By: Shapiro	S.B. No. 597

	A BILL TO BE ENTITLED
	AN ACT
	relating to the guarantee of open-enrollment charter school bonds
	by the permanent school fund.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1.  Subchapter D, Chapter 12, Education Code, is
	amended by adding Section 12.135 to read as follows:
	Sec. 12.135.  DESIGNATION AS CHARTER DISTRICT FOR PURPOSES
	OF BOND GUARANTEE. (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 commissioner.  The financial standards must require
	an open-enrollment charter school to have an investment grade
	credit rating as specified by Section 45.0541.
	(b)  A charter district may apply for bonds issued under
	Chapter 53 for the open-enrollment charter school to be guaranteed
	by the permanent school fund as provided by Chapter 45.
	SECTION 2.  Section 45.051, Education Code, is amended by
	adding Subdivision (1-a) and amending Subdivision (2) to read as
	follows:
	(1-a)  "Charter district" means an open-enrollment
	charter school designated as a charter district under Section
	12.135.
	(2)  "Paying agent" means the financial institution
	that is designated by a school district or charter district as its
	agent for the payment of the principal of and interest on guaranteed
	bonds.
	SECTION 3.  Section 45.052, Education Code, is amended to
	read as follows:
	Sec. 45.052.  GUARANTEE. (a)  On approval by the
	commissioner, bonds issued under Subchapter A by a school district
	or Chapter 53 for a charter district, including refunding bonds,
	are guaranteed by the corpus and income of the permanent school
	fund.
	(b)  Notwithstanding any amendment of this subchapter or
	other law, the guarantee under this subchapter of school district
	or charter district bonds remains in effect until the date those
	bonds mature or are defeased in accordance with state law.
	SECTION 4.  Subchapter C, Chapter 45, Education Code, is
	amended by adding Section 45.0532 to read as follows:
	Sec. 45.0532.  LIMITATION ON GUARANTEE OF CHARTER DISTRICT
	BONDS. (a)  In addition to the general limitation under Section
	45.053, the 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 commissioner.
	(b)  For purposes of Subsection (a), the total available
	capacity of the guaranteed bond program is the limit established by
	the board under Sections 45.053(d) and 45.0531 minus the total
	amount of outstanding guaranteed bonds.  Each time the board
	increases the limit under Section 45.053(d), the total amount of
	charter district bonds that may be guaranteed increases accordingly
	under Subsection (a).
	(c)  Notwithstanding Subsections (a) and (b), the
	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 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
	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.
	(e)  A guarantee of charter district bonds must be made in
	accordance with this chapter and any applicable federal law.
	SECTION 5.  Section 45.054, Education Code, is amended to
	read as follows:
	Sec. 45.054.  ELIGIBILITY OF SCHOOL DISTRICT BONDS. To be
	eligible for approval by the commissioner, school district bonds
	must be issued under Subchapter A of this chapter or under
	Subchapter A, Chapter 1207, Government Code, to make a deposit
	under Subchapter B or C of that chapter, by an accredited school
	district.
	SECTION 6.  Subchapter C, Chapter 45, Education Code, is
	amended by adding Section 45.0541 to read as follows:
	Sec. 45.0541.  ELIGIBILITY OF CHARTER DISTRICT BONDS. To be
	eligible for approval by the 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.
	SECTION 7.  Subsections (a) and (b), Section 45.055,
	Education Code, are amended 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.
	(b)  An application under Subsection (a) 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.
	SECTION 8.  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.
	(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.
	SECTION 9.  Subsection (b), Section 45.057, Education Code,
	is amended to read as follows:
	(b)  The guarantee is not effective unless the attorney
	general approves the bonds under Section 45.005 or 53.40, as
	applicable.
	SECTION 10.  Subchapter C, Chapter 45, Education Code, is
	amended by adding Section 45.0571 to read as follows:
	Sec. 45.0571.  CHARTER DISTRICT BOND GUARANTEE RESERVE FUND.
	(a)  The charter district bond guarantee reserve fund is a special
	fund in the state treasury outside the general revenue fund.  The
	following amounts shall be deposited in the fund:
	(1)  money due from a charter district as provided by
	Subsection (b); and
	(2)  interest earned on balances in the fund.
	(b)  A charter district that has a bond guaranteed as
	provided by this subchapter must annually remit to the
	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 commissioner shall adopt rules to determine
	the total and annual amounts due under this section.
	(c)  The 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 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 commissioner shall make recommendations to the
	legislature based on the review under Subsection (d).
