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 1. ADMINISTRATION Part I. Office of the Governor Chapter 4. Automobile Theft Prevention Authority 1 TAC sec.4.36 The Automobile Theft Prevention (ATPA) proposes an amendment to sec.4.36, concerning the administration of the ATPA program. The amendment is necessary to ensure that the applicants for funds have complete information concerning the level of funding for grant projects. This amendment proposes a level of funding for projects receiving ATPA funding and establishes ratios of maximum ATPA funds and minimum local cash and/or in-kind contributions from grantees. Linda Young, executive director, 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. Young 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 assurance that applicants will be fully informed concerning the administrative policies and procedures and special requirements for funding under the ATPA program. 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 Linda Young, Executive Director, Automobile Theft Prevention Authority, One Commodore Plaza, 800 Brazos Street, Suite 620, Austin, Texas 78701, for a period of 30 days following publication in this issue of the Texas Register. The amendment is proposed under Texas Civil Statutes, Article 4413(37), sec.6(a), which authorize the Automobile Theft Prevention Authority to adopt rules to implement its powers and duties. Texas Civil Statutes, Article 4413(37) is affected by this amendment. sec.4.36. Level of Funding for Grant Projects. (a) The formal definition of match is any article, service, facility or personnel expenses provided for use by the grant recipient, not to exceed 20% of the grantee's second year award OR the 1994 award as a benchmark, subject to review by the Executive Director and ATPA Board, and to availability of funds.
    The level of funding for projects receiving ATPA funding will be at the following ratios of maximum ATPA funds and minimum local cash and/or in-kind match contributions (ATPA-funded indirect costs excluded):
      Figure 1: 1 TAC sec.4.36(a) (b)-(c) (No change.) (d) [For Fiscal Year 1996 only:] [(1)] Grantees who are in their 80% ATPA funding year may either apply for 80% of the second
        Fiscal Year grant
          [1995] funds without match, or provide documentation for 20% of cash and/or in-kind contribution match, if the grantee chooses to show its local contribution to the grant program. [(2) Cash and/or in-kind contributions which have been previously documented and submitted to ATPA can be accrued for credit for the respective grantee, for the sole purpose of satisfying the 20% match, if the grantee chooses to show its local contribution to the grant program.] 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 23, 1996. TRD-9600958 Linda Young Executive Director Office of the Governor Earliest possible date of adoption: March 4, 1996 For further information, please call: (512) 494-1976 TITLE 19. EDUCATION Part II. Texas Education Agency Chapter 33. Statement of Investment Objectives, Policies, and Guidelines 19 TAC sec.sec.33.1, 33.5, 33.10, 33.15, 33.20, 33.25, 33.30, 33.35, 33.40, 33.45, 33.50, 33.55, 33.60, 33.65 (Editor's note: The text of the following sections proposed for repeal will not be published. The sections may be examined in the offices of the Texas Education Agency or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.) The Texas Education Agency (TEA) proposes the repeal of ssec.33.1, 33.5, 33.10, 33.15, 33.20, 33.25, 33.30, 33.35, 33.40, 33.45, 33.50, 33.55, 33.60, and 33.65, concerning the Texas Permanent School Fund (PSF). The sections establish investment objectives, policies, and guidelines for the PSF. The repeals are necessary to comply with the sunset review process mandated by Senate Bill 1, 74th Texas Legislature, 1995. A new Chapter 33 is proposed in a separate submission. Carlos Resendez, executive administrator of the PSF, has determined that for the first five-year period the repeals are in effect there will be no fiscal implications for state or local government or small businesses as a result of enforcing or administering the repeals. Mr. Resendez and Criss Cloudt, associate commissioner for policy planning and research, have determined that for each year of the first five years the repeals are in effect the public benefit anticipated as a result of enforcing the repeals will be compliance with Senate Bill 1. There is no anticipated economic cost to persons who are required to comply with the repeals as proposed. Comments on the proposal may be submitted to Criss Cloudt, Policy Planning and Research, 1701 North Congress Avenue, Austin, Texas 78701, (512) 463-9701. All requests for a public hearing on the proposed repeals submitted under the Administrative Procedure Act and the Texas Register Act must be received by the commissioner of education not more than 15 calendar days after notice of a proposed change in the rules has been published in the Texas Register. The repeals are proposed under the Texas Education Code, s7.102, which authorizes the State Board of Education to review specified TEA rules. The repeals implement the Texas Education Code, sec.7.102. sec.33.1. Constitutional Authority and Constitutional Restrictions. sec.33.5. Code of Ethics. sec.33.10. Purposes of Texas Permanent School Fund Assets and the Statement of Investment Policy. sec.33.15. Responsible Parties and Their Duties. sec.33.20. Objectives. sec.33.25. Permissible and Restricted Investments and General Guidelines for Investment Managers. sec.33.30. Standards of Performance. sec.33.35. Guidelines for the Custodian and the Securities Lending Agent. sec.33.40. Trading and Brokerage Policy. sec.33.45. Proxy Voting Policy. sec.33.50. Socially and Politically Responsible Investment Policy. sec.33.55. Standards for Selecting Consultants, Investment Managers, Custodians, and Other Professionals To Provide Outside Expertise for the Fund. sec.33.60. Performance and Review Procedures. sec.33.65. Guarantee Program for School District Bonds. 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 24, 1996. TRD-9600985 Criss Cloudt Associate Commissioner, Policy Planning and Research Texas Education Agency Earliest possible date of adoption: March 4, 1996 For further information, please call: (512) 463-9701 Chapter 33. Statement of Investment Objectives, Policies, and Guidelines of the Texas Permanent School Fund 19 TAC sec.sec.33.1, 33.5, 33.10, 33.15, 33.20, 33.25, 33.30, 33.35, 33.40, 33.45, 33.50, 33.55, 33.60, 33.65 The Texas Education Agency (TEA) proposes new sec.sec.33.1, 33.5, 33.10, 33. 15, 33.20, 33.25, 33.30, 33.35, 33.40, 33.45, 33.50, 33.55, 33.60, and 33.65, concerning the Texas Permanent School Fund (PSF). The sections establish investment objectives, policies, and guidelines for the PSF. The new sections are proposed as part of the sunset review process mandated by Senate Bill 1, 74th Texas Legislature, 1995. Current Chapter 33 is proposed for repeal in a separate submission. The proposed new rules contain the following changes to current Chapter 33. In sec.33.20(a)(2), language is added to clarify what is meant by the phrase "shortfall." Changes to sec.33.20(c)(4)-(9) clarify investment rate of return and risk objectives. Changes to sec.33.25(a)(1) clarify what are considered to be permissible stock investments. Changes to sec.33.25(a)(4) clarify the forms of investment or nonpublicly traded investments the State Board of Education (SBOE) may consider based on risk and return characteristics. The editorial changes to sec.33.25(b)(14) clarify restrictions concerning the purchase of short-term money market instruments. Finally, changes throughout sec.33.65 replace the phrase "Central Education Agency" with the phrase "Texas Education Agency" to comply with Senate Bill 1 and update cross-references to the Texas Education Code. Carlos Resendez, executive administrator of the PSF, 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 or small businesses as a result of enforcing or administering the sections. The income of the PSF is projected to be $1.3 billion during the 1996-1997 biennium. Mr. Resendez and Criss Cloudt, associate commissioner for policy planning and research, have determined that for each year of the first five years the sections are in effect the public benefit anticipated as a result of enforcing the sections will be that the income of the PSF will flow to school districts and reduce the tax burden to the public and the state. There is no anticipated economic cost to persons who are required to comply with the sections as proposed. Comments on the proposal may be submitted to Criss Cloudt, Policy Planning and Research, 1701 North Congress Avenue, Austin, Texas 78701, (512) 463-9701. All requests for a public hearing on the proposed sections submitted under the Administrative Procedure Act and the Texas Register Act must be received by the commissioner of education not more than 15 calendar days after notice of a proposed change in the sections has been published in the Texas Register. The new sections are proposed under the Texas Education Code, sec.7.102(b) (32), which authorizes SBOE to invest the PSF within the limits of the authority granted by the Texas Constitution, Article VII, sec.5(d), and the Texas Education Code, Chapter 43. Section 33.65 is proposed under the Texas Education Code, sec.7.102(b)(34), which requires SBOE to adopt an annual report on the status of the guarantee bond program and authorizes SBOE to adopt rules as necessary for the administration of the program as provided under the Texas Education Code, Chapter 45, Subchapter C. The new sections implement the Texas Education Code, sec.7.102(b)(32) and (34). sec.33.1. Constitutional Authority and Constitutional Restrictions. The Texas Permanent School Fund (PSF) shall be invested according to the Texas Constitution, Article VII, sec.5(d), under the direction of the State Board of Education (SBOE). sec.33.5. Code of Ethics. (a) Fiduciary responsibility. The members of the State Board of Education (SBOE) serve as fiduciaries of the Texas Permanent School Fund (PSF) and are responsible for prudently investing its assets. The SBOE members or anyone acting on their behalf shall comply with the provisions of this section, the Texas Constitution, Texas statutes, and all other applicable provisions governing the responsibilities of a fiduciary. (b) Compliance with constitution and code of ethics. The SBOE members are public officials governed by the provisions of the Texas Government Ethics Act, as stated in the Texas Government Code, Chapter 572, and the standards of conduct and conflict of interest procedures of the Texas Education Agency (TEA). (c) Persons affected by this section. A reference to an SBOE member includes the SBOE member and each member of his or her immediate family (spouse or children), members of a firm with which they are associated, or individuals with whom they have a financial association. (d) Assets affected by this section. The provisions of this section apply to all PSF assets, both publicly and nonpublicly traded investments. (e) Disclosure. An SBOE member shall not participate in a discussion or vote on a matter in which the member has direct or indirect financial interest. In addition, an SBOE member shall fully disclose any substantial interest, as defined in the Texas Government Code, Chapter 572, in any publicly or nonpublicly traded PSF investment. (f) Prohibitions against direct placement. For purposes of this chapter, the term "direct placement" (with respect to investments that are not publicly traded) is defined as a direct sale of securities, generally to institutional investors, without the use of underwriters. No SBOE member shall: (1) have a financial interest in a direct placement investment of the PSF; (2) serve as an officer, director, or employee of an entity in which a direct placement investment is made by the PSF; (3) serve as a consultant to, or receive any fee, commission or payment from, an entity in which a direct placement investment is made by the PSF; (4) act as a representative or agent of a third party in dealing with a PSF manager or consultant; or (5) be employed for two years after the end of his or her term on the SBOE with an organization in which the PSF invested, unless the organization's stock or other evidence of ownership is traded on the public stock or bond exchanges. (g) In addition to the prohibitions specified in subsections (a)-(f) of this section, no SBOE member shall solicit support on behalf of another political candidate from a PSF manager, consultant, or staff member. The manager, consultant, or staff member shall report any such incident in writing to the commissioner of education for distribution to all SBOE members. (h) Responsibilities of investment managers and consultants. Each investment manager retained by the PSF shall be notified in writing of the code of ethics contained in this section and the related conflict of interest laws of Texas. Any future investment shall strictly conform to this code of ethics. The manager or consultant shall report in writing any suggestion or offer by an SBOE member to deviate from the provisions of this section to the commissioner of education for distribution to all SBOE members. An investment manager, consultant, or other person retained in a fiduciary capacity must comply with the provisions of this section. (i) Hiring external professionals. The SBOE may contract with private professional investment managers to help make PSF investments. The SBOE has the authority and responsibility to hire other external professionals, including custodians or consultants. The SBOE shall comply with the provisions of the Texas Government Act, as stated in the Texas Government Code, Chapter 572, and the standards of conduct and conflict of interest procedures of the TEA when hiring an external professional. The SBOE shall select each professional based solely on merit and subject to the provisions of sec.33.55 of this title (relating to Standards for Selecting Consultants, Investment Managers, Custodians, and Other Professionals To Provide Outside Expertise for the