PROPOSED RULES
Before an agency may permanently adopt a new or amended section or repeal an 
existing section, a proposal detailing the action must be published in the Texas 
Register at least 30 days before action is taken. The 30-day time period gives 
interested persons an opportunity to review and make oral or written comments on 
the section. Also, in the case of substantive action, a public hearing must be 
granted if requested by at least 25 persons, a governmental subdivision or 
agency, or an association having at least 25 members.
Symbology in proposed amendments. New language added to an existing section is 
indicated by the <nl> code. [Brackets] indicate deletion of existing material 
within a section.

TITLE 10. COMMUNITY DEVELOPMENT
PART V. Texas Department of Economic Development
CHAPTER 186.Smart Jobs Fund Rules
SUBCHAPTER A.General Provisions
10 TAC sec.sec.186.102, 186.104
The Texas Department of Economic Development (department) proposes amendments to 
the Smart Jobs Fund Rules, Subchapter A. General Provisions, sec.sec.186.102 and 
186.104. The amendments are proposed pursuant to Government Code 
sec.sec.481.0044(a), authorizing the governing board of the department to adopt 
rules necessary for the administration of department programs, and 481.153, 
directing the governing board to adopt rules as necessary to implement the Smart 
Jobs Fund program, as well as Government Code, Chapter 2001, Subchapter B, 
Rulemaking, setting forth the state agency rulemaking process. Government Code, 
Chapter 481, Subchapter J, is affected by these amendments. 
The proposed amendments focus and clarify the purpose of the program as an 
economic development program, reword definitions for clarity and for consistency 
with statute, and add new definitions necessary to the administration of the 
program. Some non-substantive grammatical corrections have been made. 
Amendments to sec.186.102 clarify the purpose, intent, and goals of the program. 
Amendments to sec.186.104 amend the definitions of consortium and smart job to 
clarify the types of businesses that may form consortia under the program and to 
more accurately reflect the language of Government Code, Chapter 481, Subchapter 
J. The amendments add definitions of high impact economic development project, 
micro-business, and small business to provide for clarity of program 
administration. 
Jim Richardson, Director of the Smart Jobs Program, has determined that for each 
year of the first five years that the proposed amendments are in effect no 
additional cost to the state and to local governments, no reductions in costs to 
the state and to local governments, and no loss or increase in revenue to the 
state or to local governments is expected as a result of enforcing or 
administering the amendments, and that enforcing or administering the amendments 
does not have foreseeable implications relating to cost or revenues of the state 
or local governments. 
Mr. Richardson has further determined that there is no probable cost to persons 
required to comply with the amendments, other than any resources used to 
complete a Smart Jobs Fund application by businesses that voluntarily 
participate in the program. Mr. Richardson has determined that the public 
benefits expected as a result of adopting the proposed amendments include 
increased economic growth, more equitable distribution of program grant funds, 
and more efficient program administration. 
Written comments on the proposed amendments may be addressed to Mr. Richardson 
at the department, P.O. Box 12728, Austin, TX 78711-2728, or delivered to 1700 
N. Congress Avenue, Austin, TX 78701. Comments may be faxed to Mr. Richardson at 
(512) 936-0415. No comments received before publication of the proposed 
amendments in the Texas Register or later than 30 days after the date of 
publication will be considered.

sec.186.102.Purpose. 
The Smart Jobs Fund is established as <nl>an economic development <ol> [a 
business incentive] program<nl>. The goal of the program is to aid in the 
expansion, retention, and location of businesses by providing training 
opportunities that result in the creation and retention of smart jobs<ol> [and 
to enhance employment opportunities for Texans by fostering the development of 
jobs that include wages, benefits, opportunity for advancement, and job security 
in accordance with the program. It is also established to meet the needs of 
existing and new businesses in this state by assisting them in improving the 
overall education and skill levels of their work forces].

sec.186.104. Definitions. 
The following words and terms, when used in this chapter, shall have the 
following meanings, unless the context clearly indicates otherwise. 
Authorized employer representative--An individual authorized to bind the company 
under the terms of the contract. 
Benefits--Perquisites paid by an employer to an employee, either voluntarily or 
by collective bargaining agreement, in addition to the employee's wages. 
Classroom training--Training provided by an instructor to a group of trainees on 
a predetermined structured curriculum. 
Community-based organization--A public or private nonprofit entity authorized to 
do business within the State of Texas and exempt from taxation under the United 
States Internal Revenue Code, Section 501(c), and which has as a purpose of the 
organization providing education, employment, or training services.
Competencies--The level of skills that the employer determines to be necessary 
for the participant to successfully perform a specific job. This includes the 
employer's measures of the participant's expected learning gains or skill 
mastery for which they are being trained. Such competencies may be specified by 
the employer, by industry associations, or by inclusion in courses approved by 
the Texas Higher Education Coordinating Board, and be consistent with ISO 9000 
certification standards, or other credible sources acceptable to the employer as 
evidenced by their inclusion in the application. The employer's measures shall 
be consistent with specifications in its business plan as essential to the 
business' competitiveness. 
Completed application--A document submitted by an applicant on the forms 
provided by the Department that provides the information specified in 
sec.186.302 of this title (relating to Application Requirements) in sufficient 
detail as determined by the department to write a contract for a grant awarded 
under this chapter.
Consortium--A group that undertakes a training project <nl> for large 
businesses, small businesses, or a combination of small and large 
businesses,<ol> in which all or most of training will be the same for each 
employer. A lead entity will normally assume responsibility for preparing and 
submitting the grant application and for being the grant administrator. The lead 
entity may be one of the employers, a provider or other entity acceptable to the 
department.
Contract--The written legally binding obligation between the department, each 
employer, providers, guarantors, and administrative entities which may serve as 
a fiscal agent. 
Department--The Texas Department of Economic Development.
Employer organization--An organization funded by a group of employers that 
provides employment based training. 
Existing job--A position for which there has been an incumbent employee or a job 
opening for more than one year prior to the date the project is scheduled to 
begin. 
Full-time employment--Employment of at least 35 hours a week for a single 
employer, including normal days not worked by an employee such as a weekend or 
holiday. 
Governing Board--The existing board of the Texas Department of Economic 
Development. 
<nl>High impact economic development project<ol><nl>--A project or projects that 
the Department determines will result in a significant benefit to a community, 
region, or the State. Factors that may be considered in determining whether a 
project qualifies as a high impact economic development project include industry 
multipliers, cost-benefit models, jobs to be created, and capital investment. 
<ol>
In-kind contribution--A noncash contribution of goods and/or services provided 
by an employer as all or part of the employer's matching share of a grant or 
project. 
Job-related basic skills--The knowledge and abilities necessary to communicate 
and to function effectively in the workplace. These skills must be integrated as 
part of the job-related occupational skills training curricula and must be 
consistent with the requirements of the employer's business plan. Such skills 
may include reading, writing, mathematics, English as a Second Language, and 
Spanish as a Second Language if these skills are necessary for the job in which 
the participant will be employed at the end of the project consistent with the 
employer's certification.
Job-related occupational skills--The knowledge and abilities the employer 
specifies as necessary to perform the duties and tasks required for a specific 
job. These skills specifications shall be consistent with the requirements of 
the employer's business plan. 
Labor organization--Any organization of any kind, or any agency or employee 
representation committee or plan in which employees participate and which exists 
for the purpose, in whole or in part, of dealing with one or more employers 
concerning grievances, labor disputes, wages, rates of pay, hours of employment, 
or conditions of work.
Local labor market--One of many geographic areas of the State for which 
standardized occupational wage data is available from the Texas Workforce 
Commission.
Matching costs--The dollar value of the private contributions from the employer 
required under Smart Jobs Fund, whether they be dollar contributions or in-kind 
contributions. 
<nl>Micro-business<ol><nl>--A small business with 20 employees or less. <ol>
Minority employer status for application purposes--Minority group members 
include African-Americans, American Indians, Asian-Americans, Mexican-Americans 
and other Americans of Hispanic origin, and women. 
New job--A position which did not exist in this state in the employer's business 
and which had no incumbent employee for more than one year prior to the date the 
project is scheduled to begin. This may include an employee in an existing job 
who is being retrained for anew job with new skill requirements. 
On-the-job training--Structured training by instruction and supervision during a 
period of time a trainee works on the job. 
Prevailing wage--The average hourly wage paid for a specific occupation within a 
local labor market area and [is] based on the most current information provided 
by the Texas Workforce Commission. 
Program expenses--The costs incurred by the department for its operation of the 
program, which are not included in the cost of specific projects. 
Project--A specific employment training activity for which an employer developed 
and implemented a plan and entered into a contract under the Texas Government 
Code, Subchapter J, Section 481.151 et seq. 
Provider--A person or entity that provides employment-related training. The term 
includes employers, employer associations, labor organizations, community-based 
organizations, training consultants, public and private schools, community 
colleges, senior colleges, universities, technical colleges, and other higher 
education entities as defined in the Education Code, Section 61.003, and 
proprietary schools as defined in the Education Code, Section 32.11. 
Reimbursable costs--Those expenses in a training project that are reimbursed by 
a grant from the fund. Costs related to direct training and administrative costs 
for a project are reimbursable costs. 
<nl>Small Business<ol><nl>--A business that has fewer than 100 employees or less 
than $1 million in annual gross receipts.<ol>
<nl>Smart Job<ol>--A job that is a family wage job, a [ demand job, a job in] 
manufacturing <nl>job<ol>, [or] a job in an emerging occupation<nl>, or a job in 
a demand occupation that promotes high-skill, high-wage jobs in high-technology 
areas<ol>.
Subcontract--A written agreement between an applicant and a provider or 
administrative entity that is signed before a project has been approved and a 
grant awarded which details the rights and responsibilities of each party to the 
agreement. This can include the designation of a provider or administrative 
entity as a fiscal agent. 
Technological change--An advance in product design or production technique that 
enhances production efficiency or product performance. 
Total project cost--The sum of costs related to direct training plus 
administrative costs funded by a grant awarded under this chapter.
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 January 12, 1998.
TRD-9800406
W. Lane Lanford
Chief Administrative Officer
Texas Department of Economic Development
Earliest possible date of adoption: February 23, 1998
For further information, please call: (512) 936-0181

SUBCHAPTER C.Application for Grants
10 TAC 186.301, 186.302, 186.305-186.308
The Texas Department of Economic Development (department) proposes amendments to 
the Smart Jobs Fund Rules, Subchapter C. Application for Grants, 
sec.sec.186.301, 186.302, and 186.305-186.308. The amendments are proposed 
pursuant to Government Code sec.sec.481.0044(a), authorizing the governing board 
of the department to adopt rules necessary for the administration of department 
programs, and 481.153, directing the governing board to adopt rules as necessary 
to implement the Smart Jobs Fund program, as well as Government Code, Chapter 
2001, Subchapter B, Rulemaking, setting forth the state agency rulemaking 
process. Government Code, Chapter 481, Subchapter J, is affected by these 
amendments. 
The proposed amendments clarify grant eligibility requirements, provide per 
employee training cost caps, clarify information required from training 
consortia, clarify permissible travel costs, provide for division of funds into 
categories and dedication of funds for high impact economic development 
projects, and provide for quarterly allocation of funds and scoring of 
applications. Some language has been changed to more accurately reflect 
statutory language and statutory intent. Some organizational changes and non-
substantive grammatical corrections have been made. 
Amendments to sec.186.301 provide cost per job caps for businesses that receive 
grant funds under the program. 
Amendments to sec.186.302 clarify the information required in the application 
regarding the size of the business or businesses applying for grant funds and 
whether the employer would provide the training regardless of whether grant 
funds were awarded. The amendments also clarify the amount of grant funds that 
may be expended for travel. 
Amendments to sec.186.305 clarify the application review process, provide that 
the executive director will attempt to award 50% of funds to small businesses 
and may dedicate up to 10% of funds for high impact economic development 
projects, and provide for funding of consortiums made up of both large and small 
businesses. Amendments to sec.186.306 provide for scoring of applications 
quarterly on a competitive basis. 
Amendments to sec.sec.186.307 and 186.308 are grammatical changes or changes 
that more accurately reflect current program practices. 
Jim Richardson, Director of the Smart Jobs Program, has determined that for each 
year of the first five years that the proposed amendments are in effect no 
additional cost to the state and to local governments, no reductions in costs to 
the state and to local governments, and no loss or increase in revenue to the 
state or to local governments is expected as a result of enforcing or 
administering the amendments, and that enforcing or administering the amendments 
does not have foreseeable implications relating to cost or revenues of the state 
or local governments. 
Mr. Richardson has further determined that there is no probable cost to persons 
required to comply with the amendments, other than any resources used to 
complete a Smart Jobs Fund application by businesses that voluntarily 
participate in the program. Mr. Richardson has determined that the public 
benefits expected as a result of adopting the proposed amendments include 
increased economic growth, more equitable distribution of program grant funds, 
and more efficient program administration. 
Written comments on the proposed amendments may be addressed to Mr. Richardson 
at the department, P.O. Box 12728, Austin, TX 78711-2728, or delivered to 1700 
N. Congress Avenue, Austin, TX 78701. Comments may be faxed to Mr. Richardson at 
(512) 936-0415. No comments received before publication of the proposed 
amendments in the Texas Register or later than 30 days after the date of 
publication will be considered.

sec.186.301. Eligibility. 
(a) The department shall evaluate applications submitted by one or more 
employers or by one or more employer organizations, labor organizations, 
community-based organizations or providers acting in partnership with one or 
more employers. Only businesses that have been in operation for at least one 
year are eligible to receive a grant. An employer that is rendering services to 
a Smart Jobs Fund contractor and receiving grant monies for these services is 
not eligible to receive a grant during the contract period. All businesses must 
demonstrate financial soundness and fulfillment of state tax obligations before 
they can receive a grant from the department. 
(b) The cost per job is calculated by dividing the total project cost by the 
number of jobs. <nl>The cost per job may not exceed $1,200 per trainee for a 
large business or $2,500 per trainee for a small business.<ol>
<nl>(c)<ol> <nl>Unless one of the conditions set forth in sec.481.155(a)(1-6) is 
met, grants awarded by the department shall meet the following two tests: the 
combination of grants in any fiscal year to a single employer may not exceed 
$1,500,000, and no grant or combination of grants in any fiscal year to a single 
employer may exceed 10% of the median annual wages of the new or existing jobs 
being created or retained with the grant.<ol>

sec.186.302 Application Requirements. 
(a) One or more employers; one or more employers acting in partnership with an 
employer organization, labor organization, or community-based organization; or 
one or more employers acting in partnership with a consortium composed of one or 
more providers may submit an application for a grant under the Smart Jobs Fund:
(b) Employee leasing firms, including firms contracting for temporary employees, 
are not eligible for a grant. Employees obtained from agreements with such firms 
are not eligible to participate as trainees unless the employer complies with 
the applicable certification requirements of this chapter. 
(c) Grant applications must be filed in a form approved by the department and 
must include a complete business and training plan and a project budget with a 
line item breakdown of costs. 
(d) Business and Training Plan. Grant funds awarded hereunder shall pay for job-
related occupational skills training and job-related basic skills training that 
enhance the employer's ability to carry out its business plan. Job-related basic 
skills must be integrated as part of the job-related occupational skills 
training curricula. An approved business and training plan will become part of 
any contract for grant funds awarded. The business and training plan will 
specify project start dates and project end dates. Up to four project periods 
may be specified by the employer. Each business and training plan must contain 
the information required by the Smart Jobs Fund, sec.481.156(b). Each business 
and training plan shall also: 
(1) describe how the proposed training is consistent with, and will enhance the 
employer's ability to carry out, its business plan to retain and increase its 
competitiveness; 
(2) describe the skills training curricula for each project, including the 
number of hours each participant will spend in classroom training, on-the-job 
training, and/or other employer-designed training components, to be funded by 
the grant and specify the training provider for each curricula;
(3) describe the skills and the competencies the employer expects the 
participant to achieve upon completion of training; 
(4) describe the method(s) used to assess each participant's competencies in the 
skills for which the project will train both immediately prior to the start date 
of the project and upon completion of training; 
(5) specify the projected cost per job which is calculated by dividing the total 
Smart Jobs Fund grant amount by the number of jobs;
(6) specify the geographic location, number and kind of jobs that will be 
available at the end of the project and the wages to be paid on completion of 
the project, and 
(7) specify the geographic location of all training to be provided with grant 
funds. All trainee travel will be specified in the proposed budget. All trainee 
travel outside the geographic location in which the employer is located and all 
trainee travel to locations outside of Texas will be at the discretion of the 
executive director as specified in the contract. No trainee travel will be 
reimbursed from grant funds for any purpose other than training as specified in 
the employer's business and training plan. 
(e) The application shall include the following information:
(1) whether the employer is a small business [with less than 100 employees or $1 
million or less in annual gross receipts] or a micro-business [with 20 employees 
or less]; [and]
(2) whether the employer is a minority group member, and if so, to which 
minority group the employer belongs<nl>;<ol>[
<nl>(3)<ol> <nl>if the application is from a consortium, the number of 
businesses that are small businesses, micro-businesses, and large businesses and 
the number of employees to be trained for each; and <ol>
<nl>(4)<ol> <nl> whether the employer would provide the training but for the 
Smart Jobs grant funds. <ol>
(f) Budget. Each application shall include a budget with line item breakdown of 
costs consistent with the requirements of the Smart Jobs Fund and these rules. 
The budget shall include three parts: 
(1) specification of costs related to direct training; 
(2) specification of administrative costs; 
(3) specification of matching contributions. An approved budget with line item 
breakdown of costs will become part of any contract for grant funds awarded 
hereunder. 
(A) Costs related to direct training may include: tuition; fees; books and 
classroom materials; instructor wages and salaries and reasonable benefits if 
the instructor is not an employee of a public education institution if grant 
funds are paying tuition and fees; instructor and trainee travel and per diem 
outside the employer's specified region of the state (limited to 10% of the 
[total] <nl>other direct-related training<ol> costs [related to direct 
training]) with per diem expenses not to exceed the State of Texas allowable 
rates; reasonable equipment lease or rental costs during the term of the 
project; reasonable costs of pre- and post-training participant assessment, 
costs of purchasing approved curricula specified in the applicant's business and 
training plan if there is not already a course offering at a convenient public 
education institution for which the grant is paying tuition and fees; wages, 
salaries, and reasonable benefits of instructional aides and trainees' 
counselors if such personnel are not employees of a public education institution 
if grant funds are paying tuition and fees; and other such reasonable costs 
related to direct training. 
(B) Reimbursement for costs related to direct training will not include the 
lease, rental, purchase, or construction of facilities, the purchase of capital 
equipment, salaries, wages, or benefits paid to personnel assigned to manage or 
report on the project or the contract agreement. 
(C) Administrative costs may include the lease or rental of facilities except 
those facilities belonging to public education institutions where the curriculum 
specified in the business and training plan will be provided and for which the 
grant is paying tuition and fees; salaries, wages, and reasonable benefits paid 
to personnel assigned to manage or report on the project or the contract 
agreement; and other such reasonable expenses not included in costs related to 
direct training as are necessary to the successful completion of the project. 
Administrative costs are limited to 10% of costs related to direct training 
incurred by the training project(s). 
(D) Employers with fewer than 50 employees receiving a grant must provide a 
matching amount of private funds in an amount at least equal to 10% of the total 
project cost. Projects that provide significant economic benefits to an entire 
region of the state may have all matching requirements waived at the discretion 
of the executive director. Such projects must provide information describing the 
region to which benefits will accrue and projected economic information which 
may include other relevant macroeconomic and microeconomic data that shows 
positive effects on the region's average weekly wage, tax base, employment 
rates, family income, purchasing power, expenditures on unemployment insurance, 
Aid to Families with Dependent Children, Medicaid, and other public assistance, 
and the availability of job openings in demand, emerging, or manufacturing 
occupations. Employers may meet matching requirements by providing in-kind 
contributions. Documentation for in-kind contributions which are submitted as 
part of the employer's match must specify the dollar value of facilities, 
equipment, personnel, and consumable supplies contributed to the project. New 
equipment will be valued at cost. Existing equipment and facilities will be 
valued on a pro rata basis for the time used for training consistent with the 
United States Internal Revenue Service depreciation schedules for such assets 
based on data provided by the employer. Personnel contributions will be valued 
on a pro rata basis for the time spent on the project. In-kind contributions may 
not include the value of facilities, equipment, or personnel existing in public 
education institutions where such resources already are available to the 
employer as part of the institution's course offerings and for which the grant 
is paying tuition and fees. In-kind contributions may match either costs related 
to direct training or administrative costs. The sum of costs related to direct 
training and administrative costs will be used to determine the total matching 
costs required for any grant awarded. 
(E) The Smart Jobs Fund may reimburse nominal and reasonable costs of preparing 
an application for small and micro-businesses and shall not reimburse an 
applicant or any employer for retroactive training costs incurred prior to the 
start date of the contract. 
(g) Application process and time line. 
(1) Any eligible entity desiring to request funds from the Smart Jobs Fund shall 
submit an application for funding. 
(2) Within three business days after receiving an oral or written request for an 
application from an applicant, the department shall send an application packet 
to the applicant. 
(3) Within ten business days after receiving an application, the department 
shall notify the applicant whether the application is complete. If the 
application is incomplete, the department shall specify in a letter the 
additional information required to complete the application. With this 
notification to the applicant, the department shall identify a contact person on 
its staff who is available to assist the applicant in completing the 
application. The application will be placed in an inactive status if the 
requested additional information is not received within 30 business days from 
date of notification letter. 
(4) Within 30 business days after an application is complete, the executive 
director will act on the application. In acting on the application, the 
executive director may approve the application and award a grant; approve the 
application pending the award of the grant; disapprove the application; or 
request the applicant to modify all or part of the application. 

sec.186.305. Funding; Grants. 
(a) The executive director shall <nl>evaluate all completed applications to 
determine their eligibility for funding<ol> [attempt to award a grant for all 
approved projects], subject to the availability of funds. To ensure availability 
of funds throughout the fiscal year, <nl> the department shall attempt to ensure 
that 50% of the money spent under the program shall be used for small 
businesses. The<ol> [the] executive director <nl>will<ol> [may] award grants 
based on a quarterly allocation of funds. In deciding which projects to fund, 
the executive director shall be guided by the funding priorities <nl>and the 
scores achieved by each application as<ol> set forth [below] in Section 186.306 
of this title (relating to Funding Priorities). 
(b) <nl>To meet the legislative priorities and goals established for the 
program, the executive director may divide the funds appropriated for the 
program into separate categories. This includes funding categories for large 
businesses, small businesses, and for high impact economic development projects. 
At the beginning of each fiscal year, beginning September 1, 1998, the executive 
director may dedicate up to 10% of the total grant funding available to the 
program to fund high impact economic development projects<ol> [In June of each 
year, the Policy Board shall review the funding priorities set forth below in 
Section 186.306 and advise the executive director about changes to those 
priorities]. 
<nl>(c)<ol> <nl> If an application is from a consortium comprised of large and 
small businesses, funding for the large business trainees will originate from 
the large business funding category, as defined under subsection (b) of this 
section, and funding for small business trainees will originate from the small 
business category, as defined under subsection (b) of this section. In the event 
that no funds are available in the large business funding category, the 
consortium may be funded from the small business funding category provided that 
at least 51% of the employees being trained are from small businesses.<ol>

sec.186.306. Funding Priorities. 
(a) <nl>Program<ol> [Only program] objectives and priorities outlined in the 
Smart Jobs Fund Act and General Provisions <nl> and these rules<ol> will be 
considered in evaluating applications for funding<nl>.<ol> [, including:] 
[(1) At least 60% of the money spent under the program shall be used for 
projects that assist existing employers.] 
[(2) Shall attempt to ensure that 50% of the money spent under the program shall 
be used for projects that assist employers with fewer than 100 employees or less 
than $1 million in annual gross receipts.]
[(3) Shall attempt to ensure that 20% of the money spent under the program be 
used for projects that assist minority employers.]
[(4) Shall to the greatest extent practical spend money from the smart jobs fund 
in all areas of the state.] 
(b) The department will develop a scoring mechanism to be used for <nl>scoring 
applications on a competitive basis by quarter. Applications not funded may be 
considered in the following quarter, except for applications received in the 
last quarter of each fiscal year. No application will be considered for funding 
after two quarterly allocations. The scoring mechanism will determine which 
applications will be funded during each allocation period.<ol> [businesses, with 
100 or more employees and greater than $1 million in annual gross receipts that 
gives priority to funding applications] <nl>The scoring mechanism will include, 
but will not be limited to<ol> [based on] the following criteria: 
(1) business status, including <nl>small businesses,<ol> minority businesses, 
<nl>and<ol> existing businesses[, and businesses located in an Enterprise Zone]; 
(2) [statewide] distribution of <nl>funds including providing funds to all areas 
of the state, to under-served areas <ol> [businesses receiving grants under the 
program] and <nl> to <ol> first-time <nl>applicants<ol>[grantees]; 
(3) <nl>business impact such as the economic impact of the project on the 
community, region, and the State. Factors to be considered include the amount of 
capital investment and number of jobs created or retained relative to the 
population of the area<ol>[the regional impact of the project, the international 
impact, and involvement in defense conversion activities
(4) <nl>business type including whether it is a base industry to the community 
and an industry targeted by the State of Texas; <ol> 
<nl>(5)<ol> the quality of the jobs <nl>to be created or retained as a result of 
the training. This includes those jobs that are family wage jobs, in 
manufacturing occupations, in emerging occupations, or jobs in a demand 
occupation that provides high-skill, high-wage jobs in high-technology 
areas;<ol> [including manufacturing occupations and occupations in technological 
areas, wage levels, benefits, and whether the trainees are Texas residents 
formerly sentenced to the institutional division of the state jail division of 
the Texas Department of Criminal Justice.] 
<nl>(6)<ol> <nl> the factors set forth in Government Code, Section 481.155(a)(1) 
through (5); <ol>
<nl>(7)<ol> <nl> the employer's certification that the training to be funded 
would not be provided but for Smart Jobs funding; and <ol>
<nl>(8)<ol> <nl> whether the recipients of the job training are Texas residents, 
including residents formerly sentenced to the institutional division of the 
state jail division of the Texas Department of Criminal Justice. <ol>
<nl>(b)<ol> <nl> In June of each year, the Governing Board shall review the 
funding priorities set forth in this section and advise the executive director 
about changes to those priorities. <ol>

sec.186.307. Provider Eligibility.
An employer that has a contract under the Smart Jobs Fund <nl>cannot <ol> [can 
not] receive Smart Jobs fund grant monies for services rendered to another Smart 
Jobs Fund contractor during the contract period.

sec.186.308. Contracts and Contract Amendments.
(a) The department shall enter into a contract with each employer or employer 
designee participating in the project. Contract amendments must be requested in 
writing at least 30 days prior to the <nl>implementation of the<ol> proposed 
changes [and must be executed before changes are implemented]. Acceptance of the 
requested amendment is within the discretion of the executive director of the 
department. Amendments will not be made during the final quarter of the training 
project. Contracts and contract amendments will be executed by the authorized 
employer's representative and the department executive director or executive 
director designee. 
(b) Within 30 calendar days after the expiration of the 90-day retention period 
for each project, the employer shall submit to the department for verification 
the employment records for each trainee and other such data as the department 
may require to verify training and employment. 
(c) If all trainees specified in each project have been retained in employment 
90 days subsequent to that project end date and have successfully achieved the 
skills and competencies, wage requirements, and other contractual obligations, 
the amount of allowable expenditures withheld shall be remitted to the 
employer(s). Notwithstanding any other provision of these rules, an attrition 
rate of 15% is allowed based on the total number of jobs as outlined in the 
contract. The executive director may approve different numerical caps for micro-
businesses only based on one of the following requirements: The employer must 
certify: 
(1) that it is required to reduce or eliminate the employer's work force because 
of reductions in overall employment within an industry; or 
(2) that a substantial change in the skills required to continue the employer's 
business exists because of technological changes; or 
(3) that other reasonable factors, as determined by the executive director, 
exist.
(4) Attrition is verified 90 days after the end of the contract or 90 days after 
the end of each project period as defined in the contract. For attrition beyond 
the level specified in the contract, allowable expenditures will be reduced for 
each trainee who is not retained in employment at the end of the 90-day 
retention period by the amount of the average per-trainee training costs for a 
trainee. If there is a negative balance, the employer is liable for the amount 
of the negative balance and shall remit that amount to the department not later 
than the 30th day after the date of correspondence on which the employer is 
notified of the negative balance by the department.
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 January 12, 1998.
TRD-9800405
W. Lane Lanford
Chief Administrative Officer
Texas Department of Economic Development
Earliest possible date of adoption: February 23, 1998
For further information, please call: (512) 936-0181

TITLE 16. ECONOMIC REGULATION
PART I. Railroad Commission of Texas
CHAPTER 3.Oil and Gas Division
Conservation Rules and Regulations
16 TAC sec.3.50
The Railroad Commission of Texas proposes an amendment to sec.3.50, relating to 
Enhanced Oil Recovery Projects - Approval and Certification for Tax Incentive. 
The proposed amendments conform the rule to Texas Tax Code, sec.202.054, as 
required by Senate Bill 582, 75th Legislature, Regular Session, which extends 
the deadline for applying for certification for a tax incentive for new and 
expanded enhanced oil recovery (EOR) projects from January 1, 1998, until 
January 1, 2008. 
The proposed amendments to sec.3.50 amend subsection (c)(5) by adding a 
provision to the definition of EOR project to clearly indicate that pressure 
maintenance and water disposal projects are excluded from coverage by this 
section. 
The proposed amendments to subsection (c)(6) delete the unnecessary references 
to past active operation commencement deadlines. 
The proposed amendments to subsection (c)(13) add a descriptive provision to the 
definition of pressure maintenance which states, "wherein fluid injection 
volumes are approximately equal to fluid withdrawals and no attempt is made to 
refill pre- existing reservoir voidage or to displace in situ hydrocarbons."
Proposed new subsection (c)(20) defines water disposal project as that term is 
excluded from coverage in amended subsection (c)(5).
The exclusion from coverage for pressure maintenance operations was previously 
contained in sec.3.50 (commonly referred to as Statewide Rule 50), but was 
inadvertently deleted during revisions made in 1991; however, the exclusion of 
pressure maintenance operations has always been enforced by the commission. 
Likewise, the exclusion of water disposal projects has always been enforced by 
the commission and is being included in revised subsection (c)(5) for 
clarification. The proposed amendments to subsection (d)(1) delete the 
unnecessary references to past active operation commencement deadlines and add 
the qualification of "EOR project and area designation" to indicate the 
appropriate application. Additionally, the application deadline, extended from 
January 1, 1998, to January 1, 2008, by Senate Bill 582, is corrected in 
subsections (d)(1) and (i)(1). The proposed amendments add "injection history" 
to subsection (d)(2) as an example of relevant information to be included with 
the application. The proposed amendments to subsection (e) remove unnecessary 
language regarding separate filings and clarify the procedure for filing 
concurrent applications. The proposed amendments to subsection (g)(1)(A) delete 
unnecessary references to the past active operation commencement deadlines. 
Subsection (g)(2) is amended by adding "injection graphs" and "supporting 
tabular" data as information required to be submitted with the positive 
production response certificate application. 
The proposed amendments to subsection (i) require that an application for 
reduced or enlarged project area certification be filed prior to the filing of 
an application for positive production response certification to ensure that 
only one application for positive production response certification per project 
will be filed. 
Rita E. Percival, planner, Oil and Gas Division, has determined that there will 
be no fiscal implications for state or local government as a result of enforcing 
or administering the amended rule. The amended rule merely extends the tax 
exemption which is currently afforded to qualified EOR projects. There will be 
no cost of compliance with the amended rule for small businesses. In fact, there 
should be a reduction of the tax burden on all operators establishing new and 
expanded EOR projects and increased production from many of Texas' more mature 
oilfields resulting from this tax-saving incentive. 
Mickey R. Olmstead, hearings examiner, Office of General Counsel, has determined 
that, for each year that the amendments are in effect, the public benefit 
anticipated as a result of adopting the amendments will be a reduction of the 
tax burden as previously stated. 
Comments may be submitted to Mickey R. Olmstead, Hearings Examiner, Office of 
General Counsel, Railroad Commission of Texas, P.O. Box 12967, Austin, Texas 
78711-2967. Comments will be accepted for 30 days after publication in the Texas 
Register. All comments should refer to Oil and Gas Docket Number 20-0217580. For 
further information, please call Mickey Olmstead at (512) 463-6923. 
The commission proposes the amendments pursuant to Texas Natural Resources Code, 
sec.sec.81.051, 81.052, 85.042, 85.201, 85.202, 86.041 and 86.042, which 
authorize the commission to prevent waste of oil and gas and to protect 
correlative rights. 
Texas Tax Code, sec.sec.202.051-202.054, and Texas Natural Resources Code, 
sec.sec.101.001 - 101.052, are affected by the proposed amendments.

sec.3.50.Enhanced Oil Recovery Projects-Approval and Certification for Tax 
Incentive. 
(a)-(b) (No change.) 
(c) Definitions. The following words and terms, when used in this section, shall 
have the following meanings, unless the context clearly indicates otherwise. 
(1)-(4) (No change.) 
(5) Enhanced oil recovery project (EOR)--The use of any process for the 
displacement of oil from the reservoir other than primary recovery and includes 
the use of an immiscible, miscible, chemical, thermal, or biological process. 
<nl>This term does not include pressure maintenance or water disposal 
projects.<ol> 
(6) Existing enhanced recovery project--An EOR project that <nl>has begun<ol> 
[began] active operation [before September 1, 1989, or began active operation 
between September 1, 1989, and September 1, 1991,] but was not approved <nl>by 
the commission<ol> as a new EOR project. 
(7)-(12) (No change.) 
(13) Pressure maintenance--The injection of fluid into the reservoir for the 
purpose of maintaining the reservoir pressure at or near the bubble point or 
other critical pressure <nl>wherein fluid injection volumes are not sufficient 
to refill existing reservoir voidage and displace oil that would not be 
displaced by primary recovery operations<ol>. 
(14)-(18) (No change.) 
(19) Tertiary recovery project--An EOR project using a tertiary recovery method 
(as defined in the federal June 1979 energy regulations referred to in the 
Internal Revenue Code of 1986, sec.4993, or approved by the United States 
secretary of the treasury for purposes of administering the Internal Revenue 
Code of 1986, sec.4993, without regard to whether that section remains in 
effect) including those listed as follows<nl>:<ol>[
(A)-(I) (No change.) 
<nl>(20)<ol> <nl> Water disposal project--The injection of produced water into 
the reservoir for the purpose of disposing of the produced water wherein the 
water injection volumes are not sufficient to refill existing reservoir voidage 
and displace oil that would not be displaced by primary recovery operations. 
<ol>
(d) Application requirements. To qualify for the recovered oil tax rate the 
operator must: 
(1) [for a new EOR project, ]submit an application for approval on the 
appropriate form [on or after September 1, 1989, and] before January 1, 
<nl>2008<ol> [1998]. [For an expansion of an existing EOR project, the operator 
must submit an application for approval on the appropriate form on or after 
September 1, 1991, and before January 1, 1998. An application may be filed on or 
after the applicable date (September 1, 1989, or September 1, 1991) in this 
paragraph, even if a separate application for approval of the project has 
already been filed prior to that date.] All applications must be filed <nl>at 
the commission's Austin office<ol> [in Austin]. The form shall be executed and 
certified by a person having knowledge of the facts entered on the form. If an 
application is already on file under the Natural Resources Code, Chapter 101, 
Subchapter B, or for approval as a tertiary recovery project for purposes of the 
Internal Revenue Code of 1986, sec.4993, the operator may file a new <nl>EOR 
project and area designation<ol> application if the active operation of the 
project does not begin before the application under this section is approved by 
the commission; 
(2) submit all necessary forms to the Oil and Gas Division and provide the 
commission with any relevant information required to administer this section 
such as: area plats showing the proposed project area and all injection and 
producing wells within the area, production <nl>and injection <ol> history, 
planned enhanced oil recovery procedures, and any other pertinent data; 
(3)-(4) (No change.) 
(e) Concurrent applications. The operator may <nl>file<ol> [apply] concurrently[ 
or separately for]: 
(1) <nl>an application for<ol> approval of a new or expanded EOR project under 
this section<nl>, together with<ol>; 
(2) <nl>an application for<ol> approval of a unitization agreement for purposes 
of carrying out the enhanced oil recovery project under the Natural Resources 
Code, sec.sec.101.001 et seq.; <nl>or<ol> [and] 
(3) <nl>an application for<ol> approval [of an application] for certification of 
the project as a tertiary recovery project. 
(f) (No change.) 
(g) Approval and certification. 
(1) Project approval. In order to be eligible for the recovered oil tax rate as 
provided in the Tax Code, sec.202.052(b), the operator must apply for and be 
granted commission approval of a new EOR project or an expansion of an existing 
EOR project, prior to commencing active operation of the new project or expanded 
project. For a project to be approved the operator must:
[(A) for a new project prove that the project will begin active operation on or 
after September 1, 1989, or for the expansion of an existing project prove that 
the project will begin active operation on or after September 1, 1991;] 
<nl>(A)<ol>[(B)] prove that it qualifies as an EOR project; 
<nl>(B)<ol>[(C)] designate the area to be affected by the project and obtain 
commission approval of the designation; and 
<nl>(C)<ol>[(D)] if production from the wells within the project area is 
reported with production from wells not in the project area, designate the 
method to account for and report production from the project area. 
(2) Positive production response certificate. 
(A) (No change.) 
(B) The application for positive response certification shall include: 
(i) production <nl>and injection<ol> graphs <nl>with supporting tabular<ol> 
[and] data illustrating a positive production response and volumes of water or 
other substances that have been injected on the designated area since the 
initiation of the new [EOR project] or the expanded EOR project; 
(ii)-(iii) (No change.) 
(C) (No change.) 
(h) Annual reporting. 
(1) The operator must file an annual report on the appropriate form with the Oil 
and Gas Division each year the project remains eligible for the reduced 
severance tax rate. This form must be filed within 30 days of the <nl>first<ol> 
anniversary of the certification date of positive production response and 
annually thereafter. 
(2) (No change.) 
(i) Reduced or enlarged areas. The operator may apply for reduced or enlarged 
project area certification if: 
(1) the [original] application for <nl>reduction or enlargement of the<ol> 
project [approval] is received before January 1, <nl>2008<ol> [1998]; and 
(2) the application for reduction or enlargement is received <nl> prior to the 
filing of an application for positive production response certification of the 
original enhanced oil recovery project<ol> [no later than three years after the 
original approval of a secondary recovery project or five years after the 
original approval of a tertiary recovery project]. 
(j) (No change.)
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
January 7, 1998.
TRD-9800210
Mary Ross McDonald
Deputy General Counsel, Office of General Counsel
Railroad Commission of Texas
Earliest possible date of adoption: February 23, 1998
For further information, please call: (512) 463-7008

