ADOPTED RULES An agency may take final action on a section 30 days after a proposal has been published in the Texas Register. The section becomes effective 20 days after the agency files the correct document with the Texas Register, unless a later date is specified or unless a federal statute or regulation requires implementation of the action on shorter notice. If an agency adopts the section without any changes to the proposed text, only the preamble of the notice and statement of legal authority will be published. If an agency adopts the section with changes to the proposed text, the proposal will be republished with the changes. TITLE 1. ADMINISTRATION PART I. Office of the Governor CHAPTER 5.Budget and Planning Office SUBCHAPTER B.State and Local Review of Federal and State Assistance Applications Introduction and General Provisions of the Texas Review and Comment System 1 TAC sec.5.195 The Governor's Office adopts an amendment to sec.5.195 concerning the Texas Review and Comment System, without changes to the proposed text as published in the January 19, 1996, issue of the Texas Register (21 TexReg 477). The amendment adds federal programs for review at the request of the twenty-four Texas regional councils of government and affected state agencies, and conforms program numbers to current listings in the Catalog of Federal Domestic Assistance. No comments were received regarding adoption of the amendment. The amendment is adopted under the Government Code, Title 7, sec.772.004 and sec.772.005, and the Local Government Code, Chapter 391, which authorizes the Governor's Office to provide for review of state and local applications for grant and loan assistance and to establish policies and guidelines for review and comment. Chapter 391 of the Local Government Code requires applicants for state or federal assistance to submit their applications for review to the appropriate regional planning commissions and directs the governor to issue guidelines for carrying out such reviews. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be within the agency's authority to adopt. Issued in Austin, Texas, on March 1, 1996. TRD-9602952 Pete Wassdorf Deputy General Counsel Office of the Governor Effective Date: March 22, 1996 Proposal publication date: January 19, 1996 For further information, please call: (512) 463-1788 PART XVIII. Telecommunications Infrastructure Fund Board CHAPTER 471. Operating Rules of the Telecommunications Infrastructure Fund Board 1 TAC sec.sec.471.1, 471.3, 471.5, 471.7, 471.9, 471.11, 471.13, 471.15, 471.17, 471.19, 471.30-471.33, 471.50, 471.60, 471.70, 471.80, 471.90-471.92, 471.100 The Telecommunications Infrastructure Fund Board (TIFB) adopts new sec.sec. 471.1, 471.3, 471.5, 471.7, 471.9, 471.11, 417.13, 471.15, 471.17, 471.19, 471.30-471.33, 471.50, 471.60, 471.70, 471.80, 471.90-471.92, and 471.100, outlining the general powers and operating procedures of the Board. These include the role and term of Vice-Chairman, types of meetings allowed, requirement of a quorum to conduct official business, standing and advisory committees, contract powers, standards of conduct and conflict of interest provisions. Sections 471.9 and 471.60 are adopted with changes to the proposed text as published in the December 26, 1995, issue of the Texas Register (20 TexReg 11079). Sections 471.1, 471.3, 471.5, 471.7, 471.11, 471.13, 471.15, 471.17, 471.19, 471.30-471.33, 471.50, 471.70, 471.80, 471.90-471.92, and 471.100 are adopted without changes and will not be republished. The changes in the rules only make minor modifications to sec.471.9 regarding the reimbursement of board members for expenses incurred in attending Board meetings and other work of the Board and changes to sec.471.60 further outlining how the TIFB may accept gifts, grants and donations. No comments were received regarding the adoption of the rules. The new sections are adopted pursuant to Texas Civil Statutes, Article 1446c-0 (f) and Government Code, Chapter 2001, providing the Telecommunications Infrastructure Fund Board the authority to promulgate rules. sec.471.9. Compensation of Board Members. Members of the Board serve without pay but are entitled to reimbursement for their actual expenses incurred in attending meetings of the Board or in attending to other work of the Board. sec.471.60.Rules Governing acceptance of gifts, grants and donations. The board may accept gifts, grants, and donations and use them for the purposes for which they are given or for any purpose within the Board's authority. Any funds received by the TIFB shall be deposited in the state treasury. All donations, in whatever form, will be used for the purpose specified by the donor, or for general TIF programs if no purpose is specified. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be within the agency's authority to adopt. Issued in Austin, Texas on March 1, 1996. TRD-9602943 Pete Wassdorf Deputy General Counsel, Governor's Office Telecommunications Infrastructure Fund Board Effective date: March 22, 1996 Proposal publication date: December 26, 1996 For further information, please call: (512) 475-2498 TITLE 4. AGRICULTURE PART I. Texas Department of Agriculture CHAPTER 17.Marketing and Development Division Texas Commodity Referendum Act 4 TAC sec.sec.17.1, 17.3-17.5, 17.7, 17.9 The Texas Department of Agriculture (the department) adopts amendments to sec.17.1, sec.;17.3-17.5, sec.17.7 and sec.17.9, concerning Texas Commodity Referendum Act, Chapter 41, Texas Agriculture Code, and commodity boards established under Chapter 41, without changes to the proposed text as published in the January 26, 1996, issue of the Texas Register (21 TexReg 643). The amendments are adopted to clarify existing regulations and delete unnecessary language or language already stated in law. The amendments provide timelines and procedures for certification of commodity organizations, provide for the submission of election plans by organizations certified to conduct referenda and board elections under Chapter 41 and prescribe the content of such plans, provide for notice to the commissioner of elections and referenda to increase assessments, clarify procedures for conduct of elections and preparation and destruction of ballots after an election, clarify where assessments are collected, provide for filing of a plan to change to a geographic board representation at the same time as filing of the election plan and clarify penalties and remedies. Comments generally in favor of the proposal were submitted by the Texas Corn Producers Board. The amendments are adopted under the Texas Agriculture Code, sec.12.016, which provides the Texas Department of Agriculture with the authority to adopt rules necessary for administration of the Code. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on February 29, 1996. TRD-9602884 Dolores Alvarado Hibbs Deputy General Counsel Texas Department of Agriculture Effective date: March 21, 1996 Proposal publication date: January 26, 1995 For further information, please call: (512) 463-7583 4 TAC sec.17.2, sec.17.10 The Texas Department of Agriculture (the department) adopts the repeal ofsec.17.2 and sec.17.10, concerning the Texas Commodity Referendum Act, Chapter 41, Texas Agriculture Code, and commodity boards established under Chapter 41, without changes to the proposed text as published in the January 26, 1996, issue of the Texas Register (21 TexReg 644). The repeals are adopted in order to delete unnecessary language or language already stated in law. The repeals delete language relating to voter elibiblity in referenda and elections held by Chapter 41 commodity boards and adding new territory to an area covered by a Chapter 41 commodity producer board. No comments were received regarding the repeals. The repeals are adopted under the Texas Agriculture Code, sec.12.016, which provides the Texas Department of Agriculture with the authority to adopt rules necessary for administration of the Code. