Bill Text: TX SB1658 | 2017-2018 | 85th Legislature | Comm Sub
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Relating to the ownership, sale, lease, and disposition of property and management of assets of an open-enrollment charter school.
Spectrum: Bipartisan Bill
Status: (Engrossed - Dead) 2017-05-20 - Committee report sent to Calendars [SB1658 Detail]
Download: Texas-2017-SB1658-Comm_Sub.html
Bill Title: Relating to the ownership, sale, lease, and disposition of property and management of assets of an open-enrollment charter school.
Spectrum: Bipartisan Bill
Status: (Engrossed - Dead) 2017-05-20 - Committee report sent to Calendars [SB1658 Detail]
Download: Texas-2017-SB1658-Comm_Sub.html
By: Taylor of Galveston | S.B. No. 1658 | |
(In the Senate - Filed March 9, 2017; March 22, 2017, read | ||
first time and referred to Committee on Education; April 18, 2017, | ||
reported adversely, with favorable Committee Substitute by the | ||
following vote: Yeas 10, Nays 0; April 18, 2017, sent to printer.) | ||
COMMITTEE SUBSTITUTE FOR S.B. No. 1658 | By: Taylor of Galveston |
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relating to the ownership, sale, lease, and disposition of property | ||
and management of assets of an open-enrollment charter school. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Section 12.1012, Education Code, is amended by | ||
adding Subdivisions (7) and (8) to read as follows: | ||
(7) "Payable obligation" means a contractually | ||
obligated expenditure that was reasonably incurred for the benefit | ||
of students enrolled at an open-enrollment charter school before | ||
the open-enrollment charter school ceased operations, including a | ||
debt described by Section 12.128(e). The term does not include any | ||
amount owed to a former charter holder or officer or director of the | ||
school. | ||
(8) "Remaining funds" means funds that are held by a | ||
former charter holder after satisfaction of all payable obligations | ||
and that were received: | ||
(A) under Section 12.106; or | ||
(B) from the disposition of property. | ||
SECTION 2. Subchapter D, Chapter 12, Education Code, is | ||
amended by adding Section 12.10125 to read as follows: | ||
Sec. 12.10125. OPEN-ENROLLMENT CHARTER SCHOOL NOT IN | ||
OPERATION. An open-enrollment charter school ceases to operate if: | ||
(1) the school's charter: | ||
(A) has been revoked; | ||
(B) has expired; | ||
(C) has been surrendered; or | ||
(D) has been abandoned; or | ||
(2) the school has otherwise ceased operation as a | ||
public school. | ||
SECTION 3. Section 12.106, Education Code, is amended by | ||
adding Subsections (d), (e), and (f) to read as follows: | ||
(d) Except as provided by Subsection (e), all remaining | ||
funds of a charter holder for an open-enrollment charter school | ||
that ceases to operate must be returned to the agency and deposited | ||
in the charter school liquidation fund. | ||
(e) The agency may approve a transfer of a charter holder's | ||
remaining funds to another charter holder if the charter holder | ||
receiving the funds has not received notice of the expiration or | ||
revocation of the charter holder's charter for an open-enrollment | ||
charter school or notice of a reconstitution of the governing body | ||
of the charter holder under Section 12.1141 or 12.115. | ||
(f) The commissioner may adopt rules specifying: | ||
(1) the time during which a former charter holder must | ||
return remaining funds under Subsection (d); and | ||
(2) the qualifications required for a charter holder | ||
to receive a transfer of remaining funds under Subsection (e). | ||
SECTION 4. Section 12.107(a), Education Code, is amended to | ||
read as follows: | ||
(a) Funds received under Section 12.106 after September 1, | ||
2001, by a charter holder: | ||
(1) are considered to be public funds for all purposes | ||
under state law; | ||
(2) are held in trust by the charter holder for the | ||
benefit of the students of the open-enrollment charter school; | ||
(3) may be used only for a purpose for which a school | ||
may use local funds under Section 45.105(c); [ |
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(4) pending their use, must be deposited into a bank, | ||
as defined by Section 45.201, with which the charter holder has | ||
entered into a depository contract; and | ||
(5) may not: | ||
(A) be pledged or used to secure loans or bonds | ||
for any other organization, including a non-charter operation or | ||