TITLE 22. EXAMINING BOARDS
PART XXIII. Texas Real Estate Commission
CHAPTER 537.Professional Agreements and Standard Contracts
Professional Agreements and Standard Contracts
22 TAC sec.537.11, sec.537.42
The Texas Real Estate Commission (TREC) proposes amendments to sec.537.11, 
concerning use of standard contract forms, and sec.537.42, which adopts by 
reference an agreement for mediation. The amendment to sec.537.11 would modify 
the list of standard contract forms promulgated by TREC to include a revised 
version of an agreement for mediation. The agreement for mediation has been 
revised by the Texas Real Estate Broker-Lawyer Committee to clarify that the 
agreement survives the closing of the real estate transaction, enabling the 
parties to rely upon the agreement before resorting to litigation. The agreement 
for mediation also has been rewritten to reflect nonsubstantive changes in voice 
and style used in more recently promulgated contract forms. The amendment to 
sec.537.42 adopts the revised agreement for mediation by reference. Adoption of 
the amendments is necessary to clarify that the agreement for mediation also 
applies to disputes which may arise after closing and to make the agreement for 
mediation consistent with other forms promulgated by TREC. 
Mark A. Moseley, general counsel, has determined that for the first five-year 
period the sections are in effect there will be no fiscal implications for state 
or local government as a result of enforcing or administering the sections. 
There is no anticipated impact on local or state employment as a result of 
implementing the sections. 
Mr. Moseley also has determined that for each year of the first five years the 
sections as proposed are in effect the public benefit anticipated as a result of 
enforcing the sections will be a possible increase in the use of mediation in 
real estate transactions as an alternative to litigation. There will be no 
effect on small businesses. There is no anticipated economic cost to persons who 
are required to comply with the proposed sections. 
Comments on the proposal may be submitted to Mark A. Moseley, General Counsel, 
Texas Real Estate Commission, P.O. Box 12188, Austin, Texas 78711-2188. 
The amendments are proposed under Texas Civil Statutes, Article 6573a, sec.5(h), 
which authorize the Texas Real Estate Commission to make and enforce all rules 
and regulations necessary for the performance of its duties.
The statute that is affected by these sections is Texas Civil Statutes, Article 
6573a. 

sec.537.11.Use of Standard Contract Forms.
(a) Standard Contract Form TREC Number 9-3 is promulgated for use in the sale of 
unimproved property where intended use is for one to four family residences. 
Standard Contract Form TREC Number. 10-2 is promulgated for use as an addendum 
concerning sale of other property by a buyer to be attached to promulgated forms 
of contracts. Standard Contract Form TREC Number 11-3 is promulgated for use as 
an addendum to be attached to promulgated forms of contracts which are second or 
"back-up" contracts. Standard Contract Form TREC Numbere 12-1 is promulgated for 
use as an addendum to be attached to promulgated forms of contracts where there 
is a Veterans Administration release of liability or restoration entitlement. 
Standard Contract Form TREC Number 13-1 is promulgated for use as an addendum 
concerning new home insulation to be attached to promulgated forms of contracts. 
Standard Contract Form TREC Number 15-2 is promulgated for use as a residential 
lease when a seller temporarily occupies property after closing. Standard 
Contract Form TREC Number. 16-2 is promulgated for use as a residential lease 
when a buyer temporarily occupies property prior to closing. Standard Contract 
Form 20-3 is promulgated for use in the resale of residential real estate where 
there is all cash or owner financing, an assumption of an existing loan, or a 
conventional loan. Standard Contract Form TREC Number 21-3 is promulgated for 
use in the resale of residential real estate where there is a Veterans 
Administration guaranteed loan or a Federal Housing Administration insured loan. 
Standard Contract Form TREC Number 23-2 is promulgated for use in the sale of a 
new home where construction is incomplete. Standard Contract Form TREC Number 
24-2 is promulgated for use in the sale of a new home where construction is 
completed. Standard Contract Form TREC Number 25-2 is promulgated for use in the 
sale of a farm or ranch. Standard Contract Form TREC Number 26-2 is promulgated 
for use as an addendum concerning seller financing. Standard Contract Form TREC 
Number 28-0 is promulgated for use as an addendum to be attached to promulgated 
forms of contracts where reports are to be obtained relating to environmental 
assessments, threatened or endangered species, or wetlands. Standard Contract 
Form TREC Number 29-0 is promulgated for use as an addendum to be attached to 
promulgated forms of contracts where an abstract of title is to be furnished. 
Standard Contract Form TREC Number 30-1 is promulgated for use in the resale of 
a residential condominium unit where there is all cash or seller financing, an 
assumption of an existing loan, or a conventional loan. Standard Contract Form 
TREC Number 31-1 is promulgated for use in the resale of a residential 
condominium unit where there is a Veterans Administration guaranteed loan or a 
Federal Housing Administration insured loan. Standard Contract Form TREC Number 
32-0 is promulgated for use as a condominium resale certificate. Standard 
Contract Form TREC Number 33-0 is promulgated for use as an addendum to be added 
to promulgated forms of contracts in the sale of property adjoining and sharing 
a common boundary with the tidally influenced submerged lands of the state. 
Standard Contract Form TREC Form Number 34-0 is promulgated for use as an 
addendum to be added to promulgated forms of contracts in the sale of property 
located seaward of the Gulf Intracoastal Waterway. Standard Contract Form TREC 
Number<nl> 35-1<ol> [35-0] is promulgated for use as an addendum to be added to 
promulgated forms of contracts as an agreement for mediation. Standard Contract 
Form TREC Form Number 36-0 is promulgated for use as an addendum to be added to 
promulgated forms in the sale of property subject to mandatory membership in an 
owners' association. Standard Contract Form TREC Form Number 37-0 is promulgated 
for use as a resale certificate when the property is subject to mandatory 
membership in an owners' association. 
(b)-(j) (No change.)

sec.537.42. Standard Contract Form TREC Number <nl>35-1<ol> [35-0].
The Texas Real Estate Commission adopts by reference standard contract form TREC 
No. <nl>35-1<ol> [35-0] approved by the Texas Real Estate Commission in 
<nl>1998<ol> [1994]. This document is published by and available from the Texas 
Real Estate Commission, P.O. Box 12188, Austin, Texas 78711-2188.
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 January 8, 1998.
TRD-9800273
Mark A. Moseley
General Counsel
Texas Real Estate Commission
Earliest possible date of adoption: February 23, 1998
For further information, please call: (512) 465-3900

PART XXV. Structural Pest Control Board
CHAPTER 595.Compliance and Enforcement
22 TAC sec.595.16
The Texas Structural Pest Control Board proposes new sec.595.16, concerning 
Approval of Products. The rule establishes an approval procedure for products 
and devices used by licensees of the agency. It defines what must be included in 
a request for approval, exempts mechanical traps, glue devices and insect 
monitoring stations from the approval process and sets out a procedure for 
appeal of an agency decision. 
Benny M. Mathis, Executive Director has determined that there will be fiscal 
implications as a result of enforcing or administering the rule. The effect on 
state government for the first five-year period the rule will be in effect is an 
estimated additional cost of $30,000,000, no estimated reduction in cost and an 
estimated loss in revenue as there is currently no source of revenue for this 
proposal. There will be no effect on local government for the first five-year 
period the rule will be in effect. 
Roger B. Borgelt, General Counsel has determined that for each year of the first 
five years the rule as proposed is in effect, the public benefits anticipated as 
a result of enforcing the rule will be that licensees will only be using 
products or devices that have been determined to be effective for control of 
pest problems. The anticipated economic cost to individuals who are required to 
comply with the rule as proposed will be the delay in use while awaiting 
approval and the cost of compiling a request for approval.
Comments on the proposal may be submitted to Roger B. Borgelt, General Counsel, 
Structural Pest Control Board, 1106 Clayton Lane #100LW, Austin, Texas 78723. 
The new section is proposed under Article 135b-6, which provides the Structural 
Pest Control Board with the authority to license and regulate persons who 
provide structural pest control services. 
The following is the (statutes, articles, or code) that are affected by this 
rule: Rule Number Statute, Article or Code, Texas Civil Statutes Annotated, 
Article 135b-6. 

sec.595.16 Approval of Products
It will be illegal to use materials, products and/or methods for structural pest 
control that are not approved by the Board. 
(1) Each pesticide product or device registered by the United States 
Environmental Protection Agency and/or the Texas Department of Agriculture for 
structural pest control may be approved by the Board as long as the product is 
applied according to the instructions on the label or labeling and efficacy has 
been demonstrated. 
(2) Products or devices not subject to the Environmental Protection Agency or 
Texas Department of Agriculture registration may be approved by the Board if the 
manufacturer or a licensee submits a request for approval by the Board. The 
request should contain the following information:
(A) the name and address of the applicant and the name and address of the person 
whose name shall appear on the product label or device, if not the applicant's; 
(B) the name of the product or device; 
(C) a complete copy of all labeling or use instructions to accompany the product 
or device and a statement of all claims to be made for it, including directions 
for use; 
(D) the complete formula of the product, including active and inert ingredients; 
if any; 
(E) a full description of all tests known to the applicant and the results of 
the tests on which product efficacy claims are based. These tests should be made 
by a recognized testing agency or institution and support, to the Board's 
satisfaction, the efficacy and safety of the product or device when used as 
directed; and 
(F) all available toxicological and safety information, including any antidotes 
or effective treatments for problems associated with use of the product. 
(3) The following types of devices are exempt from this regulation: mechanical 
traps and glue-based devices used for rodent or small animal control, insect 
monitoring stations which may provide incidental control. 
(4) Requests for approval must be filed with the Executive Director of the 
Structural Pest Control Board. Not later than 60 days after a complete request 
is filed, the Executive Director shall make a recommendation to the Board 
regarding approval. The Executive Director may consult with academic 
institutions, governmental authorities and industry experts regarding the 
recommendation. The recommendation may include modifications or limitations on 
the use of the product or device. Upon receipt of the Director's recommendation, 
the Board may approve, deny or modify the request for approval. If the requestor 
disagrees with the Board's action, the requestor may request a hearing before 
the State Office of Administrative Hearings (SOAH). The request for hearing must 
be submitted within 30 days of the date of the Board's action on the request. 
The hearing will be governed by the Administrative Procedures Act (APA) and the 
regulations adopted by SOAH and the Structural Pest Control Board for conduct of 
administrative hearings. This agency hereby certifies that the proposal has been 
reviewed by legal counsel and found to be within the agency's authority to 
adopt.
Issued in Austin, Texas December 9, 1997
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 January 9, 1998.
TRD-9800374
Benny M. Mathis, Jr.
Executive Director
Structural Pest Control Board
Earliest possible date of adoption: February 23, 1998
For further information, please call: (512) 451-7200

PART XXIX. Texas Board of Professional Land Surveying
CHAPTER 661.General Rules of Procedure and Practices
Applications, Examinations, and Licensing
22 TAC sec.661.95
The Texas Board of Professional Land Surveying proposes new sec.661.95, 
concerning failures of respondent to appear for hearing. This proposed new rule 
specifies that respondents failing to appear for hearings will result in 
allegations against the respondent being admitted as true.
Sandy Smith, Executive Director, has determined that for the first five-year 
period this rule is in effect there will be no fiscal implications for state or 
local governments as a result of enforcing or administering this rule. Ms. Smith 
also has determined that for the first five-year period this rule is in effect 
the public benefits anticipated as a result of enforcing the section as proposed 
will be reduced costs for hearings where the respondent fails to appear. There 
will be no effect or economic cost to small or large businesses or persons who 
are required to comply with this rule.
Comments may be submitted to Sandy Smith,Texas Board of Professional Land 
Surveying, 7701 North Lamar Boulevard, Suite 400, Austin, Texas 78752. 
This rule is proposed under Article 5282c, sec.9, Texas Civil Statutes, which 
provides the Texas Board of Professional Land Surveying withthe authority to 
make and enforce all reasonable and necessary rules, regulations and bylaws not 
inconsistent with the Texas Constitution, the laws of this state and this Act.
The Texas Civil Statutes, Article 5282c, is affected by this proposed amendment.

sec.661.95.Failure to Attend Hearing: Default Judgment.
(a) If a respondent fails to appear in person or by legal representative on the 
day and at the time set for hearing regardless of whether an appearance has been 
entered, the Administrative law Judge, upon motion by the petitioner, shall 
enter a default judgment in the matter adverse to the respondent who has failed 
to attend the hearing. 
(b) For purposes of this section, default judgment shall mean the issuance of a 
proposal for decision against the respondent in which the factual allegations 
against the respondent contained in the Complaint shall be admitted as prima-
facie evidence and deemed admitted as true, without any requirement for 
additional proof to be submitted by the petitioner. 
(c) Any default judgment granted under this section will be entered on the basis 
of the factual allegations contained in the Complaint and upon the proof of 
proper notice to the defaulting party opponent. For purposes of this section, 
proper notice means notice sufficient to meet the provisions of the Government 
Code, sec.sec.2001.051, 2001.052 and 2001.054 and sec.661.75 of this title 
(relating to Notice and Hearing); such notice also shall include the following 
language in capital letters in boldface type; FAILURE TO APPEAR AT THE HEARING 
WILL RESULT IN THE ALLEGATIONS AGAINST YOU SET OUT IN THE COMPLAINT BEING 
ADMITTED AS TRUE. 
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 January 9, 1998.
TRD-9800358
Sandy Smith
Executive Director
Texas Board of Professional Land Surveying
Earliest possible date of adoption: February 23, 1998
For further information, please call: (512) 452-9427

TITLE 25. HEALTH SERVICES
PART II. Texas Department of Mental Health and Mental Retardation
CHAPTER 401.System Administration
SUBCHAPTER I.Certification of Community Residential Programs
25 TAC sec.sec.401.551-401.565
(Editor's note: The text of the following sections proposed for repeal will not 
be published. The sections may be examined in the offices of the Texas 
Department of Mental Health and Mental Retardation or in the Texas Register 
office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)
The Texas Department of Mental Health and Mental Retardation (department) 
proposes the repeal of sec.sec.401.551-401.565, concerning certification of 
community residential programs, as part of a comprehensive reorganization of 
chapters and subchapters within the department's portion of the Texas 
Administrative Code. 
Key provisions of the sections are incorporated into new Chapter 412, Subchapter 
H, concerning standards for mental retardation community services and supports, 
as part of a comprehensive reorganization of chapters and subchapters within the 
department's portion of the Texas Administrative Code. The new subchapter is 
published contemporaneously for public comment in this issue of the Texas 
Register, as are other related subchapters being proposed for repeal.
Donald C. Green, chief financial officer, has determined that for each year of 
the first five-year period the repeals are in effect there will be no fiscal 
impact on state or local governments of as a result of enforcing the repeals. 
Leon Evans, director, community services, has determined that for each year of 
the first five years the repeals are in effect the public benefit will be the 
existence of a concise and relevant body of policy documents as a result of 
repealing unnecessary rules. There is no anticipated economic impact on small 
businesses expected to be affected by the repeal. No local economic impact is 
anticipated as a result of adopting the repeal as proposed. A hearing to accept 
oral and written testimony from the public concerning this and other related 
rules has been scheduled for 1:30 p.m, Friday, February 13, 1998, in Room 240 of 
department's Central Office auditorium in Building 2, 909 West 45th Street in 
Austin. If accommodations are required for persons who are hearing impaired, 
please notify the Office of Policy Development at least 72 hours in advance by 
calling 512/206-4516. 
Written comments on the proposal may be sent to Linda Logan, director, Policy 
Development, Texas Department of Mental Health and Mental Retardation, P.O. Box 
12668, Austin, Texas 78711-2668, within 30 days of publication. 
The repeals are proposed under the Texas Health and Safety Code, sec.532.015, 
which provides the Texas Mental Health and Mental Retardation Board with broad 
rulemaking authority. 
Texas Health and Safety Code, sec.534.052 and sec.534.058 are affected by these 
proposed repeals. 
sec.401.551.Purpose.
sec.401.552.Application.
sec.401.553.Definitions.
sec.401.554.General Provisions Governing Certification of Community Residential 
Programs.
sec.401.555.Requirements for Certification.
sec.401.556.Initial Application Process and Provisional Certification.
sec.401.557.Certification Decision and Notification.
sec.401.558.Alternative Certification Status.
sec.401.559.Certification Renewal.
sec.401.560.Change in Certification.
sec.401.561.Denial, Suspension, and Revocation of Certification.
sec.401.562.Inspection Authority and Reporting Responsibilities.
sec.401.563.Exhibits.
sec.401.564.References.
sec.401.565.Distribution.
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 January 12, 1998.
TRD-9800421
Ann Utley
Chair, Texas MHMR Board
Texas Department of Mental Health and Mental Retardation
Earliest possible date of adoption: February 23, 1998
For further information, please call: (512) 206-4516

CHAPTER 408.Standards and Quality Assurance
SUBCHAPTER A.Standards of the Texas Department of Mental Health and Mental 
Retardation
25 TAC sec.sec.408.1-408.10
(Editor's note: The text of the following sections proposed for repeal will not 
be published. The sections may be examined in the offices of the Texas 
Department of Mental Health and Mental Retardation or in the Texas Register 
office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)
The Texas Department of Mental Health and Mental Retardation (department) 
proposes the repeal of sec.sec.408.1-408.10, concerning standards of the Texas 
Department of Mental Health and Mental Retardation -- quality assurance, as part 
of a comprehensive reorganization of chapters and subchapters within the 
department's portion of the Texas Administrative Code. 
The subchapter adopts by reference a number of national quality assurance 
standards as well as the department's mental health and mental retardation 
standards for services and supports delivered by local authorities in the 
community. The mental health standards have been incorporated into Chapter 408, 
Subchapter B, concerning mental health community services standards. Key 
provisions of the 1988 TDMHMR Community Standards for Individuals with Mental 
Retardation have been incorporated into new Chapter 412, Subchapter H concerning 
standards and quality assurance for mental retardation community services and 
supports, which is published contemporaneously for public comment in this issue 
of the Texas Register.
Donald C. Green, chief financial officer, has determined that for each year of 
the first five-year period the repeals are in effect there will be no fiscal 
impact on state or local governments of as a result of enforcing the repeals. 
Leon Evans, director, community services, has determined that for each year of 
the first five years the repeals are in effect, the public benefit will be the 
existence of a concise and relevant body of policy documents as a result of 
repealing unnecessary rules. There is no anticipated economic impact on small 
businesses expected to be affected by the repeals. No local economic impact is 
anticipated as a result of adopting the repeals as proposed.
A hearing to accept oral and written testimony from the public concerning this 
and other related rules has been scheduled for 1:30 p.m, Friday, February 13, 
1998, in Room 240 of department's Central Office auditorium in Building 2, 909 
West 45th Street in Austin. If accommodations are required for persons who are 
hearing impaired, please notify the Office of Policy Development at least 72 
hours in advance by calling 512/206-4516. 
Written comments on the proposal may be sent to Linda Logan, director, Policy 
Development, Texas Department of Mental Health and Mental Retardation, P.O. Box 
12668, Austin, Texas 78711-2668, within 30 days of publication. 
The repeals are proposed under the Texas Health and Safety Code, sec.532.015, 
which provides the Texas Mental Health and Mental Retardation Board with broad 
rulemaking authority. 
Texas Health and Safety Code, sec.534.052 and sec.534.058 are affected by these 
proposed repeals. 
sec.408.1.Purpose.
sec.408.2.Application.
sec.408.3.Definition.
sec.408.4.Scope.
sec.408.5.Standards of Care.
sec.408.6.Governing Body.
sec.408.7.Director of Standards and Quality Assurance.
sec.408.8.Program Reviews.
sec.408.9.References.
sec.408.10.Distribution.
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 January 12, 1998.
TRD-9800422
Ann Utley
Chair, Texas MHMR Board
Texas Department of Mental Health and Mental Retardation
Earliest possible date of adoption: February 23, 1998
For further information, please call: (512) 206-4516

SUBCHAPTER C.Quality Assurance and Improvement System (Oais) for Mental 
Retardation Services and Supports
25 TAC sec.sec.408.51-408.63
(Editor's note: The text of the following sections proposed for repeal will not 
be published. The sections may be examined in the offices of the Texas 
Department of Mental Health and Mental Retardation or in the Texas Register 
office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)
The Texas Department of Mental Health and Mental Retardation (department) 
proposes the repeal of sec.sec.408.51-408.63, concerning quality assurance and 
improvement system (QAIS) for mental retardation services and supports, as part 
of a comprehensive reorganization of chapters and subchapters within the 
department's portion of the Texas Administrative Code. 
Key provisions of the sections are incorporated into new Chapter 412, Subchapter 
H, concerning standards for mental retardation community services and supports, 
as part of a comprehensive reorganization of chapters and subchapters within the 
department's portion of the Texas Administrative Code. The new subchapter is 
published contemporaneously for public comment in this issue of the Texas 
Register, as are other related subhapters being proposed for repeal. 
Donald C. Green, chief financial officer, has determined that for each year of 
the first five-year period the repeals are in effect there will be no fiscal 
impact on state or local governments of as a result of enforcing the repeals. 
Leon Evans, director, community services, has determined that for each year of 
the first five years the repeals are in effect the public benefit will be the 
existence of a concise and relevant body of policy documents as a result of 
repealing unnecessary rules. There is no anticipated economic impact on small 
businesses expected to be affected by the repeals. No local economic impact is 
anticipated as a result of adopting the repeals as proposed.
A hearing to accept oral and written testimony from the public concerning this 
and other related rules has been scheduled for 1:30 p.m, Friday, February 13, 
1998, in Room 240 of department's Central Office auditorium in Building 2, 909 
West 45th Street in Austin. If accommodations are required for persons who are 
hearing impaired, please notify the Office of Policy Development at least 72 
hours in advance by calling 512/206-4516. 
Written comments on the proposal may be sent to Linda Logan, director, Policy 
Development, Texas Department of Mental Health and Mental Retardation, P.O. Box 
12668, Austin, Texas 78711-2668, within 30 days of publication. 
The repeals are proposed under the Texas Health and Safety Code, sec.532.015, 
which provides the Texas Mental Health and Mental Retardation Board with broad 
rulemaking authority. 
Texas Health and Safety Code, sec.534.052 and sec.534.058 are affected by these 
proposed repeals. 
sec.408.51.Purpose.
sec.408.52.Application.
sec.408.53.Definitions.
sec.408.54.Responsibilities of Local Authorities and Designated Providers.
sec.408.55.Self-assessment by Local Authorities and Designated Providers.
sec.408.56.Outcome Measures for People.
sec.408.57.Outcome Measures for Organizations.
sec.408.58.Plan of Improvement.
sec.408.59.External Validation.
sec.408.60.Exhibits.
sec.408.61.Training.
sec.408.62.References.
sec.408.63.Distribution.
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 January 12, 1998.
TRD-9800423
Ann Utley
Chair, Texas MHMR Board
Texas Department of Mental Health and Mental Retardation
Earliest possible date of adoption: February 23, 1998
For further information, please call: (512) 206-4516

SUBCHAPTER E.Health, Safety, and Rights in Community-based Mental Retardation 
Programs
25 TAC sec.sec.408.151-408.164
(Editor's note: The text of the following sections proposed for repeal will not 
be published. The sections may be examined in the offices of the Texas 
Department of Mental Health and Mental Retardation or in the Texas Register 
office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)
The Texas Department of Mental Health and Mental Retardation (department) 
proposes the repeal of sec.sec.408.151-408.164, concerning health, safety, and 
rights in community-based mental retardation programs. 
Key provisions of the sections are incorporated into new Chapter 412, Subchapter 
H, concerning standards and quality assurance for mental retardation community 
services and supports, as part of a comprehensive reorganization of chapters and 
subchapters within the department's portion of the Texas Administrative Code. 
The new subchapter is published contemporaneously for public comment in this 
issue of the Texas Register, as are other related subchapters proposed for 
repeal.
Donald C. Green, chief financial officer, has determined that for each year of 
the first five-year period the repeals are in effect there will be no fiscal 
impact on state or local governments of as a result of enforcing the repeals. 
Leon Evans, director, community services, has determined that for each year of 
the first five years the repeals are in effect the public benefit will be the 
existence of a concise and relevant body of policy documents as a result of 
repealing unnecessary rules. There is no anticipated economic impact on small 
businesses expected to be affected by the repeals. No local economic impact is 
anticipated as a result of adopting the repeals as proposed.
A hearing to accept oral and written testimony from the public concerning this 
and other related rules has been scheduled for 1:30 p.m, Friday, February 13, 
1998, in Room 240 of department's Central Office auditorium in Building 2, 909 
West 45th Street in Austin. If accommodations are required for persons who are 
hearing impaired, please notify the Office of Policy Development at least 72 
hours in advance by calling 512/206-4516. 
Written comments on the proposal may be sent to Linda Logan, director, Policy 
Development, Texas Department of Mental Health and Mental Retardation, P.O. Box 
12668, Austin, Texas 78711-2668, within 30 days of publication. 
The repeals are proposed under the Texas Health and Safety Code, sec.532.015, 
which provides the Texas Mental Health and Mental Retardation Board with broad 
rulemaking authority. 
Texas Health and Safety Code, sec.534.052 and sec.534.058 are affected by these 
proposed repeals. 
sec.408.151.Purpose.
sec.408.152.Application.
sec.408.153.Definitions.
sec.408.154.Encouraging Full Expression of Individual Rights.
sec.408.155.Human Resources.
sec.408.156.Medication Practice and Health Related Services.
sec.408.157.Infection Control.
sec.408.158.Behavior Management.
sec.408.159.Psychoactive Medications.
sec.408.160.Consumer Records.
sec.408.161.Environmental Requirements.
sec.408.162.Additional Requirements.
sec.408.163.References.
sec.408.164.Distribution.
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
January 12, 1998.
TRD-9800424
Ann Utley
Chair, Texas MHMR Board
Texas Department of Mental Health and Mental Retardation
Earliest possible date of adoption: February 23, 1998
For further information, please call: (512) 206-4516

CHAPTER 409.Medicaid Programs
SUBCHAPTER D.Home and Community-based Services
25 TAC sec.409.100
The Texas Department of Mental Health and Mental Retardation (TDMHMR) proposes 
an amendment to sec.409.100, concerning Home and Community-Based Services (HCS). 
In accordance with the Federal Balanced Budget Act of 1997, the proposed 
amendments would remove the requirement for an HCS consumer to have a history of 
institutionalization in an Intermediate Care Facility for Persons with Mental 
Retardation or Related Conditions or nursing facility in order to receive 
Medicaid-reimbursed for supported employment services. The proposed amendments 
would allow Medicaid matched funding for supported employment services for all 
eligible HCS consumers. 
Don Green, chief financial officer, has determined that for each year of the 
first five-year period the rule, as proposed, would be in effect there would be 
for FY 1998 a net fiscal impact of $0, of which $68,861 is federal and ($68,861) 
is state, for FY 1999 the net fiscal impact would be $0, of which $70,376 is 
federal and ($70,376) is state, for FY 2000 the net fiscal impact would be $0, 
of which $71,924 is federal and ($71,924) is state, for FY 2001 the net fiscal 
impact would be $0, of which $73,506 is federal and ($73,506) is state, for FY 
2002 the net fiscal impact would be $0, of which $75,124 is federal and 
($75,124) is state. 
Ernest McKenney, director, Medicaid Administration, has determined that for each 
year of the first five years the amendment would be in effect the public benefit 
anticipated would be a savings in state expenditures for supported employment 
services provided to HCS consumers. There is no anticipated economic cost to 
persons who are required to comply with the proposed amendment. There would be 
no effect on small business. 
A public hearing will be held at 8:30 a.m., February 19, 1998, in Room 240 of 
the main TDMHMR Central Office building (Building 2) at TDMHMR Central Office, 
909 West 45th Street, Austin, Texas, to accept oral and written testimony 
concerning the proposal. Persons requiring an interpreter for the deaf or 
hearing impaired should notify Sheila Wilkins, Office of Policy Development, at 
least 72 hours prior to the hearing by calling (512) 206-4516. 
Questions about the content of the proposal may be directed to Mr. McKenney. 
Comments on the proposed sections should be submitted to Linda Logan, director, 
Policy Development, Texas Department Mental Health and Mental Retardation, P.O. 
Box 12668, Austin, TX 78711-2668, within 30 days of publication.
The amendment is proposed under the Texas Health and Safety Code, 
sec.532.015(a), which provides TDMHMR with broad rulemaking authority; Human 
Resource Code, Chapter 32, sec.32.021, and Government Code, Chapter 531, 
sec.531.021, which provide the Texas Health and Human Services Commission 
(THHSC) with the authority to administer federal medical assistance funds and 
administer the state's medical assistance program. Senate Bill 509 of the 74th 
Texas Legislature clarifies THHSC's authority to delegate the operation of all 
or part of a Medicaid program to a health and human service agency.
The amendment affects Human Resources Code, Chapter 32, and Government Code, 
Chapter 531, sec.531.021. 

sec.409.100.Service Components of Home and Community-based Services (HCS) 
Program.
(a) HCS service components are selected for inclusion in an applicant's or 
program participant's Individual Plan of Care (IPC) to supplement rather than 
replace that individual's natural community supports. HCS service components are 
selected based on assessments which identify specific services and supports 
necessary for the individual to continue living in the community and prevent the 
individual's admission to institutional based services. The following service 
components are available to all individuals enrolled in the HCS Program unless 
indicated otherwise: 
(1)-(6) (No change.)
(7) Supported employment is provided in conjunction with day habilitation and 
may be provided up to an annual maximum of $3,000 per individual. Supported 
employment reimbursement is available only if documentation verifies that 
supported employment services have been denied or are otherwise unavailable to 
the individual through either the Texas Rehabilitation Commission or the public 
school system. [Medicaid-reimbursed supported employment may be provided only if 
the participant has a documented previous history of institutionalization in a 
nursing facility or an intermediate care facility for persons with mental 
retardation or a related condition. Supported employment may be provided as a 
state-funded, non-Medicaid reimbursed HCS service component for individuals 
without a prior history of institutionalization subject to the availability of 
state funding.] Any person receiving supported employment must have an 
identified need and desire for employment. 
(8)-(10) (No change.)
(b) (No change.) 
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 January 12, 1998.
TRD-9800426
Ann Utley
Chair, Texas MHMR Board
Texas Department of Mental Health and Mental Retardation
Earliest possible date of adoption: February 23, 1998
For further information, please call: (512) 206-4516

SUBCHAPTER J.Reimbursement for Services in Institutions for
Mental Diseases (IMD)
25 TAC sec.sec.409.373-409.375
The Texas Department of Mental Health and Mental Retardation (TDMHMR) proposes 
amendments to sec.409.373-409.375, concerning governing Reimbursement for 
Services in Institutions for Mental Diseases (IMD). 
In accordance with the Federal Balanced Budget Act of 1997, the proposed 
amendments would remove the requirement for an inspection of care (IOC) in IMDs. 
Additionally, two minor revisions are made regarding the definitions of terms 
and the deletion of an unnecessary reference to an initial time period which was 
pertinent when the rule was initially promulgated. 
Don Green, chief financial officer, has determined that for each year of the 
first five-year period the amendments would be in effect there would be no 
fiscal implications for state or local government or small businesses.
Ernest McKenney, director, Medicaid Administration, has determined that for each 
year of the first five years the amendments would be in effect the public 
benefit anticipated would be the elimination of duplicative consumer quality of 
care reviews. There is no anticipated economic cost to persons who are required 
to comply with the proposed amendments. There would be no effect on small 
business. 
A public hearing will be held at 8:30 a.m., February 19, 1998, in Room 240 of 
the main TDMHMR Central Office building (Building 2) at TDMHMR Central Office, 
909 West 45th Street, Austin, Texas, to accept oral and written testimony 
concerning the proposal. Persons requiring an interpreter for the deaf or 
hearing impaired should notify Sheila Wilkins, Office of Policy Development, at 
least 72 hours prior to the hearing by calling (512) 206-4516. 
Questions about the content of the proposal may be directed to Mr. McKenney. 
Comments on the proposed sections should be submitted to Linda Logan, director, 
Policy Development, Texas Department Mental Health and Mental Retardation, P.O. 
Box 12668, Austin, TX 78711-2668, within 30 days of publication. 
The amendments are proposed under the Texas Health and Safety Code, 
sec.532.015(a), which provides TDMHMR with broad rulemaking authority; Human 
Resource Code, Chapter 32, sec.32.021, and Government Code, Chapter 531, 
sec.531.021, which provide the Texas Health and Human Services Commission 
(THHSC) with the authority to administer federal medical assistance funds and 
administer the state's medical assistance program. Senate Bill 509 of the 74th 
Texas Legislature clarifies THHSC's authority to delegate the operation of all 
or part of a Medicaid program to a health and human service agency. The 
amendments affect Human Resources Code, Chapter 32, and Government Code, Chapter 
531, sec.531.021. 

sec.409.373.Definitions.
The following words and terms, when used in this subchapter, have the following 
meanings, unless the context clearly indicates otherwise.
[Medical review team - A team designated by TDMHMR Office of Medicaid 
Administration, that includes at least one physician, as prescribed by 42 Code 
of Federal Regulations sec.456.602, who is familiar with the care of mentally 
ill individuals. No team member may be employed by or have a significant 
financial interest in the facility under review.]
Qualified mental health professional - A person acting within the scope of his 
or her training and licensure or certification, who is a:
(A) [certified or] licensed social worker as defined by the Human Resources 
Code, sec.50.001; 
(B)-(E) (No change.)