Texas Permanent School Fund). sec.33.10. Purposes of Texas Permanent School Fund Assets and the Statement of Investment Policy. (a) The purpose of the Texas Permanent School Fund (PSF), as defined by the Texas Constitution, shall be to support and maintain an efficient system of public free schools. The State Board of Education (SBOE) views the PSF as a perpetual institution. Consistent with its perpetual nature, the PSF shall be an endowment fund with a long-term investment horizon. The SBOE shall strive to manage the PSF consistently with respect to the following: generating income for the benefit of the public free schools of Texas, the growth of the corpus of the PSF, protecting capital, and balancing the needs of present and future generations of Texas school children. (b) The purposes of the investment policy statement are to: (1) Specify the investment objectives, policies, and guidelines the SBOE considers appropriate and prudent, considering the needs of the PSF, and to comply with the Texas Constitution by directing PSF assets. Although the PSF is not subject to the provisions of the Employee Retirement Income Security Act (ERISA) of 1974, as amended, the SBOE intends to comply with the provisions of ERISA regarding fiduciary responsibility to the greatest extent possible. Further, the provisions of the Uniform Management of Institutional Funds Act, as stated in the Texas Property Code, sec.sec.163.001-163.009, shall apply, to the extent they are consistent with the provisions of the Texas Constitution, Article VII, governing the operation of the PSF; (2) establish SBOE performance criteria for an investment manager; (3) communicate the investment objectives, guidelines, and performance criteria to the SBOE, PSF investment staff and managers, and all other parties; (4) guide the ongoing oversight of PSF investment and test compliance with the Texas Constitution and other applicable statutes; (5) document that the SBOE is fulfilling its responsibilities for managing PSF investments solely in the interests of the PSF; and (6) document that the SBOE is fulfilling its responsibilities under Texas law. sec.33.15. Responsible Parties and Their Duties. (a) The Texas Constitution, Article VII, sec.sec.1-8, establishes the Available School Fund, the Texas Permanent School Fund (PSF), and the State Board of Education (SBOE), and specifies the standard of care SBOE members must exercise in managing PSF assets. In addition, the constitution directs the legislature to establish suitable provisions for supporting and maintaining an efficient public free school system, defines the composition of the PSF and the Available School Fund, and requires the SBOE to set aside sufficient funds to provide free textbooks for the use of children attending the public free schools of this state. The Texas Education Code, Chapter 15, regulates the use of state funds to support public schools, and the provisions of this chapter govern the investment objectives, policies, and guidelines of the PSF. (b) The SBOE shall be responsible for overseeing all aspects of the PSF and may employ any of the following parties, whose duties and responsibilities are as follows. (1) An investment manager is a person, firm, corporation, bank, or insurance company the SBOE retains to manage a portion of the PSF assets under specified guidelines. (2) A custodian is an organization, normally a bank, the SBOE retains to safekeep, and provide accurate and timely reports of, PSF assets. (3) A consultant is a person or firm the SBOE retains to advise the PSF based on professional expertise. (4) Investment counsel is a person or firm retained under criteria specified in the PSF Investment Procedures Manual to advise PSF investment staff and the SBOE Committee on the Permanent School Fund within the policy framework established by the SBOE. Counsel may advise PSF internal managers regarding various issues, including: selecting companies in different industries; specific stock or corporate bond issues or other investment instruments; and timing of purchases and sales. Counsel advises on the economic and market environment and asset allocation and provides PSF investment staff direction on diversifying investments between asset classes and among respective industries. (5) A performance measurement consultant is a person or firm retained to provide the SBOE Committee on the Permanent School Fund an analysis of the PSF portfolio performance. The outside portfolio performance measurement service firm shall perform the analysis on a quarterly or as-needed basis. Quarterly reports shall be distributed to each member of the SBOE Committee on the Permanent School Fund, and a representative of the firm shall be available as necessary to brief the committee. (6) The Internal Audit Division of the Texas Education Agency (TEA) reviews the internal control procedures of the PSF Investment Office annually at the direction of the SBOE. The division conducts the audit according to standards advocated by the Institute of Internal Auditors, Inc., and reports all findings to the commissioner of education. The purpose of the internal audit shall be to evaluate the controls over assets and test compliance with TEA rules and procedures. (7) The State Auditor's Office is an independent state agency that performs an annual financial audit of the TEA at the direction of the Texas Legislature. The financial audit, conducted according to generally accepted auditing standards, is designed to test compliance with generally accepted accounting principles. The state auditor performs tests of the transactions of the PSF Investment Office as part of this annual audit, including compliance with governing statutes and SBOE policies and directives. (8) The SBOE may retain independent external auditors to review the PSF accounts annually or on an as-needed basis. (c) The SBOE shall meet on a regular or as-needed basis to conduct the affairs of the PSF. (d) In case of emergency or urgent public necessity, the SBOE Committee on the Permanent School Fund or the SBOE, as appropriate, may hold an emergency meeting under the Texas Government Code, sec.551.045. (e) The SBOE shall have the following exclusive duties: (1) determining the strategic asset allocation mix between asset classes based on the attending economic conditions and the PSF goals and objectives; (2) ratifying the investment transactions pertaining to the purchase, sale, or reinvestment of fixed income, equity, or cash securities by all internal and external managers for the current reporting period; (3) appointing members to the SBOE Investment Advisory Committee; (4) approving all contracts with external professional investment managers, financial advisors, financial consultants, or other external professionals employed to help the SBOE invest the PSF; (5) approving the performance measurement contract with a well recognized and reputable firm employed to evaluate and analyze PSF investment results. The service shall compare investment results to the written investment objectives of the SBOE and also compare the investment of the PSF with the investment of other public and private funds against market indices and by managerial style; (6) setting policies, objectives, and guidelines for investing PSF assets; and (7) representing the PSF to the state. (f) The SBOE may establish committees to administer the affairs of the PSF. The duties and responsibilities of any committee established shall be specified in the PSF Investment Procedures Manual. (g) The PSF shall have an executive administrator, with a staff to be adjusted as necessary, who functions directly with the SBOE through the SBOE Committee on the Permanent School Fund concerning investment matters, and who functions as part of the internal operation under the commissioner of education. At all times, the PSF executive administrator and staff shall invest PSF assets as directed by the SBOE according to the Texas Constitution and all other applicable Texas statutes, as amended, and SBOE rules governing the operation of the PSF. The PSF staff shall: (1) administer the PSF according to SBOE goals and objectives; (2) execute all directives, policies, and procedures from the SBOE and the SBOE Committee on the Permanent School Fund; (3) keep records and provide a continuous and accurate accounting of all PSF transactions, revenues, and expenses and provide reports on the status of the PSF portfolio; (4) advise any officials, investment firms, or other interested parties about the powers, limitations, and prohibitions regarding PSF investments that have been placed on the SBOE or PSF investment staff by statutes, attorney general opinions and court decisions, or by SBOE policies and operating procedures; (5) continuously research all internally managed securities held by the PSF and report to the SBOE Committee on the Permanent School Fund or the SBOE any information requested, including reports and statistics on the PSF, for the purpose of administering the PSF; (6) establish and maintain a procedures manual that implements this section to be approved by the SBOE; (7) make recommendations regarding investment and policy matters to the SBOE Committee on the Permanent School Fund and the SBOE; (8) establish and maintain accounting policies and internal control procedures concerning all receipts, disbursements and investments of the PSF, according to the procedures adopted by the SBOE. sec.33.20. Objectives. (a) Investment objectives. (1) Investment objectives have been formulated based on the following considerations: (A) the anticipated financial needs of the Texas public free school system in light of expected future contributions to the Texas Permanent School Fund (PSF); (B) the need to preserve capital; (C) the risk tolerance set by the State Board of Education (SBOE) and the need for diversity; (D) observations about historical rates of return on various asset classes; (E) assumptions about current and projected capital market and general economic conditions and expected levels of inflation; (F) the need to invest according to the prudent person rule; and (G) the need to document investment objectives, guidelines, and performance standards. (2) Investment objectives represent desired results and are long-term in nature, covering typical market cycles of three to five years. Any shortfall in meeting the objectives should be explainable in terms of general economic and capital market conditions and asset allocation. (3) The investment objectives are consistent with generally accepted standards of fiduciary responsibility. (4) Under the provisions of this chapter, investment managers shall have discretion and authority to implement security selection and timing. (b) Goal and objectives for the PSF. (1) Goal. The goal of the SBOE for the PSF shall be to obtain the greatest amount of income and capital appreciation consistent with the safety of principal, in light of the strategic asset allocation plan adopted. To achieve this goal, PSF investment shall be carefully administered at all times. (2) Objectives. (A) The preservation and safety of principal shall be a primary consideration in PSF investment. (B) Fixed income securities shall be purchased at the highest yield consistent with the preservation and safety of principal, emphasizing current rather than deferred income. (C) To the extent possible, the PSF administrators shall hedge against inflation by purchasing equities that emphasize stability and growth of future earnings and dividends rather than current return. (D) Securities, except investments for cash management purposes as specified in sec.33.25 of this title (relating to Permissible and Restricted Investments and General Guidelines for Investment Managers), shall be selected for investment on the basis of long-term investment merits rather than short-term gains. (c) Investment rate of return and risk objectives. (1) Because the education needs of the future generations of Texas school children are long-term in nature and directly related to income growth and income potential, the return objective of the PSF shall also be long-term and focused on maintaining asset growth while preserving real capital value. Maintaining value under an income and capital appreciation concept encompasses a policy that over the long term will provide the PSF a positive return when adjusted for inflation and spending. (2) Investment rates of return shall be based on a time-weighted calculation, compounded and annualized over a rolling period of three to five years, and shall take into account all cash income plus realized and unrealized capital gains and losses, and calculated gross and net of fees and expenses. (3) The overall risk level of PSF assets in terms of potential for price fluctuation shall not be extreme. The primary means of achieving such a risk profile are: (A) a broad diversification among asset classes that, as nearly as possible, react independently through varying economic and market circumstances; (B) careful control of risk level within each asset class by avoiding over- concentration and not taking extreme positions against the market averages; and (C) a degree of emphasis on stable growth. (4) Over time, the volatility of returns (or risk) for the total fund, as measured by standard deviation of investment returns, should be comparable to investments in market indices in the proportion in which the PSF invests. (5) The objective of the domestic equity fund shall be to earn, over time, an average annual total rate of return that exceeds that of a representative benchmark index, combining dividends and capital appreciation, while maintaining an acceptable risk level compared to that of the representative benchmark index. (6) The objective of the international equity fund shall be to earn, over time, an average annual total rate of return that exceeds that of a representative international benchmark index in U.S. dollars, combining dividends and capital appreciation, while maintaining an acceptable risk level compared to that of the representative benchmark index. (7) The objective of the domestic fixed income fund shall be to earn, over time, an