Agency Response. The agency disagrees with the comment. Proposed §100.1033(c)(5)(A)(ii) was taken from a similar rule adopted by the State Board of Education. The primary purpose of the rule, then as now, is to provide notice to school districts affected by the expansion of a charter holder's operations. When a charter holder adds a site, extends is geographic area, increases its enrollment, or changes the grade levels that it serves, it changes the nature of the impact that its operations have on neighboring public schools. These neighboring public schools need adequate time to plan and budget for the financial and other impacts caused by such changes.

Comment. ACE and HCJJCS suggested that §100.1033(c)(6) should be deleted. Amendments pertaining to delegation of powers and duties should be treated as other substantive amendments and evaluated with reference to the criteria in TEC, §12.001.

Agency Response. The agency disagrees with the comment. In response to another comment, §100.1033(c)(6) must be expanded, not deleted. Section 100.1033(c)(6) has been amended to add specific criteria that the commissioner will use in exercising his discretion to grant or deny proposed amendments to the governance structure described in an open-enrollment charter.

Throughout House Bill 6, great emphasis is placed on the principle that a charter holder must be held accountable for exercising its authority to operate the public school authorized by its open-enrollment charter. Newly amended TEC, §12.111(9), provides that the open-enrollment charter itself must specifically list the powers and duties that the governing body intends to delegate to any person. The powers or duties not listed in the charter must be exercised by the governing body itself, acting as a body corporate through a public meeting. The only way that an open-enrollment charter granted before House Bill 6 is likely to be in compliance with TEC, §12.111(9), is if the commissioner amends the charter to list the duties actually performed by a person other than the governing body acting as a body corporate.

As stated in response to another comment, the commissioner has discretion to grant or deny any amendment, guided by the policies expressed by the Legislature in TEC, Chapter 12, Subchapter D. Newly adopted TEC, §12.001 (Purposes of Chapter), applies with equal force to each section of each subchapter in TEC, Chapter 12, and does not warrant special emphasis in the context of a highly discretionary decision such as an amendment concerning changes in the governance of a public school. Rather, the factors that should be weighed most heavily in such a decision concern the soundness of the governance structure proposed by the charter holder in light of the governance-related provisions of House Bill 6.

Proposed §100.1035. Compliance Records on Nepotism, Conflicts of Interest, and Restrictions on Serving.

Comment. TASB stated that requiring charter school board members to comply with proposed §100.1035 relating to nepotism, conflicts of interest, and restrictions on serving is appropriate considering that charters are publicly funded with taxpayer money.

Agency Response. No response required.

Comment. ATPE suggested requiring the records on employees, officers, and governing body members to be filed annually and to be updated within 30 days of any significant changes (i.e., resignation or appointment of governing body members). At a minimum, charter holders should be required to submit records on their governing body members since that body is responsible for all policies and operations at their schools. An individual suggested that the record-keeping requirements proposed by §100.1035(a) be handled by a mandatory disclosure and reporting system, much like a candidate running for public office, under which the affected charter personnel would be required to disclose any conflict of interest or nepotism, and held accountable through the penal code. ACE and HCJJCS suggested that proposed §100.1035(a) should be revised to eliminate the requirement that a charter holder "collect and maintain" the information referenced in that section. Rather, a charter holder may instead be required to make such information available upon request. This requirement responds to the state's interest in monitoring compliance. As written, the rule is overly prescriptive and interferes unnecessarily with the operation of the school.

Agency Response. The agency disagrees with the comments. The information listed in proposed §100.1035(a) is required by the charter holder in order for it to comply with the requirements of House Bill 6. The public and the media have a right to access this information under the Records Retention Act and the Public Information Act.

The information listed in proposed §100.1035 relates to many different requirements imposed on a charter holder by TEC, Chapter 12, Subchapter D. For example, TEC, §12.1054 (Applicability of Laws Relating to Conflict of Interest), makes Local Government Code, Chapter 171, apply to charter holders, including significant criminal penalties against a local public official who has a conflict of interest and knowingly fails to comply with its requirements. TEC, §12.1055 (Applicability of Nepotism Laws), makes Government Code, Chapter 573, apply to charter holders, including significant criminal penalties against a public official who takes official action benefiting a family member in violation of its requirements. TEC, §12.119 (Bylaws; Annual Report), requires that a charter holder must report the name, address, and telephone number of each officer and member of the governing body to the SBOE, as well as the amount of annual compensation paid to each officer and member. TEC, §12.1054, makes Local Government Code, §171.009, apply to charter holder board members, including a prohibition against having compensated charter holder board members. House Bill 6 also enacted TEC, §12.120 (Restrictions on Serving as Member of Governing Body of Charter Holder or Open-Enrollment Charter School or as Officer or Employee), a charter-specific law designed to prevent individuals with certain criminal convictions or a substantial interest in a management company from serving as a member of the governing body of a charter holder, as a member of the governing body of an open-enrollment charter school, or as an officer or employee of an open-enrollment charter school. Finally, the bill enacted TEC, §12.123 (Training for Members of Governing Body of School and Officers), a mandatory regime for training the principal officials running a publicly funded charter school.

