(Editor's note: In accordance with Texas Government Code, §2002.014, which permits the omission of material which is "cumbersome, expensive, or otherwise inexpedient," the figures in 19 TAC §109.1001 are not included in the print version of the Texas Register. The figures are available in the on-line version of the April 13, 2018, issue of the Texas Register.)

The Texas Education Agency (TEA) proposes an amendment to §109.1001, concerning financial accountability ratings. The proposed amendment would add definitions, update financial accountability rating information for school districts and open-enrollment charter schools, and add financial accountability rating information for charter schools operated by public institutions of higher education (IHEs) in accordance with Senate Bill (SB) 1837, 85th Texas Legislature, Regular Session, 2017.

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.

SB 1837, 85th Texas Legislature, Regular Session, 2017, amended the TEC, §39.082, to require the financial performance of a charter school operated by a public IHE under TEC, Chapter 12, Subchapter D or E, to be evaluated using indicators adopted by the commissioner that are appropriate to accurately measure the financial performance of such charter schools.

The proposed amendment to §109.1001 would implement SB 1837 and include other updates, as follows.

In subsection (a), the proposed amendment would add definitions for the terms ceiling indicator, open-enrollment charter school, and public institution of higher education. Definitions for Financial Integrity Rating System of Texas (FIRST) and Public Education Information Management System (PEIMS) would be modified.

In subsections (b) and (c), the proposed amendment would include charter schools operated by a public IHE to the provisions relating to the assignment of ratings and the evaluation and modification of the rating system.

In subsection (d), the proposed amendment would update the data sources the TEA uses in calculating the financial accountability indicators for school districts, open-enrollment charter schools, and charter schools operated by public IHEs. Specifically, PEIMS would be changed to Texas Student Data System (TSDS) PEIMS.

In subsections (e)(3) and (f)(3), the proposed amendment would clarify that the financial accountability rating indicators used to determine each school district's and open-enrollment charter school's 2016-2017 rating would only be for the 2016-2017 rating year and not subsequent rating years. No changes would be made to the indicator calculations for the 2016-2017 rating year, but the footers of the worksheets would be amended to remove language indicating that the worksheets apply to rating years after 2016-2017.

New subsections (e)(4) and (f)(4) would include new rating worksheets for rating years 2017-2018 through 2019-2020 that would be used to measure each school district and open-enrollment charter school on its overall performance on the financial measurements, ratios, and other indicators established by the commissioner. The proposed new worksheets would clarify that financial accountability ratings for a rating year are based on the data from the prior fiscal year.

New subsections (e)(5) and (f)(5) would include new rating worksheets for rating year 2020-2021 and subsequent ratings years that would be used to measure each school district and open-enrollment charter school on its overall performance on the financial measurements, ratios, and other indicators established by the commissioner. The proposed new worksheets would clarify that financial accountability ratings for a rating year are based on the data from the prior fiscal year.

The proposed amendment would add new subsection (g) to address provisions for charter schools operated by a public IHE. New subsection (g)(1) would include new rating worksheets for charter schools operated by a public IHE for rating years 2016-2017 through 2019-2020 that would be used to measure the overall performance on the financial measurements, ratios, and other indicators established by the commissioner. The proposed new worksheets would clarify that financial accountability ratings for a rating year are based on the data from the prior fiscal year. New subsection (g)(2) would include new rating worksheets for charter schools operated by a public IHE for rating year 2020-2021 and subsequent years that would be used to measure the overall performance on the financial measurements, ratios, and other indicators established by the commissioner. The proposed new worksheets would clarify that financial accountability ratings for a rating year are based on the data from the prior fiscal year.

New subsection (j) would be added to define the terminology for the types of financial accountability ratings charter schools operated by public IHEs may receive for the 2016-2017 and subsequent rating years. The ratings would be "P" for pass and "F" for substandard achievement.

In current subsection (i), relettered as subsection (k), the proposed amendment would add language to allow the commissioner to change a financial accountability rating in cases of disaster, flood, extreme weather conditions, fuel curtailment, or another calamity.

In current subsection (k)(2), relettered as subsection (m)(2), the proposed amendment would include clarifying language for the issuance of final ratings.

In current subsection (l)(3), relettered as subsection (n)(3), the proposed amendment would add the word "other" to indicate that the preliminary rating may be appealed for adverse issues other than those already identified in the rule. Language that is contrary to the provisions of TEC, §39.082(g), would also be deleted from the paragraph.

In current subsection (o)(4)(A), relettered as subsection (q)(4)(A), the proposed amendment would change the requirement for posting the notice for public hearing from once a week for two weeks prior to holding the public hearing to posting the notice only one time prior to holding the public hearing. The notice would be required to be posted no earlier than 30 days or later than 10 days before the date of the hearing.

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 2017-2018 to report financial accountability information for school districts, open-enrollment charter schools, and charter schools operated by public IHEs. TEA staff will continue to generate financial accountability ratings for school districts, open-enrollment charter schools, and charter schools operated by public IHEs based on data submitted by school districts, open-enrollment charter schools, and charter schools operated by public IHEs. The updated financial accountability rating system fulfills the requirements to develop and implement separate financial accountability rating systems.

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 and local government as a result of enforcing or administering the amendment.

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. The proposed amendment does not impose a cost on regulated persons and, therefore, is not subject to Texas Government Code, §2001.0045.

GOVERNMENT GROWTH IMPACT. The TEA has determined that the amendment to §109.1001 would not have a government growth impact pursuant to Texas Government Code, §2001.0221.

PUBLIC BENEFIT/COST NOTE. Mr. Lopez has determined that for each year of the first five years the proposed amendment is in effect, the public benefit anticipated as a result of enforcing the proposed amendment would be to ensure that the provisions of the financial accountability rating system align to make the indicators uniform for all school districts and charter schools and to provide a fair and equitable rating for all school districts and 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, MICROBUSINESSES, AND RURAL COMMUNITIES. There is no direct adverse economic impact for small businesses, microbusinesses, and rural communities; 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 April 13, 2018, and ends May 14, 2018. 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 April 13, 2018.

STATUTORY AUTHORITY. The amendment is proposed under Texas Education Code (TEC), §39.082, as amended by SB 1837, 85th Texas Legislature, Regular Session, 2017, which states that the financial performance of a charter school operated by a public IHE under the TEC, Chapter 12, Subchapter D or E, shall be evaluated using only the indicators adopted under the TEC, §39.082, determined by the commissioner by rule as appropriate to accurately measure the financial performance of such charter schools. The statute also requires the commissioner to develop and implement a financial accountability rating system for public schools and establishes certain minimum requirements for the system, including an appeals process; TEC, §39.083, which requires the commissioner to include in the financial accountability system procedures for public schools to report and receive public comment on an annual financial management report; TEC, §39.085, which requires the commissioner to adopt rules to implement the TEC, Chapter 39, Subchapter D, which addresses financial accountability for public schools; and TEC, §39.151, which requires the commissioner to provide a process by which a district or charter school can challenge an agency decision related to academic or financial accountability under TEC, Chapter 39. This process must include a committee to make recommendations to the commissioner. These provisions collectively authorize and require the commissioner to adopt the financial accountability system rules, which implement each requirement of statute applicable to districts and open-enrollment charter schools.

CROSS REFERENCE TO STATUTE. The amendment implements Texas Education Code, §§39.082, as amended by SB 1837, 85th Texas Legislature, Regular Session, 2017; 39.083; 39.085; and 39.151.