The Texas Education Agency (TEA) adopts amendments to §§97.1037, 97.1051, 97.1053, and 97.1055, concerning record review of certain decisions and accreditation statuses and standards. The amendments are adopted without changes to the proposed text as published in the September 12, 2008, issue of the Texas Register (33 TexReg 7659) and will not be republished. Section 97.1037 establishes procedures for creating an administrative record for review by the State Office of Administrative Hearings. Sections 97.1051, 97.1053, and 97.1055 address accreditation statuses and standards, including definitions and purpose. The adopted amendments add language to include charter schools in the accreditation process under Texas Education Code (TEC), Chapter 39.

During the 79th Texas Legislature, Third Called Session, 2006, House Bill (HB) 1 was passed, which amended the TEC, Chapter 39, Public School System Accountability. The HB 1 changes addressed, in part, the accreditation of school districts; sanctions and interventions for school districts, charter schools, and campuses; and the review by the State Office of Administrative Hearings of certain sanctions. As a result, the TEA was required to adopt rules to implement the changes addressed.

In January 2008, the TEA notified districts that 19 TAC Chapter 97, Planning and Accountability, Subchapter DD, Investigative Reports, Sanctions, and Record Reviews, had been amended and that 19 TAC Chapter 97, Planning and Accountability, Subchapter EE, Accreditation Status, Standards, and Sanctions, and 19 TAC Chapter 157, Hearings and Appeals, Subchapter EE, Review by State Office of Administrative Hearings: Certain Accreditation Sanctions, had been adopted to establish new and revised rules in compliance with HB 1. The rule actions clarified and codified current TEA practice, as well as the commissioner of education's intent, regarding accreditation issues.

New 19 TAC Chapter 97, Planning and Accountability, Subchapter EE, Accreditation Status, Standards, and Sanctions, adopted to be effective January 6, 2008, included new rules that define the accreditation statuses of Accredited, Accredited-Warned, Accredited-Probation, and Not Accredited-Revoked and state how accreditation statuses will be determined and assigned to school districts. The adoption also established accreditation standards and sanctions, including definitions, purpose, and oversight appointments.

Because they were not included in the School FIRST (Financial Integrity Rating System of Texas) financial accountability rating system, charter schools have not received an accreditation status under the TEC, Chapter 39. The adopted amendments add language to include charter schools in the accreditation process. The adopted amendments to 19 TAC Chapter 97, Subchapters DD and EE, include the following.

In 19 TAC Chapter 97, Subchapter DD, Investigative Reports, Sanctions, and Record Reviews, §97.1037, Record Review of Certain Decisions, has been amended to add new subsection (a)(5) to apply the request for record review process to a charter school accreditation finding.

In 19 TAC Chapter 97, Subchapter EE, Accreditation Status, Standards, and Sanctions, the following amendments are adopted.

Section 97.1051, Definitions, has been amended to include a charter school campus to the definition of campus and add other definitions to clarify applicability to open-enrollment charter schools. Section 97.1053, Purpose, has been amended to add new subsection (c) to specify applicability to open-enrollment charter schools.

Section 97.1055, Accreditation Status, has been amended to address charter school accreditation by adding new subsection (g) that establishes substitute criteria when considering the financial performance of a charter operator in lieu of a financial accountability rating. The adopted new subsection (g) also establishes the process to be used concerning specific financial accountability findings. In addition, adopted new subsection (h) has been added to address third-party accreditation.

The TEA determined that the amendments will have no direct adverse economic impact for small businesses and microbusinesses; therefore, no regulatory flexibility analysis, specified in Texas Government Code, §2006.002, is required.

The public comment period on the proposal began September 12, 2008, and ended October 13, 2008. Following is a summary of the public comments received during the comment period and corresponding agency responses.

Comment. A representative of Orenda Education suggested that language be included that defines the constitution of an adverse opinion in §97.1055(g)(1)(C)(i) and an established amount or percentage of financial resources or expenditures that were not properly documented in §97.1055(g)(1)(C)(ii).