sec.409.374.Eligible Population.
Reimbursement for IMD services is limited to individuals: 
(1)-(7) (No change.)
(8) for whom the department has authorized IMD services based on medical 
necessity. Effective June 1, 1996, request for initial authorization must be 
submitted to the department's Office of Medicaid Administration within seven 
calendar days of the first day for which Medicaid reimbursement for the 
provision of IMD services will be requested. Request for authorization of 
continued stay must be submitted no later than seven calendar days prior to the 
end date of the initial and all subsequent authorizations. Initial and continued 
stay authorizations are valid for up to 31 calendar days. [For persons receiving 
IMD services, prior to June 1, 1996, authorization will be granted until July 1, 
1996. Requests for authorization of continued stay for these persons must also 
be submitted no later than seven calendar days prior to the end date of the 
initial authorization. Authorizations will be determined by a registered nurse 
or a licensed physician.] 

sec.409.375.Provider Eligibility for Reimbursement.
(a)-(b) (No change.)
(c) Evidence of compliance with subsection (a) of this section will be validated 
through [onsite inspections] <nl>reviews<ol> by [a medical review team 
designated by] the TDMHMR Office of Medicaid Administration. <nl>Reviews<ol> 
[Inspections] will occur at an interval decided upon by the department [and the 
team but no less than annually]. No facility may be notified more than 48 hours 
before the scheduled [arrival of the team] <nl>review<ol>. For each Medicaid 
patient, [the team] <nl>TDMHMR<ol> will additionally review: 
(1)-(3) (No change.)
(d) If the provider fails to provide evidence of compliance with subsection 
(c)(1)-(3) of this section, then the provider must take corrective action, as 
needed, based on the findings [in the medical review team's] <nl>contained in 
TDMHMR's<ol> report.
(1)-(2) (No change.)
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 January 12, 1998.
TRD-9800428
Ann Utley
Chair, Texas MHMR Board
Texas Department of Mental Health and Mental Retardation
Earliest possible date of adoption: February 23, 1998
For further information, please call: (512) 206-4516

CHAPTER 412.Local Authority Responsibilities
SUBCHAPTER H.Standards and Quality Assurance for Mental Retardation Community 
Services and Supports
25 TAC sec.sec.412.351-412.373
The Texas Department of Mental Health and Mental Retardation (department) 
proposes new sec.sec.412.351-412.373, concerning standards and quality assurance 
for mental retardation community services. The new subchapter is part of a 
comprehensive reorganization of chapters and subchapters within the department's 
portion of the Texas Administrative Code. 
The new subchapter incorporates selected provisions of the following subchapters 
of this title which are proposed contemporaneously for repeal in this issue of 
the Texas Register: Chapter 401, Subchapter I, concerning certification of 
community residential programs; Chapter 408, Subchapter A, concerning standards 
of the Texas Department of Mental Health and Mental Retardation -- quality 
assurance (which adopts by reference the 1988 TDMHMR Community Standards for 
Individuals with Mental Retardation); Chapter 408, Subchapter C, concerning 
quality assurance and improvement system (QAIS) for mental retardation services 
and supports; and Chapter 408, Subchapter E, concerning health, safety, and 
rights in community-based mental retardation programs. 
The new subchapter describes the quality assurance and improvement system (QAIS) 
by which local mental retardation authorities and designated providers assess 
their performance in the provision of community-based supports and services to 
individuals with mental retardation; minimum standards for health, safety, and 
rights which are necessary to ensure the protection of individuals receiving 
mental retardation supports and services in community-based programs; and how 
QAIS will be extended to cover community residential programs for individuals 
with mental retardation which receive funding directly from or through contracts 
for service with the department in its role as the state mental retardation 
authority. The community residential programs have been certified in the past by 
the department based on the 1988 TDMHMR Community Standards for Individuals with 
Mental Retardation. 
The minimum standards described in this subchapter replace the more prescriptive 
1988 TDMHMR Community Standards for Individuals with Mental Retardation and are 
an integral part of the QAIS process. Local authorities and designated providers 
collect data as part of their self-assessment based on these standards. The 
subchapter also includes a section concerning respite services as required by 
the Texas Health and Safety Code, sec.534.057. 
Donald C. Green, chief financial officer, has determined that for each year of 
the first five-year period the new sections are in effect there will be a fiscal 
impact on state or local governments as a result of enforcing the new sections. 
Leon Evans, director, community services, has determined that for each year of 
the first five years the new sections are in effect the public benefit will be 
the efficient and effective execution of the department's state authority 
oversight of community-based mental retardation programs, and the existence of a 
concise and relevant body of policy documents as a result of incorporating 
select provisions of five existing subchapters into a single new subchapter.
There is no anticipated economic impact on small businesses expected to be 
affected by the new sections. No local economic impact is anticipated as a 
result of adopting the new sections as proposed. 
A hearing to accept oral and written testimony from the public concerning the 
proposed new subchapter has been scheduled for 1:30 p.m, Friday, February 13, 
1998, in Room 240 of department's Central Office auditorium in Building 2, 909 
West 45th Street in Austin. If accommodations are required for persons who are 
hearing impaired, please notify the Office of Policy Development at least 72 
hours in advance by calling 512/206-4516. 
Written comments on the proposal may be sent to Linda Logan, director, Policy 
Development, Texas Department of Mental Health and Mental Retardation, P.O. Box 
12668, Austin, Texas 78711-2668, within 30 days of publication. 
The new sections are proposed under the Texas Health and Safety Code, 
sec.532.015, which provides the Texas Mental Health and Mental Retardation board 
with broad rulemaking authority; sec.534.052, which requires the board to adopt 
rules to ensure the adequate provision of community-based mental retardation 
services through a local authorities; sec.534.058, which requires the department 
to develop standards of care for services provided by local authorities and 
their subcontractors to ensure that the quality of those services is consistent 
with the quality of care available in department facilities; and sec.534.057 
which requires the department to adopt rules concerning respite services. 
Texas Health and Safety Code, sec.sec.534.052, 534.057, and 534.058 are affected 
by these proposed new sections. 

sec.412.351.Purpose.
This subchapter describes the: 
(1) quality assurance and improvement system (QAIS) for community-based mental 
retardation services and supports funded by the Texas Department of Mental 
Health and Mental Retardation, including community-based residential programs 
for individuals with mental retardation which receive funding directly from or 
through contracts for service with the department in its role as the state 
mental retardation authority and which formerly were certified by the department 
under the repealed 1988 TDMHMR Community Standards for Individuals with Mental 
Retardation. 
(2) minimum standards, as required by the Texas Health and Safety Code (THSC), 
sec.534.052, for ensuring: 
(A) the health, safety, and rights of individuals receiving community-based 
mental retardation services and supports; and 
(B) that the quality of those services and supports are consistent with those 
provided by department facilities, as required by the Texas Health and Safety 
Code, sec.534.058; and 
(3) minimum standards, as required by Texas Health and Safety Code, sec.534.057. 

sec.412.352.Application.
(a) The provisions of this subchapter apply to community-based mental 
retardation services and supports funded by the department and delivered by: 
(1) local mental retardation authorities and the providers with which they 
contract; and 
(2) designated providers. 
(b) The provisions of this subchapter apply to community-based residential 
programs which formerly were certified by the department under the repealed 1988 
TDMHMR Community Standards for Individuals with Mental Retardation.

sec.412.353.Definitions.
The following words and terms, when used in this subchapter, have the following 
meanings, unless the context clearly indicates otherwise:
Actively involved -- Involvement with the individual which the individual's 
planning team deems to be of a quality nature based on the following: 
(A) observed interactions of the person with the individual; 
(B) advocacy for the best interests of the individual;
(C) knowledge of and sensitivity to the individual's preferences, values, and 
beliefs; 
(D) ability to communicate with the individual; and 
(E) availability to the individual for assistance or support when needed. 
AIDS -- Acquired immune deficiency syndrome as defined by the National Centers 
for Disease Control and Prevention of the U.S. Public Health Service. 
Behavior management -- All efforts to increase socially adaptive behavior and to 
modify maladaptive or problem behaviors and replace them with behaviors and 
skills that are adaptive and socially productive. This broad category includes 
behavior interventions, emergency procedures used to protect an individual or 
other persons due to the actions of that individual, and both formal and 
informal planned interactions intended to increase socially adaptive behavior 
and/or to modify maladaptive or problem behaviors. 
CARE - The department's Client Assignment and Registration System, an on-line 
data entry system developed to provide demographic and other data about 
individuals served by the department. 
Community center -- A community mental health and mental retardation center 
established under the Texas Health and Safety Code, Title 7, Chapter 534. 
Department -- The Texas Department of Mental Health and Mental Retardation. 
Designated provider -- As defined in the Texas Health and Safety Code, 
sec.534.054, a service provider with whom the department contracts for the 
delivery of a specific community-based mental retardation service in a specified 
local service area of the state if the MRA for that local service area is unable 
or unwilling to provide that service. The term does not include a local 
authority. 
Emergency care -- Procedures and intervention designed to respond to medical 
emergencies. 
Hepatitis B -- An infection of the liver caused by the hepatitis B virus (HBV). 
Hepatitis B immunization -- Vaccination of persons at risk of infection from 
HBV. 
Hepatitis B testing -- Blood test for detection of hepatitis B surface antigens 
and antibodies. 
HIV -- Human immunodeficiency virus.
HIV testing -- Blood test for detection of human immunodeficiency virus 
infection. 
HRC (human rights committee) -- A committee appointed by the MRA comprising an 
independent group of representatives with the delegated authority to ensure that 
the civil and legal rights of individuals receiving services are acknowledged, 
respected, and protected through the review of organizational practices and 
approaches. The HRC is a mechanism for ensuring due process. Members of the 
human rights committee include, but are not limited to, individuals served by 
the MRA or designated provider, their legally authorized representatives, local 
advocates, and persons from the community who are not affiliated with the MRA or 
designated provider. 
(A) Minimally, one committee member should be experienced in issues and 
decisions regarding human rights. 
(B) At least one committee member should be knowledgeable of current behavior 
management strategies At least one third of the members should not be affiliated 
with the MRA or designated provider. 
(C) Any member directly involved in the development, review, or approval of a 
proposal before the committee will not take part in deliberations relative to 
that proposal. 
(D) Members should receive appropriate training to maximize the benefit of their 
participation on the committee.
Informed consent (legally adequate consent)-- A term consistent with provisions 
of the Texas Health and Safety Code, sec.591.006, concerning consent obtained 
from an individual with mental retardation which is legally adequate when each 
of the following conditions has been met: 
(A) legal status: The individual giving the consent is of the minimum legal age 
and currently does not have a guardian appointed to manage personal affairs by 
an appropriate court of law; 
(B) comprehension of information: The individual giving the consent has been 
informed of and comprehends the nature, purpose, consequences, risks, and 
benefits of and alternatives to the procedure, and the fact that withholding or 
withdrawal of consent shall not prejudice the future provision of care and 
services to the individual with mental retardation; and 
(C) voluntariness: The consent has been given voluntarily and free from coercion 
and undue influence. 
Legally authorized representative -- The parent of an individual who is a minor, 
the guardian of an individual who has been determined by a court to lack 
capacity, or the managing conservator of an individual. 
Local authority -- As defined in the Texas Health and Safety Code, sec.531.002, 
an entity to which the Texas Mental Health and Mental Retardation Board 
delegates its authority and responsibility within a specified region for 
planning, policy development, coordination, and resource development and 
allocation and for supervising and ensuring the provision of mental retardation 
services to individuals with mental retardation in one or more local service 
areas. 
Medication administration-- The direct application of a drug by injection, 
inhalation, ingestion, topical application or any other means to the body of a 
person in accord with the Texas Medical Practice Act. 
Outcome Based Performance Measures -- The Council's copyrighted system of 
quality improvement and measurement that emphasizes responsiveness on the part 
of service organizations to the individual needs of that organization's 
consumers rather than traditional compliance with established standards. The 
system:
(A) focuses on outcomes for consumers rather than the organizational processes 
that contribute to those outcomes but also looks at outcome measures for 
organizations; 
(B) is concise, focusing on those priority outcomes that people with 
disabilities indicate are most important to them; and 
(C) can be used with all services and programs -- residential, vocational, 
social, or residential -- and for consumers with different disabilities.
Planning team -- The individual with the ability to provide legally adequate 
consent, the legally authorized representative (LAR), if any, and those persons 
chosen by the individual and LAR, if any, who assess the individual's treatment, 
training, and service/support plan needs and make recommendations to the MRA or 
designated provider for services which will enable the individual to meet 
desired personal outcomes. Team members typically could include: 
(A) family members or other persons who are actively involved in the life of the 
individual; 
(B) persons who are professionally qualified, certified, or both, in various 
professions with special training and experience in the diagnosis, management, 
needs, and treatment of individuals with mental retardation;
(C) persons who are directly involved in the delivery of mental retardation 
services to the individual; and 
(D) member(s) of the local authority's public responsibility committee (PRC), if 
requested by the individual with the ability to provide legally adequate consent 
or the LAR, if any, or the PRC in instances when the individual does not have 
either the ability to provide legally adequate consent or an LAR. 
Polypharmacy -- Simultaneous use of more than one psychoactive medication from 
the same medication class to treat an individual. The period of overlapping use 
of more than one psychoactive medication when a physician changes an individual 
from one drug to another shall not be considered polypharmacy.
Provider -- 
(A) Any organization or entity, associated by a contract in a working alliance 
with a local authority or the department to provide community-based services and 
supports, including its employees or agents; or 
(B) that part of a local authority directly providing services and supports to 
individuals with mental retardation, including employees or agents. 
Psychoactive medication -- Any medication which is prescribed for the primary 
intent of improving cognition, affective state, and/or behavior.
Quality Assurance and Improvement System (QAIS) -- The framework by which local 
authorities and designated providers measure the quality, efficiency, and 
effectiveness of their organizations and the services and supports they provide 
to consumers either directly or by contracting with providers. It is an outcome-
oriented system that concentrates on measuring desired results and the processes 
used to obtain those results, as defined by the consumer. The system is based on 
The Council's Outcome Based Performance Measures and involves three stages: 
(A) self-assessment; 
(B) quality improvement plan; and 
(C) external validation. 
Respite services -- Services which assist both individuals with mental 
retardation and their families during times of crisis or other specific events. 
Designed to be of short duration, the services may vary from one day to a 
maximum of 30 consecutive calendar days per episode. Respite services may be 
provided either in the family home or in a residence operated or contracted by 
the local authority. 
Restraint -- Refers to the use of personal restraint methods or mechanical 
devices that are intended to restrict the movement or normal functioning of a 
portion of an individual's body. 
State operated community-based MHMR services division -- Those entities which 
provide community-based mental health and/or mental retardation services and 
which are operated by the department. Formerly known as community-based service 
divisions of state facilities. 
Tardive dyskinesia -- A possible side effect of neuroleptic medication 
characterized by involuntary and abnormal movements which are purposeless and 
stereotypical. 
The Council -- The Council on Quality and Leadership in Supports for People with 
Disabilities, formerly The Accreditation Council, is a diversified quality 
enhancement organization with an international focus in the field of human 
services which: develops standards of quality; develops and disseminates 
materials; provides training, consultation, and technical assistance; and 
operates an accreditation program for organizations which serve people with 
disabilities. 
Tuberculosis-- A disease spread through airborne particles containing tubercle 
bacilli which become established in the lungs and may spread throughout the 
body. 

sec.412.354.Responsibilities of Local Authorities and Designated Providers.
(a) Through its contract with the department, the local authority or designated 
provider shall assure its compliance with the provisions of this subchapter. 
(b) Through its contract with other providers, the local authority shall require 
compliance with the provisions of this subchapter as it applies to services and 
supports provided by the provider which are funded through the department. 
(c) Programs under the purview of the Texas Interagency Council on Early 
Childhood Intervention are not required to be surveyed as a part of QAIS. 
(d) Nothing in this subchapter is intended to diminish or negate any contractual 
requirement on the organization, including a contractual requirement to comply 
with applicable department rules. 

sec.412.355.Self-assessment by Local Authorities and Designated Providers.
(a) Self-assessment and the subsequent development of a quality improvement plan 
as described in sec.412.358 of this title (relating to Quality Improvement Plan) 
occurs annually and is completed by the fourth calendar quarter following 
completion of the previous self assessment. The self-assessment is based on The 
Council 's Outcome Based Performance Measures which are adopted by reference as 
Exhibit A in sec.412.370 of this title (relating to Exhibits) and is designed to 
evaluate two aspects of quality, which are: 
(1) outcomes of services that contribute to the quality of life (outcome 
measures for people); and 
(2) the organizational structure and processes that support quality services and 
supports (outcome measures for organizations). 
(b) The self-assessment is conducted by a team comprising at least four people, 
including the team coordinator. 
(1) The chief executive officer (CEO) or designee of the local authority or 
designated provider names a staff member as team coordinator.
(2) The team coordinator selects other members of the team with consideration 
given to both the communication needs and the diverse cultural, ethnic, and 
religious backgrounds of the consumers who receive services and supports from 
that local authority or designated provider. Recommended team members include: 
(A) at least one consumer and/or family member; 
(B) one direct care staff person; 
(C) one person from the local community who has no affiliation with the 
organization; and 
(D) one administrative staff person. 
(c) The local authority or designated provider also may choose to include on the 
team persons from other local authorities or designated providers of similar 
size. Having a team member from outside the organization may prove beneficial 
when reviewing the outcome measures for organizations.
(d) Team members will receive training in the self-assessment process in 
addition to an orientation which includes an overview of the consumers being 
reviewed, the importance of confidentiality, scheduling, and team assignments.
(1) The training is based on model curriculum provided by the department, as 
described in sec.412.371 of this title (relating to Training.)
(2) Each team member will sign a statement agreeing to respect the confidential 
nature of the information concerning the consumers being reviewed. 
(e) The self assessment will be performed using guidelines provided by the 
department, applicable department rules, and the organization's contract with 
the department. 
(f) The self-assessment process should take no longer than 15 working days with 
a formal feedback session immediately following the completion of the self-
assessment. This timeframe permits the organization to gain a "snapshot" of 
itself and maintain the continuity and validity of the self-assessment. The 
self-assessment is divided into the following key components: 
(1) visits to settings where services and supports are provided for: 
(A) discussion and interaction with consumers, staff, service coordinators, and 
other significant people; 
(B) observation of the environment; and 
(C) review of documentation, when necessary; 
(2) the completion of all individual consumer interviews;
(3) the team synthesis and consensus process including;
(A) compilation of interview or rating sheets; and 
(B) a consensus to generate a summary report of findings; and 
(4) feedback session for the CEO and invited staff.

sec.412.356.Outcome Measures for People.
(a) The outcome measures for people survey is designed to measure the impact of 
services and supports on the lives of consumers 
(b) A stratified, random sample for the survey is developed as described in the 
QAIS Implementation Manual. Technical assistance in developing the sample is 
available from the department's Office of Research and Evaluation.
(c) The program coordinator/case manager for each consumer included in the 
survey will be contacted by the team coordinator or another team member to 
explain the assessment process and to obtain the written consent of the consumer 
or the consumer's legally authorized representative as described in Chapter 403, 
Subchapter K of this title (relating to Client-Identifying Information). 
(d) The presence of each outcome is determined by the consumer or the consumer's 
legally authorized representative. It is evidenced through the interview process 
with the consumer and, when appropriate, with the consumer's legally authorized 
representative and the other significant people in the consumer's life. An 
outcome also can be met if it is absent but the consumer or legal representative 
has determined that it is unimportant to the consumer. There should be evidence 
that the consumer or legally authorized representative has an experiential 
context for making such a choice. 
(e) The interview is supplemented by observations of the consumer's environment 
and, when necessary, by reviewing documentation to resolve perceived conflicts 
in information. 
(f) Each outcome measure will be addressed with every consumer chosen for the 
interview process. 
(g) The Outcome Measures for People Results Worksheet is adopted by reference as 
Exhibit B and the Outcomes for People Scoring Grid is adopted by reference as 
Exhibit C in sec.412.370 of this title (relating to Exhibits).

sec.412.357.Outcome Measures for Organizations.
(a) The outcome measures for the organization support the findings of the 
outcome measures for people. The issues of health, safety, and rights are 
reviewed through assessment of the supports and services provided by the 
organization. 
(b) The organization's written documentation, together with interviews of 
designated staff and other stakeholders and the observations of team members, 
form the basis for reviewing the outcomes for organizations. Documentation of a 
utilization management process, policies and procedures, and strategic planning 
will be in evidence. 
(c) An organization profile will be generated by the team which identifies the 
extent to which processes contribute to outcomes, strengths in meeting outcomes, 
and areas needing improvement. 
(d) The Outcomes for Organizations Results Worksheet is adopted by reference as 
Exhibit D in sec.412.370 of this title (relating to Exhibits).

sec.412.358.Quality Improvement Plan.
(a) The quality improvement is intended to be a dynamic document that guides the 
organization in assuring that improvements are made which support consumers in 
realizing their desired outcomes. Consistent with the quality improvement plan, 
the organization will implement changes which facilitate its achievement of the 
18 outcomes for organizations described in Exhibit A in sec.412.370 of this 
title (relating to Exhibits). 
(b) A team selected by the organization's CEO to coordinate the quality 
improvement plan activities should include at least one representative from the 
self-assessment team to ensure the continuity of the process. 
(c) The quality improvement plan is developed within 30 calendar days of the 
feedback session described in sec.412.355(f)(4) of this title (relating to Self-
assessment by Local Authorities and Designated Providers) and will be reviewed, 
amended, and acted upon as determined necessary by a quarterly sampling of the 
relevant outcomes. 
(d) In developing the quality improvement plan, the team analyzes the self-
assessment data and other relevant information such as the organization's 
strategic plan or reports of other regulatory entities, reviews the 
organization's monitoring of critical issues data analysis, develops a concise 
profile of the strengths and weaknesses evident in critical areas, determines 
areas for improvement, and arranges these in priorities based upon the 
organization's mission and its contract with the department. 
(1) As part of the analysis, strategies that address high priority issues and 
barriers to opportunities for improvement are identified and described. 
(2) Ultimately, the team consolidates the results of these efforts into a 
written quality improvement plan consistent with any additional strategy or 
planning done by the organization. 
(e) The following should be reflected in the quality improvement plan: 
(1) the organization's mission statement; 
(2) goals essential for the fulfillment of the mission;
(3) action steps which will lead to the accomplishment of goals and which are 
specific enough to articulate responsibilities across the organization; 
(4) a quarterly evaluation process which will document progress towards goals, 
illuminate areas for further quality enhancement endeavors, and include a 
sampling of relevant outcomes; and 
(5) an evaluation process which describes and assesses leadership and its 
involvement in setting direction, and developing and maintaining a leadership 
system that supports the mission. 

sec.412.359.External Validation.
(a) The local authority or designated provider will submit its annual self-
assessment results and quality improvement plan along with the quarterly updates 
to the department's Office of Quality Management for the external validation 
portion of the QAIS. The external validation is intended to: 
(1) reassure the public that public funds are being expended prudently for the 
purpose intended; and 
(2) affirm to the administrators of the local authority or designated provider 
and to the trustees of the local authority that QAIS is being implemented as 
intended and that data are representative of the organization's performance. 
(b) The external validation process consists of three phases:
(1) pre-visit activities including: 
(A) desk review of requested documentation; 
(B) determination of external validation team composition;
(C) selection of an independent, stratified/random sample of individuals from 
the CARE system, separate from the sample used by the organization in the self-
assessment as described in sec.412.356 of this title (relating to Outcome 
Measures for People); 
(D) scheduling of on-site external validation process activities: and 
(E) coordination of external validation process with organization;
(2) on-site activities intended to confirm the findings and products of the 
organization's self-assessment and quality improvement plan are: 
(A) examination of the products of the internal self-assessment through 
validation of the organization's implementation of the self-assessment 
instrument and quality improvement plan; 
(B) feedback regarding the consumers' responses concerning all outcomes and 
confirmation of the findings on the health, safety, and rights outcome measures 
through interviews with the consumers selected in the random sample described in 
paragraph (1)(C) of this subsection; and 
(C) establishment of the organization's overall inter-rater reliability; and 
(3) followup reporting activities including: 
(A) an optional closed exit conference with key staff, at the discretion of the 
organization chief executive officer; 
(B) an open exit conference for staff, consumers, advocates, parents, and other 
interested parties; and 
(C) provision of information to the department's Community Services Division. 
(c) The external validation team leader will: 
(1) provide information to the department's Community Services Division 
regarding the organization's performance as reflected in the self assessment and 
the status of the quality improvement plan; and 
(2) notify the organization's CEO and department's Community Services Division 
of problems in the outcome areas of health, safety, and rights which require 
immediate action. 
(d) The membership of the external validation team is composed as described in 
the QAIS Implementation Manual. 
(e) During every fiscal year, each local authority and designated provider will 
conduct a self-assessment and develop a quality improvement plan. A desk review 
will be conducted by the department's Office of Quality Management of the annual 
self-assessment and quality improvement plan submitted by each local authority 
and designated provider. The on-site visit portion of the external validation 
component will take place in one, two, or three year cycles, depending on the 
organization's accomplishment as reflected in the following elements which are 
described in detail in the QAIS Implementation Manual: 
(1) a valid self assessment; 
(2) addressing of high impact issues in the quality improvement plan; 
(3) completion and implementation of a quality improvement plan; and 
(4) presence of outcomes and processes in the self assessment.
(f) The 18 outcomes for organizations described in Exhibit A assess whether an 
organization has the necessary and appropriate processes in place to support the 
30 outcomes for people. 
(g) Information obtained during the external validation of every organization's 
self-assessment and quality improvement plan will be used by the department's 
Community Services Division for contract enforcement and negotiations and in 
compiling statewide data related to outcomes for people and organizations. 
(h) Deemed status will be granted by the department to those organizations 
accredited by The Council based on evidence presented to the department's Office 
of Quality Management of continuing accreditation. These organizations will be 
exempt from the on-site external validation process, but will be required to 
submit an annual self-assessment and quality improvement plan to the 
department's Office of Quality Management for data compilation and further 
contract negotiation. Deemed status for accreditation by other nationally 
recognized accreditation associations which meet the requirements of QAIS will 
be considered by the department's Office of Quality Management upon request by a 
local authority or designated provider. 

sec.412.360.Encouraging Full Expression of Individual Rights.
(a) The MRA or designated provider will encourage the full expression of legal 
and civil rights by each individual receiving services and will provide 
supports, as necessary, to assist individuals and their legally authorized 
representatives in the exercise of their rights. The MRA or designated provider 
will fully inform individuals and their legally authorized representatives of 
their rights as guaranteed under the Persons with Mental Retardation Act (Texas 
Health and Safety Code, Title 7, Subtitle D). In doing so, the MRA or designated 
provider will refer to Chapter 405, Subchapter Y of this title (relating to 
Client Rights -- Mental Retardation Services) and use the handbook prescribed in 
the subchapter. 
(b) The MRA or designated provider shall ensure that due process is provided 
when an individual's rights must be limited. As applicable, see Chapter 405, 
Subchapter J of this title (relating to Surrogate Decision-Making for Community-
Based ICF/MR and ICF/MR/RC Facilities). Due process includes:
(1) obtaining informed consent in writing for a period not to exceed one year 
from the individual or the legally authorized representative; and 
(2) review by the individual's planning team and, if appropriate, the human 
rights committee of the proposed limitation of the individual's rights. 
(c) When an individual's rights must be limited, the individual's planning team 
will consider what, if any, training or modifications to the individual's 
service plan might enable the limitations to be removed. 
(d) The MRA or designated provider shall develop and implement written policies 
and procedures for reporting and investigating allegations of rights violations 
and allegations of abuse, neglect, and exploitation, and taking appropriate 
action in confirmed cases. See Chapter 405, Subchapter Y of this title (relating 
to Client Rights Mental Retardation Services) and Chapter 404, Subchapter B of 
this title (relating to Abuse, Neglect, and Exploitation of People Served by 
Providers of Local Authorities), and Chapter 404, Subchapter A of this title 
(relating to Abuse, Neglect, and Exploitation in TDMHMR Facilities.)
(e) Procedures for appeal of decisions shall be delineated and publicized, and 
shall include a mechanism for external review or mediation if agreement can not 
be reached. For MRAs, these procedures will include those set forth in 
sec.401.464 of this title (relating to Notification and Appeals Process). See 
Chapter 401, Subchapter G of this title (relating to Community Mental Health and 
Mental Retardation Centers.)

sec.412.361.Human Resources.
The MRA or designated provider ensures that: 
(1) all staff possess the work experience and education/credentials required by 
the job description or contract; 
(2) professional personnel are licensed, certified, or registered, if required 
by law;
(3) verification of credentials and verification of the renewal of credentials 
is maintained in the human resource file for all certified or licensed 
professionals; 
(4) there is a mechanism in place for maintaining and ensuring standards of 
professional and ethical practice; 
(5) staff have the necessary training and demonstrate the necessary skills to 
ensure that the health, safety, and support needs of individuals are met ; and 
(6) documentation is maintained of the type and content of training and 
attendance records. 

sec.412.362.Medication Practice and Health Related Services.
(a) The MRA or designated provider operates in accordance with accepted 
principles of practice and applicable federal and state laws and regulations to 
ensure medication is administered safely and appropriately. The written policies 
and procedures of the MRA or designated provider shall address: 
(1) proper handling, storage, and disposal of medications;
(2) proper use of telephone orders; 
(3) administration of medications by staff licensed or authorized to administer 
medications; 
(4) supervision of self-administration; 
(5) administration of medications without errors; and
(6) documentation of follow up and corrective action when medication errors do 
occur. 
(b) Each individual receives preventive and timely health care services based on 
health needs and condition. 
(c) The MRA or designated provider ensures the availability of physician, 
dental, nursing, pharmacy, and laboratory services by qualified personnel, in 
compliance with laws and regulations, based on each individual's needs, and 
provides for emergency care during hours of program operation.
(d) The MRA or designated provider has written policies and procedures which 
address the use of physical restraints and psychoactive medication when 
necessary during a medical or dental procedure or to promote healing following a 
medical procedure or an injury. The policies and procedures shall address 
appropriate documentation including: 
(1) medical necessity; 
(2) the behavior to be controlled; 
(3) a physician's or dentist's written order; 
(4) renewals, if necessary, every 12 hours; and 
(5) provision of appropriate medical treatment and observation.

sec.412.363.Infection Control.
(a) In accordance with recommendations of The Centers For Disease Control and 
Prevention and the Occupational Safety and Health Administration, the MRA or 
designated provider shall ensure that an infection control plan is in place to 
decrease the risk for infection and/or transmission of diseases. (b) The plan 
addresses the following: 
(1) orientation training and updates; 
(2) prevention and management of infections for staff/providers and individuals 
(to include, but not be limited to, HIV, hepatitis B, and tuberculosis); 
(3) postexposure treatment for consumers and staff; 
(4) procedures for reporting of reportable diseases to the Texas Department of 
Health (TDH); 
(5) personnel policies in compliance with state and federal law; 
(6) criteria for determining when a consumer should be tested for HIV and 
hepatitis B; 
(7) hepatitis B immunization; and 
(8) special waste disposal as required by TDH as described in 25 TAC 
sec.sec.1.131-1.137 (relating to Definition, Treatment, and Disposition of 
Special Waste from Health Care). 
(c) Documentation shall be included in the MRA's records that the plan has been 
implemented. 

sec.412.364.Behavior Management.
(a) The MRA or designated provider has written policies and procedures 
addressing behavior management which: 
(1) specify all approved interventions including aversive procedures and 
techniques; 
(2) designate a hierarchy of intervention from most positive and least intrusive 
to most restrictive and intrusive; and 
(3) specify accepted standards of professional practice for the use of these 
interventions. 
(b) Restrictive and/or intrusive interventions (i.e., physical restraint, time-
out, or psychoactive medications) are used only when warranted by the severity 
of the behavior, based on a functional analysis and team input, and result in 
desired behavioral outcomes. 
(c) The emergency use of restrictive interventions occurs when the behavior is 
not predictable and presents the clear threat of injury to self or others. If 
emergency interventions are needed more than twice during two consecutive months 
a functional analysis is undertaken to develop a program to reduce the frequency 
and severity of the identified behaviors. 
(d) Restrictive and/or intrusive interventions may be used as part of an 
individualized plan that is intended to lead to less restrictive means of 
managing and eliminating the behavior or controlling the symptoms of mental 
illness. 
(e) Monitoring of the individual during all restrictive interventions is at the 
appropriate level for the type of intervention being used and assures that 
individual rights are protected. 
(f) All restrictive interventions addressing the management of targeted behavior 
are justified by the functional assessment, the current level of behavior, and 
are reviewed by the treatment team at least annually to determine the ongoing 
need and to assess for the possible decrease in the use of the intervention, 
based on current clinical evidence. When possible, the acquisition of adaptive 
replacement behaviors are also measured. 
(g) Non-contingent interventions (i.e. environmental engineering, counseling, 
etc.) are similarly evaluated for their effectiveness through the use of 
individualized and quantified measures. 
(h) Except in an emergency, written informed consent for a period not to exceed 
one year is obtained when restrictive and/or intrusive interventions are 
included as part of a behavior management program. 
(1) The Human Rights Committee should review the situation carefully as a matter 
of due process. When the failure to obtain written informed consent is based on 
the individual's assessed inability to provide legally adequate consent, the 
need for obtaining a guardian should be considered. When applicable, surrogate 
decision making will be considered as described in Chapter 405, Subchapter J of 
this title (relating to Surrogate Decision-Making for Community-Based ICF/MR and 
ICF/MR/RC Facilities.) 
(2) The individual or guardian have the right to withdraw consent to treatment 
at any time without regard to any time limit specified in the consent form. 
(3) People do not have the right to cause injury to self or others, but the 
individual does have a right to be free of unnecessary drugs and other 
restrictive interventions and to receive appropriate treatment. This can best be 
ascertained when planned interventions are evaluated and determined to be 
effective. 

sec.412.365.Psychoactive Medications.
In accordance with accepted principles of practice, the MRA or designated 
provider shall ensure that:
(1) psychoactive medications are used judiciously as part of an individualized 
plan in which the following are carefully considered:
(A) rationale including current DSM diagnosis; 
(B) benefits of treatment in light of potential risks of the targeted behavior; 
(C) overall impact on the individual's quality of life; 
(D) adjunctive procedures; 
(E) monitoring of side effects; and 
(F) monitoring for efficacy; 
(2) when tardive dyskinesia is suspected, the physician:
(A) informs the individual and/or legal guardian; 
(B) discusses treatment options; and 
(C) documents in the record that the individual and/or legal guardian has been 
informed of the suspected condition, possible treatment options, and the 
rationale for the treatment chosen; 
(3) the physician obtains a second opinion to review and determine the safety of 
any usage of polypharmacy or over the maximum dosage levels when clinically 
indicated prior to the individual receiving such medications; 
(4) informed consent in writing for a period not to exceed one year from the 
individual or legally authorized representative including a surrogate decision-
making committee, if applicable, as described in Chapter 405, Subchapter J of 
this title (relating to Surrogate Decision-Making for Community-Based ICF/MR and 
ICF/MR/RC Facilities) is obtained prior to initiation of the medication unless 
the use is necessitated by an emergency as described in sec.412.364 of this 
title (relating to Behavior Management.). Informed consent must include: 
(A) an explanation of the medication and its purposes; 
(B) expected beneficial effects, side effects and risks; 
(C) probable consequences of not taking medication; 
(D) the existence and value of alternative less restrictive forms of treatment, 
if any, and why the physician rejects the alternative therapy; 
(E) instruction that the individual with the ability to provide legally adequate 
consent or the LAR may withdraw consent at any time without negative actions on 
the part of staff; 
(F) an offer to answer any questions concerning the medication and its use; and 
(G) a specification of the time period to be covered by the consent document; 
(5) informed consent will be obtained on at least an annual basis or any time 
the medication regimen is altered in a way which would result in a change of 
medication class or result in a significant change in the risks or benefits to 
the individual; and 
(6) if the individual with the ability to provide legally adequate consent or 
the LAR consents to the administration of psychoactive medication but is 
physically unable to provide written consent, the physician will document the 
verbal consent in the individual's record. 

