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 use of bold text. [Brackets] indicate deletion of existing material within a section. TITLE 7. BANKING AND SECURITIES Part I. Finance Commission of Texas Chapter 3. Banking Section Subchapter A. Securities Activities and Subsidiaries 7 TAC sec.3.4 The Finance Commission of Texas (the Commission) proposes an amendment to sec.3.4, concerning foreign banking. Section 3.4 was proposed and adopted by the Commission in 1985 (10 TexReg 2543) to permit state banks to engage in foreign banking "as allowed for national banks, in an effort to achieve competitive equality in the dual banking system." The language of the rule in fact tracks the language used in 12 United States Code, sec.601, the provision authorizing national banks to engage in foreign banking. However, in connection with the recent passage of the North American Free Trade Agreement (NAFTA), questions have arisen regarding the interpretation of sec.3.4(a)(2) and whether it overrides the 10% investment limitation of Texas Civil Statutes, Article 342-513(a)(1). Terms used in the rule and the statute are similar but not identical because the rule tracks federal law without regard to terms used in the state statute, leading to some confusion. Specifically, a person has questioned whether sec.3. 4(a)(2) authorizes an investment of up to 25% of a state nonmember bank's capital and surplus in a foreign bank subsidiary as would be permitted by the Federal Deposit Insurance Corporation (FDIC), 12 Code of Federal Regulations, sec.347.4. National banks (and state member banks) are not subject to any percentage limitation as the Board of Governors of the Federal Reserve System (the Fed) apparently chose to restrict and regulate specific activities rather than limit the amount of investment, 12 Code of Federal Regulations, Part 211, Subpart A. In any event, a state nonmember bank would be required to obtain FDIC approval to invest in a foreign bank, and would be subject to the FDIC investment limitation. A state member bank would be subject to Fed activity restrictions. The purpose of sec.3.4 should be to facilitate foreign banking by state banks to the extent permitted by federal banking regulators. The proposed amendment to sec.3.4 will clarify that the investment limitations of Article 342-513(a)(1) do not apply to investments authorized by the section, broaden the Commissioner's discretion, forward the original purpose of the rule, and facilitate the implementation of NAFTA. Everette D. Jobe, general counsel, Texas Department of Banking, has determined that for the first five-year period the amendment as proposed will be in effect, there will be no fiscal implications for state or local government as a result of enforcing or administering this section. Mr. Jobe also has determined that for each year of the first five years the section is in effect, the public benefit anticipated as a result of enforcing or administering this section is the enhancement of competitive equality of state banks to national banks. There is no effect on small businesses. There is no anticipated economic cost to persons required to comply with the section as proposed. Comments on the proposal may be submitted in writing to Everette D. Jobe, General Counsel, Texas Department of Banking, 2601 North Lamar Boulevard, Austin, Texas 78705-4294. The amendment is proposed under Texas Civil Statutes, Article 342-113(4), which provide the Commission with the authority to promulgate general rules and regulations to permit state banks to transact their affairs in any manner which they could do were they organized and operating as national banks. The articles and sections that are affected by the amended sec.3.4 are: Texas Constitution, Article XVI, sec.16, and Texas Civil Statutes, Articles 342-512 and 342-513. sec.3.4. Foreign Banking. (a)-(b) (No change.) (c) The investment limitation of Texas Civil Statutes, Article 342- 513(a)(1) does not apply to an investment made pursuant to this section. The banking commissioner may approve any activity or investment authorized by this section subject to such restrictions as the banking commissioner deems advisable and consistent with safe and sound banking practices, and may require any investment pursuant to paragraphs (a)(2) or (a)(3) of this section to constitute a majority interest in the voting securities of the bank or corporation acquired. 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, on April 22, 1994. TRD-9439675 Everette D. Jobe General Counsel Texas Department of Banking Proposed date of adoption: June 17, 1994 For further information, please call: (512) 475-1300 Subchapter B. General 7 TAC sec.3.21 (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 Finance Commission of Texas or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.) The Finance Commission of the State of Texas (the Commission) proposes the repeal of sec.3.21 concerning the exemption of vehicles (automobiles) owned by the Texas Department of Banking (the Department) from state vehicle identification requirements and the use and operation of exempt vehicles. Pursuant to Senate Bill 1, 70th Legislature, Second Called Session (General Appropriations Act), the Legislature provided that none of the funds appropriated could be used by the Department "for the purchase and/or maintenance of any additional or replacement automobiles during the biennium." The biennium was for the period from September 1, 1987 to August 31, 1989. Subsequent appropriations acts have contained the same prohibition. Further, Senate Bill 1, as enacted by the 70th Legislature, provided that it was the intent of the Legislature that the Department's fleet of vehicles be "phased out over a period not to exceed three years, and that the agency begin reimbursing its personnel on a standard mileage basis." The Department has completed this phase-out process and no longer owns any automobiles or other vehicles. As there is no longer an underlying basis for sec.3.21, it should be repealed. Sammie K. Glasco, Assistant General Counsel, has determined that, for the first five-year period the repeal as proposed will be in effect, there will be no fiscal implications for state or local government as a result of repealing this section. Sammie K. Glasco, Assistant General Counsel, also has determined that, for each year of the first five-year period the repeal as proposed will be in effect, the public benefit anticipated as a result of the repeal will be that superfluous rules will be eliminated. There will be no effect on small businesses. No economic cost will result to entities as a result of the repeal of sec.3.21. Comments on the proposed repeal may be submitted in writing to Sammie K. Glasco, Assistant General Counsel, Texas Department of Banking, 2601 North Lamar Boulevard, Austin, Texas 78705-4294. The repeal of this section is proposed pursuant to the Banking Code, Article 342-103, which gives the Commission the authority to "adopt rules and determine general policies for the regulation of state banks, state associations, savings banks, and the consumer credit industry of the state." No statute will be affected by the repeal. sec.3.21. Exempting Vehicles Owned by the Banking Department of Texas from Requirements of Identification Inscriptions. 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, on April 22, 1994. TRD-9439680 Everette D. Jobe General Counsel Department of Banking Proposed date of adoption: June 17, 1994 For further information, please call: (512) 475-1300 7 TAC sec.3.27 (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 Finance Commission of Texas or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.) The Finance Commission of the State of Texas (the Commission) proposes the repeal of sec.3.27 concerning the enforcement of final judgment against state banks. Section 3.27, effective January 12, 1988, provides that no attachment, injunction or execution against a state bank or its property would be effective if issued before a final judgment. This rule has been codified in Article 342- 609 of the Banking Code, effective June 16, 1989, which provides that no attachment, injunction, or execution issued on or after September 1, 1989, shall be enforced against a financial institution until all appeals have been exhausted or foreclosed by law. As sec.3.27 has been superseded by Article 342-609 of the Banking Code which covers the same subject matters, sec.3.27 should be repealed. Sammie K. Glasco, Assistant General Counsel, has determined that, for the first five-year period the repeal as proposed will be in effect, there will be no fiscal implications for state or local government as a result of repealing this section. Sammie K. Glasco, Assistant General Counsel, also has determined that, for each year of the first five-year period the repeal as proposed will be in effect, the public benefit anticipated as a result of the repeal will be that there will be no unnecessary duplication of rules and statutes. There will be no effect on small businesses. No economic cost will result to entities as a result of the repeal of sec.3.27. Comments on the proposed repeal may be submitted in writing to Sammie K. Glasco, Assistant General Counsel, Texas Department of Banking, 2601 North Lamar Boulevard, Austin, Texas 78705-4294. The repeal of this section is proposed pursuant to the Banking Code, Article 342-103, which authorizes the Commission to "adopt rules and determine general policies for the regulation of state banks, state associations, savings banks, and the consumer credit industry in the state." The Banking Code, Article 342-609, is the only existing statute related to the proposed repeal. No statute will be affected by the repeal. sec.3.27. Enforcement of a Final Judgment Against a State Bank. 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, on April 22, 1994. TRD-9439679 Everette D. Jobe General Counsel Department of Banking Proposed date of adoption: June 17, 1994 For further information, please call: (512) 475-1300 7 TAC sec.3.33 (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 Finance Commission of Texas or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.) The Finance Commission of the State of Texas (the Commission) proposes the repeal of sec.3.33 concerning notice and processing times for certain applications by banks and trust companies. Existing sec.3.33 contains provisions regarding notice and processing times for foreign bank agencies which would be more appropriately located in Subchapter C of Chapter 3. Accordingly, the Commission proposes a new sec.3.45 in conjunction with this repeal that establishes notice and processing times for foreign bank agencies. In addition, sec.3.33 includes notice and processing times for applications other than those to engage in a business. Because such applications do not fall within the parameters of the Texas Government Code, sec.2005.003 and s2005.006, provisions in sec.3.33 relating to them are not required by law and should be repealed. Allen Barr, Deputy Director of Corporate Activities, Texas Department of Banking, has determined that, for the first five-year period the repeal as proposed will be in effect, there will be no fiscal implications for state or local government as a result of repealing this section. Mr. Barr, also has determined that, for each year of the first five-year period the repeal as proposed will be in effect, the public benefit anticipated as a result of the repeal will be that this section, which sets unnecessary notice and processing times and contains subject matter that can be located more appropriately elsewhere, will be eliminated. There will be no effect on small businesses. No economic cost will result to entities as a result of the repeal of sec.3.33. Comments on the proposed repeal may be submitted in writing to Sharon Gillespie, Assistant General Counsel, Texas Department of Banking, 2601 North Lamar Boulevard, Austin, Texas 78705-4294. The repeal of this section is proposed pursuant to the rulemaking authority under the Texas Government Code, sec.2005.003, which requires a state agency that issues permits to "adopt procedural rules for processing permit applications and issuing permits," and pursuant to the Texas Banking Code, Article 342-103, which gives the Commission the authority to "adopt rules and determine general policies for the regulation of state banks, state associations, savings banks, and the consumer credit industry of the state." Texas Civil Statutes, Articles 342-1005-342-1007; and Texas Government Code, sec.2005.003 and sec.2005.006. No statute will be affected by the repeal. sec.3.33. Notices to Applicants; Application Processing Times; Appeals. 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, on April 22, 1994. TRD-9439678 Everette D. Jobe General Counsel Department of Banking Proposed date of adoption: June 17, 1994 For further information, please call: (512) 475-1300 7 TAC sec.3.36 (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 Finance Commission of Texas or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.) The Finance Commission of the State of Texas (the Commission) proposes the repeal of 7 TAC sec.3.36 concerning the operation of banks and trust companies under the same conditions as national banks. Section 3.36 was adopted effective March 26, 1992, in order to resolve the potential conflict between Article XVI, sec.16(c) of the Constitution of the State of Texas which provides, in part, that state banks shall have "the same rights and privileges that are or may be granted to national banks of the United States" domiciled in Texas and Article 342-910a of the Banking Code, which established mandatory legal holidays for state banks and trust companies. National banks are permitted to close or remain open on any state designated holiday unless the Comptroller of the Currency directs otherwise by written order, and the purpose of sec.3.36 was to put state banks in parity with national banks in terms of holiday closings. Article 342- 910a of the Banking Code was repealed effective September 1, 1993. As a result, there are no longer mandatory state bank holidays. As there is no longer an underlying statutory basis for sec.3.36, it should be repealed. Sammie K. Glasco, Assistant General Counsel, has determined that, for the first five-year period the section as proposed will be in effect, there will be no fiscal implications for state or local government as a result of repealing this section. Sammie K. Glasco, Assistant General Counsel, also has determined that, for each year of the first five-year period the section as proposed will be in effect, the public benefit anticipated as a result of the repeal will be that superfluous rules will be eliminated. There will be no effect on small businesses. No economic cost will result to entities as a result of the repeal of sec.3.36. Comments on the proposed repeal may be submitted in writing to Sammie K. Glasco, Assistant General Counsel, Texas Department of Banking, 2601 North Lamar Boulevard, Austin, Texas 78705-4294. The repeal of this section is proposed pursuant to Article 342-103 of the Banking Code, which authorizes the Commission to "adopt rules and determine general policies for the regulation of state banks, state associations, savings banks, and the consumer credit industry in the state." Article 342-910a of the Banking Code repealed by Acts 1993, 73rd Legislature, Chapter 254, sec.1, is the only statute related to the proposed repeal. No statute will be affected by the repeal. sec.3.36. Operation of Banks and Trust Companies Under the Same Conditions as National Banks. 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, on April 22, 1994. TRD-9439677 Everette D. Jobe General Counsel Department of Banking Proposed date of adoption: June 17, 1994 For further information, please call: (512) 475-1300 Subchapter C. Foreign Bank Agencies 7 TAC sec.3.45 The Finance Commission of Texas proposes new sec.3.45 concerning notice and processing times for license applications by foreign bank agencies. Existing sec.3.33, which contains similar information, is proposed for repeal in this issue of the Texas Register. Proposed sec.3.45 incorporates those portions of sec.3.33 which pertain to foreign bank agencies; clarifies and corrects them as necessary; and places the new provisions with other rules on foreign bank agencies. The Department has received no original permit applications for foreign bank agencies within the 12-month period preceding publication of this proposed section. The Department's processing times for renewal applications for foreign bank agencies over this same 12-month period is as follows: the minimum time is nine days from the date the completed application is received; the maximum time, 50 days; and median time, 26 days. Allen Barr, Deputy Director of Corporate Activities, Texas Department of Banking, has determined that, for the first five-year period the section as proposed will be in effect, there will be no fiscal implications for state or local government as a result of amending this section. Mr. Barr also has determined that, for each year of the first five-year period the section as proposed will be in effect, the public benefit anticipated as a result of the amendment will be that this section will accurately and cogently reflect the law and departmental procedures regarding notices and processing times affecting license and license renewal applications of foreign bank agencies. There will be no effect on small businesses. No economic cost is anticipated to result to entities as a consequence of the adoption of sec.3.45. Comments on the proposed amendment may be submitted in writing to Sharon Gillespie, Assistant General Counsel, Texas Department of Banking, 2601 North Lamar Boulevard, Austin, Texas 78705-4294. The new section is proposed pursuant to the rulemaking authority under the Texas Government Code, sec.2005.003, which requires a state agency that issues permits to adopt procedural rules for processing permit applications and issuing permits. Texas Civil Statutes, Articles 342-1005-342-1007; and the Texas Government Code, sec.2005.003 and sec.2005.006. sec.3.45. Application to Engage in Business as a Foreign Bank Agency: Notices to Applicants; Application Processing Times; Appeals. (a) Form of Application. An application for authorization to engage in business as a foreign bank agency under Texas Civil Statutes, Article 342-1001, et seq, must be filed on a form prepared and prescribed by the Banking Commissioner. (b) Notice to Applicant. The Department of Banking shall issue a written notice within ten days of receipt informing each applicant either that the application is complete and accepted for filing, or that the application is deficient and specific additional information is required. (c) Action on Foreign Bank Agency Applications. (1) Application for License. Once a completed foreign bank agency application for license has been accepted for filing, the Banking Commissioner shall determine whether to approve or deny the application within 45 days; provided that if, within that period, the Commissioner determines there should be a hearing on the application, a hearing will be set and a decision made in accordance with Chapter 13 of this title. (2) Application for License Renewal. Once a complete foreign bank agency application for license renewal has been accepted for filing, the Banking Commissioner shall determine whether to approve or deny the application within 30 days. If the Commissioner determines there should be a hearing on the application, a hearing will be set and a decision made in accordance with Chapter 13 of this title. (d) Violation of Notice and Processing Times. An applicant may appeal directly to the Banking Commissioner for a timely resolution of a dispute arising from a violation of the periods set forth in this section. An applicant shall perfect an appeal by filing with the Department a written request for appeal within 30 days of the date a decision is made on the application, requesting review by the Banking Commissioner to determine whether the established period for granting or denying the application has been exceeded. The decision on the appeal shall be based on the written appeal filed by the applicant and any response by the Department and, if the Banking Commissioner deems necessary, a hearing may be set to take evidence on the matter. (e) Decision on Appeal. The Banking Commissioner shall decide the appeal in the applicant's favor if the Commissioner determines that the time periods established in this section have been exceeded and the Department has failed to establish good cause for the delay. The Banking Commissioner shall issue a written decision to the applicant within 60 days of the filing of an appeal. If an appeal is decided in an applicant's favor, the applicant will be reimbursed the application fee which the applicant has paid to the Department under Texas Civil Statutes, Article 342-1005(4) or Article 342-1007(c), as the case may be. A decision in favor of the applicant under this subsection does not affect any decision to grant or deny the application, which shall be based on applicable substantive law without regard to whether the application was timely processed. 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, on April 22, 1994. TRD-9439676 Everette D. Jobe General Counsel Department of Banking Proposed date of adoption: June 17, 1994 For further information, please call: (512) 475-1300 Chapter 4. Currency Exchange 7 TAC sec.4.1 (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 Finance Commission of Texas or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.) The Finance Commission of the State of Texas proposes the repeal of sec.4. 1 concerning the issuance of provisional licenses under the Currency Exchange Act, Texas Civil Statutes, Article 350 (the Act). Section 4.1, effective March 26, 1992, provides that the Banking Commissioner of Texas (the Commissioner) may grant a provisional license to any person who has filed a completed application with the Department of Banking on or before December 31, 1991. It also allows the Commissioner to issue a provisional license to any person who makes a good faith effort to comply with Act. The purpose of this section was to allow the Commissioner to issue provisional licenses to businesses already in operation as of the effective date of the Act, January 1, 1992, to prevent disruption or interruption of the activities of these businesses and the services they provided to the public. The Act has been in effect for more than two years. The purpose served by this section has been fulfilled and no provisional licenses are in effect at this time. Section 4.1 should therefore be repealed. Brian R. Herrick, assistant general counsel, has determined there will be no fiscal implications for state or local government as a result of repealing this section for the first five-year period after the repeal. Mr. Herrick, also has determined that for each year of the first five-year period the repeal as proposed will be in effect the public benefit anticipated as a result of the repeal will be the elimination of confusion with respect to the availability of provisional licenses under this section. There will be no effect on small businesses. No economic cost will result to entities as a result of the repeal of sec.4.1. Comments on the proposed repeal may be submitted in writing to Brian R. Herrick, Assistant General Counsel, Texas Department of Banking, 2601 North Lamar Boulevard, Austin, Texas 78705-4294. The repeal of this section is proposed pursuant to Texas Civil Statutes, Article 350, sec.7, which authorize the Finance Commission to adopt rules necessary to implement Article 350. Article 350 of the Banking Code is the only statute related to the proposed repeal. No statute will be affected by the repeal. sec.4.1. Provisional License. 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, on April 22, 1994. TRD-9439686 Everette D. Jobe General Counsel Department of Banking Proposed date of adoption: June 17, 1994 For further information, please call: (512) 475-1300 7 TAC sec.4.7 The Finance Commission of Texas proposes an amendment to s4.7, concerning bonding requirements under the Currency Exchange Act, Texas Civil Statutes, Article 350 (the Act), to allow the Banking Commissioner of Texas (the Commissioner) to review the amount of the bond during or after an examination of a licensee under the Act or a review of the quarterly reports submitted by a licensee under 7 TAC sec.4.3. Pursuant to the Act, sec.10, the Commissioner is required to determine the appropriate level of bonding for a licensee. Existing sec.4.7 was adopted to set forth the method for setting bond amounts under the Act, and subsection (e) provides that the Commissioner will review the bond amount each year when the license is renewed, or at any time after there is a change in the manner in which the licensee conducts business or a change in the ownership or management of the licensee's business. Experience has proven that the Commissioner needs the flexibility, in situations where licensees have underestimated or understated their volume of business, to change the required amount of the bond to ensure the public is adequately protected in the event of a violation of law or a defalcation by a licensee. The proposed amendment to sec.4.7(e) will give the Commissioner the power to reset or adjust the required bond amount during or subsequent to an examination of a licensee or after a review of the quarterly reports submitted by a licensee, if the bond is found to be inadequate based on findings of the examination or review of the quarterly reports. Brian R. Herrick, assistant general counsel, Texas Department of Banking, has determined that for the first five-year period the section is in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the section. Mr. Herrick also has determined that for each year of the first five years the section is in effect the public benefit anticipated as a result of enforcing the section will be enhanced protection of the public through bonding requirements that more closely reflect the current volume of a licensee's business. The economic cost to persons required to comply with the section as proposed is difficult to quantify. In most instances, the amendments would be affecting only those licensees who provided inaccurate or incorrect data to the Department when their bond amounts were set or last adjusted. The rule would allow the Commissioner to re-set the bond amount to the level at which it should have been set to begin with. In those cases, the licensee would simply be incurring a cost it should already have incurred, but delayed as a result of its error or misrepresentation. The cost to those licensees who actually experience significant fluctuations in business volume triggering adjustment of the bond amount under the amendments would be the time value of money of the additional premium cost of the increased bond for the period of time between the date on which the increase is required under the amended rule and the date it would have been required under the current rule. Under the current rule, the bond would be reviewed and adjusted annually. The amendment would allow it to be reviewed, at most, quarterly, and then adjusted only if it is less than 90% of the amount required under this section. Therefore, on the average, bonds subject to adjustment would be increased 4.5 months earlier under the amended rule. The premium for currency exchange bonds averages 5.0% to 10% per $1,000 of coverage. The difference in premium charges depends upon the financial stability of the licensee, its credit history, whether and to what extent the bond is collateralized, and the individual policies and philosophies of the underwriters. The cost of compliance will be approximately the same for small businesses and the largest businesses. Comments on the proposal may be submitted to Brian R. Herrick, Assistant General Counsel, Texas Department of Banking, 2601 North Lamar Boulevard, Austin, Texas 78705-4294. The amendment is proposed under Texas Civil Statutes, Article 350, sec.7, which require the Commission to adopt rules necessary to implement Article 350; and under sec.10, which gives the Commissioner the power to set the bond amount. Texas Civil Statutes, Article 350 and Article 489d are affected by the proposed amendment of sec.4.7. sec.4.7. Bond Requirements; Deposit in Lieu of Bond. (a)-(d) (No change.) (e) Review. (1) The Commissioner shall review the bond amount each year when the licensee's license is renewed and adjust the bond amount in accordance with subsection (a), (b), or (d) of this section
    . [The bond amount will be set based on volume of business in the previous four calendar quarters.] (2) The Commissioner may review and adjust the bond amount at any time if: (A) there is a change in the manner in which the licensee conducts business;
      [or] (B) there is a change in the ownership or management structure of licensee's business, including a change in principal ;
