The Texas Education Agency (TEA) adopts the repeal of §100.1011 and §100.1061; new §§100.1011, 100.1013, 100.1015, 100.1027, 100.1029, 100.1031, 100.1033, 100.1035, 100.1037, 100.1043, 100.1045, 100.1047, 100.1049, 100.1051, 100.1071, 100.1073, 100.1101, 100.1111-100.1116, 100.1131-100.1135, 100.1151, 100.1153, 100.1155, 100.1157, 100.1159, 100.1201, 100.1203, 100.1205, 100.1207, 100.1209, 100.1211, 100.1213, 100.1215, and 100.1217; and amendments to §100.1041 and §100.1063, concerning open-enrollment charter schools. The repeal of §100.1011 and §100.1061; new §§100.1013, 100.1015, 100.1037, 100.1043, 100.1045, 100.1049, 100.1051, 100.1071, 100.1073, 100.1112, 100.1114-100.1116, 100.1133-100.1135, 100.1155, 100.1159, 100.1201, 100.1205, 100.1209, 100.1211, 100.1215, and 100.1217 and the amendment to §100.1041 are adopted without changes to the proposed text as published in the February 15, 2002, issue of the Texas Register (27 TexReg 1070) and will not be republished. New §§100.1011, 100.1027, 100.1029, 100.1031, 100.1033, 100.1035, 100.1047, 100.1101, 100.1111, 100.1113, 100.1131-100.1132, 100.1151, 100.1153, 100.100.1157, 100.1203, 100.1207, and 100.1213 and the amendment to §100.1063 are adopted with changes to the proposed text as published in the February 15, 2002, issue of the Texas Register (27 TexReg 1070).

Section 100.1011 and §100.1061 specify provisions relating to charter renewals and definitions. The repeal of these sections is adopted in order to incorporate these provisions into other amended and new sections. Section 100.1041 and §100.1063 specify provisions relating to state funding and use of public property by a charter holder. The new sections and the amendments are adopted in order to incorporate revisions and new provisions to conform to changes enacted by House Bill (HB) 6, 77th Texas Legislature, 2001.

HB 6, 77th Texas Legislature, 2001, directed the commissioner of education to adopt rules for a wide range of issues related to open-enrollment charter schools. While much of the adopted amendments and additions to 19 TAC Chapter 100, Charters, Subchapter AA, Commissioner's Rules Concerning Open-Enrollment Charter Schools, result from new statutory requirements, some of the changes are the result of a shift in authority from the State Board of Education (SBOE) to the commissioner of education. Still other portions of the adopted rules come from provisions originally in the charter contract.

19 TAC Chapter 100, Charters, Subchapter AA, Commissioner's Rules Concerning Open-Enrollment Charter Schools, as adopted, is divided into the following divisions.

Division 1, General Provisions, addresses relevant definitions, filing of documents with the Texas Education Agency (TEA), and requirements of charter applicants.

Division 2, Commissioner Action and Intervention, addresses adverse action taken by the commissioner on an open-enrollment charter school; agency audits of open-enrollment charter schools; charter renewal; charter amendment; compliance records on nepotism, conflict of interest, and restrictions on serving as an officer or on the governing body of an open-enrollment charter school; and the notification of appropriate school districts and legislators of charter application.

Division 3, Charter School Funding and Financial Operations, addresses state funding and its uses; disclosure of campaign contributions; and the financial audit of funds used for charter school operations.

Division 4, Property of Open-Enrollment Charter Schools, addresses property acquired with state funds received before September 1, 2001; possessions and control of the public property of a former charter holder; and real property.

Division 5, Charter School Governance, addresses the delegation of powers and duties by the charter holder to any other entity; issues related to nepotism and conflicts of interest among officers or governing body members of a charter school; criminal history of employees, officers, or governing body members of a charter school; and issues related to management companies.