	SECTION 11.  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, the school district or charter district shall notify the
	commissioner.
	SECTION 12.  The heading to Section 45.059, Education Code,
	is amended to read as follows:
	Sec. 45.059.  PAYMENT OF SCHOOL DISTRICT BOND ON DEFAULT
	[FROM PERMANENT SCHOOL FUND].
	SECTION 13.  Subsection (a), Section 45.059, Education Code,
	is amended to read as follows:
	(a)  Immediately following receipt of notice under Section
	45.058 that a school district will be or is unable to pay maturing
	or matured principal or interest on a guaranteed bond, the
	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 maturing or matured
	principal or interest.
	SECTION 14.  Subchapter C, Chapter 45, Education Code, is
	amended by adding Section 45.0591 to read as follows:
	Sec. 45.0591.  PAYMENT OF CHARTER DISTRICT BOND ON DEFAULT.
	(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
	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 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.
	(c)  Immediately following receipt of the funds for payment
	of the principal or interest, the paying agent shall pay the amount
	due and forward the canceled bond or coupon to the comptroller.  The
	comptroller shall hold the canceled bond or coupon on behalf of the
	fund or funds from which payment was made.
	(d)  Following full reimbursement to the charter district
	bond guarantee reserve fund and the permanent school fund, if
	applicable, with interest, the comptroller shall further cancel the
	bond or coupon and forward it to the charter district for which
	payment was made.
	SECTION 15.  Section 45.060, Education Code, is amended to
	read as follows:
	Sec. 45.060.  BONDS NOT ACCELERATED ON DEFAULT. If a school
	district or charter district fails to pay principal or interest on a
	guaranteed bond when it matures, other amounts not yet mature are
	not accelerated and do not become due by virtue of the school
	district's or charter district's default.
	SECTION 16.  The heading to Section 45.061, Education Code,
	is amended to read as follows:
	Sec. 45.061.  REIMBURSEMENT OF FUNDS [PERMANENT SCHOOL
	FUND].
	SECTION 17.  Section 45.061, Education Code, is amended by
	amending Subsections (a) and (b) and adding Subsection (a-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. Except as provided by Subsection (a-1), the
	[The] amount withheld shall be deposited to the credit of the
	permanent school fund.
	(a-1)  After the permanent school fund has been reimbursed
	for all money paid from the fund as the result of a default of a
	charter district bond guaranteed under this subchapter, any
	remaining amounts withheld under Subsection (a) shall be deposited
	to the credit of the charter district bond guarantee reserve 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.
	SECTION 18.  Section 45.062, Education Code, is amended by
	adding Subsection (a-1) 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 commissioner
	determines that the charter district is acting in bad faith under
	the guarantee program under this subchapter, the 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 19.  Subdivision (10), Section 53.02, Education
	Code, is amended to read as follows:
	(10)  "Authorized charter school" means an
	open-enrollment charter school that holds a charter granted under
	Subchapter D, Chapter 12, and includes an open-enrollment charter
	school designated as a charter district as provided by Section
	12.135.
	SECTION 20.  Section 53.351, Education Code, is amended by
	amending Subsection (f) and adding Subsection (f-1) to read as
	follows:
	(f)  Except as provided by Subsection (f-1), a [A] revenue
	bond issued under this section is not a debt of the state or any
	state agency, political corporation, or political subdivision of
	the state and is not a pledge of the faith and credit of any of these
	entities.  A revenue bond is payable solely from the revenue of the
	authorized open-enrollment charter school on whose behalf the bond
	is issued.  A revenue bond issued under this section must contain on
	its face a statement to the effect that:
	(1)  neither the state nor a state agency, political
	corporation, or political subdivision of the state is obligated to
	pay the principal of or interest on the bond; and
	(2)  neither the faith and credit nor the taxing power
	of the state or any state agency, political corporation, or
	political subdivision of the state is pledged to the payment of the
	principal of or interest on the bond.
	(f-1)  Subsection (f) does not apply to a revenue bond issued
	under this section for a charter district if the bond is approved
	for guarantee by the permanent school fund under Subchapter C,
	Chapter 45.
	SECTION 21.  This Act applies only to a bond issued or
	refunded on or after the effective date of this Act by an
	open-enrollment charter school designated as a charter district
	under Section 12.135, Education Code, as added by this Act. A bond
	issued or refunded by an open-enrollment charter school before the
	effective date of this Act is governed by the law in effect
	immediately before that date, and that law is continued in effect
	for that purpose.
	SECTION 22.  This Act takes effect September 1, 2011.