Agency Response. The agency disagrees. These terms have specific meanings within the finance industry and are established in accounting rules set forth by the American Institution of Certified Public Accountants.

Comment. A representative of Pegasus School of Liberal Arts and Sciences recommended adding the word material before the word financial in §97.1055(g)(1)(C)(ii)(I).

Agency Response. The agency disagrees. This is a term of art used in the finance industry and has a specific meaning. If the school received an adverse or disclaimed opinion based on financial resources or expenditures that were not properly documented, that in itself makes this material. Use of the word material would be redundant.

Comment. A representative of Pegasus School of Liberal Arts and Sciences recommended making performance for the 2006-2007 and 2007-2008 fiscal years under §97.1055(g)(2)(C) for informational purposes only.

Agency Response. The agency disagrees. To postpone as recommended would mean that the first year charters would be held financially accountable for accreditation purposes would be 2010-2011. An annual audit is already a requirement for charter schools, and the commissioner considers financial issues when considering renewals and revocations as indicated in TEC, §12.115(a)(1)-(2); in 19 TAC §100.1021(a)(1), (2), (4), and (5); and in 19 TAC §100.1022(c). Current financial requirements are outlined in 19 TAC §100.1022(c).

Comment. A representative of Pegasus School of Liberal Arts and Sciences recommended an entirely new accreditation process be in effect for the 2008-2009 fiscal year, making performance for the 2006-2007 and 2007-2008 fiscal years under §97.1055(g)(2)(C) for informational purposes only.

Agency Response. The agency disagrees. This postponement would unduly delay the accreditation process authorized by the 79th Texas Legislature, Third Called Session, 2006, and established clearly for charter schools in TEC, §39.1321. This section in statute makes charter schools accountable for sanctions under TEC, Chapter 39, and gives the commissioner the authority to adopt rules to sanction charter schools. It should be noted that charters already receive state accountability ratings, and sanctions for low student performance should already be known.

Comment. A representative of Shekinah Learning Institute, Radiance Academy of Learning, and Shekinah Radiance Academy requested that the commissioner postpone the implementation of the rules to allow more time to investigate the impact the rules will have on charters and their students.

Agency Response. The agency disagrees. This postponement would unduly delay the accreditation process authorized by the 79th Texas Legislature, Third Called Session, 2006, and established clearly for charter schools in TEC, §39.1321. This section in statute makes charter schools accountable for sanctions under TEC, Chapter 39, and gives the commissioner the authority to adopt rules to sanction charter schools. It should be noted that charters already receive state accountability ratings, and sanctions for low student performance should already be known.

Charters currently submit annual audits, and the commissioner already reviews financial issues when considering renewals and revocations as indicated in TEC, §12.115(a)(1)-(2); in 19 TAC §100.1021(a)(1), (2), (4), and (5); and in 19 TAC §100.1022(c). Current financial requirements are outlined in 19 TAC §100.1022(c).

Comment. A representative of Erath Excels Academy requested that the commissioner postpone the implementation of the rules until the following year to further investigate the proposal.

Agency Response. The agency disagrees. This postponement would unduly delay the accreditation process authorized by the 79th Texas Legislature, Third Called Session, 2006, and established clearly for charter schools in TEC, §39.1321. This section in statute makes charter schools accountable for sanctions under TEC, Chapter 39, and gives the commissioner the authority to adopt rules to sanction charter schools. It should be noted that charters already receive state accountability ratings, and sanctions for low student performance should already be known.

Charters currently submit annual audits, and the commissioner already reviews financial issues when considering renewals and revocations as indicated in TEC, §12.115(a)(1)-(2); in 19 TAC §100.1021(a)(1), (2), (4), and (5); and in 19 TAC §100.1022(c). Current financial requirements are outlined in 19 TAC §100.1022(c).

Comment. A representative from DKH Consulting requested that the commissioner postpone the implementation of the rules until the following year in order to not create the failure of many charter schools based on rules that have been implemented unfairly and retroactively.

