83R9096 CAS-D

By: Davis S.B. No. 1301

A BILL TO BE ENTITLED

AN ACT

relating to granting and revoking licenses for open-enrollment charter schools and to exempting certain open-enrollment charter schools from assignment of a performance rating.

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

SECTION 1. Section 5.001(6), Education Code, is amended to read as follows:

(6) "Open-enrollment charter school" means a school that has been granted a license [charter] under Subchapter D, Chapter 12.

SECTION 2. Section 7.028(a), Education Code, is amended to read as follows:

(a) Except as provided by Section 29.001(5), 29.010(a), 39.056, or 39.057, the agency may monitor compliance with requirements applicable to a process or program provided by a school district, campus, program, or school granted a charter or license [charters] under Chapter 12, including the process described by Subchapter F, Chapter 11, or a program described by Subchapter B, C, D, E, F, H, or I, Chapter 29, Subchapter A, Chapter 37, or Section 38.003, and the use of funds provided for such a program under Subchapter C, Chapter 42, only as necessary to ensure:

(1) compliance with federal law and regulations;

(2) financial accountability, including compliance with grant requirements; and

(3) data integrity for purposes of:

(A) the Public Education Information Management System (PEIMS); and

(B) accountability under Chapter 39.

SECTION 3. Section 7.102(c)(9), Education Code, is amended to read as follows:

(9) The board may grant an open-enrollment license [charter or approve a charter revision] as provided by Subchapter D, Chapter 12.

SECTION 4. The heading to Chapter 12, Education Code, is amended to read as follows:

CHAPTER 12. CHARTERS AND LICENSES

SECTION 5. Section 12.001(b), Education Code, is amended to read as follows:

(b) This chapter shall be applied in a manner that ensures the fiscal and academic accountability of persons holding charters or licenses granted [issued] under this chapter. This chapter may not be applied in a manner that unduly regulates the instructional methods or pedagogical innovations of charter schools.

SECTION 6. Sections 12.101(a), (b), and (d), Education Code, are amended to read as follows:

(a) In accordance with this subchapter, the State Board of Education may grant a license [charter] on the application of an eligible entity for an open-enrollment charter school to operate in a facility of a commercial or nonprofit entity, an eligible entity, or a school district, including a home-rule school district. In this subsection, "eligible entity" means:

(1) an institution of higher education as defined under Section 61.003;

(2) a private or independent institution of higher education as defined under Section 61.003;

(3) an organization that is exempt from taxation under Section 501(c)(3), Internal Revenue Code of 1986 (26 U.S.C. Section 501(c)(3)); or

(4) a governmental entity.

(b) The State Board of Education may grant a license [charter] for an open-enrollment charter school only to an applicant that meets any financial, governing, and operational standards adopted by the commissioner under this subchapter. The State Board of Education may not grant a total of more than 215 licenses [charters] for an open-enrollment charter school.

(d) An educator employed by a school district before the effective date of a license [charter] for an open-enrollment charter school operated at a school district facility may not be transferred to or employed by the open-enrollment charter school over the educator's objection.

SECTION 7. Section 12.1012, Education Code, is amended by amending Subdivisions (2), (3), and (4) and adding Subdivision (3-a) to read as follows:

(2) "Governing body of a license [charter] holder" means the board of directors, board of trustees, or other governing body of a license [charter] holder.

(3) "Governing body of an open-enrollment charter school" means the board of directors, board of trustees, or other governing body of an open-enrollment charter school. The term includes the governing body of a license [charter] holder if that body acts as the governing body of the open-enrollment charter school.

(3-a) "License holder" means the entity to which a license is granted under this subchapter.

(4) "Management company" means a person, other than a license [charter] holder, who provides management services for an open-enrollment charter school.

SECTION 8. Section 12.102, Education Code, is amended to read as follows:

Sec. 12.102. AUTHORITY UNDER LICENSE [CHARTER]. An open-enrollment charter school:

(1) shall provide instruction to students at one or more elementary or secondary grade levels as provided by the license [charter];

(2) is governed under the governing structure described by the license [charter];

(3) retains authority to operate under the license [charter] contingent on satisfactory student performance as provided by the charter in accordance with Section 12.111; and

(4) does not have authority to impose taxes.

SECTION 9. Section 12.1051(a), Education Code, is amended to read as follows:

(a) With respect to the operation of an open-enrollment charter school, the governing body of a license [charter] holder and the governing body of an open-enrollment charter school are considered to be governmental bodies for purposes of Chapters 551 and 552, Government Code.

SECTION 10. Sections 12.1052(b), (c), and (e), Education Code, are amended to read as follows:

(b) Records of an open-enrollment charter school and records of a license [charter] holder that relate to an open-enrollment charter school are government records for all purposes under state law.