sec.412.366.Consumer Records.
(a) In accordance with accepted principals of practice, each MRA or designated 
provider must insure that a separate confidential record is established and 
maintained for each individual receiving services. This record must provide 
accurate documentation of the organization's efforts to provide health care, 
habilitation and support services, social information, and the protection of 
rights. The record should provide a readily accessible means of communication 
among all service providers. 
(b) The MRA or designated provider will ensure that record entries: 
(1) are accurate; 
(2) are legible; 
(3) are chronological; 
(4) are not altered; 
(5) are properly corrected when errors in documentation occur; 
(6) are timely; 
(7) are properly signed and dated; 
(8) do not reference other consumers; 
(9) use only accepted abbreviations and symbols; 
(10) provide comprehensible documentation of services provided; and 
(11) are consistent with written policies and procedures.
(c) Falsification of records is prohibited and the MRA or designated provider 
will ensure that falsification of records is not supported, encouraged, or 
condoned under any circumstances. 
(d) The MRA or designated provider must provide and maintain accurate and 
complete consumer data as required by the state authority through the 
performance contract or performance memorandum and this subchapter. 
(e) The MRA or designated provider shall make all records, reports, and other 
program information available for review on a timely basis when requested by the 
state authority. 

sec.412.367.Environmental Requirements.
The MRA or designated provider ensures that: 
(1) each individual's environment promotes human rights and dignity; 
(2) each individual is served by a sufficient number and type of staff to 
provide services needed and to insure the safety and health of each individual; 
(3) all sites meet the appropriate chapter of the most recent edition of the 
Life Safety Code (LSC); 
(4) all sites have emergency plans which address relevant emergencies 
appropriate for the type of service, geographic location, and the individuals 
receiving services; 
(5) all staff are knowledgeable of the emergency plans and that staff and 
individuals follow the plans during both drills and real procedures; and 
(6) the local sanitation codes and licensure requirements are met. 

sec.412.368.Respite Services.
The MRA has written policies and procedures addressing the provision of respite 
services which shall: 
(1) encourage the use of existing local providers; 
(2) ensure participation by the individual, family, and other actively involved 
persons in the choice of a qualified provider; 
(3) describe how in-home providers are selected and trained;
(4) describe how emergency backup for in-home respite care providers is 
provided; 
(5) address admission procedures; and 
(6) require development of a respite plan which includes addressing the unique 
medical and support needs of the individual. 

sec.412.369.Additional Requirements.
(a) The MRA or designated provider assists individuals to enter the service 
delivery system whether or not they are admitted to direct services 
operated/contracted by the MRA. 
(b) The MRA or designated provider ensures that information and education 
materials are available which are adapted to the cultural, economic and 
educational characteristics and translated into the languages appropriate to the 
major population subgroups of the local service area. 
(c) The MRA or designated provider ensures that when services which are provided 
by two or more agencies that services are coordinated/integrated and consistent 
with the needs of the individual consumer. 
(d) The MRA or designated provider ensures that: 
(1) each individual receiving services and the legally authorized representative 
are encouraged to participate in the individual's planning team; 
(2) each individual's planning team designs an individually tailored plan of 
services and supports (formal and informal) which describe what the individual 
needs to acquire the needed and desired skills and goals and details how the 
authority will assist and support; 
(3) individual plans are modified or changed in response to the individual's 
specific accomplishments, need or desire for new programs, or difficulties in 
acquiring or maintaining skills; and 
(4) each individual has a staff person who is accountable for supporting and 
assisting the individual in planning, coordinating, and monitoring supports and 
services. 
(e) The MRA or designated provider ensures that: 
(1) prior to admission to services a determination of mental retardation is made 
as described in Chapter 405, Subchapter D of this title (relating to 
Determination of Mental Retardation and Eligibility for Admission to Services.) 
(2) assessments appropriate to the needs of the individual and in response to 
requests by the individual or legally authorized representative are obtained in 
order to direct and guide the service provision; 
(3) within 21 days of initial contact the individual is: 
(A) admitted into existing services; 
(B) placed on a waiting list for existing services; or 
(C) determined to be ineligible for services and referred to an agency that can 
address the service request; and 
(4) when available services have been refused by the individual or legally 
authorized representative, the refusal is documented and appropriate 
alternatives are considered. 

sec.412.370.Exhibits.
(a) Documents adopted by reference in this subchapter include:
(1) Exhibit A -- The Council's Outcome Based Performance Measures - 1993;
(2) Exhibit B -- Outcomes for People Results Worksheet;
(3) Exhibit C -- Outcomes for People Scoring Grid; and
(4) Exhibit D -- Outcomes for Organizations Worksheet.
(b) Copies of the Outcome Based Performance Measures listed in subsection (a)(1) 
of this section may be obtained by contacting The Council, 100 West Road, Suite 
406, Towson, Maryland 21204. All other documents listed in subsection (a) of 
this section may be obtained by contacting the Office of Policy Development, 
Texas Department of Mental Health and Mental Retardation, P.O. Box, 12668, 
Austin, Texas 78711-2668. 

sec.412.371.Training.
(a) Training and other learning opportunities for all stakeholders of the local 
authority or designated provider and for the members of the external validation 
teams are based on The Council's Outcome Based Performance Measures and other 
service quality improvement concepts. Start-up training is provided for all 
stakeholders, including: 
(1) board members (of local authorities); 
(2) managers and supervisors; 
(3) staff providing services and supports; 
(4) other professional and para-professional staff, including external service 
providers; and 
(5) consumers, family members, and advocates. 
(b) Training is consistent with guidelines and materials provided by the 
department and must be tailored to the needs and interests of the stakeholder 
groups. 
(c) Specific training packages for the QAIS self-assessment review team and the 
quality improvement plan team include information on interviewing techniques, 
confidentiality, decision-making, and the processes for implementing the self 
assessment and the quality improvement plan. 

sec.412.372.References.
Statutes and department rules referenced in this subchapter include:
(1) Texas Health and Safety Code, sec.sec.531.002, 534.052, 534.054; and 
(2) Texas Health and Safety Code, sec.534.052; 
(3) Texas Health and Safety Code, sec.534.054(c); 
(4) Texas Health and Safety Code, sec.534.058; 
(5) Texas Health and Safety Code, sec.591.006; 
(6) Persons with Mental Retardation Act (Texas Health and Safety Code, Title 7, 
Subtitle D); 
(7) Texas Medical Practice Act; 
(8) Chapter 401, Subchapter G of this title (relating to Community Mental Health 
and Mental Retardation Centers. 
(9) Chapter 403, Subchapter K of this title (relating to Client-Identifying 
Information.) 
(10) Chapter 404, Subchapter A of this title (relating to Abuse, Neglect, and 
Exploition in TDMHMR Facilities; 
(11) Chapter 404, Subchapter B of this title (relating to Abuse, Neglect, and 
Exploitation of People served by Providers of Local Authorities); 
(12) Chapter 405, Subchapter Y of this title (relating to Client Rights -- 
Mental Retardation Services; and 
(13) Life Safety Code. 

sec.412.373.Distribution.
(a) Copies of this subchapter shall be distributed to: 
(1) members of the Texas Mental Health and Mental Retardation Board; 
(2) executive, management, and program staff of the department's Central Office; 
(3) chairs of boards of trustees of local authorities;
(4) CEOs of local authorities and designated providers; and 
(5) interested advocates and advocacy organizations.
(b) The CEOs of local authorities and designated providers are responsible for 
distributing copies of this subchapter to: 
(1) appropriate staff; 
(2) providers; 
(3) agents; 
(4) any individual receiving services and supports who requests a copy; 
(5) family members and advocates of individuals receiving services and supports 
who requests a copy; and 
(6) any employee who requests a copy; and 
(7) any other person who requests a copy. 
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 January 12, 1998.
TRD-9800420
Ann Utley
Chair, Texas MHMR Board
Texas Department of Mental Health and Mental Retardation
Earliest possible date of adoption: February 23, 1998
For further information, please call: (512) 206-4516

TITLE 28. INSURANCE
PART I. Texas Department of Insurance
CHAPTER 3.Life, Accident, Health Insurance and Annuities
SUBCHAPTER D.Indeterminate Premium Reduction Policies
28 TAC sec.3.309
The Texas Department of Insurance proposes an amendment to sec.3.309 concerning 
reserve requirements for indeterminate premium reduction policies. The amendment 
provides alternatives for determining the reserves required for the life 
insurance products described in sec.3.301 of this title (Relating to 
Indeterminate Premium Reduction Policies). One alternative would provide that an 
insurer that has issued these products may provide the department an annual 
actuarial opinion specific to these products in addition to the actuarial 
opinion required by Insurance Code, Article 3.28, sec.2A. The other alternative 
would be to calculate the reserves on these products in accordance with 
Subchapter NN, Valuation of Life Insurance Policies, which is published 
elsewhere in this issue of the Texas Register as a proposed new regulation. 
These methods can be used for those policies issued before December 31, 1998. 
The reserves for those policies issued on or after that date would be subject to 
Subchapter NN. Issuers of these products may use the alternative methods in the 
1997 annual statement and subsequent financial statements filed with the 
department.
Jose Montemayor, Associate Commissioner for the financial program, has 
determined that, for the first five-year period the amended section will be in 
effect, there will be no fiscal implications for state or local government or 
small business as a result of enforcing or administering the section, and there 
will be no effect on local employment or local economy. 
Mr. Montemayor also has determined that, for each year of the first five years 
the amended section will be in effect, the public benefit resulting from 
administration of the proposed section will be more competitive pricing of some 
life insurance products. Mr. Montemayor also has determined that for the first 
five years the amended section will be in effect, insurers that elect to provide 
the specific actuarial opinion will incur an additional actuarial expense 
approximately $750 each year. The estimated cost of compliance to insurers that 
elect to calculate the applicable reserves in accordance with Chapter 3, 
Subchapter NN, Valuation of Life Insurance Policies, will vary depending on the 
reserves currently held. Indeterminate premium reduction policies are those 
where the guaranteed maximum premiums after an initial period of years are much 
higher than the guaranteed low premiums during the initial period of years. In 
estimating the cost of compliance with this section by complying with Subchapter 
NN, it is assumed that the guaranteed maximum premiums for the product described 
in the preceding sentence are approximately ten to fifteen times higher in later 
years than the initial guaranteed premium. Insurers that hold reserves for these 
policies only to provide for the expected cost of insurance in the current year 
may experience an increase in reserves as a result of an earlier election to 
comply with Subchapter NN to comply with this section. This increase will vary 
by such factors as the length of the initial period of years (as referenced 
above), reserve method, reserve interest rate, the amount of increase of the 
guaranteed maximum premiums, issue age, length of the benefit period, and the 
degree of selection in the risks covered. Anticipated ranges of the increase in 
reserves for these products based on the length of the initial guarantee period 
are as follows: 1) Immaterial increase where the initial period is less than 5 
years; 2) An increase of 2-5 times where the initial period is 10 years; and 3) 
An increase of approximately 10 times where the initial period is 20 years. 
These ranges assume that the insurer is currently providing reserves for only 
the anticipated cost of insurance in the current year. Department staff assumes 
that the ranges set out above are the highest levels that could occur at some 
point in the coverage period, and particular results may vary. For insurers who 
experience the anticipated ranges of reserve increases listed above, the range 
of increases in the price of these products is estimated to be as follows: 1) 
Immaterial price increase where the initial period is less than 5 years; 2) An 
approximate 7% price increase where the initial period is 10 years; and 3) An 
approximate 20% price increase where the initial period is 20 years. Such price 
increases would only be anticipated if an insurer (subject to the assumptions 
mentioned above) funds any reserve increase solely out of premiums rather than 
other sources, and also would depend on whether the insurer chooses to continue 
to offer the particular product as presently designed, or decides to make 
modifications to its policy forms. Costs to the insurer, given any increase in 
reserves, would be the cost of funds required to be in reserves versus available 
for other uses. The impact of the cost, as with any increase in liabilities, 
depends on the opportunities for use of funds available to an insurer. The 
alternative reserving methods in the proposed amendment will result in generally 
lower reserve requirements than those currently required by the section. 
Insurers that are independently owned and operated and have fewer that 100 
employees or less than $1 million in annual gross premiums (small businesses) 
generally do not write business affected by the requirements of this section 
according to actuaries surveyed by the department and the department's 
experience. As described previously, an insurer that elects to provide the 
actuarial opinion contemplated by the amendment to the section will incur a cost 
of approximately $750 each year. A small business with total premiums of 
$500,000 would incur a cost of approximately $.15 per $100 of premium. The 
largest insurers would incur a cost of less than $.01 per $100 of premium. An 
insurer that makes an earlier election to comply with Chapter NN to comply with 
this section will incur substantially more costs to develop systems to monitor 
compliance and calculate reserves. This cost could be up to approximately 
$100,000 for the largest insurers and as low as $5,000 for small insurers based 
on the department's experience and discussions with actuaries. These costs would 
be incurred in the first year the amended rule is in effect. Large insurers have 
staff actuaries who the department assumes will develop the systems to monitor 
compliance and calculate reserves required by the regulation. Since the larger 
insurers generally have more complexity in their products and systems, the 
department estimates that the cost of developing a system for a large insurer 
will be approximately $100,000. A large insurer with total premium volume of 
$500 million that incurred a $100,000 cost in developing a system would have a 
cost of $.02 per $100 of premium. Small insurers generally do not have staff 
actuaries, but engage consulting actuarial firms. Such actuarial firms estimate 
that it would cost $30,000 to develop a system to monitor compliance and 
calculate reserves for the products and systems typically found in small 
insurers. A consulting actuarial firm would then attempt spread this cost of 
development among its client companies. For example, if an actuarial consulting 
firm had six client insurers that purchased their system, then approximately 
$5,000 of the actuarial firm's cost $30,000 would be prorated to each client 
insurer. Assuming the small insurer had $500,000 in total premiums, the cost per 
$100 of total premium would be $1.00. In summary, the department anticipates 
that insurers subject to the requirements of this section will elect to provide 
an actuarial certification of reserve adequacy. Small businesses who make such 
an election are expected to incur a cost of $.15 per $100 of premium while the 
largest insurer would incur a cost of less than $.01 per $100 of premium. In 
order to provide equal protection of policyholders, Insurance Code, Article 
3.28, requires large and small insurers alike to establish minimum reserves, 
therefore, the department finds it is neither legal nor feasible to reduce the 
effect of the proposed regulation for small insurers that offer the 
indeterminate premium reduction policies affected by this section. 
Comments on the proposal must be submitted in writing within 30 days after 
publication of the proposal in the Texas Register to the Office of the Chief 
Clerk, Mail Code 113-2A, Texas Department of Insurance, P.O. BOX 149104, Austin, 
Texas 78714-9104. An additional copy of the comments should be submitted to Mike 
Boerner, Managing Actuary for the Financial Program, Mail Code 305-3A, Texas 
Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104.
The amendment is proposed under the Insurance Code, Articles 3.28 and 1.03A. 
Article 3.28 authorizes the commissioner to adopt mortality tables and methods 
consistent with Article 3.28. Article 1.03A provides the commissioner with the 
authorization to adopt rules and regulations for the conduct and execution of 
the duties and functions by the department only as authorized by a statute. 
The Insurance Code, Article 3.28, is affected by this proposed amendment.

sec.3.309. Minimum Reserves.
(a) The minimum reserve basis stated in the Insurance Code, Article 3.28, 
requires modified net premiums that are a "uniform percentage of the respective 
contract premiums." The same contract premiums at the same durations are used in 
the reserve computation as are used in the minimum cash value computation. The 
reserve must never be less than the cash value, if any, in the policy. 
(b) Deficiency reserves are required to be calculated using guaranteed premiums. 
Thus, maximum guaranteed premiums specified in the policy are used in the 
calculation except that any lower guaranteed premiums must be used for the 
periods guaranteed. As in other type policies, negative terminal reserves are 
not permitted; and net premiums for the earlier policy years shall be increased, 
if necessary, to produce a terminal reserve of zero at the end of such policy 
years. <nl>Any increased net premiums shall be used as the valuation net 
premiums for purposes of Insurance Code, Article 3.28, sec.10.<ol> 
<nl>(c)<ol> <nl>As an alternative to calculating deficiency reserves under 
subsection (b) of this section, reserves may be calculated pursuant to 
paragraphs (1) or (2) of this subsection. <ol>
<nl>(1)<ol> <nl>Calculate reserves pursuant to Insurance Code, Article 3.28, 
supported by an actuarial certification of reserve adequacy by an appointed 
actuary based on an appropriate gross premium valuations; or<ol> 
<nl>(2)<ol> <nl>Calculate the reserves in compliance with Chapter 3, Subchapter 
NN of this title (relating to Valuation of Life Insurance Policies). <ol>
<nl>(d)<ol> <nl>For policies issued on or after December 31, 1998, and subject 
to this section, reserves for those policies shall be calculated in accordance 
with the provisions of Chapter 3, Subchapter NN of this title (relating to 
Valuation of Life Insurance Policies). <ol> 
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 January 12, 1998.
TRD-9800418
Caroline Scott
General Counsel and Chief Clerk
Texas Department of Insurance
Earliest possible date of adoption: February 23, 1998
For further information, please call: (512) 463-6327

SUBCHAPTER NN.Valuation of Life Insurance Policies
28 TAC sec.sec.3.14001-3.14008
The Texas Department of Insurance proposes new Subchapter NN concerning the 
valuation of life insurance policies. Subchapter NN will apply to all life 
insurance policies, with or without nonforfeiture values, with certain 
exceptions and conditions. The purpose of the regulation is to adopt tables of 
select mortality factors; and, rules for their use; rules concerning a minimum 
standard for the valuation of plans with nonlevel premiums or benefits, and 
rules concerning a minimum standard for the valuation of plans with secondary 
guarantees. The method for calculating basic reserves defined in the proposed 
subchapter will constitute the commissioners' reserve valuation method for 
policies to which this subchapter would apply. The effective date is proposed as 
December 31, 1998, in order to provide affected insurers time to prepare for 
these new requirements. Section 3.14002 contains six tables of base select 
mortality factors that were adopted by the NAIC on March 12, 1995, in connection 
with the adoption by the NAIC of the model regulation for the valuation of life 
insurance policies. 
Jose Montemayor, Associate Commissioner for the financial program, has 
determined that for the first five-year period the rules are in effect, there 
will be no fiscal implications for state or local government as a result of 
enforcing or administering the regulation. 
Mr. Montemayor has determined that for each year of the first five years the 
regulation is in effect, the public benefits anticipated as a result of 
enforcing the regulation will be improved regulation of insurers' reserving 
practices, which promotes solvency of insurers through consistency in reserving 
for the products subject to the regulation and use of more current mortality 
tables. The estimated cost of compliance to insurers will vary depending on the 
types of products offered and on the amount of reserves currently held. The type 
of products most affected by the regulation are those where the guaranteed 
maximum premiums after an initial period of years are much higher than the 
guaranteed low premiums during the initial period of years. In estimating the 
cost, it is assumed that the guaranteed maximum premiums for the product 
described in the preceding sentence are approximately ten to fifteen times 
higher in later years than the initial guaranteed premium. These products are 
referred to as "Indeterminate Premium Reduction Policies". Insurers with these 
products that hold reserves only to provide for the expected cost of insurance 
in the current year may experience an increase in reserves as a result of this 
regulation. This increase will vary by such factors as the length of the initial 
period of years (as referenced above), reserve method, reserve interest rate, 
the amount of increase of the guaranteed maximum premiums, issue age, length of 
the benefit period, and the degree of selection in the risks covered. 
Anticipated ranges of the increase in reserves for these products based on the 
length of the initial guarantee period are as follows: 1) Immaterial increase 
where the initial period is less than 5 years; 2) An increase of 2-5 times where 
the initial period is 10 years; and 3) An increase of approximately 10 times 
where the initial period is 20 years. These ranges assume that the insurer is 
currently providing reserves for only the anticipated cost of insurance in the 
current year. Department staff assumes that the ranges set out above are the 
highest levels that could occur at some point in the coverage period, and 
particular results may vary. Increasing reserves to the required levels would 
then extend a similar level of reserve conservatism to these products as is 
already required of other life products which should promote greater solvency 
protection to both the insurer and the public. For insurers who experience the 
anticipated ranges of reserve increases listed above, the range of increases in 
the price of these products is estimated to be as follows: 1) Immaterial price 
increase where the initial period is less than 5 years; 2) An approximate 7% 
price increase where the initial period is 10 years; and 3) An approximate 20% 
price increase where the initial period is 20 years. Such price increases would 
only be anticipated if an insurer (subject to the assumptions mentioned above) 
funds any reserve increase solely out of premiums rather than other sources, and 
would also depend on whether the insurer chooses to continue to offer the 
particular product as presently designed, or decides to make modifications to 
its policy forms. Costs to the insurer given any increase in reserves would be 
the cost of funds required to be in reserves versus available for other uses. 
The impact of the cost, as with any increase in liabilities, depends on the 
opportunities for use of funds available to an insurer. The public benefit 
served by the change is the establishment of reasonable reserve conservatism to 
promote solvency and the provision for similar reserve conservatism for 
indeterminate premium products as that required of other products. The result 
therefore is a leveling of the competitive position of various term life 
products. The numerous other products where such reserve conservatism is 
currently required are anticipated to generally experience a lower but still 
reasonable amount of reserve conservatism due to the use of improved mortality 
tables that this regulation will provide in the calculation of reserves. This 
reduction of reserves may result in lower prices for these other products. As 
stated previously, this regulation will result in the same level of acceptable 
required reserve conservatism to be extended to all products to which this 
regulation applies, which will promote solvency benefits to both the insurer and 
the public. In addition, this regulation will promote reasonable competition 
across the various product lines which is a benefit to the insurer in having 
similar reserve standards and is expected to be a benefit to the public in lower 
prices for many products. 
To analyze the economic effect of the regulation on small businesses, the cost 
of compliance is divided into two components. First, the regulation will require 
the establishment of reserves for policies issued after the effective date of 
the regulation which probably will be higher than reserves presently established 
by many insurers for products significantly affected by this regulation, such as 
indeterminate premium reduction policies. Second, insurers will have to develop 
systems to monitor compliance and calculate reserves in accordance with the 
regulation. 
Based on the department's experience and discussions with actuaries, the actual 
impact on reserves will vary from company to company as a result of the factors 
discussed previously. On the basis of $100 premium paid, the cost of 
establishing the reserves for policies issued after the effective date of this 
regulation will be similar for small and large businesses. This assumes that 
reserves are funded by the premiums paid plus the investment income on those 
premiums. While an insurer may actually derive these funds from other sources 
from time to time, in the long run the premiums paid must be adequate to provide 
the funds necessary to perform the insurance contract. 
The cost to develop systems to monitor compliance and calculate reserves in 
accordance with this the regulation could be up to $100,000 for the largest 
insurers and as low as $5,000 for small insurers based on the department's 
experience and discussions with actuaries. These costs would be incurred in the 
first year the regulation is in effect. Large insurers have staff actuaries who 
the department assumes will develop the systems to monitor compliance and 
calculate reserves required by the regulation. Since the larger insurers 
generally have more complexity in their products and systems, the department 
estimates that the cost of developing a system for a large insurer will be 
approximately $100,000. A large insurer with total premium volume of $500 
million that incurred a $100,000 cost in developing a system would have a cost 
of $.02 per $100 of premium. Small insurers generally do not have staff 
actuaries, but engage consulting actuarial firms. Such actuarial firms estimate 
that it would cost $30,000 to develop a system to monitor compliance and 
calculate reserves for the products and systems typically found in small 
insurers. A consulting actuarial firm would then attempt to spread this cost of 
development among its client companies. For example, if an actuarial consulting 
firm had six client insurers that purchased their system, then approximately 
$5,000 of the actuarial firm's cost of $30,000 would be prorated to each client 
insurer. Assuming the small insurer had $500,000 in total premiums, the cost per 
$100 of total premium would be $1.00. In summary, on the basis of $100 of 
premium, large and small insurers will incur a similar reserve impact for 
similar products. In developing the systems to monitor compliance and calculate 
reserves, small insurers will incur a cost of $1.00 per $100 of premium while 
large companies would incur a cost of $.02 per $100 of premium. The costs are 
approximations based on the department's experience and discussions with 
actuaries. In order to provide equal protection to policyholders, Insurance 
Code, Article 3.28, requires large and small insurers alike to establish minimum 
reserves, therefore, the department finds it is neither legal nor feasible to 
reduce the effect of the proposed regulation for small insurers that offer the 
type of products impacted by this regulation. 
Comments on the proposal must be submitted in writing within 30 days after 
publication of the proposed sections in the Texas Register to Caroline Scott, 
General Counsel and Chief Clerk, Mail Code 113-2A, Texas Department of 
Insurance, P. O. Box 149104, Austin, Texas 78714-9104. An additional copy of the 
comments should be submitted to Mike Boerner, Managing Actuary, Mail Code 302-
3A, Texas Department of Insurance, P. O. Box 149104, Austin, Texas 78714-9104.
The new sections are proposed under the Insurance Code, Articles 3.28 and 1.03A. 
Article 3.28 authorizes the commissioner of insurance to adopt mortality tables 
adopted by the National Association of Insurance Commissioners and modifications 
to those mortality tables and methods consistent with Article 3.28. Article 
1.03A provides the commissioner with the authority to adopt rules and 
regulations for the conduct and execution of the duties and functions of the 
department only as authorized by a statute. 
The Insurance Code, Article 3.28, is affected by these proposed new sections.

sec.3.14001. Purpose. 
(a) The purpose of this subchapter is to provide: 
(1) Tables of select mortality factors and rules for their use; 
(2) Rules concerning a minimum standard for the valuation of plans with nonlevel 
premiums or benefits; and 
(3) Rules concerning a minimum standard for the valuation of plans with 
secondary guarantees. 
(b) The method for calculating basic reserves defined in this subchapter will 
constitute the Commissioners' Reserve Valuation Method for policies to which 
this subchapter is applicable.

sec.3.14002. Adoption of Tables of Base Select Mortality Factors.
The six tables of base select mortality factors in this section are from the 
model regulation titled "Valuation of Life Insurance Policies Model Regulation" 
which was adopted by the NAIC on March 12, 1995. The six tables of base select 
mortality factors include: male aggregate, male nonsmokers, male smoker, female 
aggregate, female nonsmoker, and female smoker. These tables apply to both age 
last birthday and age nearest birthday mortality tables. The tables are the 
bases to which the respective percentage of sec.3.14005(a)(2) and (3) and 
(b)(1)(B) and (C) of this title (relating to General Calculation Requirements 
for Basic Reserves and Premium Deficiency Reserves) are applied.
FIGURE NO. 1: 28 TAC sec.3.14002 

sec.3.14003. Applicability. 
This subchapter shall apply to all life insurance policies, with or without 
nonforfeiture values, issued on or after the effective date of this subchapter, 
subject to the following exceptions in subsection (a) of this section and 
conditions in subsection (b) of this section. 
(1) Exceptions. 
(A) This subchapter shall not apply to any individual life insurance policy 
issued on or after the effective date of this subchapter if the policy is issued 
in accordance with and as a result of the exercise of a reentry provision 
contained in the original life insurance policy of the same or greater face 
amount, issued before the effective date of this subchapter, that guarantees the 
premium rates of the new policy. This subchapter also shall not apply to 
subsequent policies issued as a result of the exercise of such a provision, or a 
derivation of the provision, in the new policy.
(B) This subchapter shall not apply to any variable life insurance policy that 
provides for life insurance, the amount or duration of which varies according to 
the investment experience of any separate account or accounts.
(C) This subchapter shall not apply to any variable universal life insurance 
policy that provides for life insurance, the amount or duration of which varies 
according to the investment experience of any separate account or accounts. 
(D) This subchapter shall not apply to group life insurance certificates unless 
the certificates provide for a stated or implied schedule of maximum gross 
premiums required in order to continue coverage in force for a period in excess 
of one year. 
(2) Conditions. 
(A) Calculation of the minimum valuation standard for policies with guaranteed 
nonlevel premiums or guaranteed nonlevel benefits (other than universal life 
policies), or both, shall be in accordance with the provisions of sec.3.14006 of 
this title (relating to Calculation of Minimum Valuation Standard for Policies 
with Guaranteed Nonlevel Premiums or Guaranteed Nonlevel Benefits (Other than 
Universal Life Policies)). 
(B) Calculation of the minimum valuation standard for flexible premium and fixed 
premium universal life insurance policies, that contain provisions resulting in 
the ability of a policyholder to keep a policy in force over a secondary 
guarantee period of more than five years, shall be in accordance with the 
provisions of sec.3.14007 of this title (relating to Calculation of Minimum 
Valuation Standard for Flexible Premium and Fixed Premium Universal Life 
Insurance Policies That Contain Provisions Resulting in the Ability of a 
Policyowner to Keep a Policy in Force Over a Secondary Guarantee Period of More 
than Five Years).

sec.3.14004. Definitions.
The following words and terms, when used in this subchapter, shall have the 
following meanings, unless the context clearly indicates otherwise.
Basic reserves-reserves calculated in accordance with the principles of 
Insurance Code, Article 3.28, sec.6. 
Contract segmentation method-the method of dividing the period from issue to 
mandatory expiration of a policy into successive segments, with the length of 
each segment being defined as the period from the end of the prior segment (from 
policy inception, for the first segment) to the end of the latest policy year as 
determined below. All calculations are made using the 1980 CSO valuation tables, 
as defined in this section, (or any other valuation mortality table adopted by 
the NAIC after the effective date of this subchapter and promulgated by 
regulation by the commissioner for this purpose), and, if elected, the optional 
minimum mortality standard for deficiency reserves stipulated in Section 
3.14005(b) of this title (relating to General Calculation Requirements for Basic 
Reserves and Premium Deficiency Reserves).
FIGURE NO. 2: 28 TAC sec.3.14004
Deficiency reserves-the excess, if greater than zero, of the minimum reserves 
calculated in accordance with the principles of Insurance Code, Article 3.28, 
sec.10. over the basic reserves. 
Maximum valuation interest rates-the interest rates defined in Insurance Code, 
Article 3.28, sec.5(b)(1), Computation of Minimum Standard by Calendar Year of 
Issue, that are to be used in determining the minimum standard for the valuation 
of life insurance policies. 
NAIC-National Association of Insurance Commissioners. 
1980 CSO valuation tables-the Commissioners' 1980 Standard Ordinary Mortality 
Table (1980 CSO Table) without ten-year selection factors, incorporated into the 
1980 amendments to the NAIC Standard Valuation Law, and variations of the 1980 
CSO Table approved by the NAIC, such as the smoker and nonsmoker versions 
approved in December 1983. 
Scheduled gross premium-the smallest illustrated gross premium at issue for 
other than universal life insurance policies. For universal life insurance 
policies, scheduled gross premium means the smallest specified premium described 
in sec.3.14007(a)(3) of this title (relating to Calculation of Minimum Valuation 
Standard for Flexible Premium and Fixed Premium Universal Life Insurance 
Policies That Contain Provisions Resulting in the Ability of a Policyowner to 
Keep a Policy in Force Over a Secondary Guarantee Period of More than Five 
Years) if any, or else the minimum premium described in sec.3.14007(a)(4) of 
this title (relating to Calculation of Minimum Valuation Standard for Flexible 
Premium and Fixed Premium Universal Life Insurance Policies That Contain 
Provisions Resulting in the Ability of a Policyowner to Keep a Policy in Force 
Over a Secondary Guarantee Period of More than Five Years).
Segmented reserves-reserves, calculated using segments produced by the contract 
segmentation method, equal to the present value of all future guaranteed 
benefits less the present value of all future net premiums to the mandatory 
expiration of a policy, where the net premiums within each segment are a uniform 
percentage of the respective gross premiums within the segment. The uniform 
percentage for each segment is such that, at the beginning of the segment, the 
present value of the net premiums within the segment equals:
(A) the present value of the death benefits within the segment, plus 
(B) the present value of any unusual guaranteed cash value (see sec.3.14006(d) 
of this title (relating to Calculation of Minimum Valuation Standard for 
Policies with Guaranteed Nonlevel Premiums or Guaranteed Nonlevel Benefits 
(Other than Universal Life Policies)) occurring at the end of the segment, less 
(C) any unusual guaranteed cash value occurring at the start of the segment, 
plus 
(D) for the first segment only, the excess of clause
(i) of this paragraph over clause (ii) of this paragraph, as follows: 
(i) a net level annual premium equal to the present value, at the date of issue, 
of the benefits provided for in the first segment after the first policy year, 
divided by the present value, at the date of issue, of an annuity of one per 
year payable on the first and each subsequent anniversary within the first 
segment on which a premium falls due. However, the net level annual premium 
shall not exceed the net level annual premium on the nineteen-year premium whole 
life plan of insurance of the same renewal year equivalent level amount at an 
age one year higher than the age at issue of the policy. 
(ii) a net one year term premium for the benefits provided for in the first 
policy year. The length of each segment is determined by the "contract 
segmentation method," as defined in this section. The interest rates used in the 
present value calculations for any policy may not exceed the maximum valuation 
interest rate, determined with a guarantee duration equal to the sum of the 
lengths of all segments of the policy. For both basic reserves and deficiency 
reserves computed by the segmented method, present values must include future 
benefits and net premiums in the current segment and in all subsequent segments. 
Tabular cost of insurance-the net single premium at the beginning of a policy 
year for one-year term insurance in the amount of the guaranteed death benefit 
in that policy year. 
Ten-year select factors-the select factors in Insurance Code, Article 3.28. 
Unitary reserves-the present value of all future guaranteed benefits less the 
present value of all future modified net premiums, where:
(A) guaranteed benefits and modified net premiums are considered to the 
mandatory expiration of the policy; and 
(B) modified net premiums are a uniform percentage of the respective guaranteed 
gross premiums, where the uniform percentage is such that, at issue, the present 
value of the net premiums equals the present value of all death benefits and 
pure endowments, plus the excess of clause (i) of this subparagraph over clause 
(ii) of this subparagraph, as follows:
(i) a net level annual premium equal to the present value, at the date of issue, 
of the benefits provided for after the first policy year, divided by the present 
value, at the date of issue, of an annuity of one per year payable on the first 
and each subsequent anniversary of the policy on which a premium falls due. 
However, the net level annual premium shall not exceed the net level annual 
premium on the nineteen-year premium whole life plan of insurance of the same 
renewal year equivalent level amount at an age one year higher than the age at 
issue of the policy. 
(ii) a net one year term premium for the benefits provided for in the first 
policy year. 
(C) The interest rates used in the present value calculations for any policy may 
not exceed the maximum valuation interest rate, determined with a guarantee 
duration equal to the length from issue to the mandatory expiration of the 
policy. 
Universal life insurance policy-any individual life insurance policy under the 
provisions of which separately identified interest credits (other than in 
connection with dividend accumulations, premium deposit funds, or other 
supplementary accounts) and mortality or expense charges are made to the policy. 

