19 TAC §105.1021
The Texas Education Agency (TEA) proposes new §105.1021,
concerning severance payments made to superintendents. The proposed new section
establishes definitions, requirements, and procedures to implement the reporting
of severance payments made to superintendents and the process for reducing
Foundation School Program (FSP) funds. Texas Education Code (TEC), §11.201(c),
requires the commissioner of education to reduce an independent school district's
FSP funds based upon the amount of the severance payment reported by a board
of trustees of an independent school district that makes a severance payment
to a superintendent. TEC, §11.201(c), establishes the requirement that
a board of trustees report to the commissioner the terms of a severance payment
made to a superintendent.
The proposed new section defines terms relating to severance payments,
superintendent, and settlement; identifies the process for determining districts
subject to reductions in state funding as a result of severance payments to
superintendents; and details administrative procedures for reports, documentation,
determination, and notification of disagreement. The proposed new section
also delineates the process for the reduction of FSP funds and establishes
the provisions that the reports are subject to audit and that sanctions may
result for noncompliance. In addition, the rule provides specifications for
administration of the proposed requirements relative to all payments made
to departing superintendents between May 30, 1995, and December 31, 2000,
which are required to be reported no later than April 1, 2001. All subsequent
actions are to be reported not later than 60 days following execution of an
agreement to make payments of any kind to a departing superintendent, or any
payment under such an agreement, whichever is sooner.
Tom Canby, managing director for school financial audits, has determined
that for fiscal years 2001 through 2005 there will be no significant fiscal
implications for state government as a result of enforcing or administering
the new section. There will be fiscal implications for local government. The
fiscal impact will be to school districts that elect to make severance payments
to departing superintendents. FSP funds for a district that makes severance
payments will be reduced; therefore, the amount of the fiscal impact will
depend on the amount of severance payment. A school district is not obligated
to make a severance payment to a departing superintendent.
Mr. Canby and Criss Cloudt, associate commissioner for accountability reporting
and research, have determined that for each year of the first five years the
section is in effect the public benefit anticipated as a result of enforcing
the section will be the establishment of clear procedures to implement the
requirement that districts report severance payments. The proposed section
will also clearly establish the administration of the FSP reduction of funds
resulting from severance. There will not be an effect on small businesses.
There is anticipated economic cost to persons who are required to comply with
the proposed new section.
Comments on the proposal may be submitted to Criss Cloudt, Accountability
Reporting and Research, 1701 North Congress Avenue, Austin, Texas 78701, (512)
463-9701. Comments may also be submitted electronically to
rules@tmail.tea.state.tx.us
or faxed to (512) 475-3499. All requests
for a public hearing on the proposed section submitted under the Administrative
Procedure Act must be received by the commissioner of education not more than
15 calendar days after notice of a proposed change in the section has been
published in the
Texas Register
.
The new section is proposed under the Texas Education Code, §11.201(c),
which requires the commissioner of education to reduce an independent school
district's Foundation School Program funds based upon the amount of the severance
payment reported by a board of trustees of an independent school district
that makes a severance payment to a superintendent. TEC, §11.201(c),
stipulates that a board of trustees is required to report the terms of a severance
payment made to a superintendent.
The new section implements the Texas Education Code, §11.201(c).
§105.1021.Severance Payments to Superintendents.
(a)
Definitions.
(1)
Severance payment--Compensation, including the value of
any insurance or other benefits, paid to a departing superintendent beyond
wages and benefits actually earned under a written employment contract, upon
agreed early termination of employment. Payments to a former superintendent
who remains employed by a school district in another capacity or contracts
with a school district for services may be severance payments in whole or
in part, if the payments are compensation for the early termination of a prior
employment agreement. A severance payment does not include a settlement payment
for actual or threatened litigation separate from the termination of the employment
contract.
(2)
Superintendent--The educational leader and chief executive
officer of the school district. "Departing superintendent" means an individual
no longer acting as superintendent and includes a former superintendent who
is employed by or contracts with the same school district in any other capacity.
(3)
Settlement--A payment made to an employee to settle actual
or threatened litigation, or to resolve an actual or disputed claim the employee
may have against the employer. A settlement does not include payments for
the early termination of a contract. Damages for early termination of an employment
contract, including loss of benefits, are severance payments regardless of
whether litigation has commenced or the form of the settlement.
(b)
Identification. Identification of districts subject to
reductions in state funding attributable to severance payment to superintendent
provisions in Texas Education Code (TEC), §11.201(c), is based on information
filed by districts with the Texas Education Agency (TEA) on the superintendent
payment disclosure form. A district must file the superintendent payment disclosure
form with the TEA not later than 60 days following execution of an agreement
to make payments of any kind to a departing superintendent, or any payment
under such an agreement, whichever is sooner. No report is required to be
filed for payments already earned and payable under the terms of a terminated
employment contract, such as accrued vacation. The interim superintendent,
new superintendent, or school board president is responsible for timely filing
of the superintendent payment disclosure form. Reporting on the disclosure
form is required regardless of whether or not the district considers the payment
to be a severance payment within the meaning of TEC, §11.201(c).
(c)
Administration.
(1)
All payments made to a departing superintendent reported
on the superintendent payment disclosure form are presumed to be severance
payments, up to the total amount to be paid or one year's salary and benefits
under the terminated contract, whichever is less. All payments in excess of
one year's salary and benefits under the terminated contract are presumed
to be payments in settlement of potential litigation and not severance payments.