(c) Any requirement in Subtitle C, Title 6, Local Government Code, or Subchapter J, Chapter 441, Government Code, that applies to a school district, the board of trustees of a school district, or an officer or employee of a school district applies to an open-enrollment charter school, the governing body of a license [charter] holder, the governing body of an open-enrollment charter school, or an officer or employee of an open-enrollment charter school except that the records of an open-enrollment charter school that ceases to operate shall be transferred in the manner prescribed by Subsection (d).

(e) If the license [charter] holder of an open-enrollment charter school that ceases to operate or an officer or employee of such a school refuses to transfer school records in the manner specified by the commissioner under Subsection (d), the commissioner may ask the attorney general to petition a court for recovery of the records. If the court grants the petition, the court shall award attorney's fees and court costs to the state.

SECTION 11. Sections 12.1053(a) and (c), Education Code, are amended to read as follows:

(a) This section applies to an open-enrollment charter school unless the school's license [charter] otherwise describes procedures for purchasing and contracting and the procedures are approved by the State Board of Education.

(c) To the extent consistent with this section, a requirement in a law listed in this section that applies to a school district or the board of trustees of a school district applies to an open-enrollment charter school, the governing body of a license [charter] holder, or the governing body of an open-enrollment charter school.

SECTION 12. Section 12.1054, Education Code, is amended to read as follows:

Sec. 12.1054. APPLICABILITY OF LAWS RELATING TO CONFLICT OF INTEREST. (a) A member of the governing body of a license [charter] holder, a member of the governing body of an open-enrollment charter school, or an officer of an open-enrollment charter school is considered to be a local public official for purposes of Chapter 171, Local Government Code. For purposes of that chapter:

(1) a member of the governing body of a license [charter] holder or a member of the governing body or officer of an open-enrollment charter school is considered to have a substantial interest in a business entity if a person related to the member or officer in the third degree by consanguinity or affinity, as determined under Chapter 573, Government Code, has a substantial interest in the business entity under Section 171.002, Local Government Code;

(2) notwithstanding Subdivision (1) [any provision of Section 12.1054(1)], an employee of an open-enrollment charter school that has been assigned an [rated] acceptable performance rating [or higher] under Section 39.054 for at least two of the preceding three school years may serve as a member of the governing body of the license [charter] holder or [of the governing body of] the school if the employees do not constitute a quorum of the governing body or any committee of the governing body; however, all members shall comply with [the requirements of] Sections 171.003-171.007, Local Government Code.

(b) To the extent consistent with this section, a requirement in a law listed in this section that applies to a school district or the board of trustees of a school district applies to an open-enrollment charter school, the governing body of a license [charter] holder, or the governing body of an open-enrollment charter school.

(c) An open-enrollment charter school rated as academically acceptable or higher under Subchapter D, Chapter 39, as that subchapter existed January 1, 2009, for the 2010-2011 school year is considered to have been assigned an acceptable performance rating for the 2010-2011 school year. This subsection expires September 1, 2015.

SECTION 13. Section 12.1055, Education Code, is amended by amending Subsection (b) and adding Subsection (c) to read as follows:

(b) Notwithstanding Subsection (a), if an open-enrollment charter school has been assigned an [is rated] acceptable performance rating [or higher] under Section 39.054 for at least two of the preceding three school years, [then] Chapter 573, Government Code, does not apply to that school; however, a member of the governing body of a license [charter] holder or a member of the governing body or officer of an open-enrollment charter school shall comply with [the requirements of] Sections 171.003-171.007, Local Government Code, with respect to a personnel matter concerning a person related to the member or officer within the degree specified by Section 573.002, Government Code, as if the personnel matter were a transaction with a business entity subject to those sections, and persons described [defined] under Sections 573.021-573.025, Government Code, may [shall] not constitute a quorum of the governing body or any committee of the governing body.

(c) An open-enrollment charter school rated as academically acceptable or higher under Subchapter D, Chapter 39, as that subchapter existed January 1, 2009, for the 2010-2011 school year is considered to have been assigned an acceptable performance rating for the 2010-2011 school year. This subsection expires September 1, 2015.

SECTION 14. Section 12.1056, Education Code, is amended to read as follows:

Sec. 12.1056. IMMUNITY FROM LIABILITY. In matters related to operation of an open-enrollment charter school, an open-enrollment charter school is immune from liability to the same extent as a school district, and its employees and volunteers are immune from liability to the same extent as school district employees and volunteers. A member of the governing body of an open-enrollment charter school or of a license [charter] holder is immune from liability to the same extent as a school district trustee.

SECTION 15. Section 12.1057(a), Education Code, is amended to read as follows:

(a) An employee of an open-enrollment charter school operating under a license [charter] granted by the State Board of Education who qualifies for membership in the Teacher Retirement System of Texas shall be covered under the system to the same extent a qualified employee of a school district is covered.