It is impossible for a charter holder to comply with TEC, §§12.1054, 12.1055, 12.119, 12.120, and 12.123, without first informing itself as to the information listed in proposed §100.1035(a). For example, the policy of TEC, §12.120, is clearly that a person convicted of certain criminal offenses may not serve as an employee of a charter school. Yet if a charter holder fails to inform itself concerning the criminal convictions of its employees, the policy behind TEC, §12.120, will be frustrated. A clear (if implicit) requirement of TEC, §12.120, is that the charter holder must collect this information. There is certainly an administrative cost associated with gathering, maintaining, and reviewing the information listed in proposed §100.1035. But failing to implement these provisions is not an option.

Under TEC, §12.1052, electronic or other documents collected or created by a charter holder must be retained for the period required by the applicable records retention schedule. Under TEC, §12.1051, this information is generally public. Thus, the costs attributed to §100.1035 are, in fact, associated with the underlying statute. By contrast, the commissioner might have proposed a centralized reporting regime that required each charter holder to submit the information listed in §100.1035 in electronic form to the agency. Such a system of reporting- suggested by ATPE and the individual commenter above- would avoid substantial travel expenses to the agency for reviewing such information at the site of each charter holder. However, such savings to the agency would have come at the expense of the charter holders, whose budgets can scarcely afford the added cost. Accordingly, proposed §100.1035 merely requires the charter holder to create and retain such records as are reasonably necessary to comply with the requirements of the law. The agency will review this information via proposed §100.1029 instead.

Comment. ACE and HCJJCS suggested that the scope of the individuals covered by §100.1035(a) is overly broad. The law firm of Bracewell & Patterson, L.L.P., Attorneys and Counselors at Law, on behalf of its client, Texans Can!, on behalf of its open-enrollment charter schools, commented as follows. Regarding proposed §100.1035, the statute does not target officers of the governing body of a charter holder, if they are not also members of the governing body. Texans Can!, therefore, recommends that proposed rule § 100.1035 be revised to delete the words "officer and" in §100.1035(a)(1).

Agency Response. The agency agrees, in part, with the comment. The scope of the information listed in proposed §100.1035(a) is required by the charter holder in order for it to comply with the requirements of House Bill 6. See discussion above. However, there is an equivocal use of the term, "officer" in proposed §100.1035(a)(1) and (a)(2), which introduces an ambiguity in the rules.

The phrase, "officer of the charter school" is a defined term under the proposed rules. Typically, an officer of a charter school is a member of the charter holder's administrative staff, either an employee or an independent contractor. As used in proposed §100.1035(a)(1), the phrase, "each officer and member of the governing body of the charter holder" refers only to offices held by members of the governing body. Section 100.1035(a)(1), as proposed, was not intended to include any member of the administrative staff of the charter holder who does not fall within the definition of the phrase, "officer of the charter school."

As proposed, the definition of an officer of a charter school necessarily includes top charter holder administrators, regardless whether the charter holder engages in non-charter activities. For example, it is impossible for the chief executive officer or chief financial officer of a charter holder to fall outside the definitions provided by proposed §100.1011(18) and (21), respectively. Similarly, any employee or contractor of the charter holder who is charged with performing, or does perform, any of the functions listed in proposed §100.1011(19) is a central administration officer. These administrators are at the apex of an organization that is responsible to the governing body of the charter holder for the operation of the charter school.

However, a charter holder engaged in non-charter activities may have administrators, employees and contractors who do not perform, and are not charged with performing, any charter school functions. Such staff engaged in purely non-charter activities should be free from the requirements of House Bill 6 relating to the employees and officers of a charter school. Accordingly, proposed §100.1035 has been revised to delete the phrase, "officer and" from §100.1035(a)(1). In addition, proposed §100.1011(1) has been revised to delete the phrase "officer of a charter school," and proposed §100.1011(17), adopted as §100.1011(16), has been revised to clarify that a charter holder employee or independent contractor engaged solely in non-charter activities for the charter holder is not an "officer of a charter school" under these rules.

Comment. ACE and HCJJCS suggested that the level of detail required by §100.1035(b) is unnecessary to meet statutory goals. A charter holder should not be required to collect and maintain any of the information described in this subsection. A charter holder should only be required to produce upon request the information necessary to establish compliance with statute.

Agency Response. The agency disagrees with the comments. The information listed in proposed §100.1035(b) is required by the charter holder in order for it to comply with the requirements of House Bill 6. See earlier agency response.

Comment. ACE and HCJJCS requested that the terms "business interests" and "transactions" be defined at §100.1035(b)(7). ACE and HCJJCS asked, "For example, is an unsuccessful application for employment a "transaction?"

Agency Response. The agency disagrees with the comment. Section 100.1035(b)(7), as proposed, covers only actual business interests or transactions with a charter holder, charter school, or management company. It does not cover inchoate transactions or the solicitation of a business interest that is not obtained.