average annual total rate of return that exceeds that of a representative benchmark index, combining interest income and capital appreciation, while maintaining an acceptable risk level compared to that of the representative benchmark index. (8) The objective of the international fixed income fund shall be to earn, over time, an average annual total rate of return that exceeds the return of a representative Non-U. S. benchmark index in U.S. dollars, combining interest income and capital appreciation, while maintaining an acceptable risk level compared to that of the representative benchmark index. (9) The objective of the short-term cash fund shall be to provide liquidity for the timely payment of security transactions, while earning a competitive return. The expected return, over time, shall exceed that of the representative benchmark index, while maintaining an acceptable risk level compared to that of the representative benchmark index. (10) Notwithstanding the risk parameters specified in paragraphs (4)-(9) of this subsection, consideration shall be given to marginal risk variances exceeding the representative benchmark indices if returns are commensurate with the risk levels of the respective portfolios. Additional consideration shall be given to meeting the projected income expectations of the PSF in each respective biennium as a guideline in allocating assets to the respective PSF investment managers, if this guideline is consistent with the prudent person mandate of the Texas Constitution, Article VII, sec.5(d), and the SBOE asset allocation strategy. (d) Asset allocation policy. (1) The SBOE shall adopt and implement a strategic asset allocation plan based on a well diversified, balanced investment approach that uses a broad range of asset classes indicated by the following characteristics of the PSF: (A) the long-term nature of the PSF; (B) the spending policy of the PSF; (C) the relatively low liquidity requirements of the PSF; (D) the investment preferences and risk tolerance of the SBOE; (E) the rate of return objectives; and (F) the diversification objectives of the PSF, specified in the Texas Constitution, Article VII, sec.5(d), the Texas Education Code, Chapter 15, and the provisions of this chapter. (2) The strategic asset allocation plan shall contain guideline percentages, at market value of the total fund's assets, to be invested in various asset classes. The target mix may not be attainable at a specific point in time since actual asset allocation will be dictated by current and anticipated market conditions, as well as the overall directions of the SBOE. (3) The SBOE Committee on the Permanent School Fund, with the advice of the PSF investment staff, shall review the provisions of this section at least annually and, as needed, rebalance the assets of the portfolio according to the asset allocation rebalancing procedure specified in the PSF Investment Procedures Manual. The SBOE Committee on the Permanent School Fund shall consider the industry diversification and the percentage allocation between fixed income and equity securities within the following asset classes: (A) domestic equities; (B) international equities; (C) domestic fixed income; (D) international fixed income; and (E) cash. (4) Investments shall not exceed the strategic ranges the SBOE establishes for each asset class. (5) Periodically, the SBOE shall allocate segments of the total fund to each investment manager and specify guidelines, investment objectives, and standards of performance that apply to those assets. sec.33.25. Permissible and Restricted Investments and General Guidelines for Investment Managers. (a) Permissible investments. (1) Equities are considered to be common or preferred corporate stocks; corporate bonds, debentures, or preferreds that may be converted into corporate stock; and investment trusts. Stocks listed or traded on well recognized or principal U.S. or foreign exchanges or nationally recognized over-the-counter markets are permitted. (2) Fixed income securities are considered to be U.S. or foreign treasury or government agency obligations, U.S. or foreign corporate bonds, asset- or mortgage-backed securities, taxable municipal obligations, Canadian bonds, Yankee bonds, supranational bonds (denominated in U.S. dollars), and 144A securities. (3) Cash equivalents are securities with maturities of less than or equal to one year that are considered to include interest bearing or discount instruments of the U.S. government or its agencies, money market funds, corporate discounted instruments, corporate-issued commercial paper, time deposits of U.S. or foreign banks, bankers acceptances, and fully collateralized repurchase agreements. Both U.S. and foreign offerings are permitted. All residual cash in the Texas Permanent School Fund (PSF) portfolio must be swept and invested on a daily basis. (4) Any form of investment or nonpublicly traded investment may be considered by the State Board of Education (SBOE) based on risk and return characteristics, provided the investment is consistent with PSF goals and objectives. (5) The State Board of Education (SBOE) may approve currency hedging strategies for the international portfolios and delineate the related procedures in the "Standards of Performance" section of the PSF Investment Procedures Manual. (b) Prohibited transactions and restrictions. Unless the SBOE gives its written approval, the following prohibited transactions and restrictions apply for all PSF managers: (1) short sales of any kind; (2) purchasing letter or restricted stock; (3) buying or selling on margin; (4) engaging in purchasing or writing options or similar transactions; (5) purchasing or selling futures on commodities contracts; (6) borrowing money, or pledging or otherwise encumbering PSF assets; (7) purchasing the equity or debt securities of the portfolio manager's organization or an affiliated organization; (8) engaging in any purchasing transaction, after which the cumulative market value of common stock in a single corporation exceeds 2.5% of the PSF total market value or 5.0% of the manager's total portfolio market value; (9) engaging in any purchasing transaction, after which the cumulative number of shares of common stock in a single corporation held by the PSF exceeds 5.0% of the outstanding voting stock of that issuer; (10) engaging in any purchasing transaction, after which the cumulative market value of fixed income securities or cash equivalent securities in a single corporation (excluding the U.S. government or its agencies) exceeds 2.5% of the PSF total market value or 5.0% of the manager's total portfolio market value; (11) purchasing tax exempt bonds; (12) purchasing guaranteed investment contracts (GICs) from an insurance company or bank investment contracts (BICs) from a bank not rated at least AAA by Standard & Poor's or Moody's; (13) purchasing any fixed income security not rated at least BBB- by Standard & Poor's or Baa3 by Moody's, subject to the provisions in the PSF Investment Procedures Manual related to the fixed income portfolio mandates regarding quality and duration; (14) purchasing short-term money market instruments rated below A-1 by Standard and Poor's or P-1 by Moody's; (15) engaging in any transaction that results in unrelated business taxable income (excluding current holdings); (16) engaging in any transaction considered a "prohibited transaction" under the Internal Revenue Code or the Employee Retirement Income Security Act (ERISA); (17) purchasing precious metals or other commodities; (18) engaging in any transaction that would leverage a manager's position; (19) lending securities owned by the PSF, but held in custody by another party, such as a bank custodian, to any other party for any purpose, unless lending securities according to a separate written agreement the SBOE approved; and (20) purchasing fixed income securities without a stated par value amount due at maturity. (c) General guidelines for investment managers. (1) Each investment manager retained to manage a portion of PSF assets shall be aware of, and operate within, the provisions of this chapter and all applicable Texas statutes. (2) As fiduciaries of the PSF, investment managers shall discharge their duties solely in the interests of the PSF according to the prudent expert rule, engaging in activities that include the following. (A) Diversification. The investment policy shall be to diversify each manager's common stock portfolio by participating in industries and companies with above average prospects or sound fundamentals. (B) Securities trading. (i) Each manager shall send copies of each transaction record to the PSF investment staff and custodians. (ii) Each manager shall be required to reconcile the accounts under management on a monthly basis with the PSF investment staff and custodians. (iii) Each manager shall be responsible for complying fully with PSF policies for trading securities and selecting brokerage firms, as specified in sec.33.40 of this title (relating to Trading and Brokerage Policy). In particular, the emphasis of security trading shall be on best execution; that is, the highest proceeds to the PSF and the lowest costs, net of all transaction expenses. Placing orders shall be based on the financial viability of the brokerage firm and the assurance of prompt and efficient execution. (iv) The SBOE shall require each external manager to indemnify the PSF for all failed trades not due to the negligence of the PSF or its custodian. (C) Acknowledgments in writing. (i) Each external investment manager retained by the PSF must be a person, firm, or corporation registered as an investment adviser under the Investment Adviser Act of 1940, a bank as defined in the Act, or an insurance company qualified to do business in more than one state, and must acknowledge its fiduciary responsibility in writing. A firm registered with the Securities and Exchange Commission (SEC) must annually provide a copy of its Form ADV, Section II. (ii) The SBOE may require each external manager to obtain coverage for errors and omissions in an amount set by the SBOE, but the coverage shall be at least the greater of $500,000 or 1.0% of the assets managed, not exceeding $10 million. The coverage should be specific as to the assets of the PSF. The manager shall annually provide evidence in writing of the existence of the coverage. (iii) Each external manager may be required by the SBOE to obtain fidelity bonds, fiduciary liability insurance, or both. (iv) Each manager shall acknowledge in writing receiving a copy of, and agreeing to comply with, the provisions of this chapter. (D) Subject to the provisions of this chapter, any investment manager of marketable securities or other investments, retained by the PSF, shall have full discretionary investment authority over the assets for which the manager is responsible. (d) Reporting procedures for investment managers. The investment manager shall: (1) prepare a monthly report for delivery to the SBOE, the SBOE Committee on the Permanent School Fund, and the PSF investment staff that shall include, in the appropriate format, items requested by the SBOE. The reports shall cover any change in the firm's structure, professional team, or product offerings; the firm's economic review; a review of recent and anticipated investment activity; an analysis of major changes that have occurred in the investment markets and in the portfolio, particularly since the last report; a detail of the portfolio holdings and each transaction that has been completed or is in process since the last report; and a summary of the key characteristics of the PSF portfolio. Periodically, the PSF investment staff shall provide the investment manager a detailed description of, and format for, these reports; (2) when requested by the SBOE Committee on the Permanent School Fund, make a presentation describing the professionals retained for the PSF, the investment process used for the PSF portfolio under the manager's responsibility, and any related issues; (3) when requested by the PSF investment staff, meet to discuss the management of the portfolio, new developments, and any related matters; and (4) implement a specific investment process for the PSF. The manager shall describe the process and its underlying philosophy in an attachment to its investment management agreement with the PSF and manage according to this process until the PSF and manager agree in writing to any change. sec.33.30. Standards of Performance. (a) The State Board of Education (SBOE) Committee on the Permanent School Fund shall set and maintain performance standards for the total fund, the equity fund, the fixed income fund, and the cash fund of the Texas Permanent School Fund (PSF), and all investment managers based on criteria that include the following: (1) time horizon; (2) real rate of return; (3) representative benchmark index; (4) volatility of returns (or risk), as measured by standard deviation; and (5) universe comparison. (b) The SBOE Committee on the Permanent School Fund shall develop and implement the procedures necessary to establish and recommend to the SBOE the performance standards criteria. (c) Performance standards shall be included in the PSF Investment Procedures Manual. sec.33.35. Guidelines for the Custodian and the Securities Lending Agent. Completing custodial and security lending functions in an accurate and timely manner is necessary for effective investment management and accurate records. (1) A custodian shall have the following responsibilities regarding the segments of the funds for which the custodian is responsible. (A) Provide complete custody and depository services for the designated accounts. (B) Provide for investment of any cash on a daily basis to avoid uninvested amounts. (C) Implement the investment actions in a timely and effective manner as directed by the investment managers. (D) Collect all realizable income and principal and properly report the information on the periodic statements to the Texas Permanent School Fund (PSF) investment staff, the investment managers, or other appropriate parties. (E) Provide monthly and annual accounting