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on February 29, 1996. TRD-9602885 Dolores Alvarado Hibbs Deputy General Counsel Texas Department of Agriculture Effective date: March 21, 1996 Proposal publication date: January 26, 1995 For further information, please call: (512) 463-7583 Certification of Farmers Market 4 TAC sec.sec.17.70-17.74 The Texas Department of Agriculture (the department), adopts amendments to sec.sec.17.70-17.74, concerning Certification of Farmers Market. Section 17.72 and sec.17.73 are adopted with changes to the proposed text as published in the September 5, 1995, issue of the Texas Register (20 TexReg 6875). Sections 17.70, 17.71, and 17.74 are adopted without changes and will not be republished. The amendments are adopted in order to provide better data collection by the department, better monitoring of the markets by the department due to the ongoing collection of more information by the department, greater self-policing of the markets, and more efficient operation of the program. Section 17.72 is adopted with changes. In response to a comment by the Texas Farmers Market Corporation, sec. 17.72(b) has been changed to reflect an expiration date of May 31 for farmers market certifications, as opposed to the proposed December 31. Section 17.73 is adopted with changes. In response to comments by the Texas Department of Health and the Sustainable Food Center, sec.17.73(2) has been changed to require that the information submitted by applicants for certification must include an identification of those members that are farmers growing their own produce. The amendments will function by changing several definitions, clarifying that farmers markets may be certified in accordance with these rules and the Texas Agriculture Code, Chapter 15, providing for the issuance of a certificate as opposed to a plaque, changing the reference to the department's district offices to the regional offices, altering the time period from receipt of application to approval or denial, providing that a farmers market certification expires on May 31, requiring that certifications be renewed annually and providing procedures for same, adding to the types of information that an applicant market must provide for certification, deleting the requirements that at least 50% of all agricultural products sold at the market are Texas-grown and at least 50% of the sellers are farmers and ranchers and instead requiring that the farmers market association bylaws must control same, providing that the farmers market association bylaws shall require that the agricultural products sold at the market must be of merchantable quality, changing the title of sec.17.74 from "Appeal" to "Withdrawal of Certification," providing that the failure of the farmers market to enforce the mandatory bylaws provisions required by sec.17.73 is grounds for withdrawal of the market's certification, and changing certain statutory cites. Several comments were received regarding the proposed amendments. The Texas Department of Health supported the concept of annual renewal of certification, agreed with the eligibility requirement of annual submission of market association information, and recommended that the list of membership designate whether or not the member is a farmer in order to document compliance with eligibility requirements. The Sustainable Food Center (SFC) agreed with the concept of annual renewal of certification and recommended that the list of market association members include information regarding which members are farmers selling their own produce. The department agrees with the suggestion that the information provided by farmers market associations state which members are farmers, and the rule has been changed accordingly. The Texas Certified Farmers Market Corporation (TCFMC) agreed with the annual renewal of certification, and recommended that the renewal date for certifications should be May 30 as opposed to December 31. The department agrees with this recommendation, with the exception that the department will use May 31 instead of May 30, and the rule has been changed accordingly. Both the SFC and the TCFMC opposed the removal of the requirements that at least 50% of all agricultural products sold at the market are Texas grown and at least 50% of the sellers are farmers and ranchers. The SFC stated that the standards provide a guarantee of the origin of the produce and protect farmers from competition with imported produce. The SFC further stated that the original 50% requirements would protect a year-round market system, as they are based on an annual average. The TCFMC stated that it is better for the department to have the 50% minimum benchmark. The department disagrees with these comments. Farmers markets provide an outlet for farmers to sell and distribute their produce. Whether the farmer sells his produce through the farmers market directly, or indirectly through another farmer or vendor, the farmer has still found a good, viable outlet for his produce. The 50% requirement did not "guarantee" a consumer Texas-grown produce. As pointed out by SFC, the requirement was an annual requirement, and at any particular time a consumer could be purchasing imported produce. Instead, the key is for farmers and vendors to highlight Texas- grown produce and increased consumer awareness to demand quality Texas-grown produce when available. The department intends to focus on these issues and to provide greater support to the farmers markets in the areas of marketing of Texas-grown produce and consumer education and awareness. In addition, the 50% requirement did not protect farmers from competition from imported produce. As stated previously, imported produce could still be offered in the certified farmers markets under the 50% rule and imported produce is also sold in non-certified farmers markets. Again, the key is to promote Texas-grown produce through marketing initiatives and to educate consumers to demand Texas-grown produce. Finally, farmers and consumers can only benefit from farmers markets if the markets are able to remain open. Certain areas of the state have limited growing seasons and types of produce. Other markets are located near the state border. Many of these markets would be unable to remain open on a consistent basis if they had to meet the 50% requirement. The farmers market program was created by statute to work in concert with the federal special supplemental food program for women, infants, and children (W.I.C.) administered by the Texas Department of Health. Women and children living in these areas have effectively been denied the benefits of the W.I.C. program. The department has determined that under the rule as proposed and adopted certain minimum standards will apply, and individual farmers market associations can adopt stricter guidelines if they so chose. Each market association is encouraged to adopt bylaws and guidelines that reflect its unique situation. The rule as adopted will provide for more local control in order to better address local needs and problems. The amendments are adopted under the Texas Agriculture Code (the Code), Chapter 15, which provides the Texas Department of Agriculture with the authority to develop a farmers market certification program; and, Texas Government Code, sec.2001.004, which requires that the department adopt rules of practice stating the nature and requirements of all available formal and informal procedures. sec.17.72. Application Process. (a) An applicant seeking certification must submit a completed application on a form approved by the Texas Department of Agriculture to the state headquarters in Austin. Application forms may be obtained from any regional office and/or state headquarters of the Texas Department of Agriculture. (b) Within 45 days of receipt of a completed application for certification, the commissioner or an authorized agent shall notify the applicant in writing, of the approval or denial of his application. If approved, the department shall mail to the registrant the farmers market certificate, which shall expire on the following May 31. (c) Certifications must be renewed annually. Between April 1 and April 30, annually, the department shall mail to each certified farmers market a renewal form setting forth the requirements for renewal. Within 30 days of receipt of the renewal form, the farmers market shall complete and return the form to the department, together with all items required by sec.17.73(2) of this title (relating to Eligibility Requirements) to be filed with the department on an annual basis. sec.17.73. Eligibility Requirements. A farmers market is eligible for certification if: (1) (No change.) (2) the applicant has filed annually with the Texas Department of Agriculture at the state headquarters office in Austin, a copy of the farmers market association bylaws, a list of the members of the governing body, a list of the association members, identifying those members that are farmers selling their own produce, a description of the market location, and the seasons, days, and hours of operation; (3) the farmers market association bylaws require that a certain percentage of all agricultural products sold through the farmers market are grown in Texas; (4) the farmers market association bylaws require that a certain number, at least two or more, of its members are farmers selling their own produce; and, (5) the farmers market association bylaws require that all agricultural products sold at the market shall be of merchantable quality. