85R12195 CAE-D     By: Shine H.B. No. 3604       A BILL TO BE ENTITLED   AN ACT   relating to the guarantee by the permanent school fund of bonds   issued by a charter district on the approval of the Bond Review   Board.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Section 12.135(a), Education Code, is amended to   read as follows:          (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 Bond Review Board [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 2.  Section 45.052, Education Code, is amended by   amending Subsection (a) and adding Subsection (a-1) to read as   follows:          (a)  On approval by the commissioner, bonds issued under   Subchapter A by a school district [or Chapter 53 for a charter   district], including refunding and refinanced bonds, are   guaranteed by the corpus and income of the permanent school fund.          (a-1)  On approval by the Bond Review Board, bonds issued   under Chapter 53 for a charter district, including refunding and   refinanced bonds, are guaranteed by the corpus and income of the   permanent school fund. The Bond Review Board must impose an   appropriate debt limit for a charter district seeking the guarantee   of bonds under this section. A bond may not be guaranteed under   this section unless:                (1)  the charter district produces an independent   feasibility study documenting the student demand and corresponding   revenues of the open-enrollment charter school that will benefit   from the bond proceeds;                (2)  the charter district demonstrates the manner in   which the open-enrollment charter school will benefit from the bond   proceeds;                (3)  the charter district demonstrates that the   open-enrollment charter school attained a minimum student   retention rate in each of the last three school years, as determined   by the Bond Review Board; and                (4)  the charter district establishes that the   open-enrollment charter school will maintain an acceptable   academic accountability rating under Chapter 39.          SECTION 3.  Sections 45.053(a), (c), and (d), Education   Code, are amended to read as follows:          (a)  Except as provided by Subsection (d), the commissioner   and the Bond Review Board 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.          (c)  The commissioner, with assistance from the Bond Review   Board, shall prepare and the board shall adopt an annual report on   the status of the guaranteed bond program under this subchapter.          (d)  The board by rule may increase the limit prescribed by   Subsection (a) to an amount not to exceed five times the cost value   of the permanent school fund, provided that the increased limit is   consistent with federal law and regulations and does not prevent   the bonds to be guaranteed from receiving the highest available   credit rating, as determined by the board. The board shall at least   annually consider whether to change any limit in accordance with   this subsection. This subsection may not be construed in a manner   that impairs, limits, or removes the guarantee of bonds that have   been approved by the commissioner or the Bond Review Board.          SECTION 4.  Sections 45.0532(a), (a-1), (c), and (d),   Education Code, are amended to read as follows:          (a)  In addition to the general limitation under Section   45.053, the Bond Review Board [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 Bond Review Board [commissioner].          (a-1)  The Bond Review Board [commissioner] may not approve   charter district refunding or refinanced bonds for guarantee under   this subchapter in a total amount that exceeds one-half of the total   amount available for the guarantee of charter district bonds under   Subsection (a).          (c)  Notwithstanding Subsections (a) and (b), the Bond   Review Board [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 Bond Review Board [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 Bond Review Board [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.          SECTION 5.  Section 45.0541, Education Code, is amended to   read as follows:          Sec. 45.0541.  ELIGIBILITY OF CHARTER DISTRICT BONDS. (a)    To be eligible for approval by the Bond Review Board   [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.          (b)  For purposes of Subsection (a)(1), a bond is rated as   investment grade if it receives a rating of at least BBB- or the   equivalent.          SECTION 6.  Section 45.055, Education Code, is amended by   amending Subsections (a) and (b) and adding Subsections (a-1) and   (d) 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.          (a-1)  A charter district seeking guarantee of eligible   bonds under this subchapter shall apply to the Bond Review Board   using a form adopted by the Bond Review Board for that purpose.          (b)  An application under Subsection (a) or (a-1) 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.          (d)  An application under Subsection (a-1) must be   accompanied by a fee set by rule of the Bond Review Board in an   amount designed to cover the costs of administering the program to   provide the guarantee of eligible bonds.          SECTION 7.  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.          (a-1)  Following receipt of an application for the guarantee   of bonds, the Bond Review Board shall conduct an investigation of   the applicant charter district in regard to:                (1)  the status of the charter 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.          (c)  If following the investigation the Bond Review Board is   satisfied that the charter district's bonds should be guaranteed   under this subchapter, the Bond Review Board shall endorse the   bonds.          SECTION 8.  Section 45.057, Education Code, is amended by   adding Subsection (a-1) to read as follows:          (a-1)  The Bond Review Board shall endorse bonds approved for   guarantee with:                (1)  the Bond Review Board stamp; and                (2)  a statement relating the Bond Review Board's   statutory authority for the guarantee.          SECTION 9.  Sections 45.0571(b), (c), (d), and (e),   Education Code, are amended to read as follows:          (b)  A charter district that has a bond guaranteed as   provided by this subchapter must annually remit to the Bond Review   Board [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 Bond Review Board [commissioner]   shall adopt rules to determine the total and annual amounts due   under this section.          (c)  The Bond Review Board [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 Bond Review Board [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 Bond Review Board [commissioner] shall make   recommendations to the legislature based on the review under   Subsection (d).          SECTION 10.  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:                (1)[,]  the school district [or charter district] shall   notify the commissioner; and                (2)  the charter district shall notify the Bond Review   Board.          SECTION 11.  Sections 45.0591(a), (b), and (d), Education   Code, are amended to read as follows:          (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 Bond   Review Board [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 Bond Review Board [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.          (d)  Following full reimbursement to the charter district   bond guarantee reserve fund and the permanent school fund, if   applicable, with interest, the Bond Review Board [comptroller]   shall further cancel the bond or coupon and forward it to the   charter district for which payment was made.          SECTION 12.  Section 45.061, Education Code, is amended by   amending Subsections (a) and (b) and adding Subsections (a-2) and   (b-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]. The [Except as provided by   Subsection (a-1), the] amount withheld shall be deposited to the   credit of the permanent school fund.          (a-2)  If the Bond Review Board orders payment from the   permanent school fund or the charter district bond guarantee   reserve fund on behalf of a charter district, the Bond Review Board   shall direct the comptroller to withhold the amount paid, plus   interest, from the first state money payable to the charter   district. Except as provided by Subsection (a-1), the amount   withheld shall be deposited to the credit of the permanent school   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.          (b-1)  In accordance with the rules of the Bond Review Board,   the Bond Review Board 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 13.  Section 45.062(a-1), Education Code, is amended   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 Bond Review Board   [commissioner] determines that the charter district is acting in   bad faith under the guarantee program under this subchapter, the   Bond Review Board [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 14.  Section 45.063, Education Code, is amended to   read as follows:          Sec. 45.063.  RULES. (a) The board may adopt rules   necessary for the administration of the bond guarantee program.          (b)  The Bond Review Board may adopt rules necessary for the   administration of the bond guarantee program for charter districts.          SECTION 15.  This Act takes effect September 1, 2017.