sec.3.14005. General Calculation Requirements for Basic Reserves and Premium 
Deficiency Reserves. 
(a) At the election of the company for any one or more specified plans of life 
insurance, the minimum mortality standard for basic reserves may be calculated 
using the 1980 CSO valuation tables with select mortality factors (or any other 
valuation mortality table adopted by the NAIC after the effective date of this 
subchapter and promulgated by regulation by the commissioner for this purpose). 
If select mortality factors are elected, they may be: 
(1) the ten-year select mortality factors incorporated in Insurance Code, 
Article 3.28, The Standard Valuation Law; 
(2) 150% of the base select mortality factors adopted by reference in 
sec.3.14002 of this title (relating to Adoption by Reference of Tables of Base 
Select Mortality Factors); or
(3) 150% of the base select mortality factors adopted by reference in 
sec.3.14002 of this title (relating to Adoption by Reference of Tables of Base 
Select Mortality Factors) for the first ten policy years; then linearly graded 
from the resulting tenth year factor to 100% at policy year sixteen; or 
(4) Any other table of select mortality factors adopted by the NAIC after the 
effective date of this regulation and promulgated by regulation by the 
commissioner for the purpose of calculating basic reserves.
(b) Deficiency reserves are required in addition to the basic reserves under the 
conditions described in this subsection. 
(1) Deficiency reserves, if any, are calculated for each policy as the excess, 
if greater than zero, of the quantity A over the basic reserve. The quantity A 
is obtained by recalculating the basic reserve for the policy using guaranteed 
gross premiums instead of net premiums when the guaranteed gross premiums are 
less than the corresponding net premiums. At the electionof the company for any 
one or more specified plans of insurance, the quantity A and the corresponding 
net premiums used in the determination of quantity A may be based upon the 1980 
CSO valuation tables with select mortality factors (or any other valuation 
mortality table adopted by the NAIC after the effective date of this regulation 
and promulgated by regulation by the commissioner). If select mortality factors 
are elected, they may be: 
(A) the ten-year select mortality factors in Insurance Code, Article 3.28; 
(B) 120% of the base select mortality factors adopted by reference in 
sec.3.14002 of this title (relating to Adoption by Reference of Tables of Base 
Select Mortality Factors); 
(C) 120% of the base select mortality factors adopted by reference in 
sec.3.14002 of this title (relating to Tables of Base Select Mortality Factors) 
for the first ten policy years; then linearly graded from the resulting tenth 
year factor to 100% at policy year sixteen; 
(D) Any other table of select mortality factors adopted by the NAIC after the 
effective date of this regulation and promulgated by regulation by the 
commissioner for the purpose of calculating deficiency reserves. 
(2) Notwithstanding the above, if the length of the first segment as determined 
by the contract segmentation method for the basic reserves is not greater than 
five years (safe harbor), then for that length of time measured from issue, for 
either the unitary method or the contract segmentation method, gross premiums 
need not be substituted for net premiums even if the gross premiums are less 
than the net premiums. For subsequent periods, gross premiums must be 
substituted for net premiums if the gross premiums are less than the 
corresponding net premiums. 
(3) For any policies for which the company chooses to use the "safe harbor" 
describe in paragraph (2) of this subsection, the company must demonstrate 
annually to the satisfaction of the commissioner, by submitting a statement of 
actuarial opinion signed by the appointed actuary, that the reserves held for 
all such policies are adequate. 
(c) In applying percentages to the base select mortality factors:
(1) do not round any result; and 
(2) set equal to 100 any result that exceeds 100. 
(d) This subsection applies to both basic reserves and deficiency reserves. Any 
set of base select mortality factors may be used only for the first segment. 
However, if the first segment is less than ten years, the appropriate ten-year 
select mortality factors may be used thereafter through the tenth policy year 
from the date of issue. 
(e) In determining basic reserves or deficiency reserves, gross premiums without 
policy fees may be used where the calculation involves the gross premium but 
only if the policy fee is a level dollar amount for the entire premium-paying 
period of the policy. In determining deficiency reserves, policy fees may be 
included in gross premiums even if not included in the actual calculation of 
basic reserves. 

sec.3.14006. Calculation of Minimum Valuation Standard for Policies with 
Guaranteed Nonlevel Premiums or Guaranteed Nonlevel Benefits (Other than 
Universal Life Policies)
(a) Basic Reserves. Basic reserves shall be calculated as the greater of the 
segmented reserves and the unitary reserves. Both the segmented reserves and the 
unitary reserves for any policy must use the same valuation mortality table and 
selection factors. At the option of the insurer, in calculating segmented 
reserves and net premiums, either one of the two adjustments described in 
paragraphs (1) or (2) of this subsection may be made. 
(1) An insurer may use the adjustments described in this paragraph.
(A) Treat the unitary reserve, if greater than zero, applicable at the end of 
each segment as a pure endowment; and 
(B) subtract the unitary reserve, if greater than zero, applicable at the 
beginning of each segment from the present value of guaranteed life insurance 
and endowment benefits for each segment. 
(2) An insurer may use the adjustments described in this paragraph. 
(A) Treat the guaranteed cash surrender value, if greater than zero, applicable 
at the end of each segment as a pure endowment; and
(B) subtract the guaranteed cash surrender value, if greater than zero, 
applicable at the beginning of each segment from the present value of guaranteed 
life insurance and endowment benefits for each segment. 
(b) Deficiency Reserves. 
(1) The deficiency reserve at any duration shall be calculated:
(A) on a unitary basis if the corresponding basic reserve determined by 
subsection (a) of this section is unitary; 
(B) on a segmented basis if the corresponding basic reserve determined by 
subsection (a) of this section is segmented; or 
(C) on the segmented basis if the corresponding basic reserve determined by 
subsection (a) of this section is equal to both the segmented reserve and the 
unitary reserve. 
(2) This subsection shall apply to any policy for which the guaranteed gross 
premium at any duration is less than the corresponding modified net premium 
calculated by the method used in determining the basic reserves, but using the 
minimum valuation standards of mortality specified in subsection (b) of this 
section and rate of interest. 
(3) Deficiency reserves, if any, shall be calculated for each policy as the 
excess if greater than zero, for the current and all remaining periods, of the 
quantity A over the basic reserve, where A is obtained as indicated in 
subsection (b) of this section. 
(4) For deficiency reserves determined on a segmented basis, the quantity A is 
determined using segment lengths equal to those determined for segmented basic 
reserves. 
(c) Minimum Value. Basic reserves may not be less than the tabular cost of 
insurance for the balance of the policy year, if mean reserves are used. Basic 
reserves may not be less than the tabular cost of insurance for the balance of 
the current modal period or to the paid-to-date, if later, but not beyond the 
next policy anniversary, if mid-terminal reserves are used. The tabular cost of 
insurance must use the same valuation mortality table, select mortality factor 
and interest rates as that used for the calculation of both the segmented and 
the unitary reserves. In no case may total reserves (including basic reserves, 
deficiency reserves and any reserves held for supplemental benefits that would 
expire upon contract termination) be less than the amount that the policyowner 
would receive (including the cash surrender value of the supplemental benefits, 
if any, referred to above), exclusive of any deduction for policy loans, upon 
termination of the policy. 
(d) Unusual Pattern of Guaranteed Cash Surrender Values. 
(1) For any policy with an unusual pattern of guaranteed cash surrender values, 
the reserves actually held prior to the first unusual guaranteed cash surrender 
value shall not be less than the reserves calculated by treating the first 
unusual guaranteed cash surrender value as a pure endowment and treating the 
policy as an n year policy providing term insurance plus a pure endowment equal 
to the unusual cash surrender value, where n is the number of years from the 
date of issue to the date the unusual cash surrender value is scheduled. 
(2) The reserves actually held subsequent to any unusual guaranteed cash 
surrender value shall not be less than the reserves calculated by treating the 
policy as an n year policy providing term insurance plus a pure endowment equal 
to the next unusual guaranteed cash surrender value, and treating any unusual 
guaranteed cash surrender value at the end of the prior segment as a net single 
premium, where: 
(A) n is the number of years from the date of the last unusual guaranteed cash 
surrender value prior to the valuation date to the earlier of: 
(i) the date of the next unusual guaranteed cash surrender value, if any, that 
is scheduled after the valuation date; or 
(ii) the mandatory expiration date of the policy; and 
(B) the net premium for a given year during the n year period is equal to the 
product of the net to gross ratio and the respective gross premium; and 
(C) the net to gross ratio is equal to subparagraph (i) of this paragraph 
divided by subparagraph (ii) of this paragraph as follows:
(i) the present value, at the beginning of the n year period, of death benefits 
payable during the n year period plus the present value, at the beginning of the 
n year period, of the next unusual guaranteed cash surrender value, if any, 
minus the amount of the last unusual guaranteed cash surrender value, if any, 
scheduled at the beginning of the n year period;
(ii) the present value, at the beginning of the n year period, of the scheduled 
gross premiums payable during the n year period. 
(3) For purposes of this subsection , a policy is considered to have an unusual 
pattern of guaranteed cash surrender values if any future guaranteed cash 
surrender value exceeds the prior year's guaranteed cash surrender value by more 
than the sum of: 
(A) 110% of the scheduled gross premium for that year; 
(B) 110% of one year's accrued interest on the sum of the prior year's 
guaranteed cash surrender value and the scheduled gross premium using the 
nonforfeiture interest rate used for calculating policy guaranteed cash 
surrender values; and 
(C) 5% of the first policy year surrender charge, if any.
(e) Optional Exemption for Yearly Renewable Term (YRT) Reinsurance. At the 
option of the company, the following approach for reserves on YRT reinsurance 
may be used: 
(1) Calculate the valuation net premium for each future policy year as the 
tabular cost of insurance for that future year. 
(2) Basic reserves shall never be less than the tabular cost of insurance for 
the appropriate period, as defined in subsection (c) of this section. 
(3) Deficiency reserves. 
(A) For each policy year, calculate the excess, if greater than zero, of the 
valuation net premium over the respective maximum guaranteed gross premium. 
(B) Deficiency reserves shall never be less than the sum of the present values, 
at the date of valuation, of the excesses determined in accordance with 
subparagraph (A) of this paragraph. 
(4) For purposes of this subsection, the calculations use the maximum valuation 
interest rate and the 1980 CSO mortality tables with or without ten-year select 
mortality factors, or any other table adopted after the effective date of this 
regulation by the NAIC and promulgated by regulation by the commissioner for 
this purpose. 
(5) A reinsurance agreement shall be considered YRT reinsurance for purposes of 
this subsection if: 
(A) the reinsurance premium rates (on both the initial current premium scale and 
the guaranteed maximum premium scale) for any given year are independent of both 
the premium rates and the plan of the original policy; and 
(B) only the mortality risk is reinsured. 
(f) Optional Exemption for Attained-Age-Based Yearly Renewable Term Life 
Insurance Policies. At the option of the company, the approach described in 
paragraphs (1) and (2) of this subsection for reserves for attained-age-based 
YRT life insurance policies may be used. 
(1) Calculate the valuation net premium for each future policy year as the 
tabular cost of insurance for that future year. 
(2) Basic reserves shall never be less than the tabular cost of insurance for 
the appropriate period, as defined in subsection (c) of this section. 
(3) Deficiency reserves. 
(A) For each policy year, calculate the excess, if greater than zero, of the 
valuation net premium over the respective maximum guaranteed gross premium. 
(B) Deficiency reserves shall never be less than the sum of the present values, 
at the date of valuation, of the excesses determined in accordance with 
subparagraph (A) of this paragraph. 
(4) For purposes of this subsection, the calculations use the maximum valuation 
interest rate and the 1980 CSO valuation tables with or without ten-year select 
mortality factors, or any other table adopted after the effective date of this 
regulation by the NAIC and promulgated by regulation by the commissioner for 
this purpose. 
(5) A policy shall be considered an attained-age-based YRT life insurance policy 
for purposes of this subsection if: 
(A) the premium rates (on both the initial current premium scale and the 
guaranteed maximum premium scale) are based upon the attained age of the insured 
such that the rate for any given policy at a given attained age of the insured 
is independent of the year the policy was issued; and 
(B) the premium rates (on both the initial current premium scale and the 
guaranteed maximum premium scale) are the same as the premium rates for policies 
covering all insureds of the same sex, risk class, plan of insurance and 
attained age. 
(6) For policies that become attained-age-based YRT policies after an initial 
period of coverage, the approach of this subsection may be used after the 
initial period if: 
(A) the initial period is constant for all insureds of the same sex, risk class 
and plan of insurance; or 
(B) the initial period runs to a common attained age for all insureds of the 
same sex, risk class and plan of insurance; and 
(C) after the initial period of coverage, the policy meets the conditions of 
paragraph (5) of this subsection.. 
(7) If this election is made, this approach must be applied in determining 
reserves for all attained-age-based YRT life insurance policies issued on or 
after the effective date of this subchapter. 
(g) Exemption from Unitary Reserves for Certain n-Year Renewable Term Life 
Insurance Polices. Unitary basic reserves and unitary deficiency reserves need 
not be calculated for a policy if the conditions described in paragraphs (1) - 
(3) of this subsection are met. 
(1) The policy consists of a series of n-year periods, including the first 
period and all renewal periods, where n is the same for each period, and for 
each n-year period, the premium rates on both the initial current premium scale 
and the guaranteed maximum premium scale are level; 
(2) the guaranteed gross premiums in all n-year periods are not less than the 
corresponding net premiums based upon the 1980 CSO Table with or without the 
ten-year select mortality factors; and 
(3) there are no cash surrender values in any policy year. 
(h) Exemption from Unitary Reserves for Certain Juvenile Policies. Unitary basic 
reserves and unitary deficiency reserves need not be calculated for a policy if 
the conditions described in paragraphs (1) - (3) of this subsection are met, 
based upon the initial current premium scale at issue. 
(1) At issue, the insured is age twenty-four or younger; 
(2) until the insured reaches the end of the juvenile period, which must occur 
at or before age twenty-five, the gross premiums and death benefits are level, 
and there are no cash surrender values; and
(3) after the end of the juvenile period, gross premiums are level for the 
remainder of the premium paying period, and death benefits are level for the 
remainder of the life of the policy. 

sec.3.14007.Calculation of Minimum Valuation Standard for Flexible Premium and 
Fixed Premium Universal Life Insurance Policies That Contain Provisions 
Resulting in the Ability of a Policyowner to Keep a Policy in Force Over a 
Secondary Guarantee Period of More Than Five Years. 
(a) General.
(1) Policies with a secondary guarantee include: 
(A) a policy with a guarantee that the policy will remain in force at the 
original schedule of benefits over a period exceeding five years, subject only 
to the payment of specified premiums; 
(B) a policy in which the minimum premium at any future duration beyond the end 
of the fifth policy year is less than the corresponding one year valuation 
premium, calculated using the maximum valuation interest rate and the 1980 CSO 
valuation tables with or without ten-year select mortality factors, or any other 
table adopted after the effective date of this regulation by the NAIC and 
promulgated by regulation by the commissioner for this purpose; or 
(C) a policy with any combination of paragraphs (A) and (B) of this paragraph. 
(2) A secondary guarantee period is the longest period for which the policy is 
guaranteed to remain in force subject only to a secondary guarantee. Secondary 
guarantees that are unilaterally extended by the insurer after issue shall be 
considered to have been made at issue. Reserves described in subsections (b) and 
(c) of this section must be recalculated from issue to reflect the extensions. 
(3) Specified premiums mean the premiums specified in the policy, the payment of 
which guarantees that the policy will remain in force at the original schedule 
of benefits, but which otherwise would be insufficient to keep the policy in 
force in the absence of the guarantee if maximum mortality and expense charges 
and minimum interest credits were made and any applicable surrender charges were 
assessed. 
(4) For purposes of this section, the minimum premium for any policy year is the 
premium that, when paid into a policy with a zero account value at the beginning 
of the policy year, produces a zero account value at the end of the policy year. 
The minimum premium calculation must use the policy cost factors (including 
mortality charges, loads and expense charges) and the interest crediting rate, 
which are all guaranteed at issue.
(5) The one-year valuation premium means the net one-year premium based upon the 
original schedule of benefits for a given policy year. The one-year valuation 
premiums for all policy years are calculated at issue. The select mortality 
factors defined in sec.3.14005(b)(1)(B), (C), and (D) of this title (relating to 
General Calculation Requirements for Basic Reserves and Premium Deficiency 
Reserves) may not be used to calculate the one-year valuation premiums. 
(b) Basic Reserves for the Secondary Guarantees. Basic reserves for the 
secondary guarantees shall be the segmented reserves for the secondary guarantee 
period. In calculating the segments and the segmented reserves, the gross 
premiums shall be set equal to the specified premiums, if any, or otherwise to 
the minimum premiums, that keep the policy in force and the segments will be 
determined according to the contract segmentation method as defined in 
sec.3.14004(b) of this title (relating to Definitions). 
(c) Deficiency Reserves for the Secondary Guarantees. Deficiency reserves, if 
any, for the secondary guarantees shall be calculated for the secondary 
guarantee period in the same manner as described in sec.3.14006(b) of this title 
(Calculation of Minimum Valuation Standard for Policies with Guaranteed Nonlevel 
Premiums or Guaranteed Nonlevel Benefits (Other Than Universal Life Policies) 
with gross premiums set equal to the specified premiums, if any, or otherwise to 
the minimum premiums that keep the policy in force. 
(d) Minimum Reserves. The minimum reserves during the secondary guarantee period 
are the greater of: 
(1) The basic reserves for the secondary guarantee plus the deficiency reserve, 
if any, for the secondary guarantees; or 
(2) The minimum reserves required by other rules or subchapters governing 
universal life plans. 

sec.3.14008. Effective Date. 
This subchapter is effective December 31, 1998. 
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 January 12, 1998.
TRD-9800417
Caroline Scott
General Counsel and Chief Clerk
Texas Department of Insurance
Earliest possible date of adoption: February 23, 1998
For further information, please call: (512) 463-6327

TITLE 30. ENVIRONMENTAL QUALITY
PART I. Texas Natural Resource Conservation
CHAPTER 335.Industrial Solid Waste and Municipal Solid Waste
SUBCHAPTER K.Hazardous Substance Facilities Assessment and Remediation
30 TAC sec.sec.335.341-335.351
The Texas Natural Resource Conservation Commission (commission) proposes 
amendments to sec.sec.335.341-335.351 and the repeal of sec.335.352, concerning 
the assessment and remediation of State Superfund sites that may constitute an 
imminent and substantial endangerment to public health and safety or the 
environment due to a release or threatened release of hazardous substances into 
the environment. 
EXPLANATION OF PROPOSED RULES
The rule changes to these sections are proposed to enhance the implementation of 
certain provisions of House Bill (HB) 2776 passed by the 75th Texas Legislature, 
to streamline current assessment and remediation procedures of State Superfund 
sites, and to ensure consistency with the existing cleanup standards of the Risk 
Reduction Rules in Chapter 335, Subchapter S. Later this year or early next 
year, the commission intends to propose repealing the existing Risk Reduction 
Rules and replacing them with a new set of risk-based corrective action 
standards referred to as the Texas Risk Reduction Program (TRRP) rules. As the 
TRRP rules are currently envisioned, the proposed changes to Chapter 335, 
Subchapter K would be consistent with the new rules; however, a review of the 
amended Subchapter K rules will be required after adoption of the TRRP rules to 
determine if any further amendments to sections in Subchapter K are necessary. 
Among the proposed changes today are the removal of the "Texas Water Commission" 
and its acronym "TWC" wherever they appear in the existing Subchapter K 
sections. Also, the commission is proposing to amend the rules to be consistent 
with the terms and definitions of 30 TAC Chapter 3, which defines agency, 
commission, and executive director. Where appropriate, the correct term is being 
proposed to replace an incorrect term. As an example, in sec.335.344(b) the 
existing rule states that the commission shall hold a public meeting. The 
proposed change would replace "commission" with "executive director" since the 
executive director's staff actually schedules and holds the meeting and the 
commission does not formally act at the public meeting. 
The commission proposes to amend sec.335.341 to recognize the commission's 
Voluntary Cleanup Program (VCP) as a viable alternative to listing a site on the 
State Superfund Registry. This change is a result of changes to the Solid Waste 
Disposal Act, sec.361.183 and sec.361.189, in HB 2776. Proposed changes to 
sec.335.343 and sec.335.344 are intended to be consistent with the amendment to 
sec.335.341. Under sec.335.343, a delisted facility that is no longer being 
adequately addressed in the VCP shall automatically revert to its status prior 
to deletion from the State Registry. Under sec.335.344, the executive director 
shall consider whether a site has been accepted into the VCP when making a 
determination to delist a facility from the State Registry. Section 335.342 sets 
forth the terms and associated definitions specific to the State Superfund 
program. The commission is proposing to add, amend, and delete a number of terms 
and definitions in Subchapter K. The following new terms and definitions are 
proposed for addition to sec.335.342: "Feasibility study," "Health and safety 
plan," "Implementation schedule," "Operation and maintenance plan," "Presumptive 
remedy," "Quality assurance project plan," "Remedial Action," "Remedial action 
drawings and specifications," "Remedial design," "Remedial investigation," 
"Responsible Party," "Sampling and analysis plan," "Settlement offer," 
"Spill/release contingency plan," and "Unilateral order." Amendment to the 
definitions for existing terms is being proposed for "Divisible," "Facility," 
"Good faith offer," "Hazard ranking system," Hazardous waste disposal fee fund," 
"Oversight costs," "Potentially responsible party (PRP)," and "Substantial 
Change in Use." The terms "Remedial Action Plan," "Remedial 
investigation/feasibility study" and "State superfund hazard ranking system" are 
proposed for deletion. Consistent with these changes, other sections of 
Subchapter K reflect the use of the proposed new terms. Section 335.343 
establishes requirements for the ranking of facilities. The commission proposes 
to clarify the agency's use of the same Hazardous Ranking System (HRS) as the 
U.S. Environmental Protection Agency (EPA) for scoring State Superfund sites. 
The proposed changes would give the agency greater flexibility in establishing 
priorities for action at listed sites by allowing the agency to prioritize sites 
based on reasons other than the HRS such as community interests, simplicity, and 
costs. An updated state registry identifying each facility and relative priority 
will be published annually. The commission proposes to amend sec.335.344 
relating to delisting and modifications to delete the language that allowed "any 
interested person" to request that a facility be delisted from the State 
Registry, modify the facility's priority ranking, or modify any information 
regarding the facility. The effect of this proposed change would be that PRPs of 
a listed facility or the executive director would be the only parties that could 
request the previously noted actions. 
The commission is proposing to amend sec.335.345 to simplify the agency's 
process for information requests on listed sites and potentially listed sites. 
Existing language would be replaced with clear, succinct requirements requiring 
submission of requested information and documents within 45 days from the date 
of request and a statement that the submitted documents are subject to the 
Public Information Act and its exceptions. 
Proposed amendments to sec.335.346 would provide that the executive director may 
use money in the Hazardous and Solid Waste Remediation Fee Account to conduct 
early planned removals at sites to substantially reduce the overall cost of 
cleaning up the site. The change is being added to be consistent with HB 2776. 
The proposed amendments to sec.335.347 relating to Financial Capability 
Determinations would clarify the existing requirement that financial statements 
and income tax information may be requested from PRPs in addition to other 
financial information. Also, notice to all PRPs of the executive director's 
determination on financial capability would no longer be required. 
The commission proposes several amendments to sec.335.348 relating to General 
Requirements for a Remedial Investigation. One proposed change is that a 
baseline risk assessment will no longer be required as a comparison standard for 
remedial action alternatives. Instead, a PRP must evaluate health-based and 
ecological risks, and then calculate cleanup levels to the satisfaction of the 
executive director before the remedial action is selected. The current rules 
require a health and safety plan to assure the health and safety of all 
personnel engaged in implementing the remedial investigation. The proposal 
extends the scope of the health and safety plan to include all on-site personnel 
and the general public. Another proposed amendment makes the remedial 
alternative selection criteria consistent with the Solid Waste Disposal Act. 
Under the proposal, a PRP may choose a presumptive remedy in lieu of the 
feasibility study to expedite the remedial process. Finally, to be consistent 
with changes to the Texas Engineering Practice Act by the 75th Legislature 
(Senate Bill 623), all engineering plans and specifications are to be prepared 
under the supervision of a Licensed Engineer. 
In sec.335.349, the commission proposes to change the current time frames for 
selecting the proposed remedial action and to add procedures for modifying the 
proposed remedial action after the date of the initial public meeting. In 
addition, all documents submitted in connection with the remedial design and 
remedial action must be sealed by a Licensed Engineer. 
Proposed amendments to sec.335.350 are simple cleanup changes consistent with 
other changes in the proposed rule. 
Proposed amendments to sec.335.351 would add language that outlines the basis 
for the executive director's consideration regarding settlement offers. The 
commission proposes to repeal sec.335.352 because the reference to federal 
Hazard Ranking System is no longer necessary given the amendments to 
sec.335.343. The section also refers to an appendix which lists recommended 
commission and EPA guidance documents. Repealing the section will allow guidance 
documents to be added or taken off the list administratively instead of having 
to go through a formal rulemaking. 
FISCAL NOTE
Stephen Minick, Strategic Planning and Appropriations Division, has determined 
that for the first five-year period the sections as proposed are in effect, 
there will be fiscal implications as a result of administration or enforcement 
of the sections. The effect on state government will be an anticipated reduction 
in costs as a result of streamlining processes and procedures in the state 
Superfund program. These cost savings are variable and will be realized on a 
site-by-site basis. While the costs of responding to individual contaminated 
sites may decrease, total expenditures in the program are not anticipated to be 
reduced. The total estimated costs of remedial action at all identified state 
Superfund sites is significantly greater than current appropriations or 
available fund balances. The cost savings generated by these proposed amendments 
will enable staff to improve the timeliness of response at contaminated sites 
and address sites that would not otherwise be addressed within current projected 
project schedules. These rules also increase incentives for potentially 
responsible parties to participate in the voluntary cleanup program for site 
remediation. Parties exercising this option will pay fees to the commission to 
offset the costs of processing applications, evaluating proposals, and 
monitoring progress of remedial actions. For sites currently being addressed 
under the voluntary cleanup program, fees typically range between $2,000 and 
$5,000 for most projects, although costs could be significantly greater for 
larger projects. The fees received would be to recover actual costs; however, no 
projection is available of the number of sites for which responsible parties 
will elect to participate and total revenues to be gained by the state have not 
been estimated. There are no significant fiscal implications anticipated for 
local governments, except for those units of local government that may be 
identified as operators of contaminated sites subject to these proposed rules or 
potentially responsible parties for contaminated sites. 
PUBLIC BENEFIT
Mr. Minick also has determined that, for the first five years the sections as 
proposed are in effect, the public benefit anticipated as a result of 
enforcement of and compliance with the sections will be more cost-effective 
remediation of contaminated sites under the state Superfund program, increased 
protection of public health and safety, improvements in the recovery of costs 
from parties responsible for contamination of sites, reduced financial 
liabilities for lenders with security interests in contaminated properties or 
potential purchasers, maintenance or enhancement of local government tax bases 
as a result of restoration of contaminated sites, and increased consistency 
between federal and state procedures for assessment and ranking of hazards posed 
by contaminated sites. Generally, the adoption of these proposed rules is 
anticipated to improve and streamline the process for addressing contaminated 
sites under the state Superfund program and result in cost savings for parties 
subject to the rules. These provisions are generally not prescriptive, but 
rather, represent options for responsible parties in addressing contaminated 
sites that can result in costs savings. These savings will vary on a case-by-
case basis and cannot be determined prospectively. These savings will result 
from proposed options for selection of presumptive remedies instead of full 
feasibility studies at sites to be remediated, reduced time periods for 
initiating and completing remedial actions, and mitigation of potential cleanup 
costs due to early removal of sources of contamination. While fiscal 
implications for any individual site are not known and are quite variable, it is 
anticipated that, for a typical project, the selection of a presumptive remedy 
could result in costs savings of $30,000. Potential costs savings due to 
acceleration of project schedules will generally be proportional to the overall 
administrative and overhead costs of the project. The opportunity for early 
removal of contamination could generate costs savings on a site-by-site basis, 
but the extent of those cost savings is difficult to quantify until the proposed 
changes are implemented. Parties electing to use the voluntary cleanup program 
as an option under these rules will be liable for the payment of application 
fees and the commission's oversight and processing costs. The oversight costs 
are currently billed at $67 per hour of staff time. These costs for sites which 
have been addressed under the voluntary cleanup program to date have typically 
been less than $5,000, although higher fees are possible for larger and more 
complex projects. These costs do not include costs of actual site assessment or 
remedial action. Although no comparisons have been quantified, it is anticipated 
that cleanup costs through the voluntary cleanup program will be less than 
cleanup costs under the procedures and requirements of the state Superfund 
program. Potential costs savings will apply to both small businesses and larger 
concerns and will be based on the allocation of financial participation by a 
responsible party in the assessment and remediation of a contaminated property. 
There are no significant costs anticipated to be imposed on affected persons, 
including small business, required to comply with the provisions of these 
sections as proposed. 
DRAFT REGULATORY IMPACT ANALYSIS
The commission has reviewed the proposed rulemaking in light of the regulatory 
analysis requirements of Texas Government Code, sec.2001.0225, and has 
determined that the rulemaking is not subject to sec.2001.0225 because it does 
not meet the definition of a "major environmental rule" as defined in the act, 
and it does not meet any of the four applicability requirements listed in 
sec.2001.0225(a). 
TAKINGS IMPACT ASSESSMENT 
The commission has prepared a Takings Impact Assessment for these rules pursuant 
to Texas Government Code, Annotated, sec.2007.043. The following is a summary of 
that Assessment. The specific purpose of the rule is to enhance the existing 
State Superfund program and to implement provisions of HB 2776. The rules will 
substantially advance this specific purpose by clarifying portions of the rule, 
by streamlining the assessment and remediation procedures, and by implementing 
certain provisions in HB 2776 where rulemaking is necessary. Promulgation and 
enforcement of these rules will not burden private real property which is the 
subject of the rules because the rules are intended to streamline existing 
procedures to facilitate removals and remedial actions at affected sites. These 
streamlining measures should reduce the administrative burden of remediating a 
site within the State Superfund program while continuing to be protective of 
human and ecological receptors. 
COASTAL MANAGEMENT PROGRAM CONSISTENCY REVIEW
The commission has reviewed this rulemaking for consistency with the Coastal 
Management Program (CMP) goals and policies in accordance with the regulations 
of the Coastal Coordination Council, and has determined that the rulemaking is 
consistent with the applicable CMP goals and policies. 
SUBMITTAL OF COMMENTS
Written comments may be mailed to Bettie Bell, Texas Natural Resource 
Conservation Commission, Texas Register Team, MC-205, P.O. Box 13087, Austin, 
Texas 78711-3087. All comments should reference Rules Tracking Log Number 97155-
335-WS. Comments must be received by 5:00 p.m., on February 23, 1998. For 
further information, please contact Michael A. Bame, C.P.G., Pollution Cleanup 
Division (512) 239-5658 or Clark Talkington, Waste Policy and Regulations 
Division, (512) 239-6731.
STATUTORY AUTHORITY
The repeal and amendments are proposed under the Texas Water Code, sec.5.103 and 
sec.26.011, which provide the commission with authority to adopt any rules 
necessary to carry out its powers, duties, and policies and to protect water 
quality in the state. The amendments and repeal are also proposed under the 
Texas Solid Waste Disposal Act, Texas Health and Safety Code, sec.361.017, and 
sec.361.024, which provide the commission the authority to regulate industrial 
solid waste and municipal hazardous wastes and all other powers necessary or 
convenient to carry out its responsibilities. The Texas Solid Waste Disposal 
Act, Texas Health and Safety Code, Subchapter F provides additional authority to 
propose rules specific to the registry and cleanup of certain hazardous waste 
facilities. 
The repeal and amendments affect Health and Safety Code, Chapter 361. 
The amendments are proposed under the Texas Water Code, sec.5.103 and 
sec.26.011, which provide the commission with authority to adopt any rules 
necessary to carry out its powers, duties, and policies and to protect water 
quality in the state. The amendments are also proposed under the Texas Solid 
Waste Disposal Act, Texas Health and Safety Code, sec.361.017, and sec.361.024, 
which provide the commission the authority to regulate industrial solid waste 
and municipal hazardous wastes and all other powers necessary or convenient to 
carry out its responsibilities. The Texas Solid Waste Disposal Act, Texas Health 
and Safety Code, Subchapter F provides additional authority to propose rules 
specific to the registry and cleanup of certain hazardous waste facilities. The 
amendments affect Health and Safety Code, Chapter 361. 

sec.335.341.Purpose and Scope.
(a) (No change.) 
(b) This subsection describes the [Texas Water Commission (TWC)] procedures for 
identifying, proposing,[and] listing<nl>, and delisting<ol> facilities on the 
State Registry. 
(1) (No change.) 
(2) If the potential endangerment cannot be fully resolved by the present owner 
or operator, then the executive director shall determine whether the potential 
endangerment can be resolved by voluntary cooperation of some or all of the 
potentially responsible parties (PRPs) identified in the Act, sec.361.271 
pursuant to an agreed administrative order issued by the commission <nl>or a 
Voluntary Cleanup Agreement pursuant to Chapter 333 of this title (relating to 
Voluntary Cleanup Programs)<ol>. If<nl> a facility <ol> [it] can be cleaned up 
pursuant to an agreed administrative order <nl>or an executed Voluntary Cleanup 
Agreement,<ol> then it shall not be proposed for listing. 
(3)-(5) (No change.)