        or (C) the Commissioner finds that the amount of bond posted by the licensee is less than 90% of the amount required under subsection (a), (b), or (d) of this section during or after an examination of a licensee's business or review of a licensee's quarterly reports submitted in accordance with sec.4.3 of this title (relating to Reporting and Recordkeeping). (3) The adjusted bond amount will be based on the volume of licensee's currency exchange and transmission business in the previous four calendar quarters. (f) (No change.) 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, on April 22, 1994. TRD-9439684 Everette D. Jobe General Counsel Texas Department of Banking Proposed date of adoption: June 17, 1994 For further information, please call: (512) 475-1300 Part II. Banking Department of Texas Chapter 10. Trust Companies 7 TAC sec.10.1 The Finance Commission of Texas (the Commission) proposes new sec.10.1 to establish minimum capital requirements for a trust company to do business with the general public. Section 10.1 was originally proposed in the March 8, 1994, issue of the Texas Register (19 TexReg 1618), and such proposal is withdrawn in this issue of the Texas Register. Texas Civil Statutes, Articles 342-1101, sec.2(b), and 342-1108(b) authorize the Commission to adopt rules regarding and the Banking Commissioner of Texas (the Commissioner) to require additional capital of a trust company as may be necessary to protect the safety and soundness of the trust company. The experience of the Commissioner and her predecessor in office over the last several years in closing and liquidating insolvent trust companies has convinced her and the Commission that the minimum capital required under the Banking Code is insufficient to protect the safety and soundness of a trust company and to protect those members of the general public that do business with a trust company. Adequate protection is not provided to trust company customers through directors and officers liability insurance policies and blanket bonds. Several commenters disagreed with this statement based on discussions with insurance agents and companies, but the case law suggests otherwise. Such policies and bonds almost universally contain a "regulatory exclusion" clause that prohibits claims brought by a regulatory agency in any capacity (including as receiver for the purpose of restoring losses to customers) and a "regulatory takeover" clause that effectively cancels the policy or bond, no matter who a subsequent claimant might be, at the moment the regulator first takes action to control the institution to correct a deteriorating financial condition. United States Fire Insurance Company v. Federal Deposit Insurance Corporation, 981 F.2d 850 (5th Cir. 1993), holds that even the appointment of a supervisor by agreement constituted a takeover by state officials sufficient to invoke automatic cancellation of a standard Form 24 bond. Regulators have argued that regulatory exclusion and regulatory takeover clauses should be void as against public policy, to no avail. Federal Deposit Company of Maryland v. Conner , 973 F.2d 1236 (5th Cir. 1992); Sharp v. Federal Savings and Loan Insurance Corporation, 858 F.2d 1042 (5th Cir. 1988). Given the illusory protections afforded by insurance, increased capital standards are necessary to provide an adequate cushion to members of the general public against operating and investment errors, whether intentional or otherwise, fraud and defalcations by trust company employees. Contrary to the belief of some commenters, the Commissioner does not seek insurance recoveries on behalf of the regulator, but rather solely to recover funds for the purpose of restoring losses caused to trust company customers by mismanagement or fraud. As originally proposed, sec.10.1 set a minimum capital standard of the greater of $1.5 million or 0.25% of the value of fiduciary assets under management. Existing trust companies would have been required to raise their capital levels ratably over a three year period, subject to extensions of time at the discretion of the Commissioner upon application. The amount of required minimum capital and the time within which to make required adjustments could, in the discretion of the Commissioner upon written application, be reduced or increased as the particular circumstances of a trust company may justify or require. The Texas Department of Banking (the Department), on behalf of the Commission, received 55 comment letters, excluding from such count early comment letters received from persons that have been superceded by later comment letters from these same persons. While all comments opposed the current proposal, approximately 50% expressed the belief that an increase in capital requirements was probably warranted, and about 50% opposed any rule at all. Those that suggested a specific capital increase supported a $1 million capital level with a five year phase-in period, although six commenters suggested a tiered structure of discrete capital levels based on fiduciary assets under management, with a ceiling of from $1 million to $1.5 million. All commenters opposed any capital standard expressed as a percentage of fiduciary assets under management, although one commenter included an interesting, December 1993 study, by a consulting group on behalf of Bankers Roundtable, which concludes that appropriate economic capital ratios for fiduciary services are 2-4 basis points (0.02%-0.04%) for non-discretionary assets and 5-9 basis points (0.05%-0.09%) for discretionary assets. That commenter argues that, if the Commission must use a percentage formula in the rule, the rule should use three and seven basis points for non-discretionary and discretionary assets, respectively, in reliance on the study. Only about 36% stated that the proposal was anti-competitive in that banks and other financial service providers were not subject to the rule or that it discriminated against small trust companies, but the sentiment clearly is present in a majority of comments. One commenter supported the capital requirements of the rule if the phase-in period could be longer. Several commenters supported the concept of a guaranty fund, which would require legislative action. A number of commenters opined that the Commission was without authority to adopt the rule, arguing that the intent of the Legislature was to impose a capital standard of $500,000 and to grant the Commissioner the power to increase capital as to any particular trust company based only on the specific facts of that case. The Commissioner does have that authority, Texas Civil Statutes, Article 342-1108(b). The Commission, however, has the authority to adopt rules "as may be necessary to accomplish the purposes" of trust company regulation, Texas Civil Statutes, Article 342-1106(b). The Department believes this grant of authority is broad enough to encompass the proposed sec.10.1, especially because the Commissioner believes the $500,000 standard is inadequate to protect the safety and soundness of any of the trust companies within her jurisdiction. While the Commissioner could elect to increase capital for each trust company pursuant to individual action, adoption of the higher capital standard by rule, with discretion to lower the standard where warranted, is a more efficient and effective process. Finally, a substantial minority of commenters suggested increased reliance on insurance, and either rejected the Department's analysis of insurance limitations or proposed the required deletion of regulatory exclusion and regulatory takeover clauses. The Department will continue to investigate the potential for a rule requiring insurance but believes the minimum capital rule as revised should be considered separately. The Department has carefully reviewed all comments and has revised the proposal to require a capital level of $1 million plus $25,000 for each $50 million, or portion thereof, of total fiduciary assets under management by the trust company in excess of $1 billion, with a five year phase-in period. The definition of trust company has also been expanded in the revised proposal to include state banks with only trust powers. The incremental, add-on portion of capital is equivalent to 0.05% (five basis points) of fiduciary assets under management in excess of $1 billion, but tiered to provide greater ease of calculation and capital management. The amount of required minimum capital and the time within which to make required adjustments could, in the discretion of the Commissioner upon written application, be reduced or increased as the particular circumstances of a trust company may justify or require. Trust companies subject to the incremental, add-on portion of capital will have two quarters to increase capital to the required level indicated by a four quarter moving average of fiduciary assets under management. The Commissioner and the staff of the Department of Banking (the Department) find the December 1, 1993, study prepared by First Manhatten Consulting Group on behalf of The Bankers Roundtable to be highly persuasive. The study is available from the Department for $7.20, the cost of duplication and mailing. According to the study, for fiduciary services the principal causes of loss are operating risks which can be grouped into seven categories: investment management decisions; operations errors; fraud and embezzlement; technical failures; legal liabilities; natural hazards (e.g., fire, earthquake, flood); and others (e.g., environmental risk). The key operational risks for fiduciary services include the failure to: clear and settle customer-directed trades on a timely basis; properly hold collateral for loan securities; manage trust assets to preserve capital or according to the stated purpose of the trust; maintain accurate records of customer activities; properly account for, or notify clients of, corporate actions (e.g., dividends or stock splits); and issue tax or government required forms in an accurate and timely manner. Businesses can take action to limit operating risks such as through the purchase of insurance, adjustment of cost structures, and use of internal and external audit and examination procedures, but a residual amount of operating risk remains for which capital should be calculated and assigned. The study concluded by recommending economic capital ratios of 0.05% to 0.09% for discretionary assets and 0.02% to 0.04% for nondiscretionary assets. Over 95% of commenters on the proposed sec.10.1 strongly opposed any distinction between discretionary and nondiscretionary assets, and the Department believes that such a distinction would be difficult and complex to administer. Accordingly, the revised proposal does not make the distinction, although the rule proposal specifies that the Commissioner can take the degree of discretion vested in the trustee into account regarding an application to alter the required minimum capital level. Based on trust company equity capital and fiduciary assets under management as of September 30, 1993, the new proposed capital standard would apply to 39 trust companies, 13 of which already have capital and surplus in excess of the proposed requirement. The new proposed standard would also apply to one state bank, which meets the capital requirement. Three trust companies have in excess of $1 billion under management and would be subject to the variable addition to capital, with deficiencies ranging from $390,000 to $1,986,000. The remaining 23 trust companies would have deficiencies in capital ranging from $129,000 to $500,000, with an average deficiency of $300,000. Each trust company with a deficiency in capital would be required to raise capital to the required level over a five-year period with possible extensions available. Several commenters also requested greater discretion in investing capital in excess of $500,000 than is currently permitted. The Department believes that due consideration should be given to the suggestion and will examine its options in this regard. Everette D. Jobe, General Counsel, Texas Department of Banking, has determined that, for the first five-year period the section as proposed will be in effect, there will be no fiscal implications for state or local government as a result of enforcing or administering this section. While trust companies both large and small will be required to raise capital either through retained earnings or contributions by shareholders, the increase in capital is not an expense or cost, but rather remains the property of the trust company. Mr. Jobe also has determined that, for each year of the first five years the section is in effect, the public benefit anticipated as result of enforcing or administering this section is the enhanced protection of the general public and a substantially reduced risk of loss of fiduciary assets in the event of an involuntary liquidation, as has frequently occurred in prior trust company closings. There will be no effect on small businesses. No economic cost will result to entities as a result of complying with the proposed section. An economic cost will accrue to the shareholders of each affected trust company, as dividends will be restricted for a period of years or capital calls will be made in order to increase capital. Comments on the proposal may be submitted in writing to Everette D. Jobe, General Counsel, Texas Department of Banking, 2601 North Lamar Boulevard, Austin, Texas 78705-4294. The new section is proposed under Texas Civil Statutes, Article 342-1101, sec.2(b), which provide the Commission with the authority to prescribe regulations to require additional capital, and under Article 342-1106, which provides the Commission with the authority to promulgate and adopt rules and regulations as may be necessary to accomplish the purposes of Chapter XI of the Banking Code (Texas Civil Statutes, Article 342-1101 et seq). The following are the articles and sections that are affected by the proposed new sec.10.1: Texas Civil Statutes, Articles 342-1101 and 342-1108. sec.10.1. Minimum Required Capital for a Trust Company. (a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. (1) Beginning restricted capital-The initial level of restricted capital of a trust company as determined by the first quarterly report filed by the trust company after the effective date of this section, or annual report if the effective date is in the fourth quarter, subject to correction or restatement as a result of examination. (2) Capital-The aggregate amount paid in by shareholders for the par or stated value of the shares of capital stock of a trust company, in consideration for such shares. (3) Certified surplus-That amount of surplus of the trust company that is designated in writing by the board of directors or managers as certified and disclosed on periodic quarterly and annual reports delivered to the Commissioner. (4) Commissioner-The Banking Commissioner of Texas. (5) Restricted Capital-The sum of capital and certified surplus. (6) Surplus-The aggregate amount paid in by shareholders in excess of the par or stated value of the shares of capital stock of a trust company in consideration for such shares, plus undivided profits. (7) Total fiduciary assets under management-The aggregate of assets held by a trust company in any fiduciary capacity, including but not limited to the capacity of trustee, executor, administrator, guardian, custodian, or agent, or another capacity in which the trust company has legal but not beneficial title, regardless of the degree of discretion vested in the trust company. For purposes of this section, a trust company shall calculate total fiduciary assets under management as the average of fiduciary assets under management for the preceding four quarters, as reported in quarterly and annual reports filed by the trust company, subject to correction or restatement as a result of examination. (8) Trust company-A corporate entity that possesses a Texas charter to do business as a trust company, issued by either the State Banking Board pursuant to Texas Civil Statutes, Article 342-1101, sec.1(b), or the Commissioner pursuant to Texas Civil Statutes, Article 342-1101, sec.4; or a state bank with only trust powers. (b) Minimum Restricted Capital. Except as otherwise provided in this section, the minimum restricted capital of a trust company must be not less than $1 million plus $25,000 for each $50 million, or portion thereof, of total fiduciary assets under management by the trust company in excess of $1 billion, as determined on a quarterly basis. Subject to subsection (c) of this section, a trust company has two quarters to fund an increase in minimum restricted capital caused by an increase in total fiduciary assets under management. (c) Implementation. (1) Any trust company with beginning restricted capital that is less than the minimum restricted capital required by subsection (b) of this section must increase its restricted capital annually thereafter, by each anniversary date of the quarterly or annual report upon which the initial determination of beginning restricted capital is made, according to the following schedule: (A) year 1-by a sufficient amount to cause restricted capital to equal such company's beginning restricted capital plus at least 20% of the difference between the minimum restricted capital required at that time and such company's beginning restricted capital; (B) year 2-by a sufficient amount to cause restricted capital to equal such company's beginning restricted capital plus at least 40% of the difference between the minimum restricted capital required at that time and such company's beginning restricted capital; (C) year 3-by a sufficient amount to cause restricted capital to equal such company's beginning restricted capital plus at least 60% of the difference between the minimum restricted capital required at that time and such company's beginning restricted capital; (D) year 4-by a sufficient amount to cause restricted capital to equal such company's beginning restricted capital plus at least 80% of the difference between the minimum restricted capital required at that time and such company's beginning restricted capital; and (E) year 5-by a sufficient amount to cause restricted capital to equal at least the minimum restricted capital required at that time by subsection (b) of this section. Thereafter, the trust company shall have and maintain at least the minimum restricted capital. (2) The implementation schedule set forth in paragraph (1) of this subsection is a minimal requirement, and does not authorize a reduction of capital and surplus for a trust company that has more capital and surplus than is required for restricted capital under the implementation schedule but less than is required under subsection (b) of this section. Any trust company that possesses restricted capital in excess of minimal requirements or achieves the minimum restricted capital level prior to the required deadlines in the implementation schedule may not thereafter reduce its restricted capital without the express written consent of the Commissioner. (d) Certified Surplus. Except to absorb losses in excess of uncertified surplus, certified surplus shall not be reduced without the prior written consent of the Commissioner. The board of directors shall, in connection with each transfer to or reduction in certified surplus, promptly file with the Commissioner its certificate reflecting such transfer or reduction. An increase in certified surplus is effective immediately upon the approval of an appropriate resolution by the board of directors. (e) Extensions of Time. Upon application by a trust company subject to subsection (c) of this section, the Commissioner, in the exercise of discretion, may grant one or more extensions to a trust company to permit additional time to achieve the required restricted capital levels if, in the Commissioner's opinion, the trust company has made a good faith effort to achieve such restricted capital levels. (f) Modifications in Minimum Restricted Capital. Notwithstanding subsection (b) of this section, the Commissioner may, on a case by case basis and in the exercise of discretion consistent with protecting safety and soundness, reduce or increase the amount of minimum restricted capital, or may grant extensions of time to achieve required, periodic adjustments in the minimum restricted capital for such trust company. Among the safety and soundness factors to be considered by the Commissioner in the exercise of discretion are the nature and type of business conducted; the amount of fiduciary assets under management; the type of fiduciary assets held and the depository of such assets; the complexity of fiduciary duties and degree of discretion undertaken; the competence and experience of management; the extent and adequacy of internal controls; the presence or absence of annual unqualified audits by an independent certified public accountant; the reasonableness of business plans for retaining or acquiring additional restricted capital; and the existence and adequacy of insurance obtained or held by the trust company for the purpose of protecting its customers, beneficiaries and grantors. (g) This section does not create any presumption regarding the adequacy of the capital structure proposed for a new trust company in a charter application to the State Banking Board. 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, on April 22, 1994. TRD-9439693 Everette D. Jobe General Counsel Texas Department of Banking Proposed date of adoption: June 17, 1994 For further information, please call: (512) 475-1300 Chapter 11. Miscellaneous General 7 TAC sec.11.27 The Texas Commissioner of Banking and the Finance Commission propose new sec.11.27 to establish procedures and fees for inspection and photocopying of public records under Chapter 552 of the Texas Government Code, commonly known as the Texas Open Records Act. Pursuant to Acts 1993, 73rd Legislature, Chapter 428, sec.5, and amendments to the Texas Open Records Act made therein (see text following the Government Code, sec.552.261), each agency must adopt rules specifying its charges in an effort to recover the agency's full cost of providing copies of public records. Proposed sec.11.27 will accomplish this objective. David Speer, Director, Budget and Planning Division, Texas Department of Banking, has determined that, for the first five-year period the proposed new section will be in effect there will be no fiscal implications for state government, local government. The proposed rule will formalize pre-existing agency policy regarding copy charges and will not result in an increase in revenue to state government. Mr. Speer also has determined that, for each year of the first five years the proposed new section is in effect, the public benefit anticipated as a result of enforcing this section is the publication of the means by which public information maintained by the Department of Banking may be accessed by members of the general public. There will be no effect on small businesses. Mr. Speer estimates that no increased economic costs to persons required to comply with the proposed section will be incurred. Comments on the proposal may be submitted in writing to Everette Jobe, General Counsel, Texas Department of Banking, 2601 North Lamar Boulevard, Austin, Texas 78705. The new rule is proposed under the provisions of Acts 1993, 73rd Legislature, Chapter 428, and Government Code sec.sec.552.230, 552.261, and 552. 263, which authorize the agency to promulgate reasonable rules of procedure under which public records may be inspected efficiently, safely, and without delay, and which require the agency to prescribe rules specifying the charges the agency will make for copies of public records. The following statutes are affected by this rule: Government Code, Chapter 552. sec.11.27. Open Records Requests; Charges. (a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. (1) Commissioner-The Banking Commissioner of Texas. (2) Department-The Texas Department of Banking. (3) Readily available information-Public information that already exists in printed form, or information that is stored electronically, and is ready to be printed or copied without requiring any programing, but not information that requires more than 30 minutes to prepare for release as a result of required redaction for the purpose of deleting information that is confidential by law. (4) Standard-size copy-A printed impression on one side of a piece of paper that measures up to 8 1/2 inches by 14 inches. A piece of paper that is printed on both sides shall be counted as two copies. (b) The request. Upon receipt of a written request from a requesting party, including another state or federal agency, which clearly identifies the public records requested to be copied or examined pursuant to Chapter 552 of the Government Code (the Texas Open Records Act), the Department shall make every reasonable effort to provide the information in the manner requested as quickly as possible without disruption of normal business activities, provided that information that is confidential by law will not be provided except under court order, Attorney General directive, or other legal process. All inquiries will be treated equally. Fees imposed by this section may be waived or reduced in the discretion of the Banking Commissioner, provided that no fee will be charged for requests for less than five standard-size copies. (c) Copy and service charges. (1) A charge of $0.10 per page will be collected from the requestor and recipient of standard-size copies. (2) For standard-size copies of more than 50 pages of readily available information, a charge of $15 per hour of personnel time spent locating, copying, and preparing the information for delivery or inspection shall be added to the copy charges specified by paragraph (1) of this subsection (c). (3) For standard-size copies of information that is not readily available, a charge of $15 per hour of personnel time spent locating, copying, redacting confidential information, and preparing the information for delivery or inspection, plus $3.00 per hour for overhead, plus $0.50 per minute of computer time (if applicable) shall be added to the copy charges specified by paragraph (1) of this subsection (c). (4) If certification of copies is requested, an additional charge of $5.00 per document will be added to the computed fee. (5) The cost for non-standard-size copies shall be determined by reference to any recommended standards promulgated by the General Services Commission, Title 1, sec.sec.111.61-111.70. (6) If the anticipated charges under this subsection plus anticipated charges under subsection (d) of this section exceed $100, the Department may require a bond for payment of costs or cash prepayment equal to the total anticipated charges prior to release of the requested information. (d) Delivery charges. (1) U.S. mail. When copies are required to be mailed, the cost of postage will be added to the computed fee. (2) Expedited delivery. When copies are required to be sent by overnight courier or other expedited delivery, the cost of the service will be added to the computed fee unless the requestor furnishes a recipient billing number for use by the Department in delivering the copies to the carrier. (3) Faxing. The charge for faxing copies is $0.10 per page for local telephone delivery, $0.50 per page for telephone delivery within the same area code, and $1.00 per page for telephone delivery to a different area code. The Department may not be required to fax 20 or more pages of information and may require another form of delivery. (e) Inspection of records. Records access for purposes of inspection will be by appointment only and will only be available during regular business hours of the Department. However, if the safety of any public record or the protection of confidential information is at issue, or when a request for inspection would be unduly disruptive to the ongoing business of the office, physical access may be denied and the option of receiving copies at the usual fees shall be provided. (f) Department coordinator. The open records coordinator for the Department is the Commissioner or designee. 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, on April 22, 1994. TRD-9439673 Everette D. Jobe General Counsel Texas Department of Banking Proposed date of adoption: June 17, 1994 For further information, please call: (512) 475-1300 Chapter 25. Prepaid Funeral Contracts Subchapter B. Regulation of Licenses 7 TAC sec.25.23 The Texas Department of Banking (the Department) proposes an amendment to 7 TAC sec.25.23, governing fees applicable to the regulated prepaid funeral services and merchandise industry, sometimes referred to as the prepaid funeral benefits industry, pursuant to Texas Civil Statutes, Article 548b (the Act), to reduce the insurance conversion fees in certain circumstances. The Department adopted sec.25.23 to be effective February 24, 1994 (19 TexReg 1037). One comment regarding an earlier version of proposed sec.25.23 criticized the $1,000 fee for applications to convert from a trust-funded plan to an insurance-funded plan. The Department responded that even the $1,000 fee was insufficient to recover the costs associated with processing the application because of the complexity and variety of insurance products and problems uncovered by the Texas Department of Insurance. However, the Department committed to lowering the fee by amendment at some future date if it can bring down the cost of processing through experience and developed expertise in insurance conversions. The proposed amendment is designed to provide such a reduction in the case of conversion applications involving certain insurance products. Stephanie Newberg, director, Special Audits Division, Texas Department of Banking, has determined that for each year of the first five years the proposed section will be in effect, there will not be fiscal implications for state or local government as a result of enforcing or administering the section. Ms. Newberg also has determined that, for each year of the first five years the section as proposed will be in effect, the public benefit anticipated as a result of enforcing the section is reduced application fees for a limited number of applications. There will be no effect on small businesses. There is no anticipated economic cost to persons required to comply with the section as proposed. Comments on the proposal to be considered by the Texas Department of Banking should be submitted in writing within 30 days after publication of the proposed section in the Texas Register to Everette D. Jobe, General Counsel, Texas Department of Banking, 2601 North Lamar Boulevard, Austin, Texas 78705. The new section is proposed under Texas Civil Statutes, Article 548b, sec.1A(d) and sec.2, which empower the Department to set fees for insurance conversion applications. Texas Revised Civil Statutes, Article 548b, is affected by the proposed rule. sec.25.23. Application Fees. (a) (No change.) (b) Application Fees. The application fees set forth in this subsection have been set in accordance with the Act for the purpose of defraying the cost of administering this Act. Except as otherwise provided in this subsection, all fees are due at the time the application is filed and are nonrefundable. An application submitted without the appropriate filing fee will be deemed incomplete and will not be considered. (1)-(2) (No change.) (3) Conversion Application Fee. An applicant for the conversion of a trust- funded prepaid funeral benefits operation to an insurance-funded prepaid funeral benefits operation shall pay a $1,000 fee per application, provided that, if the conversion will result in the issuance of an annuity product identical in form to one that has been approved by the Department after December 1, 1993, in response to a substantially similar application, the applicant shall submit a $500 fee per application. In the event additional processing time is required because the application is incomplete, the applicant shall pay the addition processing costs incurred in excess of the filing fee originally submitted, at the rate of $500 per eight-hour employee day, provided that the total fee cannot exceed $1,000. Until any such additional fee has been paid by the applicant, the application will be deemed incomplete and will not be considered. (c) (No change.) 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, on April 22, 1994. TRD-9439694 Everette D. Jobe General Counsel Texas Department of Banking Proposed date of adoption: June 17, 1994 For further information, please call: (512) 475-1300 Subchapter B. Regulation of Licenses 7 TAC sec.25.25 The Banking Department of Texas (the Department) proposes new sec.25.25 concerning the conversion of prepaid funeral contracts from trust funded benefits to insurance funded benefits, as provided for under Texas Civil Statutes, Article 548b, s1A (the Act). The conversion of prepaid funeral contracts to insurance funded benefits from trust funded benefits is permissible under sec.1A of the Act if the insurance funded arrangement will safeguard the rights and interests of the individual prepaid funeral contract purchasers to substantially the same or greater degree as the trust funded arrangement. In the past, the Department has reviewed insurance conversion applications and based its determination on the quality and extent of benefits under the insurance policy, as well as the status and condition of the applicant funeral home and the insurer, as a way of determining whether the proposed insurance funded arrangement would safeguard the rights and interests of the individual prepaid funeral contract purchasers to the same degree as or a greater degree than provided under the existing trust funded arrangement. (See Opinion Texas Attorney General Number MW-336 (1981)). While relatively few insurance companies have been involved in these conversions in the past, interest in insurance conversions has grown among insurers in Texas. The Department proposes to adopt sec.25.25 in order to more clearly outline the basic requirements for an application for conversion under sec.1A of the Act. As proposed, sec.25.25 would also set forth the standards for approval of the conversion application and the required documentation that must accompany an application for conversion, as well as information relevant to requesting a hearing on an application prior to final denial by the Department. Brian R. Herrick, Assistant General Counsel, Texas Department of Banking, has determined that for each year of the first five years the proposed rule is in effect there will be no fiscal implications that will result from enforcing or administering the section. The proposed amendment will have no effect on state or local government. Mr. Herrick also has determined that, for each of the first five years the proposed amendment will be in effect, the public benefits anticipated as a result of enforcing the proposed amendment will be the clarification and streamlining of the conversion application process under sec.1A of the Act. This should enhance the orderly administration of the Act and ensure that the purposes of the Act, as they relate to the conversion of prepaid funeral contracts from trust funded benefits to insurance funded benefits, are substantially fulfilled. There will be no effect on small businesses. There will be no greater economic cost to persons who choose to apply for conversion under the Act, sec.1A. Proposed s25.25 should shorten the time period required to process and approve or reject an application by setting forth the requirements for applications and the standards against which those applications will be measured. Comments on the proposal may be submitted to Brian R. Herrick, Assistant General Counsel, Texas Department of Banking, 2601 North Lamar Boulevard, Austin, Texas 78705-4294. This section is proposed under Texas Civil Statutes, Article 548b, sec.2, which authorize the Department to prescribe reasonable rules and regulations concerning all matters incidental to the enforcement and orderly administration of Article 548b. Texas Civil Statutes, Article 548b, is affected by the newly proposed sec.25. 