SECTION 16. Section 12.106(a), Education Code, as effective until September 1, 2017, is amended to read as follows:

(a) A license [charter] holder is entitled to receive for the open-enrollment charter school funding under Chapter 42 equal to the greater of:

(1) the percentage specified by Section 42.2516(i) multiplied by the amount of funding per student in weighted average daily attendance, excluding enrichment funding under Sections 42.302(a-1)(2) and (3), as they existed on January 1, 2009, that would have been received for the school during the 2009-2010 school year under Chapter 42 as it existed on January 1, 2009, and an additional amount of the percentage specified by Section 42.2516(i) multiplied by $120 for each student in weighted average daily attendance; or

(2) the amount of funding per student in weighted average daily attendance, excluding enrichment funding under Section 42.302(a), to which the license [charter] holder would be entitled for the school under Chapter 42 if the school were a school district without a tier one local share for purposes of Section 42.253 and without any local revenue for purposes of Section 42.2516.

SECTION 17. Section 12.106(a), Education Code, as effective September 1, 2017, is amended to read as follows:

(a) A license [charter] holder is entitled to receive for the open-enrollment charter school funding under Chapter 42 equal to the amount of funding per student in weighted average daily attendance, excluding enrichment funding under Section 42.302(a), to which the license [charter] holder would be entitled for the school under Chapter 42 if the school were a school district without a tier one local share for purposes of Section 42.253.

SECTION 18. Section 12.106(a-2), Education Code, is amended to read as follows:

(a-2) In addition to the funding provided by Subsection (a), a license [charter] holder is entitled to receive for the open-enrollment charter school enrichment funding under Section 42.302 based on the state average tax effort.

SECTION 19. Sections 12.1061, 12.107, and 12.1071, Education Code, are amended to read as follows:

Sec. 12.1061. RECOVERY OF CERTAIN FUNDS. The commissioner may not garnish or otherwise recover funds paid to an open-enrollment charter school under Section 12.106 if:

(1) the basis of the garnishment or recovery is that:

(A) the number of students enrolled in the school during a school year exceeded the student enrollment described by the school's license [charter] during that period; and

(B) the school received funding under Section 12.106 based on the school's actual student enrollment;

(2) the school:

(A) submits to the commissioner a timely request to revise the maximum student enrollment described by the school's license [charter] and the commissioner does not notify the school in writing of an objection to the proposed revision before the 90th day after the date on which the commissioner received the request, provided that the number of students enrolled at the school does not exceed the enrollment described by the school's request; or

(B) exceeds the maximum student enrollment described by the school's license [charter] only because a court mandated that a specific child enroll in that school; and

(3) the school used all funds received under Section 12.106 to provide education services to students.

Sec. 12.107. STATUS AND USE OF FUNDS. (a) Funds received under Section 12.106 after September 1, 2001, by a license [charter] holder:

(1) are considered to be public funds for all purposes under state law;

(2) are held in trust by the license [charter] holder for the benefit of the students of the open-enrollment charter school;

(3) may be used only for a purpose for which a school may use local funds under Section 45.105(c); and

(4) pending their use, must be deposited into a bank, as defined by Section 45.201, with which the license [charter] holder has entered into a depository contract.

(b) A license [charter] holder shall deliver to the agency a copy of the depository contract between the license [charter] holder and any bank into which state funds are deposited.

Sec. 12.1071. EFFECT OF ACCEPTING STATE FUNDING. (a) A license [charter] holder who accepts state funds under Section 12.106 after the effective date of a provision of this subchapter agrees to be subject to that provision, regardless of the date on which the license [charter] holder's license [charter] was granted.

(b) A license [charter] holder who accepts state funds under Section 12.106 after September 1, 2001, agrees to accept all liability under this subchapter for any funds accepted under that section before September 1, 2001. This subsection does not create liability for charter holder conduct occurring before September 1, 2001.

SECTION 20. Sections 12.110(a), (b), and (c), Education Code, are amended to read as follows:

(a) The State Board of Education shall adopt:

(1) an application form and a procedure that must be used to apply for a license [charter] for an open-enrollment charter school; and

(2) criteria to use in selecting a program for which to grant a license [charter].

(b) The application form must provide for including the information required under Section 12.111 to be contained in a license [charter].

(c) As part of the application procedure, the board may require a petition supporting a license [charter] for a school signed by a specified number of parents or guardians of school-age children residing in the area in which a school is proposed or may hold a public hearing to determine parental support for the school.