sec.335.342.Definitions. 
The following words and terms when used in this section have the following 
meanings unless the context clearly indicates otherwise.
Divisible - [That the] Hazardous substance(s) released or threatened to be 
released <nl>at a facility<ol> are capable of being managed separately under a 
remedial action plan. 
Facility -<nl>In accordance with the Act, sec.361.181(c), a facility means:<ol> 
(A) (No change.) 
(B) any site or area where a hazardous substance has been [posted], 
<nl>deposited<ol> , stored, disposed of, or placed or otherwise come to be 
located, but does not include any consumer product in consumer use or any 
vessel.
<nl>Feasibility study (FS) <ol><nl>- A study which describes and evaluates a set 
of remedial action alternatives for effectively mitigating or minimizing damage 
to, and for providing adequate protection of, the public health and safety and 
the environment in accordance with the requirements of sec.335.348 of this title 
(relating to General Requirements for Remedial Investigations).<ol>
Good faith offer - A written proposal by one or more PRPs which is not 
contingent on participation of other PRPs which, in the judgment of the 
executive director, will: 
(A) in the case of a good faith offer to fund or perform a remedial 
investigation[/feasibility study or other similar study], <nl>fully and<ol> 
effectively determine the nature and extent of the release or threatened release 
of hazardous substances and its impact on air, soils, groundwater, and surface 
water, both within and beyond the boundaries of the facility<nl>. The executive 
director will not consider an offer a good faith offer unless it is an offer to 
fully fund or perform the remedial investigation<ol>; or 
(B) in the case of a good faith offer to fund or perform a remedial action, 
<nl>fully and<ol> effectively mitigate or minimize damage to, and provide 
adequate protection of, the public health and safety and the environment. 
<nl>The executive director will not consider an offer a good faith offer unless 
it is an offer to fully fund or perform the remedial action.<ol>
[Federal] Hazard ranking system - <nl>The method used by the Environmental 
Protection Agency and the agency to evaluate the relative potential of hazardous 
substance releases to cause health or safety problems, ecological or 
environmental damage.<ol> The scoring system <nl> was<ol> developed by the 
United States Environmental Protection Agency as set out in 40 Code of Federal 
Regulations Part 300, Appendix A, as amended. Hazardous <nl>and Solid Waste 
Remediation Fee Account<ol> [waste disposal fee fund] - The fund <nl>as<ol> 
described in the Act, sec.361.133.
<nl>Health and safety plan <ol><nl>- A document that addresses the protection of 
on-site personnel and the public from potential hazards particular to a facility 
while implementing the remedial investigation or remedial action. The plan shall 
conform to applicable Occupational Safety and Health Administrative Rules but 
not limited to 29 Code of Federal Regulations sec.1910 and sec.1926.<ol>
<nl>Implementation schedule <ol><nl>- A document describing the sequence, 
dependency on other activities, and duration of each activity to be conducted 
during a remedial investigation or remedial action. <ol>
<nl>Operation and maintenance plan<ol><nl> - A document detailing the necessary 
operation and maintenance, inspection, and monitoring activities, including 
schedules, required to maintain the attainment of performance goals after 
completion of the implementation phase of the remedial action.<ol>
Oversight costs - All administrative costs and costs for technical and legal 
services incurred by <nl>the agency<ol> [commission personnel], or agents or 
contractors for the [commission] <nl>the agency<ol> , incurred in the 
<nl>determination of superfund eligibility, identification of PRPs<ol> , 
oversight of the <nl>remedial investigation <ol> [RI/FS] and remedial action, 
plus all such costs incurred in verifying compliance by PRPs with the terms of 
any agreed order which may be issued <nl>and costs incurred by the agency for 
delisting a site from the State Registry and cost recovery costs.<ol>
Potentially responsible party ([or] PRP) - A person potentially responsible for 
solid waste as defined in the Act sec.361.271.
<nl> Presumptive remedy <ol><nl>- A remedy in a commission document titled 
"Presumptive Remedies" which describes site specific remedial alternatives for a 
facility in lieu of a full feasibility study as required by sec.335.348 of this 
title (relating to General Requirements for Remedial Investigations). <ol>
<nl>Quality assurance project plan (QAPP) <ol><nl>- A document describing in 
comprehensive detail the necessary quality assurance, quality control, and other 
technical activities that must be implemented to meet the data quality goals 
during an investigation or remedial action.<ol>
<nl>Remedial action (RA) <ol><nl>-An action, including remedial design and post-
closure care, consistent with a remedy taken instead of or in addition to a 
removal action in the event of a release or threatened release of hazardous 
substances into the environment to prevent or minimize the release of a 
hazardous substance so that the hazardous substance does not migrate to cause an 
imminent and substantial danger to present or future public health and safety or 
the environment. <ol>
<nl>Remedial action drawings and specifications <ol><nl> - Documents that 
include the drawings showing the scope, extent, and character of the work to be 
performed during the remedial action and the written technical descriptions of 
materials, equipment, remediation systems, standards and workmanship as applied 
to the remedial action. <ol>
[Remedial action plan - A detailed plan for the design, construction, and long-
term operation and maintenance of the remedial action agreed to by the 
commission.] 
<nl>Remedial design (RD)<ol><nl>- A design consisting of engineering drawings 
and technical specifications and other documents developed for implementation of 
the remedial action in accordance with the requirements of sec.335.349 of this 
title (relating to General Requirements For Remedial Activities).<ol>
[Remedial investigation/feasibility study (or RI/FS) 
[(A) An investigative study of the entire facility designed to determine the 
nature and extent of a release or threatened release of hazardous substances 
and, as appropriate, its impact on air, soils, ground-water, and surface water, 
both within and beyond the boundaries of the facility in accordance with the 
requirements of sec.335.348 of this title (relating to General Requirements for 
a RI/FS); and ]
[(B) A study which describes and evaluates a set of remedial action alternatives 
for effectively mitigating or minimizing damage to, and for providing adequate 
protection of, the public health and safety or the environment in accordance 
with the requirements of sec.335.348 of this subchapter.]
<nl>Remedial investigation (RI)<ol><nl> - An investigative study, including 
removals, feasibility study, human health risk assessment, ecological risk 
assessment, or similar study, designed to adequately determine the nature and 
extent of a release or threatened release of hazardous substances and, as 
appropriate, its impact on air, soils, groundwater, and surface water, both 
within and beyond the boundaries of the facility in accordance with the 
requirements of sec.335.348 of this title (relating to General Requirements for 
Remedial Investigations).<ol>
<nl>Responsible party (RP)<ol><nl> - A person responsible for solid waste as 
defined in the Act, sec.361.271 and sec.361.275(g).<ol>
<nl>Sampling and analysis plan (SAP) <ol><nl>- A document describing the 
specific sampling and analytical protocols to be implemented during a remedial 
investigation or remedial action.<ol> 
[State superfund hazard ranking system- The scoring system used by the executive 
director for determining the relative priority for an RI/FS or remedial action 
needed at a facility.]
<nl>Settlement offer<ol><nl>- A written offer by a potentially responsible party 
to fund or perform less than a full and complete remedial investigation, and/or 
remedial action. <ol>
<nl>Spill/release contingency plan <ol><nl>- A document describing the 
sequences, procedures, and requirements to be implemented to protect both 
workers at the facility and the public from hazardous exposure to releases or 
spills resulting from the remedial action. <ol>
Substantial change in use - A physical or functional alteration of a facility, 
the effect of which is to interfere significantly with a proposed or ongoing 
<nl>remedial investigation<ol> [RI/FS study or similar study] <nl>, proposed, 
ongoing, or completed remedial action<ol> or to expose [the] public health and 
safety or the environment to a significantly increased threat of harm. The term 
includes, but is not limited to, actions such as the erection or razing of a 
building or other structure at the facility, the use of a facility for 
agricultural production, the paving over of a facility, the creation of a park 
or other public or private recreational use on the facility, and any other 
alteration of the site or activity which could interfere with the performance of 
<nl>a remedial investigation <ol> [an RI/FS] or remedial action. 
<nl>Unilateral Order <ol><nl>- An order issued by the commission without the 
consent of the person subject to the order.<ol>

sec. 335.343. Ranking of Facilities. 
(a) The relative priority for action needed at a facility investigated by the 
executive director for possible listing on the State Registry <nl> may be<ol> 
[is] based on a [State] Superfund Hazard Ranking System (HRS). The [State] 
Superfund HRS is a methodology designed to determine a numerical score for a 
facility based on the judgment of the executive director concerning various 
factors which may impact the public health and safety or the environment. 
(b) Upon appropriate investigation by the executive director, a facility will be 
assigned a [State] Superfund HRS score. A facility may be proposed for listing 
on the State Superfund Registry if it is assigned a [state] Superfund HRS score 
5.0 or greater. 
[(c) Facilities with the highest State Superfund HRS score shall receive the 
highest priority for remedial action and state-funded cleanup, unless a 
situation described in the Act,sec.361.191 warrants more immediate action.]
<nl>(c)<ol>[(d)] The relative priority for action at facilities listed on the 
State Registry will be periodically reviewed and revised by the <nl>executive 
director<ol> [commission] as necessary to accurately reflect the need for action 
at the facilities. 
<nl>(d)<ol> <nl>The commission shall annually publish an updated state registry 
identifying each facility and the relative priority for action at each listed 
facility. <ol>
<nl>(e)<ol> <nl> If a facility has been deleted in accordance with sec.335.344 
of this title (relating to Delisting and Modifications) based in whole or part 
on the facility being addressed pursuant to Chapter 333 of this title (relating 
to Voluntary Cleanup Programs), and the executive director determines that the 
facility is no longer being adequately addressed, the facility shall 
automatically revert to the status the facility had immediately before the 
facility was deleted from the Registry in accordance with the Act, sec.361.189. 
No public meeting is required under this subsection.<ol>

sec.335.344.Delisting and Modifications. 
(a) Any [Potentially Responsible Party] PRP of a facility listed or proposed for 
listing on the State Registry [or any interested person] may request the 
executive director to delete such facility from the Registry, modify the 
facility's priority ranking within the Registry, or modify any information 
regarding such facility by submitting a written statement setting forth the 
grounds of the request. The PRP [or interested person] shall submit to the 
executive director any information as may be reasonably required to enable the 
executive director to further evaluate the facility including, but not limited 
to, information on all factors used to develop a [State] Superfund HRS score and 
to make a determination on the request. The executive director may initiate the 
delisting procedures described in this section. 
(b) The <nl>executive director<ol> [commission] shall hold a public meeting to 
receive comment. This meeting is not a contested case hearing within the meaning 
of Texas Government Code, Chapter 2001. This meeting shall be held upon requests 
filed with or initiated by the executive director under subsection (a) of this 
section. At least 30 days prior to the date set forth for the meeting, notice 
shall be provided by first class mail to all other PRPs [and other interested 
persons], and by publication in a newspaper of general circulation in the county 
where the facility is located. The person submitting the request, if any, shall 
bear the cost of publication of the notice.
(c) In making a determination under subsection (a) of this section, the 
executive director [or the commission] will consider the following: 
(1) the extent to which the facility has been remediated under the terms of 
<nl>any removals and<ol> [the] remedial action [plan] agreed to by the executive 
director; 
(2)-(3) (No change.) 
(4) whether, because of the nature of <nl>any removals and<ol> the remedial 
action implemented at the facility, it is not yet feasible to make a 
determination that the remedial action has effectively remediated the release or 
<nl>threatened<ol> [threat of] release of hazardous substances; or 
(5) whether the site has been <nl>accepted<ol> [remediated] under the voluntary 
cleanup program as set out in [30, TAC,] Chapter 333 of this title (relating to 
Voluntary Cleanup Programs).
(d) <nl>With the exception of paragraph (c) (5) of this section, no<ol> [No] 
requests for the delisting of a facility from the State Registry or requests to 
modify information about a facility eligible for listing on the Registry will be 
granted unless, at a minimum, the facility has been investigated under the terms 
of <nl>a remedial investigation<ol> [an RI/FS or other similar study] approved 
by the executive director.

sec.335.345.Requests for Information or Production of Documents. 
(a) The executive director may submit requests for information and requests for 
production of documents as authorized by the Act, sec.361.182 to any person who 
has information or documents which in the executive director's opinion are 
necessary for the adequate investigation or remediation of a facility listed on 
the Registry <nl>or that the executive director has reason to believe should be 
listed on the State Registry<ol> [or proposed for listing on the Registry]. [If] 
The requested information or documents <nl> shall be<ol> [are not] produced 
<nl>within forty-five days from the date of request<ol>. [in a timely manner, 
the executive director may petition the commission to issue an order directing 
compliance with the requests for information or production of documents. The 
executive director shall serve a copy of the petition on the person to whom the 
request for information or production of documents was directed at least 20 days 
prior to the scheduled date of commission action on the petition. The person to 
whom the request for information or production of documents was directed may 
appear before the commission and present evidence and argument on the petition 
or in support of a claim asserted under subsection (b), or the commission may 
refer the matter to the office of hearings examiners for the taking of 
evidence.] 
(b) Information or documents provided to the executive director in accordance 
with this section are <nl>subject to the Public Information Act and its 
exceptions.<ol> [presumed to be public records except to the extent that a 
showing satisfactory to the commission is made that the information or documents 
would divulge trade secrets if made public. The commission shall deem the 
information or documents to be confidential and not subject to public disclosure 
if such a showing is made. Upon request, confidential information and documents 
supplied to the executive director will be returned to the person supplying the 
information or documents after it has served the purpose for which it was 
requested by the executive director.

sec.335.346. <nl>Removals<ol> [Removal Actions ] and Preliminary Site 
Investigations.
(a) For facilities listed on the Registry or proposed for listing on the 
Registry, no person may perform any partial or total <nl> removals<ol> [removal 
activities] at such facility or conduct [on-site sampling, testing, or] 
preliminary investigations of any type at such facility without the advance 
written authorization of the executive director after notice and opportunity for 
comment to all other potentially responsible parties. 
(b) To expedite the executive director's consideration of a proposal to conduct 
<nl>removals<ol> [removal activities] or preliminary investigations at a 
facility, the person proposing such actions <nl> shall<ol> [should] submit to 
the executive director a workplan describing the [precise nature of the] removal 
<nl>and/<ol> or investigation activities proposed, a safety and health plan, 
<nl>a quality assurance project plan, and an implementation schedule<ol> [and a 
quality assurance/quality control plan as well as a schedule] for completing 
various subtasks identified in the workplan. 
(c) Any authorization by the executive director to perform [on-site testing, 
sampling, or] preliminary investigations<nl>, investigation activities,<ol> or 
partial or total <nl>removals<ol> [removal activities] at a facility does not 
constitute a finding or determination by the <nl>executive director<ol> 
[commission] that such testing, sampling, or preliminary investigation 
constitutes an approved <nl> remedial investigation<ol> [remedial 
investigation/feasibility study ] or that the removal <nl>constitutes<ol> 
[activities constitute ] the final remedial action. An authorization by the 
executive director to perform any partial or total <nl>removals or investigation 
activities <ol> [removal activities] also does not constitute a determination or 
finding by the <nl>executive director<ol> [commission] that any release or 
threatened release attributed to the removed materials is divisible as defined 
in the Act, <nl>sec.361.276.<ol> 
(d) Pursuant to the Act,sec.361.133(c)<nl>(1)-(4) and (g), <ol> the executive 
director may use money in the Hazardous and Solid Waste Remediation Fee 
<nl>Account<ol> [Fund] for necessary and appropriate removal and remedial action 
at sites at which solid waste or hazardous substances have been disposed if 
funds from a liable party, independent third party, or the federal government 
are not sufficient for the removal or remedial action. <nl> The executive 
director may also perform removals under the Act, sec.361.133(c)(5) to protect 
human health and the environment. <ol> [A necessary and appropriate aspect of 
any such removal or remedial action may be the construction of a fence as 
necessary to provide site security, and the taking and analysis of samples of 
potential hazardous substances, and potentially contaminated soils, surface 
water and groundwater.]

sec.335.347.Financial Capability Determinations.
[(a)] The executive director <nl>may<ol> [ will]make a determination of whether 
a potentially responsible party (PRP) is financially capable of participating in 
a facility investigation or remediation. Such a determination may be based on 
some or all of the following financial information:
(1) <nl>a PRP's<ol> audited financial statements;
(2) <nl>a PRP's<ol> federal or state income tax returns; 
(3) a PRP's gross and net income for each of the preceding three years;
(4) a PRP's net worth for each of the preceding three years; 
(5) a PRP's current cash flow position; 
(6) a PRP's long-term liabilities; 
(7) the liquidity of a PRP's assets; and 
(8) any other data requested pursuant to sec.335.345 of this title (relating to 
Requests for Information or Production of Documents), which in the opinion of 
the executive director is relevant to a determination of the ability of the PRP 
to participate in a facility investigation or remediation.
[(b) A determination by the executive director pursuant to this section shall be 
provided to all PRPs.]

sec.335.348.General Requirements for Remedial Investigations[/Feasibility 
Study]. 
(a) Unless otherwise directed by the commission, <nl>a remedial 
investigation<ol> [an RI/FS or other similar study] as approved by the 
<nl>executive director<ol> [Texas Water Commission (TWC)] shall be completed 
before the executive director's selection of the remedial action, except for 
<nl>removals<ol> [emergency removal actions] and preliminary site investigations 
pursuant to sec.335.346 of this title (relating to <nl>Removals<ol> [Removal 
Actions] and Preliminary Site Investigations). 
(b) A similar study may be approved by the <nl>executive director<ol> [TWC] as 
an appropriate alternative to the performance of a full <nl>remedial 
investigation<ol> [RI/FS] when necessary to avoid delay, to make more effective 
use of resources or when such similar study is sufficient to adequately 
characterize a site. 
(c) The contents of the <nl>remedial investigation<ol> [RI/FS] as approved by 
the <nl>executive director<ol>, [commission] will depend on the particular 
circumstances of each specific facility. Under any <nl>remedial 
investigation;<ol> [RI/FS] however, sufficient information must be collected and 
evaluated to allow the <nl> executive director<ol> [commission] to select an 
appropriate remedial action. 
(d) <nl>A remedial investigation<ol> [An RI/FS] may include the following, as 
appropriate to a particular facility, for the purpose of allowing <nl>the 
executive director<ol> [TWC] to select an appropriate remedial action: 
(1) (No change.) 
(2) investigations to adequately characterize the <nl> nature and extent<ol> 
[vertical and areal distribution and concentrations] of hazardous substances in 
the soils encompassing the facility. Properties associated with the soils which 
would influence the type and rate of hazardous substance migration or affect the 
ability to implement alternative remedial actions shall be characterized. 
(3) investigations of hydrogeology and geology to adequately characterize the 
<nl>nature and extent<ol> [horizontal and vertical distribution and 
concentrations] of hazardous substances in the ground water and the features 
which affect the fate and transport of those hazardous substances. This should 
include, but is not limited to, the physical properties and distribution of 
bedrock and unconsolidated materials, groundwater flow rate and gradient for 
contaminated and potentially contaminated aquifers, groundwater divides, areas 
of groundwater recharge and discharge, and location of public and private 
groundwater wells. 
(4)-(5) (No change.) 
(6) descriptions of the location, quantity, horizontal and vertical extent, 
concentrations and sources of hazardous substances [in disposal areas]. 
Information on the physical and chemical characteristics and the toxicological 
effects of hazardous substances shall be provided, if available. 
[(e) In order to identify possible health problems associated with the "no 
action" remedial action alternative, a baseline public health evaluation will be 
conducted in accordance with the Environmental Protection Agency's Risk 
Assessment Guidance for Superfund - Volume 1: Human Health Evaluation Manual or 
other equivalent EPA guidance document. The evaluation may not be required when 
the executive director determines that remediation standards are apparent and 
undisputed and adequately protective of human health and the environment.] 
[(f) The number and types of remedial action alternatives to be evaluated shall 
take into consideration the particular characteristics and complexities of the 
facility. Development of remedial action alternatives shall include, at a 
minimum, the following:] 
[(1) an alternative which involves the treatment of hazardous substances to 
health-based levels or the level of Best Demonstrated Available Technology 
(BDAT).] 
[(2) an alternative consisting of containment of all hazardous substances either 
on-site or off-site.] 
[(3) an alternative consisting of a combination of on-site and off-site 
containment.] 
[(4) no remedial action.] 
[(g) At a minimum, the following criteria will be used to evaluate each remedial 
action alternative:] 
[(1) the extent to which the alternative mitigates long-term exposure of any 
residual contamination;] 
[(2) the extent to which the alternative achieves remediation standards and 
complies with applicable federal, state and local regulations;]
[(3) the extent to which the alternative permanently and significantly reduces 
the volume, toxicity, and mobility of hazardous substances;] 
[(4) the present value cost including the total costs of implementation and 
annual operation and maintenance costs;
[(5) the extent to which local community concerns are addressed and whether 
implementation of the alternative would result in other adverse effects on the 
local community;] 
[(6) other significant impacts on human health and the environment resulting 
from implementation of the remedial action alternative; and]
[(7) the technical merits of each remedial alternative relative to the other.] 
<nl>(e)<ol> [(h)] A workplan for <nl>a remedial investigation<ol> [an RI/FS] 
shall be submitted to the executive director for final review and possible 
modifications and shall include the following: 
(1) a sampling and analysis plan covering all sampling activities to be 
undertaken pursuant to the <nl>remedial investigation<ol> [RI/FS]; 
(2) a <nl>quality assurance project plan<ol> [quality assurance/quality control 
plan] to assure the integrity of all samples taken pursuant to the <nl>remedial 
investigation<ol> [RI/FS ]; and 
(3) a health and safety plan to describe steps to be taken to assure the health 
and safety of all personnel engaged in implementing the <nl>remedial 
investigation<ol> [RI/FS]; and 
(4) <nl>an implementation schedule<ol> [a schedule of implementation] for all 
aspects of the <nl>remedial investigation <ol> [RI/FS]. 
<nl>(f)<ol> <nl> A health based risk assessment or similar study and an 
ecological risk assessment shall be completed before the executive director's 
selection of the proposed remedial action. The evaluation is not required when 
the executive director determines that remediation standards are apparent and 
undisputed and adequately protective of human health and the environment. <ol>
<nl>(g)<ol> <nl> For the purpose of conducting an ecological risk assessment, 
any ecological risk assessment guidance material may be used as long as the 
material has credible authority. <ol> 
<nl>(h)<ol>[(i)] Treatability studies may be required as necessary to provide 
information to evaluate remedial action alternatives. 
<nl>(i)<ol> <nl> In evaluating the acceptability of a remedial investigation, 
the executive director may require the utilization of published agency and EPA 
technical guidance documents.<ol>
(j) <nl>A health and safety plan shall be prepared that addresses the protection 
of on-site personnel and the public from potential hazards particular to a 
facility while implementing the remedial investigation.<ol> [A report shall be 
prepared at the completion of the remedial investigation/feasibility study and 
submitted to the executive director for review, possible modification and final 
approval.] 
(k) <nl>A report shall be prepared at the completion of the remedial 
investigation and submitted to the executive director for review, possible 
modification and final approval.<ol> [In evaluating the acceptability of a RI/FS 
or similar study, the executive director may utilize published TWC and EPA 
technical guidance documents including, but not limited to, the documents set 
forth in Appendix II.] 
<nl>(l)<ol> <nl>The selection of the remedial alternative shall be made 
according to the process outlined in the guidance document "Presumptive Remedies 
for Soils at Texas State Superfund Sites" or other applicable presumptive remedy 
documents, unless the executive director determines that a feasibility study 
must be conducted. <ol>
<nl>(m)<ol> <nl>The remedial action for a particular facility shall be selected 
based on the remedial alternative that the executive director determines to be 
the lowest cost alternative which is technologically feasible and reliable, 
effectively mitigates and minimizes damage to the environment, and provides 
adequate protection of the public health and safety and the environment. <ol> 
<nl>(n)<ol> <nl> All engineering evaluations, plans, and specifications included 
in the feasibility study or similar study must be prepared under the supervision 
of and sealed by a Licensed Engineer, currently licensed in accordance with the 
provisions of The Texas Engineering Practice Act. <ol>

sec.335.349.General Requirements For [a] Remedial <nl>Activities<ol> [Action].
(a) Based on the proposals set forth in the feasibility study, <nl> the 
presumptive remedy, or other similar study, elements from different remedial 
action alternatives as proposed in a remedial investigation as well as any other 
information available to the executive director,<ol> the executive director 
shall select a <nl>proposed<ol> remedial action. <nl>After the selection of the 
proposed remedial action, the executive director shall hold a public meeting to 
discuss the proposed action, as required by the Act, sec.361.187. This meeting 
is not a contested case hearing within the meaning of Texas Government Code, 
Chapter 2001. Persons desiring to submit comments are encouraged to do so prior 
to the public meeting. Written comments should be submitted to the executive 
director at least 5 days prior to the date set for public meeting. All other 
comments shall be presented in the public meeting.<ol> [ The selection of the 
remedial action shall be based on relevant information collected during the 
remedial investigation/feasibility study (RI/FS), or other approved study, as 
well as any other information available to the commission. The commission may 
select a final remedial action which incorporates elements from different 
remedial action alternatives as proposed in an RI/FS.] 
<nl>(b)<ol> <nl> This subsection describes the administrative procedures for 
modifying the proposed remedial action after the date of the initial public 
meeting to discuss the remedial action for the site. <ol>
<nl>(1)<ol> <nl> A minor change in the proposed remedial action is one that does 
not significantly affect the scope, performance, or cost of the proposed 
remedial action. The executive director will document minor changes in the 
project records without the necessity of another public meeting. <ol>
<nl>(2)<ol> <nl> A significant change in the proposed remedial action is one 
that materially affects the scope, performance, or cost of the proposed remedial 
action, but uses the same approach and results in a remedial action as least as 
protective as originally proposed. For significant changes, the executive 
director shall notify the PRPs by certified mail of the changes and issue a 
public notice in the Texas Register and in a newspaper of general circulation in 
the county in which the facility is located. The notice shall provide 
information regarding the significant changes in the proposed remedial action; 
however, a public meeting or opportunity for public comment is not required. If 
the commission has not entered into an administrative order to perform the 
remedial action, a significant change will extend the schedules provided in the 
Act, sec.361.187(d). <ol>
<nl>(3)<ol> <nl> A fundamental change in the proposed remedial action is one 
that uses a different approach to achieve the remedial action goals, or one that 
uses the same approach, but results in a remedial action that is less protective 
than that originally proposed. A major change in technology to address the 
contamination is a fundamental change. For fundamental changes, the executive 
director shall hold another public meeting to discuss the proposed changes in 
accordance with the Act, sec.361.187, and as described in subsection (a) of this 
section. This newly proposed remedial action shall supersede the remedial action 
originally proposed in the initial public meeting. <ol>
<nl>(c)<ol>[(b)] Engineering documents submitted in connection with the remedial 
action <nl>must be approved by the executive director and must<ol> [will be 
required to] demonstrate compliance with relevant cleanup standards, except as 
provided in the Act, sec.361.193. The scope of these documents will depend on 
the nature and complexity of the proposed remedial action and may vary from 
<nl>facility to facility <ol> [site to site]. 
[(c) A remedial action plan shall consider the following factors if relevant to 
a particular facility, but shall not be limited to those factors, as follows:] 
[(1) a design engineering report to include information for the development and 
review of construction plans and specifications; 
[(2) construction plans and specifications describing in detail the cleanup 
actions to be performed and prepared in conformance with currently acceptable 
engineering techniques and practices; and] 
[(3) an operation and maintenance plan to assure effective and environmentally 
safe operations under normal and emergency situations.] 
<nl>(d)<ol> <nl> The executive director shall establish the minimum requirements 
for the remedial design, based on the specific characteristics of the facility 
and the remedial action. If appropriate, the executive director may waive any of 
the requirements in this subsection for a particular facility. Typical remedial 
design requirements include, but are not limited to: <ol>
<nl>(1)<ol> <nl> remedial action drawings and specifications;<ol>
<nl>(2)<ol> <nl>quality assurance project plan; <ol>
<nl>(3)<ol> <nl>sampling and analysis plan; <ol>
<nl>(4)<ol> <nl>spill/release contingency plan;<ol>
<nl>(5)<ol> <nl>implementation schedule; and<ol>
<nl>(6)<ol> <nl>an operations and maintenance plan. <ol>
<nl>(e)<ol> <nl> A health and safety plan shall be prepared that addresses the 
protection of on-site personnel and the public from potential hazards particular 
to a facility while implementing the remedial action.<ol>
<nl>(f)<ol> <nl> All engineering plans and specifications included in remedial 
activities must be prepared under the supervision of and sealed by a Licensed 
Engineer licensed in accordance with the Texas Engineering Practice Act. <ol>

sec.335.350.Defense to Liability and Claims of Divisibility.
(a) The burden of establishing that a <nl>PRP<ol> [potentially responsible party 
(PRP)] qualifies for any defenses to liability set forth in the Act, sec.361.275 
or that a release is divisible as set forth in the Act, sec.361.276 lies with 
the PRP asserting such claim.
(b) (No change.) 
(c) The executive director will not consider claims of divisibility until a site 
has been adequately characterized by <nl>a remedial investigation <ol> [an RI/FS 
or other approved study]. 
(d) (No change.)

sec.335.351.Settlement Agreements.
(a) General purpose. The <nl>commission<ol> [Texas Water Commission (TWC)] 
encourages <nl>PRPs<ol> [potentially responsible parties (PRP)] to enter into 
negotiated settlement agreements <nl> which shall include an agreed 
administrative order<ol> with the commission so that an effective <nl>remedial 
investigation and remedial action<ol> [cleanup] of a [state superfund] facility 
can be quickly implemented while at the same time resolving PRP's apparent 
liability for the facility. The goal of the executive director in negotiating 
PRP settlements is to obtain a complete <nl>remedial<ol> investigation and 
<nl>remedial action<ol> [cleanup] of the facility by PRPs, or to collect from 
PRPs 100% of the <nl>agency's<ol> [commission's] cost of performing a complete 
<nl>remedial<ol> investigation and <nl>remedial action<ol> [cleanup] of the 
facility. <nl>PRPs shall have 60 days after the end of the good faith offer 
period to negotiate a settlement/final administrative order. Settlement 
negotiations shall run concurrently with agreed order negotiations. <ol> 
(b) <nl>Remedial investigation settlement. In the case of an offer which is less 
than a good faith offer to fund or perform a remedial investigation, the 
executive director's consideration of the offer shall be based on a party's 
ability to pay.<ol> [Partial settlements. The commission may consider a 
settlement proposal for cleanup of less than 100% of a facility's cleanup 
remedial activities or cleanup costs. Upon settling with cooperative parties, 
the commission will vigorously seek all remaining relief, including full cost 
recovery of monies expended from the Hazardous Waste Remediation Fee Fund, 
including penalties, damages, and interest where appropriate, as well as TWC 
oversight costs, from parties whose non-cooperation prevented the achievement of 
a complete settlement.] 
<nl>(c)<ol> <nl> Remedial action settlement. <ol>
<nl>(1)<ol> <nl> In the case of an offer which is less than a good faith offer 
to fund or perform a remedial action, the executive director's consideration of 
the offer may be based on: <ol> 
<nl>(A)<ol> <nl>the relationship between the parties' actions in storing, 
processing, and disposing of hazardous substances and the remedial action 
required to eliminate the release or threatened release; <ol>
<nl>(B)<ol> <nl> the volume of hazardous substances each party is responsible 
for at the site to the extent that the costs of the remedial action are based on 
the volume of waste present; <ol>
<nl>(C)<ol> <nl> consideration of toxicity or other waste characteristics if 
those characteristics affect the cost to eliminate the release or threatened 
release; <ol>
<nl>(D)<ol> <nl> a party's cooperation with state agencies, its cooperation or 
noncooperation with the pending efforts to eliminate the release or threatened 
release, or a party's actions concerning storing, processing, or disposing of 
hazardous substances, as well as the degree of care that the party exercised; 
and <ol>
<nl>(E)<ol> <nl> a party's ability to pay. <ol>
<nl>(2)<ol> <nl> The commission may consider a settlement proposal for remedial 
action of less than 100% of a facility's remedial activities or remedial action 
costs. Upon settling with cooperative parties, the commission will vigorously 
seek all remaining relief, including full cost recovery of monies expended from 
the Hazardous and Solid Waste Remediation Fee Account, including penalties, 
damages, and interest where appropriate, as well as the agency's oversight 
costs, from parties whose non-cooperation prevented the achievement of a 
complete settlement. <ol>
<nl>(d)<ol>[(c)] Mixed funding. Mixed Funding means use of funds from federal, 
state, and private party sources, or any combination of those sources, to fund a 
timely <nl>remedial<ol> [response] action. Mixed funding may be used in the 
following circumstances.
(1) In order to achieve an expeditious <nl>remedial action <ol> [cleanup] of a 
facility listed on the Registry, the commission may agree to reimburse parties 
to a settlement agreement from the <nl>Hazardous and Solid Waste Remediation Fee 
Account<ol> [Hazardous Waste Disposal Fee Fund] with interest, for certain costs 
incurred as a result of the timely implementation of the remedial action plan 
that the parties agree to perform but which the commission agrees to finance<nl> 
in whole or in part <ol>. The commission may agree to utilize funds from 
whatever other federal or state <nl>sources<ol> [source] are available to the 
commission for the funding of a facility remediation. 
(2) Mixed funding shall be provided only to PRPs whom the commission has found 
to be eligible and who have entered into an agreed administrative order with 
<nl>the commission<ol> [TWC]. The agreed administrative order shall identify 
remedial action tasks to be addressed by the mixed funding, costs to be borne by 
the <nl>Hazardous and Solid Waste Remediation Fee Account<ol> [Hazardous Waste 
Disposal Fee Fund] and the terms of agreement. 
(3) A PRP must submit sufficient documentation, as requested by the executive 
director, to support its request for mixed funding. 
(4) The commission's granting of a request for mixed funding does not diminish 
or alter the standard and scope of liability as set out in the Act. The 
commission will not approve mixed funding based solely on the grounds that a 
share of wastes at a site may be attributable to an unknown or financially 
nonviable party. In addition, the availability or the amount of any fund-
financing for a particular site will not be dependent on consistency with any 
volumetric allocation. 
(5) Good faith negotiations and early cooperation of settlers will be considered 
in mixed funding requests. <nl>The executive director shall only consider mixed 
funding for remedial action if the PRP meets the following conditions:<ol> 
[Mixed funding for remedial actions would not be appropriate where the executive 
director did not receive a good faith offer for the participation of the PRPs in 
the completion of the remedial investigation/feasibility study.] 
<nl>(A)<ol> <nl> the PRP participated in the remedial investigation; or <ol>
<nl>(B)<ol> <nl> the PRP agreed to reimburse all agency expenses associated with 
the remedial investigation, if the PRP did not participate in the remedial 
investigation. <ol> 
(6) If a PRP is found to be eligible for mixed funding, the executive director 
shall make an initial determination regarding the amount of funding to be 
provided. This determination is solely within the discretion of the executive 
director and is not subject to adjudication in an administrative hearing or 
appeal to the commission. A determination of eligibility is not a funding 
commitment as actual funding will depend on availability of funds and approval 
of the commission 
(7) Where a remedial action has been completed at a facility pursuant to a mixed 
funding agreement, the <nl>Hazardous and Solid Waste Remediation Fee Account<ol> 
[hazardous and waste disposal fee fund (the fund)] shall be subject to an 
obligation for subsequent remedial actions at the same facility only to the 
extent that such subsequent actions are necessary by reason of failure of the 
original remedial action. Such obligation shall be in a proportion equal to, but 
not exceeding, the proportion contributed by the fund for the original remedial 
action. The fund's obligation for such future remedial action may be met through 
fund expenditures, or through payment by parties who were not signatories to the 
original agreement.
<nl>(e)<ol> [(d)] De minimis settlements. The commission may reach a final 
settlement with a PRP for only a minor portion of the response costs at a 
facility if the conditions in either of the following subparagraphs (1) or (2) 
of this subsection are met. 
(1) A PRP can demonstrate the following: 
(A) the amount of the hazardous substances contributed by a particular PRP is 
minimal in comparison to the amounts of other hazardous substances at the 
facility; or 
(B) the toxicity or other hazardous effects of the hazardous substances 
contributed by a particular PRP are minimal in comparison to the toxicity or 
other hazardous effects of other hazardous substances at the facility. 
(2) The PRP can demonstrate that it: 
(A) is the owner of the real property on or in which the facility is located; 
(B) did not conduct or permit the generation, transportation, storage, 
treatment, or disposal of any hazardous substance at the facility; and 
(C) did not contribute to the release or <nl>threatened<ol> [threat of] release 
of a hazardous substance at the facility through any action or omission. 
(3) Paragraph (2) of this subsection does not apply if the PRP purchased the 
real property with actual or constructive knowledge that the property was used 
for the generation, transportation, storage, treatment, or disposal of any 
hazardous substance. 
<nl>(f)<ol> [(e)] Covenants not to sue. 
(1) The commission may, in its discretion, provide any PRP with a covenant not 
to sue concerning any existing or future liability resulting from a release or 
threatened release of a hazardous substance addressed by a remedial action if 
each of the following conditions is met: 
(A) the covenant not to sue is in the public interest as determined by criteria 
set forth in paragraph (2) of this subsection; 
(B) the granting of the covenant not to sue would expedite a remedial action 
approved by the commission; and 
(C) the PRP is in full compliance with the terms of any order issued by the 
commission for response to the release or threatened release <nl> for the 
facility<ol> concerned. 
(2) In assessing the appropriateness of granting a covenant not to sue and in 
determining the appropriate legal scope of such a covenant, the commission shall 
consider whether the covenant is in the public interest on the basis of such 
factors as the following: 
(A) the effectiveness and reliability of the remedial action, in light of other 
alternative remedies considered for the facility concerned;
(B) the nature of the environmental risks remaining at the facility; 
(C) the extent to which performance standards are included in the order or 
decree; 
(D) the extent to which the response [action] provides a complete <nl>remedial 
action<ol> [remedy] for the facility, including a reduction in the hazardous 
nature of the substances at the facility;
(E) the extent to which the technology used in the <nl>remedial <ol> [response] 
action is demonstrated to be effective; 
(F) whether the <nl>Hazardous and Solid Waste Remediation Fee Account<ol> 
[Hazardous Waste Disposal Fee Fund] or other sources of funding would be 
available for any additional remedial actions that might eventually be necessary 
at the facility; and 
(G) whether the remedial action will be carried out, in whole or in significant 
part, by the PRPs themselves. 
(3) A covenant not to sue shall be subject to the satisfactory performance by 
the PRP of its obligations under any order issued by the commission for 
[response of] remedial actions to address the release or threatened release of a 
hazardous substance at the facility. A covenant not to sue concerning future 
liability for remediation of the facility shall not take effect until the 
executive director certifies that the remedial action has been completed<nl> or 
the ordered action has been performed<ol> in accordance with any such order 
issued by the commission.
(4) A covenant not to sue a PRP concerning future liability for remediation of a 
facility may include an exception to the covenant that allows the commission to 
sue such person where such liability arises out of conditions which are unknown 
to the executive director at the time he certifies under paragraph (3) of this 
subsection that the remedial action has been completed at the facility. A 
covenant not to sue may provide that such future liability may be limited to the 
same proportion as that established in the original settlement agreement or 
order issued by the commission. 
<nl>(g)<ol> [(f)] <nl>Discharge of liability for other PRPs.<ol> Any settlement 
agreement with the commission which resolves a PRP's liability for remediation 
of a facility does not discharge the liability of any other PRP unless its terms 
so provide, but it reduces the potential liability of the other PRPs by the 
amount of the settlement. A PRP will be afforded the opportunity to comment on 
any settlement agreement with the commission to which it is not a party. 
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 January 9, 1998.
TRD-9800346
Kevin McCalla
Director, Legal Division
Texas Natural Resource Conservation
Earliest possible date of adoption: February 23, 1998
For further information, please call: (512) 239-6087

