter C and then, if that guarantee is
  rejected, for credit enhancement 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 programs to
  provide the guarantee or credit enhancement of eligible bonds.
         Sec. 45.256.  INVESTIGATION.  (a)  Following receipt of an
  application under Section 45.255, 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 provided credit enhancement
  under this subchapter, as applicable, the commissioner shall
  endorse the bonds.
         Sec. 45.257.  CREDIT ENHANCEMENT ENDORSEMENT.  (a)  The
  commissioner shall endorse bonds approved for credit enhancement
  under this subchapter in substantially the same manner provided
  under Section 45.057 for endorsing bonds approved under Subchapter
  C.
         (b)  The credit enhancement is not effective unless the
  attorney general approves the bonds under Section 45.005.
         Sec. 45.258.  NOTICE OF FAILURE OR INABILITY TO PAY.  
  Immediately following a determination that a school district will
  be or is unable to pay maturing or matured principal or interest on
  a bond for which credit enhancement is provided under this
  subchapter, but not later than the fifth day before maturity date,
  the school district shall notify the commissioner.
         Sec. 45.259.  PAYMENT FROM INTERCEPTED 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.
         (c)  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, other than any
  portion appropriated from the available school fund, in the same
  manner provided by Section 42.253(h) for a case in which school
  district entitlements exceed the amount appropriated.  The
  following fiscal year, a district's entitlement under Section
  42.253 is increased by an amount equal to the reduction under this
  subsection.
         (d)  A payment made under this section by the state on behalf
  of a school district of funds the district owes on bonds for which
  credit enhancement is provided under this subchapter creates a
  repayment obligation of the district to the state regardless of the
  maturity date of, or any payment of interest on, the bonds.
         (e)  This section does not create a debt of the state under
  the Texas Constitution or, except to the extent provided by this
  subchapter, create a payment obligation.
         Sec. 45.260.  BONDS NOT ACCELERATED ON FAILURE TO PAY.  If a
  school district fails to pay principal or interest on a bond for
  which credit enhancement is provided under this subchapter when the
  amount matures, other amounts not yet mature are not accelerated
  and do not become due by virtue of the district's failure to pay
  amounts matured.
         Sec. 45.261.  REIMBURSEMENT OF FOUNDATION SCHOOL PROGRAM.  
  (a)  If the commissioner orders payment from the money appropriated
  to the Foundation School Program on behalf of a school district that
  is not required to reduce its wealth per student under Chapter 41,
  the commissioner shall direct the comptroller to withhold the
  amount paid from the first state money payable to the district.  If
  the commissioner orders payment from the money appropriated to the
  Foundation School Program on behalf of a school district that is
  required to reduce its wealth per student under Chapter 41, the
  commissioner shall increase amounts due from the district under
  that chapter in a total amount equal to the amount of payments made
  on behalf of the district under this subchapter.  Amounts withheld
  or received under this subsection shall be used for the Foundation
  School Program.
         (b)  In accordance with commissioner rules, the commissioner
  may authorize reimbursement of the Foundation School Program 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) is considered
  part of the district's:
               (1)  current debt rate for purposes of computing a
  rollback tax rate under Section 26.08, Tax Code; and
               (2)  interest and sinking fund tax rate.
         (f)  On reimbursement by a school district as required by
  this section, the commissioner shall pay to the district any amount
  withheld under this section.
         Sec. 45.262.  REPEATED FAILURE TO PAY.  (a)  If a total of
  two or more payments are made under Subchapter C or this subchapter
  on the bonds of a school district and the commissioner determines
  that the district is acting in bad faith under the guarantee program
  under Subchapter C or the credit enhancement program under this
  subchapter, 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.  (a)  The commissioner shall adopt
  rules necessary for the administration of the bond credit
  enhancement program under this subchapter.
         (b)  In adopting rules under Subsection (a), the
  commissioner shall establish an annual deadline by which a school
  district must pay the debt service on bonds for which credit
  enhancement is provided under this subchapter.  The deadline
  established may not be later than the 10th day before the date
  specified under Section 42.259 for payment to school districts of
  the final Foundation School Program installment for a school year.
         SECTION 2.  Section 45.052, Education Code, is amended to
  read as follows:
         Sec. 45.052.  GUARANTEE. (a)  On approval by the
  commissioner, bonds issued under Subchapter A, including refunding
  bonds, are guaranteed by the corpus and income of the permanent
  school fund.
         (b)  Notwithstanding any amendment of this subchapter or
  other law, the guarantee under this subchapter of school district
  bonds remains in effect until the date those bonds mature or are
  defeased in accordance with state law.
         SECTION 3.  Subsections (a), (b), and (c), Section 45.053,
  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 4.  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 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 under this
  subchapter 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 guarantee or credit
  enhancement of eligible bonds may apply simultaneously first for
  guarantee under this subchapter and then, if that guarantee is
  rejected, for credit enhancement 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 programs to provide the
  guarantee or credit enhancement of eligible bonds [program].
         SECTION 6.  Subsection (b), Section 45.056, 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 provided credit enhancement under
  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.  Subsection (a), Section 45.062, 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 program under this subchapter or the credit enhancement
  program under Subchapter I, 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 42.259, Education Code, is amended by
  adding Subsection (g) to read as follows:
         (g)  The commissioner shall make all annual Foundation
  School Program payments under this section for purposes described
  by Sections 45.252(a)(1) and (2) before the deadline established
  under Section 45.263(b) for payment of debt service on bonds.
  Notwithstanding any other provision of this section, the
  commissioner may make Foundation School Program payments under this
  section after the deadline established under Section 45.263(b) only
  if the commissioner has not received notice under Section 45.258
  concerning a district's failure or inability to pay matured
  principal or interest on bonds.
         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.