25. sec.25.25. Conversion From Trust to Insurance Funded Benefits. (a) Purpose. Existing prepaid funeral contracts that utilize trust funded benefits may be converted to an insurance funded benefits arrangement pursuant to Texas Civil Statutes, Article 548b, sec.1A(d) (the Act). Application for conversion must be made on forms prescribed by the Texas Department of Banking (the Department) and must meet the requirements of the Act and this section. (b) Applications. (1) A funeral home applying for permission to convert trust funded benefits under existing prepaid funeral contracts to insurance funded benefits must, at a minimum: (A) hold a valid permit issued by the Department under the Act; (B) be in good standing with the Department; (C) have been examined by the Department at least once within the 24 month period immediately preceding the date of the application and not have been found to be in violation of any applicable laws or regulations, or to have any other deficiencies of any significance which have not been remedied or corrected to the satisfaction of the Department; and (D) submit a completed conversion application with the Special Audits Division of the Department. (2) Each application for conversion must be accompanied by: (A) a copy of a letter from an insurance company authorized to do business in Texas to the applicant that: (i) sets forth the insurance company's agreement to issue insurance policies to convert the prepaid funeral contracts from trust funded benefits to insurance funded benefits; and (ii) identifies all of the permit holders with whom the insurance company has contracted during the previous two years for conversion of prepaid funeral contracts from trust to insurance funded benefits; (B) a copy of the agreement between or among the insurance company, the applicant, and the permit holder who will hold and administer the insurance funded prepaid funeral contracts after conversion (if other than the insurance company), regarding the transfer, receipt, and application of the trust funds upon conversion, which agreement must: (i) include the full name of the agent or agents who will be receiving the commission and their respective Texas Department of Insurance (TDI) license numbers; and (ii) require that a copy of the policies issued be furnished to the respective prepaid funeral contract purchasers; (C) a pre-enhancement summary of the individual prepaid funeral contracts, which must include, at a minimum, the following information, as well as aggregated totals for each category of information, if appropriate: (i) purchaser's name and date of birth; (ii) date of issuance; (iii) face amount; (iv) amount paid in and amount left owing; (v) accumulated earnings; (vi) cancellation benefit and death benefit; and (vii) portion of face amount retained by the applicant; (D) a post-enhancement summary of the individual prepaid funeral contracts, which must include, at a minimum, the following information, as well as aggregated totals for each category of information, if appropriate: (i) insured's name; (ii) amount paid in; (iii) amount applied to the purchase of the insurance policy; (iv) cancellation benefit and death benefit under the insurance policy; and (v) portion of face amount retained by the applicant; (E) a copy of the form of insurance policy to be issued upon conversion showing the approval stamp of TDI; (F) a copy of a letter from TDI approving the use of the specific policy for prepaid funeral contract conversions; (G) a copy of the proposed negative response notification letter to the prepaid funeral contract purchasers containing a statement explaining the purchaser has only 30 days to file a request with the Department of Banking to have the contract converted back to trust funded benefits; (H) if the insurance company is not rated in Best's Agents Guide, current financial statements for the insurance company (dated no more than 18 months prior to the date of the application) and a copy of the insurance company's most recent National Association of Insurance Commissioner's report; (I) a copy of the insurance company's most recent TDI examination report, dated no more than 36 months prior to the date of the application; (J) a copy of the insurance company's most recent independent actuarial certification, dated no more than one year prior the date of application; (K) a copy of the proposed notification letter from the insurance company to the prepaid funeral contract purchasers regarding the conversion; (L) a statement defining the insurance policy load, including the percentage and dollar amount of the load and how the load will be distributed; (M) a copy of the mortality tables for life insurance products issued in connection with the conversion, which must include cash surrender values, cash reserves, and derived premiums; (N) a statement from the insurance company that the reserves for each policy will equal the cancellation benefits of the insurance policy; and (O) the conversion application fee prescribed in sec.25.23 of this chapter. (c) Standards for Approval of Application. (1) Applications for conversion will be approved by the Department if, in the Department's opinion, the rights and interests of the prepaid funeral contract purchasers under the insurance funded benefits arrangement will be safeguarded to the same degree as or to a greater degree than provided under the trust funded benefits arrangement. (2) In order for insurance benefits under an application for conversion to be considered to safeguard the rights and interests of the prepaid funeral contract purchasers to the same degree as or a greater degree than the trust funded benefits, the insurance benefits must comply with this subsection. (A) The insurance funding vehicle must provide the prepaid funeral contract purchaser with a cancellation benefit that is greater than or equal to the cancellation benefit provided for under the trust funded arrangement. (B) The cancellation benefit must be the obligation of the insurance company and not a third party. (C) The initial transfer of the trust funds to the insurance company must include the full sum collected by the applicant as principal on the trust funded prepaid funeral contracts proposed for conversion, plus all earnings accumulated with respect thereto, as of the transfer date. No load, commissions, or other fees or expenses may be paid from the trust funds transferred pursuant to the conversion application. (D) No provision may appear in the insurance policy that provides or allows for contesting coverage, limited death benefits in the case of suicide, or makes reference to a physical examination, or any other provision that contradicts the original trust funded prepaid funeral contract or the benefits provided thereunder. (E) The death benefit under the insurance policy must be no less than the death benefit prior to conversion. (F) The insurance policy must provide for guaranteed growth beginning in the first year of the policy, both in the death benefit and cash surrender value. (G) The insurance company must pay all death and cancellation claims in accordance with the provisions of the Act. (H) The insurance company, or an agency or subsidiary of the insurance company, must have a current valid permit issued by the Department under the Act to hold the post- conversion insurance funded contracts, and must be in good standing with the Department. (I) The permit holder of the post-conversion prepaid funeral contracts must have been examined by the Department at least once within the 24 month period immediately preceding the date of the application and not have been found to be in violation of any applicable laws or regulations, or to have any other deficiencies of any significance which have not been remedied or corrected to the satisfaction of the Department. (3) The Department may require that the trust funds transferred to the insurance company pursuant to the conversion be segregated and held in safekeeping by a trust company or a state or federally chartered bank if deemed necessary to adequately safeguard the rights of the prepaid funeral contract purchasers in accordance with paragraph (1) of subsection (c) of this section. (d) Examination. The Department, pursuant to the Act, sec.(8)(b), may conduct an examination of the applicant if deemed necessary to protect the interests of the prepaid funeral contract purchasers. In the event the annual examination of the applicant permit holder has already been completed by the Department when an application is accepted for filing, notwithstanding the provisions of sec.25.24 of this chapter, the applicant permit holder must reimburse the Department for all reasonable costs and expenses associated with any examination related to the conversion application or subsequent voluntary cancellation of the applicant's permit. (e) Hearings. The Commissioner may order a hearing on the application. A hearing, if ordered, shall be conducted pursuant to the Department of Banking's rules governing hearings. The applicant shall have the burden to demonstrate the existence of all factors necessary to entitle the applicant to convert to insurance funded benefits from trust funded benefits by a preponderance of the evidence. 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, on April 22, 1994. TRD-9439687 Everette D. Jobe General Counsel Texas Department of Banking Proposed date of adoption: June 17, 1994 For further information, please call: (512) 475-1300 Chapter 26. Perpetual Care Cemeteries 7 TAC sec.26.1 The Texas Department of Banking (the Department) proposes an amendment sec.26.1, concerning fees and assessments, to change the financial base used for determination of examination fees assessed against regulated perpetual care cemetery trust funds pursuant to the Health and Safety Code, Chapter 712. Adopted to be effective March 7, 1994 (19 TexReg 1213), s26.1 established through various fees a funding mechanism to defray the cost of administering the law governing perpetual care cemetery trust funds, as mandated by the Health and Safety Code, sec.712.042 and sec.712.044(b). In addition to specified application fees, an examination fee is collected based on the book value of the total assets in each trust fund. The assessment base for the examination fee has been criticized as discouraging voluntary contributions to the trust fund in excess of statutory requirements. Commenters have argued that excess contributions are necessary to adequately maintain a perpetual care cemetery, but that such contributions would cease if subject to assessment. The Department agrees that assessments should be based on required contributions to the trust fund rather than the absolute size of the trust fund in order to continue to encourage voluntary, excess contributions. Because aggregate trust funds have grown since sec.26.1 was initially proposed, a change in the assessment rate is unnecessary. Commenters had also urged the Department to consider a tiered structure of fees based on the size of the affected business, and the Department had indicated that it would consider doing so. The Department has concluded that a tiered structure of fees based on the size of the affected business is not presently feasible because the Department does not keep records to support such a determination. The Department solicits comments on what data should be collected and its authority to collect such data to permit a tiered system of fees. Stephanie Newberg, director, Special Audits Division, has determined that for the first five-year period the section is in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the section. Ms. Newberg also has determined that for each year of the first five years the section is in effect the public benefit anticipated as a result of enforcing the section is the removal of a disincentive to voluntary, excess contributions to perpetual care cemetery trust funds and the consequent enhancement to protection of the interests of cemetery plot owners. There will be no effect on small businesses. There is no anticipated economic cost to persons who are required to comply with the section as proposed. Comments on the proposal may be submitted in writing to Everette D. Jobe, General Counsel, Texas Department of Banking, 2601 North Lamar Boulevard, Austin, Texas 78705. The amendment is proposed pursuant to the Health and Safety Code, sec.714. 044(b), which empowers the Department to set fees in sufficient amount to defray the cost of administering the Health and Safety Code, Chapter 712. The following statutes are affected by this rule: Chapter 712 of the Health and Safety Code. sec.26.1. Fees and Assessment. (a)-(b) (No change.) (c) Examination Fees. The Department shall assess and collect nonrefundable examination fees in accordance with this subsection. Except as otherwise provided in this section, any assessed fee or an installment payment as part of a fee is due at the time of billing. The Department shall annually assess each Corporation an examination fee, not to exceed $5,000 in a fiscal year, at a rate of not more than $0.0012 per dollar of the aggregate of required deposits to
          [book value of the total assets in] the Fund from inception of the Fund to the date of the most recent examination report, as determined pursuant to the Health and Safety Code, sec.712.028 and reflected in the examination report.
            The Department may levy this fee in quarterly or fewer installments in such periodically adjusted amounts as reasonably appear necessary to defray the costs of examination and the administration of the Act. If the examination fee as computed in this subsection is less than $25, a minimum examination fee of $25 shall be levied and collected. (d)-(e) (No change.) 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, on April 22, 1994. TRD-9439695 Everette D. Jobe General Counsel Department of Banking Proposed date of adoption: June 17, 1994 For further information, please call: (512) 475-1300 TITLE 10. COMMUNITY DEVELOPMENT Part V. Texas Department of Commerce Chapter 162. Texas Exporters Loan Fund 10 TAC sec.sec.162.1, 162.3-162.6, 162.8-162.10 The Texas Department of Commerce proposes amendments to ssec.162.1, 162. 3- 162.6, and 162.8-162.10, concerning the Texas Exporters Loan Fund authorized by the Texas Government Code, Chapter 481, Subchapter D. Section 162.1, General Provisions, is being changed in several ways. Section 162.1(a) is being changed to correctly cite and refer to the Administrative Procedure Act, which was renamed and moved into the Texas Government Code last legislative session. Several definitions are being changed to standardize language within the rules and to make corrections and clarifications to the definitions. Section 162.1(d)(2) is being amended to refer to the "export business' rather than to the "exporter". While the terms mean the same thing, the term "export business" is consistent with the definition in the Texas Exporters Loan Fund Act (the "Act") at sec.481.042(1) of the Commerce Act. The subsection is also being amended to delete the word "private" so that the definition will refer to a "lender" rather than to a "private lender". This amendment is being proposed in order to be consistent with the Act, which defines the term "lender", but does not define the term "private lender" at sec.481.042(2). Section 162.1(d)(4) is being amended to define "Board" as the Policy Board of the Texas Department of Commerce, because the Policy Board is the governing board of the Agency. Section 162.1(d) (7) is being amended to refer to the "export business" rather than to the "exporter." Section 162.1(d)(11) is being amended to delete the definition of FCIA in its entirety, because it is no longer necessary due to the dissolution of the previous relationship between the Eximbank and the FCIA. Section 162.1(d)(12) - (22) is being renumbered as sec.162.1(d)(11)-(21) due to the deletion of sec.162.1(d)(11). Section 162.1(d)(12) is being amended to enable the Texas Department of Commerce to guarantee up to 90% of a loan. This change comports with sec.481.059(d) of the Act which allows the Agency to guarantee up to 90% of a loan. Section 162.1(d)(14) is being amended to expand the definition of "lender" to include other providers of working capital loans which the Texas Department of Commerce may approve. This change is being made to give export businesses a larger pool of lenders. The definition of loan review committee at sec.481.162.1(d)(15) is being amended to allow the Executive Director of the Texas Department of Commerce to appoint the committee. There is no requirement in the Act that the committee be approved by the Policy Board, and the Policy Board wants to allow the Executive Director to appoint the loan review committee. Sections 162.1(e)(1) and (2) are being amended to add the Executive Director of the Texas Department of Commerce to the list of individuals to which the conflict of interest provision applies. This change is necessary because the 73rd Legislature amended sec.481.050 of the Act to include the Executive Director. These subsections are also being amended to refer to members of the "loan review committee" rather than to members of the "committee" for clarification. Section 162.1(g) is being amended to correct the name of the Texas Open Records Act and to provide the new citation to the Texas Open Records Act, which is now codified in the Texas Government Code. This subsection is also being amended to delete the requirements that the party requesting to examine a document state the specific nature of the document to be viewed and that the appropriate fee accompany the request. The deletion is being proposed because the Agency's Open Records policy will be covered in another, more general, portion of its rules. Section 162.1(h) is being amended to delete the reference to the Finance Division, which no longer exists, and to refer instead to the Export Finance Office, which administers the Exporters Loan Fund Program. Sections 162.3(a) and (a)(4), Eligibility Requirements, are being amended to make grammatical and clarifying changes. Similarly, sec.162.3(b)(1) is being amended to clarify that it refers back to the General Provisions of the rules. Section 162.4(a), Filing Requirements and Consideration of Applications, is being changed to substitute the term "export business" for the word applicant" and to delete the words "during a business day" from the end of the sentence. These changes should provide greater clarity to this subsection of the rules. Subsection (b) of sec.162.4 is being amended to add the words "relating to Criteria for Approval of Loan Guaranty" to the end of the subsection. This change is being proposed to provide greater clarification. Subsection (d) of sec.162.4 is being amended to remove an unnecessary comma after the word "may" in the last sentence. New sec.162.4(e) is being added to enable the Texas Department of Commerce to assist export businesses which have not found a lender. This subsection will allow the Agency to provide the export business a letter which the business may present to potential lenders indicating that the Texas Department of Commerce is generally aware of the transaction for which the export business is seeking funding, and that the transaction, as presented to the Agency, generally meets eligibility requirements for a guarantee if a satisfactory lender is obtained. These letters of interest do not commit the Texas Department of Commerce to the guarantee of the loan. Existing sec.sec.162. 4(e) and (f) are being relettered as sec.sec.162.4(f) and (g) to have consecutive lettering as a result of the new sec.162.4(e). Section 162.5(a), Contents of Application, is being amended at subsections (a)(1) and (8) to refer to the "export business" rather than to the "exporter. " This change is being made to be consistent in terminology within the rules. Subsection (a)(6) is being clarified by adding additional information which the Texas Department of Commerce requires to consider an application under the rules. Similarly, subsection (a)(7) is being clarified by deleting the words "foreign risk" and replacing them with "account receivable insurance." New subsections (a)(10) and (11) are being added to reflect additional requirements that the Texas Department of Commerce will require in the application of the export business. Subsection (a)(10) requires that the export business provide evidence that the project for which the loan or guarantee is being sought contains the requisite Texas content under sec.481. 042(3) of the Act. Subsection (a)(11) requires the export business to identify the ten percent equity infusion it is providing for the project, as required by sec.481.059(d) of the Act. Section 162.6(c), General Terms and Conditions of Department's Financial Commitment, is being amended to increase the loan amount which the Texas Department of Commerce can guarantee from 85% to 90%. This change is being made to be consistent with sec.481.059(d) of the Act, which authorizes the guarantee of up to 90% of a loan. Section 162.6(d) is being changed to delete the reference to "FCIA" since that entity no longer has a relationship with the Eximbank. Section 162.6(h) is being changed to allow the Texas Department of Commerce to charge up to 1.5% of the principal balance guaranteed, and to increase the non-refundable application fee from $100 to $250. These changes are being made in order to recover more of the administrative costs incurred by the Agency from the direct beneficiaries of the loan guarantees as required by sec.481.048(e) of the Act. Section 162.6(i)(2) is being changed to refer to the "export business," rather than to the "exporter." This change is being made throughout the rules. Section 162.8(b) is being amended to refer to the "export business," rather than to the "exporter." This change is being made throughout the rules to be consistent in terminology. Section 162.9, Loan Review Committee, is being changed to allow the Agency's Executive Director, rather than its Policy Board, to appoint the loan review committee. Section 162.10, Eligible Lenders, is being changed to delete references to "private lenders," and to refer, instead, to "lenders." This change is being made throughout the rules to be consistent with the definition of lender" at sec.481.042(2) of the Act. Sections 162.10(a) and (b)(2) are being amended to refer to the export business" rather than to the "exporter." This change is being made throughout the rules for consistency. Section 162.10(c) is being amended to delete the word private" before the word "lender" in order to be consistent with the definition of "lender" found at sec.481.042(2) of the Act and to add that a lender seeking to make a loan for an export transaction must include with the application the interest rate that the lender will charge the export business. This information is necessary to enable the Texas Department of Commerce to determine whether to guarantee the loan. Ed Sosa, export finance manager, has determined that during the first five-year period the rules are in effect there will be fiscal implications as a result of enforcing or administering the rules. For the first five years that the rules are in effect, the effect on state government will be the administrative costs which the Texas Department of Commerce incurs in administering the Exporter Loan Fund Program. These costs cannot be precisely quantified; however, it is anticipated that the costs will be somewhat less than the Agency is now incurring in administering the Fund since higher fees are proposed to be charged. Mr. Sosa does not believe that there will be any costs to local government as a result of the proposed rules. Local governments should indirectly benefit from the Exporter Loan Fund Program, if loan guarantees are given to export businesses within a local community since the capital should allow the export business to grow, thereby increasing its revenues, upon which taxes are paid, and increasing its need for employees. There may be small increased costs to a lender which makes a loan to an export business, because the Texas Department of Commerce is proposing to change the guaranty fee paid by the lender from 1.0% to up to 1.5% of the principal balance being guaranteed by the Agency. It is also proposing to increase the application fee by $150, to $250. This latter amount, however, is applied to the guaranty fee if the loan guarantee is approved. These small cost increases to a lender will be partially, if not totally, offset if the Texas Department of Commerce increases its loan guarantee from 85% to 90% of the loan. Other costs to the public of complying with the rules are not quantifiable since they depend, in large part, on the amount of time spent on the application and the wages of the individual or individuals working on the application. Such costs, however, should be no greater under the amended rules than they are under the existing rules for the Exporter Loan Fund Program. These costs, which will be incurred only by applicants that seek to receive loan guarantees from the Exporter Loan Fund Program, should be more than offset by the economic benefits realized by successful applicants. The cost to small business of complying with the rules is no different than the cost to other applicants. A local employment impact statement has not been requested from the Texas Employment Commission concerning the impact of these rules. Two copies of written comments on the proposed rules should be submitted to Renee Mauzy, Staff Attorney, Texas Department of Commerce, 816 Congress Avenue, Suite 1180, Austin, Texas 78701 within 30 days of the publication of the proposed rules. The rules are proposed under the authority of the Texas Exporter Loan Fund, Subchapter D, the Texas Government Code, sec.481.021(a)(1), and the Texas Government Code, Chapter 2001. The amendments implement the Texas Government Code, sec. s481.041-481.060. sec.162.1. General Provisions. (a) Introduction. Pursuant to the authority granted by the Texas Department of Commerce Act, Texas Government Code, Chapter 481, and the Administrative Procedure Act, Government Code, Chapter 2001,
              [Administrative Procedure and Texas Register Act, Texas Civil Statutes, Article 6252-13a], the Texas Department of Commerce prescribes the following sections regarding practice and procedure before the department in the administration and implementation of the Texas Exporters Loan Fund program. (b) Purpose. The purpose of these sections is to provide standards of eligibility and application procedures for participation in the program. (c) Objectives. The major objectives of the Texas Exporters Loan Fund Program are to expand employment and income opportunities for Texans through increased exports of Texas products or services by providing actual and potential exporters, particularly small and medium-sized exporters, and agricultural enterprises, with information and technical assistance on export opportunities, exporting techniques, and financial assistance in support of export transactions. (d) Definition of Terms. The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise. (1) Act-The Texas Department of Commerce Act, Texas Government Code, Chapter 481. (2) Application-A completed application, including all documents and information required by the department and submitted by the export business
                [exporter] or [private] lender for a project. (3) Allied Lenders-Financial institutions receiving approval from the department to participate in the department's export finance programs. (4) Board-The policy
                  board [of directors] of the department. (5) Business day-A day on which the department is open for business. The term shall not include any Saturday, Sunday or traditional holiday officially observed by the state. The department's normal business hours are 8 a.m. to 5 p.m. each business day. (6) Department-Texas Department of Commerce. (7) Equity-The export business's
                    [exporter's] contribution to a project in the form of cash, land or depreciable property. (8) Executive director-The executive director of the department. (9) Eximbank-The Export Import Bank of the United States, which is the independent United States Government agency that helps to finance and facilitate the export of United States goods and services. (10) Export business-A person engaged in the export of a Texas product or service. [(11) FCIA-Foreign Credit Insurance Association, which is Eximbank's agent responsible for insuring export accounts receivable.] (11)
                      [(12)] Fund-Texas Export Loan Guaranty Fund. (12)
                        [(13)] Guaranty amount --With respect to loans made by financial institutions, is a sum measured in terms of United States dollars, that in the case of default by the borrower, guarantees repayment of the loan, not to exceed 90%
                          [85%] of the loan. The guaranty amount may not exceed $350,000, except in those instances where the department determines that substantial job creation is a major component of the project. (13)
                            [(14)] Intellectual property-Architectural, engineering, surveys and other professional type services. (14)
                              [(15)] Lender -A lending institution, including a bank, trust company, banking association, savings and loan association, mortgage company, investment bank, credit union, life insurance company, governmental agency that customarily provides financing, or an affiliate of any of those entities. The term also applies to allied lenders or other providers of working capital loans approved by the Department
                                . (15)
                                  [(16)] Loan Review Committee-A committee appointed by the [board] Executive Director
                                    to provide advisory services on the issuance of guaranties on export loans. (16)
                                      [(17)] Program-Texas Exporters Loan Guaranty Fund Program. (17)
                                        [(18)] Project-The activities of an export business engaged in entering or expanding into export markets, found by the department to meet all eligibility requirements of the Act and this chapter. (18)
                                          [(19)] SBA-United States Small Business Administration. (19)
                                            [(20)] Staff-The staff of the department. (20)
                                              [(21)] State-State of Texas. (21)
                                                [(22)] Texas product -A manufactured good or service at least 25% of the total value of which is represented by Texas source components, labor, or intellectual property or the export or pre-export preparation of a Texas agricultural product or livestock. (e) Conflicts of interest. (1) A member of the board, the Executive Director, the loan review
                                                  committee, agent, or employee of the department, in his or her own name or in the name of a nominee, may not hold an ownership interest of more than 7-1/2% or in excess of $50,000 of the fair market value of an association, trust, corporation, partnership, or other entity that is, in its own name or in the name of a nominee, a party to a contract or agreement under this chapter on which the member of the board, the Executive Director, the loan review
                                                    committee, agent, or employee may be called on to act or vote. (2) With respect to a direct or indirect interest, other than an interest prohibited by paragraph (1) of this subsection, in
                                                      a contract or agreement under this chapter on which the member of the board, the Executive Director, the member of the loan review
                                                        committee, agent or employee may be called on to act or vote, the member of the board, the Executive Director, the member of the loan review
                                                          committee, agent, or employee shall disclose the interest to the department before the taking of final action by the department concerning the contract or agreement, and shall disclose the nature and extent of the interest and his or her acquisition of it. This disclosure shall be publicly acknowledged by the department and kept a part of the loan file. A member of the board, the Executive Director, a member of the loan review
                                                            committee, agent, or employee who holds such interest may not be officially involved in regard to the contract or agreement, may not vote on a matter relating to the contract or agreement, and may not communicate with the Executive Director or
                                                              other members, agents, or employees concerning the contract or agreement. Notwithstanding any other provision of law, a contract or agreement entered into in conformity with this subsection is not void or invalid because of an interest described by this subsection, nor is a person who complies with this subsection guilty of an offense, and the person may not be removed from office or be subjected to other penalty because of this interest. (3) A contract or agreement made in violation of this section is null and void and does not create an action against the department. (f) Statements and opinions. Statements and opinions expressed orally or in writing by the staff in response to inquiry or otherwise, and not specifically identified and promulgated as rules, shall not be considered regulatory standards of the department. (g) Examination of records. Any party may request
                                                                [requesting] the examination of records pursuant to the Texas
                                                                  Open Records Act, Texas Government Code, Chapter 552, in writing to the Department's General Counsel.