Agency Response. The agency disagrees. This postponement would unduly delay the accreditation process authorized by the 79th Texas Legislature, Third Called Session, 2006, and established clearly for charter schools in TEC, §39.1321. This section in statute makes charter schools accountable for sanctions under TEC, Chapter 39, and gives the commissioner the authority to adopt rules to sanction charter schools. It should be noted that charters already receive state accountability ratings, and sanctions for low student performance should already be known.

Charters currently submit annual audits, and the commissioner already reviews financial issues when considering renewals and revocations as indicated in TEC, §12.115(a)(1)-(2); in 19 TAC §100.1021(a)(1), (2), (4), and (5); and in 19 TAC §100.1022(c). Current financial requirements are outlined in 19 TAC §100.1022(c).

Comment. A representative of Feldman, Rogers, Morris, & Grover, L.L.P., commented that the commissioner does not have authority to adopt the proposed amendments to 19 TAC Chapter 97, stating charters are not subject to the financial accountability rating system under TEC, Chapter 39, Subchapter I, and that the proposed rule in §97.1055(g)(1) allows the commissioner to use a finding in lieu of a rating, thus overreaching statutory authority.

Agency Response. The agency disagrees. TEC, §12.104(b)(2)(L), makes clear that charter schools are bound by public school accountability under TEC, Chapter 39, Subchapters B, C, D, and G. In addition, TEC, Chapter 39, Subchapter K, §39.301(a), explicitly states, "The commissioner by rule shall provide a process for a school district or open-enrollment charter school to challenge an agency decision made under this chapter relating to an academic or financial accountability rating that affects the district or the school."

Clearly the intent is for the commissioner to evaluate charter schools based on financial criteria, and the commissioner already reviews financial issues when considering renewals and revocations as indicated in TEC, §12.115(a)(1)-(2); in 19 TAC §100.1021(a)(1), (2), (4), and (5); and in 19 TAC §100.1022(c). Current financial requirements are outlined in 19 TAC §100.1022(c).

The accreditation process was authorized by the 79th Texas Legislature, Third Called Session, 2006, and established clearly for charter schools in TEC, §39.1321. This section in statute makes charter schools accountable for sanctions under TEC, Chapter 39, and gives the commissioner the authority to adopt rules to sanction charter schools.

Comment. A representative from Seashore Learning Center commented that state accreditation should be replaced with regional accreditation.

Agency Response. The agency agrees that third-party accreditation has merit; however, the agency has no authority to substitute regional accreditation for state accreditation. A change from state accreditation to regional accreditation would require explicit statutory authority.

Comment. Orenda Education inquired about third-party accreditation rating agencies.

Agency Response. At this time, there is no commissioner's approved list of third-party accreditation rating agencies. Under 19 TAC §97.1055(h), a third-party accreditation rating process is a permissible option left to the discretion of the commissioner.

Comment. DKH Consulting, Erath Excels Academy, Shekinah Learning Institute, Radiance Academy of Learning, and Shekinah Radiance Academy expressed concerns about imposing the same instructional accountability and student attendance standards on school districts and charters alike. The commenters stated that this system, along with financial accountability standards and the evaluation of districts and charters, places charters at a disadvantage.

Agency Response. The agency disagrees. The issues raised by the commenters address topics that are not part of this adoption.

The amendments are adopted under the Texas Education Code (TEC), §12.104, which establishes the applicability of public school accountability under TEC, Chapter 39, to an open-enrollment charter school; TEC, §39.071, which authorizes the commissioner to define accreditation statuses and to determine the accreditation status of each school district; TEC, §39.131, which authorizes the commissioner to determine sanctions for a district that does not satisfy accreditation criteria under TEC, §39.071, the academic performance standards under TEC, §39.072, or any financial accountability standard as determined by the commissioner; TEC, §39.132, which authorizes the commissioner to determine sanctions for an under-performing campus; and TEC, §39.1321, which authorizes the commissioner to adopt rules to implement procedures to impose any sanction provision under TEC, Chapter 39, as those provisions relate to open-enrollment charter schools.

The adopted amendments implement the Texas Education Code, §§12.104, 39.071, 39.131, 39.132, and 39.1321.