19 TAC §§105.1021, - 105.1023
The Texas Education Agency (TEA) proposes new §§105.1021,
105.1022, and 105.1023, concerning severance payments made to superintendents.
These proposed new sections replace an earlier version that was filed as proposed
in the January 5, 2001, issue of the
Texas Register
(26 TexReg 55), which has been withdrawn. The notice of withdrawal
can be found in the Withdrawn Rules section in this issue.
Like the earlier version, these proposed new sections detail provisions
for definitions, identification, administration, reduction of Foundation School
Program (FSP) funds, audit, and compliance to implement the reporting of severance
payments made to superintendents and the process for reducing FSP funds. Senate
Bill (SB) 1446, 77th Texas Legislature, 2001, warrants that a distinction
be made regarding the applicability of payments made before September 1, 2001,
and payments made on or after that date. These proposed new sections include
this distinction that was not addressed in the earlier withdrawn version.
Texas Education Code (TEC), §11.201(c), enacted by SB 1, 75th Texas
Legislature, 1995, and amended by SB 1446, 77th Texas Legislature, 2001, 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 shall report to the commissioner the terms of a severance
payment made to a superintendent.
Section 105.1021 primarily applies to any payments made to a superintendent
based upon a written agreement entered into on or after September 1, 2001.
A district must submit a disclosure form to TEA within 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. Notwithstanding
any other subsection in the proposed sections, districts may also elect to
apply the provisions of §105.1021 to all payments made to departing superintendents
on or after May 30, 1995. Section 105.1022 details the provisions for identification,
reduction of FSP funds, audit, and compliance for payments subject to the
provisions in both §105.1021 and 105.1023. In addition, §105.1023
applies to all payments made to departing superintendents between May 30,
1995, and August 31, 2001. A district must report these payments no later
than January 1, 2002, even when a district elects to apply the provisions
of §105.1021 to any agreement entered into prior to September 1, 2001.
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 sections. 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
sections are in effect the public benefit anticipated as a result of enforcing
the sections will be the establishment of clear procedures to implement the
requirement that districts report severance payments. The proposed sections
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 no anticipated economic cost to persons who are required to comply
with the proposed new sections.
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@tea.state.tx.us
or faxed to (512) 475-3499. All requests for
a public hearing on the proposed sections 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 sections has been
published in the
Texas Register
.
The new sections are 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 to the commissioner
the terms of a severance payment made to a superintendent.
The new sections implement the Texas Education Code, §11.201(c).
§105.1021.Severance Payments to Superintendents After September 1, 2001.
(a)
Applicability. The provisions of this section apply to
any payments made to a superintendent based upon a written agreement entered
into on or after September 1, 2001. An independent school district may elect
to apply the provisions of this section to any agreement subject to §105.1023
of this title (relating to Severance Payments to Superintendents Prior to
September 1, 2001).
(b)
Definitions.
(1)
Severance payment--Any amount paid by the board of trustees
of an independent school district to or in behalf of a superintendent on early
termination of the superintendent's contract that exceeds the amount earned
by the superintendent under the contract as of the date of termination, including
any amount that exceeds the amount of earned standard salary and benefits
that is paid as a condition of termination of the contract. 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 includes
any payment for actual or threatened litigation involving or related to the
employment contract. The amount of the severance payment in excess of one
year's salary and benefits under the superintendent's terminated contract,
as applicable, is deducted from the district's Foundation School Program funds,
in accordance with Texas Education Code (TEC), §11.201(c), as amended
by Senate Bill 1446, 77th Texas Legislature, 2001.
(2)
Superintendent--The educational leader and chief executive
officer of an independent 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.
(c)
Administration. The commissioner of education shall reduce
the district's Foundation School Program funds by the severance payment amount
disclosed in the Superintendent Payment Disclosure Form that exceeds one year's
salary and benefits under the superintendent's terminated contract, in accordance
with §105.1022 of this title (relating to Administration of Severance
Payment Reporting and Payment Reduction).
§105.1022.Administration of Severance Payment Reporting and Payment Reduction.
(a)
Applicability. This section applies to any severance payment
determined under §105.1021 of this title (relating to Severance Payments
to Superintendents After September 1, 2001) and §105.1023 of this title
(relating to Severance Payments to Superintendents Prior to September 1, 2001),
with certain exceptions, as stated.
(b)
Identification.
(1)
Identification of an independent school district subject
to reductions in state funding attributable to severance payment to superintendent
provisions under Texas Education Code (TEC), §11.201(c), is based on
information filed by the district 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 the district considers
the payment to be a severance payment within the meaning of TEC, §11.201(c).