                                                                    [Texas Civil Statutes, Article 6252-17a, shall indicate in writing the specific nature of the document to be viewed, and if photocopying is desired, the appropriate fee must accompany the request.] (h) Written communication with the department. Applications and other written communications to the department should be addressed to the attention of the Export Finance Office,
                                                                      [Finance Division] Texas Department of Commerce, Post Office Box 12728, Austin, Texas 78711-2728. sec.162.3. Eligibility Requirements. (a) Applicants. An export business, located in Texas ,
                                                                        is eligible to submit an application to the department if the [proposed] export business meets the following criteria: (1) must be entering or expanding into export markets; (2) has a reasonable equity interest in the business, which shall be determined on a case-by-case basis by the department and/or
                                                                          [and] the lender; however, the applicant must provide at least 10% of the total cost of the project; (3) the project must involve an export transaction; and (4) meet approval standards as set forth in sec.162.7 of this title (relating to Criteria for Approval of Loan Guarantee). (b) Projects. In order for a project to be eligible for financing under the program, the project must meet the following requirements: (1) be a Texas product, as defined in sec.162.1(d), of this title (relating to General Provisions); and (2) consist of eligible project costs. (c) Project costs. The proceeds of a loan guaranteed by the fund may be used to finance the following costs which are directly related to exporting: (1) the purchase of inventory; (2) the purchase and installation of machinery and equipment; (3) the purchase of raw materials; (4) operations costs relating to the manufacture of a Texas product; and (5) operations cost relating to the marketing of a Texas product. (d) Ineligible project costs. Costs which are not eligible include the refinancing of existing debt. sec.162.4. Filing Requirements and Consideration of Applications. (a) Application forms. An export business
                                                                            [applicant] or lender seeking a loan guaranty from the department must use the application forms provided by the department. One copy of the completed application with all supporting documentation and required exhibits and attachments must be submitted to the department [during a business day]. (b) Initial review by staff. The staff reviews the application for completeness and notifies the applicant of any additional information required. When all required information has been received, the staff determines if the project meets the approval standards set forth in sec.162.7 of this title (relating to Criteria for Approval of Loan Guaranty). (c) Consideration of application. Following staff review, the loan review committee considers the application. The executive director finally considers the application taking into account the purpose of the fund and the criteria and terms of the program. (d) Approval of application. If the executive director approves the application, the applicant is notified in writing setting forth the terms and conditions of the financial assistance approved. The department, together with the lender and any other private or governmental participants, prepares the written agreements and documents necessary to close the loan or finalize the credit, in accordance with the terms and conditions set forth in the notice of approval. The executive director may[,] waive any requirement of any section in situations where such requirement is not necessary for the protection of the public interest. (e) Letter of Interest. If an applicant has not been able to secure a lender, a letter of interest may be issued by the Department summarizing the proposed transaction as presented to the Department by the applicant, and providing terms and additional information, if any are required. The applicant may then use the letter of interest to locate a lender. The Department may assist the applicant in locating a funder. The letter of interest does not commit the Department to the guaranty of the loan. Rather, it serves to indicate, generally, that the application meets eligibility requirements. (f)
                                                                              [(e)] Denial of application. If the application is disapproved, the department notifies the applicant in writing of the reasons for denial. (g)
                                                                                [(f)] Misrepresentation by applicant. Each applicant has an affirmative and continuing duty to update and correct all information provided to the department and the lender. The department may reject any application, may revoke any notice of approval, or may refuse to close any loan in the event that any information provided by the applicant contains a material misrepresentation or omission or false information. In addition the department may: (1) hold the applicant ineligible to apply for an export loan guarantee for a period of two years or until any issue of restitution is resolved, whichever is longer; and (2) terminate the applicant's guarantee if the correct information would have changed the department's guarantee decision. sec.162.5. Contents of Application. (a) The application must set forth the information necessary for the determination of eligibility and must include, among other things: (1) a description and history of the export business
                                                                                  [exporter]; (2) the experience of management; (3) financial statements; (4) income and expense projections for the export sale; (5) a description of collateral and other security; (6) purchase orders, contract and/or letter of credit, whichever is
                                                                                    [if] applicable, and proposed terms of the export sale; (7) account receivable insurance
                                                                                      [foreign risk] coverage when necessary; (8) a statement by the export business
                                                                                        [exporter] or lender identifying other sources of financing which have been secured for the project; and (9) a schedule of all debt of the export business detailing outstanding balance, payment amount, remaining term life, interest rate, and original term. (10) Evidence of Texas Content, as required by the Act, sec.481.042(3). (11) A statement by the export business identifying how and in what form the 10% equity for the Project is to be provided (b) The applicant must submit any other information as requested by the department in order to make a sound loan decision. sec.162.6. General Terms and Conditions of Department's Financial Commitment. (a) Permissible use of financial commitment. The department's financial commitment may be used to finance the costs and expenses related to the acquisition or production, financing, and shipment of a Texas product. (b) Minimum loan or credit guaranteed. The department shall not provide financial assistance to the exporter where the amount of the guaranty needed is less than $10,000. (c) Maximum amount of loan guaranty. The department's net exposure for financial assistance to an exporter, including all its affiliates, may not, at any one time, exceed 90%
                                                                                          [85%] of the loan amount. The guaranty amount may not exceed $350,000, except in those instances where the department determines that substantial job creation is a major component of the project. (d) Extent of participation. The department may participate in a loan guaranty to the extent necessary and appropriate to facilitate the required financing. The applicant may seek co-participation in financial assistance from other private and governmental sources, including the SBA, Eximbank, [FCIA,] and private insurers. In any event, the department's maximum participation will be as stated in subsection (c) of this section, and the lender must remain at risk for at least 10% of the outstanding principal balance amount. (e) Maturity. The maturity of a loan guaranteed by the department may not exceed 12 months. (f) Security. Loans must be secured by collateral of a type, amount, and value which, considered with other criteria affords reasonable assurance of repayment. (g) Interest rates and fees. The lender may charge fees and a legal rate of interest on guaranteed loans. (h) Fees. A guaranty fee of up to 1.5%
                                                                                            [1.0%] of the principal balance guaranteed is payable by the lender to the department. A non-refundable application fee will also be required in the amount of $250
                                                                                              [$100]. The application fee is applied towards the guaranty fee if the project is approved. (i) Reporting requirements. (1) Reports by lender. The lender shall report in writing to the department as provided in the guaranty agreement. (2) Reports by export business
                                                                                                [exporter]. The export business
                                                                                                  [exporter] shall report to the lender immediately upon making shipment of the goods and shall provide copies of documents evidencing shipment according to the terms of trade. If requested by the department, the export business
                                                                                                    [exporter] shall submit other reports or documentation reasonably related to an assessment of the export business's
                                                                                                      [exporter's] compliance with the Act and this chapter, or the terms of the sale transaction, loan agreements or the department's guaranty. sec.162.8. Loan Administration. (a) Servicing. The lender shall service the loan and receive all payments of principal and interest. In the event of default, the lender shall continue to service the loan if requested by the department to do so. (b) Notification of nonpayment. If the export business
                                                                                                        [exporter] fails to make any payment of principal or interest within 15 days after the due date, the lender shall immediately notify the export business
                                                                                                          [exporter] and the department specifying the outstanding balance, due date, and remedial action planned or taken. If the export business
                                                                                                            [exporter] fails to cure the default, the lender will report the same information to the department at 30 and 45 days after the due date. (c) Notification of modification of terms. If terms of the loan agreement are modified written notification will be sent to the department by the lender immediately. sec.162.9. Loan Review Committee. (a) The Loan Review Committee consists of the following members, appointed by the Executive Director
                                                                                                              [board]: (1) three members from financial institutions that are knowledgeable about, and experienced in, the exporting and export finance unique to Texas; and (2) two members from export firms located in Texas, experienced in exporting, knowledgeable about the needs and problems of small and entrepreneurial exporters, and actively employed or retired from an exporting firm, export trading company, or export management company. (b) Appointments to the loan review committee shall be for two-year terms. Members of the loan review committee shall serve at the pleasure of the Executive Director
                                                                                                                [board] and vacancies shall be filled by the Executive Director
                                                                                                                  [board]. A quorum shall consist of three members with a majority vote necessary for decision-making. sec.162.10. Eligible [Private] Lenders. (a) Types of organizations. A participating [private] lender may be any financial organization whose primary business is lending money, is prepared to support a Texas export business
                                                                                                                    [exporter] through the extension of credit, and receives participating status approval by the department. (b) Lender qualification procedures. (1) Each financial institution will be required to qualify itself for participation in the program by submission of a letter of request, accompanied by its latest audited financial statements, and the designation of the individual(s) within the financial institution who will be responsible for working with the department. (2) As a condition to participation, a lender must agree to make investigation, as specified in the application package, to determine the export business
                                                                                                                      [exporter's] viability, the economic benefits to be derived, the prospects for repayment, and other facts that it considers necessary to determine whether participation by the export business
                                                                                                                        [exporter] is consistent with the purposes of the Act. (c) Application process. A [private] lender interested in making a loan for an export transaction must submit a commitment letter to the department outlining the terms and conditions of the proposed loan. An application, proposed closing date, collateral for the loan, interest rate
                                                                                                                          and guaranty amount that the lender is seeking from the department must be included. The department may request other information from the lender. 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, on April 23, 1994. TRD-9439698 Deborah C. Kastrin Acting Executive Director Texas Department of Commerce Earliest possible date of adoption: May 30, 1994 For further information, please call: (512) 320-9401 TITLE 16. ECONOMIC REGULATION Part IV. Texas Department of Licensing and Regulation Chapter 74. Elevators, Escalators and Related Equipment 16 TAC sec.sec.74.10, 74.80, 74.100 The Texas Department of Licensing and Regulation proposes amendments to sec.sec.74.10, 74.80, and 74.100, concerning elevators, escalators, and related equipment. The amendments add a definition of annual inspection, lower the fee for a seal crimping tool, and require test tags to be dated annually. James D. Brush II, director, Policies and Standards Division, 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. Brush 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 safety, health, and welfare of the public. The cost for compliance for small businesses will be a savings of $35 for each crimping tool purchased. The anticipated economic cost to persons who are required to comply with the sections as proposed is a savings of $35 for each crimping tool purchased. Comments on the proposal may be submitted to James D. Brush II, Director, Policies and Standards Division, Texas Department of Licensing and Regulation, P.O. Box 12157, 920 Colorado, Eighth Floor, Austin, Texas 78711. The amendments are proposed under the Health and Safety Code, Chapter 754, which provides the Texas Department of Licensing and Regulation with the authority to promulgate and enforce a code of rules and take all action necessary to assure compliance with the intent and purposes of the Act. The amendments affect Health and Safety Code, Chapter 754. sec.74.10. Definitions. Annual inspection -Periodic inspection/test as defined in the ASME Safety Code for Elevators and Escalators, A17.1. sec.74.80. Fees. (a)-(b) (No change.) (c) Test tags, wire rope, and lead seals: (1) (No change.) (2) $90
                                                                                                                            [$125] for seal crimping tool. (d)-(e) (No change.) sec.74.100. Technical Requirements. (a)-(b) (No change.) (c) Test tags must be attached to equipment in accordance with the latest edition of the ASME A17.1 and A17.3, Safety Code for Elevator and Escalators. (1) (No change.) (2) Test tags shall be dated and
                                                                                                                              attached to equipment annually
                                                                                                                                with wire rope using a crimping tool purchased from the department bearing the department's seal. 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, on April 20, 1994. TRD-9439578 Jack W. Garison Executive Director Texas Department of Licensing and Regulation Earliest possible date of adoption: May 30, 1994 For further information, please call: (512) 463-7357 TITLE 25. HEALTH SERVICES Part II. Texas Department of Mental Health and Mental Retardation Chapter 405. Client (Patient) Care Subchapter B. Prescribing of Psychotropic Medication-Mental Retardation Facilities 25 TAC sec.sec.405.25-405.38 The Texas Department of Mental Health and Mental Retardation (TXMHMR) proposes new sec.sec.405.25-405.38, concerning prescribing of psychotropic medication- mental retardation facilities. The repeal of existing sec.sec.405. 821-405.835, concerning prescribing of psychoactive drugs, is contemporaneously proposed in this edition of the Texas Register . In addition to establishing general principles to be utilized in the prescribing of psychotropic medication for persons with mental retardation, the proposed new subchapter outlines procedures for the ongoing evaluation of individuals for whom psychotropic medication have been prescribed. In addition, the new subchapter introduces a drug protocol to be used for purposes of assessing quality improvement. Leilani Rose, director, Office of Financial Services, has determined that for the first five-year period the rules are in effect there will be no significant fiscal implications for state or local government as a result of enforcing or administering the rules as proposed. Local economic impact is anticipated to be insignificant. Dr. William Reid, M.D., M.P.H., medical director, has determined that the for the first five-year period the rules as proposed are in effect, the public benefit anticipated as a result of the rules will be rules which address the special concerns of prescribing psychotropic medication for persons with mental retardation. There will be no effect on small businesses. There is no anticipated cost to persons required to comply with the proposed new sections. Comments on the proposal may be submitted 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 Texas Health and Safety Code, sec.532. 015, which provides the Texas Board of Mental Health and Mental Retardation with rulemaking powers. The proposed rules affect the Texas Health and Safety Code, sec.592.038. sec.405.25. Purpose. The purpose of this subchapter is to establish guidelines for the prescribing of psychotropic medication to individuals who are served in campus-based components of mental retardation facilities of the Texas Department of Mental Health and Mental Retardation. sec.405.26. Application. The provisions of this subchapter shall apply to all campus-based components of mental retardation facilities of the Texas Department of Mental Health and Mental Retardation. sec.405.27. Definitions. The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise. Commissioner-The commissioner of the Texas Department of Mental Health and Mental Retardation (TXMHMR). Consultation-A deliberation with or report by a health care professional providing an expert opinion as requested by a physician or other authorized person. Department-The Texas Department of Mental Health and Mental Retardation (TXMHMR). Emergency-A situation in which, in the opinion of the treating physician or other appropriate professional, the immediate use of medication is necessary for acute treatment or essential to interrupt imminent danger to the individual or others. Fully-qualified psychiatrist -A physician, licensed to practice medicine in Texas, who has completed approved residency training in psychiatry. Individual-A person who is receiving residential services at a state school or state center. Individual's record -The facility's official written record of an individual's care (medical record, chart). Informed consent -Voluntary consent given by a person or the person's legally authorized representative. Guidelines for obtaining and documenting informed consent are outlined in Chapter 405, Subchapter I, of this title (relating to Consent to Treatment with Psychotropic Medication-Mental Retardation). Interdisciplinary team (IDT)-A group of MR professionals and paraprofessionals plus other concerned persons, including the individual, who assess the individual's treatment, training, and rehabilitation needs and make recommendations for services. Medical director -The medical director or clinical director of a facility. Except as noted elsewhere in this subchapter, or in situations in which he/she declines to provide the consultation, the medical director is, by definition, qualified to render the consultations or second opinions required in this subchapter. Mental retardation facility-All state schools and state centers providing 24- hour residential services to persons with mental retardation. The term applies to the campus-based programs of state schools and state centers, but does not apply to multiple disability units of state hospitals. Pharmacist-A person with a current license issued by the Texas State Pharmacy Board to practice pharmacy. Physician-A doctor of medicine or osteopathy who holds a current license issued by the Texas State Board of Medical Examiners to practice medicine, or who possesses an institutional practice permit issued by the Texas State Board of Medical Examiners. A licensed dentist or podiatric physician, when acting within the scope of his/her professional training and licensure, is authorized to prescribe, dispense, and administer medications appropriate to the specialty, and is included in this definition. Polypharmacy-Simultaneous use of more than one psychotropic medication from the same medication class to treat an individual. For the purpose of this rule, the period of overlapping use of more than one psychotropic medication when a physician changes an individual from one drug to another. Prescription-A lawful written or telephone/verbal order by a licensed prescriber or the authorized agent of a licensed prescriber to dispense or administer medication. PRN-As needed. Psychotropic medication -Any medication which is prescribed for the primary purpose of, and with the primary intent of, improving cognition, affective state, and/or behavior. Registered nurse -A person with a current license issued by the Texas State Board of Nurse Examiners to practice professional nursing. Respite care-The care of a person with mental retardation voluntarily within a mental retardation facility for a brief period of time, the purpose of placement being to provide temporary relief or special assistance for the individual or the individual's family. TXMHMR Executive Formulary Committee-A committee, appointed by the commissioner, which is responsible for creation and revision of the TXMHMR Formulary and other duties. TXMHMR Formulary -A continually revised printed listing by nonproprietary name of all drugs approved for use within TXMHMR facilities by the Executive Formulary Committee. sec.405.28. General Principles. (a) Prior to the administration of psychotropic medication, informed consent for the medication class and the individualized dosage range will be obtained as described in Chapter 405, Subchapter I of this title (relating to Consent to Treatment with Psychotropic Medication-Mental Retardation Facilities). (b) Psychotropic medication shall not be used excessively, for punishment, for convenience of staff, as a substitute for activities or treatment, or in frequency or quantities that interfere with the individual's rehabilitation program. (c) Psychotropic medication shall be prescribed only after: (1) a psychiatric evaluation (including documentation of current symptoms and/or behaviors) of the individual for whom the medication is being prescribed has been conducted; and (2) behavioral and clinical goals and objectives have been established; and (3) appropriate laboratory screening procedures have been performed. (d) Psychotropic medication shall only be prescribed with prior input and participation by the individual's IDT, and as a part of the individual's treatment program. When a psychotropic medication is prescribed primarily for control of inappropriate behavior, it must be used only as an integral part of the individual's treatment program plan that is directed specifically toward the reduction of and eventual elimination of the behavior for which the medication is employed. There must be consensus between the physician and the IDT before prescribing psychotropic medication primarily for control of inappropriate behavior. (e) Documentation of the significant factors considered in arriving at the decision to use psychotropic medication, the consent process, the treatment procedures, and the individual's response to treatment are to be entered into the individual's record. (f) If the prescribing physician is not a fully-qualified psychiatrist, a consultation must be obtained before any change in medication class or other significant changes are made to a psychotropic medication regimen. Except for emergencies, changes will be made with input and participation by appropriate members of the individual's IDT. (g) Nothing in this rule shall be understood to preclude use of psychotropic medication in an emergency, as outlined in sec.405. 