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on February 29, 1996. TRD-9602883 Dolores Alvarado Hibbs Deputy General Counsel Texas Department of Agriculture Effective date: March 21, 1996 Proposal publication date: September 25, 1995 For further information, please call: (512) 463-7583 TITLE 16. ECONOMIC REGULATION PART III. Texas Alcoholic Beverage Commission CHAPTER 37.Legal Rules of Practice 16 TAC sec.37.45 The Texas Alcoholic Beverage Commission adopts an amendment to sec.37.45, concerning the record in contested cases before the commission. The amendment is passed without changes to the proposed text as published in the December 22, 1995, issue of the Texas Register (20 TexReg 10947) and as corrected in the January 9, 1996, issue of the Texas Register (21 TexReg 273). The rule was amended by adding subsection (c) to sec.37.45. The amendment requires parties seeking administrative review of agency orders to pay the costs incurred by preparation of the record to be reviewed. The amendment was passed to bring agency policy into conformance with practices permissible under Texas Government Code, sec.2001.177 and to relieve the agency of the financial responsibility of preparing the record for appeal of certain administrative cases. No comments were received regarding adoption of the amendment. This amendment is adopted pursuant to Alcoholic Beverage Code, sec.5.31. Cross reference: Alcoholic Beverage Code, sec.11.67 and sec.61.81. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on February 29, 1996. TRD-9602840 Doyle Bailey Administrator Texas Alcoholic Beverage Commission Effective date: March 21, 1996 Proposal publication date: December 22, 1995 and January 9, 1996 For further information, please call (512) 206-3204. PART Part IX. Texas Lottery CommissionCHAPTER 401.Administration of the State Lottery Act 16 TAC 401.309 The Texas Lottery Commission adopts new sec.401.309, relating to the Assignability of Prizes, without changes to the proposed text published in the November 14, 1995, issue of the Texas Register (20 TexReg 9361). Texas Government Code, sec.466.406 states the following: (a)Except as otherwise provided by this section, the right of any person to a prize is not assignable. (b)Payment of a prize may be made to the estate of a deceased prizewinner. (c)A prize to which a winner is otherwise entitled may be paid to any person under an appropriate judicial order. The plain meaning of subsection (a) of the statute is to prohibit assignments. The type of assignments to be permitted by the application of subsection (c) of the statute is the reason for this proposed rule. Because subsection (a) is a clear and unambiguous statement of legislative intent, it would surely frustrate the legislative intent to allow the voluntary assignment of lottery winnings in a proceeding brought for the sole and express purpose of obtaining a court order authorizing an assignment of lottery winnings pursuant to subsection (c). The plain meaning of the statutory provisions is not contradicted by any legislative history. There is no legislative history (floor testimony, legislative committee reports, or other written documents) in Texas regarding the meaning of the phrase "appropriate judicial order". The Texas Lottery Commission, an agency created by legislation in 1993, has been served with several Texas district court orders which declare valid a voluntary agreement between a prizewinner and a third party where the prizewinner has agreed to transfer future prize payments to a third party in exchange for consideration. These orders further declare that they are an "appropriate judicial order" as contemplated by Texas Government Code, sec.466.406. The parties to the action are the prizewinner and the prizewinner's assignee; the Texas Lottery Commission was not a party to these actions. Since no separate controversy is referred to in the orders (such as a property distribution as part of a divorce proceeding), it can be fairly stated that the purpose for obtaining the orders was simply to satisfy the "appropriate judicial order" language of Texas Government Code, sec.466.406. The Texas Lottery Commission believes that to acknowledge these particular orders and pay the assignees the prizewinners' prizes would fly in the face of the clear and express general rule set out in Texas Government Code, sec.466.406 which prohibits assignments of prizes. The Texas statutory language in subsections (a) and (c) is similar to language in other states' lottery statutes, such as Louisiana, Illinois and Ohio. In those other jurisdictions, courts have determined that to recognize an order upholding a voluntary assignment of prizes as an "appropriate judicial order" would allow an exception to swallow the general rule, such rule clearly and expressly prohibits assignments of prizes. See Walker and R & P Capital Resources, Inc., v. Rogers, et al., 650 N.E.2d 272 (Ill. App. 3d-1995). Although the Texas Lottery Commission staff informs each prizewinner before the prizewinner claims the prize of the language of Texas Government Code, sec.466.406 which prohibits assignments of prizes, several prizewinners have subsequently obtained district court orders upholding voluntary assignments of their prizes in an attempt to fall within the scope of the phrase "appropriate judicial order". As such, the Texas Lottery Commission believes it is important to clarify that an order issued to enforce or approve an agreement between a prizewinner and any third party in exchange for consideration is not an "appropriate judicial order", as contemplated by Texas Government Code, sec.466.406. For this reason, the Texas Lottery Commission adopts new rule 16 TAC sec.401.309. The rule will confirm the clear and express general rule set out in Texas Government Code, sec.466.406, which is that assignments of prizes are prohibited. While this statute authorizes a person other than a prizewinner to be paid a prize pursuant to an appropriate judicial order, this rule will track the general rule of prohibition of assignability of prizes, including assignments supported by a judicial order. This rule does not define or identify the type or kind of order which would be an appropriate judicial order. It simply clarifies that an order issued to enforce or approve an agreement between a prizewinner and any third party in exchange for consideration is not an appropriate judicial order, as contemplated by Texas Government Code, sec.466.406. The Texas Lottery Commission received comments from eleven individuals. The commenters are opposed to a rule prohibiting the assignment of prizewinners because the commenters believe the rule is an attempt by the state to increase its revenues, will prevent the transfer of the prize to a prizewinner's heirs at the time of the prizewinner's death, and people should be able to do what they want with their money. No groups or associations submitted comments on the proposed rule. The agency disagrees with the comments because it believes the rule simply clarifies the clear and express statutory language prohibiting assignments of prizes, and, as such, does not attempt to prohibit something which the legislature allowed. Also, the agency believes the rule does not prohibit the transfer of prize winnings to the estate of a deceased prizewinner. This type of transfer is clearly authorized by Texas Government Code, sec.466.406 and there is no language in the rule which suggests otherwise. Finally the agency does not believe the rule is in conflict with the Texas Government Code, sec.466.406 since it is the statutory language that creates the prohibition of assignments of prizes, not the rule. The new section is adopted under Texas Government Code, sec.466.015, which gives the Texas Lottery Commission authority to adopt rules governing the establishment and operation of the lottery and Texas Government Code, sec.467.102, which gives the Texas Lottery Commission the authority to adopt rules for the enforcement and administration of Texas Government Code, Chapter 467 and the laws under the Texas Lottery Commission's jurisdiction. