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A BILL TO BE ENTITLED
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AN ACT
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relating to the management and operation of open-enrollment charter |
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schools, including certain contracts involving management and |
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operation. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 12.1012, Education Code, is amended by |
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adding Subdivision (5-a) to read as follows: |
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(5-a) "Nonresident management company" means a |
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management company whose: |
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(A) principal place of business is in another |
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state; or |
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(B) parent company, governing entity, or |
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majority owner has its principal place of business in another |
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state. |
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SECTION 2. Section 12.1053(b), Education Code, is amended |
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to read as follows: |
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(b) An open-enrollment charter school is considered to be: |
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(1) a governmental entity for purposes of: |
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(A) Subchapters A and [Subchapter] D, Chapter |
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2252, Government Code; and |
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(B) Subchapter B, Chapter 271, Local Government |
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Code; |
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(2) a political subdivision for purposes of Subchapter |
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A, Chapter 2254, Government Code; and |
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(3) a local government for purposes of Sections |
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2256.009-2256.016, Government Code. |
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SECTION 3. Section 12.107, Education Code, is amended to |
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read as follows: |
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Sec. 12.107. STATUS AND USE OF FUNDS; DEPOSITORY. (a) |
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Funds received under Section 12.106 after September 1, 2001, by a |
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charter holder: |
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(1) are considered to be public funds for all purposes |
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under state law; |
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(2) are held in trust by the charter holder for the |
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benefit of the students of the open-enrollment charter school; |
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(3) may be used only for a purpose for which a school |
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may use local funds under Section 45.105(c); |
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(4) pending their use, must be deposited into the |
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charter holder's depository, selected under Subsection (a-1) [a |
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bank, as defined by Section 45.201, with which the charter holder |
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has entered into a depository contract]; and |
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(5) may not: |
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(A) be pledged or used to secure loans or bonds |
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for any other organization, including a non-charter operation or |
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out-of-state operation conducted by the charter holder or a related |
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party, as defined by commissioner rule adopted under Section |
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12.1166; or |
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(B) be used to support an operation or activity |
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not related to the educational activities of the charter holder. |
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(a-1) A charter holder may select as the charter holder's |
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depository for the deposit of state funds received under Section |
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12.106 only a bank, as defined by Section 45.201, that is located in |
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this state. |
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(b) A charter holder shall deliver to the agency a copy of |
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the depository contract between the charter holder and the |
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depository selected under Subsection (a-1) [any bank] into which |
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state funds are to be deposited. |
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SECTION 4. Section 12.1168(b), Education Code, is amended |
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to read as follows: |
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(b) A financial report filed under Section 44.008 by an |
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open-enrollment charter school must separately disclose: |
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(1) all financial transactions between the |
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open-enrollment charter school and any related party, as defined by |
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commissioner rule adopted under Section 12.1166, separately |
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stating the principal, interest, and lease payments; [and] |
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(2) the total compensation and benefits provided by |
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the school and any related party, as defined by commissioner rule |
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adopted under Section 12.1166, for each member of the governing |
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body and each officer and administrator of the school and the |
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related party; |
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(3) the total amount of financial transactions: |
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(A) between the school and a management company; |
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and |
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(B) between the school and any related party of a |
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management company, as defined by commissioner rule adopted under |
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Section 12.1169; and |
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(4) the total compensation and benefits provided by |
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the school or a related party of a management company described by |
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Subdivision (3)(B) for each nonresident person who provides |
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management services through a management company under a contract |
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with the school. |
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SECTION 5. Subchapter D, Chapter 12, Education Code, is |
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amended by adding Section 12.1169 to read as follows: |
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Sec. 12.1169. TRANSACTIONS INVOLVING RELATED PARTY OF A |
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MANAGEMENT COMPANY. (a) The commissioner shall adopt a rule |
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defining "related party of a management company" for purposes of |
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this subchapter. The definition of "related party of a management |
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company" must include: |
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(1) a party with a current or former board member, |
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administrator, or officer who is: |
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(A) a board member, administrator, or officer of |
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a management company that provides management services for an |
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open-enrollment charter school; or |
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(B) related within the third degree of |
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consanguinity or affinity, as determined under Chapter 573, |
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Government Code, to a board member, administrator, or officer of a |
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management company that provides management services for an |
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open-enrollment charter school; |
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(2) any organizations, joint ventures, and jointly |
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governed organizations related to a management company that |
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provides management services for an open-enrollment charter |
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school; |
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(3) any board members, administrators, or officers of |
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a management company that provides services for an open-enrollment |
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charter school, including a person related to a board member, |
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administrator, or officer of the management company within the |
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third degree of consanguinity or affinity, as determined under |
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Chapter 573, Government Code; and |
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(4) any other disqualified person, as that term is |
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defined by 26 U.S.C. Section 4958(f). |
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(b) For purposes of Subsection (a)(1), a person is a former |
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board member, administrator, or officer if the person served in |