SECTION 21. Sections 12.1101, 12.111, 12.112, 12.113, and 12.114, Education Code, are amended to read as follows:

Sec. 12.1101. NOTIFICATION OF LICENSE [CHARTER] APPLICATION. The commissioner by rule shall adopt a procedure for providing notice to the following persons on receipt by the State Board of Education of an application for a license [charter] for an open-enrollment charter school under Section 12.110:

(1) the board of trustees of each school district from which the proposed open-enrollment charter school is likely to draw students, as determined by the commissioner; and

(2) each member of the legislature that represents the geographic area to be served by the proposed school, as determined by the commissioner.

Sec. 12.111. CONTENT. (a) Each license [charter] granted under this subchapter must:

(1) describe the educational program to be offered, which must include the required curriculum as provided by Section 28.002;

(2) specify the period for which the charter or any charter renewal is valid;

(3) provide that continuation or renewal of the license [charter] is contingent on acceptable student performance on assessment instruments adopted under Subchapter B, Chapter 39, and on compliance with any accountability provision specified by the license [charter], by a deadline or at intervals specified by the license [charter];

(4) establish the level of student performance that is considered acceptable for purposes of Subdivision (3);

(5) specify any basis, in addition to a basis specified by this subchapter, on which the license [charter] may be placed on probation or revoked or on which renewal of the license [charter] may be denied;

(6) prohibit discrimination in admission policy on the basis of sex, national origin, ethnicity, religion, disability, academic, artistic, or athletic ability, or the district the child would otherwise attend in accordance with this code, although the license [charter] may:

(A) provide for the exclusion of a student who has a documented history of a criminal offense, a juvenile court adjudication, or discipline problems under Subchapter A, Chapter 37; and

(B) provide for an admission policy that requires a student to demonstrate artistic ability if the school specializes in performing arts;

(7) specify the grade levels to be offered;

(8) describe the governing structure of the program, including:

(A) the officer positions designated;

(B) the manner in which officers are selected and removed from office;

(C) the manner in which members of the governing body of the school are selected and removed from office;

(D) the manner in which vacancies on that governing body are filled;

(E) the term for which members of that governing body serve; and

(F) whether the terms are to be staggered;

(9) specify the powers or duties of the governing body of the school that the governing body may delegate to an officer;

(10) specify the manner in which the school will distribute to parents information related to the qualifications of each professional employee of the program, including any professional or educational degree held by each employee, a statement of any certification under Subchapter B, Chapter 21, held by each employee, and any relevant experience of each employee;

(11) describe the process by which the person providing the program will adopt an annual budget;

(12) describe the manner in which an annual audit of the financial and programmatic operations of the program is to be conducted, including the manner in which the person providing the program will provide information necessary for the school district in which the program is located to participate, as required by this code or by State Board of Education rule, in the Public Education Information Management System (PEIMS);

(13) describe the facilities to be used;

(14) describe the geographical area served by the program; and

(15) specify any type of enrollment criteria to be used.

(b) A license [charter] holder of an open-enrollment charter school shall consider including in the school's license [charter] a requirement that the school develop and administer personal graduation plans under Section 28.0212.

Sec. 12.112. FORM. A license [charter] for an open-enrollment charter school shall be in the form of a written contract signed by the chair of the State Board of Education and the chief operating officer of the school.

Sec. 12.113. LICENSE [CHARTER] GRANTED; CONTINUATION OF CHARTERS. (a) Each license [charter] the State Board of Education grants for an open-enrollment charter school must:

(1) satisfy this subchapter; and

(2) include the information that is required under Section 12.111 consistent with the information provided in the application and any modification the board requires.

(b) The grant of a charter under this subchapter does not create an entitlement to a renewal of a charter on the same terms as it was originally issued. A charter granted under this subchapter before September 1, 2013, may not be renewed. At the time the charter is eligible to be renewed under the terms of the charter, the charter may be renewed only as a license under this subchapter and relevant rules adopted under this subchapter. Except as otherwise provided by this section, during the period before a charter may be renewed as a license as provided by this subsection, this subchapter applies to the charter holder as though the charter holder were a license holder, to the governing body of the charter holder as though that governing body were the governing body of a license holder, and to the charter as though the charter were a license granted under this subchapter. The terms "charter holder" and "governing body of a charter holder" have the meanings assigned to those terms under Section 12.1012, as that section existed August 31, 2013, and that section is continued in effect for that purpose. The commissioner shall adopt rules as necessary to provide for the renewal of a charter as a license as provided by this subsection. This subsection expires September 1, 2025.

Sec. 12.114. REVISION. (a) A revision of a license [charter] of an open-enrollment charter school may be made only with the approval of the commissioner.

(b) Not more than once each year, an open-enrollment charter school may request approval to revise the maximum student enrollment described by the school's license [charter].