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be within the agency's authority to adopt. Issued in Austin, Texas, on February 22, 1996. TRD-9602539 Kimberly L. Kiplin General Counsel Texas Lottery Commission Effective date: March 14, 1996 Proposed publication date: November 14, 1995 For further information, please call: (512) 323-3791 TITLE 19. EDUCATION PART II. Texas Education Agency CHAPTER 109. Budgeting, Accounting, and Auditing The Texas Education Agency (TEA) adopts the repeal of sec.sec.109.1, 109.21- 109.24, 109.41-109.44, and 109.61, concerning budgeting, accounting, and auditing, without changes to the proposed text as published in the January 12, 1996, issue of the Texas Register (21 TexReg 294). The sections establish definitions, requirements, and procedures related to: the uniform system of public school budgeting, accounting, and financial reporting; internal audits; auditing public school districts, county education districts, and regional education service centers; reviewing the reports and audit working papers of independent auditors; and the Advisory Committee for Budgeting, Accounting, and Auditing. The sections also adopt by reference TEA Bulletin 679, "Financial Accounting Manual." The repeals are necessary to comply with the sunset review process mandated by Senate Bill 1, 74th Texas Legislature, 1995. A new Chapter 109 is adopted in a separate submission. No comments were received regarding adoption of the repeals. SUBCHAPTER A. Budgeting, Accounting, Financial Reporting, and Auditing for School Districts 19 TAC sec.109.1 The repeal is adopted under the Texas Education Code, sec.7.102, which authorizes the State Board of Education to review specified TEA rules. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on March 4, 1996. TRD-9602993 Criss Cloudt Associate Commissioner, Policy Planning and Research Texas Education Agency Effective date: September 1, 1996 Proposal publication date: January 12, 1995 For further information, please call: (512) 463-9701 The repeals are adopted under the Texas Education Code, sec.7.102, which authorizes the State Board of Education to review specified Texas Education Agency rules. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on March 4, 1996. TRD-9602994 Criss Cloudt Associate Commissioner, Policy Planning and Research Texas Education Agency Effective date: September 1, 1996 Proposal publication date: January 12, 1995 For further information, please call: (512) 463-9701 SUBCHAPTER C. Advisory Committee for Budgeting, Accounting, and Auditing 19 TAC sec.sec.109.41-109.44 The repeals are adopted under the Texas Education Code, sec.7.102, which authorizes the State Board of Education to review specified Texas Education Agency rules. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on March 4, 1996. TRD-9602995 Criss Cloudt Associate Commissioner, Policy Planning and Research Texas Education Agency Effective date: September 1, 1996 Proposal publication date: January 12, 1995 For further information, please call: (512) 463-9701 SUBCHAPTER D. Adoptions by Reference 19 TAC sec.109.61 The repeal is adopted under the Texas Education Code, sec.7.102, which authorizes the State Board of Education to review specified Texas Education Agency rules. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on March 4, 1996. TRD-9602996 Criss Cloudt Associate Commissioner, Policy Planning and Research Texas Education Agency Effective date: September 1, 1996 Proposal publication date: January 12, 1995 For further information, please call: (512) 463-9701 The Texas Education Agency (TEA) adopts new sec.sec.109.1, 109.21,109.23, and 109.41, concerning budgeting, accounting, and auditing. Section 109.21 is adopted with changes to the proposed text as published in the January 12, 1996, issue of the Texas Register (21 TexReg 295). Sections 109.1, 109.23, and 109.41 are adopted without changes and will not be republished. The sections establish definitions, requirements, and procedures related to: the uniform system of public school budgeting, accounting, and financial reporting; auditing public school districts, county education districts, and regional education service centers; and reviewing the reports and audit working papers of independent auditors. The sections also adopt by reference TEA Bulletin 679, "Financial Accountability System Resource Guide." The new sections are adopted as part of the sunset review process mandated by Senate Bill 1, 74th Texas Legislature, 1995. The repeal of current Chapter 109 is adopted in a separate submission. The changes in sec.109.21 delete reference to plans for internal audits. The State Auditor's Office recommended deleting references to internal audits as a result of changes in state law. The changes were made to sec.109.21. In addition, proposed new sec.109.22 (relating to Internal Audits and Reviews) is withdrawn in a separate submission. The new section is adopted under the Texas Education Code, sec.sec.7.102(b)(33), 44.001, 44.002, 44.007, and 44.008, which authorizes the State Board of Education to adopt rules relating to school district budgets and audits of school district fiscal accounts. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on March 4, 1996. TRD-9602997 Criss Cloudt Associate Commissioner, Policy Planning and Research Texas Education Agency Effective date: September 1, 1996 Proposal publication date: January 12, 1995 For further information, please call: (512) 463-9701 SUBCHAPTER B. Texas Education Agency Audit Functions 19 TAC sec.109.21, sec.109.23 New sec.109.21 is adopted under the Texas Education Code, sec.44.001, which directs the commissioner of education to report annually to the State Board of Education the status of school district fiscal management; and the Government Code, Title 10, sec.2102.008, which requires that the annual audit plan developed by the internal auditor be approved by the state agency's governing board or its designee and that the audit reports be reviewed by the state agency's governing board and the administrator of the agency. New sec.109.23 is adopted under the Texas Education Code, sec.sec.7.102(b)(33), 44.008, and 44.010, which authorizes the State Board of Education to adopt rules relating to school district budgets and audits of school district fiscal accounts. sec.109.21. Annual Audit Plan. The commissioner of education shall submit an annual audit plan for field and independent audits for review of the designated committee of the State Board of Education. The plan may be amended as needed by the commissioner of education. The designated committee of the State Board of Education shall be informed at least annually by the commissioner of education on the progress of and amendments to the plan. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on March 4, 1996. TRD-9602998 Criss Cloudt Associate Commissioner, Policy Planning and Research Texas Education Agency Effective date: September 1, 1996 Proposal publication date: January 12, 1995 For further information, please call: (512) 463-9701 SUBCHAPTER C. Adoptions by Reference 19 TAC sec.109.41 The new section is adopted under the Texas Education Code, sec.sec.7.102(b)(33), 44.001, 44.002, 44.007, and 44.008, which authorizes the State Board of Education to adopt rules relating to school district budgets and audits of school district fiscal accounts. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on March 4, 1996. TRD-9602999 Criss Cloudt Associate Commissioner, Policy Planning and Research Texas Education Agency Effective date: September 1, 1996 Proposal publication date: January 12, 1995 For further information, please call: (512) 463-9701 PART XXIX. Texas Board of Professional Land Surveying CHAPTER 661.General Rules of Procedures and Practices Applications, Examinations, and Licensing 22 TAC sec.661.41 The Texas Board of Professional Land Surveying adopts an amendment to sec.661.41, concerning filing an application for certification as a surveyor-in- training or registration as a registered professional land surveyor. This adoption is without changes to the proposed text as published in the November 14, 1995, issue of the Texas Register (20 TexReg 9378). This rule is being amended to clarify what experience is necessary to be considered for certification as a surveyor-in-training or registration as a registered professional land surveyor. Adoption of this rule will clearly define what a person must do to file an application. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Civil Statutes, Article 5282c, sec.9, which provide the Texas Board of Professional Land Surveying with the authority to make and enforce all reasonable and necessary rules, regulations and bylaws not inconsistent with the Texas Constitution, the laws of this state and this Act. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be within the agency's authority to adopt. Issued in Austin, Texas, on March 1, 1996. TRD-9602900 Sandy Smith Executive Director Texas Board of Professional Land Surveying Effective date: March 22, 1996 Proposal publication date: November 14, 1995 For further information, please call: (512) 452-9427 22 TAC sec.661.48 The Texas Board of Professional Land Surveying adopts new sec.661.48, concerning unsuccessful examinations with changes to the proposed text as published in the November 17,1995, issue of the Texas Register (20 TexReg 9528). The last sentence was added to add language of retroactivity. Adding this language does not affect a new or different set of applicants. This section clearly defines what an applicant must do if they are unsuccessful in three attempts to pass any part of the licensing examination. Adoption of this rule will better prepare applicants to take the examination. No comments were received regarding adoption of the new section. The new section is adopted under Texas Civil Statutes, Article 5282c, sec.9, which provide the Texas Board of Professional Land Surveying with the authority to make and enforce all reasonable and necessary rules, regulations and bylaws not inconsistent with the Texas Constitution, the laws of this state and this Act. sec. 661.48.Unsuccessful Examination. Any applicant who is unsuccessful in three attempts to pass any part of the licensing examination shall not have an application approved for a subsequent taking of the same examination for a period of one year from the date of notice of failure of the third exam. Applications submitted subsequent to the one year waiting period shall include documented evidence satisfactory to the Board that the applicant has acquired additional education and experience indicative that the applicant would better be able to pass a subsequent examination. This rule applies to all examinations administered by the Board, both past and future. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be within the agency's authority to adopt. Issued in Austin, Texas, on March 1, 1996. TRD-9602932 Sandy Smith Executive Director Texas Board of Professional Land Surveying Effective date: March 22, 1996 Proposal publication date: November 17, 1995 For further information, please call: (512) 452-9427 CHAPTER 663.Standards of Responsibility and Rules of Conduct Professional and Technical Standards 22 TAC sec.663.20 The Texas Board of Professional Land Surveying adopts new sec.663.20, concerning criminal convictions without changes to the proposed text as published in the November 17, 1995, issue of the Texas Register (20 TexReg 9529). The new rule is adopted in compliance with Texas Civil Statutes, Articles 6252 - 13c and 13d, which require state agencies to adopt rules addressing criminal convictions. Adoption of this rule clearly defines what an applicant or registrant must do if they have been convicted of a crime. No comments were received regarding adoption of the new section. The new section is adopted under Texas Civil Statutes, Article 5282c, sec.9, which provide the Texas Board of Professional Land Surveying with the authority to make and enforce all reasonable and necessary rules, regulations and bylaws not inconsistent with the Texas Constitution, the laws of this state and this Act. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be within the agency's authority to adopt. Issued in Austin, Texas, on March 1, 1996. TRD-9602939 Sandy Smith Executive Director Texas Board of Professional Land Surveying Effective date: March 22, 1996 Proposal publication date: November 17, 1995 For further information, please call: (512) 452-9427 TITLE 25. HEALTH SERVICES PART I. Texas Department of Health CHAPTER 29.Purchased Health Services SUBCHAPTER B.Medicaid Vision Care Services 25 TAC sec.29.105 On behalf of the State Medicaid Director, the Texas Department of Health (department) submits an adopted amendment to sec.29.105, concerning Medicaid Vision Care Program without changes to the proposed text as published in the October 6, 1995, issue of the Texas Register (20 TexReg 8167). Specifically the amendment allows reimbursement to therapeutic optometrists for treatment provided to Medicaid clients for services within the scope of practice of therapeutic optometrists. The amendment expands coverage of optometrist services reimbursed under the Medicaid vision care services. The amendment allows reimbursement to therapeutic optometrists for treatment services provided to Medicaid clients. The following comments were received during the comment period. Following each comment is the department's response. COMMENT: The Texas Ophthalmological Association suggested that the rules specifically limit the services of therapeutic optometrists to those established by the Texas Optometry Act. This was so the rule could not be misconstrued as covering surgical services provided by therapeutic optometrists. RESPONSE: No change was made as a result of this comment as the unchanged portion of rule sec.29.105 (b) states that "To be covered, the services shall be: (1) Within the optometrist's scope of practice, as defined by state law." The department feels that this statement addresses the Ophthalmological Association's concern and request for specificity. COMMENT: The Texas Optometric Association responded to the Texas Ophthalmological Association's comment, suggesting that the rule's language be changed to cite the Texas Optometry Act, Article 4552, as the defining source of the therapeutic optometrists' practice. RESPONSE: No change was made as the result of the comment as the department feels that the current rule language is specific enough in its statement that in order to be covered, the services provided must be within the scope of practice for a therapeutic optometrist as defined by state law. The department received written comments from the Texas Optometric Association and the Texas Ophthalmlogical Association regarding the proposed rule. The commenters were generally supportive of the amendment; however, they asked for some clarifying language in the rule. The amendment is adopted under the Human Resources Code, sec.32.021 and Texas Civil Statutes, Article 4413 (502), sec.16, which provides the Health and Human Services Commission with the authority to adopt rules to administer the state's medical assistance program and is submitted by the Texas Department of Health under its agreement with the Health and Human Services Commission to operate the purchased health services program and authorized under Chapter 15, sec.1.07, Acts of the 72nd Legislature, First Called Session (1991). This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be within the agency's authority to adopt. Issued in Austin, Texas, on March 1, 1996. TRD-9602968 Susan K. Steeg General Counsel Texas