30 TAC sec.335.352
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Texas Natural 
Resource Conservation or in the Texas Register office, Room 245, James Earl 
Rudder Building, 1019 Brazos Street, Austin.)
The Texas Natural Resource Conservation Commission (commission) proposes the 
repeal of sec.335.352, concerning the assessment and remediation of State 
Superfund sites that may constitute an imminent and substantial endangerment to 
public health and safety or the environment due to a release or threatened 
release of hazardous substances into the environment. 
EXPLANATION OF PROPOSED RULES
The commission proposes to repeal sec.335.352 because the reference to federal 
Hazard Ranking System is no longer necessary given the amendments to 
sec.335.343. The section also refers to an appendix which lists recommended 
commission and EPA guidance documents. Repealing the section will allow guidance 
documents to be added or taken off the list administratively instead of having 
to go through a formal rulemaking. 
FISCAL NOTE 
Stephen Minick, Strategic Planning and Appropriations Division, has determined 
that for the first five-year period the sections as proposed are in effect, 
there will be fiscal implications as a result of administration or enforcement 
of the sections. The effect on state government will be an anticipated reduction 
in costs as a result of streamlining processes and procedures in the state 
Superfund program. These cost savings are variable and will be realized on a 
site-by-site basis. While the costs of responding to individual contaminated 
sites may decrease, total expenditures in the program are not anticipated to be 
reduced. The total estimated costs of remedial action at all identified state 
Superfund sites is significantly greater than current appropriations or 
available fund balances. The cost savings generated by these proposed amendments 
will enable staff to improve the timeliness of response at contaminated sites 
and address sites that would not otherwise be addressed within current projected 
project schedules. These rules also increase incentives for potentially 
responsible parties to participate in the voluntary cleanup program for site 
remediation. Parties exercising this option will pay fees to the commission to 
offset the costs of processing applications, evaluating proposals, and 
monitoring progress of remedial actions. For sites currently being addressed 
under the voluntary cleanup program, fees typically range between $2,000 and 
$5,000 for most projects, although costs could be significantly greater for 
larger projects. The fees received would be to recover actual costs; however, no 
projection is available of the number of sites for which responsible parties 
will elect to participate and total revenues to be gained by the state have not 
been estimated. There are no significant fiscal implications anticipated for 
local governments, except for those units of local government that may be 
identified as operators of contaminated sites subject to these proposed rules or 
potentially responsible parties for contaminated sites.
PUBLIC BENEFIT
Mr. Minick also has determined that, for the first five years the sections as 
proposed are in effect, the public benefit anticipated as a result of 
enforcement of and compliance with the sections will be more cost-effective 
remediation of contaminated sites under the state Superfund program, increased 
protection of public health and safety, improvements in the recovery of costs 
from parties responsible for contamination of sites, reduced financial 
liabilities for lenders with security interests in contaminated properties or 
potential purchasers, maintenance or enhancement of local government tax bases 
as a result of restoration of contaminated sites, and increased consistency 
between federal and state procedures for assessment and ranking of hazards posed 
by contaminated sites. Generally, the adoption of these proposed rules is 
anticipated to improve and streamline the process for addressing contaminated 
sites under the state Superfund program and result in cost savings for parties 
subject to the rules. These provisions are generally not prescriptive, but 
rather, represent options for responsible parties in addressing contaminated 
sites that can result in costs savings. These savings will vary on a case-by-
case basis and cannot be determined prospectively. These savings will result 
from proposed options for selection of presumptive remedies instead of full 
feasibility studies at sites to be remediated, reduced time periods for 
initiating and completing remedial actions, and mitigation of potential cleanup 
costs due to early removal of sources of contamination. While fiscal 
implications for any individual site are not known and are quite variable, it is 
anticipated that, for a typical project, the selection of a presumptive remedy 
could result in costs savings of $30,000. Potential costs savings due to 
acceleration of project schedules will generally be proportional to the overall 
administrative and overhead costs of the project. The opportunity for early 
removal of contamination could generate costs savings on a site-by-site basis, 
but the extent of those cost savings is difficult to quantify until the proposed 
changes are implemented. Parties electing to use the voluntary cleanup program 
as an option under these rules will be liable for the payment of application 
fees and the commission's oversight and processing costs. The oversight costs 
are currently billed at $67 per hour of staff time. These costs for sites which 
have been addressed under the voluntary cleanup program to date have typically 
been less than $5,000, although higher fees are possible for larger and more 
complex projects. These costs do not include costs of actual site assessment or 
remedial action. Although no comparisons have been quantified, it is anticipated 
that cleanup costs through the voluntary cleanup program will be less than 
cleanup costs under the procedures and requirements of the state Superfund 
program. Potential costs savings will apply to both small businesses and larger 
concerns and will be based on the allocation of financial participation by a 
responsible party in the assessment and remediation of a contaminated property. 
There are no significant costs anticipated to be imposed on affected persons, 
including small business, required to comply with the provisions of these 
sections as proposed. 
DRAFT REGULATORY IMPACT ANALYSIS 
The commission has reviewed the proposed rulemaking in light of the regulatory 
analysis requirements of Texas Government Code, sec.2001.0225, and has 
determined that the rulemaking is not subject to sec.2001.0225 because it does 
not meet the definition of a "major environmental rule" as defined in the act, 
and it does not meet any of the four applicability requirements listed in 
sec.2001.0225(a). 
TAKINGS IMPACT ASSESSMENT 
The commission has prepared a Takings Impact Assessment for these rules pursuant 
to Texas Government Code, Annotated, sec.2007.043. The following is a summary of 
that Assessment. The specific purpose of the rule is to enhance the existing 
State Superfund program and to implement provisions of HB 2776. The rules will 
substantially advance this specific purpose by clarifying portions of the rule, 
by streamlining the assessment and remediation procedures, and by implementing 
certain provisions in HB 2776 where rulemaking is necessary. Promulgation and 
enforcement of these rules will not burden private real property which is the 
subject of the rules because the rules are intended to streamline existing 
procedures to facilitate removals and remedial actions at affected sites. These 
streamlining measures should reduce the administrative burden of remediating a 
site within the State Superfund program while continuing to be protective of 
human and ecological receptors. 
COASTAL MANAGEMENT PROGRAM CONSISTENCY REVIEW 
The commission has reviewed this rulemaking for consistency with the Coastal 
Management Program (CMP) goals and policies in accordance with the regulations 
of the Coastal Coordination Council, and has determined that the rulemaking is 
consistent with the applicable CMP goals and policies. 
SUBMITTAL OF COMMENTS 
Written comments may be mailed to Bettie Bell, Texas Natural Resource 
Conservation Commission, Texas Register Team, MC-205, P.O. Box 13087, Austin, 
Texas 78711-3087. All comments should reference Rules Tracking Log Number 97155-
335-WS. Comments must be received by 5:00 p.m., on February 23, 1998. For 
further information, please contact Michael A. Bame, C.P.G., Pollution Cleanup 
Division (512) 239-5658 or Clark Talkington, Waste Policy and Regulations 
Division, (512) 239-6731. 
STATUTORY AUTHORITY 
The repeal and amendments are proposed under the Texas Water Code, sec.5.103 and 
sec.26.011, which provide the commission with authority to adopt any rules 
necessary to carry out its powers, duties, and policies and to protect water 
quality in the state. The amendments and repeal are also proposed under the 
Texas Solid Waste Disposal Act, Texas Health and Safety Code, sec.361.017, and 
sec.361.024, which provide the commission the authority to regulate industrial 
solid waste and municipal hazardous wastes and all other powers necessary or 
convenient to carry out its responsibilities. The Texas Solid Waste Disposal 
Act, Texas Health and Safety Code, Subchapter F provides additional authority to 
propose rules specific to the registry and cleanup of certain hazardous waste 
facilities. 
The repeal and amendments affect Health and Safety Code, Chapter 361.
sec.335.352. Adoption of Appendices by Reference. 
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 January 9, 1998.
TRD-9800345
Kevin McCalla
Director, Legal Division
Texas Natural Resource Conservation
Earliest possible date of adoption: February 23, 1998
For further information, please call: (512) 239-6087

TITLE 34. PUBLIC FINANCE
PART III. Teacher Retirement System of Texas
CHAPTER 29.Benefits
Retirement
34 TAC sec.29.21
The Teacher Retirement System of Texas (TRS) proposes a new sec.29.21 concerning 
tables to figure life expectancy needed to administer a new law found at 
sec.824.1012 of the Government Code. The new law allows a retiree receiving a 
benefit with a life-time payment available to beneficiary, to change the named 
beneficiary under certain circumstances. When a retiree selects a new 
beneficiary under an Option 1, 2, or 5 (life-time benefits for the beneficiary), 
the system must know what life expectancy to use. The benefit will be paid for 
the shorter of the remainder of the life expectancy of the beneficiary 
designated as of the effective date of the retiree's retirement or the remainder 
of the new beneficiary's life. These tables supply that needed information. 
Ronnie Jung, TRS Chief Financial Officer, has determined that for the first 
five-year period the section is in effect, there will be no fiscal implications 
for state and local government as a result of enforcing or administering the new 
rule. 
Mr. Jung also has determined that for each year of the first five years the new 
rule is in effect that the public benefit anticipated from the section is that 
the TRS will have the needed tables to administer the new law. There will be no 
effect on small business. There is no anticipated economic cost to persons who 
are required to comply with the proposed section. While there will be an 
economic impact on the old and new beneficiary, those costs were considered and 
are built into the law. 
Comments on the proposal must be submitted in writing to: Charles L. Dunlap, 
Executive Director, Teacher Retirement System, 1000 Red River, Austin, Texas 
78701-2698, within 30 days of publication in the Texas Register. 
The new rule is proposed under the Government Code, Chapter 825, sec. 825.102, 
which provides the Board of Trustees of the Teacher Retirement System with the 
authority to adopt rules for the administration of the funds of the retirement 
system. In addition. sec.824.1012 of the Government Code allows the changes in 
beneficiary designations which this rule addresses. 
Government Code, sec.824.1012 is affected by this proposed action.

sec.29.21. Beneficiary Tables. 
Tables for Unisex Joint Beneficiary Life furnished by Watson Wyatt Worldwide, 
Consulting Actuaries, will be used in calculating a life expectancy under 
Section 824.1012 of the Government Code. A fraction of a year shall be converted 
to whole months with any partial month being rounded upward to a full month. 
Life expectancy shall be determined as of the date of the retirement in question 
and the age of the original beneficiary at that time. The Teacher Retirement 
System of Texas adopts Watson Wyatt Worldwide's August 1997 Tables for Unisex 
Joint Beneficiary Life.
Figure 1: 34 TAC sec.29.21
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 January 12, 1998.
TRD-9800412
Charles Dunlap
Executive Director
Teacher Retirement System of Texas
Proposed possible date of adoption: February 27, 1998
For further information, please call: (512) 370-0592

CHAPTER 41.Insurance
34 TAC sec.41.12
The Teacher Retirement System of Texas (TRS) proposes amendments to sec.41.12 
concerning the certification process with public schools for TRS Insurance. New 
law passed by the 75th Legislature found at sec.22.004 of the Education Code 
requires rules with the information outlined in the amended language. It is a 
requirement for each school district to provide the information outlined in the 
amended section. There is also a new date for submission outlined in the law as 
well as a new reference to the pertinent law. 
Ronnie Jung, TRS Chief Financial Officer, has determined that for the first 
five-year period the section is in effect, there will be no fiscal implications 
for state and local government as a result of enforcing or administering the 
section. 
Mr. Jung also has determined that for each year of the first five years the 
section is in effect that the public benefit anticipated from the section is 
that more relevant data will be submitted to TRS for the determination of 
comparability. There will be no effect on small business. There may be a 
economic cost to persons who are required to comply with the proposed section.
Comments on the proposal must be submitted in writing to: Charles L. Dunlap, 
Executive Director, Teacher Retirement System, 1000 Red River, Austin, Texas 
78701-2698, within 30 days of publication in the Texas Register.
The amendments are proposed under the Government Code, Chapter 825, sec.825.102, 
which provides the Board of Trustees of the Teacher Retirement System with the 
authority to adopt rules for the administration of the funds of the retirement 
system. In addition, the Education Code, sec.22.004 provides the requirements on 
the substance of the rule and on submitting the certification.
Education Code,sec.22.004, is affected by this proposed action. 

sec.41.12. Certification of Insurance Coverage 
<nl>(a)<ol> <nl>The Executive Director of TRS shall determine the comparability 
of a school district's group health coverage to the coverage provided under the 
Texas Employees Uniform Group Insurance Benefits Act (Texas Insurance Code, 
Article 3.50-2). In making that decision the following factors shall be 
considered: <ol>
<nl>(1)<ol> <nl>the deductible amount for service provided inside and outside of 
the network; <ol>
<nl>(2)<ol> <nl> the coinsurance percentages for service provided inside and 
outside of the network; <ol>
<nl>(3)<ol> <nl> the maximum amount of coinsurance payments a covered person is 
required to pay; <ol>
<nl>(4)<ol> <nl>the amount of the copayment for an office visit;<ol> 
<nl>(5)<ol> <nl>the schedule of benefits and the scope of coverage; <ol>
<nl>(6)<ol> <nl> the lifetime maximum benefit amount; and <ol>
<nl>(7)<ol> <nl>verification that the coverage is issued by a provider licensed 
to do business in this state by the Texas Department of Insurance or is provided 
by a risk pool authorized under Chapter 172, Local Government Code, or that a 
district is capable of covering the assumed liabilities in the case of coverage 
provided through district self-insurance. <ol>
<nl>(b)<ol> <nl> For the purposes of this decision, comparable means similar, 
but not identical. <ol>
<nl>(c)<ol> <nl>TRS staff, under the direction of the executive director, will 
develop a methodology and criteria for comparison determination. <ol>
<nl>(d)<ol> [(a)] Each public school district shall <nl>report<ol> [certify] the 
districts compliance with the Education Code, <nl>sec. 22.004(c)<ol> 
[13.913(a)], to the executive director of the Teacher Retirement System of Texas 
by <nl> November<ol> [February] 1 of each school year. <nl>The report must 
reflect the district group health coverage plan in effect on November 1 and must 
include all information required by statute and any additional information 
requested by TRS staff to complete the certification.<ol> 
[(b) The executive director may establish the necessary procedures to be 
followed in certifying compliance. The certification must include a copy of the 
district's current contract for group health coverage. The certification 
procedures may require the district to compare its plan to specific features of 
the coverage provided under the Texas Employees Uniform Group Insurance Benefits 
Act (Vernon's Texas Insurance Code, Article 3.50-2). 
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 January 12, 1998.
TRD-9800413
Charles Dunlap
Executive Director
Teacher Retirement System of Texas
Proposed date of adoption: February 27, 1998
For further information, please call: (512) 370-0592

CHAPTER 51.General Administration
34 TAC sec.51.1
The Teacher Retirement System of Texas (TRS) proposes amendments to sec.51.1 
concerning the term and make-up of some Advisory and Auxiliary Committees of 
TRS. The new language sets an expiration of the committees at the same time that 
TRS completes the next sunset review. In addition, the new language eliminates 
an Investment Advisory Committee and a Real Estate Finance Committee. These 
committees are no longer needed, nor do they exist for TRS purposes. Finally, 
the word "Retired" is eliminated from the Group Insurance Program as it was 
eliminated in the law. 
Ronnie Jung, TRS Chief Financial Officer, has determined that for the first 
five-year period the section is in effect, there will be no fiscal implications 
for state and local government as a result of enforcing or administering the 
amendments. 
Mr. Jung also has determined that for each year of the first five years the 
section is in effect that the public benefit anticipated from the section is 
that the TRS Medical Board and Retirees Advisory Committee will continue to 
exist and function as needed by TRS. There will be no effect on small business. 
There is no anticipated economic cost to persons who are required to comply with 
the proposed section. 
Comments on the proposal must be submitted in writing to: Charles L. Dunlap, 
Executive Director, Teacher Retirement System, 1000 Red River, Austin, Texas 
78701-2698, within 30 days of publication in the Texas Register. 
The amendments are proposed under the Government Code, Chapter 825, sec. 
825.102, which provides the Board of Trustees of the Teacher Retirement System 
with the authority to adopt rules for the administration of the funds of the 
retirement system. In addition, sec.825.114 of the Government Code allows TRS to 
create any advisory committee considered necessary. The TRS Medical Board is 
created under sec.825.204 of the Government Code. The Retirees Advisory 
Committee is created under Art.3.50-4, sec.6 of the Insurance Code. A 
credentialing committee is authorized under sec.18 of the Insurance Code. 
Government Code, sec.sec.825.114 and 825.204, and Insurance Code, Art. 3.50-4 
are affected by this proposed action. 

sec.51.1. Advisory and Auxiliary Committees 
(a) The following committees are created for <nl>a period which will expire at 
the end of sunset review for TRS which is September 1, 2007, unless continued by 
the outcome of the sunset process, <ol> [an indefinite period] to advise or 
otherwise serve the retirement system and are deemed necessary to assist the 
Board of Trustees in performing its duties: 
(1) a Medical Board, composed of three <nl>licensed<ol> [board] physicians as 
provided by Government Code, Section 825.204;
[(2) an Investment Advisory Committee composed of private sector investment 
professionals in accordance with the retirement system's investment policies; 
[(3) a Real Estate Finance Committee composed of investment professionals as 
provided by the retirement system's investment policies;] 
<nl>(2)<ol> [(4)] a Retirees Advisory Committee for the Texas Public School 
[Retired] Employees Group Insurance Program, composed as provided by the 
Insurance Code, Art. 3.50-4, Section 6; 
<nl>(3)<ol> [(5)] regional credentialing committees composed of health care 
practitioners as provided by the retirement system's health care network 
policies; and 
<nl>(4)<ol> [(6)] a Medical Advisory Committee composed of health care 
practitioners and administrators as provided by the retirement system's health 
care network policies. 
(b) (No change.) 
(c) [Except for such retirement system personnel as may serve ex officio on such 
committees, the] <nl>The<ol>members of the Medical Board[, Investment Advisory 
Committee, and Real Estate Finance Committee]shall be paid, as independent 
contractors'<nl>,<ol> fees and expenses in accordance with contracts negotiated 
by the executive director or his designee subject to the applicable resolutions, 
policies, and annual budget adopted by the Board of Trustees. The members of the 
credentialing committees and the Medical Advisory Committee may be paid fees and 
expenses in accordance with contracts negotiated by the executive director or 
his designee subject to the applicable resolutions, policies, and annual budget 
adopted by the Board of Trustees. To the extent advisory committees are composed 
of independent contractors they are to be considered consultants employed by the 
retirement system under the authority recognized by the Government Code, 
sec.2254.024. 
(d) Members of the Retirees Advisory Committee for the Texas Public School 
[Retired] Employees Group Insurance Program are entitled only to reimbursement 
for actual and reasonable expenses incurred in performing functions as members 
of the committee. 
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 January 12, 1998.
TRD-9800414
Charles Dunlap
Executive Director
Teacher Retirement System of Texas
Proposed date of adoption: February 27, 1998
For further information, please call: (512) 370-0592

TITLE 37. PUBLIC SAFETY AND CORRECTIONS
PART XI. Texas Juvenile Probation Commission
CHAPTER 343. Standards for Juvenile Pre-Adjudication Secure Detention Facility
37 TAC sec.343.8, sec.343.9
The Texas Juvenile Probation Commission proposes amendments to sec.343.8, 
concerning population in pre-adjudication secure detention facilities and 
sec.343.9, concerning security and control in juvenile detention facilities. 
The amendment is proposed in an effort to clarify and improve TJPC standards. 
Steve Bonnell, Deputy Executive Director, has determined that for the first five 
year period the amendments are in effect, there will be no fiscal implications 
for state or local government as a result of enforcing or administering the 
amended standard. 
Mr. Bonnell has also determined that for each year of the first five years the 
amended standard is in effect, the public benefit anticipated will be improved 
probation services. 
There will be no effect on small businesses. There are no anticipated economic 
costs to persons who are required to comply with the amended standard as 
proposed. 
Comments on the proposed amendments may be submitted to Maribeth Powers at the 
Texas Juvenile Probation Commission, P. O. Box 13547, Austin, Texas 78711. 
The amendments are proposed under Texas Human Resource Code, sec.141.042, which 
provides the Texas Juvenile Probation Commission with the authority to adopt 
reasonable rules that provide minimum standards for juvenile boards and that are 
necessary to provide adequate and effective probation services. 
No other code or article is affected by the amendment. 

sec.343.8. Physical Plant. 
(a) Written policy and procedure and practice of the following standards shall 
apply to all detention facilities. 
(1)-(5) (No change.) 
(6) Population. The population in housing and living units shall not exceed the 
rated capacity of the facility. <nl>Written policies shall specify procedures to 
be followed in case the rated capacity is unavoidably exceeded. such procedures 
shall specify steps to be taken to reduce the population to the rated capacity. 
A facility that is chronically overcrowded shall meet TJPC policies regarding 
such conditions in order to be considered for a temporary waiver of this 
standard.<ol> 
(7)-(9) (No change.) 
(b) (No change.) 

sec.343.9. Security and Control. 
(a) Written policy and procedure and practice of the following standards shall 
apply to all detention facilities. 
(1) Policy. Written policies for security and control of the facility standards 
shall include, but shall not be limited to, the following:
(A)-(C) (No change.) 
<nl>(D)<ol> <nl>Written procedures for coordination with law enforcement 
authorities in the case of riot, rebellion, escape, or other situations 
requiring assistance from city, county, or state law enforcement agencies.<ol> 
(2)-(6) (No change.) 
(b) (No change.) 
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 January 6, 1998.
TRD-9800152
Steve Bonnell 
Deputy Executive Director
Texas Juvenile Probation Commission
Earliest possible date of adoption: February 23, 1998
For further information, please call: (512) 424-6681

CHAPTER 344. Standards for Juvenile Post-Adjudication Secure Correctional 
Facilities
37 TAC sec.344.8
The Texas Juvenile Probation Commission proposes an amendment to sec.344.8, 
concerning security and control in secure post-adjudication juvenile residential 
facilities. 
The amendment is proposed in an effort to clarify and improve TJPC standards. 
Steve Bonnell, Deputy Executive Director, has determined that for the first five 
year period the amendments are in effect, there will be no fiscal implications 
for state or local government as a result of enforcing or administering the 
amended standard. 
Mr. Bonnell has also determined that for each year of the first five years the 
amended standard is in effect, the public benefit anticipated will be improved 
probation services. 
There will be no effect on small businesses. There are no anticipated economic 
costs to persons who are required to comply with the amended standard as 
proposed. 
Comments on the proposed amendments may be submitted to Maribeth Powers at the 
Texas Juvenile Probation Commission, P. O. Box 13547, Austin, Texas 78711. 
The amendment is proposed under Texas Human Resource Code, sec.141.042, which 
provides the Texas Juvenile Probation Commission with the authority to adopt 
reasonable rules that provide minimum standards for juvenile boards and that are 
necessary to provide adequate and effective probation services. 
No other code or article is affected by the amendment. 

sec.344.8. Security and Control. 
(a) Written policy, procedure, and practice for security and control of the 
facility shall include the following: 
(1)-(4) (No change.) 
<nl>(5)<ol> <nl>Written procedures for coordination with law enforcement 
authorities in the case of riot, rebellion, escape, or other situations 
requiring assistance from city, county, or state law enforcement agencies.<ol> 
(b)-(j) (No change.)
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 January 6, 1998.
TRD-9800153
Steve Bonnell 
Deputy Executive Director
Texas Juvenile Probation Commission
Earliest possible date of adoption: February 23, 1998
For further information, please call: (512) 424-6681

TITLE 40. SOCIAL SERVICES AND ASSISTANCE
PART I. Texas Department of Human Services
CHAPTER 18.Nursing Facility Administrators
40 TAC sec.sec.18.1, 18.11-18.14
The Texas Department of Human Services (DHS) proposes the repeal of sec.18.1, 
concerning introduction; sec.18.11, concerning adverse licensure actions; 
sec.18.12, concerning violations by an unlicensed person; sec.18.13, concerning 
complaint procedures; sec.18.14, concerning monitoring of licenses; and proposes 
new sec.18.1, concerning introduction; sec.18.11, concerning complaint 
procedures; sec.18.12, concerning referral recommendations; sec.18.13, 
concerning schedule of sanctions; and sec.18.14, concerning violations by an 
unlicensed person; in its Nursing Facility Administrators chapter. The purpose 
of the repeals and new sections is to comply with Senate Bill 84, which was 
passed during the 75th Regular Session of the Texas Legislature and which 
transferred all functions, obligations, rights, contracts, records, and rules of 
the Texas Board of Nursing Facility Administrators to DHS, effective September 
1, 1997. These rule changes alter the complaint procedures by allowing a 
complainant to be heard, and establish information that should be provided to 
the complainant and a time frame for the resolution of a complaint. The grounds 
for sanctioning an administrator have been expanded to include whether a 
deficiency is related to an act or failure to act by the administrator, and a 
procedure has been established for the referral of an administrator for a 
finding of substandard quality of care during an investigation or survey.
Eric M. Bost, commissioner, has determined that for the first five-year period 
the sections are in effect there will be no fiscal implications for state or 
local government as a result of enforcing or administering the sections.
Mr. Bost also has 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 that the health and safety of nursing facility residents 
will be better protected by ensuring the timely and efficient management of 
complaints and ensuring appropriate sanctions are initiated against an 
administrator for a finding of substandard quality of care and deficiency 
citations that are related to an act or failure to act by the administrator. 
There will be no effect on small businesses. There is no anticipated economic 
cost to persons who are required to comply with the proposed sections. 
Questions about the content of this proposal may be directed to Renee Clack at 
(512) 231-5800 in DHS's Credentialing Department. Written comments on the 
proposal may be submitted to Supervisor, Rules and Handbooks Unit-110, Texas 
Department of Human Services E-205, P.O. Box 149030, Austin, Texas 78714-9030, 
within 30 days of publication in the Texas Register . 
The repeals are proposed under the Texas Health and Safety Code, Chapter 242, 
Subchapter I, which authorizes the department to license nursing facility 
administrators. 
The repeals implement the Texas Health and Safety Code, Chapter 242.301-242.322.
sec.18.1. Introduction.
sec.18.11. Adverse Licensure Actions. 
sec.18.12. Violations by an Unlicensed Person. 
sec.18.13. Complaint Procedures. 
sec.18.14. Monitoring of Licenses. 
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 January 12, 1998.
TRD-9800407
Glenn Scott
General Counsel, Legal Services
Texas Department of Human Services
Proposed date of adoption: April 15, 1998
For further information, please call: (512) 438-3765

40 TAC sec.sec.18.1, 18.11-18.14
The new sections are proposed under the Texas Health and Safety Code, Chapter 
242, Subchapter I, which authorizes the department to license nursing facility 
administrators. 
The new sections implement the Texas Health and Safety Code, Chapter 242.301-
242.322.

sec.18.1. Introduction. 
(a) Purpose. The purpose of this chapter is to implement the provisions of Texas 
Health and Safety Code, Chapter 242, Subchapter I. 
(b) Definitions. The following words and terms, when used in this chapter, shall 
have the following meanings, unless the context clearly indicates otherwise. 
(1) Abbreviated standard survey - A survey other than a standard survey that 
gathers information primarily through resident-centered techniques on facility 
compliance with the requirements for participation. An abbreviated survey may be 
premised on complaints, a change in ownership, management, director of nursing, 
or other indicators of specific concern. 
(2) Abuse - Any act, failure to act, or incitement to act done willfully, 
knowingly, or recklessly through words or physical action which causes or could 
cause mental or physical injury or harm or death to a resident. This includes 
verbal, sexual, mental/psychological, or physical abuse, including corporal 
punishment, involuntary seclusion, or any other actions within this definition. 
(3) Administrative Law Judge - An attorney duly designated and appointed who 
conducts hearings under this chapter on behalf of the department.
(4) Administrator - See definition for "nursing facility administrator." 
(5) Administrator-in-training (AIT) - An applicant who is currently undergoing 
an internship under the auspices of a department-approved, certified preceptor 
or through a department-approved college practicum. 
(6) Applicant - A person who applies for licensure under the Texas Health and 
Safety Code, Chapter 242, Subchapter I. 
(7) APA - The Administrative Procedure Act, Chapter 2001 of the Texas Government 
Code. 
(8) Committee - The nine-member Nursing Facility Administrators Advisory 
Committee. 
(9) Complaint - An allegation that a licensed nursing facility administrator has 
violated one or more provisions of the Texas Health and Safety Code, Chapter 
242, Subchapter I, or rules adopted under that chapter.
(10) Completed application - The official nursing facility administrator 
application forms, fees and all supporting documentation which meet the criteria 
set out in sec.18.3 of this title (relating to Application Procedures). 
(11) Contested case - A proceeding in accordance with the APA and this chapter, 
including but not limited to rule enforcement and licensing, in which the legal 
rights, duties, or privileges of a party are to be determined by the 
Administrative Law Judge after an opportunity for an adjudicative hearing. 
(12) Deficiency - A skilled nursing facility or nursing facility's failure to 
meet a participation requirement as specified in the Social Security Act. 
(13) Department - The Texas Department of Human Services (DHS). 
(14) Equivalency - A level of achievement equivalent to completion of an 
educational or training program equal in force, amount, or value. 
(15) Formal hearing - A hearing or proceeding conducted under the provisions of 
the APA. 
(16) Internship - The training period for an Administrator-In-Training gaining 
supervised practical experience. 
(17) License - A nursing facility administrator license or a provisional nursing 
facility administrator license. 
(18) Licensee - A person who is licensed under the Texas Health and Safety Code, 
Chapter 242, Subchapter I. 
(19) Misappropriation of resident property - The taking, secretion, 
misapplication, deprivation, transfer, or attempted transfer to any person not 
entitled to receive any property, real or personal, or anything of value 
belonging to or under the legal control of a resident without the effective 
consent of the resident or other appropriate legal authority, or taking of any 
action contrary to any duty imposed by federal or state law prescribing conduct 
relating to the custody or disposition of property of a resident. 
(20) NAB - National Association of Boards of Examiners for Nursing Home 
Administrators, Inc. 
(21) Neglect - A deprivation of life's necessities of food, water, or shelter, 
or a failure of an individual to provide services, treatment, or care to a 
resident which causes or could cause mental or physical injury, or harm or death 
to the resident. 
(22) Nursing facility - An institution or facility that is licensed as a nursing 
facility by the department under the Texas Health and Safety Code, Chapter 242. 
(23) Nursing facility administrator or administrator - A person who engages in 
the practice of nursing facility administration without regard to whether the 
person has an ownership interest in the facility or whether the functions and 
duties are shared with any other person. 
(24) Party - Each person, governmental agency, or officer or employee of a 
governmental agency named by the Administrative Law Judge as having a 
justiciable interest in the matter being considered, or any person, governmental 
agency, or officer or employee of a governmental agency meeting the requirements 
of a party prescribed by applicable law. 
(25) Person - An individual, corporation, partnership, or other legal entity. 
(26) Practice of nursing facility administration--The performance of the acts of 
administering, managing, supervising, or being in general administrative charge 
of a nursing facility. 
(27) Practicum - A course of study designed for the preparation of nursing 
facility administrators that involves supervision by the college of the 
practical application of previously studied theory in a nursing facility 
setting. 
(28) Preceptor - A licensed nursing facility administrator who meets the 
criteria in sec.18.6 of this title (relating to Administrators-in-Training).
(29) Referral - A finding of substandard quality of care in a nursing facility 
that requires Long Term Care-Regulatory to report an administrator to its 
licensing authority as mandated by the Code of Federal Regulations. 
(30) Substandard Quality of Care - Any deficiency in Resident Behavior and 
Facility Practices, Quality of Life, or Quality of Care that constitutes: 
immediate jeopardy to resident health or safety; or, a pattern of widespread 
actual harm that is not immediate jeopardy; or, a widespread potential for more 
than minimal harm that is not immediate jeopardy, with no actual harm. 
(31) Standard survey - A periodic, resident-centered inspection that gathers 
information about the quality of service furnished in a facility to determine 
compliance with the requirements of participation.
(32) Texas Open Meetings Act - The Government Code, Chapter 551, Subchapters A-
G. 
(33) Texas Open Records Act - The Government Code, Chapter 552, Subchapters A-G. 
(34) Year - A calendar year. 

sec.18.11. Complaint Procedures.
(a) The Texas Department of Human Services (DHS), Credentialing Department, will 
receive and investigate complaint allegations against a licensed nursing 
facility administrator, including but not limited to, reports of abuse, neglect, 
misappropriation of a resident's property, and reports of violations of Texas 
Health and Safety Code, Chapter 242, Subchapter I or DHS's rules adopted under 
that chapter. 
(b) A person wanting to report a complaint against a licensee will notify the 
Credentialing Department by calling (512) 231-5800 (for complaints only) or 
writing the department at the following address: Texas Department of Human 
Services, Credentialing Department, Mail Code: Y-978, ATTN: Complaint 
Investigations Section, P.O. Box 149030, Austin, TX 78714-9030. 
(c) Upon receipt of a complaint, the Credentialing Department director or 
designee will send to the complainant, an official form which the complainant 
will be requested to complete and return to DHS. DHS will provide reasonable 
assistance to an individual wishing to file a complaint against a licensee. 
(d) DHS will utilize the following form which standardizes information 
concerning complaints made about a licensee: 
Figure 1: 40 TAC 18.11(d) 
(e) The Credentialing Department director or designee will receive and 
prioritize complaint allegations that are made against a licensee in the 
following manner: 
(1) Priority one investigations are allegations of physical abuse, sexual abuse, 
neglect, death, serious injury, or immediate jeopardy to resident health or 
safety. Priority one investigations will be initiated by the Credentialing 
Department within 24 hours of receipt or by the next working day. 
(2) Priority two investigations are allegations of inadequate resident care that 
are not life threatening; verbal abuse; or misappropriation of resident 
property. Priority two investigations will be initiated within 14 calendar days 
following receipt of the complaint. 
(3) Priority three investigations are allegations of misconduct. Priority three 
investigations will be initiated within 30 calendar days following receipt of 
the complaint. 
(f) An investigation of the licensee and complaint allegation will be conducted 
by DHS investigative staff to determine compliance with this rule. The 
investigation will include contact with the complainant who will be provided an 
opportunity to explain the allegations made in the complaint.
(g) After a complaint is filed against a licensee, the Credentialing Department 
will provide the following information to a complainant: 
(1) the assigned case number; 
(2) the projected time requirements for pursuing the complaint; 
(3) any change in the schedule for pursuing the complaint; and 
(4) DHS's final disposition of the complaint at the conclusion of the 
investigation. 
(h) If special circumstances exist, DHS may utilize the services of a private 
investigator to conduct complaint investigations when DHS determines it would be 
an efficient and expeditious process. The private investigator will be obtained 
by following DHS's usual contracting procedures. 
(i) The investigation will be initiated by no later than 30 calendar days after 
the date the written complaint is received by DHS. 
(j) The licensee must make all facility books, records, and other pertinent 
documents maintained by or on behalf of a facility accessible to DHS upon 
request. 
(1) During an investigation, DHS is authorized to photocopy documents, 
photograph residents, and use any other recording devices to preserve evidence. 
(2) Examples of records and documents which may be requested or photocopied or 
otherwise reproduced are medical records, including nursing notes, 
incident/accident reports, pharmacy records, physician orders, and bookkeeping 
records. 
(3) When copies are requested, the facility may charge DHS at a rate not to 
exceed the rate charged by DHS for copies. The administrator will be responsible 
for providing copies to DHS staff. If copying requires the records to be removed 
from the facility, a representative of the facility will be expected to 
accompany the records and assure their order and preservation.
(4) DHS will protect the copies for privacy and confidentiality in accordance 
with recognized standards of medical records practice, applicable state and 
federal laws, and DHS policy. 
(k) The licensee must not impede an investigation through the harassment or 
intimidation of nursing facility employees or residents.
(l) The Credentialing Department director or designee will keep an information 
file on each complaint which will include the following information: 
(1) all persons contacted in relation to the complaint, which must include the 
person who filed the complaint and an explanation for the allegation; 
(2) a summary of findings made at each step of the complaint process; 
(3) an explanation of the legal basis and reason for a complaint that is 
dismissed, or substantiated; and 
(4) other relevant information. 
(m) The Credentialing Department director or designee will maintain a schedule 
of the projected time frames for pursuing a complaint that must be kept in the 
information file for the complaint. A change in the schedule must be recorded in 
the complaint information file and all parties to the complaint must be notified 
not later than seven calendar days after the date the change is made. 
(n) The Credentialing Department director or designee will notify all parties of 
the status of the complaint on a quarterly basis until final disposition of the 
complaint, unless notice would jeopardize an undercover investigation. 
(o) After completion of the investigation, the person completing the 
investigation will submit the findings to the Credentialing Department director 
or designee. The complaint investigative report will state all relevant facts 
and findings obtained during the investigation. The complaint investigative 
report, facts, and findings will be presented to the committee for consideration 
of adverse licensure action. 
(p) If the committee determines insufficient evidence exists to support or act 
upon the complaint, the complaint will be dismissed. Written notification of the 
dismissal will be provided to the complainant and licensee or person against 
whom the complaint has been filed. 
(q) If the committee determines that there are sufficient grounds to support the 
complaint, the committee may initiate a recommendation for adverse licensure 
action or any other action as authorized by law. 
(r) The resolution of a complaint will not exceed 90 days from the date the 
written complaint is received to the date of the notification letter that 
informs the licensee of the department's findings and proposed actions. 
(s) The commissioner of the Texas Department of Human Services or designee will 
report to the Texas Board of Human Services quarterly on complaints that have 
been dismissed by DHS. 