statements, as well as on-line, real-time accounting, that includes all transactions. Accounting shall be based on accurate security values for cost and market value and provided within a time frame acceptable to the State Board of Education (SBOE). (F) Report to the PSF investment staff situations in which security pricing is either not possible or subject to considerable uncertainty. (G) Distribute all proxy voting materials to the PSF investment staff in a timely manner. (H) Provide research and assistance to the SBOE and the PSF investment staff on all issues related to accounting and administration. (I) Confirm that the depth of resources and personnel associated with the designated funds are comparable to those of the nation's leading custodial banks. (2) A securities lending agent for the PSF shall have the following responsibilities. (A) Provide complete transaction reporting for the designated funds. (B) Provide a monthly accounting, as well as on-line, real-time accounting for securities lending transactions, based on accurate security values. (C) Report to the PSF investment staff any irregular situation that is outside the standard of practice for securities lending or inconsistent with the provisions of the securities lending agreement. (D) Implement a securities lending program for the PSF in a manner that does not impair any rights of the PSF by virtue of PSF ownership in securities. (E) As requested, provide research and assistance to the SBOE and the PSF investment staff on all issues related to accounting and administration. (F) Provide indemnification to the PSF satisfactory to the SBOE in the event of default on securities lending transactions. (G) Fully disclose all revenues and other fees associated with the securities lending program. (H) Comply with restrictions on types of securities lending transactions or eligible investments of cash collateral or any other restrictions imposed by the SBOE or the PSF investment staff. (I) Provide a copy of the investment policy governing the custodian's securities lending program, as amended, to the PSF investment staff. (J) Confirm that the depth of resources and personnel associated with the designated funds are comparable to those of the nation's leading securities lending agents. sec.33.40. Trading and Brokerage Policy. (a) Security transaction policy. (1) The following principles shall guide all Texas Permanent School Fund (PSF) transactions. (A) Best execution and lowest cost must apply to each PSF trade. (B) Ongoing efforts must be made to reduce trading costs, in terms of both commissions and market impact, provided the investment returns of the PSF are not jeopardized. (2) The State Board of Education (SBOE) may enter into brokerage commission recapture agreements or soft dollar agreements. (3) The SBOE may evaluate transaction activity annually through a trading cost analysis. (b) Directed Trades. The SBOE may adopt directed trade procedures for the PSF portfolio according to procedures developed by the SBOE Committee on the Permanent School Fund. (c) Guidelines for selecting a brokerage firm. (1) Introduction and basic principles. (A) The SBOE intends that any transaction of publicly traded security occur through a brokerage firm or automated trading system, regardless of location, to obtain the lowest transaction cost consistent with best execution. (B) Each investment manager shall be responsible for selecting brokerage firms or automated trading systems through which PSF trading shall be completed. The selections must meet PSF guidelines and be for the exclusive benefit of the PSF. (2) Guidelines for selection. The broker or dealer firm must: (A) have appropriate trading and comprehensive, proprietary, in-house research capabilities and market expertise; (B) be in compliance with applicable federal and Texas laws related to conducting business as a broker or dealer; (C) be a member in good standing of the major financial exchanges; (D) have on-site, in-house trading capability and direct access to major markets; (E) have in-house access to trading support equipment; (F) trade for competitive rates that provide the lowest transaction cost consistent with best execution; (G) be financially able to accommodate a capital commitment trade over an industry standard settlement period; (H) have the ability and record to clear and settle trades without unnecessary delays or fails; and (I) have been in business as a broker or dealer for a reasonable period of time to ensure financial and operational stability. (3) A broker or dealer firm may have an independent contractual relationship with a historically underutilized business. (4) Review and evaluation. At least annually, the SBOE Committee on the Permanent School Fund shall review the brokerage firms used by PSF investment managers and all transactions for compliance with the provisions of this section. sec.33.45. Proxy Voting Policy. The State Board of Education (SBOE) recognizes its fiduciary obligations with respect to the voting of proxies of companies with securities that are owned by the Texas Permanent School Fund (PSF). Because the issues related to proxy voting are complex and directly impact investment values, the SBOE believes the PSF is best suited to vote the proxies of shares held in the PSF portfolio. Therefore, as part of the PSF investment policy, the SBOE instructs the PSF executive administrator and investment staff to vote all of the PSF proxies of companies according to the following guidelines. (1) Routine matters. Routine proxy proposals shall be voted in support of company proposals unless there is a clear reason not to do so. Routine matters include: (A) electing directors; (B) determining the size of a board; (C) changing a corporate name; (D) appointing an auditor; (E) splitting stock; (F) amending articles of incorporation that are required to comply with federal or state regulation; and (G) changing the date, time, or location of an annual meeting. (2) Business matters. Business proposals that do not eliminate the rights of shareholders, especially minority shareholders, or the status of securities held, including ownership status, shall not be treated as routine; rather, they shall be carefully analyzed. These issues may be voted with management. However, business proposals that are nonroutine or would impair the economic interests of shareholders shall be voted against management. Examples of such proposals include: (A) requests to alter bylaws to require a super majority to approve mergers; (B) anti-takeover proposals that could restrict tender offers or deny majority owners from exercising judgment; (C) proposals to dilute existing shares by issuing substantially more stock without adequate explanation by management; and (D) proposals that would enrich management excessively or substantially increase compensation awards or employment contracts to senior management that become effective when ownership of the company changes (also known as "golden parachute" awards). (3) Other matters. On all other matters, the PSF executive administrator and investment staff shall vote proxies judged to be in the best interests of the PSF. (4) At each regularly scheduled SBOE meeting, the PSF executive administrator shall advise the SBOE of all instances in which the PSF executive administrator voted against management. sec.33.50. Socially and Politically Responsible Investment Policy. Investments shall be considered based on the prudent person rule and the provisions of this chapter. Investments shall provide the highest return commensurate with the lowest risk and shall be diversified. sec.33.55. Standards for Selecting Consultants, Investment Managers, Custodians, and Other Professionals To Provide Outside Expertise for the Fund. The State Board of Education (SBOE) may retain qualified professionals to assist in investment and related matters. (1) Basis for selection. The SBOE shall retain professional assistance based solely on the demonstrated ability of the professional to provide the expertise or assistance needed. For each type of expertise, relevant and objective criteria shall be established to judge and select experts. (2) Types of expertise for consideration. Examples of professionals or specialized expertise the SBOE may retain include: investment managers, accountants, consultants, legal counsel, custodians, security lending agents, and system specialists. (3) Process for selecting professional assistance. The SBOE shall establish and maintain in the Texas Permanent School Fund (PSF) Procedures Manual an objective process for selecting expertise or assistance. The SBOE Committee on the Permanent School Fund shall periodically review the process to ensure it reflects SBOE objectives. sec.33.60. Performance and Review Procedures. As requested by the State Board of Education (SBOE) or Texas Permanent School Fund (PSF) investment staff, evaluation and periodic investment reports shall supply critical information on a continuing basis, such as the amount of trading activity, investment performance, cash positions, diversification ratios, rates of return, and other perspectives of the portfolios. The reports shall address compliance with investment policy guidelines. (1) Performance measurements. The SBOE Committee on the Permanent School Fund shall review at least quarterly the performance of each investment manager portfolio of the PSF in terms of the provisions of this chapter. The investment performance review shall include comparisons with representative benchmark indices, a broad universe of investment managers, and the consumer price index. A time-weighted return formula (which minimizes the effect of contributions and withdrawals) shall be used for investment return analysis. The review also may include quarterly performance analysis and comparisons of retained firms. The services of an outside, independent consulting firm that provides performance measurement and evaluation shall be retained. (2) Meeting and reports. At least annually, the SBOE Committee on the Permanent School Fund shall meet with the PSF investment managers and custodian to review their responsibilities, the PSF portfolio, and investment results in terms of the provisions of this chapter. (3) Review and modification of investment policy statement. The SBOE Committee on the Permanent School Fund shall review the provisions of this chapter at least once a year to determine if modifications are necessary or desirable. Upon approval by the SBOE, any modifications shall be promptly reported to all investment managers and other responsible parties. (4) Compliance with this chapter and Texas statutes. Annually, the SBOE Committee on the Permanent School Fund shall confirm that the PSF and each of its managed portfolios have complied with the provisions of this chapter concerning exclusions imposed by the SBOE, proxy voting, and trading and brokerage selection. (5) Significant events. The SBOE must be notified promptly if any of the following events occur within the custodian or external investment manager organizations: (A) any event that is likely to adversely impact to a significant degree the management, professionalism, integrity, or financial position of the custodian or investment manager. A custodian must report the loss of an account of $500 million or more. An investment manager must report the loss of an account of $25 million or more; (B) a loss of one or more key people; (C) a significant change in investment philosophy; (D) the addition of a new portfolio manager on the sponsor's account; or (E) a change in ownership or control, through any means, of the custodian or investment manager. (F) any violation of policy. sec.33.65. Guarantee Program for School District Bonds. (a) The commissioner of education shall administer the guarantee program for school district bonds according to the provisions of the Texas Education Code, Chapter 45, Subchapter C. (b) A school district seeking the guarantee of eligible bonds shall apply to the commissioner of education. The district shall submit, in a form specified by the commissioner of education, the information required under the Texas Education Code, sec.45.055(b), and this section and any additional information the commissioner may require. The application shall be accompanied by a fee to be set by the commissioner of education and approved by the State Board of Education (SBOE). (c) Under the Texas Education Code, sec.45.056, the commissioner of education shall investigate the applicant school district's accreditation status and financial status. A district must be accredited and financially sound to be eligible for approval by the commissioner of education. (1) The commissioner's review shall include the following: (A) the purpose of the bond issue; (B) the district's accreditation status and compliance with statutes and rules of the Texas Education Agency; and (C) the district's financial status and stability, including approval of the bonds by the attorney general under the provisions of the Texas Education Code, sec.45.003(e) and sec.45.005. (2) A district applying for approval for the guarantee of refunding bonds must be accredited and comply with the following. (A) The district must demonstrate that issuing the bonds will result in a total interest saving to the district, if the refunding bonds are to be issued under the Texas Education Code, sec.45.004. (B) If the refunding bonds do not meet the requirements of subparagraph (A) of this paragraph, the district must demonstrate to the satisfaction of the commissioner of education that the refunding is otherwise beneficial to the district. (3) Under Texas Civil Statutes, Article 717k, a district may issue combination new money bonds and refunding bonds in a single guarantee bond issue and sell the issue at a private sale. (d) If necessary to successfully operate the guarantee program, the commissioner of education may allocate specific holdings of the Texas Permanent School Fund (PSF) to specific bond issues guaranteed under this section. This allocation shall not prejudice the right of the State Board of Education (SBOE) to dispose of the holdings according to law