32 of this title (relating to Emergency Use of Psychotropic Medication). In the event of an emergency, requirements of subsections (c) and (d) of this section shall be met in keeping with provisions outlined in sec.405.32. sec.405.29. Diagnosis and Documentation of Diagnosis when Initiating Psychotropic Medication. (a) For each individual, the physician, with input from the individual's team, shall develop a diagnostic impression in accordance with the current edition of the Diagnostic and Statistical Manual of Mental Disorders (DSM) prior to initiating psychotropic medication. (b) The physician shall document the diagnostic impression in the individual's record, including, but not limited to, the history, symptoms, and any behavioral manifestations that support the impression. (c) A physician shall assess the general health of the individual. This assessment may include a reference to a physical evaluation conducted within the last year, physical examination by the physician, or the referral of the individual for more thorough examination. sec.405.30. Prescribing Parameters. (a) Dose and dosage levels. The TXMHMR Formulary or other professionally accepted and authoritative references will be used as guidelines for dosage. Higher doses may be used only with treatment by or documentation of consultation with a fully-qualified psychiatrist. (b) Pharmacist's responsibility. (1) Prior to dispensing or distributing medication the pharmacist shall review the prescription for: (A) dosage ranges; (B) drug interactions; (C) polypharmacy; and (D) drug allergies or sensitivities. (2) If the pharmacist discovers an irregularity, he or she shall contact the prescribing physician for resolution of the issue. The prescribing physician shall consult with a fully-qualified psychiatrist as needed for additional professional opinion and clinical recommendation. If no agreement is reached, the pharmacist or prescribing physician shall contact the facility medical director for assistance. (c) Polypharmacy. The simultaneous use of more than one psychotropic medication of the same class (polypharmacy) in treating an individual shall be permitted only after the prescribing physician (if not a fully-qualified psychiatrist) has reviewed the matter with a fully-qualified psychiatrist and the prescribing rationale has been documented. (d) PRNs. (1) PRN orders for antipsychotic and anxiolytic drugs are valid for a maximum of 96 hours. (2) All PRN orders for medications other than antipsychotic and anxiolytic drugs are valid for a maximum of 31 days. (3) All PRN orders must include: (A) the target symptoms or signs which trigger use of the medication; (B) the dose to be used; (C) the minimum interval allowed between doses; and (D) the maximum dose in a single 24-hour period. sec.405.31. Emergency Use of Psychotropic Medication. (a) Psychotropic medication may be ordered by a licensed physician in an emergency. The clinical condition and treatment rationale will be documented in the individual's record. (b) Emergency use of psychotropic medication shall be reviewed by the treating physician within five working days with input and participation by the IDT. If continued use of the medication is required or recommended, and the use has not previously been incorporated into the individual's treatment plan, the physician shall ensure that psychiatric consultation is obtained within five days. (c) If the continued use of the medication is recommended all provisions of this subchapter apply to its use. sec.405.32. Initiation and Ongoing Evaluation of Medication Response and Clinical Condition. (a) Initiation of psychotropic medication. When a new psychotropic medication is initiated or a dose is significantly changed: (1) The response and clinical condition of the individual shall be directly evaluated and documented in the individual's record by a physician as often as medically necessary for the period of time needed to stabilize the clinical response, but at least weekly for one month. (2) Side-effects shall be monitored and evaluated by the registered nurse or physician's designee at least weekly for at least one month. The evaluations shall be reviewed weekly by a physician. (b) Monthly evaluation of prescription. At least monthly the individual's prescribing physician and/or a fully qualified psychiatrist, along with appropriate members of the individual's IDT, will review the case of each individual who is taking psychotropic medication. (c) Quarterly psychiatric evaluation. At least quarterly, a fully-qualified psychiatrist will personally review data compiled since the last review, assess each individual taking psychotropic medication, and discuss the case with appropriate members of the individual's IDT. (d) Quarterly tardive dyskinesia screening. All individuals receiving medication known to be associated with tardive dyskinesia shall be screened by an appropriately trained physician, physician's assistant, registered nurse, or pharmacist for involuntary movements prior to initiation of therapy (except in an emergency), with all positive findings verified by a qualified physician, and the verification documented in the individual's record. Subsequent testing shall be performed quarterly for the duration of the treatment, unless otherwise specified, by appropriately trained professional staff utilizing a recognized examination procedure for abnormal involuntary movement. Results shall be documented in the individual's record. Abnormal findings shall be reviewed and verified by a physician. Psychiatric or neurologic consultations will be obtained as clinically indicated, and at the first examination which suggests a diagnosis of tardive dyskinesia. A diagnosis of tardive dyskinesia will only be made by a psychiatrist or neurologist. (e) Quarterly pharmacist's review. (1) At least quarterly, a pharmacist with input from appropriate members of the individual's IDT shall review the drug regimen of each individual consistent with the "Medication Audit Criteria and Guidelines" attached to this subchapter as Exhibit A. (2) The pharmacist must report any irregularities in the drug regimen to the prescribing physician and IDT. The pharmacist must prepare and maintain a record of each individual's drug regimen review. (f) Annual withdrawal. Withdrawal from psychotropic medication shall be attempted in a clinically appropriate manner at least annually, unless clinical evidence is provided and documented in the individual's record that attempted withdrawal is contraindicated. The IDT shall be notified and will participate in clinical and behavioral monitoring as needed. (g) Laboratory and other evaluations. After medication is initiated, laboratory and other evaluations shall be carried out as clinically appropriate. Relevant hematologic and other body systems shall be examined at least every 12 months. (h) Medication concentration in fluids and tissues. Concentrations of medication in body fluids or tissues shall be determined when possible and clinically indicated, provided appropriately valid and reliable laboratory measures are available. sec.405.33. Individuals with Medication-Related Dyskinesias, including Tardive Dyskinesia. For individuals with a verified diagnosis of medication-related dyskinesia (which, for purposes of this subchapter, will include other, similar drug-induced movement disorders), the following provisions shall apply. Variations may be warranted according to specific needs of the individual. (1) The diagnosis, duration (if known), and severity of symptoms will be recorded in the individual's record. (2) Once the diagnosis is confirmed, it will be conveyed to the individual and the individual's legally authorized representative, if any. The relevant aspects of the syndrome will be explained, including the possibility that it may be related to medication. (3) The physician will share the information with appropriate members of the IDT. (4) If the individual is taking antipsychotic or other medication which may be associated with dyskinesias, the risks and benefits of reducing the dosage, discontinuing the medication, or changing to a medication less likely to cause tardive dyskinesia will be considered and documented in the individual's record. (5) For cases in which continuing an apparently causative medication or class of medications is justified, the physician shall: (A) document the rationale for continuing to prescribe the antipsychotic medication to the dyskinetic individual; (B) attempt a discussion of potential benefits and risks with the individual and the individual's authorized representative, if any, and document the attempt and/or discussion in the individual's record; and (C) if the physician is not a fully-qualified psychiatrist, secure and document a second opinion via consultation with a fully-qualified psychiatrist or neurologist. sec.405.34. Prescribing of Psychotropic Medication for Special Populations. (a) Respite services. When an individual admitted for extended respite services is taking psychotropic medication, the facility will attempt to obtain current medical and psychiatric record summaries from the individual's outside attending physician or psychiatrist, if possible. (1) If the facility physician determines the psychotropic medication regimen is not appropriate, the facility physician may choose to change the regimen consistent with clinical need and the provisions of this subchapter. The facility physician will confer with the individual and/or family/guardian of the individual, as appropriate, and the outside prescribing physician, if available, to discuss the proposed changes. The facility physician, if not a fully- qualified psychiatrist, shall obtain a psychiatric consultation prior to any significant change and shall notify the outside prescribing physician of the change. (2) If, in the opinion of the facility treating physician, the preadmission psychotropic medication regimen is appropriate, the medication will be continued. (b) Children/Adolescents. In cases in which large doses of psychotropic medication not usually recommended for pediatric use are warranted, justification and consultation with a fully-qualified psychiatrist, preferably a child psychiatrist, must be documented in the individual's record. (c) Pregnant or nursing individuals. When, based upon consideration of potential benefits and risks, psychotropic medication is required during pregnancy or nursing, the following will occur: (1) Except in an emergency, consultation will be obtained from an obstetrics consultant or the physician currently managing the pregnancy (in the case of pregnant individuals) OR from a pediatrician or the physician currently managing the infant (in the case of nursing individuals), prior to prescribing. (2) A summary of current treatment, including diagnosis and medications, will be communicated to the physician or clinic (if any) providing prenatal or postnatal care. (3) The actions taken in paragraphs (1) and (2) of this subsection will be documented in the individual's record. (c) Other special clinical populations. The facility physician will be aware of special medication issues, and consider consultation with an appropriate specialist, before prescribing psychotropic medication for persons with particular clinical or risk-factors associated with their treatment. In addition to children and adolescents and pregnant or nursing individuals, such persons include the elderly, persons with alcohol and or drug abuse/dependency, and persons with a general medical condition which may significantly affect psychiatric diagnosis or treatment. sec.405.35. Prescribing of Psychotropic Medication for New Admissions. When an individual admitted to a mental retardation facility is already taking a psychotropic medication, psychiatric history will be requested from the prescribing physician. Consideration of psychiatric consultation will be documented by the facility physician within 14 days of admission and, if needed, obtained within 30 days of admission. The medication regimen shall be maintained until or unless a physician orders otherwise. sec.405.36. Use of Medication Commonly Considered Psychotropic for Nonpsychiatric and Non-Behavioral Conditions. Medications commonly considered psychotropic but prescribed for a nonpsychiatric or non-behavioral symptom, sign, or condition (e.g., sleep or spasticity), are not considered "psychotropic" for purposes of this rule. Ordinary prescribing rules and standards will apply. sec.405.37. Quality Improvement. (a) Each state school and state center shall maintain a pharmacy and therapeutics committee (PTC). The PTC will be composed of at least two physicians, one pharmacist, and one registered nurse. (b) On a quarterly basis, the chief pharmacist will submit to the PTC a summary of findings regarding use of psychotropic medication as determined by the quarterly drug regimen review. (c) The PTC shall consider potential problems with utilization of psychotropic medication, findings, conclusions, recommendations, action taken, and results of actions taken. The minutes of the meeting will reflect active physician participation in the psychotropic medication use evaluation process. The minutes or portion of the minutes applicable to medication audit will be maintained in a file in the office of the medical director or the director of quality assurance or management and program evaluation of each facility, subject to outside inspection or review only upon authorization of the director, Legal Services. (d) The PTC shall forward a summary of its recommendations to the facility medical director, who shall share the summary with executive staff. The summary will include known trends or potential problem areas requiring improvement. (e) The TXMHMR Executive Formulary Committee or other duly-appointed departmental bodies will, upon request of the commissioner or the TXMHMR medical director, be authorized to review representative minutes to determine facilities' compliance with this section. (f) The actions of the PTC shall be considered part of the quality-assurance process of each facility, each of which is a healthcare organization as defined in Texas statute. As such, the actions, minutes, reports and data used by the committee shall be confidential and privileged to the fullest extent allowed by law. sec.405.38. Distribution. (a) This subchapter shall be distributed to all members of the Texas Board of Mental Health and Mental Retardation; the medical director; deputy commissioners, associate deputy commissioners, assistant deputy commissioners, and Central Office directors; superintendents and directors of all TXMHMR mental retardation facilities; clinical directors and medical directors of TXMHMR mental retardation facilities; members of the TXMHMR Medical Advisory Committee; and the chair of the TXMHMR Formulary Committee. (b) In addition, the superintendent or director of each TXMHMR mental retardation facility shall: (1) provide an individual copy of this subchapter to every physician who works at or for the facility, whether as an employee, consultant, volunteer, or in another capacity; (2) provide copies to every pharmacist who works at or for the facility; (3) provide copies to the director of nurses and other staff members, as appropriate; (4) maintain copies on each unit and at each service site at which medication is prescribed; and (5) maintain a copy with the policies and procedures manuals of the facility. (c) Each facility will maintain documentation that every salaried or contracted physician who treats individuals in that facility has received a copy of this subchapter and has agreed to abide by it as a condition of his or her employment or contract. 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, on 20, 1994. TRD-9439505 Ann K. Utley Chair Texas Board of Mental Health and Mental Retardation Earliest possible date of adoption: May 30, 1994 For further information, please call: (512) 206-4516 Subchapter I. Consent to Treatment with Psychotropic Medication -Mental Retardation Facilities 25 TAC sec.sec.405.201-405.209 The Texas Department of Mental Health and Mental Retardation (TXMHMR) proposes new sec.sec.405.201-405.209, concerning consent to treatment with psychotropic medication-mental retardation facilities. In addition to establishing procedures for obtaining informed consent for treatment with psychotropic medications for persons admitted to mental retardation facilities, the proposed new rules establishe guidelines for determining the appropriateness of treatment with psychotropic medications for persons who are judicially committed. The proposed rules include a requirement that consent be reviewed and renewed on at least an annual basis, and requires that individuals be informed of their right to withdraw consent to treatment at any time. Leilani Rose, director, Office of Financial Services, has determined that for the first five-year period the rules are in effect, there will be no significant fiscal implications for state or local government as a result of enforcing or administering the rules as proposed. Local economic impact is anticipated to be insignificant. Jaylon Fincannon, deputy commissioner, Mental Retardation Services, has determined that the first five-year period the rules as proposed are in effect, the anticipated public benefit as a result of the rules will be rules establishing procedures to ensuring the extension of the right to refuse medication to persons who are admitted to mental retardation facilities, as well as the establishment of a means of providing due process for judicially committed persons for whom psychotropic medications are prescribed. There will be no effect on small businesses. There is no anticipated economic cost to persons who are required to comply with the rules as proposed. Comments on the proposal may be submitted 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. These sections are proposed under Texas Health and Safety Code, sec.532.015, which provides the Texas Board of Mental Health and Mental Retardation with rulemaking powers. The proposed new sections affects the Texas Health and Safety Code, sec.592.038. sec.405.201. Purpose. The purpose of this subchapter is to: (1) establish requirements for informed consent for treatment with psychotropic medications for those persons who have been voluntarily admitted to a mental retardation facility; (2) provide guidelines for obtaining and documenting this consent; and (3) ensure due process for those persons who have been committed involuntarily to a mental retardation facility under the provisions of the Persons with Mental Retardation Act (PMRA), Texas Health and Safety Code, Subtitle D. sec.405.202. Application. This subchapter applies to all campus-based components of mental retardation facilities of the Texas Department of Mental Health and Mental Retardation. sec.405.203. Definitions. The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise: Chief physician -The medical director or clinical director of a state mental retardation facility. Committed person -A person committed to a mental retardation facility involuntarily under the provisions of the PMRA, Texas Health and Safety Code, Subtitle D, or transferred to a mental retardation facility under the provisions of the Mental Health Code, Texas Health and Safety Code, Part I, Subtitle C. Emergency-A situation which, in the opinion of the treating physician or other appropriate professional, the immediate use of medication is essential to interrupt imminent danger to the person served or others. Fully-qualified psychiatrist -A physician, licensed to practice medicine in Texas, who has completed approved residency training in psychiatry. Informed consent -Voluntary consent given by a person or the legally authorized representative of the person admitted to a mental retardation facility under the voluntary or Order of Protective Custody (OPC) provisions of the PMRA. The basic elements of information necessary to informed consent, and ongoing counselling with the patient regarding his or her care, must be provided by the treating physician or his/her designee in simple, non-technical terms in the person's primary language or mode of communication. The information necessary to provide for informed consent includes: (A) a fair explanation of the procedures to be followed and their purposes; (B) a description of any attendant discomforts and risks reasonably to be expected; (C) a description of any benefits reasonable to be expected; (D) a disclosure of any appropriate alternative procedures that might be advantageous to the person served as well as the potential risks and benefits associated with that alternative; (E) an explanation of the risks or benefits and potential consequences associated with refusal of treatment; (F) an offer to answer any questions concerning the procedures; and (G) an instruction that the consent may be withdrawn at any time without prejudice to the client. Legally authorized representative-The parent, managing conservator, or guardian of a minor; or the guardian of the person of an adult; or the limited guardian of an adult, who has been granted specific authority to consent to such decisions. Medically appropriate treatment-Treatment with psychotropic medication based on a physician's judgment that such medication is clinically indicated and that the medication's potential benefits outweigh its potential risks. Mental retardation facility-All state facilities providing 24-hour residential services to persons with mental retardation. The term applies to the campus-based programs of state schools and state centers, but does not apply to multiple-disability units of state hospitals. Minor-A person under 18 years of age who is not and has not been married or who has not had disabilities of minority removed for general purposes. Outside consultant -A fully-qualified psychiatrist providing services to the facility on a contract-only basis for the purpose of providing a second opinion in the event a committed person or his legally authorized representative objects to the administration of psychotropic medication. The outside consultant shall be a psychiatrist other than the psychiatrist involved in the initiation and/or ongoing evaluation of the individual for whom psychoactive medications have been prescribed. Psychotropic medication -Any medication which is prescribed for the primary purpose of, and with the primary intent of, improving cognition, affective state, and/or behavior. sec.405.204. General Information. (a) Documentation. Each step of the procedure outlined in this subchapter shall be clearly documented in the person's clinical record. (b) Prescribing of psychotropic medications. This subchapter establishes guidelines for obtaining informed consent for administration of psychotropic medications. Such medications will be prescribed in accordance with the guidelines established in Chapter 405, Subchapter B of this title (relating to Prescribing of Psychotropic Medications-Mental Retardation Facilities.) (c) Emergencies. Nothing in this subchapter is intended to preclude the administration of psychotropic medication to any person in an emergency as defined in sec.405.203 of this subchapter (relating to Definitions) and as outlined in Chapter 405, Subchapter B of this title (relating to Prescribing of Psychotropic Medications-Mental Retardation Facilities). sec.405.205. Informed Consent: Persons Admitted Under the Voluntary or Order of Protective Custody (OPC) Provisions of the Persons with Mental Retardation (PMRA). (a) Psychotropic medication will not be administered to persons admitted to a mental retardation facility under the voluntary or Order of Protective Custody (OPC) provisions of the PMRA without first obtaining informed consent or when existing consent has been withdrawn, except as provided in sec.405.204 of this subchapter (relating to General Information). (b) Informed consent to administer psychotropic medication may be given by the legally authorized representative of a person admitted under the OPC provisions of the PMRA, or by the person if he or she meets the criteria for legal capacity described in sec.405.203 of this title (relating to Definitions). (c) Persons who are admitted under the voluntary provisions of the PMRA are presumed to have the legal capacity to give informed consent. sec.405.206. Informed Consent: Persons Involuntarily Committed Under the Provisions of the PMRA (Judicial Commitment). (a) Persons admitted under judicial commitment do not require informed consent for medically appropriate treatment, although such persons or their legally authorized representatives objecting to the treatment will be afforded due process, as outlined in subsection (d) of this section. (b) Persons admitted under judicial commitment receiving psychotropic medication at the time of admission may be continued on that medication until the development of the individual rehabilitation plan (IHP) by the interdisciplinary team (IDT), within 30 days of admission. (c) On recommendation of the interdisciplinary team, the superintendent/director or his/her designee may authorize continued use or initiation of the use of psychotropic medication for a judicially committed person. In such a case, the person and his or her legally authorized representative will be provided information necessary to informed consent, including the risks and benefits of the prescribed psychotropic medication, and will be informed of his or her right to object to the treatment. (d) If a committed person or his legally authorized representative objects to the administration of psychotropic medication, the following review procedure will be initiated: (1) The chief physician of the mental retardation facility will ensure that an outside consultant psychiatrist will, within 14 calendar days of the person's objection or that of his or her legally authorized representative: (A) personally examine the person; (B) interview the person and his or her legally authorized representative, if the representative is available; (C) review the clinical record; (D) discuss the case with the treating physician; and (E) make a determination concerning the appropriateness of treatment with psychotropic medication. (2) Psychotropic medication may be administered if the outside consultant determines that the administration of such medication is medically appropriate treatment. In making this determination, the outside consultant will consider: (A) the accuracy of the diagnosis; (B) indications for the medication; (C) probable benefits and risks of the medication; (D) the existence and value of alternative, less restrictive forms of treatment, if any; and (E) whether the medication promotes greater functional independence. (3) If, at any time, the outside consultant determines that the administration of a psychotropic medication is not medically appropriate treatment, the administration of such medication will be discontinued within a reasonable period of time based on the condition of the person and the type and dosage of medication being administered pursuant to the professional judgment of the treating physician. (4) Evaluation of individuals administered psychotropic medications pursuant to a determination under subsection (b) of this section will be in keeping with provisions outlined in sec.405.59 of this title (relating to Prescribing of Psychotropic Medications). sec.405.207. Documentation of Informed Consent. (a) Informed consent for the administration of psychotropic medication will be evidenced by a form which includes on it the information necessary to provide for informed consent, executed by a person admitted under the voluntary or OPC provisions of the PMRA or by that person's legally authorized representative. Persons who have been involuntarily committed and who do not object to treatment with psychotropic medications should also execute the form to indicate that they received information about the treatment and do not object. Facilities may use the standard "Departmental Form for Consent to Treatment with Psychotropic Medication," which is referred to in sec.405.208 of this title (relating to Exhibits) as Exhibit A, or they may develop a mechanism of their own. (1) The executed form will be retained in the person's clinical record. (2) A new 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 would, in the clinical judgment of the interdisciplinary team, result in a significant change in the risks or benefits to the person. (b) If the person or his legally authorized representative consents to the administration of psychotropic medication but is physically incapable or is unavailable to execute the form, the treating physician or his/her designee will document the verbal consent in the person's clinical record. (c) The treating physician or his/her designee will discuss the administration of psychotropic medication with all persons for whom such medication has been prescribed, will provide to them the information required for informed consent as described in sec.405.203 of this title (relating to Definitions), and will attempt to create a therapeutic alliance with each person for whom medication has been prescribed. sec.405.208. Exhibits. Copies of Exhibit A-Departmental Form for Consent to Treatment with Psychotropic Medication are available from the Texas Department of Mental Health and Mental Retardation, P.O. Box 12668, Austin, Texas 78711- 2668. sec.405.209. Distribution. (a) The provisions of this subchapter shall be distributed to members of the Texas Board of Mental Health and Mental Retardation; the medical director; deputy commissioners, associate deputy commissioners, and assistant deputy commissioners and Central Office directors; superintendents and directors of all TXMHMR mental retardation facilities; clinical directors and medical directors of TXMHMR mental retardation facilities; members of the TXMHMR Medical Advisory Committee; and the chair of the TXMHMR Formulary Committee. (b) In addition, the superintendent or director of each TXMHMR mental retardation facility shall: (1) provide an individual copy of this subchapter to every physician who works at or for the facility, whether as an employee, consultant, volunteer, or in another capacity; (2) provide copies to every pharmacist who works at or for the facility; (3) disseminate the information contained in this subchapter to appropriate staff members. (c) Each facility will maintain documentation that every salaried or contracted physician who treats individuals in that facility has received a copy of this subchapter and has agreed to abide by it as a condition of his or her employment or contract. This agency hereby certifies that the sections have been reviewed by legal counsel and found to be within the agency's authority to adopt. Issued in Austin, Texas, on 20, 1994. TRD-9439506 Anne K. Utley Chair Texas Board of Mental Health and Mental Retardation Earliest possible date of adoption: May 30, 1994 For further information, please call: (512) 206-4516 TITLE 28. INSURANCE Part I. Texas Department of Insurance Chapter 7. Corporate and Financial Subchapter A. Examination and Corporate Custodian and Tax 28 TAC sec.7.36 (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 Department of Insurance or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.) The Texas Department of Insurance proposes the repeal of s7.36 concerning the preparation and filing of a report of the audit of an insurer's workers' compensation reserves by all insurers which transact workers' compensation business in Texas. The repeal of this section will eliminate Form WCR-1. The repeal of this section is necessary to streamline reporting requirements for insurers which transact workers' compensation business in Texas and to enable the Texas Department of Insurance simultaneously to adopt a new sec.7.36, which replaces the repealed section with other provisions concerning preparation and filing of a report of the audit of an insurer's workers' compensation reserves. Notification of the proposed new section which replaces this repealed section appears elsewhere in this issue of the Texas Register. Sandra Autry, associate commissioner for the financial program, has determined that, for the first five-year period the repeal of the section is in effect, there will be no fiscal implications for state or local government as a result of the repeal of the section. Ms. Autry also has determined that, for each year of the first five years the repeal of the rule is in effect, the public benefit anticipated as a repeal of the section will be more efficient and accurate reporting of data on workers' compensation reserves of insurers. There will be no effect on small businesses. There is no anticipated economic cost to persons who are required to comply with the repeal as proposed. 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, P.O. Box 149104, Austin, Texas 78714-9104. An additional copy of the comments should be submitted to Sandra Autry, Associate Commissioner for the Financial Program, Mail Code 305-2A, P.O. Box 149104, Austin, Texas 78714-9104. The repeal of the existing rule is authorized under the Insurance Code, Articles 5.61 and 1.03A. Article 5.61 requires each workers' compensation insurer transacting business in Texas to maintain reserves in an amount estimated to provide for the payment of all losses and to file a report with the Department showing its year-end loss, expense, and unearned premium reserves for workers' compensation insurance results in Texas and that the report must be audited by an independent certified public accountant. Article 1.03A authorizes the commissioner to adopt rules and regulations for the conduct and execution of the duties and functions of the department only as authorized by statute for general and uniform application. The Insurance Code, Article 5.61, is affected by this rule. sec.7.36. Audited Report of Workers' Compensation Reserves. 