Adopted New 19 TAC Chapter 109, Budgeting, Accounting, and Auditing, Subchapter AA, Commissioner's Rules Concerning Financial Accountability, Division 2, Financial Solvency, §109.1101, Financial Solvency Review
I. Statutory Citations (PDF)
II. Text of Adopted New 19 TAC Chapter 109, Budgeting, Accounting, and Auditing, Subchapter AA, Commissioner's Rules Concerning Financial Accountability, Division 2, Financial Solvency, §109.1101, Financial Solvency Review (PDF)
III. Summary of Public Comments and Agency Responses
The rule action presented in this item will be filed as adopted with the Texas Register under the commissioner's rulemaking authority. This item adopts new 19 TAC Chapter 109, Budgeting, Accounting, and Auditing, Subchapter AA, Commissioner's Rules Concerning Financial Accountability, Division 2, Financial Solvency, §109.1101, Financial Solvency Review. The adopted new rule allows the commissioner to implement and administer the provisions of the Texas Education Code (TEC), §39.0822 and §39.0823, as added by Section 59 of House Bill (HB) 3, 81st Texas Legislature, 2009, which direct the Texas Education Agency (TEA) to develop a review process relating to financial solvency of school districts and open-enrollment charter schools and to take certain actions if the TEA's review indicates a projected deficit.
TEC, §39.0822 and §39.085.
December 22, 2010.
BACKGROUND INFORMATION AND SIGNIFICANT ISSUES:
HB 3, 81st Texas Legislature, 2009, added the TEC, §39.0822 and §39.0823. Section 39.0822 requires the commissioner to adopt rules related to the financial solvency review required by that section. This review is to be developed by the TEA, in consultation with school district financial officers and public finance experts, to anticipate the future financial solvency of school districts and open-enrollment charter schools through analysis of tax and financial information and staff and student count information. Section 39.0823 requires the commissioner to assign an accredited-warned status to a school district or an open-enrollment charter school that has been required to submit a financial plan as a result of the findings of the TEA's financial solvency review if the district or charter school fails to submit, get approval for, or appropriately implement the plan.
From December 2009 through April 2010, the TEA held a series of focus groups with school district and open-enrollment charter school financial officers and public finance experts to develop the financial solvency review required by the TEC, §39.0822, and to solicit feedback on draft rule language. The adopted new 19 TAC §109.1101, which incorporates feedback from these focus groups, implements the required financial solvency review. Specifically, the adopted new rule explains the review's purpose, provides definitions, describes the data to be used in the review, explains the review process and methodology, and sets out requirements related to financial plans and consequences for failing to comply with these requirements. The adoption includes adoption as rule the document entitled "Financial Solvency Review Methodology."
In addition, Chapter 109, Subchapter AA, was renamed and organized to include the adopted new financial solvency rule. The subchapter title was changed from "Commissioner's Rules Concerning Financial Accountability Rating System" to "Commissioner's Rules Concerning Financial Accountability."
In response to public comment, subsection (d)(3)(C) and the figure provided in subsection (d)(1) were modified at adoption to reference the financial accountability terms of "assigned and unassigned" that will go into effect with fiscal year 2010-2011 data. Also in response to public comment, subsection (g) was modified at adoption to remove the prohibition on appealing accreditation status decisions made by the commissioner in regard to the financial solvency review.
The TEA has determined that there are no additional costs to the persons or entities required to comply with the rule action. In addition, there is no direct adverse economic impact for small businesses and microbusinesses; therefore, no regulatory flexibility analysis, specified in Texas Government Code, §2006.002, is required.
PUBLIC AND STUDENT BENEFIT:
The financial solvency review will alert school districts and open-enrollment charter schools to conditions that could result in financial insolvency and allow the districts and schools to correct these conditions before financial insolvency occurs.
PROCEDURAL AND REPORTING IMPLICATIONS:
School districts and open-enrollment charter schools are required to use an electronic template to submit to the TEA first-quarter financial data for the current school year; information about district/school borrowing, administration turnover, and whether the district has recently declared financial exigency or the school has recently declared bankruptcy; and comments on any irregularities. School districts and open-enrollment charter schools that the TEA selects for additional review are required to submit interim financial reports supplemented by staff and student data.
LOCALLY MAINTAINED PAPERWORK REQUIREMENTS:
The adopted rule action has no locally maintained paperwork requirements.
The public comment period on the proposal began October 8, 2010, and ended November 8, 2010. Attachment III provides a summary of public comments and corresponding agency responses.
OTHER COMMENTS AND RELATED ISSUES:
Staff Members Responsible:
Lisa Dawn-Fisher, Deputy Associate Commissioner, School Finance
Belinda Dyer, Director, Forecasting and Fiscal Analysis
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