SECTION 22. Section 12.115, Education Code, is amended to read as follows:

Sec. 12.115. BASIS FOR MODIFICATION, PLACEMENT ON PROBATION, REVOCATION, OR DENIAL OF RENEWAL. (a) The commissioner may modify, place on probation, revoke, or deny renewal of the license [charter] of an open-enrollment charter school if the commissioner determines that the license [charter] holder:

(1) committed a material violation of the license [charter], including failure to satisfy accountability provisions prescribed by the license [charter];

(2) failed to satisfy generally accepted accounting standards of fiscal management;

(3) failed to protect the health, safety, or welfare of the students enrolled at the school; or

(4) failed to comply with this subchapter or another applicable law or rule.

(b) Except as provided by Section 12.116(a-1), the [The] action the commissioner takes under Subsection (a) shall be based on the best interest of the open-enrollment charter school's students, the severity of the violation, and any previous violation the school has committed.

SECTION 23. Section 12.116, Education Code, is amended by amending Subsections (a) and (b) and adding Subsection (a-1) to read as follows:

(a) The commissioner shall adopt a procedure to be used for modifying, placing on probation, revoking, or denying renewal of the license [charter] of an open-enrollment charter school.

(a-1) The procedure adopted under Subsection (a) must provide for the commissioner to give written notice to a license holder of a determination by the commissioner that Section 12.115(a)(1), (2), or (3) applies to the license holder. The notice must specifically list each failure or violation by the license holder to which Section 12.115(a)(1), (2), or (3) applies, as determined by the commissioner. If, not later than the 270th day after the date of the receipt of notice by the license holder and after a hearing under Subsection (b), the commissioner determines that each violation or failure listed by the notice has not been corrected, the commissioner shall revoke the license holder's license.

(b) The procedure adopted under Subsection (a) must provide an opportunity for a hearing to the license [charter] holder and to parents and guardians of students in the school. A hearing under this subsection must be held at the facility at which the program is operated.

SECTION 24. Section 12.1161, Education Code, is amended to read as follows:

Sec. 12.1161. EFFECT OF REVOCATION, DENIAL OF RENEWAL, OR SURRENDER OF LICENSE [CHARTER]. (a) Except as provided by Subsection (b), if the commissioner revokes or denies the renewal of a license [charter] of an open-enrollment charter school, or if an open-enrollment charter school surrenders its license [charter], the school may not:

(1) continue to operate under this subchapter; or

(2) receive state funds under this subchapter.

(b) An open-enrollment charter school may continue to operate and receive state funds under this subchapter for the remainder of a school year if the commissioner denies renewal of the school's license [charter] before the completion of that school year.

SECTION 25. Sections 12.1162(a) and (d), Education Code, are amended to read as follows:

(a) The commissioner shall take any of the actions described by Subsection (b) or by Section 39.102(a), to the extent the commissioner determines necessary, if an open-enrollment charter school, as determined by a report issued under Section 39.058(b):

(1) commits a material violation of the school's license [charter];

(2) fails to satisfy generally accepted accounting standards of fiscal management; or

(3) fails to comply with this subchapter or another applicable rule or law.

(d) Not later than the third business day after the date the commissioner acts under Subsection (b), the commissioner shall provide the license [charter] holder an opportunity for a hearing.

SECTION 26. Sections 12.1163(a) and (c), Education Code, are amended to read as follows:

(a) To the extent consistent with this section, the commissioner may audit the records of:

(1) an open-enrollment charter school;

(2) a license [charter] holder; and

(3) a management company.

(c) Unless the commissioner has specific cause to conduct an additional audit, the commissioner may not conduct more than one on-site audit under this section [Section 12.1163] during any fiscal year, including any financial and administrative records. For purposes of this subsection, an audit of a license [charter] holder or management company associated with an open-enrollment charter school is not considered an audit of the school.

SECTION 27. Section 12.1164(a), Education Code, is amended to read as follows:

(a) The commissioner must notify the Teacher Retirement System of Texas in writing of the revocation, denial of renewal, or surrender of a license [charter] under this subchapter not later than the 10th business day after the date of the event.

SECTION 28. Section 12.117(c), Education Code, is amended to read as follows:

(c) An open-enrollment charter school authorized by a license [charter] granted under this subchapter to a municipality:

(1) is considered a work-site open-enrollment charter school for purposes of federal regulations regarding admissions policies that apply to open-enrollment charter schools receiving federal funding; and

(2) notwithstanding Subsection (a), may admit children of employees of the municipality to the school before conducting a lottery to fill remaining available positions, provided that the number of children admitted under this subdivision constitutes only a small percentage, as may be further specified by federal regulation, of the school's total enrollment.