Comment. ACE and HCJJCS suggested that §100.1035(c) should be deleted, and that a requirement that a charter holder make information available upon request is sufficient to permit monitoring of compliance.

Agency Response. The agency disagrees with the comment. The information listed in proposed §100.1035(b) is required by the charter holder in order for it to comply with the requirements of House Bill 6. See earlier agency response.

Proposed §100.1037. Notification of Charter Application.

Comment. TASB stated that it appreciates §100.1037, which requires that school boards be notified of potential charter schools that could be set up in their district and draw students.

Agency Response. No response required.

Division 3. Charter School Funding.

Proposed §100.1043. Status and Use of State Funds; Depository Contract.

Comment. TASB stated that it welcomes §100.1043, which spells out that state funds received by a charter holder are public funds, holding them to the same standard as districts, TEC, §45.105(c).

Agency Response. No response required.

Proposed §100.1047. Accounting for State Funds.

Comment. TCTA supported the provisions of §100.1047 including existing charter contract language, stating that it is a necessary addition to the rules due to the fact that financial mismanagement has been one of the biggest problems plaguing some charter schools.

Agency Response. No response required.

Comment. ATPE suggested that §100.1047(b) should require the charter holder to notify the parents of students enrolled in a charter school of the results of their annual financial audit reports, and that a copy of the report be forwarded to appropriate legislators representing the area served by the charter.

Agency Response. The agency disagrees with the comment. House Bill 6 amended Local Government Code, §140.006, (Publication of Annual Financial Statement by School, Road, or Other District) to provide that the financial statement of an open-enrollment charter school shall be made available in the manner provided by Chapter 552, Government Code.

The suggested change would conflict with this provision of House Bill 6.

Comment. ATPE requested clarification concerning the reason proposed §100.1047(d)(1) includes an exemption to charter schools from complying with rules regarding the attendance accounting for court-related students, since many of the students they serve are at-risk and may fall into this category.

Agency Response. The agency disagrees with the comment. Proposed §100.1047(d)(1) provides that a charter holder is not required to comply with §129.22 of this title (relating to Court-Related Students). Section 129.22(a) requires that a student referred to a juvenile court for delinquent conduct or conduct indicating a need for supervision shall be given excused absences under TEC, §25.087 (Excused Absences), for any missed classes under certain circumstances. Section 129.22(b) requires that a student referred to the Texas Department of Human Services or a county or local welfare unit on the basis that he or she is abused or neglected shall be given excused absences under TEC, §25.087, for any missed classes under certain circumstances. Charter schools are not subject to TEC, §25.087.

Comment. TASB requested the addition of language to this section that would spell out that TEC, §25.002, (requirements for student enrollment in public schools, such as identification documents or immunization records that need to be produced within 30 days) applies to charter schools.

Agency Response. The agency agrees with the comment. Section 100.1047(d) has been modified to provide that a charter holder shall comply with TEC, §25.002.

Comment. ACE and HCJJCS suggested that the word "any" in §100.1047(e)(1) and (2) should be deleted.

Agency Response. The agency disagrees with the comment. There is no amount of private financial activity that may be commingled with the accounting, auditing, budgeting, reporting, and recordkeeping systems of the charter school, and any amount of commingling of such systems is a material charter violation. The suggested change would introduce an ambiguity in the rules.

Comment. ACE suggested that the qualifiers "intentional and knowing" should be inserted immediately before the word "commingling" in §100.1047(e)(2).

Agency Response. The agency disagrees with the comment. The suggested change would introduce an ambiguity in the rules. A person who "intentionally" or "knowingly" commingles public and private business in the accounting, auditing, budgeting, reporting, and recordkeeping systems of a charter school commits a criminal offense. By contrast, a person who unintentionally and unknowingly commingles public and private business in the accounting, auditing, budgeting, reporting, and recordkeeping systems of a charter school merely commits a material charter violation. The agency has an obligation under TEC, §12.107, to insure that taxpayer funds are not used to support the private business ventures of a charter holder, regardless of whether it is done deliberately.

Comment. ACE and HCJJCS suggested that §100.1047(f) should be reduced to the first sentence appearing in the proposed draft. Statute does not require that a charter holder separately record the information listed after the first sentence.

Agency Response. The agency disagrees with the comment. Proposed §100.1047(f) is authorized by TEC, §12.106(c), and is taken from language that has been included in every contract for charter since Generation 1. The requirement that the books and records of a charter school clearly identify self-interested transactions by charter school officials is distinguishable from the regime found in Local Government Code, Chapter 171, and its purpose is different. Section 100.1047(f) enables the agency to carry out its responsibility to audit and review these self-interested transactions for compliance with other provisions of House Bill 6.

Comment. ACE suggested that, if the language appearing after the first sentence of §100.1047(f) is not deleted, the phrase "position of influence" in subsection (f)(5) should be defined.

Agency Response. The agency agrees with the comment. Section 100.1047 has been modified to add a new subsection (g) defining the phrase, "position of influence."