out-of-state operation conducted by the charter holder or a related | ||
party; or | ||
(B) be used to support an operation or activity | ||
not related to the educational activities of the charter holder. | ||
SECTION 5. Section 12.1163, Education Code, is amended by | ||
adding Subsection (d) to read as follows: | ||
(d) An audit under Subsection (a) may include the review of | ||
any real property transactions between the charter holder and a | ||
related party, as defined by commissioner rule adopted under | ||
Section 12.1166. If the commissioner determines that a transaction | ||
with a related party using funds received under Section 12.106 was | ||
structured in a manner that did not benefit the open-enrollment | ||
charter school or that the transaction was in excess of fair market | ||
value as determined under Section 12.1167, the commissioner may | ||
order that the transaction be reclassified or that other action be | ||
taken as necessary to protect the school's interests. Failure to | ||
comply with the commissioner's order is a material violation of the | ||
charter. | ||
SECTION 6. Subchapter D, Chapter 12, Education Code, is | ||
amended by adding Sections 12.1166, 12.1167, and 12.1168 to read as | ||
follows: | ||
Sec. 12.1166. RELATED PARTY TRANSACTIONS. (a) The | ||
commissioner shall adopt a rule defining "related party" for | ||
purposes of this subchapter. The definition of "related party" | ||
must include: | ||
(1) a party with a current or former board member, | ||
administrator, or officer who is: | ||
(A) a board member, administrator, or officer of | ||
an open-enrollment charter school; or | ||
(B) related within the third degree of | ||
consanguinity or affinity, as determined under Chapter 573, | ||
Government Code, to a board member, administrator, or officer of an | ||
open-enrollment charter school; | ||
(2) a charter holder's related organizations, joint | ||
ventures, and jointly governed organizations; | ||
(3) an open-enrollment charter school's board members, | ||
administrators, or officers or a person related to a board member, | ||
administrator, or officer within the third degree of consanguinity | ||
or affinity, as determined under Chapter 573, Government Code; and | ||
(4) any other disqualified person, as that term is | ||
defined by 26 U.S.C. Section 4958(f). | ||
(b) For purposes of Subsection (a)(1), a person is a former | ||
board member, administrator, or officer if the person served in | ||
that capacity within one year of the date on which a financial | ||
transaction between the charter holder and a related party | ||
occurred. | ||
(c) In a charter holder's annual audit filed under Section | ||
44.008, the charter holder must include a list of all transactions | ||
with a related party. | ||
Sec. 12.1167. APPRAISAL OF CERTAIN PROPERTY. The | ||
commissioner may adopt rules to require: | ||
(1) an open-enrollment charter school to provide | ||
notice to the commissioner of an appraiser before entering into a | ||
transaction with a related party; | ||
(2) the commissioner to publish a list of acceptable | ||
appraisers; | ||
(3) an appraiser to use specific methods for an | ||
appraisal; or | ||
(4) an appraisal to be filed with the agency. | ||
Sec. 12.1168. FINANCIAL REPORT OF CERTAIN SCHOOLS. (a) In | ||
this section, "related party" has the meaning adopted by | ||
commissioner rule under Section 12.1166. | ||
(b) A financial report filed under Section 44.008 by an | ||
open-enrollment charter school must separately disclose: | ||
(1) all financial transactions between the | ||
open-enrollment charter school and any related party, separately | ||
stating the principal, interest, and lease payments; and | ||
(2) the total compensation and benefits provided by | ||
the school and any related party for each member of the governing | ||
body and each officer and administrator of the school and the | ||
related party. | ||
(c) The commissioner may adopt rules to implement this | ||
section. | ||
SECTION 7. Section 12.128, Education Code, is amended by | ||
amending Subsections (a) and (c) and adding Subsections (a-1), | ||
(b-1), (b-2), (c-1), (c-2), and (f) to read as follows: | ||
(a) Property purchased [ |
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charter holder under Section 12.106 after September 1, 2001: | ||
(1) is considered to be public property for all | ||
purposes under state law; | ||