(2)
A school district may submit documentation with the superintendent
payment disclosure form to rebut the presumptions created by paragraph (1)
of this subsection within 30 days of filing the superintendent payment disclosure
form. Such evidence must demonstrate that the value to the departing superintendent
of the full remaining term of the terminated employment contract is less than
the presumptive amount described in the disclosure form that would be used
to reduce state aid under paragraph (1) of this subsection.
(A)
A district submitting documentation to rebut the presumptive
amount must include the following items:
(i)
final signed agreement terminating the employment relationship;
(ii)
canceled check(s) for any payment(s) made to a departing
superintendent beyond amounts earned under the contract at the time the employment
relationship is terminated;
(iii)
Internal Revenue Service Form W-2, Wage and Tax Statement,
reporting payments as supplemental wages (compensation paid in addition to
the employee's regular wages) and/or special wage payments (amount paid to
an employee or former employee for services performed in a prior year) that
the district submits to cover in whole or in part payments made to a departing
superintendent;
(iv)
worksheet(s) documenting calculation of earned payroll
amounts through last day of employment;
(v)
general ledger detail documenting transactions involving
payment(s) to a departing superintendent;
(vi)
minutes of board of trustees documenting approval of a
final agreement to make payment(s) to a departing superintendent;
(vii)
employment contract for the most recent contractual period
(year) of employment and for the year immediately preceding, if applicable;
(viii)
compensation plan or salary schedule for superintendent
for the most recent contractual period (year) of employment and for the year
immediately preceding, if applicable;
(ix)
salary distribution records for the most recent contractual
period (year) of employment and for the year immediately preceding, if applicable;
and
(x)
board policy covering employee benefits including monthly
allowances, deferred compensation, vacation days, personal leave days, and
sick leave days in effect at the time of termination of employment.
(B)
The commissioner of education may require any additional
documentation to evaluate the documentation submitted.
(3)
The commissioner or the commissioner's designee will determine
whether a payment to a departing superintendent is a severance payment for
purposes of TEC, §11.201(c), based on the documentation submitted and
any additional documentation required, or from agency documents that are made
available to the district. The commissioner or the commissioner's designee
may determine that an amount greater than the presumptive amount under paragraph
(1) of this subsection is a severance payment based upon the documentation
considered. A determination by the commissioner or the commissioner's designee
upon the record compiled under this rule is the final agency administrative
decision and may not be appealed under TEC, §7.057(a).
(4)
A waiver of a district's ability to contest the presumption
under paragraph (1) of this subsection is constituted by:
(A)
failure to submit the superintendent payment disclosure
form within the established timeline;
(B)
failure to timely notify the commissioner of disagreement
with the presumptive amount under paragraph (1) of this subsection;
(C)
failure to submit required documents with the superintendent
payment disclosure form; or
(D)
failure to submit additional documentation within 30 days
of request.
(d)
Reduction of Foundation School Program Funds.
(1)
The commissioner shall reduce the district's Foundation
School Program (FSP) funds for the school year following the school year in
which the first payment is made by an amount equal to the severance payment
made by the board of trustees to the superintendent, as determined under subsection
(c) of this section. The commissioner shall also reduce the district's FSP
funds in the school year following each school year that any additional severance
payment(s) are made to the superintendent. Districts will be subject to reductions
to FSP state funding amounts specified in TEC, Chapter 42, for one or more
school years until the liability amount(s) has been liquidated in full, if
the liability to the state exceeds the total flow of estimated earned revenue
to a district under the FSP. The reduction in FSP state aid payments may apply
to any FSP state aid sources of estimated earned revenue. The reductions in
FSP state aid will be proportionately deducted from each FSP state aid payment
for the school year(s).
(2)
For districts subject to the provisions of TEC, Chapter
41, any reduction for severance payments shall be made to the Foundation School
Program Tier I allotment for the district prior to computation of weighted
average daily attendance for purposes of determining the district's equalized
wealth level.
(3)
Reductions in FSP amounts arising from severance payments
will not affect the district's requirements to comply with all provisions
of TEC, Chapter 42, to provide educational services to special populations
and other provisions of TEC, Chapter 42.
(e)
Audit. Accurate reporting of a district's superintendent
payment disclosure form is subject to audit by the TEA division responsible
for school financial audits. The audit shall examine amounts accrued as earned
salaries and benefits for services provided by the superintendent prior to
termination from the district which are deducted from the gross amount of
severance payment(s) and reconciled with the liability amount disclosed by
the district.
(f)
Noncompliance. Compliance with the reporting requirements
of this section shall be considered as part of the district's compliance with
required financial accounting practices. Failure to comply with disclosure
requirements may result in sanctions under TEC, §39.076(a)(4).
(g)
Other reporting and settlement provisions. Notwithstanding
any other subsection, all payments made to departing superintendents between
May 30, 1995, and December 31, 2000, are required to be reported no later
than April 1, 2001. Upon a determination that all or part of such a payment
is a severance payment, FSP funds available to a school district shall be
reduced for payments due during the 2001-2002 school year. This subsection
expires August 31, 2002.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State, on December 21, 2000.
TRD-200008889
Criss Cloudt
Associate Commissioner, Accountability Reporting and Research
Texas Education Agency
Earliest possible date of adoption: February 4, 2001
For further information, please call: (512) 463-9701