82R6703 CAE-D
 
  By: Eissler H.B. No. 1437
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the guarantee of open-enrollment charter school bonds
  by the permanent school fund.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subchapter D, Chapter 12, Education Code, is
  amended by adding Section 12.135 to read as follows:
         Sec. 12.135.  DESIGNATION AS CHARTER DISTRICT FOR PURPOSES
  OF BOND GUARANTEE. (a) On the application of the charter holder,
  the commissioner may grant designation as a charter district to an
  open-enrollment charter school that meets financial standards
  adopted by the commissioner. The financial standards must require
  an open-enrollment charter school to have an investment grade
  credit rating as specified by Section 45.0541.
         (b)  A charter district may apply for bonds issued under
  Chapter 53 for the open-enrollment charter school to be guaranteed
  by the permanent school fund as provided by Chapter 45.
         SECTION 2.  Section 45.051, Education Code, is amended by
  adding Subdivision (1-a) and amending Subdivision (2) to read as
  follows:
               (1-a)  "Charter district" means an open-enrollment
  charter school designated as a charter district under Section
  12.135.
               (2)  "Paying agent" means the financial institution
  that is designated by a school district or charter district as its
  agent for the payment of the principal of and interest on guaranteed
  bonds.
         SECTION 3.  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 by a school district
  or Chapter 53 for a charter district, 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
  or charter district bonds remains in effect until the date those
  bonds mature or are defeased in accordance with state law.
         SECTION 4.  Subchapter C, Chapter 45, Education Code, is
  amended by adding Section 45.0532 to read as follows:
         Sec. 45.0532.  LIMITATION ON GUARANTEE OF CHARTER DISTRICT
  BONDS. (a) In addition to the general limitation under Section
  45.053, the commissioner may not approve charter district bonds for
  guarantee under this subchapter in a total amount that exceeds the
  percentage of the total available capacity of the guaranteed bond
  program that is equal to the percentage of the number of students
  enrolled in open-enrollment charter schools in this state compared
  to the total number of students enrolled in all public schools in
  this state, as determined by the commissioner.
         (b)  For purposes of Subsection (a), the total available
  capacity of the guaranteed bond program is the limit established by
  the board under Section 45.053(d) minus the total amount of
  outstanding guaranteed bonds.  Each time the board increases the
  limit under Section 45.053(d), the total amount of charter district
  bonds that may be guaranteed increases accordingly under Subsection
  (a).
         (c)  Notwithstanding Subsections (a) and (b), the
  commissioner may not approve charter district bonds for guarantee
  under this subchapter if the guarantee will result in lower bond
  ratings for school district bonds for which a guarantee is
  requested under this subchapter.
         (d)  The commissioner may request that the comptroller place
  the portion of the permanent school fund committed to the guarantee
  of charter district bonds in a segregated account if the
  commissioner determines that a separate account is needed to avoid
  any negative impact on the bond ratings of school district bonds for
  which a guarantee is requested under this subchapter.
         (e)  A guarantee of charter district bonds must be made in
  accordance with this chapter and any applicable federal law.
         SECTION 5.  Section 45.054, Education Code, is amended to
  read as follows:
         Sec. 45.054.  ELIGIBILITY OF SCHOOL DISTRICT BONDS. To be
  eligible for approval by the commissioner, school district bonds
  must be 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.
         SECTION 6.  Subchapter C, Chapter 45, Education Code, is
  amended by adding Section 45.0541 to read as follows:
         Sec. 45.0541.  ELIGIBILITY OF CHARTER DISTRICT BONDS. To be
  eligible for approval by the commissioner, charter district bonds
  must:
               (1)  without the guarantee, be rated as investment
  grade by a nationally recognized investment rating firm; and
               (2)  be issued under Chapter 53.
         SECTION 7.  Sections 45.055(a) and (b), Education Code, are
  amended to read as follows:
         (a)  A school district or charter district seeking 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 school
  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 application under Subsection (a) must include:
               (1)  the name of the school district or charter
  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.
