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 an amendment to 19 TAC Chapter 61, School Districts, Subchapter CC, Commissioner's Rules Concerning School Facilities, §61.1032, Instructional Facilities Allotment. The adopted amendment modifies the calculation of a district's wealth per student for districts affected by a defense base realignment, based on changes to statutory language, in accordance with Senate Bill 962, 80th Texas Legislature, 2007. The adopted amendment also incorporates other updates and revisions for the Instructional Facilities Allotment (IFA) program, such as the addition of new definitions, establishment of procedures and time limits for reporting changes, and explanations of present value savings calculations and the effects of refinancing. No changes were made to the rule since published as proposed.

STATUTORY AUTHORITY:

Texas Education Code (TEC), §46.002.

EFFECTIVE DATE:

May 4, 2008.

BACKGROUND INFORMATION AND SIGNIFICANT ISSUES:

Through 19 TAC §61.1032, adopted to be effective October 13, 1997, the commissioner exercised rulemaking authority relating to assistance with payment of instructional facility debt. The current provisions include procedural and other requirements that districts applying for and receiving assistance must follow, debt eligibility requirements, limitations on assistance, a description of the data sources used in making assistance determinations, and procedures for payment of assistance.

Senate Bill 962, 80th Texas Legislature, 2007, amended TEC, §46.006, to reduce a district's wealth per student if the district must construct, acquire, or renovate instructional facilities as a result of a military base realignment. In accordance with this change, the adopted amendment to 19 TAC §61.1032 adds new language in subsection (m)(2)(D) to modify the calculation of wealth per student for districts that meet the stipulations set forth in amended TEC, §46.006.

The adopted amendment to 19 TAC §61.1032 also incorporates the following updates and revisions.

Subsection (a) is revised to modify the definition of debt service in paragraph (4) and to add new paragraph (6) to define the term "interest rate management agreement."

Subsection (b) is revised to clarify that a separate application must be completed for each debt issue or lease-purchase agreement proposed for funding.

Subsection (d) is revised to clarify debt eligibility requirements, including the addition of new language in paragraphs (6) and (7) and new paragraph (8). Paragraph (6) addresses refinancing bonded debt. Paragraph (7) specifies reporting requirements that a district must follow when it makes a change to any IFA-supported bonds or IFA-supported lease-purchase agreement. New paragraph (8) establishes a state aid penalty for failure to disclose such a change and explains how IFA eligibility is regained after it has been lost as a result of failing to report a change.

Subsection (d) also is revised to add new paragraph (9) to address refunding bonds. New paragraph (9)(C) defines present-value savings and requires a district's financial advisor to certify present-value savings. New paragraph (9)(D) explains that a conversion of the period, mode, or index used to determine the interest rate for eligible debt will not be considered a refunding of the debt. New paragraphs (9)(E) and (9)(F) explain how the refinancing of debt multiple times may affect its eligibility for IFA aid and cause it to be considered for conversion to Existing Debt Allotment eligibility.

Subsequent paragraphs in subsection (d) are renumbered and updated accordingly. Changes in the renumbered paragraphs include revisions in new paragraph (10)(B) to remove from IFA eligibility any debt service associated with a lease-purchase agreement that has been refinanced for a term of fewer than eight years. Also, new paragraph (13) addresses debt entered into through an interest rate management agreement.

Subsection (f) is revised to address potential increased IFA support.

Subsection (g) is revised to clarify how a change in debt service requirements may affect the allotment awarded.

Subsection (h) is revised by modifying paragraph (6) and adding new paragraph (7). The modification to paragraph (6) requires that adjustments to state assistance for any reason be requested within a three-year time limit. New paragraph (7) requires that a district submit an up-to-date debt service schedule after any financing activity in order for bond issues and lease-purchase agreements and their related debt service payments to remain eligible to receive IFA state assistance.

Subsection (i) is revised to establish a method for allocation of debt service between eligible and ineligible categories.

Subsection (j) is revised by modifying paragraph (1) and adding new paragraph (6). The modification to paragraph (1) explains that requests for payments and/or adjustments submitted to TEA after December 15 will be processed with the payments due for the following fiscal year. New paragraph (6) requires that adjustments to state assistance for any reason be requested within a three-year time limit.

Subsections (k), (l), and (p) are revised to incorporate technical edits.

Subsection (s) is revised to clarify supplemental filings for fixed-rate bonds.

Subsection (t) is revised to require that a district notify the commissioner of IFA-related financing activities by submitting an amended application packet. New paragraph (2) defines the materials that make up a complete amended application packet.

No changes were made to the rule since published as proposed.

FISCAL IMPACT:

The TEA has determined that there are no fiscal implications to persons or entities required to comply with the proposed rule action, including local school districts and open-enrollment charter schools. In addition, there is no 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 adopted amendment's requirements to disclose interest rate management agreements will provide greater transparency in school district transactions. The modification of the calculation of wealth per student for districts affected by military base realignments will help these districts absorb costs associated with the realignments.

PROCEDURAL AND REPORTING IMPLICATIONS:

The adopted amendment to 19 TAC §61.1032 includes the addition of new language in subsection (m)(2)(D), which incorporates the provisions of Senate Bill 962, 80th Texas Legislature, 2007, and the provisions of amended TEC, §46.006, and requires districts that are eligible for a modified calculation of their wealth per student as a result of a military base realignment to provide documentation from the U.S. Department of Defense describing the impact of the base realignment on the local school district. Districts also will be required to disclose interest rate management transactions in their final official statements, though this appears to be a common practice and will not likely result in a change in the way of doing business for most districts.

Also, 19 TAC §61.1032(b) addresses the requirement for the submission of supplemental information to reflect changes in amounts and conditions related to debt. In conjunction with the adopted rule amendment, the Schedule 4A of the Standard Application System for IFA state aid has been revised to ask a district for several new pieces of information. The schedule now requires a district to list the comptroller's registration number associated with a bond issue or, for amended applications, the registration number associated with the original bond issue and with the refinanced bond issue. It also requires a district to indicate whether the application is the first submitted for a proposed debt issue, provide identifying information for any previous application(s) for the proposed debt issue, and indicate whether the application is an amended application.

LOCALLY MAINTAINED PAPERWORK REQUIREMENTS:

The locally maintained paperwork requirements resulting from the adopted amendment to 19 TAC §61.1032 correspond with and support the stated procedural and reporting implications.

PUBLIC COMMENTS:

The public comment period on the proposal began February 8, 2008, and ended March 9, 2008. No public comments were received.

ALTERNATIVES:

None.

OTHER COMMENTS AND RELATED ISSUES:

None.

Staff Members Responsible:

Adam Jones, Deputy Commissioner, Finance and Administration
Shirley Beaulieu, Associate Commissioner, Finance / CFO
Lisa Dawn-Fisher, Deputy Associate Commissioner, School Finance

For additional information, email rules@tea.state.tx.us.

Page last modified on 8/30/2011.