and requirements applicable to the fund; however, the SBOE shall ensure that holdings of the PSF are available for a substitute allocation sufficient to meet the purposes of the initial allocation. This allocation shall not affect any rights of the bond holders under law. (e) If, in the judgment of the commissioner of education, it becomes necessary or advisable to limit the total amount of bonds that may be guaranteed under this program, the commissioner may further investigate the proposed issues submitted for approval. (1) The commissioner of education shall determine whether to guarantee an issue based on considerations that may include the following: (A) purpose of the bond issue and the district's need for the bond issue; (B) whether the bonds to be issued are new issues or refunding bonds; (C) the repayment plan for bonds; (D) the percentage of savings to the district represented by the refunding bonds, if any; or (E) any other consideration that, in the judgment of the commissioner, would enable the commissioner to make a decision in the best interest of the bond guarantee program and Texas school districts. (2) The commissioner of education may limit approval of the guarantee to a district with a bond rating below the "AAA" category, as rated by a nationally recognized municipal bond rating service. When a rating is issued by more than one service, the lower of the two ratings shall be used to determine whether the school district shall be eligible for the guarantee. (f) The guarantee shall be completely removed when bonds guaranteed by this program are defeased, and such a provision shall be specifically stated in the bond resolution. If bonds guaranteed by this program are defeased, the district shall notify the commissioner of education in writing within 10 calendar days of the action. (g) For bonds issued before August 15, 1993, a school district seeking the guarantee of eligible bonds shall certify that, on the date of issuance of any bond, no funds received by the district from the Available School Fund are reasonably expected to be used directly or indirectly to pay the principal or interest on, or the tender or retirement price of, any bond of the political subdivision or to fund a reserve or placement fund for any such bond. (h) For bonds guaranteed before December 1, 1993, if a school district cannot pay the maturing or matured principal or interest on a guaranteed bond, the commissioner of education shall cause the amount needed to pay the principal or interest to be transferred to the district's paying agent solely from the Texas Permanent School Fund and not from the Available School Fund. The commissioner also shall direct the comptroller of public accounts to withhold the amount paid, plus interest, from the first state money payable to the district, excluding payments from the Available School Fund. (i) For bonds issued after August 15, 1993, and guaranteed on or after December 1, 1993, if a school district cannot pay the maturing or matured principal or interest on a guaranteed bond, the commissioner of education shall cause the amount needed to pay the principal or interest to be transferred to the district's paying agent from the Texas Permanent School Fund. The commissioner also shall direct the comptroller of public accounts to withhold the amount paid, plus interest, from the first state money payable to the district, regardless of source, including the Available School Fund. 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 24, 1996. TRD-9600986 Criss Cloudt Associate Commissioner, Policy Planning and Research Texas Education Agency Earliest possible date of adoption: March 4, 1996 For further information, please call: (512) 463-9701 Chapter 49. Internal Operations Contracts 19 TAC sec.49.1, sec.49.4 (Editor's note: The text of the following sections proposed for repeal will not be published. The sections may be examined in the offices of the Texas Education Agency or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.) The Texas Education Agency (TEA) proposes the repeal of s49.1 and sec.49. 4, concerning TEA internal operations. The sections establish definitions, requirements, and procedures related to nondiscrimination and the agency sick leave pool. The repeals are necessary to comply with the sunset review process mandated by Senate Bill 1, 74th Texas Legislature, 1995. Joe Neely, deputy commissioner of education, has determined that for the first five-year period the repeals are in effect there will be no fiscal implications for state or local government or small businesses as a result of enforcing or administering the repeals. Mr. Neely and Criss Cloudt, associate commissioner for policy planning and research, have determined that for each year of the first five years the repeals are in effect the public benefit anticipated as a result of enforcing the repeals will be compliance with Senate Bill 1. There is no anticipated economic cost to persons who are required to comply with the repeals as proposed. Comments on the proposal may be submitted to Criss Cloudt, Policy Planning and Research, 1701 North Congress Avenue, Austin, Texas 78701, (512) 463-9701. All requests for a public hearing on the proposed repeals submitted under the Administrative Procedure Act and the Texas Register Act must be received by the commissioner of education not more than 15 calendar days after notice of a proposed change in the sections has been published in the Texas Register. The repeals are proposed under the Texas Education Code, s7.102, which authorizes the State Board of Education to review specified TEA rules. The repeals implement the Texas Education Code, sec.7.102. sec.49.1. Nondiscrimination. sec.49.4. Sick Leave Pool. 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 24, 1996. TRD-9600987 Criss Cloudt Associate Commissioner, Policy Planning and Research Texas Education Agency Earliest possible date of adoption: March 4, 1996 For further information, please call: (512) 463-9701 Chapter 61. School Districts The Texas Education Agency (TEA) proposes the repeal of ssec.61.11, 61. 21, 61.30, 61.31, 61.41, 61.43, 61.45, 61.47, 61.49, 61.51, 61.53, 61.63, 61. 71- 61.73, 61.91-61.94, and 61.101-61.104, concerning school district operations. The sections establish definitions, requirements, and procedures related to: paperwork; year-round schools; waivers and exemptions; the pupil relationship; tuition and fees; boards of trustees; mineral leases; emergency facility grant funds; and school facilities standards. The repeals are necessary to comply with the sunset review process mandated by Senate Bill 1, 74th Texas Legislature, 1995. New sec.61.2, concerning military reservation school districts, is proposed in a separate submission to replace current sec.61.63. New Chapter 61, Subchapter B, concerning school facilities standards, is proposed in a separate submission to replace current Chapter 61, Subchapter H. New sec.61. 1041, concerning missing child prevention and identification programs, is proposed under the authority of the commissioner of education in a separate submission to replace current sec.61.45. David Anderson, chief counsel, has determined that for the first five-year period the repeals are in effect there will be no fiscal implications for state or local government or small businesses as a result of enforcing or administering the repeals. Mr. Anderson and Criss Cloudt, associate commissioner for policy planning and research, have determined that for each year of the first five years the repeals are in effect the public benefit anticipated as a result of enforcing the repeals will be compliance with Senate Bill 1. There is no anticipated economic cost to persons who are required to comply with the repeals as proposed. Comments on the proposal may be submitted to Criss Cloudt, Policy Planning and Research, 1701 North Congress Avenue, Austin, Texas 78701, (512) 463-9701. All requests for a public hearing on the proposed repeals submitted under the Administrative Procedure Act and the Texas Register Act must be received by the commissioner of education not more than 15 calendar days after notice of a proposed change in the sections has been published in the Texas Register. Subchapter A. Operations 19 TAC sec.61.11, sec.61.21 (Editor's note: The text of the following sections proposed for repeal will not be published. The sections may be examined in the offices of the Texas Education Agency or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.) The repeals are proposed under the Texas Education Code, s7.102, which authorizes the State Board of Education to review specified TEA rules. The repeals implement the Texas Education Code, sec.7.102. sec.61.11. School District Information Requirements. sec.61.21. Year-round Schools. 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 24, 1996. TRD-9600988 Criss Cloudt Associate Commissioner, Policy Planning and Research Texas Education Agency Earliest possible date of adoption: March 4, 1996 For further information, please call: (512) 463-9701 Subchapter B. Waivers and Exemptions 19 TAC sec.61.30, sec.61.31 (Editor's note: The text of the following sections proposed for repeal will not be published. The sections may be examined in the offices of the Texas Education Agency or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.) The repeals are proposed under the Texas Education Code, s7.102, which authorizes the State Board of Education to review specified TEA rules. The repeals implement the Texas Education Code, sec.7.102. sec.61.30. Waivers and Exemptions from Rules or Laws. sec.61.31. Commissioner of Education's Discretionary Authority To Waive State Board of Education Rules under Certain Circumstances. 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 24, 1996. TRD-9600989 Criss Cloudt Associate Commissioner, Policy Planning and Research Texas Education Agency Earliest possible date of adoption: March 4, 1996 For further information, please call: (512) 463-9701 Subchapter C. Pupil Relationship 19 TAC sec.sec.61.41, 61.43, 61.45, 61.47, 61.49 (Editor's note: The text of the following sections proposed for repeal will not be published. The sections may be examined in the offices of the Texas Education Agency or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.) The repeals are proposed under the Texas Education Code, s7.102, which authorizes the State Board of Education to review specified TEA rules. The repeals implement the Texas Education Code, sec.7.102. sec.61.41. Dropout Reporting. sec.61.43. Absences. sec.61.45. Missing Child Prevention and Identification Program: Fingerprints and Photographs. sec.61.47. Commitment to and Procedures for Nonbiased Pupil Appraisal. sec.61.49. Safe School Checklist. 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 24, 1996. TRD-9600990 Criss Cloudt Associate Commissioner, Policy Planning and Research Texas Education Agency Earliest possible date of adoption: March 4, 1996 For further information, please call: (512) 463-9701 Subchapter D. Tuition and Fees 19 TAC sec.61.51, sec.61.53 (Editor's note: The text of the following sections proposed for repeal will not be published. The sections may be examined in the offices of the Texas Education Agency or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.) The repeals are proposed under the Texas Education Code, s7.102, which authorizes the State Board of Education to review specified TEA rules. The repeals implement the Texas Education Code, sec.7.102. sec.61.51. School District Collection of Student Fees. sec.61.53. Tuition. 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 24, 1996. TRD-9600991 Criss Cloudt Associate Commissioner, Policy Planning and Research Texas Education Agency Earliest possible date of adoption: March 4, 1996 For further information, please call: (512) 463-9701 Subchapter E. Board of Trustees Relationship 19 TAC sec.61.63 (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 Education Agency or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.) The repeal is proposed under the Texas Education Code, s7.102, which authorizes the State Board of Education to review specified TEA rules. The repeal implements the Texas Education Code, sec.7.102. sec.61.63. Nomination of Trustees for Military Reservation School Districts. 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 24, 1996. TRD-9600992 Criss Cloudt Associate Commissioner, Policy Planning and Research Texas Education Agency Earliest possible date of adoption: March 4, 1996 For further information, please call: (512) 463-9701 Subchapter F. Other Resources 19 TAC sec.sec.61.71-61.73 (Editor's note: The text of the following sections proposed for repeal will not be published. The sections may be examined in the offices of the Texas Education Agency or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.) The repeals are proposed under the Texas Education Code, s7.102, which authorizes the State Board of Education to review specified TEA rules. The repeals implement the Texas Education Code, sec.7.102. sec.61.71. Mineral Leases, General Provisions. sec.61.72. Mineral Leases, Common School Districts. sec.61.73. Mineral Leases, Independent School Districts. 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 24, 1996. TRD-9600993 Criss Cloudt Associate Commissioner, Policy Planning and Research Texas Education Agency Earliest possible date of adoption: March 4, 1996 For further information, please call: (512) 463-9701 Subchapter G. School Facilities Emergency Facility Grant Funds 19 TAC sec.sec.61.91-61.94 (Editor's note: The text of the following sections proposed for repeal will not be published. The sections may be examined in the offices of the Texas Education Agency or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.) The repeals are proposed under the Texas Education Code, s7.102, which authorizes the State Board of Education to review specified TEA rules. The repeals implement the Texas Education Code, sec.7.102. sec.61.91. Definitions. sec.61.92. District Prioritization. sec.61.93. Project Eligibility. sec.61.94. General Requirements. 