Proposed Amendment to 19 TAC Chapter 105, Foundation School Program, Subchapter B, Use of State Funds, §105.11, Maximum Allowable Indirect Cost
(Second Reading and Final Adoption)
November 20, 2009
COMMITTEE ON SCHOOL FINANCE/PERMANENT SCHOOL FUND: ACTION
STATE BOARD OF EDUCATION: ACTION
SUMMARY: This item presents proposed amendment to 19 TAC Chapter 105, Foundation School Program, Subchapter B, Use of State Funds, §105.11, Maximum Allowable Indirect Cost, for second reading and final adoption. The proposed amendment would update the rule to reflect a change to the use of special program allotments for indirect or administrative expenses, in accordance with House Bill (HB) 3646, 81st Texas Legislature, 2009.
STATUTORY AUTHORITY: Texas Education Code (TEC), §§42.151(h), 42.152(c), 42.153(b), 42.154(c), 42.156(b), and 42.1541.
EFFECTIVE DATE: The proposed effective date of the proposed amendment to 19 TAC §105.11 is 20 days after filing as adopted with the Texas Register. Under TEC, §7.102(f), the State Board of Education (SBOE) must approve the rule action at second reading and final adoption by a vote of two-thirds of its members to specify an effective date earlier than the beginning of the 2010-2011 school year. The earlier effective date is necessary to implement the TEC, §42.1541, that requires the SBOE to take action that permits the increased indirect cost allotments to apply beginning with the 2009-2010 school year.
PREVIOUS BOARD ACTION: Section 105.11 was adopted to be effective September 1, 1996, and amended to be effective December 5, 2004. The Committee on School Finance/Permanent School Fund discussed the proposed amendment to 19 TAC §105.11 at the July 2009 meeting. The SBOE approved the proposed amendment for first reading and filing authorization at the September 2009 meeting. The committee conducted a work session on the proposed amendment to 19 TAC §105.11 on October 16, 2009.
BACKGROUND INFORMATION AND SIGNIFICANT ISSUES: Through 19 TAC §105.11, the SBOE establishes the maximum percentage of Foundation School Program (FSP) special allotments under the TEC, Chapter 42, Subchapter C, that school districts may expend for indirect costs for specific programs. Currently, no more than 15% of FSP special allotments can be expended on indirect costs related to the following programs: compensatory education, gifted and talented education, bilingual education and special language programs, and special education. The rule also limits the maximum indirect cost for career and technical education to no more than 10%, as authorized by the General Appropriations Act, Rider 74, 78th Texas Legislature, 2003. In addition, the rule specifies the expenditure function codes to which the indirect costs may be attributed, as defined in the Texas Education Agency (TEA) publication, Financial Accountability System Resource Guide.
HB 3646, 81st Texas Legislature, 2009, amended the TEC, §42.152(c), to provide that up to 45%, rather than 15%, may be expended from FSP special allotments for indirect costs for the compensatory education program. HB 3646 also added the TEC, §42.1541, directing the SBOE to by rule increase the indirect cost allotments established for special education, bilingual education, and career and technical education programs. HB 3646 directs the SBOE to take action not later than the date that permits the increased indirect cost allotments to apply beginning with the 2009-2010 school year.
The proposed amendment to 19 TAC §105.11 (Attachment II) approved for first reading and filing authorization by the SBOE in September 2009 would increase the percent allowances for indirect costs for the FSP special allotments under the TEC, Chapter 42, Subchapter C, to no more than 45% for the compensatory education program and no more than 35% for gifted and talented education, bilingual education, career and technical education, and special education programs, in accordance with the TEC, §42.152(c), and §42.1541.
Attachment III of this item presents the indirect percentage calculation comparison, which includes hold harmless information, provided to the committee during the October 16, 2009 meeting.
FISCAL IMPACT: The TEA has determined that there are no additional costs to persons or entities required to comply with the proposed rule action. The proposed amendment would allow schools to reallocate their special revenue funds with a different indirect cost rate. The change does not increase or decrease the amount of funds available to the schools.
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 proposed amendment would implement the statutory change related to the use of state funds for special program allotments.
PROCEDURAL AND REPORTING IMPLICATIONS: The proposed amendment would have no new procedural and reporting requirements.
LOCALLY MAINTAINED PAPERWORK REQUIREMENTS: The proposed amendment would have no new locally maintained paperwork requirements.
PUBLIC COMMENTS: Following the September 2009 SBOE meeting, notice of the proposed amendment was filed with the Texas Register, initiating the official public comment period.
Public comments received by the agency have been provided to the SBOE on a weekly basis. A summary of public comments received and corresponding agency responses regarding the proposal will be provided to the SBOE during the November 2009 meeting.
OTHER COMMENTS AND RELATED ISSUES: None.
COMMISSIONER'S RECOMMENDATION: I recommend that the State Board of Education:
By an affirmative vote of two-thirds of the members of the board, approve for second reading and final adoption a proposed amendment, as determined by the board, to 19 TAC Chapter 105, Foundation School Program, Subchapter B, Use of State Funds, §105.11, Maximum Allowable Indirect Cost, with an effective date of 20 days after filing as adopted with the Texas Register.
Commissioner of Education
Staff Members Responsible: Laura Taylor, Associate Commissioner
Rita Chase, Director
Attachments: I. Statutory Citations
II. Text of Proposed Amendment to 19 TAC Chapter 105, Foundation School Program, Subchapter B, Use of State Funds, §105.11, Maximum Allowable Indirect Cost
III. Indirect Percentage Calculation Comparison Provided During the October 16, 2009, Meeting of the Committee on School Finance/Permanent School Fund