SECTION 29. Section 12.118(b), Education Code, is amended to read as follows:

(b) An evaluation under this section must include consideration of the following items before implementing the license [charter] and after implementing the license [charter]:

(1) students' scores on assessment instruments administered under Subchapter B, Chapter 39;

(2) student attendance;

(3) students' grades;

(4) incidents involving student discipline;

(5) socioeconomic data on students' families;

(6) parents' satisfaction with their children's schools; and

(7) students' satisfaction with their schools.

SECTION 30. Section 12.119(a), Education Code, is amended to read as follows:

(a) A license [charter] holder shall file with the State Board of Education a copy of its articles of incorporation and bylaws, or comparable documents if the license [charter] holder does not have articles of incorporation or bylaws, within the period and in the manner prescribed by the board.

SECTION 31. The heading to Section 12.120, Education Code, is amended to read as follows:

Sec. 12.120. RESTRICTIONS ON SERVING AS MEMBER OF GOVERNING BODY OF LICENSE [CHARTER] HOLDER OR OPEN-ENROLLMENT CHARTER SCHOOL OR AS OFFICER OR EMPLOYEE.

SECTION 32. Section 12.120(a), Education Code, is amended to read as follows:

(a) A person may not serve as a member of the governing body of a license [charter] holder, as a member of the governing body of an open-enrollment charter school, or as an officer or employee of an open-enrollment charter school if the person:

(1) has been convicted of a felony or a misdemeanor involving moral turpitude;

(2) has been convicted of an offense listed in Section 37.007(a);

(3) has been convicted of an offense listed in Article 62.001(5), Code of Criminal Procedure; or

(4) has a substantial interest in a management company.

SECTION 33. Section 12.124, Education Code, is amended to read as follows:

Sec. 12.124. LOANS FROM MANAGEMENT COMPANY PROHIBITED. (a) The license [charter] holder or the governing body of an open-enrollment charter school may not accept a loan from a management company that has a contract to provide management services to:

(1) that charter school; or

(2) another charter school that operates under a license [charter] granted to the license [charter] holder.

(b) A license [charter] holder or the governing body of an open-enrollment charter school that accepts a loan from a management company may not enter into a contract with that management company to provide management services to the school.

SECTION 34. Section 12.127(c), Education Code, is amended to read as follows:

(c) This section is cumulative of all other remedies and does not affect:

(1) the liability of a management company to the license [charter] holder; or

(2) the liability of a license [charter] holder, a member of the governing body of a license [charter] holder, or a member of the governing body of an open-enrollment charter school to the state.

SECTION 35. Sections 12.128(a), (b), and (e), Education Code, are amended to read as follows:

(a) Property purchased or leased with funds received by a license [charter] holder under Section 12.106 after September 1, 2001:

(1) is considered to be public property for all purposes under state law;

(2) is held in trust by the license [charter] holder for the benefit of the students of the open-enrollment charter school; and

(3) may be used only for a purpose for which a school district may use school district property.

(b) If at least 50 percent of the funds used by a license [charter] holder to purchase real property are funds received under Section 12.106 before September 1, 2001, the property is considered to be public property to the extent it was purchased with those funds.

(e) This section does not affect a security interest in or lien on property established by a creditor in compliance with law if the security interest or lien arose in connection with the sale or lease of the property to the license [charter] holder.

SECTION 36. Section 12.132, Education Code, is amended to read as follows:

Sec. 12.132. USE OF MUNICIPAL FUNDS FOR CHARTER SCHOOL LAND OR FACILITIES. A municipality to which a license [charter] is granted under this subchapter may borrow funds, issue obligations, or otherwise spend its funds to acquire land or acquire, construct, expand, or renovate school buildings or facilities and related improvements for its open-enrollment charter school within the city limits of the municipality in the same manner the municipality is authorized to borrow funds, issue obligations, or otherwise spend its funds in connection with any other public works project.

SECTION 37. Section 12.133, Education Code, is amended to read as follows:

Sec. 12.133. WAGE INCREASE FOR CERTAIN PROFESSIONAL STAFF. (a) This section applies to a license [charter] holder that on January 1, 2006, operated an open-enrollment charter school.

(b) Each school year, using state funds received by the license [charter] holder for that purpose under Subsection (d), a license [charter] holder that participated in the program under Chapter 1579, Insurance Code, for the 2005-2006 school year shall provide employees of the license [charter] holder, other than administrators, compensation in the form of annual salaries, incentives, or other compensation determined appropriate by the license [charter] holder that results in an average compensation increase for classroom teachers, full-time librarians, full-time counselors, and full-time school nurses who are employed by the license [charter] holder and who would be entitled to a minimum salary under Section 21.402 if employed by a school district, in an amount at least equal to $2,500.