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 24, 1996. TRD-9600994 Criss Cloudt Associate Commissioner, Policy Planning and Research Texas Education Agency Earliest possible date of adoption: March 4, 1996 For further information, please call: (512) 463-9701 Subchapter H. School Facilities Standards 19 TAC sec.sec.61.101-61.104 (Editor's note: The text of the following sections proposed for repeal will not be published. The sections may be examined in the offices of the Texas Education Agency or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.) The repeals are proposed under the Texas Education Code, s7.102, which authorizes the State Board of Education to review specified TEA rules. The repeals implement the Texas Education Code, sec.7.102. sec.61.101. Applicability. sec.61.102. Space, Minimum Square Foot Requirements. sec.61.103. Educational Adequacy. sec.61.104. Construction Quality. 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 24, 1996. TRD-9600995 Criss Cloudt Associate Commissioner, Policy Planning and Research Texas Education Agency Earliest possible date of adoption: March 4, 1996 For further information, please call: (512) 463-9701 The Texas Education Agency (TEA) proposes new sec.sec.61.2 and 61. 11-61.14, concerning school district operations. Section 61.2 establishes a uniform process for selecting nominees for military school reservation district trustees. This section is proposed to replace current sec.61.63, which is proposed for repeal in a separate submission. Sections 61.11-61.14 establish standards related to the adequacy of school facilities. These sections, which constitute Chapter 61, Subchapter B, are proposed to replace current Chapter 61, Subchapter H, which is proposed for repeal in a separate submission. The new sections in this submission are proposed as part of the sunset review process mandated by Senate Bill 1, 74th Texas Legislature, 1995. Proposed new sec.61.2 contains the following changes to current sec.61.63. Cross-references to the Texas Education Code were updated. Editorial corrections were made to clarify the text. Finally, language was added to require that a majority of the trustees appointed to the school district board of trustees be civilian. The only changes to current Chapter 61, Subchapter H, contained in proposed new Chapter 61, Subchapter B, are updated cross-references to the Texas Administrative Code, Title 19. Joe Neely, deputy commissioner of education, 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 or small businesses as a result of enforcing or administering the sections. Mr. Neely and Criss Cloudt, associate commissioner for policy planning and research, have determined that for each year of the first five years the sections are in effect the public benefit anticipated as a result of enforcing the sections will be consistency in the process of selecting nominees for military school reservation district trustees and assurance that school facilities construction will meet consistent requirements for adequacy. There is no anticipated economic cost to persons who are required to comply with the sections as proposed. Comments on the proposal may be submitted to Criss Cloudt, Policy Planning and Research, 1701 North Congress Avenue, Austin, Texas 78701, (512) 463-9701. All requests for a public hearing on the proposed sections submitted under the Administrative Procedure Act and the Texas Register Act must be received by the commissioner of education not more than 15 calendar days after notice of a proposed change in the sections has been published in the Texas Register. Subchapter A. Board of Trustees Relationship 19 TAC sec.61.2 The new section is proposed under the Texas Education Code, sec.11.352, which authorizes the State Board of Education to adopt rules for the governance of a special-purpose district. The new section implements the Texas Education Code, sec.11.352. sec.61.2. Nomination of Trustees for Military Reservation School Districts. (a) In nominating trustee candidates for military reservation school districts, the commanding officer of the military reservation shall do the following: (1) submit a list to the commissioner of education with at least three nominees for each vacancy. A majority of the trustees appointed to the school board must be civilian, and all may be civilian. When two or more vacancies occur simultaneously, a list of three different nominees for each vacancy shall be submitted. In cases when the commanding officer wishes to reappoint an existing board member(s), a list of three nominees for each vacancy must still be submitted. Nominees not selected for existing vacancies may be resubmitted as candidates for subsequent vacancies. The commanding officer may rank in the order of preference the nominees submitted for each vacancy; (2) submit a statement that verifies that each of the nominees is qualified under the general school laws of Texas and lives or is employed on the military reservation; (3) submit a copy of a current biographical vita (resume) for each of the nominees, with a signature by the nominee attesting truth to the contents of the biographical vita; (4) submit a statement from each of the nominees which expresses the nominee's willingness to accept appointment and to serve in such a capacity with full adherence to the state established standards on the duties and responsibilities of school board members; (5) submit a signed statement which expresses recognition of the powers of the board of trustees to govern and manage the operations of the military reservation school districts; (6) submit a signed statement regarding the governance and management operations of the district which expresses recognition that the role of the commanding officer of the military reservation is limited only to the duty defined by statute in the process for appointing members of the board of trustees; and (7) submit a statement that the membership composition of the entire board of trustees is in full compliance with the provisions of the Texas Education Code, sec.11.352. (b) A member of the board of trustees, who during the period of the term of office experiences a change of status which disqualifies such member for appointment under the provisions of the Texas Education Code, shall become ineligible to serve at the time of the change of status. 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 24, 1996. TRD-9600996 Criss Cloudt Associate Commissioner, Policy Planning and Research Texas Education Agency Earliest possible date of adoption: March 4, 1996 For further information, please call: (512) 463-9701 Subchapter B. School Facilities Standards 19 TAC sec.sec.61.11-61.14 The new sections are proposed under the Texas Education Code, sec.42.352, which directs the State Board of Education to establish standards for adequacy of school facilities. The new sections implement the Texas Education Code, sec.42.352. sec.61.11. Applicability. (a) Definitions and procedures. The following words, terms, and procedures, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise. (1) Educational program-A written document that includes the following information: (A) a summary of the school district's educational philosophy, mission, and goals; and (B) a description of the general nature of the district's instructional program in accordance with Chapter 75 of this title (relating to Curriculum). (2) Educational specifications-Educational specifications for a proposed new school facility or major space renovation include a description of the proposed project, expressing the range of issues and alternatives. The following information should be included in the educational specifications: (A) the instructional programs, grade configuration, and type of facility; (B) number of students; (C) a list of any specialized classrooms or major support areas, noninstructional support areas, or external activity spaces; (D) estimated size of facility; (E) estimated budget for the facility project; (F) school administrative organization; and (G) hours of operation that include the instructional day, extracurricular activities, and any public access or use. (3) Instructional space-General classrooms, specialized classrooms, and major support areas. (4) Library-Library will include the following minimum requirements: (A) reading room; (B) stack area; and (C) necessary service areas. (5) Major space renovations-At least 50% of the gross area of the facility's instructional space is within the limits of the work. The provisions of this subchapter shall apply to projects involving major space renovations. Other renovations associated with repair or replacement of architectural interior or exterior finishes; fixtures; equipment; and electrical, plumbing, and mechanical systems are not subject to the requirements of sec.61.12 of this title (relating to Space, Minimum Square Foot Requirements) and sec.61.13 of this title, but shall comply with applicable building codes as required by sec.61.14 of this title (relating to Construction Quality). (6) Square feet per pupil-The net interior space of a room divided by the maximum number of pupils to be housed in that room during a single class period. (7) Square feet per room measurements-The net square footage of a room that will house 22 students at the elementary level and 25 students at the middle or high school level. The net square footage of a room includes exposed storage space, such as cabinets or shelving, but does not include hallway space or storage space, such as closets or preparation offices. (b) Effective date. The requirements in this subchapter shall apply to projects for new construction or major space renovations approved by a school district board of trustees after September 1, 1994. (c) Certification of design and construction. (1) In this section, the word "certify" indicates that the architect or engineer has reviewed the standards contained in this chapter and used the best professional judgment and reasonable care consistent with the practice of architecture or engineering in the State of Texas in executing the construction documents. The architect or engineer also certifies that these documents conform with the provisions of this subchapter, except as indicated on the certification. (2) The school district shall notify and obligate the architect or engineer to provide the required certification. The architect's or engineer's signature and seal on the construction documents shall certify compliance. (3) To ensure that facilities have been designed and constructed according to the provisions of this subchapter, each of the involved parties shall execute responsibilities as follows. (A) The school district shall provide the architect or engineer the long- range school facility plan and/or educational specifications approved by the board of trustees as required by this subchapter, and building code specifications for the facility. (B) The architect or engineer shall perform a building code search under applicable regulations that may influence the project, and shall certify that the design has been researched before it is final. (C) The architect or engineer shall also certify that the facility has been designed according to the provisions of this subchapter, based on the long-range school facility plan and/or educational specifications, building code specifications, and all documented changes to the construction documents provided by the district. (D) The building contractor or construction manager shall certify that the facility has been constructed in general accordance with the construction documents specified in subparagraph (C) of this paragraph. (E) When construction is completed, the school district shall certify that the facility conforms with the design requirements specified in subparagraph (A) of this paragraph. sec.61.12. Space, Minimum Square Foot Requirements. (a) A school district shall provide instructional space as specified in subsection (b) of this section if required by the district educational specifications described in sec.61.13 of this title (relating to Educational Adequacy). (b) For each type of instructional space, a district may satisfy the requirements of this section by using, as appropriate, either the standard for the minimum square feet per pupil or for square feet per room specified in paragraphs (1)-(3) of this subsection. Room size requirements are based on rooms that will house 22 students at the elementary level and 25 students at the middle or high school level. (1) General classrooms. (A) Classrooms for prekindergarten through first grade shall have a minimum of 36 square feet per pupil or 800 square feet per room. (B) Classrooms at the elementary school level shall have a minimum of 30 square feet per pupil or 700 square feet per room. (C) Classrooms at the secondary school level shall have a minimum of 28 square feet per pupil or 700 square feet per room. (2) Specialized classrooms. (A) Computer laboratories shall have a minimum of 41 square feet per pupil or 900 square feet per room at the elementary school level; and 36 square feet per pupil or 900 square feet per room at the secondary school level. (B) Science lecture/lab shall have a minimum of 41 square feet per pupil or 900 square feet per room at the elementary school level; 50 square feet per pupil or 1, 000 square feet per room at the middle school level; and 50 square feet per pupil or 1,200 square feet per room at the high school level. (3) Major support areas. (A) Primary gymnasiums or physical education space, if required by the district's educational program, shall have a minimum of 3,000 square feet at the elementary school level; 4,800 square feet at the middle school level; and 7,500 square feet at the high school level. (B) Libraries shall have a minimum of 3.0 square feet times the planned student capacity of the school. The minimum size of any elementary school library shall be 1,400 square feet. The minimum size of any middle school library shall be 2,100 square feet. The minimum size of any high school library shall be 2,800 square feet. (c) Other space requirements should be developed from school district design criteria as required to meet educational program needs. sec.61.13. Educational Adequacy.