Division 6, Charter School Operations, addresses voluntary participation in state programs; records management; procurement of professional services; student admission; municipal ordinances; and a variety of issues related to students, failure of a charter school to operate, instructional facilities, and changes in the status of entities eligible to hold charters.

In response to public comments, the following changes were made to the rules since published as proposed.

Section 100.1011 was modified in several ways. Paragraph (1) was modified to delete the phrase "officer of a charter school." Paragraph (2) was modified to that the holder of an abandoned open-enrollment charter is a "former charter holder" within the meaning of that section. Paragraph (3) was modified by adding a new subparagraph (A) clarifying that the phrase, "employee of a charter school," as used in this subchapter, means a person paid to work at a charter school under the direction and control of an officer of a charter school, regardless of whether the person is on the payroll of the charter holder, a charter school operated by the charter holder, or a management company providing management services to the charter holder, or any other person. Paragraph (3) was also modified by adding a new subparagraph (B) clarifying that the phrase, "employee of a charter holder," as used in this subchapter, means a charter holder employee who engages in no charter school activity for the charter holder and is not an officer of a charter school. Paragraph (12) was modified to define both misuse and misapplication of funds or property. Paragraph (13) was deleted to remove the separate definition of misapplication of funds or property.

Section 100.1011(14)-(24) was renumbered accordingly. Proposed paragraph (14), adopted as paragraph (13), was modified to exclude both public accountancy services and legal services from the definition of "management services" in subparagraphs (E) and (F). Proposed paragraph (15), adopted as paragraph (14), was modified to exclude regional education service center from the definition of "management company." Proposed paragraph (16), adopted paragraph (15), was modified to clarify that subparagraph (E) covers an oral statement, assurance, commitment, and/or representation made to the SBOE during a public meeting. Proposed paragraph (17), adopted as paragraph (16), was modified to clarify the phrase "employee of a charter school" and 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. Proposed paragraph (19), adopted as paragraph (18), was modified to change the word "initiating" to "recommending" in both places in subparagraph (D). This paragraph was also modified to exclude services provided by attorneys and certified public accountants from the functional definition of a "central administration officer."

Section 100.1011 was also modified to delete proposed paragraphs (19)(K) and (20)(G).

Section 100.1027 was modified to replace the word "cooperation" in the final sentence of subsections (b) and (c) with "failure to comply with lawful requests, directives, or other agency actions."

Section 100.1029 was modified to replace the word "cooperation" in the final sentence of subsections (b) and (c) with the phrase, "failure to comply with lawful requests, directives, or other agency actions."

Section 100.1031 was modified to provide in subsection (b) that an amendment or renewal of a contract may only be negotiated upon renewal if required by the commissioner under subsection (c). Subsection (b) was also modified to replace the phrase "differs from" with the phrase "conflicts with." Subsection (d) was modified to clarify that the phrase, "made with the consent of the charter holder," modifies only the word "amendments."

Section 100.1033 was modified to require in subsection (c)(1) that the substantive amendment request include a written resolution adopted by the governing body of the charter holder and signed by the members voting in favor. Subsection (c)(4) was modified to specify provisions for amendments granted conditional approval, including the requirement of the written resolution. Subsection (c)(5) was modified to delete the phrase "or change." Subsection (c)(6) was modified to add new subparagraphs (C) and (D) dealing with the commissioner's criteria for approving delegation amendments. In the new subparagraph (D), the functions previously listed in proposed §100.1101(e)(2), (5), and (6) were made delegable to the chief executive officer. The remaining functions listed in proposed §100.1101(e), now reflected in adopted §100.1033(c)(6)(C), will require a specific waiver before a delegation amendment is granted. In addition, the function listed in proposed §100.1101(e)(4) has been clarified in adopted §100.1033(c)(6)(C)(iii) to provide that the final authority of the governing body to direct the disposition and safekeeping of public records does not prevent the governing body from delegating the maintenance of public records subject to the final authority of the governing body to direct their disposition and safekeeping.