Department of Health Effective date: April 1, 1996 Proposal publication date: October 6, 1995 For further information, please call: (512) 458-7236 CHAPTER 41.Utilization Review On behalf of the State Medicaid Director, the Texas Department of Health (department) submits adopted amendments to sec.sec.41.104, 41.108, and 41.110, and the repeal of sec.41.106, concerning utilization review and procedures, without changes to the proposed text published in the December 5, 1995, issue of the Texas Register (20 TexReg 10251), and therefore the sections will not be republished. The amendments reduce administrative burden for physicians and hospitals. The amendments and repeal remove the requirement for the completion of the physician attestation statement. No comments were received regarding adoption of the amendments and repeal. Waiver for Utilization Review Procedures 25 TAC sec.sec.41.104, 41.108, 41.110 The amendments are adopted under the Human Resources Code, sec.32.021 and Texas Civil Statutes, Article 4413 (502), sec.16, which provides the Health and Human Services Commission with the authority to adopt rules to administer the state's medical assistance program and are submitted by the Texas Department of Health under its agreement with the Health and Human Services Commission to operate the purchased health services program and as authorized under Chapter 15, sec.1.07, Acts of the 72nd Legislature, First Called Session (1991). This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be within the agency's authority to adopt. Issued in Austin, Texas, on March 1, 1996. TRD-9602967 Susan K. Steeg General Counsel Texas Department of Health Effective date: March 25, 1996 Proposal publication date: December 5, 1995 For further information, please call: (512) 458-7236 25 TAC sec.41.106 The repeal is adopted under the Human Resources Code, sec.32.021 and Texas Civil Statutes, Article 4413 (502), sec.16, which provides the Health and Human Services Commission with the authority to adopt rules to administer the state's medical assistance program and are submitted by the Texas Department of Health under its agreement with the Health and Human Services Commission to operate the purchased health services program and as authorized under Chapter 15, sec.1.07, Acts of the 72nd Legislature, First Called Session (1991). This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be within the agency's authority to adopt. Issued in Austin, Texas, on March 1, 1996. TRD-9602966 Susan K. Steeg General Counsel Texas Department of Health Effective date: March 25, 1996 Proposal publication date: December 5, 1995 For further information, please call: (512) 458-7236 CHAPTER 61.Chronic Diseases Osteoporosis Advisory Committee 25 TAC sec.61.61 The Texas Department of Health (department) adopts new sec.61.61, concerning the creation of the Osteoporosis Advisory Committee with changes to the proposed text published in the December 15, 1995, issue of the Texas Register (20 TexReg 10736). The Osteoporosis Advisory Committee will provide advice on the strategies for educating the public on the health benefits of the early detection, prevention and treatment of osteoporosis. The creation of the committee is allowed by Health and Safety Code, sec.90.003. The new section is required by Texas Civil Statutes, Article 6252-33 relating to state agency advisory committees. The following comments were received during the comment period. Comment: A commenter replied that the work of this committee can be very beneficial to improving the health of Texans. Response: The department concurs. Comment: Concerning sec.61.61(f), a commenter expresses concern that 11 committee members is too limiting, especially when you divide the work into subcommittees. Another commenter also recommended amending the rule to appoint at least 11 members. Response: The department agrees. Given the broad level of interest in this advisory committee, staff recommend increasing the committee to 17 members. Comment: Concerning sec.61.61(f), commenter noted the lack of a definition of the qualifications for advisory committee members. The commenter recommended that the committee's composition include a major percentage of health professionals and some educators. Response: The application for nomination delineates the information needed to be eligible to apply for nomination. The committee will be comprised of five consumers and 12 professional representatives. Comment: Concerning sec.61.61(i)(4), commenter noted that at least five working days before a meeting is not enough notification for committee members. Response: The department believes that a "minimum" of five days notification before a meeting as stated is sufficient. Comment: One staff commenter noted that it was unclear what type of compensation committee members would receive for travel expenses. Response: The department agrees that clarification is needed and added subsection (p) to clarify this issue, with language from the statute. These comments were submitted by individuals representing Dairy Max, Austin, Texas and the Texas Department of Health Division of Communication and Special Health Initiatives. The commenters were generally in favor of the rules; however, they raised questions, offered comments for clarification, and made recommendations concerning specific provisions in the rules. The new section is adopted under Texas Health and Safety Code, sec.90.003 which allows the creation of the Osteoporosis Advisory Committee; Article 6252-33, sec.5, which sets standards for the evaluation of advisory committees by the agencies for which they function; under Health and Safety Code, sec.12.001, which provides the board with authority to adopt rules for the performance of every duty imposed by law upon the board, the department, and the commissioner of health; and Health and Safety Code, sec.11.016, which allows the board to establish committees. sec.61.61.The Osteoporosis Advisory Committee. (a) The committee. An advisory committee shall be appointed under and governed by this section. (1) The name of the advisory committee shall be the Osteoporosis Advisory Committee (committee). (2) The committee is authorized to be established by the Texas Board of Health (board)by Health and Safety Code, sec.90.003. (b) Applicable law. The committee is subject to Texas Civil Statutes, Article 6252-33 relating to state agency advisory committees. (c) Purpose. The purpose of the committee is to provide advice to the board on strategies for educating the public on the health benefits of the early detection, prevention, and treatment of osteoporosis. (d) Tasks. (1) The committee shall advise the board concerning rules relating to educating the public on the health benefits of the early detection, prevention, and treatment of osteoporosis. (2) The committee shall carry out any other tasks given to the committee by the board. (e) Review and duration. By September 1, 2000, the board will initiate and complete a review of the committee to determine whether the committee should be continued, consolidated with another committee, or abolished. If the committee is not continued or consolidated, the committee shall be abolished on that date. (f) Composition. The committee shall be composed of 17 members appointed by the board. The composition of the committee shall include: (1) 5 consumer representatives; and (2) 12 other representatives. (g) Terms of office. The term of office of each member shall be six years. (1) Members shall be appointed for staggered terms so that the terms of a substantial equivalent number of members will expire on December 31st of each even-numbered year. (2) If a vacancy occurs, a person shall be appointed to serve the unexpired portion of that term. (h) Officers. The advisory committee shall elect a presiding officer and an assistant presiding officer at its first meeting after August 31st of each year. (1) Each officer shall serve until the next regular election of officers. (2) The presiding officer shall preside at all committee meetings at which he or she is in attendance, call meetings in accordance with this section, appoint subcommittees of the committee as necessary, and cause proper reports to be made to the board. The presiding officer