(2)
The commissioner of education or the commissioner's designee
will determine whether a payment to a departing superintendent is a severance
payment for purposes of this section, 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 or less than the presumptive amount under §105.1023
of this title 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 section is the final agency administrative decision
and may not be appealed under TEC, §7.057(a).
(c)
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 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 in TEC, Chapter 42, for one or more school years
until the liability amount(s) has(have) 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 FSP 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.
(d)
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.
(e)
Noncompliance. Compliance with the reporting requirements
of this section shall be considered as part of the district's compliance with
required financial accounting practices under TEC, §39.075(a)(4). Failure
to comply with disclosure requirements may result in sanctions as authorized
by TEC, §39.075(c).
(f)
Implementation. Notwithstanding any other subsection of
this section, all payments made to a departing superintendent on or after
May 30, 1995, are required to be reported to TEA on forms distributed to a
district for the purpose of administering the provisions of this section.
Upon a determination that all or part of such a payment is a severance payment,
FSP funds available to a district shall be reduced for payments due for the
school year(s) that follow the school year(s) of any severance payment(s),
in accordance with this section.
§105.1023.Severance Payments to Superintendents Prior to September 1, 2001.
(a)
Applicability. The provisions of this section apply to
any payments made to a superintendent based upon a written agreement entered
into prior to September 1, 2001. An independent school district may elect
to apply the provisions of §105.1021 of this title (relating to Severance
Payments to Superintendents After September 1, 2001) to any agreement subject
to this section.
(b)
Definitions.
(1)
Severance Payment--Any amount paid by the board of trustees
of an independent school district to or in behalf of a superintendent on early
termination of the superintendent's contract that exceeds the amount earned
by the superintendent under the contract as of the date of termination, including
any amount that exceeds the amount of earned standard salary and benefits
that is paid as a condition of termination of the contract. 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. A severance payment to a
departing superintendent up to the amount paid or equal to one year's salary
and benefits under the superintendent's terminated contract, whichever is
less, is deducted from the district's Foundation School Program funds, in
accordance with Texas Education Code (TEC), §11.201(c), as enacted by
the 74th Texas Legislature, 1995.
(2)
Superintendent--The educational leader and chief executive
officer of an independent 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.
(c)
Identification. Identification of an independent school
district subject to reductions in state funding attributable to severance
payment to superintendent provisions in TEC, §11.201(c), is based on
information filed by the district with the Texas Education Agency (TEA) on
the Superintendent Payment Disclosure Form. 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 the district considers the payment to be a severance payment within
the meaning of TEC, §11.201(c).
(d)
Administration.
(1)
All payments made to a departing superintendent reported
under 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.
A school district may elect to apply the provisions of §105.1021 of this
title to any agreement subject to this section. A school district must submit
the Disclosure Form no later than January 1, 2002, to report severance payments
from agreements signed between May 30, 1995, and August 31, 2001.
(2)
A school district may submit documentation with its Superintendent
Payment Disclosure Form to rebut the presumptions created by this section.
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 under this section to reduce the amount of reduction
under this section. A district submitting documentation to rebut the presumptive
amount must include the following items:
(A)
final signed agreement terminating the employment relationship;
(B)
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;
(C)
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;
(D)
worksheet(s) documenting calculation of earned payroll
amounts through last day of employment;
(E)
general ledger detail documenting transactions involving
payment(s) to a departing superintendent;
(F)
minutes of board of trustees documenting approval of a
final agreement to make payment(s) to a departing superintendent;
(G)
employment contract for the most recent contractual period
(year) of employment and for the year immediately preceding, if applicable;
(H)
compensation plan or salary schedule for a superintendent
for the most recent contractual period (year) of employment and for the year
immediately preceding, if applicable;
(I)
salary distribution records for the most recent contractual
period (year) of employment and for the year immediately preceding, if applicable;
and
(J)
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.
(3)
The commissioner of education may require any additional
documentation to evaluate the documentation submitted.
(4)
Failure to timely submit the Superintendent Payment Disclosure
Form, failure to notify the commissioner of disagreement with the presumptive
amount under this section, failure to submit required documents with the Superintendent
Payment Disclosure Form, or failure to submit additional documentation within
30 days of request constitutes a waiver of a district's ability to contest
the presumption under this section.
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 June 29, 2001.
TRD-200103727
Criss Cloudt
Associate Commissioner, Accountability Reporting and Research
Texas Education Agency
Earliest possible date of adoption: August 12, 2001
For further information, please call: (512) 463-9701