Section 100.1035 was modified to delete the phrase "officer and" from subsection (a)(1). Subsection (b)(5) was modified to replace the term "six months" with "one year."

Section 100.1047 was modified to provide in subsection (d) that a charter holder shall comply with TEC, §25.002. This section was also modified by adding subsection (g) defining the phrase "position of influence."

Section 100.1063 was modified to add a subsection (c)(6) providing that nothing in §100.1063 prevents a contractor of the charter holder from using public property owned by the charter holder for the purpose of providing goods or services to the charter school under the contract, if such use of charter school property is an express contract term, factored into the price of the goods or services provided under the contract, and the contract is duly authorized by the governing body of the charter holder under §100.1063(c).

Section 100.1101 was modified to delete subsection (e). The functions previously listed in proposed §100.1101(e)(2), (5), and (6) were made delegable to the chief executive officer and are delineated in adopted §100.1033(c)(6)(D). The remaining functions listed in proposed §100.1101(e), now reflected in adopted §100.1033(c)(6)(C), will require a specific waiver before a delegation amendment is granted. In addition, the function listed in proposed §100.1101(e)(4) has been clarified in adopted §100.1033(c)(6)(C)(iii) to provide that the final authority of the governing body to direct the disposition and safekeeping of public records does not prevent the governing body from delegating the maintenance of public records subject to the final authority of the governing body to direct their disposition and safekeeping.

Section 100.1111 was modified to correct the phrase "comply with subsection (d)" in subsections (b), (c), and (c)(3) to read "comply with subsection (e)." For clarification purposes, the phrase "district/campus" was changed to "district and/or campus" in subsection (d). In addition, a new subsection (g) was added addressing the time frame within which a charter holder must comply with applicable nepotism provisions after ratings are assigned each year.

Section 100.1113 was modified to summarize Government Code, §§573.021-573.025, instead of merely referring to those sections.

Section 100.1131 was modified to delete subsections (b)(2) and (7). This section was also modified to replace the phrase "comply with subsection (e)" in proposed subsections (c) and (d), with "comply with subsection (f)" and also to replace the phrase "Notwithstanding subsection (c)," with the phrase "Notwithstanding subsection (b)." For clarification purposes, the phrase "district/campus" was changed to "district and/or campus" in subsection (e). In addition, §100.1131 was modified by adding a new subsection (h) that substantially conforms to new §100.1111(g), addressing the time frame within which a charter holder must comply with applicable conflict of interest provisions after ratings are assigned each year.

Section 100.1132 was modified to delete the phrase, "who exercises responsibilities beyond those that are advisory in nature," from subsection (a)(1).

Section 100.1151 was modified to replace the phrase, "as an employee, an officer, or a member of the governing body of a charter school, or as a member of the governing body of a charter holder," in subsections (a), (h), and (j), with the phrase, "as a member of the governing body of a charter holder, as a member of the governing body of a charter school, or as an officer or employee of a charter school." Subsection (b) was modified to replace the phrase "twice a year" with the word "annually." Subsection (b)(1) was modified to replace the word "holder" with the word "school" and to add the phrase "or whom the charter holder intends to employ in any capacity relating to its charter school activities." In addition, subsection (j)(2) was modified by adding subparagraph (C), "the person does not perform, and is not charged with performing, any charter school functions."

Section 100.1153 was modified to replace the phrase, "as an employee, an officer, or a member of the governing body of a charter school, or as a member of the governing body of a charter holder," in subsections (a), (d), and (e) (2) with the phrase, "as a member of the governing body of a charter holder, as a member of the governing body of a charter school, or as an officer or employee of a charter school." Subsection (e)(2) was modified by adding subparagraph (C), "the person does not perform, and is not charged with performing, any charter school functions."