            A proposed new school facility or major space renovation of an existing school facility meets the conditions of educational adequacy if the design of the proposed projects is based on the requirements of the school district's educational program and the student population that it serves. sec.61.14. Construction Quality. (a) Districts with existing building codes. A school district located in an area that has adopted local building codes shall comply with those codes (including fire and mechanical, electrical, and plumbing codes). The school district is not required to seek additional plan review of school facilities projects other than what is required by the local building authority. (b) Districts without existing building codes. A school district located in an area that has not adopted local building codes shall adopt and use the latest edition of either the Uniform Building Code or Standard (Southern) Building Code (and related fire, mechanical, and plumbing codes); and the National Electric Code. A qualified, independent third party, not employed by the design architect or engineer, shall review the plans and specifications for compliance with the requirements of the adopted building code. The plan review shall examine compliance conditions for emergency egress, fire protection, structural integrity, life safety, plumbing, and mechanical and electrical design. The review shall be conducted before bidding and must be conducted by a certified building code consultant. Associated fees shall be the responsibility of the school district. The reviewer shall prepare a summary list of any conditions not in conformance with the provisions of the adopted building code and is required to send a copy to the school district, design architect, or engineer. The design architect or engineer shall revise the plans and specifications as necessary and certify code compliance to the district. Any disputes shall be a matter for contract resolution. (c) Other Provisions. School districts shall comply with the provisions of the Americans with Disabilities Act of 1990 (Title I and Title II) and other local, state, and federal requirements as applicable. 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 24, 1996. TRD-9600997 Criss Cloudt Associate Commissioner, Policy Planning and Research Texas Education Agency Earliest possible date of adoption: March 4, 1996 For further information, please call: (512) 463-9701 Subchapter AA. Commissioner's Rules County Education Districts 19 TAC sec.61.1001 The Texas Education Agency (TEA) proposes an amendment to sec.61.1001, concerning county education districts (CEDs). The section establishes definitions, requirements, and procedures related to managing the assets, liabilities, and records of former CEDs. The amendment is necessary to delete obsolete provisions of the section concerning outdated time lines for certain activities. Joe Neely, deputy commissioner of education, 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 or small businesses as a result of enforcing or administering the section. Mr. Neely and Criss Cloudt, associate commissioner for policy planning and research, have determined that for each year of the first five years the section is in effect the public benefit anticipated as a result of enforcing the section will be a clearer, more concise statement of the rules regarding management of the assets, liabilities, and records of former CEDs. 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 to Criss Cloudt, Policy Planning and Research, 1701 North Congress Avenue, Austin, Texas 78701, (512) 463-9701. All requests for a public hearing on the proposed amendment submitted under the Administrative Procedure Act and the Texas Register Act must be received by the commissioner of education not more than 15 calendar days after notice of a proposed change in the section has been published in the Texas Register. The amendment is proposed under Senate Bill 7, sec.4.15, 73rd Texas Legislature, 1993, which authorizes the commissioner of education to adopt rules as necessary to implement statutory requirements concerning abolition of CEDs. The amendment implements Senate Bill 7, sec.4.15, 73rd Texas Legislature, 1993. sec.61.1001. Management of Assets, Liabilities, and Records of Former County Education Districts. [(a) Not later than August 31, 1993, the governing board of each county education district (CED) shall designate a governmental entity or an officer of a governmental entity located within the boundaries of the CED as the successor- in-interest to the assets, liabilities, and records of the CED and shall notify the commissioner of education of the designation.] (a)
              [(b)] On August 31, 1993, the governing board of each CED shall distribute all funds paid to a county education district in 1993 except any penalties under the Texas Tax Code, sec.33.07. In the following order of priority, the governing board of each CED shall distribute the funds: (1) to pay any outstanding debts of the former CED, including refunds, and establish a reasonable reserve for refunds to be held by the successor-in- interest; (2) to the school districts in the CED as required by the Texas Education Code, sec.16.501, in the full amount of the 1992-1993 district entitlement as determined by the 1992-1993 Summary of Finances issued by the Texas Education Agency (TEA), Division of State Funding; (3) to the school districts of the former CED according to the ratio of each district's reduction in revenues, resulting solely from formula changes between the 1992-1993 school year and the 1993-1994 school year, to the sum of all reductions in revenues for school districts in the former CED. This ratio shall be computed and sent to the districts by TEA, Division of State Funding. This distribution ratio shall apply until 100% of the loss in revenues as defined in this subsection has been paid; and (4) to the school districts of the former CED according to the ratio of each district's number of weighted average daily attendance for the 1992-1993 school year to the number of weighted average daily attendance in the CED for the same school year. This ratio shall be computed and sent to the districts by TEA, Division of State Funding. (b)
                [(c)] The successor-in-interest shall continue to collect all delinquent taxes of the CED, including any accrued but unpaid penalties and interest, and to distribute any amounts collected under subsections (d) and (e)
                  [(f) and (g)] of this section according to the priorities specified in subsection (a)
                    [(b)] of this section. Funds may be distributed on a monthly basis or less often according to administrative costs for processing small monetary amounts. (c)
                      [(d)] All
                        [Penalties under the Texas Tax Code, sec.33.07, paid to a CED in the 1992-1993 school year shall be allocated to the school district that is the situs of the property that incurred the penalties. Thereafter, all] penalties under the Texas Tax Code, sec.33.07, shall be allocated to the entity collecting the delinquent CED tax. All other CED revenues, including interest, shall be paid according to the priorities specified in subsection (a)
                          [(b)] of this section. [(e) On September 1, 1993, the governing board shall also transfer other assets of the CED, and all contracts, liabilities, and the records of the CED to the successor-in-interest. The governing board shall notify the commissioner of education of the amounts of the assets and liabilities transferred and the amounts of any uncollected taxes levied by the former CED in the annual financial report for the fiscal year ended August 31, 1993.] (d)
                            [(f)] The successor-in-interest of a CED shall collect or contract for the collection of any taxes levied by the former CED that are delinquent. (e)
                              [(g)] The successor-in-interest of a CED may sell any assets, other than funds, of the former CED that the successor does not need to perform the duties of successor-in-interest. (f)
                                [(h)] Not later than December 31 of each year, beginning with 1994, each successor-in-interest shall file with the commissioner of education an annual report compiled by an independent certified public accountant of the amount of delinquent taxes collected, the amount of proceeds received from the sale of assets, the amount of debts paid, the amount of distributions made to school districts, and the related administrative costs of the successor-in- interest during the preceding fiscal year. The financial report shall include a supplemental schedule of assets and liabilities transferred to the successor-in- interest or any component school district. [(i) The successor-in-interest of a former CED shall file an annual financial report for the fiscal year ended August 31, 1993, for the former CED according to the instructions in Change 27, Bulletin 679, Financial Accounting Manual.] (g)
                                  [(j)] A majority of the boards of trustees of the component districts of a former CED may by a majority vote redesignate the successor-in- interest of the former CED. The commissioner of education may require the board of trustees of component districts of a former CED to redesignate the successor- in-interest of the former CED. (h)
                                    [(k) ] The successor-in-interest of a former CED may pay necessary administrative costs from penalties and other delinquent tax proceeds. Administrative costs include, but are not limited to, audit expenses, payroll, contracted services, supplies and materials, and other operating costs associated with continuing delinquent tax collection and distribution activities. (i)
                                      [(l)] The successor-in-interest of a former CED shall report delinquent taxes collected and funds distributed, administrative costs, and delinquent tax receivable balances to each component school district of the former CED within 30 days after the end of any month during which the successor- in-interest collects or distributes any delinquent taxes. Reports may be made on a monthly basis or less often according to administrative costs for communicating small transaction reports amounts. 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 24, 1996. TRD-9600999 Criss Cloudt Associate Commissioner, Policy Planning and Research Texas Education Agency Earliest possible date of adoption: March 4, 1996 For further information, please call: (512) 463-9701 19 TAC sec.61.1002 (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 Education Agency or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.) The Texas Education Agency (TEA) proposes the repeal of s61.1002, concerning county education districts (CEDs). Senate Bill 7, 73rd Texas Legislature, 1993, abolished the system of CEDs. Currently, sec.61.002, prescribes the form of a notice a school district may publish explaining the conversion from CED taxes. The repeal is necessary to delete this obsolete form, which school districts were authorized to publish during the 1993-1994 school year. Joe Neely, deputy commissioner of education, has determined that for the first five-year period the repeal is in effect there will be no fiscal implications for state or local government or small businesses as a result of enforcing or administering the repeal. Mr. Neely and Criss Cloudt, associate commissioner for policy planning and research, have 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 a clearer, more concise statement of the rules regarding management of the assets, liabilities, and records of former CEDs. There is no anticipated economic cost to persons who are required to comply with the repeal as proposed. Comments on the proposal may be submitted to Criss Cloudt, Policy Planning and Research, 1701 North Congress Avenue, Austin, Texas 78701, (512) 463-9701. All requests for a public hearing on the proposed repeal submitted under the Administrative Procedure Act and the Texas Register Act must be received by the commissioner of education not more than 15 calendar days after notice of a proposed change in the section has been published in the Texas Register. The repeal is proposed under Senate Bill 7, sec.4.15, 73rd Texas Legislature, 1993, which authorizes the commissioner of education to adopt rules as necessary to implement statutory requirements concerning abolition of CEDs. The repeal implements Senate Bill 7, sec.4.15, 73rd Texas Legislature, 1993. sec.61.1002. Tax Rate Notice. 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 24, 1996. TRD-9601000 Criss Cloudt Associate Commissioner, Policy Planning and Research Texas Education Agency Earliest possible date of adoption: March 4, 1996 For further information, please call: (512) 463-9701 Subchapter DD. Commissioner's Rules Concerning Missing Child Prevention and Identification Programs 19 TAC sec.61.1041 The Texas Education Agency (TEA) proposes new sec.61.1041, concerning missing child prevention and identification programs. The section establishes requirements and procedures related to the disposition of fingerprints and photographs made in compliance with the Texas Education Code, Chapter 33, Subchapter C. The new section is proposed to replace current sec.61.45, which is proposed for repeal in a separate submission to comply with the sunset review process mandated by Senate Bill 1, 73rd Texas Legislature, 1995. Senate Bill 1 transferred rulemaking authority related to this topic from the State Board of Education to TEA. Proposed new sec.61.1041 contains the following changes to current sec.61.45. Cross-references to the Texas Education Code were updated, and editorial corrections were made to clarify the text. Joe Neely, deputy commissioner of education, 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 or small businesses as a result of enforcing or administering the section. Mr. Neely and Criss Cloudt, associate commissioner for policy planning and research, have determined that for each year of the first five years the section is in effect the public benefit anticipated as a result of enforcing the section will be compliance with Senate Bill 1 and consistency in the requirements and procedures related to the disposition of fingerprints and photographs obtained for the purposes of missing child prevention and identification. 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 to Criss Cloudt, Policy Planning and Research, 1701 North Congress Avenue, Austin, Texas 78701, (512) 463-9701. All requests for a public hearing on the proposed section submitted under the Administrative Procedure Act must be received by the commissioner of education not more than 15 calendar days after notice of a proposed change in the section has been published in the Texas Register . The new section is proposed under the Texas Education Code, sec.33.057, which directs TEA to adopt rules relating to the destruction of fingerprints and photographs made or kept under the Texas Education Code, Chapter 33, Subchapter C. The new section implements the Texas Education Code, sec.33.057. sec.61.1041. Missing Child Prevention and Identification Program: Fingerprints and Photographs. (a) In accordance with the Texas Education Code, sec.33.054, a photograph of a student shall be retained by the participating school until the photograph is replaced by a photograph taken after the date of the original photograph or until the expiration of three years, whichever is earlier. (b) When a student withdraws from a school district, all photographs and fingerprints of the student taken as part of the Missing Child Prevention and Identification Program shall be returned to the parent or guardian of the student. If the district is unable to return the photograph and fingerprints to the parent or guardian, the photograph and fingerprints shall be destroyed by the school district. 