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, on January 1, 1988. TRD-9439710 D.J. Powers Legal Counsel to the Commissioner Texas Department of Insurance Earliest possible date of adoption: May 30, 1994 For further information, please call: (512) 463-6327 The Texas Department of Insurance proposes new sec.7.36, concerning the preparation and filing of a report of the audit of an insurer's workers' compensation reserves by all insurers which transact workers' compensation business in Texas. The proposal of new sec.7.36 is simultaneous with the proposed repeal of present sec.7.36. Notice of the proposed repeal appears elsewhere in this issue of the Texas Register . The new section will eliminate Form WCR-1 and streamline reporting requirements of workers' compensation data submitted to the Texas Department of Insurance by consolidating some of the data in call reports and the data that was required under existing s7.36. The proposed rule implements the requirement of Insurance Code, Article 5.61, which requires an audit of data relating to an insurers Texas workers' compensation reserves. The proposed rule will require insurers which have issued new or have renewal workers' compensation insurance policies in this state in the most recent calendar year to have the data, specified in the proposed rule, audited. This is a reduction in the scope of the existing regulation, which required any insurer which had written workers' compensation insurance in the past five years to have this information audited. Sandra Autry, associate commissioner for the financial program, has determined that for the first five-year period the proposed new section will be in effect, there will not be fiscal implications for state or local government as a result of enforcing or administering the proposed section and there will be no effect on local employment or local economy Ms. Autry also has determined that for each year of the first five years this section as proposed is in effect, the public benefit anticipated as a result of enforcing this section will be more efficient and accurate reporting of data on workers' compensation reserves of insurers. The information formerly required to filed with the department in Form WCR-1 will be contained in a new report that insurance companies writing workers' compensation insurance will file with the Texas Department of Insurance. The anticipated economic cost to small businesses and to other persons who are required to comply with this section as proposed will not be significantly different than compliance with the rule that is being repealed simultaneously with the adoption of this proposed rule. The cost of complying with the existing regulation was estimated to range from three or four thousand dollars to 15 or 20,000 thousand dollars. Cost of compliance with the proposed new section is estimated to be the same;however, only those insurers which issued new or renewal workers' compensation insurance policies in the most recent calendar year will be required to have the data audited. On the basis of cost per hour of labor, there will be no difference in cost of compliance between small businesses and larger businesses. Comments on the proposal, to be considered by the commissioner of insurance, 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, P.O. Box 149104, Austin, Texas 78714-9104. An additional copy of the comments should be submitted to Sandra Autry, Associate Commissioner for the Financial Program, Mail Code 305-2A, P.O. Box 149104, Austin, Texas 78714-9104. The proposed new rule is authorized under the Insurance Code, Articles 5.61, 5.62 and 1.03A. Article 5.61 requires each workers' compensation insurer transacting business in Texas to maintain reserves in an amount estimated to provide for the payment of all losses and to file a report with the Department showing its year-end loss, expense, and unearned premium reserves for workers' compensation insurance results in Texas and that the report must be audited by an independent certified public accountant in accordance with generally accepted auditing standards and the rules of the department. Article 5.62 authorizes the commissioner to make and enforce rules necessary to carry out the provisions of the Insurance Code, Chapter 5, Subchapter D, concerning the regulation of workers' compensation insurance. Article 1.03A authorizes the commissioner to adopt rules for the conduct and execution of the duties and functions of the department only as authorized by statute for general and uniform application. The proposed rule affects Insurance Code, Article 5.61. sec.7.36. Report on Audit of Workers' Compensation Reserves. (a) Applicability. This section applies to all insurers which are authorized to write and which have issued new or renewal workers' compensation insurance policies in this state in the most recent calendar year. (b) Scope of Audit. The workers' compensation data which is to be audited is contained in Texas Workers' Compensation Financial Call Plan, Calls 5, 5(supplement), 5A, and 5A(supplement), required by the department. The data to be audited in these forms shall be audited by the same accountant that performs the annual audit of the insurer under Insurance Code, Article 1.15A, if such an audit is performed, and such data is described in paragraphs (1)-(4) of this subsection as follows: (1) From page 2, column 11, Accident Year Outstanding Losses Excluding IBNR- Indemnity-Case and Bulk-last 5 accident years only; (2) From page 2, column 12, Accident Year Outstanding Losses Excluding IBNR- Medical-Case and Bulk-last 5 accident years only; (3) From page 4, column 19, Accident Year Unearned Premium -last accident year only; and (4) From page 4, column 21, Accident Year Allocated Loss Adjustment Expense Outstanding-last 5 accident years only. (c) Audit Coverage. The report of the audit of the workers' compensation reserves described in subsection (b) of this section shall address the items described in paragraphs (1)-(4) of this subsection: (1) the opinion of the accountant, which should address the validity of data reported and not the adequacy of reserves; (2) a statement of the amount of Texas workers' compensation reserves as prescribed by subsection (b)(1)-(4) of this section; (3) any notes to the statement required in paragraph (2) of this subsection; and (4) a statement that the accountant has reviewed the Reconciliation Report for Compensation Experience (identified as page 4 of 6 in the call reports) and that the amounts therein agree with the amounts of the same data items reported elsewhere in the Call reports and reported on page 14 of the Annual Statement. For purposes of this section, this paragraph is not intended to require the accountant to audit data beyond that described in subsection (b)(1)-(4) of this section. (d) Filing Requirements for Audit Reports of Workers' Compensation Data. The audit report required by this section shall be filed with the Financial Program, 333 Guadalupe, Mail Code 303-1A, P.O. Box 149099, Austin, Texas 78714-9099 on or before June 30 of the year following the year audited. If the insurer is required to file an annual audit report under Insurance Code, Article 1.15A, then the audit report required under this section shall be filed as a supplement to the annual audit report. 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, on April 23, 1994. TRD-9439709 J.D. Powers Legal Counsel to the Commissioner Texas Department of Insurance Earliest possible date of adoption: May 30, 1994 For further information, please call: (512) 463-6327 28 TAC sec.sec.7.1601-7.1615 The Texas Department of Insurance proposes new sec.sec.7.1601-7.1615, concerning licensing, examination, and taxation of third party administrators. Additionally, the proposed new sections concern exemption from licensing requirements for third party administrators solely administering "employee benefit plans" as defined in the Employee Retirement Income Security Act, (ERISA), codified at 29 United States Code sec.1001, et seq. ERISA provides exclusive federal jurisdiction over regulation of employee benefit plans described in 29 United States Code sec.1003(a), and preempts any state regulation that "relates" to such plans. See 29 United States Code sec.1144(a). In NGS American Inc. v. Barnes, 988 F. 2d 296 (5th Cir. 1993), the Fifth Circuit held that Article 21.07-6 of the Texas Insurance Code, which regulates third party administrators relates to employee benefit plans, to the extent it is applied to third party administrators in their capacity as administrators of employee benefit plans governed exclusively by ERISA. However, ERISA includes a "savings clause" which preserves certain categories of state laws from preemption, namely, insurance, banking and securities. See 29 United States Code sec.1144(b)(2)(A). The states may also apply their insurance laws to multiple employer welfare arrangements described in 29 United States Code sec.1144(b)(6)(A)(ii). Because ERISA permits states to regulate insurance, including multiple employer welfare arrangements, the purpose of these new sections is to create an exemption from regulation for those third party administrators solely administering employee benefit plans governed exclusively by ERISA. The new sections also adopt forms by reference to be used by the Department for the application, registration, filing and documentation of third party administrators by the Department. The Department has filed a copy of the forms with the Secretary of State's office, Texas Register section. Persons desiring copies of the forms can obtain such from the Texas Department of Insurance, Third Party Administrator Unit, Mail Code 105-6A, P.O. Box 149104, Austin, Texas 78714-9104. The proposal of new sec.sec.7.1601-7.1615 is simultaneous with the proposed repeal of existing sec.sec.7.1601-7.1613. Notice of the proposed repeal appears elsewhere in this issue of the Texas Register. Beverly McVey, director of the licensing group, has determined that for each year of the first five-years the new sections will be in effect, there will be no fiscal implications to state and local government as a result of enforcing or administering the sections, and there will be no effect on local employment or the local economy. Enforcement and administration will be performed by existing staff of the department. Ms. McVey also has determined that, for each year of the first five years the new sections are in effect, the public benefit resulting from the implementation of these new sections will be that regulation by the Texas Department of Insurance will accord with ERISA. There will be no effect on small businesses. There is no anticipated economic cost to persons who are required to comply with the sections as proposed. Comments on the proposal to be considered by the Department must be submitted within 30 days after publication of the proposed sections in the Texas Register to D. J. Powers, Legal Counsel to the Commissioner, Texas Department of Insurance, P.O. Box 149104, Mail Code 113-2A, Austin, Texas 78714-9104. An additional copy of the comment should be submitted to Beverly McVey, Director, Licensing Group, Texas Department of Insurance, Mail Code 107-1B, P.O. Box 149104, Austin, Texas 78714-9104. Request for a public hearing on this proposal should be submitted separately to the Chief Clerk's office. The new sections are proposed pursuant to the Insurance Code, Articles 21. 07- 6, 1.02, 1.03A, and 1.04C; and the Government Code, sec.2001.004, et seq. Article 21.07-6, which regulates third party administrators, authorizes the State Board of Insurance to promulgate reasonable rules and regulations that are appropriate to accomplish the purposes of the article. This rulemaking authority is interpreted to be delegated to the Commissioner of Insurance under Article 1.02 of the Insurance Code, as amended by the 73rd Texas Legislature in House Bill 1461, which provides that a reference in the Insurance Code or another insurance law to the State Board of Insurance means the Commissioner of Insurance or the Texas Department of Insurance, as consistent with the respective powers and duties of the Commissioner and the Department under Article 1.02. Article 1.03A, as enacted in House Bill 1461, provides that the Commissioner of Insurance may adopt rules and regulations, which must be for general and uniform application, for the conduct and execution of the duties and functions of the Texas Department of Insurance only as authorized by a statute. Article 1.04C of the Insurance Code, as enacted in House Bill 1461, requires the Commissioner of Insurance to develop and implement policies that provide the public with a reasonable opportunity to appear before the Commissioner and to speak on any issue under the Commissioner's jurisdiction. The Government Code, sec.2001.004, et seq (Administrative Procedure Act) authorizes and requires each state agency to adopt rules of practice setting forth the nature and requirement of available procedures and to prescribe the procedures for adoption of rules by a state agency. The following articles of the Insurance Code are affected by this rule: sec.sec.7.1601-7.1615, The Insurance Code, Article 21.07-6. sec.7.1601. Definitions. The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise. Administrative or service fees-The total gross amount of all consideration, fees, assessments, payments, reimbursements, dues, and any other compensation, monetary or otherwise, received by a third party administrator during the taxable year. Administrative or service fees shall not include sales commissions received by an administrator that has a valid agent's license or lawfully distributed by the administrator to licensed agents or other sales representatives. Administrative or service fees shall not include those amounts received for the administration of employee benefit plans governed exclusively by ERISA. Administrator, third party administrator, or TPA -A person who collects premiums or contributions from, or who adjusts or settles claims in connection with life, health and accident benefits or annuities for residents of this state, but the term does not include those persons to the extent their operations are specifically excluded in the Insurance Code, Article 21.07-6, sec.(1)(A)-(R) or are exempted from regulation pursuant to sec.7.1606(a) of this subchapter. ERISA-The Employee Retirement Income Security Act of 1974, codified at 29 United States Code sec.1001, et seq, which includes the series of federal statutes regulating employee benefit plans and pension plans. Functions of a group policyholder-All services, functions, duties, or activities which may lawfully be delegated to a policyholder pursuant to a contract between an insurer and a group policyholder. Plan-A plan, fund, or program established, adopted, or maintained by a plan sponsor, insurer, or person to the extent that the plan, fund, or program is established, adopted, or maintained to provide: (A) indemnification or expense reimbursement for a life, health, or accident benefit; or (B) an individual or group annuity business. Trade name-An assumed name or DBA (doing business as) which is used by an administrator in its operations or activities with residents of this state. sec.7.1602. Forms Relating to Regulation and Exemption of Administrators Under the Insurance Code, Article 21.07-6.
                                                                                                                                  The Texas Department of Insurance adopts and incorporates herein by reference standard administrator forms for use in the regulation and exemption from regulation of administrators. Applicants and licensed administrators are required to utilize these forms in preparing applications, requests for exemptions, statements, notices of required information, and other submissions required under the Insurance Code, Article 21.07-6, and this subchapter. These forms are published by the Texas Department of Insurance and may be obtained from the Third Party Administrator Unit, Mail Code 105-6A, Texas Department of Insurance, P.O. Box 149104, 333 Guadalupe, Austin, Texas 78714-9104. These forms are more specifically identified in paragraphs (1)-(10) of this subsection: (1) TPA Form Number 1, Name Application; (2) TPA Form Number 1A, Assumed Name Certificate; (3) TPA Form Number 2, Application for Certificate of Authority; (4) TPA Form Number 2A, Supplemental Information/Annual Report; (5) TPA Form Number 3, Officers and Directors Page; (6) TPA Form Number 4, Biographical Affidavit; (7) TPA Form Number 5, Service of Process; (8) TPA Form Number 6, Identification and Reporting of Certain Insurers and Health Maintenance Organizations; (9) TPA Form Number 7, ERISA Exemption/Registration Form; (10) TPA Form Number 7A, Summary Plan Description. sec.7.1603. Application for Certificate of Authority. (a) Any person who collects premiums or contributions from, or who adjusts or settles claims in connection with life, health, and accident benefits or annuities for residents of this state, excluding those persons identified in the Insurance Code, Article 21.07-6, sec.(1)(A)-(R), or in sec.7. 1606 of this title (relating to Exemption from Licensing for Certain Administrators) of this subchapter, must apply for a license to operate as a third party administrator. (b) Applications for a certificate of authority shall be made in the name of the corporation, partnership, or sole proprietor on TPA Form 2. The certificate of authority, when issued, shall extend to the officers and managers of the corporation, so long as they remain in that capacity and are qualified to act as an officer or manager of that corporate TPA; to each of the partners of the partnership so long as they remain in that capacity and are qualified to act as a partner of that partnership TPA; and to the sole proprietor of such sole proprietor TPA. The certificate of authority when issued shall not extend to any employees, agents, or subcontractors of the applicant. (c) A certificate of authority issued to an administrator under the Insurance Code, Article 21.07-5 (repealed 71st Legislature, 1989) has the same effect as a certificate of authority issued under the Insurance Code, Article 21.07-6. The administrator is still subject to the provisions of the Insurance Code, Article 21.07-6. An administrator that has submitted all or part of the documents required for the application of a certificate of authority under the Insurance Code, Article 21.07-5, can be required to submit only those documents needed to make the application administratively complete. (d) If items required under this subchapter for application for a certificate of authority are absent, or deemed insufficient by the commissioner, the commissioner shall notify the applicant and the applicant shall be given a reasonable time to correct said deficiencies. If, after the reasonable time has expired the deficiencies have not been corrected, the commissioner will notify the applicant by letter that, if the applicant does not request an opportunity for a hearing, the commissioner will withdraw the application without prejudice. (e) Applicants may request in writing to the commissioner that their application be withdrawn from the consideration process. This request must be made prior to the issuance or denial of a certificate of authority. However, when requesting withdrawal of an application, an applicant must not have operated or be operating as an administrator under the Insurance Code, Article 21.07-6, in this state. In the event an application is withdrawn or denied, any fees submitted with the application will not be refunded. After a withdrawal and prior to commencing any administrator activities in this state, applicants must submit a new application with appropriate fees. sec.7.1604. Application Denial, Suspension, Cancellation, or Revocation.
                                                                                                                                    If the commissioner denies the application, the affected party may not resubmit a new application for a period of time not less than one year from the date of denial. If the commissioner suspends a certificate of authority, the affected party may not operate as an administrator for a period of time certain as specified in the suspension order which may not exceed one year from the date of suspension. If the commissioner cancels or revokes a certificate of authority, the affected party may not resubmit a new application for a period of time not less than one year from the date of the cancellation or revocation. sec.7.1605. Application Procedures. (a) Each applicant for a TPA certificate of authority will complete TPA Form 2 in compliance with the requirements in the Insurance Code, Article 21. 07-6 and this subchapter. TPA Form 2 will be completed as prescribed and accompanied by such documents, statements, notices, and attachments necessary to support the application. Applicants with a relationship or affiliation such as a commonality of management, ownership, and/or consolidated financial information may, upon written request and approval of the commissioner, be permitted to submit only one copy of the required information to avoid duplicative filings by such related or affiliated applicants. Applicants will be provided a listing of documents required to complete their application. (b) Each applicant must reserve its name by completing TPA Form 1. The name of the entity on TPA Form 1 must agree in complete detail with the actual legal name of the applicant. A TPA shall transact business in its own name, which shall not closely resemble the name of any other insurer or TPA doing business in this state. If the name does resemble the name of any other insurer or TPA, the applicant TPA may do business under a trade name. If a trade name is to be used in this state, the applicant must complete TPA Form 1A to reserve the use of the trade name. (c) One complete, originally signed copy of each statement, notice, form, or application, including exhibits and all other papers and documents filed as a part thereof, shall be filed with the commissioner of insurance and addressed to: Third Party Administrator Unit, Mail Code 105-6A, Texas Department of Insurance, 333 Guadalupe, P. O. Box 149104, Austin, Texas 78714-9104. (d) Statements, notices, forms, and applications should be prepared on paper 8 1/2 inches by 11 inches in size. All copies of any statement, notice, application, exhibit, or financial statement shall be clear, easily readable, and suitable for microfilming and photocopying. Debits in credit categories and credits in debit categories shall be designated so as to be clearly distinguishable as such on microfilm and photocopies. Statements, notices, and applications shall be stated in the English language and monetary values shall be stated in United States currency. If any exhibit or other paper or document filed with a statement, notice, or application is in a foreign language, it shall be accompanied by an accurate English language translation, and any monetary value other than in United States currency shall be converted into United States currency and the rate of exchange used shall be as of the date of the financial statement filed by the applicant. sec.7.1606. Exemption from Licensing for Certain Administrators. (a) An administrator who is acting solely as the administrator of employee benefit plans described in 29 United States Code sec.1003(a) is exempt from regulation under the Insurance Code, Article 21.07-6.. This exemption shall not apply to administrators of multiple employer welfare arrangements described in 29 United States Code, sec.1144(b)(6)(A)(ii). Administrators who solely administer employee benefit plans as described in 29 United States Code, sec.1003(a) must request and receive exempt status from the Texas Department of Insurance. To receive exempt status, an administrator must: (1) complete and submit a request for ERISA exemption and registration form on TPA Form 7; and (2) obtain from the employer or employee organization establishing the plan a complete description of the plan, on TPA Form 7A for all plans serviced by the administrator. (b) Administrators will be notified, in writing, of the approval or denial of the request for exemption. There shall be no filing fee for the filing of a request for exemption. The exemption, if granted, shall last for 12 months from the date the exemption was granted. Upon expiration of the exemption, an administrator must file for new exemption status. Any subsequent exemption filings must contain the required documents submitted with the initial exemption request. sec.7.1607. Identification and Reporting Requirements for Certain Insurers and Health Maintenance Organizations. (a) An insurer who otherwise collects premiums or contributions from or adjusts or settles claims in connection with life, health, and accident benefits or annuities for residents of this state may not act as or hold itself out as an administrator unless it has notified the commissioner of its intent to do business under the Insurance Code, Article 21.07-6, except to the extent its operations or activities are exempt as described in subsection (b) of this section. (b) Exempt operations or activities are those operations described in paragraphs (1) and (2) of this subsection which exclusively consist of either: (1) an insurance company which is collecting premiums for or adjusting or settling claims under its own insurance policies or annuities; (2) a health maintenance organization authorized to operate in this state under the Texas Health Maintenance Organization Act for the following purposes: (A) collecting revenues on its own behalf for evidences of coverage that it has issued and delivered under state law; (B) adjusting or settling claims under evidences of coverage issued and delivered by it under state law, including the contracting with and payment to providers for performing services, verification of eligibility, and subrogation; (C) collecting premiums, adjusting, or settling claims for insurance which was issued incidental or supplemental to its lawfully issued and delivered evidences of coverage; and (D) performing any other activity that is specifically regulated by the Texas Health Maintenance Organization Act, or exempt under this Act or through operation of federal law. (c) Insurers specifically described in subsection (a) of this section are subject to all the provisions of this subchapter except sec.7.1603 of this title (relating to Application for Certificate of Authority), sec.7.1605 of this title (relating to Application Procedures), sec.7.1612 of this title (relating to Supplemental Information/Annual Report), and sec.7.1613 of this title (relating to Fidelity Bond) and are subject to any other appropriate statutes and regulations. The following provisions in paragraphs (1)-(3) of this subsection apply to such insurers. (1) Each insurer must transact business under the name in which it holds a certificate of authority. (2) Every insurer that is operating as an administrator must notify the commissioner, on TPA Form 6, of its activities as an administrator prior to commencing operations. (3) Every insurer shall, on or before March 1 of each calendar year, prepare and submit to the commissioner an annual report, on TPA Form 6, concerning the insurer's organization, operation, and status as an administrator with respect to Texas risks for the preceding calendar year sec.7.1608. Fees. (a) The commissioner shall collect, and the person affected shall pay to the commissioner, the fees set forth in paragraphs (1)-(3): (1) $500-Filing fee for processing an original application for a certificate of authority; (2) $250-On-site visit examination fee as specified in the Insurance Code, Article 21.07-6, sec.8; and (3) $100-Filing fee for annual report. (b) No fee shall be due and owing from administrators applying or registering for exempt status pursuant to sec.7.1606. sec.7.1609. Prohibited Transactions.
                                                                                                                                      A TPA may not engage in any of the activities listed in paragraphs (1)-(5) of this section: (1) misrepresenting the terms, advantages, or nature of its service contract; (2) making false or incomplete comparisons with the service contracts of other TPAs or persons in order to induce a plan, insurer, or person to enter into, continue, or discontinue any service contract with the TPA; (3) accepting or rejecting risk other than in compliance with and in accordance with the terms of the written agreement structured under the requirements of the Insurance Code, Article 21.07-6, sec.11; (4) publishing or circulating any advertising or informational material, benefit descriptions, certificates, booklets, or brochures pertaining to business underwritten by a plan, insurer, or plan sponsor without the advance written approval of such plan, insurer, or plan sponsor; or; (5) designing, constructing, or implementing barriers under the written agreement that would unreasonably restrict the right of a plan participant to avail himself of individual life, health, or accident policies or annuities through an agent selected by the plan participant. sec.7.1610. On-Site Visits. (a) The commissioner or his designated representative is authorized to make a complete on-site visit examination of the affairs of each administrator as often as is deemed necessary. (b) Administrators will be notified of the scheduled on-site visit by letter, which will specify, as a minimum, the identity of the commissioner's designated representative and the expected arrival date and time. (c) The administrator must make available during such on-site visits all books and records relating to its operation, including but not limited to, the information specified in paragraphs (1) and (2) of this subsection: (1) complete copies of any written agreements as defined in the Insurance Code, Article 21.07-6, sec.11; and (2) financial statements. sec.7.1611. Cease and Desist Orders. The commissioner is authorized pursuant to the Insurance Code, Article 1.10A, to issue emergency cease and desist orders prior to notice and hearing if it appears to the commissioner that the alleged misconduct is fraudulent or creates an immediate danger to the public safety or is causing or can be reasonably expected to cause significant, imminent, and irreparable public injury. sec.7.1612. Supplemental Information/Annual Report. (a) Every TPA must ensure that the commissioner is informed, on TPA Form 2A, within 20 days, of any change in ownership, officers, directors, partners, sole proprietors, or any other significant change that might have an impact on the TPA's operations or certificate of authority. The Texas Department of Insurance will designate the manner in which the TPA will inform the commissioner of any of the changes specified in this subsection that will have an impact on the TPA's operations or certificate of authority. (b) Every TPA shall, on or before March 1 of each calendar year, prepare and submit to the commissioner a sworn report on a completed TPA Form 2A, concerning the TPA's organization, operations, and status for the preceding calendar year. (c) An administrator shall notify and deliver a copy of any order or judgment to the commissioner within 30 days of the occurrence in another state of any one or more of the actions set forth in paragraphs (1)-(4) of this subsection: (1) suspension or revocation of the administrator's right to do business; (2) receipt of an order to show cause why its license should not be suspended or revoked; (3) imposition of any penalty, forfeiture, or sanction on it for any violation of the insurance laws of such other state; or (4) any of the actions in paragraphs (1)-(3) of this subsection with respect to any of an administrator's partners, directors, officers, or persons who own more than 10% of the voting interest of an administrator. sec.7.1613. Fidelity Bond.
                                                                                                                                        The fidelity bond, as required by the provisions of the Insurance Code, Article 21.07-6, sec.6, will be equal to at least 10% of the amount of total funds handled during the preceding year or, if no funds were handled during the preceding year, 10% of the amount of funds reasonably estimated to be handled during the current calendar year. In no event will the fidelity bond be less than $10,000 nor will a fidelity bond be required in excess of $500,000. Funds handled will be as defined in the Insurance Code, Article 21.07-6, sec. 6(d). sec.7.1614. Maintenance Tax.