(b-1) Using state funds received by the license [charter] holder for that purpose under Subsection (d-1), a license [charter] holder that participated in the program under Chapter 1579, Insurance Code, for the 2005-2006 school year shall provide employees of the license [charter] holder, other than administrators, compensation in the form of annual salaries, incentives, or other compensation determined appropriate by the license [charter] holder that results in average compensation increases as follows:

(1) for full-time employees other than employees who would be entitled to a minimum salary under Section 21.402 if employed by a school district, an average increase at least equal to $500; and

(2) for part-time employees, an average increase at least equal to $250.

(c) Each school year, using state funds received by the license [charter] holder for that purpose under Subsection (e), a license [charter] holder that did not participate in the program under Chapter 1579, Insurance Code, for the 2005-2006 school year shall provide employees of the license [charter] holder, other than administrators, compensation in the form of annual salaries, incentives, or other compensation determined appropriate by the license [charter] holder that results in an average compensation increase for classroom teachers, full-time librarians, full-time counselors, and full-time school nurses who are employed by the license [charter] holder and who would be entitled to a minimum salary under Section 21.402 if employed by a school district, in an amount at least equal to $2,000.

(d) Each school year, in addition to any amounts to which a license [charter] holder is entitled under this chapter, a license [charter] holder that participated in the program under Chapter 1579, Insurance Code, for the 2005-2006 school year is entitled to state aid in an amount, as determined by the commissioner, equal to the product of $2,500 multiplied by the number of classroom teachers, full-time librarians, full-time counselors, and full-time school nurses employed by the license [charter] holder at an open-enrollment charter school.

(d-1) In addition to any amounts to which a license [charter] holder is entitled under this chapter, a license [charter] holder that participated in the program under Chapter 1579, Insurance Code, for the 2005-2006 school year is entitled to state aid in an amount, as determined by the commissioner, equal to the sum of:

(1) the product of $500 multiplied by the number of full-time employees other than employees who would be entitled to a minimum salary under Section 21.402 if employed by a school district; and

(2) the product of $250 multiplied by the number of part-time employees.

(e) Each school year, in addition to any amounts to which a license [charter] holder is entitled under this chapter, a license [charter] holder that did not participate in the program under Chapter 1579, Insurance Code, for the 2005-2006 school year is entitled to state aid in an amount, as determined by the commissioner, equal to the product of $2,000 multiplied by the number of classroom teachers, full-time librarians, full-time counselors, and full-time school nurses employed by the license [charter] holder at an open-enrollment charter school.

(f) A payment under this section is in addition to wages the license [charter] holder would otherwise pay the employee during the school year.

SECTION 38. Section 12.135(a), Education Code, is amended to read as follows:

(a) On the application of the license [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.

SECTION 39. Subchapter D, Chapter 12, Education Code, is amended by adding Section 12.136 to read as follows:

Sec. 12.136. ADOPTION OF RULES FOR TRANSITION TO LICENSING. The commissioner may adopt rules as necessary to provide for the transition from granting charters to granting licenses under this subchapter. This section expires January 1, 2015.

SECTION 40. Section 12.156, Education Code, is amended to read as follows:

Sec. 12.156. APPLICABILITY OF CERTAIN PROVISIONS. (a) Except as otherwise provided by this subchapter, Subchapter D applies to a college or university charter school or junior college charter school as though the college or university charter school or junior college charter school, as applicable, were granted a license [charter] under that subchapter.

(b) A charter granted under this subchapter is not considered for purposes of the limit on the number of licenses [open-enrollment charter schools] imposed by Section 12.101(b).

SECTION 41. Section 38.152, Education Code, is amended to read as follows:

Sec. 38.152. APPLICABILITY. This subchapter applies to an interscholastic athletic activity, including practice and competition, sponsored or sanctioned by:

(1) a school district, including a home-rule school district, or a public school, including any school for which a charter or license has been granted under Chapter 12; or

(2) the University Interscholastic League.

SECTION 42. Section 39.104(a), Education Code, is amended to read as follows:

(a) Except to the extent of a conflict with Section 12.116(a-1), interventions [Interventions] and sanctions authorized under this chapter for a school district or campus apply in the same manner to an open-enrollment charter school.

SECTION 43. Subchapter C, Chapter 39, Education Code, is amended by adding Section 39.0541 to read as follows:

Sec. 39.0541. EXEMPTION FROM ASSIGNMENT OF PERFORMANCE RATING FOR ALTERNATIVE EDUCATION OPEN-ENROLLMENT CHARTER SCHOOL. (a) Notwithstanding any other provision of this subchapter, based on standards adopted by commissioner rule, the commissioner may grant an exemption from the assignment of a performance rating under Section 39.054 to an open-enrollment charter school that is an alternative education campus serving only or primarily students who:

(1) have dropped out of school;

(2) are students at risk of dropping out of school, as defined by Section 29.081; or

(3) are part of a special population, including students eligible for a school district special education program under Section 29.003.