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that capacity within one year of the date on which a financial |
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transaction between a management company and a related party of a |
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management company occurred. |
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SECTION 6. Sections 12.120(a) and (b), Education Code, are |
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amended to read as follows: |
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(a) A person may not serve as a member of the governing body |
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of a charter holder, as a member of the governing body of an |
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open-enrollment charter school, or as an officer or employee of an |
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open-enrollment charter school if the person: |
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(1) has been convicted of: |
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(A) a felony; or |
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(B) a misdemeanor involving moral turpitude; |
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(2) has been convicted of: |
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(A) an offense listed in Section 37.007(a) or[; |
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[(3) has been convicted of an offense listed] in |
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Article 62.001(5), Code of Criminal Procedure; or |
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(B) an offense under the laws of another state or |
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federal law that contains elements that are substantially similar |
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to the elements of an offense listed in Section 37.007(a) or in |
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Article 62.001(5), Code of Criminal Procedure; or |
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(3) [(4)] has a substantial interest in a management |
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company. |
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(b) For purposes of Subsection (a)(3) [(a)(4)], a person has |
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a substantial interest in a management company if the person: |
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(1) has a controlling interest in the management |
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company; |
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(2) owns more than 10 percent of the voting interest in |
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the management company; |
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(3) owns more than $25,000 of the fair market value of |
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the management company; |
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(4) has a direct or indirect participating interest by |
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shares, stock, or otherwise, regardless of whether voting rights |
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are included, in more than 10 percent of the profits, proceeds, or |
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capital gains of the management company; |
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(5) is a member of the board of directors or other |
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governing body of the management company; |
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(6) serves as an [elected] officer of the management |
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company; [or] |
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(7) is an employee of the management company; |
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(8) is an officer or employee of a contractor of the |
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management company; or |
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(9) is an officer or employee of a related party of a |
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management company, as defined by commissioner rule adopted under |
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Section 12.1169. |
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SECTION 7. Section 12.1202, Education Code, is amended to |
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read as follows: |
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Sec. 12.1202. REQUIREMENT FOR [MAJORITY OF] MEMBERS OF |
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GOVERNING BODY. (a) In this section, "qualified voter" has the |
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meaning assigned by Section 11.002, Election Code. |
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(b) A person must be a qualified voter to serve as a member |
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[majority of the members] of the governing body of an |
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open-enrollment charter school or the governing body of a charter |
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holder [must be qualified voters]. |
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SECTION 8. Section 12.125, Education Code, is amended to |
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read as follows: |
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Sec. 12.125. CONTRACT FOR MANAGEMENT SERVICES; PUBLIC |
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INFORMATION. (a) Any contract, including a contract renewal, |
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between an open-enrollment charter school and a management company |
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proposing to provide management services to the school must require |
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the management company to maintain all records related to the |
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management services separately from any other records of the |
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management company. |
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(b) A contract for management services is public |
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information under Chapter 552, Government Code, and may not be |
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excepted from required disclosure under Subchapter C of that |
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chapter. |
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SECTION 9. Subchapter D, Chapter 12, Education Code, is |
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amended by adding Section 12.1251 to read as follows: |
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Sec. 12.1251. REQUIRED REPORTING ON CONTRACTS FOR |
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MANAGEMENT SERVICES WITH NONRESIDENT MANAGEMENT COMPANIES. (a) An |
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open-enrollment charter school that contracts with a nonresident |
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management company for management services in an amount that |
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exceeds the lesser of $1 million per year or five percent of the |
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school's entitlement under Section 12.106 shall, not later than |
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October 1 of each year, post on the school's Internet website and |
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submit to the agency and the Legislative Budget Board: |
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(1) the total amount the school spent during the |
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preceding year for management services provided by a nonresident |
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management company; |
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(2) a copy of each contract for management services |
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provided by a nonresident management company and information |
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regarding any amendment, modification, renewal, or extension of |
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that contract; and |
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(3) any contract between the school and a nonresident |
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related party of a management company, as defined by commissioner |
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rule adopted under Section 12.1169, that provides management |
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services to the school. |
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(b) Not later than December 1 of each year, the agency shall |
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submit to the legislature a report on the total amount of state |
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money spent by an open-enrollment charter school on: |
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(1) management services provided by a nonresident |
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management company; and |
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(2) any services provided by a nonresident related |
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party of a management company, as defined by commissioner rule |
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adopted under Section 12.1169, that provides management services to |
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the school. |
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SECTION 10. Section 12.1168(a), Education Code, is |
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repealed. |
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SECTION 11. (a) Except as provided by Subsection (b) of |
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this section, this Act applies beginning with the 2023-2024 school |
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year. |
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(b) Sections 12.1053 and 12.107, Education Code, as amended |
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by this Act, apply only to a contract entered into or renewed on or |
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after September 1, 2023. |
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SECTION 12. This Act takes effect immediately if it |
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receives a vote of two-thirds of all the members elected to each |
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house, as provided by Section 39, Article III, Texas Constitution. |
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If this Act does not receive the vote necessary for immediate |
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effect, this Act takes effect September 1, 2023. |