         SECTION 8.  Section 45.056, Education Code, is amended to
  read as follows:
         Sec. 45.056.  INVESTIGATION. (a)  Following receipt of an
  application for the guarantee of bonds, the commissioner shall
  conduct an investigation of the applicant school district or
  charter district in regard to:
               (1)  the status of the district's accreditation; and
               (2)  the total amount of outstanding guaranteed bonds.
         (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, or the charter district's bonds should
  be guaranteed under this subchapter, the commissioner shall endorse
  the bonds.
         SECTION 9.  Section 45.057(b), Education Code, is amended to
  read as follows:
         (b)  The guarantee is not effective unless the attorney
  general approves the bonds under Section 45.005 or 53.40, as
  applicable.
         SECTION 10.  Subchapter C, Chapter 45, Education Code, is
  amended by adding Section 45.0571 to read as follows:
         Sec. 45.0571.  CHARTER DISTRICT BOND GUARANTEE RESERVE FUND.
  (a) The charter district bond guarantee reserve fund is a special
  fund in the state treasury outside the general revenue fund.  The
  following amounts shall be deposited in the fund:
               (1)  money due from a charter district as provided by
  Subsection (b); and
               (2)  interest earned on balances in the fund.
         (b)  A charter district that has a bond guaranteed as
  provided by this subchapter must annually remit to the
  commissioner, for deposit in the charter district bond guarantee
  reserve fund, an amount equal to 10 percent of the savings to the
  charter district that is a result of the lower interest rate on the
  bond due to the guarantee by the permanent school fund. The amount
  due under this section shall be amortized and paid over the duration
  of the bond. Each payment is due on the anniversary of the date the
  bond was issued. The commissioner shall adopt rules to determine
  the total and annual amounts due under this section.
         (c)  The commissioner may direct the comptroller to annually
  withhold the amount due to the charter district bond guarantee
  reserve fund under Subsection (b) for that year from the state funds
  otherwise payable to the charter district.
         (d)  Each year, the commissioner shall:
               (1)  review the condition of the bond guarantee program
  and the amount that must be deposited in the charter district bond
  guarantee reserve fund from charter districts; and
               (2)  determine if charter districts should be required
  to submit a greater percentage of the savings resulting from the
  guarantee.
         (e)  The commissioner shall make recommendations to the
  legislature based on the review under Subsection (d).
         SECTION 11.  Section 45.058, Education Code, is amended to
  read as follows:
         Sec. 45.058.  NOTICE OF DEFAULT. Immediately following a
  determination that a school district or charter 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 or charter district shall notify the
  commissioner.
         SECTION 12.  The heading to Section 45.059, Education Code,
  is amended to read as follows:
         Sec. 45.059.  PAYMENT OF SCHOOL DISTRICT BOND ON DEFAULT 
  [FROM PERMANENT SCHOOL FUND].
         SECTION 13.  Section 45.059(a), Education Code, is amended
  to read as follows:
         (a)  Immediately following receipt of notice under Section
  45.058 that a school district will be or is unable to pay maturing
  or matured principal or interest on a guaranteed bond, the
  commissioner shall instruct the comptroller to transfer from the
  appropriate account in the permanent school fund to the district's
  paying agent the amount necessary to pay the maturing or matured
  principal or interest.
         SECTION 14.  Subchapter C, Chapter 45, Education Code, is
  amended by adding Section 45.0591 to read as follows:
         Sec. 45.0591.  PAYMENT OF CHARTER DISTRICT BOND ON DEFAULT.
  (a) Immediately following receipt of notice under Section 45.058
  that a charter district will be or is unable to pay maturing or
  matured principal or interest on a guaranteed bond, the
  commissioner shall instruct the comptroller to transfer from the
  charter district bond guarantee reserve fund created under Section
  45.0571 to the district's paying agent the amount necessary to pay
  the maturing or matured principal or interest.
         (b)  If money in the charter district bond guarantee reserve
  fund is insufficient to pay the amount due on a bond under
  Subsection (a), the commissioner shall instruct the comptroller to
  transfer from the appropriate account in the permanent school fund
  to the district's paying agent the amount necessary to pay the
  balance of the unpaid maturing or matured principal or interest.
         (c)  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
  fund or funds from which payment was made.