(2) is property of this state held in trust by the | ||
charter holder for the benefit of the students of the | ||
open-enrollment charter school; and | ||
(3) may be used only for a purpose for which a school | ||
district may use school district property. | ||
(a-1) Property leased with funds received by a charter | ||
holder under Section 12.106 after September 1, 2001: | ||
(1) is considered to be public property for all | ||
purposes under state law; | ||
(2) is property of this state held in trust by the | ||
charter holder for the benefit of the students of the | ||
open-enrollment charter school; and | ||
(3) may be used only for a purpose for which a school | ||
district may use school district property. | ||
(b-1) Subject to Subsection (b-2), while an open-enrollment | ||
charter school is in operation, the charter holder holds title to | ||
any property described by Subsection (a) or (b) and may exercise | ||
complete control over the property as permitted under the law. | ||
(b-2) A charter holder may not transfer, sell, or otherwise | ||
dispose of any property described by this section without the prior | ||
written consent of the agency if: | ||
(1) the charter holder has received notice of: | ||
(A) the expiration of the charter holder's | ||
charter under Section 12.1141 and the charter has not been renewed; | ||
or | ||
(B) the charter's revocation under Section | ||
12.115(c); | ||
(2) the charter holder has received notice that the | ||
open-enrollment charter school is under discretionary review by the | ||
commissioner, which may result in the revocation of the charter or a | ||
reconstitution of the governing body of the charter holder under | ||
Section 12.115; or | ||
(3) the open-enrollment charter school for which the | ||
charter is held has otherwise ceased to operate. | ||
(c) The commissioner shall: | ||
(1) take possession and assume control of the property | ||
described by Subsection (a) of an open-enrollment charter school | ||
that ceases to operate; and | ||
(2) supervise the disposition of the property in | ||
accordance with this subchapter [ |
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(c-1) Notwithstanding Subsection (c), if an open-enrollment | ||
charter school ceases to operate, the agency: | ||
(1) for property purchased with state funds, shall | ||
direct the charter holder to dispose of the property through one of | ||
the following methods: | ||
(A) retain or liquidate the property and provide | ||
reimbursement to the state as provided by Section 12.1281; | ||
(B) transfer the property to: | ||
(i) the agency under Section 12.1281(h); or | ||
(ii) a school district or open-enrollment | ||
charter school under Section 12.1282; | ||
(C) close the operations of the open-enrollment | ||
charter school under Section 12.1284; or | ||
(D) take any combination of the actions described | ||
by Paragraphs (A), (B), and (C); and | ||
(2) for property leased with state funds, may direct | ||
the charter holder to assign the charter holder's interest in the | ||
lease to the agency. | ||
(c-2) The agency may approve an expenditure of remaining | ||
funds by a former charter holder for insurance or utilities for or | ||
maintenance, repairs, or improvements to property described by this | ||
section if the agency determines that the expenditure is reasonably | ||
necessary to dispose of the property or preserve the property's | ||
value. | ||
(f) A decision by the agency under this section is final and | ||
may not be appealed. | ||
SECTION 8. Subchapter D, Chapter 12, Education Code, is | ||
amended by adding Sections 12.1281, 12.1282, 12.1283, and 12.1284 | ||
to read as follows: | ||
Sec. 12.1281. DISPOSITION OF PROPERTY PURCHASED WITH STATE | ||
FUNDS. (a) A former charter holder of an open-enrollment charter | ||
school that has ceased to operate may retain property described by | ||
Section 12.128 if the former charter holder reimburses the state | ||
with non-state funds and the former charter holder: | ||
(1) provides written assurance that the requirements | ||
of Section 12.1284 will be met; and | ||
(2) receives approval from the agency. | ||
(b) On receiving consent from the agency under Section | ||
12.128(b-2) and a written agreement from any creditor with a | ||
security interest described by Section 12.128(e), the former | ||
charter holder may: | ||
(1) sell property for fair market value; or | ||
(2) transfer property to an open-enrollment charter | ||