(b) To be granted an exemption under Subsection (a), an open-enrollment charter school must apply for the exemption in the time and manner required by commissioner rule.

(c) An exemption under Subsection (a) expires at the end of the school year for which it is granted.

SECTION 44. Section 45.301(1), Education Code, is amended to read as follows:

(1) "License [Charter] holder" has the meaning assigned by Section 12.1012.

SECTION 45. Section 45.302(a), Education Code, is amended to read as follows:

(a) The commissioner by rule may establish an open-enrollment charter school facilities credit enhancement program to assist license [charter] holders in obtaining financing for the purchase, repair, or renovation of real property, including improvements to real property, for facilities of open-enrollment charter schools.

SECTION 46. Section 45.303, Education Code, is amended to read as follows:

Sec. 45.303. LIMITATION ON PARTICIPATION; MINIMUM REQUIREMENTS FOR DEBT SERVICE RESERVE. In adopting rules under Section 45.302, the commissioner may:

(1) limit participation in the program to license [charter] holders who hold licenses [charters] for open-enrollment charter schools that meet standards established by the commissioner, including standards for financial stability, compliance with applicable state and federal program requirements, and student academic performance; and

(2) impose minimum requirements for a debt service reserve to secure repayment of obligations for which credit enhancement is provided under this subchapter.

SECTION 47. Sections 45.306(a), (b), (c), and (e), Education Code, are amended to read as follows:

(a) If a license [charter] holder on behalf of which the state makes a payment under the program does not immediately repay the Foundation School Program the amount of the payment, the commissioner shall withhold any funds due from the state to the license [charter] holder as necessary to recover the total amount of state and private funds paid on behalf of the license [charter] holder under the program.

(b) If a license [charter] holder is for any reason, including revocation or surrender of a license [charter] or bankruptcy, unable to repay any amount due under this subchapter, any loss of funds shall be shared equally between the Foundation School Program and the person providing the private funds obligated for credit enhancement under this subchapter.

(c) A license [charter] holder for which credit enhancement is provided under this subchapter to purchase, repair, or renovate real property for open-enrollment charter school facilities must agree to execute a lien on that real property in a form prescribed by the commissioner and approved by the attorney general to secure repayment of all amounts due to the state from the license [charter] holder, including reimbursement of any private funds paid on behalf of an open-enrollment charter school under this subchapter.

(e) The commissioner shall notify a license [charter] holder of any amount determined to be due to the state, including federal funds. If the full amount due to the state has not been repaid or recovered by the commissioner from other funds due to the license [charter] holder within the current and subsequent school year, the commissioner may request the attorney general to file an action to foreclose on a lien under this section. Funds recovered from foreclosure of a lien under this section shall be credited first to any security interest or lien with priority over the lien under this section, then to the license [charter] holder's obligation under this section, and then to any other program to which the funds are due.

SECTION 48. 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 license [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 49. Section 221.0071(a), Human Resources Code, is amended to read as follows:

(a) Notwithstanding any other law and in addition to the number of licenses [charters] allowed under Subchapter D, Chapter 12, Education Code, the State Board of Education may grant a charter on the application of a detention, correctional, or residential facility established only for juvenile offenders under Section 51.12, 51.125, or 51.126, Family Code.

SECTION 50. Section 221.056(d), Human Resources Code, is amended to read as follows:

(d) Notwithstanding any other law and in addition to the number of licenses [charters] allowed under Subchapter D, Chapter 12, Education Code, the State Board of Education shall grant a charter on the application of a residential treatment facility established under this section for a school chartered for the purposes of this section.

SECTION 51. Sections 375.308(b) and (c), Local Government Code, are amended to read as follows:

(b) An authority may not:

(1) issue bonds or notes without the prior approval of the governing body of the municipality that created the authority;

(2) seek a license [charter] for or operate, within the boundaries of the authority, an open-enrollment charter school authorized by Subchapter D, Chapter 12, Education Code; or

(3) levy ad valorem property taxes.

(c) A municipality may not seek a license [charter] for or operate an open-enrollment charter school authorized by Subchapter D, Chapter 12, Education Code, within the boundaries of the authority.

SECTION 52. Section 12.1012(1), Education Code, is repealed.

SECTION 53. The amendment of Subchapter D, Chapter 12, Education Code, by this Act and amendments to other provisions of law by this Act to conform to the amendment of Subchapter D, Chapter 12, Education Code, by this Act do not affect the status of a charter, including any legal rights, duties, and obligations based on a charter, granted under Subchapter D, Chapter 12, Education Code, before September 1, 2013.

SECTION 54. This Act takes effect September 1, 2013.