may serve as an ex-officio member of any subcommittee of the advisory committee. (3) The assistant presiding officer shall perform the duties of the presiding officer in case of the absence or disability of the presiding officer. In case the office of presiding officer becomes vacant, the assistant presiding officer will serve until a successor is elected to complete the unexpired portion of the term of the office of presiding officer. (4) A vacancy which occurs in the offices of presiding officer or assistant presiding officer may be filled at the next committee meeting. (5) A member shall serve no more than two consecutive terms as presiding officer and/or assistant presiding officer. (6) The committee may reference its officers by other terms, such as chairperson and vice-chairperson. (i) Meetings. The committee shall meet only as necessary to conduct committee business. (1) A meeting may be called by agreement of department staff and either the presiding officer or at least three members of the committee. (2) Meeting arrangements shall be made by department staff. Department staff shall contact committee members to determine availability for a meeting date and place. (3) Each meeting of the committee shall be announced and conducted in accordance with the Open Meetings Act, Texas Government Code, Chapter 551. (4) Each member of the committee shall be informed of a committee meeting at least five working days before the meeting. (5) A simple majority of the members of the committee shall constitute a quorum for the purpose of transacting official business. (6) The committee is authorized to transact official business only when in a legally constituted meeting with a quorum present. (7) The agenda for each committee meeting shall include an item entitled public comment under which any person will be allowed to address the committee on matters relating to committee business. The presiding officer may establish procedures for public comment, including a time limit on each comment. (j) Attendance. Members shall attend committee meetings as scheduled. Members shall attend meetings of subcommittees to which the member is assigned. (1) A member shall notify the presiding officer or appropriate department staff if he or she is unable to attend a scheduled meeting. (2) It is grounds for removal from the committee if a member cannot discharge the member's duties for a substantial part of the term for which the member is appointed because of illness or disability, is absent from more than half of the committee and subcommittee meetings during a calendar year, or is absent from at least three consecutive committee meetings. (3) The validity of an action of the committee is not affected by the fact that it is taken when a ground for removal of a member exists. (4) The attendance records of the members shall be reported to the board. The report shall include attendance at committee and subcommittee meetings. (k) Staff. Staff support for the committee shall be provided by the department. (l) Procedures. Roberts Rules of Order, Newly Revised, shall be the basis of parliamentary decisions except where otherwise provided by law or rule. (1) Any action taken by the committee must be approved by a majority vote of the members present once quorum is established. (2) Each member shall have one vote. (3) A member may not authorize another individual to represent the member by proxy. (4) The committee shall make decisions in the discharge of its duties without discrimination based on any person's race, creed, gender, religion, national origin, age, physical condition, or economic status. (5) Minutes of each committee meeting shall be taken by department staff. (A) A draft of the minutes approved by the presiding officer shall be provided to the board and each member of the committee within 30 days of each meeting. (B) After approval by the committee, the minutes shall be signed by the presiding officer. (m) Subcommittees. The committee may establish subcommittees as necessary to assist the advisory committee in carrying out its duties. (1) The presiding officer shall appoint members of the committee to serve on subcommittees and to act as subcommittee chairpersons. The presiding officer may also appoint nonmembers of the committee to serve on subcommittee. (2) Subcommittees shall meet when called by the subcommittee chairperson or when so directed by the committee. (3) A subcommittee chairperson shall make regular reports to the committee at each committee meeting or in interim written reports as needed. The reports shall include an executive summary or minutes of each subcommittee meeting. (n) Statement by members. The board, the department, and the committee shall not be bound in anyway by any statement or action on the part of any committee member except when a statement or action is in pursuit of specific instructions from the board, department, or committee. (o) Reports to board. The committee shall file an annual written report with the board. (1) The report shall list the meeting dates of the committee and any subcommittees, the attendance records of its members, a brief description of actions taken by the committee, a description of how the committee has accomplished the tasks given to the committee by the board, the status of any rules which were recommended by the committee to the board, anticipated activities of the committee for the next year, and any amendments to this section requested by the committee. (2) The report shall identify the costs related to the committee's existence, including the cost of agency staff time spent in support of the committee's activities. (3) The report shall cover the meetings and activities in the immediate proceedings 12 months and shall be filed with the board each January. It shall be signed by the presiding officer and appropriate department staff. (p) Reimbursement for expenses. Members of the advisory committee are not entitled to compensation, a perdiem, or expense reimbursement for their service on the advisory committee. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be within the agency's authority to adopt. Issued in Austin, Texas, on March 1, 1996. TRD-9602969 Susan K. Steeg General Counsel Texas Department of Health Effective date: March 25, 1996 Proposal publication date: December 15, 1995 For further information, please call: (512) 458-7236 TITLE 28. INSURANCE PART I. Texas Department of Insurance CHAPTER 7.Corporate and Financial SUBCHAPTER A.Examiniation and Corporate Custodian and Tax 28 TAC sec.7.65 The Commissioner of Insurance adopts the repeal of sec.7.65 concerning the annual statement blanks, instructions, and other forms used by insurers and certain other entities regulated by the Texas Department of Insurance to report their financial condition and business operations and activities for calendar year 1986, without changes to the proposed text published in the September 29, 1995, issue of the Texas Register (20 TexReg 7933). The repeal of this section is necessary to eliminate unnecessary provisions and to enable the Texas Department of Insurance simultaneously to adopt new sec.7.65, which replaces the repealed section with other provisions concerning the filing requirements for annual and quarterly statements and other reporting forms for calendar year 1995 and 1996. Notification of the adoption of the new section which replaces this repealed section appears elsewhere in this issue of the Texas Register. The repeal of this section will eliminate unnecessary and outdated provisions pertaining to reports of financial condition and business operations and activities for calendar year 1986. No comments were received regarding the adoption of the repeal of this section. The repeal is adopted under the Insurance Code, Articles 1.11, 1.10, 3.07, 3.20- 1, 3.27-2, 6.11, 6.12, 8.07, 8.08, 8.21, 8.24, 9.22, 9.47, 10.30, 11.06, 11.19, 14.15, 14.39, 15.15, 15.16, 16.18, 16.24, 17.22, 17.25, 18.12, 19.08, 20.02, 20A.10, 20A.22, 21.39, 21.43, 21.54, 22.06, 23.02, 23.26, 1.03A; and the Government Code, sec.sec.2001.004-2001.038. The Insurance Code, Article 1.11 authorizes the commissioner to make changes in the forms of the annual statements required of insurance companies of any kind, as shall seem