                                                                                                                                          Each administrator shall annually pay a maintenance tax on its correctly determined administrative or service fees with respect to risks located in this state. The maintenance tax rate will be determined annually, but may not exceed 1.0%. Each administrator shall complete and submit the maintenance tax on a tax form prescribed by the Office of the Texas Comptroller of Public Accounts. sec.7.1615. Severability. If any section or portion of a section this Subchapter P is held to be invalid for any reason, all valid parts are severable from the invalid parts and remain in effect. If any section or portion of a section is held to be invalid in one or more of its applications, the part remains in effect in all valid applications that are severable from the invalid applications. To this end, all provisions of sec.sec.7.1601-7.1614 of this title (relating to Licensing and Examination of Third party Administrators) are declared to be severable. 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, on April 20, 1994. TRD-9439500 D. J. Powers Legal Counsel to the Commissioner Texas Department of Insurance Earliest possible date of adoption: May 30, 1994 For further information, please call: (512) 463-6327 Subchapter P. Third Party Administrators; Examinations; Licenses 28 TAC sec.sec.7.1601-7.1613 (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 Department of Insurance or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.) The Texas Department of Insurance proposes the repeal of ssec.7.1601-7. 1613, concerning the regulation, examination, and licensing of third party administrators. The repeal of this subchapter is necessary to enable the commissioner simultaneously to adopt a new subchapter which replaces the repealed sections with other provisions concerning the regulation of third party administrators. This repeal and adoption of a new subchapter is necessary to bring the regulation by the Texas Department of Insurance into accord with ERISA. ERISA provides exclusive federal jurisdiction over regulation of employee benefit plans described in 29 United States Code, sec.1003(a), and preempts any state regulation that "relates" to such plans. Notification appears elsewhere in this issue of the Texas Register of the proposed new sections which would replace those sections proposed for repeal. Beverly McVey, director of the licensing group, has determined that for each year of the first five years the proposed repeal 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 repeal, and there will be no effect on the local employment or local economy. Ms. McVey also has determined that for each year of the first five years the repeal is in effect, the public benefit anticipated as a result of enforcing the repeal will be that regulation by the Texas Department of Insurance will accord with ERISA. There will be no effect on small businesses. There is no anticipated economic cost to persons who are required to comply with the repeal as proposed. Comments on the proposal must be submitted within 30 days after the publication of the proposed section in the Texas Register to the Office of the Chief Clerk, Texas Department of Insurance, P.O. Box 149104, Mail Code 113-2A, Austin, Texas 78714-9104. An additional copy of the comment is to be submitted to Beverly McVey, Director, Licensing Group, Texas Department of Insurance, Mail Code 107- 1B, 333 Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104. Any request for a public hearing on this proposal should be submitted separately to the office of the Chief Clerk. The repeal is proposed pursuant to the Insurance Code, Articles 21.07-6, 1. 02, 1.03A, and 1.04C, and the Government Code, s2001.004, et seq. Article 21. 07-6 authorizes the State Board of Insurance to promulgate reasonable rules and regulations that are appropriate to accomplish the purposes of the Article regulating Third Party Administrators. This authority is interpreted to be delegated to the Commissioner of Insurance under Article 1.02 of the Insurance Code, as amended by the 73rd Texas Legislature in House Bill 1461, which provides that a reference in the Insurance Code or another insurance law to the State Board of Insurance means the Commissioner of Insurance or the Texas Department of Insurance, as consistent with the respective powers and duties of the Commissioner and the Department under Article 1.02. Article 1.03A, as enacted in House Bill 1461, provides that the Commissioner of Insurance may adopt rules and regulations, which must be for general and uniform application, for the conduct and execution of the duties and functions of the Texas Department of Insurance only as authorized by a statute. Article 1.04C of the Insurance Code, as enacted in House Bill 1461, requires the Commissioner of Insurance to develop and implement policies that provide the public with a reasonable opportunity to appear before the Commissioner and to speak on any issue under the Commissioner's jurisdiction. The Government Code, sec.2001.004 et seq (Administrative Procedure Act) authorize and require each state agency to adopt rules of practice setting forth the nature and requirement of available procedures and to prescribe the procedures for adoption of rules by a state agency. The following articles are affected by this repeal: sec. s7.1601-7.1613, Insurance Code, Article 21.07-6. sec.7.1601. Definitions. sec.7.1602. Forms Relating to Regulation of Administrators Under the Insurance Code, Article 21.07-6. sec.7.1603. Application for Certificate of Authority. sec.7.1604. Application Denial, Suspension, Cancellation or Revocation. sec.7.1605. Application Procedures. sec.7.1606. Identification and Reporting Requirements for Certain Insurers and Health Maintenance Organizations as Described in the Insurance Code, Article 21.07-6, sec.24. sec.7.1607. Fees. sec.7.1608. Prohibited Transactions. sec.7.1609. On-site Visits. sec.7.1610. Cease and Desist Orders. sec.7.1611. Supplemental Information Report. sec.7.1612. Fidelity Bond. sec.7.1613. Maintenance Tax. This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's authority to adopt. 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, on April 21, 1994. TRD-9439591 D. J. Powers Legal Counsel to the Commissioner Texas Department of Insurance Earliest possible date of adoption: May 30, 1994 For further information, please call: (512) 463-6327 TITLE 30. ENVIRONMENTAL QUALITY Part I. Texas Natural Resource Conservation Commission Chapter 114. Control of Air Pollution From Motor Vehicles Motor Vehicles 30 TAC sec.sec.114.3, 114.5, 114.6 The Texas Natural Resource Conservation Commission (TNRCC) proposes amendments to sec.114.3, concerning Inspection Requirements; sec.114.5, concerning Exclusions and Exceptions; and new s114.6, concerning Hardship Waiver Eligibility Criteria. A revised control strategy which specifies the technical, administrative, and enforcement provisions of the Inspection/Maintenance (I/M) program is being proposed concurrently. The amended sections, new section, and control strategy are proposed as a revision to the State Implementation Plan (SIP) for the control of ozone in the Houston/Galveston, Beaumont/Port Arthur, Dallas/Fort Worth, and El Paso nonattainment areas. These revisions are necessary under the 1990 Federal Clean Air Act Amendments and the subsequent November 5, 1992, I/M program rulemaking by the U.S. Environmental Protection Agency (EPA) which require the establishment of I/M programs in moderate, serious, and severe ozone nonattainment areas and carbon monoxide nonattainment areas. The amendments are needed to provide a more cost effective I/M program, to allow EPA to make a finding that the I/M SIP meets the requirements of the Federal Clean Air Act Amendments of 1990, and to clarify the intent of and/or eliminate conflict between the SIP, Chapter 114, and the contract for operating inspection facilities. The purpose of this program is to reduce in-use automobile evaporative and exhaust emissions. The proposal amends sec.114.3 to provide a definition for uncommon part; remove the 25% emissions reduction requirement for minimum expenditure waivers; exempt vehicles with antique license plates from the I/M program requirements; provide conditions for voluntarily testing at fleet facilities and dealerships for a fee two times the standard test fee in the program area; establish the requirements for voluntary certification of repair technicians and repair facilities; establish a $25 annual test fee for certified repair technicians of Texas (CERTTs); require a motorist whose vehicle has failed an emissions test to submit a completed vehicle emissions repair report (VERR) before receiving a retest; establish that covered fleet vehicles not registered by the Texas Department of Transportation must be in compliance by December 31 of the year the vehicle was scheduled for testing; establish a grace period until January 1, 1995, for repairs for waivers to be performed by CERTTs; and establish reciprocal compliance and alternative scheduling. Proposed amendments to sec.114.5 change the word "waiver" to the word "exclusion." These revisions are needed to reflect the title to the section which allows exclusions to sec.114.1 and to eliminate conflict with the waiver provisions in sec.114.3. The proposed new sec.114.6 establishes hardship waiver eligibility criteria and requirements. In addition to the proposed changes corresponding to the rules, the proposed SIP revisions also clarify that minimum expenditure waiver is limited to one test cycle while one-time hardship waivers are limited to once in the life of the vehicle; clarify that the referee facilities will be open 48 hours a week; establish that 60 days is the length of time that a motorist whose vehicle fails an out-of-cycle or remote sensing test has to repair the vehicle; change the method that TNRCC will use to comply with EPA's Final Rule 51.369 to training assessment instead of curriculum development; and provide a definition for tactical vehicle. The proposed SIP revisions also delete the requirement for Plumbtesmo Test in the current I/M emissions test in Dallas and Tarrant counties beginning July 1, 1994 and in El Paso County beginning October 1, 1994. Stephen Minick, Budget and Planning Division, has determined that for the first five-year period the sections are in effect there will be fiscal implications for state government as a result of enforcing or administering the sections. The effect on state government will be an anticipated increase in cost of approximately $379,000 in 1995 and $340,000 in each of the years 1996-1999 related to oversight of the certification of facilities and repair technicians. Revenues to the state will increase by an anticipated $37,500 in 1995, increasing progressively to $87,500 in 1999, based on the projected number of persons to register as certified emissions repair technicians at a cost of $25 per individual per year. There are no significant fiscal implications anticipated for local government. Mr. Minick 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 reduced aggregate emissions from vehicles, improved emission-related repairs, improved consumer protection, and improved customer convenience in the Houston/Galveston, Dallas/Fort Worth, Beaumont/Port Arthur, and El Paso areas. The sections will have an effect on small businesses. The rules set forth the current statutory authority that allows fleet facilities and dealerships the option of vehicle emissions testing at their facilities at a fee equal to two times the standard test fee that is applicable to the program area. This effect will vary with the rate applicable to the program area and with the number of vehicles to be tested. These sections do not change the anticipated costs for businesses and persons for the biennial inspection of vehicles registered in each of the I/M program areas. These sections as proposed will result in a cost savings in the inspection fees and associated repairs for owners of vehicles with antique license plates, since the proposed rules exempt these vehicles. There is no anticipated economic cost to persons who are required to comply with the sections as proposed, other than those costs previously identified. Public hearings on this proposal are scheduled for the following times and places: May 23, 1994, 7:00 p.m., Houston-Galveston Area Council, Second Floor, Conference Room A, 3555 Timmons Lane, Houston; May 24, 1994, 7:00 p.m., John Gray Institute, 855 Florida Avenue, Beaumont; May 25, 1994, 6:00 p.m., City of El Paso Council Chambers, Second Floor, 2 Civic Center Plaza, El Paso; and May 26, 1994, 7:00 p.m., Irving Central Library, Auditorium, 801 West Irving, Irving. Staff members will be available to discuss the proposal 30 minutes prior to each hearing. Public comments, both oral and written, on the proposed changes are invited at the hearings. Interrogation or cross-examination is not permitted. Written comments not presented at the hearings must be submitted to the TNRCC central office in Austin no later than June 3, 1994. Material received by the Mobile Source Division by 4:00 p.m. on that date will be considered by the Commission prior to any final action on the proposed revisions. Copies of the proposed revisions are available at the Mobile Source Division of the TNRCC located at 12118 North IH-35, Park 35 Technology Center, Building E, Austin, Texas 78753, and at all TNRCC regional offices. For further information, contact Sherry L. Bryan at (512) 239-1994. Persons with disabilities who have special communication or other accommodation needs who are planning to attend the hearings should contact the agency at (512) 239-1457. Requests should be made as far in advance as possible. The amendments and new section are proposed under the Texas Clean Air Act (TCAA), the Texas Health and Safety Code, sec.382.017, which provides the TNRCC with the authority to adopt rules consistent with the policy and purposes of the TCAA. The proposed amendments and new section affect Health and Safety Code, sec.382.017. sec.114.3. Inspection Requirements. (a) Unless specifically defined in the Texas Clean Air Act (TCAA) or in the rules of the Texas Natural Resource Conservation Commission (TNRCC), the terms used by the TNRCC have the meanings commonly ascribed to them in the field of air pollution control. In addition to the terms which are defined by the TCAA, the following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. (1)-(11) (No change.) (12) Uncommon part-An uncommon part is defined as one that takes more than 30 days for expected delivery and installation, and a motorist can prove that a reasonable attempt made to locate necessary emission control parts by retail or wholesale part suppliers will exceed the remaining time prior to expiration of the vehicle registration. (b) No person may operate any motor vehicle which does not comply with: (1) (No change.) (2) the vehicle emissions inspection and maintenance requirements contained in the revised Texas I/M SIP; and (A) has obtained a valid vehicle emissions certificate (VEC) from an inspection facility that is marked "Registration Authorized"; or (B) has completed the requirements for reciprocal compliance; or (C) has completed the requirements for an alternative schedule and has obtained a valid VEC through the Managing Contractor at a referee facility. (c) No person may issue or allow the issuance of: (1) (No change.) (2) a Vehicle Emissions Certificate (VEC), as authorized by the TNRCC, unless: (A) (No change.) (B) reciprocal compliance is established in accordance with all vehicle emissions I/M requirements and procedures contained in the revised Texas I/M SIP. A motorist shall submit an original vehicle emissions inspection document to a referee inspection facility. If the inspector determines that the document fulfills the requirements of the program area in which the motorist intends to register a motor vehicle, the motorist shall receive a VEC upon remittance of any applicable fees; or (C) an alternative schedule is established in accordance with the procedures contained in the revised Texas I/M SIP. To obtain the alternative schedule, the motorist or registered vehicle owner shall: (i) submit documentation to the Managing Contractor's area headquarter office establishing that the vehicle is continuously operated entirely outside of an I/M program area and that it is not feasible to return the vehicle for emissions testing prior to the expiration of registration; (ii) provide a date within the next 12 months that would establish a feasible time to return the vehicle for testing; and (iii) agree to obtain a valid VEC marked "Registration Authorized" by the feasibility date that was established in the application. If the inspector determines that the documentation fulfills the requirements for alternative scheduling, upon remittance of any applicable fees, the motorist shall receive a VEC and an alternative scheduled date by which time the motorists must submit the vehicle for emissions testing. (d) No person may allow or participate in the preparation, duplication, sale, distribution, or use of false, counterfeit, or stolen VECs, vehicle emission repair reports (VERRs)
                                                                                                                                            , vehicle emissions repair documentation, or other documents which may be used to circumvent the vehicle emissions I/M requirements and procedures contained in the revised Texas I/M SIP. (e) No person may own, operate, or allow the operation of a fleet vehicle primarily operated in a program area, unless the fleet vehicle has complied with all vehicle emissions I/M requirements contained in the revised Texas I/M SIP. An owner or operator of a fleet vehicle exempted from the payment of a registration fee and issued a specially designated license plate or otherwise not required to be registered in a program area by the TxDOT shall comply with the following requirements specific to such fleets: (1) (No change.) (2) register with the TNRCC by March 1, 1994, and shall provide by that date information on each vehicle including, but not limited to, all data required for the registration of the fleet vehicle by the TxDOT and other information specified on forms provided by the TNRCC; [and] (3) (No change.) (4) update the vehicle registration database reflecting any additions, deletions, or other changes to the covered vehicles by December 31 of each year; and (5) submit vehicles for testing and repair, if necessary, to obtain a valid VEC stating "Registration Authorized" by December 31 of the year the vehicle was scheduled for testing. (f)-(j) (No change.) (k) A motorist whose vehicle has failed an emissions test must have emission-related repairs performed and must submit a properly completed VERR in order to receive a retest, a minimum expenditure waiver, or a time extension waiver. (l)
                                                                                                                                              [(k)] A motorist may apply to the Managing Contractor at a referee inspection facility
                                                                                                                                                for waivers which defer the need for full compliance with vehicle emissions standards for a specified period of time after failing a vehicle emissions inspection. For the minimum expenditure and time extension waiver, the motorist may apply only once for each type of waiver for each testing cycle and shall pay any applicable processing fee. For the one-time hardship extension waiver, the motorist may apply once for the lifetime of the vehicle and shall pay any applicable processing fee. (1) A Minimum Expenditure Waiver may be granted in accordance with the following conditions. (A) The motor vehicle must have a valid VEC, a valid VERR, and
                                                                                                                                                  have failed a retest after repairs, provided the following conditions have been met: (i) in enhanced program areas, repairs shall require a minimum expenditure of at least $450, adjusted annually; or (ii) in basic program areas, repairs shall require a minimum expenditure of at least $75 for pre-1981 model year vehicles and at least $200 for 1981 and later model year vehicles; and (iii) after January 1, 1995,
                                                                                                                                                    repairs shall be performed by a TNRCC voluntarily certified repair technician of Texas (CERTT) at a voluntarily certified repair facility of Texas (CERFT); and (iv) repairs shall be directly applicable to the cause for the test failure. [(v) repairs shall have directly reduced emissions by 25% of the difference between emissions during the initial test and the emissions standards contained in the revised Texas I/M SIP.] (B) A Minimum Expenditure Waiver shall be valid for the remaining portion of the testing cycle. (2) A one-time hardship extension waiver may be granted once in the life of the vehicle in accordance with the following conditions. (A) A motorist must have a valid VEC indicating that the subject vehicle failed the initial emission inspection test. (B) A motorist shall provide proof in writing to the Managing Contractor at a referee inspection facility that the registered vehicle owner(s) meets the hardship eligibility criteria established by the TNRCC in s114.6 of this title (relating to Hardiship Elgibility Criteria). [or at least one of the following criteria to establish financial hardship:] [(i) the motorist's family income is below the poverty level as defined by the Office of Management and Budget Poverty Index; [(ii) the motorist's family receives financial assistance pursuant to the Texas Human Resources Code, Chapter 31, Financial Assistance Programs Code; [(iii) the motorist's family receives food stamp assistance as determined by the Texas Department of Human Services in accordance with the Food Stamp Act Amendments of 1977; or [(iv) the motorist's family earns not more than 40% of the area median income as defined in the Comprehensive Housing Affordability Strategy of the Texas Department of Housing and Community Development.] (3) A Time Extension Waiver may be granted in accordance with the following conditions. (A) The motorist can document that emissions-related repairs cannot be completed before the expiration of current registration or before the 30-day period following an out-of-cycle inspection because the repairs require an uncommon part. [An uncommon part is defined as one that takes more than 30 days for expected delivery and installation and a motorist can prove that a reasonable attempt made to locate necessary emission control parts by retail or wholesale part suppliers, will exceed the remaining time prior to expiration of the vehicle registration.] (B) The motorist shall provide to the Managing Contractor at a referee inspection facility
                                                                                                                                                      an original VEC indicating that the vehicle failed the emissions test
                                                                                                                                                        and an original itemized documentation, by a CERTT at a CERFT (after January 1, 1995),
                                                                                                                                                          indicating parts ordered, source of parts, including address and phone number,
                                                                                                                                                            [prepayment, if applicable, and] expected delivery,
                                                                                                                                                              and installation dates of uncommon parts before a Time Extension Waiver can be issued. (C) The motorist shall return the motor vehicle to the referee inspection facility for a retest and verification of repairs upon completion of the repairs. (D) The motorist shall provide to the Managing Contractor at the referee facility
                                                                                                                                                                [TNRCC], prior to expiration of a Time Extension Waiver, adequate documentation that one of the following conditions exists: (i) the motor vehicle passed a retest; (ii) the motorist qualifies for a Minimum Expenditure Waiver or Hardship Waiver; or (iii) the motor vehicle shall no longer be operated in the program area. (E) The length of a Time Extension Waiver shall depend upon expected delivery and installation dates of uncommon parts as determined by the Managing Contractor, but shall not exceed 90 days
                                                                                                                                                                  [three months]. (4) If a motorist or other entity
                                                                                                                                                                    leases or offers for lease, sells or offers for sale, trades or offers for trade, or otherwise transfers the title of a motor vehicle during the time any waiver is in effect, the motorist or entity
                                                                                                                                                                      shall notify the prospective owner or operator in writing of the waiver[.] and that the VEC is marked "Registration Denied. " (5) A motorist shall use any available warranty coverage to obtain needed repairs before expenditures shall be used in calculating the minimum repair expenditures to qualify for a Minimum Expenditure [or a Hardship Waiver] , unless the warranty remedy has been denied in writing from the manufacturer or authorized dealer. (6) A motorist may not use or attempt to use expenditures for tampering- related repairs in calculating the minimum repair expenditures to qualify for a Minimum Expenditure [or a Hardship] Waiver. Tampering includes, but is not limited to, engine modifications, emission system modifications, or fuel-type modifications not approved by the TNRCC or EPA. (7) A motorist shall provide to the Managing Contractor at the referee inspection facility an original retest VEC , a properly completed VERR provided by a CERTT at a CERFT,
                                                                                                                                                                        and an original itemized receipt indicating the emissions-related repairs performed for the issuance of a Minimum Expenditure [or a Hardship] Waiver. A motorist shall provide to the Managing Contractor at the referee inspection facility an original retest VEC and an original itemized receipt indicating the purchase or payment, and expected delivery and installation dates of uncommon parts for the issuance of a Time Extension Waiver. (m)
                                                                                                                                                                          [(l)] If the vehicle has failed an I/M test and the VEC is marked "Registration Denied," a
                                                                                                                                                                            [A] motorist may petition the Executive Director of the TNRCC for the exemption of a motor vehicle from the requirements of the vehicle emissions I/M program contained in the revised Texas I/M SIP, upon demonstration that the motorist has taken reasonable measures to comply with such requirements and that such exemption shall have minimal impact on air quality. If the Executive Director approves the petition, the motorist may receive an exemption upon remittance of any applicable fees. (n) If a motorist has obtained vehicle registration using a VEC issued through alternative scheduling, one of the following conditions must be met: (1) the vehicle must be returned to the program area, submitted for emissions testing, and receive a VEC marked "Registration Authorized" prior to the alternative scheduled date; or (2) if the vehicle is returned to the program area prior to the alternative scheduled date, the vehicle must be submitted for testing within 30 days of returning to the program area. (o)
                                                                                                                                                                              [(m)] The requirements of the vehicle emissions I/M program contained in the revised Texas I/M SIP shall be applied to all 1968 and newer model year gasoline-powered motor vehicles, excluding motorcycles [.] and antique vehicles (as defined by the Texas Department of Transportation registration, specifically as defined in Texas Civil Statutes, Article 6675a, concerning registration of antique passenger cars and trucks; license plates; renewal; penalty.)