sec.18.12. Referrals. 
(a) Long Term Care-Regulatory survey team findings will be evaluated in each 
regional office to determine if substandard quality of care exists and whether 
deficiency citations from a standard or abbreviated standard survey are related 
to the following criteria which are based on the Standards of Conduct for 
nursing facility administrators: 
(1) the licensee's failure to be knowledgeable and involved in the daily 
management of the facility and its resources to ensure compliance;
(2) the licensee's failure to respond in a timely manner when aware of 
inadequate care or conditions in the facility which results in actual harm to a 
resident; 
(3) the licensee's failure to adequately investigate allegations of abuse, 
neglect, or misappropriation of a resident's property and implement appropriate 
interventions for continued resident protection; or 
(4) the licensee's failure to establish or utilize effective delivery systems to 
promote quality resident care and services. 
(b) The Credentialing Department will receive and evaluate referrals from Long 
Term Care- Regulatory when survey findings indicate substandard quality of care. 
(c) The Texas Department of Human Services, upon consideration of all factors 
related to a violation, will impose one or more sanctions for a statutory or 
rule violation as set forth in sec.18.13 of this title (relating to Schedule of 
Sanctions). 
(d) The procedures for notification of adverse licensure are set forth in 
sec.18.13(e) of this title (relating to Schedule of Sanctions).

sec.18.13. Schedule of Sanctions.
(a) The Texas Department of Human Services (DHS), upon consideration of all 
factors related to a violation, will impose one or more of the following 
sanctions for statutory or rule violations: 
(1) assessment of an administrative penalty; 
(2) revocation of a license; 
(3) suspension of a license; 
(4) denial of an application to renew a license; 
(5) issuance of a written reprimand to a licensee; 
(6) requirement of a licensee to participate in additional continuing education 
programs; or 
(7) placement of a nursing facility administrator's license on probation. 
(b) The procedures for notification of adverse licensure actions are set forth 
in subsection (e) of this section. DHS will initiate sanctions on any of the 
following grounds: 
(1) the licensee has wilfully or repeatedly violated a provision of this 
subchapter or a rule adopted under this subchapter; 
(2) the licensee has wilfully or repeatedly acted in a manner inconsistent with 
the health and safety of the residents of a facility of which the licensee is an 
administrator; 
(3) the licensee obtained or attempted to obtain a license through 
misrepresentation or deceit or by making a material misstatement of fact on a 
license application; 
(4) the licensee's use of alcohol or drugs creates a hazard to the residents of 
a facility; 
(5) a judgment of a court of competent jurisdiction finds that the licensee is 
mentally incapacitated; 
(6) the licensee has been convicted in a court of competent jurisdiction of a 
misdemeanor or felony involving moral turpitude; 
(7) the licensee has been negligent or incompetent in the licensee's duties as a 
nursing facility administrator; 
(8) a survey indicates substandard quality of care that is related to an act or 
failure to act by the licensee; 
(9) the deficiencies cited during a survey are related to the licensee's failure 
to: 
(A) be knowledgeable and involved in the daily management of the facility and 
its resources to ensure compliance; 
(B) respond in a timely manner when aware of inadequate care or conditions in 
the facility which results in actual harm to a resident;
(C) adequately investigate allegations of abuse, neglect, or misappropriation of 
a resident's property and implement appropriate interventions for continued 
resident protection; or 
(D) establish or utilize effective service delivery systems to promote quality 
resident care and services. 
(c) DHS will consider the following factors before determining a sanction for a 
statutory or rule violation: 
(1) the seriousness of the violation and the harm or potential harm created to 
the health and safety of facility residents; 
(2) the economic harm to property or environment caused by the violation; 
(3) the efforts of the licensee to correct the violation; and 
(4) the licensee's history of previous violations. 
(d) Probation of sanctions. DHS may probate a sanction and require the licensee 
to: 
(1) periodically report on matters that are the basis for the probation; 
(2) limit practice to only specific areas; or 
(3) obtain continuing education until a satisfactory degree of skill is attained 
in those areas that are the basis of the probation.
(e) Procedures for adverse licensure action. 
(1) If DHS initiates an adverse licensure action, the deputy commissioner of the 
Office of Program Integrity or designee will give the licensee written notice of 
the reason(s) for the decision to initiate action.
(2) The deputy commissioner of the Office of Program Integrity or designee will 
provide written notification of the opportunity to a hearing to the licensee in 
accordance with the provisions of the Administrative Procedure Act and hearing 
procedures in Chapter 79, Subchapter Q of this title (relating to Formal 
Appeals). 
(f) Opportunity for a hearing. The licensee is entitled to a hearing in 
accordance with rules promulgated by the Texas Board of Human Services before a 
sanction is imposed under this section.
(g) Suspension of license for failure to pay child support.
(1) On receipt of a final court or attorney general's order suspending a license 
due to failure to pay child support, the Credentialing Department director or 
designee will immediately determine if DHS has issued a license to the obligator 
named on the order, and, if a license has been issued: 
(A) record the suspension of the license in the department's records; 
(B) report the suspension as appropriate; and 
(C) demand surrender of the suspended license. 
(2) DHS will implement the terms of a final court or attorney general's order 
suspending a license without additional review or hearing. DHS will provide 
notice as appropriate to the licensee or to others concerned with the license. 
(3) DHS may not modify, remand, reverse, vacate, or stay a court or attorney 
general's order suspending a license issued under the Family Code, Chapter 232 
as added by Acts 1995, 74th Legislature, Chapter 751, sec.85 and may not review, 
vacate, or reconsider the terms of an order.
(4) A licensee who is the subject of a final court or attorney general's order 
suspending his or her license is not entitled to a refund for any fee paid to 
DHS. 
(5) If a suspension overlaps a license renewal period, an individual with a 
license suspended under this section will comply with the normal renewal 
procedures in this chapter; however, the license will not be renewed until 
paragraphs (7) and (8) of this subsection are met.
(6) An individual who continues to act as a licensed nursing facility 
administrator after the issuance of a court or attorney general's order 
suspending the license is liable for the same civil and criminal penalties 
provided for engaging in the prohibited activity without a license or while a 
license is suspended as any license holder. 
(7) On receipt of a court or attorney general's order vacating or staying an 
order suspending a license, the Credentialing Department director or designee 
will promptly issue the affected license to the individual if the individual is 
otherwise qualified for the license. 
(8) The individual must pay a reinstatement fee set out in sec.18.2 of this 
title (relating to Fees) prior to issuance of the license under paragraph (7) of 
this subsection. 
(9) A party may appear in person or be represented by counsel or other 
authorized representative. 

sec.18.14. Violations by an Unlicensed Person. 
(a) An individual may not act as a nursing facility administrator or represent 
to others that the individual is a nursing facility administrator unless 
licensed under the Texas Health and Safety Code, Chapter 242, Subchapter I. 
(b) An unlicensed person who facilitates or coordinates the provision of 
professional services but does not act as a licensed nursing facility 
administrator is not in violation of Texas Health and Safety Code, Chapter 242, 
Subchapter I. 
(c) If a licensee is under investigation for an alleged statutory or rule 
violation and allows a license to expire or voluntarily surrenders a license 
before completion of the investigation, the Texas Department of Human Services 
(DHS) maintains the authority to issue a written reprimand and/or assess an 
administrative penalty against the individual at the conclusion of the 
investigation. 
(d) DHS may file suit in its own name and avail itself of any other action, 
proceeding, or remedy authorized by law to enjoin a violation of Texas Health 
and Safety Code, Chapter 242, Subchapter I or rules adopted under that chapter. 
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 January 12, 1998.
TRD-9800408
Glenn Scott
General Counsel, Legal Services
Texas Department of Human Services
Proposed date of adoption: April 15, 1998
For further information, please call: (512) 438-3765

CHAPTER 48.Community Care for Aged and Disabled
1915(c) Medicaid Home and Community-based Waiver Services for Aged and Disabled 
Adults Who Meet Criteria for Alternatives to Nursing Facility Care 
40 TAC sec.sec.48.6092, 48.6094, 48.6096
The Texas Department of Human Services (DHS) proposes new sec.sec.48.6092, 
48.6094, and 48.6096, concerning initiation of Community Based Alternatives 
(CBA) home and community support services (HCSS), delay of Community Based 
Alternatives (CBA) home and community support services (HCSS) initiation, and 
service breaks, in its Community Care for Aged and Disabled chapter. The purpose 
of the new sections is to establish provider standards and performance outcomes 
for service delivery. 
Eric M. Bost, commissioner, has determined that for the first five- year period 
the proposed sections will be in effect there will be no fiscal implications for 
state or local government as a result of enforcing or administering the 
sections. 
Mr. Bost also has 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 the performance outcomes of timely 
initiation of service, the use of trained providers, and services delivered in 
accordance with the individual plan of care. There will be no effect on small 
businesses. There is no anticipated economic cost to persons who are required to 
comply with the proposed sections. 
Questions about the content of the proposal may be directed to Anita Anderson at 
(512) 438-3195 in DHS's Community Care Section. Written comments on the proposal 
may be submitted to Supervisor, Rules and Handbooks Unit-124, Texas Department 
of Human Services E-205, P.O. Box 149030, Austin, Texas 78714-9030, within 30 
days of publication in the Texas Register The new sections are proposed under 
the Human Resources Code, Title 2, Chapters 22 and 32, which provides the 
department with the authority to administer public and medical assistance 
programs and under Texas Government Code sec.531.021, which provides the Health 
and Human Services Commission with the authority to administer federal medical 
assistance funds.
The new sections implement sec.sec.22.001-22.030 and sec.sec.32.001-32.042 of 
the Human Resources Code.

sec.48.6092. Initiation of Community Based Alternatives (CBA) Home and Community 
Support Services (HCSS).
In order to initiate CBA HCSS services, the provider agency must: 
(1) negotiate a start date with the case manager for: 
(A) priority status applicants; or 
(B) routine status applicants needing a specific start date as determined by the 
case manager; 
(2) initiate waiver services: 
(A) on or before any negotiated start date; or 
(B) within seven calendar days from the effective date on the Texas Department 
of Human Services' (DHS's) Notification of CBA Services form for routine status 
applicants, if no earlier start date has been negotiated; and 
(3) ensure that the HCSS registered nurse (RN) provides the training specified 
in subparagraphs (A)-(C) of this paragraph to the attendant in the participant's 
home, on or before the date of initiation of service: 
(A) information about the participant's health condition and how it may affect 
the performance of tasks; 
(B) tasks to be performed, work schedule, and safety and emergency procedures; 
and 
(C) symptoms or changes in the participant's health status about which the 
unlicensed person should notify either the RN or the attending physician.

sec.48.6094.Delay of Community Based Alternatives (CBA) Home and Community 
Support Services (HCSS) Initiation. 
(a) The HCSS agency must verbally notify the case manager by the next Texas 
Department of Human Services (DHS) work day if services cannot be initiated: 
(1) within seven calendar days of the effective date entered on DHS's 
Notification of CBA Services form, for cases in which a service initiation date 
was not negotiated; or 
(2) by the negotiated service initiation date documented on DHS's Case 
Information form sent to the HCSS agency by the case manager as part of the 
written authorization. 
(b) The HCSS agency must submit DHS's Case Information form to the case manager 
confirming verbal agreements by the next DHS work day of having negotiated a new 
service initiation date with the case manager. 

sec.48.6096. Service Breaks.
The home and community support services (HCSS) agency must ensure that any 
authorized or scheduled personal assistance services are delivered in accordance 
with the Individual Service Plan unless the actions specified in paragraphs (1)-
(4) of this section occur:
(1) services are automatically suspended; 
(2) services are suspended for cause; 
(3) the participant is not at home when services are scheduled to be delivered; 
or 
(4) the participant requests that services not be provided on specific days. 
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 January 7, 1998.
TRD-9800252
Glenn Scott
General Counsel, Legal Services
Texas Department of Human Services
Proposed date of adoption: March 15, 1998
For further information, please call: (512) 438-3765

PART XX. Texas Workforce Commission
CHAPTER 821.Texas PayDay Rules
The Texas Workforce Commission proposes new sec.sec.821.1-821.6, 821.21-821.28, 
821.41-821.46, 821.61-821.63 and 821.81, concerning Payment of Wages. The 
proposed rules interpret and clarify the provisions of Texas Labor Code, Chapter 
61, Payment of Wages. 
The Commission administers the investigation, determination and collection of 
unpaid wages for employees. This program is an administrative alternative to 
litigation in Texas courts. 
Subchapter A of the proposed rules contains provisions of general application 
relating to the title and purpose of the rules, definitions of terms, 
jurisdiction and the relation of Texas Labor Code, Chapter 61, to other wage and 
hour laws. Subchapter B of the proposed rules interprets and clarifies statutory 
provisions relating to the form and delivery of wages, the timeliness of 
payment, fringe benefits and commissions, treatment of loans and advances, and 
withholding wages. Subchapter C of the proposed rules interprets and clarifies 
statutory provisions relating to various stages in the administrative wage claim 
process. Subchapter D of the proposed rules addresses the wage collection 
process. Finally, Subchapter E of the proposed rules sets out the Commission's 
policy on requiring bonds of certain employers. 
Randy Townsend, Director of Finance, has determined that for the first five-year 
period the rules are in effect, there will be no fiscal implications for state 
or local government as a result of enforcing or administering the rules. 
LaSha Barefield, Deputy Director of Labor Law Enforcement, Education & 
Regulation, has determined that for each year of the first five years the rules 
are in effect, the public benefit anticipated as a result of enforcing the rules 
will be to provide a clear understanding of the rules implementing and 
interpreting the provisions of the Texas Labor Code, Chapter 61, Payment of 
Wages. 
There will be no effect on small businesses. 
There are no anticipated economic costs to persons who are required to comply 
with the proposed rules. 
Comments on the proposed rules may be submitted to LaShea Barefield, Labor Law 
Enforcement, Education and Regulation Department, Texas Workforce Commission, 
101 East 15th Street, Austin, Texas 78778-0001; telephone number (512) 837-9559; 
facsimile number (512) 834-3632; e-mail address 
LaShea.Barefield@twc.state.tx.us.
The Commission will schedule a public hearing on the proposed rules to follow 
the Commission's regularly scheduled meeting on February 10, 1998 in Room 644 of 
the TWC Building at 101 E. 15th Street in Austin, Texas. 

SUBCHAPTER A.General Provisions
40 TAC sec.sec.821.1-821.6
The new rules are proposed under Texas Labor Code, Title 2, which provides the 
Texas Workforce Commission with the authority to adopt, amend, or rescind such 
rules as it deems necessary for the effective administration of the Commission 
and compliance with Texas Labor Code, Chapter 61, Payment of Wages. 
The proposed new rules affect the Texas Labor Code, Title 2, and Texas Labor 
Code, Chapter 61, Payment of Wages. 

sec.821.1. Title and Purpose.
(a) Title. These rules may be cited as the Texas Payday Rules.
(b) Purpose. The purpose of these rules is to implement and interpret the 
provisions of the Texas Labor Code, Chapter 61, Payment of Wages. 

sec.821.2. Definitions. 
The following words and terms, when used in this chapter, shall have the 
following meanings, unless the context clearly indicates otherwise. 
Act -- Texas Labor Code, Chapter 61, also known as the Texas Payday Act or the 
Texas Payday Law. 
Claimant -- A person who has filed a wage claim under the Act. 
Commission -- The Texas Workforce Commission. 
Court of competent jurisdiction -- a court authorized to issue an order 
including, but not limited to, a legislative or statutory county court at law, 
district court, small claims court, or federal court that acts within the 
appropriate jurisdiction over the amount in controversy, the person, and other 
appropriate subject matter. 

sec.821.3. Jurisdiction. 
(a) The Commission shall exercise jurisdiction over wage claims in which: 
(1) the work is performed exclusively in Texas; 
(2) the work is performed in part in Texas and in part in other states within 
the United States and where the wages would be reportable to Texas for 
Unemployment Insurance purposes pursuant to Texas Labor Code sec.201.043; or 
(3) the work is performed by an individual who is a Texas resident at the time 
the work is performed and the work is performed outside Texas for a Texas 
employer or a non-resident employer over whom Texas exercises jurisdiction 
pursuant to subsection (b) of this section. 
(b) The Commission shall exercise jurisdiction over a non-resident employer 
pursuant to the Texas Civil Practice & Remedies Code, Chapter 17, Subchapter C, 
also known as the "Texas Long-Arm Statute," when all three of the following are 
met: 
(1) the employer purposely does some act or consummates some transaction in 
Texas; 
(2) the wage claim arises from the employer's act or the employer's contact with 
Texas is continuing and systematic; and 
(3) exercising jurisdiction is consistent with: 
(A) fair play and justice as determined by the quality, nature and extent of the 
employer's activities in Texas including the extent to which the employer avails 
itself of the benefits and protections of Texas law; and 
(B) the relative convenience of the parties. 
(c) The Commission shall not exercise jurisdiction over wage claims to the 
extent the wages are for work performed outside the United States. 

sec.821.4. Political Subdivision.
(a) An entity is a political subdivision of the state, and therefore not an 
employer under the Act, if it meets the criteria in either subsections (b) or 
(c) of this section. 
(b) An entity is a political subdivision of this state if it is a governmental 
unit having: 
(1) the power to tax real and tangible personal property;
(2) limited geographic and jurisdictional boundaries;
(3) locally elected or locally appointed governing members; and 
(4) the authority to provide a general public service or benefit. 
(c) An entity is a political subdivision of this state if the entity is so 
designated by Texas statute. 
(d) Entities that are political subdivisions of this state include, but are not 
limited to: 
(1) cities; 
(2) counties; 
(3) school districts; 
(4) junior college districts; 
(5) levee improvement districts; 
(6) drainage districts; 
(7) irrigation districts; 
(8) water improvement districts; 
(9) water control and improvement districts; 
(10) water control and preservation districts; 
(11) freshwater supply districts; 
(12) navigation districts; 
(13) conservation and reclamation districts; 
(14) soil conservation districts; 
(15) municipal utility districts; 
(16) river authorities; and 
(17) other similar entities. 

sec.821.5. Employment Status: Employee or Independent Contractor. 
The Commission adopts the following form, Form C-8, as its official guideline 
for use in determining employment status. 
Figure 1: 40 TAC sec.821.5 

sec.821.6. Wage Claims Involving Minimum Wage or Overtime. 
(a) The Commission shall consider any applicable minimum wage and overtime 
requirement in determining if wages are due and unpaid. 
(b) In determining an employee's entitlement to federal minimum wage or 
overtime, the Commission shall look to the Fair Labor Standards Act (FLSA) of 
1938 as amended, 29 U.S.C. 201 et seq., and the regulations promulgated by the 
United States Department of Labor thereunder. In determining an employee's 
entitlement to state minimum wage, the Commission shall look to the Texas 
Minimum Wage Act, located at Texas Labor Code, Chapter 62.
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 January 12, 1998.
TRD-9800400
J. Ferris Duhon
Acting Deputy Director
Texas Workforce Commission
Earliest possible date of adoption: February 23, 1998
For further information, please call: (512) 463-8812

SUBCHAPTER B.Payment of Wages
40 TAC sec.sec.821.21-821.28
The new rules are proposed under Texas Labor Code, Title 2, which provides the 
Texas Workforce Commission with the authority to adopt, amend, or rescind such 
rules as it deems necessary for the effective administration of the Commission 
and compliance with Texas Labor Code, Chapter 61, Payment of Wages. 
The proposed new rules affect the Texas Labor Code, Title 2, and Texas Labor 
Code, Chapter 61, Payment of Wages. 

sec.821.21. Complete and Unconditional Payment of Wages. 
(a) An employer has paid an employee's wages for purposes of the Act if the 
employer has delivered the wages to the employee: 
(1) in a form authorized by Texas Labor Code sec. 61.016; and 
(2) by a method authorized by Texas Labor Code sec. 61.017. 
(b) An employer has paid an employee's wages for purposes of the Act if the 
employer has complied with subsection (a) of this section despite the subsequent 
loss, misplacement or theft of the wages unless the loss, misplacement or theft 
is attributable to the employer. 
(c) An employer has not paid an employee's wages for purposes of the Act if: 
(1) the employee returns or refuses the paycheck because the employee has good 
reason to believe the paycheck will be dishonored; or 
(2) the employee disagrees with the amount of the paycheck, and has good reason 
to believe the employee's endorsement of the paycheck will release the employer 
from further liability to the employee for wages already earned. 
(d) An employer has not paid an employee's wages for purposes of the Act if the 
employee has received the wages subject to a third party claim because: 
(1) the paycheck has been dishonored due to insufficient funds, a stop-payment 
order or any other reason attributable to the employer; 
(2) the employer has caused a direct deposit of the wages to be reversed; or 
(3) the employer has taken other similar action to undo the payment of wages. 

sec.821.22. Payment Other Than on Payday. 
(a) For purposes of sec. 61.013 of the Act, the Commission interprets "another 
regular business day" to mean any regular business day, which is designated as 
being such within the customary practice of the employer, following the 
employer's designated payday. 
(b) When an employee leaves employment other than by discharge on a payday, 
payment of wages in full will be due the following scheduled payday. The 
Commission shall consider "discharge" as dismissal or release from employment 
initiated by the employer including, but not limited to, layoff. 

sec.821.23. Delayed Wage Payments.
(a) An employer may delay beyond the regularly scheduled payday the payment to 
an employee of wages the employer is unable to calculate solely because of the 
employee's failure or refusal to submit information required for the 
calculation. If the employer is able to calculate part of the employee's wages, 
the employer may not delay the payment of that part of the employee's wages. 
(b) An employer may not delay the payment of wages to an employee under 
subsection (a) of this section beyond the payday immediately following the time 
the employer is able to reasonably ascertain the amount of wages due for the pay 
period in question. 
(c) An employer is deemed to be able to calculate the amount of an employee's 
wages before a payday if the employee submits all information required for the 
calculation no later than the deadline set by the employer for that purpose. 

sec.821.24. Electronic Funds Transfer.
(a) An employer may not mandate that an employee accept payment by electronic 
funds transfer for wages already earned. Although the Act allows for payment of 
wages in the form of electronic funds transfer, it requires the employee's 
written agreement to electronic funds transfer as the method of delivery. 
(b) An employer may deduct from an employee's wages the cost to the employer of 
that employee's electronic funds transfer payment of wages when authorized in 
writing by the employee. 

sec.821.25. Fringe Benefits. 
(a) For purposes of sec. 61.001 (7)(B) of the Act, vacation pay and sick leave 
pay are payable to an employee upon separation from employment only if a written 
agreement with the employer or a written policy of the employer specifically 
provides for payment. 
(b) Severance pay is payment by an employer to an employee beyond the employee's 
wages on termination of employment, usually based on the employee's length of 
prior services, and is not attributable to any period of time subsequent to 
termination. Wages in lieu of notice is not severance pay. Wages in lieu of 
notice is payment by an employer to an employee beyond the employee's wages on 
termination of employment when no advance notice of termination has been given 
to the employee. 
(c) For purposes of sec. 61.001 (7)(B) of the Act, the sale of an employer's 
business is a termination of employment with all of the employer's employees. At 
the time of termination, the employer becomes liable for the payment of vacation 
pay, holiday pay, sick leave pay, parental leave pay, or severance pay if owed 
pursuant to a written agreement or written policy between the employer and its 
employees. 
(d) For purposes of sec. 61.001 (7) of the Act, expense reimbursements paid to 
employees are not wages. Expense reimbursements are payments to the employee for 
costs expended by the employee directly related to the employer's business. 
(e) Absent the inclusion of definitions of terms in a written agreement with the 
employer or under a written policy of the employer, a term will be given its 
ordinary meaning unless a party establishes that it is defined in another way. 
(f) For purposes of sec. 61.001 (7)(B) of the Act, accrued leave time of an 
employee shall carry over to subsequent years only if a written agreement with 
the employer or a written policy of the employer specifically provides for it.

sec.821.26. Commissions.
(a) For purposes of sec. 61.015 of the Act: 
(1) Commissions are earned when the employee has met all the required conditions 
set forth in the applicable agreement with the employer. To change an agreement, 
there must be prior notice as to the nature and effective date of the changes. 
Changes to written agreements shall be in writing. 
(2) Commissions are due to be paid, in a timely manner, according to the terms 
specified in an agreement between an employer and an employee. The terms should 
specify the time intervals or circumstances (or combinations thereof) that would 
cause commissions to become payable, such as, but not limited to, weekly, 
monthly, quarterly, when sales transactions are recorded, upon buyer's 
remittance, etc. 
(b) Unless the agreement states otherwise, the employer shall pay, after 
separation, commissions earned as of the time of separation.
(c) Commissions due after separation from employment are payable based on the 
routine or practice specified in the agreement when the employee was employed, 
or on any special agreement made between the employee and the employer upon 
separation. 
(d) Draws against commissions may be recovered from the current or any 
subsequent pay period until fully reconciled. 

sec.821.27. Loans and Advances.
(a) An employer must comply with Texas Labor Code sec. 61.018, and this chapter 
in order to recoup a loan the employer made to an employee.
(b) In recouping a loan made to an employee, an employer may count the loan 
repayment toward any applicable minimum or overtime wages the employer is 
obligated to pay to the employee. 
(c) In recouping a loan made to an employee from any of the employee's 
paychecks, including the employee's final paycheck, the employer may not 
withhold or divert more than the agreed amount. The agreed amount is the amount: 
(1) identified as the amount to be withheld from any one paycheck in the written 
loan agreement between the employer and employee; or 
(2) otherwise authorized in writing by the employee for repayment of the loan. 
(d) An employer does not need written authorization to recoup wages the employer 
paid in advance to an employee. 
(e) An employer pays wages in advance only if both the employer and employee 
understand and agree that the employer is advancing to the employee wages that 
are unearned, or earned but not yet due for payment. 

sec.821.28. Deductions. 
(a) The Commission provides the following guidance in determining whether an 
employer is entitled to withhold or divert wages under court order, by law or 
with written authorization under sec.61.018 of the Act: 
(1) A court is presumed to be a court of competent jurisdiction with respect to 
issuing court orders. The burden shall be on the party opposing a court order to 
challenge the court's authority by appealing to the issuing court or court of 
appropriate review as the Commission will presume full faith and credit applies 
to court orders. 
(2) State or federal law includes statutes and codes enacted by Congress or the 
Texas Legislature, rules promulgated by a Texas or federal agency, and 
regulations promulgated by a Texas or federal agency.
(3) A lawful purpose is one that is authorized, sanctioned, or not forbidden, by 
law. 
(b) Deductions shall be specific as to the lawful purpose for which the employee 
has accepted the responsibility or liability. Written authorizations shall 
include: 
(1) sufficient information to give the employee a reasonable expectation of the 
amount to be withheld from pay; and 
(2) a clear indication that the deduction is to be withheld from wages. 
(c) The employee's signed acknowledgment of receipt of company policies can be 
authorization to withhold wages if the acknowledgment meets the requirements of 
subsection (b) of this section. The signed acknowledgment of receipt shall also 
include language that states that the employee agrees to abide by or be bound to 
these company policies. 
(d) The Commission shall consider the following factors when evaluating 
deductions for losses: 
(1) the employer shall provide evidence to the Commission that the employee was 
responsible for the losses; and 
(2) the employer shall provide evidence to the Commission of the dollar value or 
amount of the losses. 
(e) The employer shall ensure that properly withheld wages are applied toward 
their authorized purpose. Properly withheld wages not applied toward their 
authorized purpose will be considered unlawful deductions.
(f) The employer shall obtain written authorization as required under the Act to 
deduct credit card service charges from an employee's tips.
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 January 12, 1998.
TRD-9800401
J. Ferris Duhon
Acting Deputy Director
Texas Workforce Commission
Earliest possible date of adoption: February 23, 1998
For further information, please call: (512) 463-8812

SUBCHAPTER C.Wage Claims
40 TAC sec.sec.821.41-821.46
The new rules are proposed under Texas Labor Code, Title 2, which provides the 
Texas Workforce Commission with the authority to adopt, amend, or rescind such 
rules as it deems necessary for the effective administration of the Commission 
and compliance with Texas Labor Code, Chapter 61, Payment of Wages. 
The proposed new rules affect the Texas Labor Code, Title 2, and Texas Labor 
Code, Chapter 61, Payment of Wages. 

sec.821.41. Validity of Claim/Filing and Investigative Procedures. 
(a) A faxed wage claim does not meet the requirements of sec. 61.051 and will 
not be accepted as a valid claim. 
(b) A photocopy of a wage claim is not valid without original signatures of the 
claimant and the witness. 
(c) A wage claim must be filled out completely, legibly, and sufficiently to 
identify and allow the Commission to attempt contact with the employer. 

sec.821.42. Timeliness. 
(a) The Commission shall determine the filing date of a wage claim as the date 
delivered in person to the Commission or the date of a mailed wage claim based 
on the following: 
(1) The postmark date of a wage claim properly addressed shall establish by a 
rebuttable presumption the date upon which the wage claim was filed unless the 
party opposing this presumption presents evidence to establish some other filing 
date. 
(2) Absent a postmark or evidence establishing some other filing date, the date 
of receipt by the Commission shall control. 
(b) The Commission shall deem a wage claim invalid if filed before the wages are 
due for payment. 
(c) The Commission shall suspend the time limit for filing a wage claim only for 
those reasons required by law including, but not limited to, bankruptcy stays. 

sec.821.43. Wage Claim Withdrawal.
(a) The Commission shall allow a claimant to withdraw a wage claim when: 
(1) the order has not become final; or 
(2) the order has become final but the parties agree on a settlement, part of 
which is the claimant's agreement to withdraw the wage claim. 
(b) A claimant withdrawing a wage claim must submit a form as prescribed by the 
Commission before the Commission levies funds to satisfy the order. Regardless 
of any settlement agreement entered into by the parties, after the Commission 
has collected funds to satisfy the order, the Commission shall disburse the 
collected funds in accordance with the final order of the Commission to the 
claimant unless otherwise ordered by a court. 
(c) The Commission shall apply the withdrawal of a wage claim to both 
administrative penalties and wages. 

sec.821.44. Bad faith. 
(a) An employer acts in bad faith in not paying wages as required by the Act 
when that employer acts: 
(1) with the knowledge that the failure to pay wages is in violation of the Act 
or this chapter; or 
(2) in reckless disregard for the requirements of the Act or this chapter. 
(b) An employee brings a wage claim in bad faith when the employee does so: 
(1) with the knowledge that the claim is groundless; or 
(2) solely to harass the employer against whom the claim is brought. 
(c) An employee brings a wage claim by filing the claim with the Texas Workforce 
Commission. 

sec.821.45. Appeals. 
(a) If either party files an appeal to a preliminary wage determination order, 
the Commission shall consider all issues, including the amount of wages in 
controversy.
(b) The Commission shall hear all timely requests for reopening and grant such 
requests if it appears the petitioner has shown good cause for his failure to 
appear at the prior hearing. 

sec.821.46. Void Determination Orders and Decisions. 
A preliminary wage determination order and a decision shall be void from its 
inception when a non-existent entity is ordered to pay wages. 
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 January 12, 1998.
TRD-9800402
J. Ferris Duhon
Acting Deputy Director
Texas Workforce Commission
Earliest possible date of adoption: February 23, 1998
For further information, please call: (512) 463-8812

SUBCHAPTER D.Collection Action
40 TAC sec.sec.821.61-821.63
The new rules are proposed under Texas Labor Code, Title 2, which provides the 
Texas Workforce Commission with the authority to adopt, amend, or rescind such 
rules as it deems necessary for the effective administration of the Commission 
and compliance with Texas Labor Code, Chapter 61, Payment of Wages. 
The proposed new rules affect the Texas Labor Code, Title 2, and Texas Labor 
Code, Chapter 61, Payment of Wages. 

sec.821.61. Proof of Payment. 
(a) When the employer submits proof of payment, the Commission shall afford the 
claimant the opportunity to contest the information submitted.
(b) A claimant who submits proof of payment shall do so in writing by a 
signature verifiable by the Commission. 

sec.821.62.Collection Pending Judicial Review. 
The Commission may initiate or continue collection on a final order unless a 
party complies with the payment provision of Texas Labor Code sec. 61.063. 

sec.821.63. Assignment of Lien to Claimant. 
(a) Upon written request by the claimant, the Commission shall execute an 
assignment of lien to the claimant. The claimant shall bear responsibility for 
recording the lien. 
(b) Any partial assignment shall leave in full force and effect the lien 
regarding the remaining claimants. 
(c) The Commission's assignment of lien is final and irrevocable. 
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 January 12, 1998.
TRD-9800403
J. Ferris Duhon
Acting Deputy Director
Texas Workforce Commission
Earliest possible date of adoption: February 23, 1998
For further information, please call: (512) 463-8812

SUBCHAPTER E.Bonds
40 TAC sec.821.81
The new rules are proposed under Texas Labor Code, Title 2, which provides the 
Texas Workforce Commission with the authority to adopt, amend, or rescind such 
rules as it deems necessary for the effective administration of the Commission 
and compliance with Texas Labor Code, Chapter 61, Payment of Wages. 
The proposed new rules affect the Texas Labor Code, Title 2, and Texas Labor 
Code, Chapter 61, Payment of Wages. 

sec.821.81. Bonding. 
(a) When authorized by Texas Labor Code sec. 61.031, the Commission may require 
a bond of an employer if the Commission reasonably believes the employer would 
otherwise fail to comply with the Act. 
(b) The Commission shall consider the following factors in determining the 
amount of the bond: 
(1) the seriousness of the violation, including nature, circumstances, extent 
and gravity of any prohibited acts; 
(2) the history of previous violations; 
(3) the amount necessary to deter future violations;
(4) efforts to pay past due wages and penalties; 
(5) the total amount of wages not paid in accordance with the Act; and 
(6) any other matter that justice may require. 
(c) The bond shall be in an amount not less than the cumulative total amount of 
wages finally determined to be due and unpaid by the employer in the past. The 
maximum bond shall be in an amount not more than five times the cumulative total 
amount of wages finally determined to be due and unpaid by the employer in the 
past. 
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 January 12, 1998.
TRD-9800404
J. Ferris Duhon
Acting Deputy Director
Texas Workforce Commission
Earliest possible date of adoption: February 23, 1998
For further information, please call: (512) 463-8812