school or a school district as provided under Section 12.1282. | ||
(c) The amount of funds the state is entitled to as | ||
reimbursement for property of a former charter holder is: | ||
(1) for property retained by the former charter | ||
holder, the current fair market value less the amount of any debt | ||
subject to a security interest or lien described by Section | ||
12.128(e), multiplied by the percentage of state funds used to | ||
purchase the property; or | ||
(2) for property sold by the former charter holder, | ||
the net sales proceeds of the property multiplied by the percentage | ||
of state funds used to purchase the property. | ||
(d) To determine the amount of state funds a former charter | ||
holder used to purchase property, the agency shall calculate: | ||
(1) an estimated state reimbursement amount based on | ||
the last annual financial report filed under Section 44.008 | ||
available at the time the former charter holder retains or sells the | ||
property; and | ||
(2) a final state reimbursement amount using the | ||
former charter holder's final financial audit filed under Section | ||
44.008. | ||
(e) A former charter holder retaining property under | ||
Subsection (a) or selling the property under Subsection (b)(1) | ||
shall: | ||
(1) file an affidavit in the real property records of | ||
the county in which the property is located disclosing the state | ||
interest in the property; | ||
(2) place in escrow with the state comptroller an | ||
amount of non-state funds equal to 110 percent of the estimated | ||
state reimbursement amount; and | ||
(3) not later than two weeks after the date the charter | ||
holder's final financial audit is filed under Section 44.008, | ||
submit to the state the final state reimbursement amount using the | ||
funds in escrow in addition to any other funds necessary to pay the | ||
full amount of state reimbursement. | ||
(f) A former charter holder may retain any funds remaining | ||
after complying with this section. | ||
(g) As soon as the agency is satisfied that the former | ||
charter holder complied with Subsection (e), the agency shall file | ||
written notice of the release of the state interest in property the | ||
former charter holder retains under this section and authorize the | ||
return of any funds not used for state reimbursement to the former | ||
charter holder. | ||
(h) Subject to the satisfaction of any security interest or | ||
lien described by Section 12.128(e), if a former charter holder | ||
does not dispose of property under Subsection (a) or (b), the former | ||
charter holder shall transfer the property, including a conveyance | ||
of title, to the agency in accordance with the procedures and time | ||
requirements established by the agency. | ||
(i) Subject to the satisfaction of any security interest or | ||
lien described by Section 12.128(e), if the agency determines a | ||
former charter holder failed to comply with this section or Section | ||
12.1282, on request of the agency, the attorney general shall take | ||
any appropriate legal action to compel the former charter holder to | ||
convey title to the agency or other governmental entity authorized | ||
by the agency to maintain or dispose of property. | ||
(j) A decision by the agency under this section is final and | ||
may not be appealed. | ||
(k) The commissioner may adopt rules necessary to | ||
administer this section. | ||
Sec. 12.1282. TRANSFER OF PROPERTY PURCHASED WITH STATE | ||
FUNDS. (a) The agency may approve the transfer of property | ||
described by Section 12.128 from an open-enrollment charter school | ||
that has ceased to operate, or may transfer property conveyed to the | ||
agency by the former charter holder under Section 12.1281, to a | ||
school district or an open-enrollment charter school if: | ||
(1) the open-enrollment charter school or school | ||
district receiving the property: | ||
(A) agrees to the transfer; and | ||
(B) agrees to identify the property as purchased | ||
wholly or partly using state funds on the school's annual financial | ||
report filed under Section 44.008; | ||
(2) any creditor with a security interest in or lien on | ||
the property described by Section 12.128(e) agrees to the transfer; | ||
and | ||
(3) the transfer of the property does not make the | ||
open-enrollment charter school or school district receiving the | ||
property insolvent. | ||
(b) Property received by an open-enrollment charter school | ||