         (d)  Following full reimbursement to the charter district
  bond guarantee reserve fund and the permanent school fund, if
  applicable, with interest, the comptroller shall further cancel the
  bond or coupon and forward it to the charter district for which
  payment was made.
         SECTION 15.  Section 45.060, Education Code, is amended to
  read as follows:
         Sec. 45.060.  BONDS NOT ACCELERATED ON DEFAULT. If a school
  district or charter district fails to pay principal or interest on a
  guaranteed bond when it matures, other amounts not yet mature are
  not accelerated and do not become due by virtue of the school
  district's or charter district's default.
         SECTION 16.  The heading to Section 45.061, Education Code,
  is amended to read as follows:
         Sec. 45.061.  REIMBURSEMENT OF FUNDS [PERMANENT SCHOOL
  FUND].
         SECTION 17.  Section 45.061, Education Code, is amended by
  amending Subsections (a) and (b) and adding Subsection (a-1) to
  read as follows:
         (a)  If the commissioner orders payment from the permanent
  school fund or the charter district bond guarantee reserve fund on
  behalf of a school district or charter district, the commissioner
  shall direct the comptroller to withhold the amount paid, plus
  interest, from the first state money payable to the school district
  or charter district. Except as provided by Subsection (a-1), the
  [The] amount withheld shall be deposited to the credit of the
  permanent school fund.
         (a-1)  After the permanent school fund has been reimbursed
  for all money paid from the fund as the result of a default of a
  charter district bond guaranteed under this subchapter, any
  remaining amounts withheld under Subsection (a) shall be deposited
  to the credit of the charter district bond guarantee reserve fund.
         (b)  In accordance with the rules of the board, the
  commissioner may authorize reimbursement to the permanent school
  fund or charter district bond guarantee reserve fund with interest
  in a manner other than that provided by this section.
         SECTION 18.  Section 45.062, Education Code, is amended by
  adding Subsection (a-1) to read as follows:
         (a-1)  If a total of two or more payments are made under this
  subchapter on charter district bonds and the commissioner
  determines that the charter district is acting in bad faith under
  the guarantee program under this subchapter, the commissioner may
  request the attorney general to institute appropriate legal action
  to compel the charter district and its officers, agents, and
  employees to comply with the duties required of them by law in
  regard to the bonds.
         SECTION 19.  Section 53.02(10), Education Code, is amended
  to read as follows:
               (10)  "Authorized charter school" means an
  open-enrollment charter school that holds a charter granted under
  Subchapter D, Chapter 12, and includes an open-enrollment charter
  school designated as a charter district as provided by Section
  12.135.
         SECTION 20.  Section 53.351, Education Code, is amended by
  amending Subsection (f) and adding Subsection (f-1) to read as
  follows:
         (f)  Except as provided by Subsection (f-1), a [A] revenue
  bond issued under this section is not a debt of the state or any
  state agency, political corporation, or political subdivision of
  the state and is not a pledge of the faith and credit of any of these
  entities.  A revenue bond is payable solely from the revenue of the
  authorized open-enrollment charter school on whose behalf the bond
  is issued.  A revenue bond issued under this section must contain on
  its face a statement to the effect that:
               (1)  neither the state nor a state agency, political
  corporation, or political subdivision of the state is obligated to
  pay the principal of or interest on the bond; and
               (2)  neither the faith and credit nor the taxing power
  of the state or any state agency, political corporation, or
  political subdivision of the state is pledged to the payment of the
  principal of or interest on the bond.
         (f-1)  Subsection (f) does not apply to a revenue bond issued
  under this section for a charter district if the bond is approved
  for guarantee by the permanent school fund under Subchapter C,
  Chapter 45.
         SECTION 21.  This Act applies only to a bond issued or
  refunded on or after the effective date of this Act by an
  open-enrollment charter school designated as a charter district
  under Section 12.135, Education Code, as added by this Act. A bond
  issued or refunded by an open-enrollment charter school before the
  effective date of this Act is governed by the law in effect
  immediately before that date, and that law is continued in effect
  for that purpose.
         SECTION 22.  This Act takes effect September 1, 2011.