                                                                                                                                                                                Alternatively fueled or dual-fueled vehicles will be tested in the gasoline mode, if the vehicle can be operated on gasoline. (p)
                                                                                                                                                                                  [(n)] The requirements of the vehicle emissions I/M program contained in the revised Texas I/M SIP shall be applied in the program areas in accordance with the following schedule: (1) the basic program in Collin, Dallas, Denton, Jefferson, Orange, and Tarrant counties beginning on July 1, 1994; (2) the enhanced program in Brazoria, El Paso, Fort Bend, Galveston, Harris, and Montgomery counties beginning on January 1, 1995; and (3) the enhanced program in Chambers, Liberty, and Waller counties beginning on January 1, 1997. (q) No person may act as or offer to perform services as a CERTT, as defined in this chapter, without first obtaining an annual certification from the TNRCC. (1) The following requirements must be met for CERTT certification to be issued and renewed: (A) demonstration to the National Institute of Automotive Service Excellence (ASE) of a minimum of three years of full-time automotive repair service experience; (B) certification in the following four tests offered by the ASE: Engine Repair (Test A1), Electrical Systems (Test A6), Engine Performance (Test A8), and Advanced Engine Performance Specialist (APES) Test (or the APES Test successor); (C) receipt by TNRCC of a completed CERTT application; and (D) receipt by TNRCC of payment of the $25 annual registration fee. (2) A CERTT shall perform the following in his duties: (A) oversee all emissions related repairs that are performed at the facility; (B) certify the emissions related repairs on the VERR form to be submitted to the TNRCC; (C) complete and certify the VERR form for customers; (D) comply with the following notification provisions: (i) notify TNRCC within 14 days of changes in employment from a CERFT; and (ii) notify the TNRCC of changes in the ASE testing status; and (E) when issued a TNRCC CERTT emblem patch, wear this patch on a visible part of clothing. (r) No owner or operator of a repair facility may represent a facility to be, or use a facility as a CERFT, as defined in this chapter, without first obtaining or renewing an annual certification from the TNRCC. (1) All the following conditions must be met for CERFT certification to be issued: (A) employment of a minimum of one full-time CERTT; (B) possession of all the following functional equipment: (i) ammeter; (ii) alternator/regulator/starting circuit tester (all functions); (iii) battery load tester; (iv) compression tester; (v) cooling system tester; (vi) dwellmeter; (vii) engine analyzer; (viii) exhaust gas analyzer (with at least hydrocarbon (HC) , carbon monoxide (CO),and carbon dioxide (CO [sub]2) measurement capability); (ix) fuel pressure/pressure drop tester (both functions); (x) fuel quality tester; (xi) ohmmeter; (xii) propane gas bottle (for carburetor lean drop check); (xiii)repair reference information; (xiv) scanner; (xv) tachometer; (xvi) timing light; (xvii) vacuum/pressure gauge (both functions); (xviii) vacuum pump; and (xiv) voltmeter; and (C) receipt by TNRCC of a completed CERFT application. (2) The owner or operator of a CERFT shall comply with the following requirements: (A) maintain the equipment referenced in paragraph (1)(B) of this subsection in proper operable condition; (B) employ a minimum of one CERTT, performing duties in compliance with these regulations, at all times that the facility is performing emissions- related repairs; (C) prominently display the TNRCC CERFT sign. The owner or operator of a CERFT must remove this sign any time that the requirements of this subparagraph are not being met; and (D) comply with the following notification provisions: (i) notify the TNRCC of changes in employment of a CERTT; (ii) notify the TNRCC anytime the CERFT does not meet the requirements of this paragraph; and (iii) notify the TNRCC of a change of business address. (s) A CERTT or CERFT issued under this chapter may be suspended or revoked for good cause at any time by order of the Commission after notice and opportunity for public hearing is provided pursuant to the Texas Government Code, sec.2001.054. Good cause includes, but is not limited to, failure to comply with the certification and operating conditions and requirements contained in subsections (q) or (r) of this section. (t) The TNRCC may refuse to issue a certification under subsections (q) and (r) of this section if the applicant has a history of noncompliance with the provisions of subsections (q) or (r) of this section or for other good cause shown. (u) For a per-vehicle fee remitted by a fleet operator to the Managing Contractor that equals twice the test fee established for the I/M program area, the Managing Contractor may agree to perform testing at a fleet facility or dealership under one of the following conditions: (1) using mobile test equipment; (2) using test equipment owned by the fleet or dealership but calibrated and operated by the Managing Contractor's personnel; or (3) using test equipment owned and operated by the managing contractor and installed at the fleet or dealership facility. (v) The Commission will determine an appropriate portion of the fee collected from fleet operators, dealers, or motorists for testing performed under subsection (u) of this section that may be remitted by the Managing Contractor to each fleet facility or dealership. sec.114.5. Exclusions and Exceptions. (a)-(b) (No change.) (c) Any person owning or operating a motor vehicle or motor vehicle engine may apply to the Executive Director for an exclusion
                                                                                                                                                                                    [a waiver] from the provisions of sec.114.1(a) and (b) of this title. Such an exclusion
                                                                                                                                                                                      [a waiver] may be granted if the following conditions are met. (1) (No change.) (2) The air pollution control systems or devices on the vehicle or vehicle engine which would be covered by the exclusion
                                                                                                                                                                                        [waiver] shall be specified in the application. (3) A demonstration shall be made in the application that provides adequate justification for special consideration of the specified vehicle under the provisions of this chapter. This demonstration shall include, but shall not be limited to, the following information necessary to determine that the use of certain pollution control devices or systems on the vehicle to be covered by the exclusion
                                                                                                                                                                                          [waiver] would result in a clear danger to persons or property or would be detrimental to the purpose for which the vehicle is intended to be used. (A)-(F) (No change.) (4) The applicant shall agree and ensure that a copy of the waiver shall be kept with the vehicle at all times and shall be available for inspection by representatives of the TNRCC, the Texas Department of Public Safety (DPS)
                                                                                                                                                                                            , or any other law enforcement agency upon request. The approved exclusion
                                                                                                                                                                                              [waiver] shall also be presented to the certified vehicle inspector before each annual vehicle safety inspection of the vehicle as administered by the DPS [Texas Department of Public Safety]. (5) The applicant shall agree and ensure that the exclusion
                                                                                                                                                                                                [waiver] shall be void and all pollution control systems and devices replaced on the vehicle and/or engine covered by the exclusion
                                                                                                                                                                                                  [waiver] when the vehicle changes ownership or is no longer used for the purpose identified in the exclusion
                                                                                                                                                                                                    [waiver] application. The Executive Director shall be informed in writing prior to the change of ownership or usage. (6) The applicant shall comply with all special provisions and conditions specified by the Executive Director in the exclusion
                                                                                                                                                                                                      [waiver]. (d) (No change.) (e) Federal, state, and local agencies or their agents which sell abandoned, confiscated, or seized vehicles and any commercial vehicle auction facilities are exempt from the provisions of sec.114.1(c) of this title (relating to Maintenance and Operation of Air Pollution Control Systems or Devices Used to Control Emissions from Motor Vehicles) if the following conditions are met. (1) The DPS motor vehicle safety
                                                                                                                                                                                                        inspection certificates must be removed from the vehicle and destroyed before the vehicle may be offered for sale or displayed for public examination. (2) (No change.) (f) The owner of a motor vehicle which has been totally disabled by accident, age, or malfunction and which will no longer be operated is exempt from the provisions of sec.114.1(c) of this title if the DPS motor vehicle safety
                                                                                                                                                                                                          inspection certificate is removed and destroyed before the vehicle is offered for sale or displayed for public examination. sec.114.6. Hardship Eligibility Criteria. No person shall be eligible for a hardship waiver extension from sec.114.3 of this title (relating to Inspection Requirements) for the vehicle emission Inspection/Maintenance (I/M) requirements and receive a vehicle emissions certificate marked "Registration Authorized" unless the following conditions are met: (1) the hardship waiver applicant is the owner of the vehicle that has failed an I/M test; (2) the waiver applicant signs a form that authorizes the Department of Human Services (DHS) to disclose the applicant's DHS case number; (3) DHS staff verifies to the referee facility that the applicant is a recipient of Food Stamps assistance or Aid to Families with Dependent Children (AFDC); and (4) the Managing Contractor at the referee facility verifies and compares the applicant's photo identification, the vehicle's vehicle identification number, and the DHS case number. 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, on April 15, 1994. TRD-9439700 Mary Ruth Holder Director, Legal Division Texas Natural Resource Conservation Commission Proposed date of adoption: July 27, 1994 For further information, please call: (512) 239-0615 TITLE 34. PUBLIC FINANCE Part IX. Texas Bond Review Board Chapter 181. Bond Review Board Subchapter B. Public School Facilities Funding Program Rules 34 TAC sec.sec.181.21, 181.23, 181.25, 181.27, 181.29-181.31, 181. 33, 181.35 The Texas Bond Review Board proposes amendments to sec. s181.21, 181.23, 181.25, 181.27, 181.29, 181.31, 181.33, 181.35, and new sec.181.30. The amendments and the new section clarify procedures and incorporate statutory amendments to the program resulting from Acts of the 73rd Legislature, House Bill 1608, enacted in June of 1993. Albert L. Bacarisse, executive director, Bond Review Board, has determined that for each year of the first five years that the amended and new sections are in effect, there will be negligible fiscal implications to units of state government as a result of enforcing or administering the amended and new sections. Mr. Bacarisse also has determined that for each year of the first five years the sections are in effect, the public benefits anticipated as a result of enforcing the sections will be from simplifying and clarifying procedures for participating in the Program. 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 may be submitted to Sonja Suessenbach, Director, Public School Facilities Funding Program, Texas Bond Review Board, P.O. Box 13292, Austin, Texas 78711-3292. The amendments and new section are proposed under Acts of the 71st Legislature, Regular Session, 1989, Chapter 815, s5(d), which gives the Texas Bond Review Board the authority to adopt rules governing administration of the Public School Facilities Funding Act. The amendments and new section affect Texas Civil Statutes, Title 22, Article 717t. sec.181.21. Definitions. The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise. Agreement-The document signed by the board and the district which specifies the terms and conditions of program financing. Authorized representative -An officer or employee of the district
                                                                                                                                                                                                            [One or more individuals] designated by the governing body of a school district in its application. An authorized representative may act on behalf of the district to the extent authorized by the governing body and
                                                                                                                                                                                                              to the extent provided by law. Board-The Bond Review Board created by Chapter 1078, Acts of the 70th Legislature, 1987 (Article 717k-7, Texas Civil Statutes). Capital assets - (A) Permanent fixtures, including mechanical or electrical equipment, of an instructional facility; and (B) other property that constitutes furnishings or equipment
                                                                                                                                                                                                                of an instructional facility. District-Any duly-constituted public school district in the state of Texas. Fund-The school facilities aid fund created by Section 6 of the Public School Facilities Funding Act, including any accounts created within it. Instructional facility -Real property, a building or other improvement to real property, or a fixture that is used predominantly for teaching or is required by state law. Loan Committee -A six-member body, one member to be appointed by each of the five board members and one member designated by the Central Education Agency. Local Account-A fund within a depository account designated by a district exclusively for receipt of requisitioned funds. Participating District -A district which has received financing under the program. Program-The financing program authorized by the Public School Facilities Funding Act. State Bonds-Any debt instruments issued by the treasurer to fund the program. sec.181.23. Application Procedures. (a) The board will notify districts when applications are being accepted for financing of new projects or refinancing of existing projects. After such notification by the board, districts may apply to the board at any time. Each application shall be immediately referred to the loan committee. The loan committee will make a written recommendation to the board within twenty working days of receipt of a completed application. Such recommendation will include approval or disapproval of specific projects and the estimated costs thereof. The board will act on an application no later than the next regularly scheduled board meeting for which such item may be properly posted. Applications from districts which have not held an election may only receive contingent approval by the board, subject to voter approval of the bonds or loan. Applications approved on a contingent basis will be funded following voter approval and a determination by the board that no material changes have occurred since contingent approval in the district's ability to repay the approved financing. Contingent approvals shall lapse after six months from the date of board approval, if no election has been held. The board will notify districts regarding state revenue bond issue schedules, including closing dates for applications due, loan committee and board application approval dates, and the dates for distribution of funds. The board may cancel a financing schedule due to market or other economic conditions. (b) The board may approve all or a part of the application as recommended by the loan committee. Board approval may specify parameters relating to the financing as necessary to ensure repayment, including but not limited to, maximum loan term and maximum annual payments. (c) The board will notify the district of the approval or disapproval of its application by telephone and will mail written notification by certified mail within three working days of board action. Written notification of the approval will be accompanied by the agreement to be signed by an authorized representative of the district and returned to the board by certified mail. A district may reject all or part of the financing approved, but not yet issued, and will be deemed to have rejected all funding if it fails to timely return the signed agreement. A district may not reject a part or parts of the financing approved by the board if such rejection would cause the financing to fail to meet board rules regarding eligible costs. (d) The application must be signed by the president of the district's school board and the superintendent of the schools, or duly authorized representatives thereof. Applications submitted prior to voter approval must be accompanied by a resolution of the district's board authorizing submission of the application. Applications must include the following: (1) name and address of the district; (2) name and telephone number of an authorized representative and of school district's attorney; (3) name of paying agent/local bank, telephone number, contact person, and wire number; (4) names of the district's school board members; (5) current credit ratings, if any; (6) itemization of the proposed use or uses of loan or bond proceeds; (7) detailed description of the project or projects to be financed or refinanced; information on each project to include: (A) whether it is, or will be, used for teaching, required by state law (to include citation), or for some other purpose (to include detailed description); (B) the projected cost; (C) the estimated useful life of the project and selected components (furnishings, equipment, etc.) as detailed in the application form; and (D) what percentage of time during a 12-month school year the project is, or will be, used for extracurricular activities; (8) letter certifying that the project or projects were duly authorized and approved by the school board; (9) if the election has been held, a copy of the ballot proposition and any other order entered or action taken by the district's board which specifies the purposes for which approved bond proceeds may be used; (10) date project or projects approved by voters or expected election date; (11) an identification of all bonded indebtedness presently outstanding, by series name and principal amount (both the original principal amount and the currently outstanding amount) and the debt service schedule associated with each series; (12) the district's annual audited financial reports for the most recent three years; (13) requested loan payback period, and if application is for the refinancing of an existing project; (14) name,
                                                                                                                                                                                                                  [and] series and maturities
                                                                                                                                                                                                                    of bonds to be refunded; (15) paying agent for the bonds to be refunded; and (16) additional information as requested by the board or loan committee. (e) All communications regarding a district's application or qualification for aid shall be directed to the executive director of the board. sec.181.25. District Qualifications. (a) In approving an application, the board must find that a district has the ability to repay the loan granted or bonds purchased. (b) A district qualifies for participation in the program if it meets the following criteria: (1) The district has a property-wealth per student ratio below the statewide average; or (2) The district has a property-wealth per student ratio below 1.25 times the statewide average, and in addition meets one of the following: (A) The district has an
                                                                                                                                                                                                                      [a local] effective debt service tax rate greater than the statewide average for the latest year for which data is available; (B) the district has in the last year requested and obtained a waiver of a legally required teacher-to-student ratio; (c) If the application is for the refinancing of an existing project, the proposed financing must result in present value savings in percentage terms of at least 3
                                                                                                                                                                                                                        [5] % based on the total refunded par amount, and cash
                                                                                                                                                                                                                          and present value] savings in dollar terms of at least $35,000 per total refunded par amount
                                                                                                                                                                                                                            $25,000 per issue refunded] in order for the district to qualify for participation in the program. The calculation of savings for purposes of this requirement will be the responsibility of the board. (d) If it is determined that funds are not available to fund all requests from districts meeting the qualifications listed in subsection (b) of this section, the board will prioritize applications based on the degree to which the qualifications are met. (e) Prior to submitting a formal application a school district may request from the board an advisory statement as to whether the board will consider purchasing the district's bonds. The request should include a description of the project to be financed or bonds to be refinanced. sec.181.27. Eligible Projects and Costs. Costs which are eligible for financing under this program include all or any portion of the cost of acquisition, construction, renovation, major repair, remodeling, retrofitting or improvement of qualifying
                                                                                                                                                                                                                              [installation, reconstruction and improvement of] capital assets and instructional facilities; the refinancing of any outstanding obligations, mortgages or advances made, issued or given for financing costs of capital assets and instructional facilities; or bond issuance costs associated with eligible project financings or refinancings. A district which has had funds previously approved for financing or refinancing specific projects may apply to the board to redirect funds to a different project made necessary by unanticipated events. Capital assets and instructional facilities qualify if the average useful life of such capital assets and instructional facilities meets or exceeds the final maturity of bonds purchased by the Board, and they meet standards for reasonable costs set by the Board. Construction or renovation projects contracted for after September 1, 1992, shall meet requirements specified by 34 TAC Chapter 61, Subchapter H, relating to School Facilities Standards, as amended, or successor rules. Construction or renovation projects contracted for before September 1, 1992, may demonstrate reasonable cost standards by confirming that contracts for the construction or renovation of any building were awarded pursuant to competitive bid pursuant to the Education Code, sec.21.901.
                                                                                                                                                                                                                                [Until such time as the Texas Education Agency adopts facilities standards for public school facilities, compliance with reasonable cost standards for voter-approved projects may be demonstrated by confirming that contracts for the construction or renovation of any building were awarded pursuant to competitive bid pursuant to sec.21.901 of the Education Code.] Decisions regarding the design, engineering and materials used in voter- approved projects shall rest with the school district. sec.181.29. State Bond Issuance. (a) The board will authorize the treasurer to issue bonds necessary to fund agreements between the board and districts. (b) The treasurer will consider market and other economic conditions in timing the issuance of obligations and the board
                                                                                                                                                                                                                                  will coordinate the issuance with the district. (c) The board reserves the right to limit the use of proceeds of the initial issuance of bonds and any subsequent issuance of bonds to the refunding of outstanding district bonds and may limit the size of each refunding issue. The board further reserves the right to limit the initial state bond issue to a pilot issuance with minimum and maximum size limitations. sec.181.30. Purchase of School District Bonds by the State. (a) A qualifying district is authorized to borrow from the Fund by selling its bonds to the board. (1) Qualifying district bonds must be authorized by the district in accordance with applicable law, including approval by the voters of the district if voter approval is required by law. (2) Qualifying district bonds are not required to comply with Education Code, sec.20.01, that bonds be sold to the highest bidder. (3) The school board may designate an officer or employee of the district to act on behalf of the district to set the price, interest rate, and date for the sale of the bonds. Such designation must be pursuant to official action of the school board and made part of the agreement. (4) Until the bonds have been repaid in full, each qualifying district selling bonds to the board will be required to submit to the board a copy of its annual audited financial statements as soon as they are available. (b) The board will purchase bonds of qualifying districts as set forth in the agreement: (1) The board will purchase bonds at private sale. (2) The costs of issuing the state revenue bonds will be passed on to the school districts participating in each finance program on a pro-rata basis. (3) The board, on behalf of the qualifying district, will submit the district's bonds to the Texas Attorney General's Office for approval. (4) The board will set out in the agreement the documents required for the bond purchase agreement and for closing of the bond sale as well as any other terms and provisions required to purchase the bonds. (5) Should the board find it economically advantageous to refinance the state revenue bonds issued to fund the qualifying bonds purchased, any net savings associated with such refunding will be passed along to the district on a pro- rata basis. sec.181.31. Finance Administration. (a) All fund transfers shall be sent directly to the state treasury as specified in the bond documents. Specialized correspondence may be specified in the bond documents. All other correspondence regarding the purchase or repayment of qualifying district bonds shall be sent to the executive director of the board.
                                                                                                                                                                                                                                    [All correspondence regarding the issuance of state bonds shall be sent to the director of public finance programs of the state treasury and not to the board or its members.] (b) The treasurer will maintain a separate fund for each participating district and may, upon the request of such district, invest each district's proceeds until requisitioned for expenditure. Interest earnings on funds invested in each separate fund will be credited to the appropriate district's account. (c) A district which is not refinancing may receive all bond proceeds at closing or may, at its option, requisition funds from the treasury as needed. The treasurer will accept requisition requests by telephone, with such requests subsequently confirmed in writing. All requests made before 10 a.m. (Central Time) will be transferred to the district's local account the same day. (d) A district's program principal and interest payments must be received by the treasury in immediately available funds no later than the close of business on the due date thereof or, if such date is not a business day, by the close of business on the first preceding business day. (e) For districts that are refinancing outstanding obligations, the treasurer will direct funds used to purchase refunding bonds to the escrow account in accordance with and established by the bond documents. (f) Interest earned on debt-service payments made by districts prior to the treasurer making debt-service payments on the state's bonds may be credited to the next payment due by the district in accordance with normal investment allocation procedures. (g) Should a district fail to make payment on the bonds as required by this section, action will be taken in accordance with sec.181.33 of this title (relating to Remedies for School District Default). sec.181.33. Remedies for School District [Late Payment or] Default. If the state treasurer receives notification from a school district that it will not make a timely payment on a loan made under this program, or if a school district fails to make a timely payment of principal or interest due on a loan made under this program, the state treasurer shall notify the board and the commissioner of education and shall notify the local district in writing by certified mail. The Central Education Agency shall deduct the total amount due to the board or fund, including interest and any applicable late payment charges as of the date of notification, from the foundation school fund payment next due to that school district, including any allocations to that district under Education Code, Chapter 16, and shall continue making the deductions from subsequent foundation school fund payments until the total amount then due has been deducted.
                                                                                                                                                                                                                                      [Should a district be more than 15 days delinquent in any payment due under the program, the treasurer shall certify that fact to the board and to the commissioner of education and shall notify the district by certified mail. Upon certification of payment delinquency, the Central Education Agency shall deduct the total payment past due the program from the Foundation School Fund payment or payments next due the defaulting district, including any allocations to that district under the Education Code, Chapter 16.] sec.181.35. Permanent School Fund Guarantee. Application forms for the program will address whether the Permanent School Fund (PSF) will be utilized to guarantee the state revenue bonds or the individual bonds of school districts. Use of the PSF guarantee program will require a school district to meet the rules of the PSF guarantee program then in effect. [(a) The board may apply to the commissioner of education for Permanent School Fund Guarantee for all or part of the state bonds. [(b) If principal and interest payments by the districts and the deductions under sec.181.31 of this title (relating to Finance Administration) are insufficient to meet the principal and interest payments on state bonds, and such state bonds are guaranteed by the Permanent School Fund, any remaining deficiency shall be paid by the Permanent School Fund. Amounts paid by the Permanent School Fund shall be general obligations of the state until reimbursed by the treasury. [(c) The treasurer shall immediately thereafter reimburse the Permanent School Fund out of the general revenue fund in an amount equal to the amount paid from it pursuant to this section. [(d) Late payments the treasury receives from a district will be credited to the fund from which reimbursement of the Permanent School Fund was drawn.] 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, on April 21, 1994. TRD-9439593 Albert L. Bacarisse Executive Director Texas Bond Review Board Earliest possible date of adoption: May 30, 1994 For further information, please call: (512) 463-1741 TITLE 40. SOCIAL SERVICES AND ASSISTANCE Part I. Texas Department of Human Services Chapter 27. Intermediate Care Facilities for the Mentally Retarded (ICFs-MR) Subchapter D. Reimbursement Methodology 40 TAC sec.27.413 The Texas Department of Human Services (DHS) proposes an amendment to sec.27.413, concerning rate setting methodology, in its Intermediate Care Facilities for the Mentally Retarded (ICFs-MR) rule chapter. The purpose for the amendment is to modify the reimbursement methodology for ICF-MR Level V children's facilities to ensure adequate payment to care for children in this class. Burton F. Raiford, commissioner, has determined that for the first five-year period the proposed section is in effect there will be fiscal implications as a result of enforcing or administering the amendment. The effect on state government for the first five-year period the section is in effect is an estimated additional cost of $64,328 for fiscal year 1994; $14, 419 for fiscal year 1995; $0 for fiscal year 1996; $0 for fiscal year 1997; and $0 for fiscal year 1998. There will be no fiscal implications for local government as a result of enforcing or administering the amendment. Mr. Raiford also has determined that for each year of the first five years the section is in effect the public benefit anticipated as a result of enforcing the section will be to allow the only Level V ICF-MR special children's facility to continue to operate. This facility is dedicated to serving disabled children with mental retardation or a related condition. There will be no effect on small businesses. There is no anticipated economic cost to persons who are required to comply with the proposed section. Questions about the content of the proposal may be directed to Pamela Robers at (512) 450-4051 in DHS's Rate Analysis Department. Comments on the proposal may be submitted to Nancy Murphy, Agency Liaison, Policy and Document Support-126, Texas Department of Human Services W-402, P.O. Box 149030, Austin, Texas 78714- 9030, within 30 days of publication in the Texas Register. Local DHS field offices have copies of the proposed rules for public review. The amendment is 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 Civil Statutes, Article 4413 (502), sec.16, which provide the Health and Human Services Commission with the authority to administer federal medical assistance funds. The proposal implements the Human Resources Code, sec. s32.001-32.042. sec.27.413. Rate Setting Methodology. (a)-(b) (No change.) (c) Rate determination. The Texas Board of Human Services determines general reimbursement rates for medical assistance programs for Medicaid recipients under the provisions of Chapter 24 of this title (relating to Reimbursement Methodology). The Texas Board of Human Services determines particular reimbursement rates for each class of ICF-MR provider by class of service based on consideration ofTexas Department of Human Services (
                                                                                                                                                                                                                                        DHS )
                                                                                                                                                                                                                                          staff recommendations. To develop a separate set of reimbursement rate recommendations for each class of service within each provider class, DHS staff apply the following procedures. (1)-(2) (No change.) (3) Alternate children's facility reimbursement rates for selected children's facilities are determined as follows, effective January 1, 1992. (A)-(D) (No change.) (E) Temporary method for determination of ICF-MR Level V alternative children's facility rates for the period beginning May 1, 1994. An eligible children's facility is reimbursed in the following manner: (i) Rates are based on projected per diem costs, not to exceed the current ICF-MR/RC-VIII base rate, including the estimated per diem cost of augmentative communication devices, plus the single highest supplemental rate amount, as specified under sec.27.415(c) of this title (relating to ICF-MR/RC VIII Experimental Class). The cost- based rates will not include a mark-up or incentive factor. (ii) Reimbursement for fixed capital assets is in the form of a use fee. The use fee will be paid in lieu of building and building equipment depreciation, land and leasehold amortization, mortgage interest, and/or building and building equipment lease expense. The annual use fee is calculated as 14% of the appraised value of buildings, improvements and land, as determined by local taxing authorities. If an appraisal by local taxing authorities is unavailable, the appraised value of the property is determined as the square footage of the facility devoted to ICF-MR services multiplied by the statewide median value per square foot of facilities in the large facility Level V class of service. The per diem use fee is calculated by dividing the annual use fee by anticipated facility days of service. (iii) In calculating the projected costs, historical costs are adjusted to reflect anticipated expenses related to resident care, active treatment, health and safety, or other areas deemed necessary by DHS to deliver quality services. (iv) The portion of the Medicaid rate to a provider that represents administrative costs, as collected on the administrative cost area of the Medicaid cost report, is limited to the 90th percentile in the array of administrative costs for all large Level V ICFs-MR. (v) Any Medicaid payments not expended on Medicaid allowable costs may be recouped by the state. (vi) This temporary method remains in effect until September 30, 1994, or until formally replaced or modified, whichever comes first. (d)-(e) (No change.) 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, on April 22, 1994. TRD-9439623 Nancy Murphy Section, Manager, Policy and Document Support Texas Department of Insurance Proposed date of adoption: July 1, 1994 For further information, please call: (512) 450-3765 Part VI. Texas Commission for the Deaf and Hearing Impaired Chapter 183. Board Certification Procedures Subchapter B. Petition for Regrading 40 TAC sec.183.131 (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 Commission for the Deaf and Hearing Impaired or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.) The Texas Commission for the Deaf and Hearing Impaired is proposing the repeal of sec.183.131, concerning petition for regradings. This repeal is necessary to make more efficient use of the resources of the certification program and adopt program policies standard to other state licensing agencies. David W. Myers, executive director, has determined that there will be no fiscal implications for state or local government as a result of the repeal. Mr. Myers has also determined that the public benefit anticipated as a result of repealing this section will be updated procedures and clarification in the operation of the Board of Evaluation of Interpreters. Standardization of licensing policies will enable the program to service more individuals more effectively. There will be no effect on small businesses. There is no anticipated economic cost to persons required to comply with the section as proposed. Comments on this repeal may be submitted to Angela Bryant, Board for Evaluation of Interpreters, Texas Commission for the Deaf and Hearing Impaired, P.O. Box 12904, Austin, Texas 78711-2904. The repeal is proposed under the Human Resources Code, s81.006(b)(3), which provides the Texas Commission for the Deaf and Hearing Impaired the authority to adopt rules for administration and programs. sec.183.131. Petition for Regrading. 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, on April 18, 1994. TRD-9439712 David W. Myers Executive Director Texas Commission for the Deaf and Hearing Impaired Earliest possible date of adoption: May 30, 1994 For further information, please call: (512) 451-8494