or school district under this section is considered to be state | ||
property under Section 12.128(a). | ||
(c) The commissioner may adopt rules necessary to | ||
administer this section, including rules establishing | ||
qualifications and priority for a school district or | ||
open-enrollment charter school to receive a transfer of property | ||
under this section. | ||
(d) If the agency determines that the cost of disposing of | ||
personal property described by Section 12.128 transferred to the | ||
agency by an open-enrollment charter school that ceases to operate | ||
exceeds the return of value from the sale of the property, the | ||
agency may distribute the personal property to open-enrollment | ||
charter schools and school districts in a manner determined by the | ||
commissioner. | ||
(e) A determination by the agency under this section is | ||
final and may not be appealed. | ||
Sec. 12.1283. SALE OF PROPERTY PURCHASED WITH STATE FUNDS. | ||
(a) After the agency receives title to property described by | ||
Section 12.128, the agency may sell the property at any price | ||
acceptable to the agency. | ||
(b) On request of the agency, the following state agencies | ||
shall enter into a memorandum of understanding to sell property for | ||
the agency: | ||
(1) for real property, the General Land Office; and | ||
(2) for personal property, the Texas Facilities | ||
Commission. | ||
(c) A memorandum of understanding entered into as provided | ||
by Subsection (b) may allow the General Land Office or Texas | ||
Facilities Commission to recover from the sale proceeds any cost | ||
incurred by the agency in the sale of the property. | ||
(d) Subject to the satisfaction of any security interest or | ||
lien described by Section 12.128(e), proceeds from the sale of | ||
property under this section shall be deposited in the charter | ||
school liquidation fund. | ||
(e) The commissioner may adopt rules as necessary to | ||
administer this section. | ||
Sec. 12.1284. CLOSURE OF CHARTER SCHOOL OPERATIONS. | ||
(a) After extinguishing all payable obligations owed by an | ||
open-enrollment charter school that ceases to operate, including a | ||
debt described by Section 12.128(e), a former charter holder shall: | ||
(1) remit to the agency: | ||
(A) any remaining funds described by Section | ||
12.106(d); and | ||
(B) any state reimbursement amounts from the sale | ||
of property described by Section 12.128; or | ||
(2) transfer the remaining funds to another charter | ||
holder under Section 12.106(e). | ||
(b) The agency shall deposit any funds received under | ||
Subsection (a)(1) in the charter school liquidation fund. | ||
(c) The commissioner may adopt rules necessary to | ||
administer this section. | ||
SECTION 9. Subchapter D, Chapter 12, Education Code, is | ||
amended by adding Section 12.141 to read as follows: | ||
Sec. 12.141. RECLAIMED FUNDS. (a) The agency shall | ||
deposit funds received under Sections 12.106, 12.128, 12.1281, | ||
12.1283, and 12.1284 into the charter school liquidation fund and | ||
may use the funds to: | ||
(1) pay expenses relating to managing and closing an | ||
open-enrollment charter school that ceases to operate, including | ||
maintenance of the school's student and other records; | ||
(2) dispose of property described by Section 12.128; | ||
and | ||
(3) maintain property described by Section 12.128, | ||
including expenses for insurance, utilities, maintenance, and | ||
repairs. | ||
(b) The agency may not use funds under this section until | ||
the commissioner determines if the open-enrollment charter school | ||
that ceases to operate received an overallocation of funds under | ||
Section 12.106 that must be recovered for the foundation school | ||
program. | ||
(c) The agency shall annually review the amount of funds in | ||
the charter school liquidation fund and transfer any funds | ||
exceeding $2 million: | ||
(1) for use in funding a high-quality educational | ||
grant program established by the commissioner; or | ||
(2) to the comptroller to deposit in the charter | ||
district bond guarantee reserve fund under Section 45.0571. | ||
(d) The agency may delay a transfer of funds under | ||
Subsection (c) if the excess is less than $100,000. Funds set aside | ||
for an overallocation of funds from the foundation school program | ||
are not included in determining whether the amount of funds exceeds | ||
$2 million. | ||
(e) The commissioner may adopt rules necessary to implement | ||