Section 100.1157 was modified by reorganizing proposed text into paragraphs (1) and (2). Adopted paragraph (1) reflects provisions from proposed language relating to conditions that must be met for management contracts and indebtedness that may continue past September 1, 2001. Adopted paragraph (2) reflects provisions for charter holder debt to its management company under subsection (e) that may be refinanced after September 1, 2001, if the management company will not be the lender but will merely guarantee or co-sign for the debt; and if the TEA division responsible for legal services finds that each of the conditions listed in new paragraph (2) have been met and that any compliance problems do not prevent the approval of the refinancing.

Section 100.1203 was modified to provide that, for purposes of subsection (a)(3), the records of a charter school mean the records indicated by the Financial Accountability System Resource Guide or the laws and rules summarized therein. Subsection (a)(4) was modified as a technical edit for consistency in referencing.

Section 100.1207 was modified to delete subsection (d).

Section 100.1213 was modified by adding the clause, "Except as otherwise provided in this section," at the beginning of subsection (a).

The following comments were received regarding adoption of the repeals, new sections, and amendments.

General Comments

Comment. The Texas Association of School Boards (TASB) stated that the proposed rules provide much needed financial and academic accountability to the Texas charter school system. Nineteen individuals commented that they supported the proposed rules implementing House Bill 6, and supported more accountability for charter schools.

Agency Response. No response required.

Comment. An individual suggested that all open-enrollment charter schools should be changed to campus charters or home-rule school district charters, and that all open-enrollment charters should not have charters renewed and should cease to exist.

Agency Response. No response required.

Division 1. General Provisions.

Proposed §100.1011. Definitions.

Comment. The Texas Classroom Teachers Association (TCTA) supports the comprehensiveness of the definitions in §100.1011. These are necessary in order to avoid any confusion or misunderstanding about what terms, such as "misuse of funds or property" mean. TCTA especially supports the definitions for various employment positions held in charter schools as there has been some confusion in the past about where responsibility and liability lie.

Agency Response. No response required.

Comment. TASB stated that many of the definitions in proposed §100.1011 are new and will certainly help provide much needed guidance on terms for charter holders. For instance, TASB appreciates the Texas Education Agency (TEA) defining "state funds" and "misuse of funds or property," as $4.5 million in public funds have been lost to charter school closures and has yet to be recovered by the state.

Agency Response. No response required.

Comment. The Association of Charter Educators (ACE) asked how long a charter holder must have ceased to operate to be considered a "former charter holder" in §100.1011(2).

Agency Response. Under §100.1011(2), a charter holder becomes a former charter holder on the date its open-enrollment charter is revoked, surrendered, or denied renewal, or the date on which all programs are ordered closed under Texas Education Code (TEC), §39.131(a)(10). To determine this date in a particular case, the charter holder must refer to the effective date of the final order of revocation, denial, or program closure, or to the effective date specified in an exchange of correspondence concerning the surrender of the open-enrollment charter.

Comment. TASB recommends amending the definition of "charter school" in §100.1011(3) or adding a separate definition to clarify that an "employee of a charter school" includes teachers, aides, and anyone else who provides instructional services to students, regardless of what legal entity technically employs them. TASB's concern is the possibility of circumventing proposed new §100.1151(a) (relating to Criminal History; Restrictions on Serving). TASB commented that charter schools are not required to hire certified teachers, but must still protect school children from felons, sex offenders, and drug dealers in their classrooms. Section 100.1151(a) states a person may not serve as an employee of a charter school if they have certain criminal convictions. However, the term "employee" normally has a very specific meaning, and §100.1011(3) fails to fully define a charter school employee. Conceivably, a charter school may incorporate separately from the charter holder, or the management company may be the employer of these personnel, and thereby evade the requirements of §100.1151(a). TCTA also recommends that §100.1151(a) extend the definition of employees, officers, members of the governing body of a charter school, and members of the governing body of a charter holder who have been convicted of a certain crime to include all employees who provide services at a school, whether compensated by the charter school, charter holder, or a managing company.