The Texas Education Agency (TEA) proposes an amendment to §109.1001, concerning financial accountability ratings. The proposed amendment would clarify the financial accountability rating indicators used to determine each school district's and open-enrollment charter school's rating for the 2016-2017 rating year.

Chapter 109, Subchapter AA, establishes provisions that detail the purpose, ratings, types of ratings, criteria, reporting, and sanctions for the financial accountability rating system, in accordance with Senate Bill 218, 77th Texas Legislature, 2001, and House Bill (HB) 3, 81st Texas Legislature, 2009. HB 5, Section 49, 83rd Texas Legislature, Regular Session, 2013, amended the Texas Education Code (TEC), §39.082, requiring that the commissioner of education include in the financial accountability rating system processes for anticipating the future financial solvency of each school district and open-enrollment charter school, including analysis of district and school revenues and expenditures for preceding school years. The TEC, §39.082, also requires the commissioner to adopt rules by which to measure the financial management performance and future financial solvency of a school district or an open-enrollment charter school and sets forth specific requirements relating to indicators adopted by the commissioner and the assignment of ratings.

Section 109.1001 includes the financial accountability rating system and rating worksheets that explain the indicators that the TEA will analyze to assign financial accountability ratings for school districts and open-enrollment charter schools. The rule also specifies the minimum financial accountability rating information that a school district and an open-enrollment charter school is to report to parents and taxpayers in the district.

The proposed amendment would clarify the financial accountability rating indicators used to determine each school district's rating for the 2016-2017 rating year and subsequent years by revising the ratings worksheet calculations in Figure: 19 TAC §109.1001(e)(3). The proposed worksheet, dated December 2016, would differ from the current worksheet, dated August 2015, as follows.

The Determination of School District Rating table would be revised to disclose the point range applicable for each rating for the 2016-2017 School FIRST rating year. The ranges are A = Superior, 90 through 100; B = Above Standard, 80 through 89; C = Meets Standards, 60 through 79; and F = Substandard Achievement, 0 through 59.

Indicator 5 would be revised to amend variable F by removing pension expense from the calculation since the amount is not applicable to the indicator calculation.

Indicator 5 would also be revised by removing the phrases net asset and net assets and replacing them with the phrase net position.

Indicator 10 would be revised by amending variables A, B, and C to specify that the governmental fund that the data is derived from is the General Fund and Debt Service Fund.

Indicator 10 would also be revised by adding the word "Ending" to variable D to disclose that the Debt Service Fund ending fund balance will be used in the calculation.

Finally, Indicator 10 would be revised by amending variable E to specify that the governmental fund that the data is derived from is the General Fund.

The proposed amendment would have no new procedural and reporting implications. The proposed amendment would clarify the worksheet calculations that were implemented beginning with data from fiscal year 2015-2016 to report school district and open-enrollment charter school financial accountability information. TEA staff will continue to generate school district and open-enrollment charter school financial accountability ratings based on data submitted by school districts and open-enrollment charter schools.

The proposed amendment would have no new locally maintained paperwork requirements.

FISCAL NOTE. Leo Lopez, associate commissioner for school finance / chief school finance officer, has determined that for the first five-year period the amendment is in effect, there will be no fiscal implications for state or local government as a result of enforcing or administering the amendment. The proposed amendment would clarify and continue a financial accountability rating system that has been implemented under the requirements of statute since fiscal year 2014-2015 and that is required to continue.

There is no effect on local economy for the first five years that the proposed amendment is in effect; therefore, no local employment impact statement is required under Texas Government Code, §2001.022.

PUBLIC BENEFIT/COST NOTE. Mr. Lopez has determined that for each year of the first five years the amendment is in effect the public benefit anticipated as a result of enforcing the amendment will be ensuring that the provisions of the financial accountability rating system align to make the indicators uniform for all school districts and open-enrollment charter schools and providing a fair and equitable rating for all school districts and open-enrollment charter schools. There is no anticipated economic cost to persons who are required to comply with the proposed amendment.

ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS FOR SMALL BUSINESSES AND MICROBUSINESSES. 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.

REQUEST FOR PUBLIC COMMENT. The public comment period on the proposal begins January 20, 2017, and ends February 21, 2017. Comments on the proposal may be submitted to Cristina De La Fuente-Valadez, Rulemaking, Texas Education Agency, 1701 North Congress Avenue, Austin, Texas 78701. Comments may also be submitted electronically to rules@tea.texas.gov. A request for a public hearing on the proposal submitted under the Administrative Procedure Act must be received by the commissioner of education not more than 14 calendar days after notice of the proposal has been published in the Texas Register on January 20, 2017.

STATUTORY AUTHORITY. The amendment is proposed under the Texas Education Code (TEC), §39.082, which requires the commissioner to develop and implement a financial accountability rating system for school districts and open-enrollment charter schools, establishes certain requirements, including procedures, to enable the commissioner and administrators to provide meaningful financial oversight and improvement along with transparency to the public, and provides additional requirements and rulemaking authority for the commissioner; and the TEC, §39.085, which provides the commissioner rulemaking authority for the implementation and administration of the financial accountability subchapter of the TEC, Chapter 39.

CROSS REFERENCE TO STATUTE. The amendment implements the Texas Education Code, §39.082 and §39.085.