this section. | ||
SECTION 10. Section 39.1121, Education Code, is amended by | ||
adding Subsection (c-1) to read as follows: | ||
(c-1) A board of managers appointed for the final closure of | ||
a former open-enrollment charter school under Subsection (c) has | ||
the authority to: | ||
(1) access and manage any former charter holder's bank | ||
account that contains funds received under Section 12.106; and | ||
(2) subject to approval by a creditor with a security | ||
interest in or lien on property described by Section 12.128 and in | ||
accordance with Section 12.1282, sell or transfer to another | ||
charter holder or school district any property titled to the former | ||
charter holder that is identified in the former open-enrollment | ||
charter school's annual financial report filed under Section 44.008 | ||
as being acquired, wholly or partly, with funds received under | ||
Section 12.106. | ||
SECTION 11. Section 39.1122(c), Education Code, is amended | ||
to read as follows: | ||
(c) The agency [ |
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due to the former charter holder under Section 12.106 or funds | ||
returned to the state from liquidation of [ |
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described by Section 12.128 and held by a former charter holder for | ||
compensation of a member of a board of managers for an | ||
open-enrollment charter school or a campus of an open-enrollment | ||
charter school or a superintendent. | ||
SECTION 12. Section 43.001(a), Education Code, is amended | ||
to read as follows: | ||
(a) Except as provided by Subsection (b), the permanent | ||
school fund, which is a perpetual endowment for the public schools | ||
of this state, consists of: | ||
(1) all land appropriated for the public schools by | ||
the constitution and laws of this state; | ||
(2) all of the unappropriated public domain remaining | ||
in this state, including all land recovered by the state by suit or | ||
otherwise except pine forest land as defined by Section 88.111 and | ||
property described by Section 12.128; | ||
(3) all proceeds from the authorized sale of permanent | ||
school fund land; | ||
(4) all proceeds from the lawful sale of any other | ||
properties belonging to the permanent school fund; | ||
(5) all investments authorized by Section 43.003 of | ||
properties belonging to the permanent school fund; and | ||
(6) all income from the mineral development of | ||
permanent school fund land, including income from mineral | ||
development of riverbeds and other submerged land. | ||
SECTION 13. Section 44.008, Education Code, is amended by | ||
adding Subsections (f), (g), and (h) to read as follows: | ||
(f) An open-enrollment charter school shall provide an | ||
accounting of each parcel of the school's real property, including | ||
identifying the amount of local, state, and federal funds used to | ||
purchase or improve each parcel of property. | ||
(g) An open-enrollment charter school for which the charter | ||
has expired, been revoked, or been surrendered or an | ||
open-enrollment charter school that otherwise ceases to operate | ||
shall submit a final annual financial report to the agency. The | ||
report must verify that all state property held by the charter | ||
holder has been returned or disposed of in accordance with Section | ||
12.128. | ||
(h) The commissioner may adopt rules necessary to implement | ||
this section, including rules defining local funds. | ||
SECTION 14. A transfer of property from an open-enrollment | ||
charter school that ceases to operate to another open-enrollment | ||
charter school that occurred before the effective date of this Act | ||
is ratified if both open-enrollment charter schools classified the | ||
property as purchased with state funds on each school's annual | ||
financial report under Section 44.008, Education Code. | ||
SECTION 15. This Act takes effect only if a specific | ||
appropriation for the implementation of the Act is provided in a | ||
general appropriations act of the 85th Legislature. | ||
SECTION 16. This Act takes effect immediately if it | ||
receives a vote of two-thirds of all the members elected to each | ||
house, as provided by Section 39, Article III, Texas Constitution. | ||
If this Act does not receive the vote necessary for immediate | ||
effect, this Act takes effect September 1, 2017. | ||
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