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 24, 1996. TRD-9601001 Criss Cloudt Associate Commissioner, Policy Planning and Research Texas Education Agency Earliest possible date of adoption: March 4, 1996 For further information, please call: (512) 463-9701 Chapter 63. Student Services 19 TAC sec.sec.63.11, 63.21, 63.22 (Editor's note: The text of the following sections proposed for repeal will not be published. The sections may be examined in the offices of the Texas Education Agency or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.) The Texas Education Agency (TEA) proposes the repeal of ssec.63.11, 63. 21, and 63.22, concerning student services. The sections establish definitions, requirements, and procedures related to library media programs, school-community guidance centers, and attendance services. The repeals are necessary to comply with the sunset review process mandated by Senate Bill 1, 74th Texas Legislature, 1995. Ruben Olivarez, associate commissioner for accountability, has determined that for the first five-year period the repeals are in effect there will be no fiscal implications for state or local government or small businesses as a result of enforcing or administering the repeals. Mr. Olivarez and Criss Cloudt, associate commissioner for policy planning and research, have determined that for each year of the first five years the repeals are in effect the public benefit anticipated as a result of enforcing the repeals will be compliance with Senate Bill 1. There is no anticipated economic cost to persons who are required to comply with the repeals as proposed. Comments on the proposal may be submitted to Criss Cloudt, Policy Planning and Research, 1701 North Congress Avenue, Austin, Texas 78701, (512) 463-9701. All requests for a public hearing on the proposed repeals submitted under the Administrative Procedure Act and the Texas Register Act must be received by the commissioner of education not more than 15 calendar days after notice of a proposed change in the sections has been published in the Texas Register. The repeals are proposed under the Texas Education Code, s7.102, which authorizes the State Board of Education to review specified TEA rules. The repeals implement the Texas Education Code, sec.7.102. sec.63.11. Requirements for Library Media Programs. sec.63.21. School-Community Guidance Centers. sec.63.22. Attendance Services. 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 24, 1996. TRD-9600998 Criss Cloudt Associate Commissioner, Policy Planning and Research Texas Education Agency Earliest possible date of adoption: March 4, 1996 For further information, please call: (512) 463-9701 Chapter 75. Curriculum Subchapter AA. Driver Education 19 TAC sec.sec.75.1001-75.1009 The Texas Education Agency (TEA) proposes new sec.sec.75.1001-75.1009, concerning driver education. The new sections provide for a program of organized instruction in driver education and traffic safety for public school students and establish standards for certifying professional and paraprofessional personnel who conduct the programs in the public schools. J. R. Cummings, associate commissioner for special populations, 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 or small businesses as a result of enforcing or administering the sections. Mr. Cummings and Criss Cloudt, associate commissioner for policy planning and research, have determined that for each year of the first five years the sections are in effect the public benefit anticipated as a result of enforcing the sections will be consistency in the requirements for driver education instruction and for certification of driver education personnel. There is no anticipated economic cost to persons who are required to comply with the sections as proposed. Comments on the proposal may be submitted to Criss Cloudt, Policy Planning and Research, 1701 North Congress Avenue, Austin, Texas 78701, (512) 463-9701. All requests for a public hearing on the proposed sections submitted under the Administrative Procedure Act and the Texas Register Act must be received by the commissioner of education not more than 15 calendar days after notice of a proposed change in the sections has been published in the Texas Register. The new sections are proposed under the Texas Education Code, sec.29.902, which directs TEA to develop a program of organized instruction in driver education and traffic safety for public school students and to establish standards for certifying professional and paraprofessional personnel who conduct the programs in the public schools. The new sections implement the Texas Education Code, sec.29.902. sec.75.1001. Administration and Supervision. (a) To be approved, a driver education course must be part of the regular curriculum of a public school, college, or university. (b) The superintendent, chief school official, or education service center (ESC) director must: (1) certify that the course meets Texas Education Agency (TEA) and Texas Department of Public Safety (DPS) standards for an approved course in driver education for Texas schools; (2) certify that all driver education personnel meet state requirements; (3) provide each driver education instructor and administrator a copy of this subchapter; and (4) provide each driver education instructor a state-approved curriculum guide appropriate for his or her phase of instruction. sec.75.1002. Driver Education Teachers. (a) To qualify to add a driver education endorsement as a specialization area on his or her current Texas teaching certificate, a teacher must meet the requirements in Chapter 137 of this title (relating to Professional Educator Preparation and Certification). (b) A fully certified teacher of driver education may be designated by the Texas Education Agency (TEA) as a supervising teacher of driver education by successfully completing one of the following: (1) six semester hours of university instruction beyond the basic six hours of driver education certification courses that include administering driver education programs that incorporate classroom and in-car instruction, techniques of simulation and multicar driving range instruction, supervising, and administering traffic safety education. The instruction for supervising teachers must be given by a university approved to train driver education supervising teachers; or (2) five years as a driver education teacher, during which the individual must teach at least one driver education course per year. The individual must obtain the recommendation of a superintendent, chief school official, or education service center (ESC) director submitted on a form provided by TEA. (c) The TEA shall issue certificates of completed training for supervising teachers. (d) At least once each year a school district, an ESC, or a college or university must document that each certified driver education teacher employed in the driver education program meets the driving record evaluation standards established by the Texas Department of Public Safety (DPS) for Texas school bus drivers. sec.75.1003. Teaching Assistants. (a) An individual may be employed as a teaching assistant in a driver education program under the direction of a supervising driver education teacher after completing one of the following programs. (1) Teaching assistant (full). An individual may be approved as a teaching assistant (full) to assist certified teachers in the classroom phase of driver education and to conduct behind-the-wheel, multicar range, and simulator training by successfully completing one of the following requirements: (A) a program of study in driver education developed by the Texas Education Agency (TEA). Applications are available from the TEA and must be submitted 30 days before the training program starts; or (B) the six semester hours of driver and traffic safety education from an approved university that are required for driver education teacher endorsement, plus three additional hours in techniques of teaching in-car instruction and simulation. (2) Teaching assistant (in-car only). An individual may be approved as a teaching assistant (in-car only) to conduct only in-car training by completing the six semester hours of driver and traffic safety education required for driver education teacher certification. (b) The TEA shall issue certificates of completed training for teaching assistants. (c) To be approved, a teaching assistant in driver education must have graduated high school, have been a licensed driver for at least five years, possess a Texas driver's license valid for the type of vehicle used for instruction, and meet the driving record evaluation standards established for Texas school bus drivers. (d) A teaching assistant may be trained by: an approved university as described in subsection (a)(1)(B) of this section; or by a university, college, a school district, or an education service center (ESC) as described in subsection (a)(1)(A) of this section. When the training is conducted by a college, a school district, or an ESC, the program must be approved by TEA. (e) A school district, an ESC, or a college or university that uses teaching assistants must employ driver education supervising teachers to supervise the teaching assistants. At least twice each year, the driver education supervising teacher must formally evaluate each teaching assistant giving instruction. These evaluations must become part of the teaching assistant's personnel file. (f) At least once each year a school district, an ESC, or a college or university must document that each driver education teaching assistant employed in the driver education program meets the driving record evaluation standards established by the Texas Department of Public Safety (DPS) for Texas school bus drivers. sec.75.1004. Course Requirements. (a) To be approved under this subchapter, a driver education plan shall include one or more of the following: (1) at least 32 clock hours of classroom instruction, seven hours of behind- the-wheel instruction, and seven hours of in-car observation. Under this plan, a student may receive only local credit for the course; (2) at least one class period per day, for a semester, covering the driver education curriculum. This class traditionally consists of at least 56 clock hours of driver education classroom instruction, seven hours of behind-the-wheel instruction, and seven hours of in-car observation. Under this plan, a student may receive one-half unit of state credit toward graduation; (3) at least one class period per day, for a semester, covering the driver education curriculum. This class traditionally consists of at least 56 clock hours of driver education classroom instruction and 24 clock hours of additional traffic safety education. Under this plan, a student may receive one-half unit of state credit toward graduation. (b) A school may use multimedia systems, simulators, and multicar driving ranges for instruction in a driver education program. Each simulator, including the filmed instructional programs, and each plan for a multicar driving range must meet state specifications developed by the Texas Department of Public Safety (DPS) and the Texas Education Agency (TEA). The specifications are available from TEA. (c) Course content, minimum instruction requirements, and administrative guidelines for each phase of instruction must conform to the state-approved curriculum guide appropriate for that phase. (d) Four periods of at least 55 minutes of instruction in a simulator may be substituted for one clock hour of in- car instruction. Two periods of at least 55 minutes of multicar driving range instruction may be substituted for one clock hour of in-car instruction relating to elementary or city driving lessons. However, a minimum of four clock hours must be devoted to behind-the-wheel instruction. (e) A learning system that has programs correlated with the course content contained in the curriculum guide may be used in class instruction. (f) A class instruction course conducted through the medium of television must be approved by TEA. sec.75.1005. Scheduling. (a) A driver education program may be scheduled with the classroom phase of instruction presented in block form or concurrently with the laboratory phases. Under the block form program, a student may apply to the Texas Department of Public Safety (DPS) for an instruction permit after completing the required classroom instruction. Under the concurrent program, a student may apply to DPS for an instruction permit after completing six hours of classroom instruction devoted to the lessons contained in the curriculum guide that cover driving laws and procedures. (b) When a student receives an instruction permit from DPS under the concurrent schedule provision, the instructor must record the license number. A student licensed under the concurrent program must subsequently complete the required class instruction. If a student does not subsequently complete the required class instruction, the instructor must complete DPS Form DL-42 and send it to the License and Driver Record Division of DPS. Form DL-42 should be prepared as soon as it is evident the student will not complete the required hours of instruction. The DPS may then revoke the student's instruction permit. The DE-42 form should not be prepared and submitted to DPS when the student successfully completes the classroom phase of instruction. sec.75.1006. Instructor Hours, Class Size, and Age Level. (a) A driver education instructor may not teach more than eight hours of in- car instruction per day. The limit of eight hours applies in all approved programs, regardless of the number of schools involved. (b) No more than 36 students may be enrolled in a driver education class. In addition, a minimum of two students must be in the car during in-car instruction. (c) Driver education instruction is limited to eligible students who are at least 14 years of age when the driver education classroom phase begins and who will be 15 years of age or older when the classroom phase ends. A student certified by the Texas Department of Public Safety (DPS) as eligible for a minor's restricted driver's license shall not be required to be 15 when the classroom phase ends. In all cases, a student must be 15 years of age before commencing behind-the-wheel driving instruction. (d) In-car instruction given on public roadways is limited to a student who has an instruction permit or driver's license issued by DPS for the type of vehicle being driven. (e) A student may be dropped from the driver education class for violating any Texas motor vehicle law. sec.75.1007. Driver Education Course Records. (a) A written record of instruction and observation time shall be maintained for each driver education student. Sample forms contained in the curriculum guides may be used, or appropriate forms may be developed provided they incorporate the basic information contained in the sample forms. (b) A school district, an education service center (ESC), or a college or university must maintain a record of instruction in minutes and hours for each driver education student. The record shall be made available to officials of the Texas Education Agency (TEA) or the Texas Department of Public Safety (DPS). (c) Each fiscal transactions for driver education must be handled through the district's regular accounting procedures as required in the TEA financial accounting manual, Bulletin 679. (d) The DPS and TEA shall accept driver education instruction received by a student in another state. Driver education instruction completed in another state must be certified in writing by the chief official of the school where the instruction was given. A student who receives part of his or her instruction in another state may complete the instruction in Texas; however, the student must complete all of the course requirements in the Texas curriculum guide. sec.75.1008. Signatures. The Texas Department of Public Safety (DPS) shall accept only the original signature of a certified driver education teacher. The signature of the chief school official or education service center (ESC) director may be written or stamped. sec.