best adapted to elicit a true exhibit of their condition and methods of transacting business, and requires certain insurers to make filings with the National Association of Insurance Commissioners. Article 1.10(9), requires the department to furnish the statement blanks and other reporting forms necessary for companies to comply with the filing requirements. Articles 3.07, 3.20-1, 3.27-2, 6.11, 6.12, 8.07, 8.08, 8.21, 8.24, 9.22, 9.47, 10.30, 11.06, 11.19, 14.15, 14.39, 15.15, 15.16, 16.18, 16.24, 17.22, 17.25, 18.12, 19.08, 20.02, 20A.10, 20A.22, 21.54, 22.06, 23.02, and 23.26, require the filing of financial reports and other information by insurers and other regulated entities, and specify particular rule-making authority of the commissioner relating to those insurers and other regulated entities. Article 21.39 requires insurers to establish adequate reserves and provides for the adoption of each current formula for establishing reserves applicable to each line of insurance. Article 21.43 provides the conditions under which foreign insurers are permitted to do business in this state and requires foreign insurers to comply with the provisions of the Insurance Code. Article 1.03A authorizes the commissioner to adopt rules for the conduct and execution of the duties and functions of the department only as authorized by statute for general and uniform application. The Government Code, sec.sec.2001.004-2001.038, authorize and require each state agency to adopt rules of practice setting forth the nature and requirement of available procedures, and prescribe the procedures for adoption of rules by a state administrative agency. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on March 4, 1996. TRD-9603034 Alicia M. Fechtel General Counsel and Chief Clerk Texas Department of Insurance Effective date: March 25, 1996 Proposal publication date: September 29, 1995 For further information, please call: (512) 463-6327 28 TAC sec.7.65 The Commissioner of Insurance adopts new sec.7.65 with changes to the proposed text published in the September 29, 1995, issue of the Texas Register (20 TexReg 7933). A public hearing on the proposed section was requested, but was withdrawn as a result of the changes made to the proposed rule by the department. The new section concerns annual and quarterly statement blanks, other reporting forms, diskettes and instructions to be used by insurers and certain other entities regulated by the Texas Department of Insurance when reporting their financial condition and business operations and activities, and the requirement to file such completed statement blanks and other reporting forms, including diskettes. These statement blanks, other reporting forms, and diskettes are required for reporting, in 1996, the financial condition and business operations and activities conducted during the 1995 and 1996 calendar years. The adoption of new sec.7.65 is simultaneous with the proposed repeal of present sec.7.65, concerning the 1986 annual statement filings. Notice of the repeal appears elsewhere in this issue of the Texas Register. The new section defines terms relevant to the statement blanks and reporting forms; provides the dates by which certain reports are to be filed; adopts by reference the annual and quarterly statement blanks, other reporting forms, and instructions for reporting the financial condition and business operations and activities; and requires insurance companies and certain other regulated entities to file such annual and quarterly statements and other reporting forms with the department and/or the National Association of Insurance Commissioners as directed. The required documents will provide financial information to the public and regulatory agencies, and will be used by the department to monitor the financial condition of insurers and other regulated entities licensed in Texas to assure financial solvency and compliance with applicable laws and accounting requirements. The annual and quarterly statement blanks, other reporting forms, and manuals which are adopted by this section have been filed with the Office of the Secretary of State, Texas Register Division. Copies are available for inspection in the office of the Financial Monitoring Activity of the Texas Department of Insurance, William P. Hobby State Office Building, 333 Guadalupe, Building 3, Third Floor, Austin, Texas. In response to comments, six changes were made to the section. Section sec.7.65(c)(1)(L), concerning the adoption of the form to certify compliance with the requirements of the Securities Valuation Office, was deleted in response to comments questioning the department's authority to require insurers to certify compliance with the reporting requirements of the Securities Valuation Office of the NAIC. Staff will give the matter further consideration. In addition, sec.7.65(d)(1)(J), sec.7.65(e)(1)(G), sec.7.65(e)(2)(H) and sec.7.65(f)(1)(F) were also deleted for the section to be consistent. The latter subparagraphs contained the same requirement for property and casualty, fraternal and title insurers, respectively. Proposed sections 7.65(c)(1)(N) and 7.65(d)(1)(L) ((M) and (K), respectively, in the adopted section which adopt the forms for the Combined Life, Accident and Health Annual Statement and the Combined Property/Casualty Annual Statement, respectively, were amended in response to comments from insurers that completion of the form was overly burdensome for small insurers. The provisions are amended to require only affiliated life insurers and affiliated property and casualty insurers that write direct premiums of more than $35 million as a group of life insurers or property and casualty insurers to complete the form. The department also changed sec.7.65(c)(1)(A) by deleting a duplicative "11 inch by 17 inch size"; clarified sec.7.65(d)(2)(E) by inserting "in 1995" so the parenthetical statement reads "required of companies writing prepaid legal business in 1995"; deleted subparagraphs sec.7.65(f)(1)(C)-(E), the Supplemental Title Operating Expense Exhibit, Supplemental Schedule of Business Written by Agency and Supplemental Schedule of Aging Analysis of Security Deposits Held for Others by Company's Agents and Representatives, respectively, after staff reconsidered the usefulness of the information provided by these forms. Subdivision designations have been amended in the adoption of the section to reflect the foregoing changes to the section. Three comments were received on sec.7.65(c)(1)(L) which proposed to adopt a form titled "Certificate of Compliance with All Required Reporting Requirements of the Securities Valuation Office of the National Association of Insurance Commissioners." The commenters argued that this proposal did not comply with Insurance Code, Article 1.27, which states that the department may not require an insurer to comply with any standard adopted by the NAIC unless it is expressly authorized by law and approved by the commissioner. The department has deleted paragraph (L) in response to the comments and also deleted sec.7.65(d)(1)(J), sec.7.65(e)(1)(G), sec.7.65(e)(2)(H) and sec.7.65(f)(1)(F), which also proposed to adopt the certificate for other insurers, to be consistent. The department will take the matter under consideration. Three comments were received on sec.7.65(c)(1)(N) which proposed to adopt the forms for the Combined Life, Accident and Health Annual Statement. The commenters stated that this was a very expensive requirement, especially for small and medium size insurers that write life and health insurance. In response to the comments, the department has amended subsections (c)(1)(N) and (d)(1)(L) to exempt affiliated companies from the requirement to file this form if the affiliated companies as a group of life insurers or a group of property and casualty insurers wrote, as a group, $35 million or less in direct premiums in 1995 as defined in Schedule T of the Annual Statement. Two comments were received on sec.7.65(c)(2)(H) which adopts a form called the "Supplemental Investment Income Exhibit." The exhibit discloses the percent of net income investment by type of investment which assists the department in identifying high yielding investments. The commenters stated that the form was burdensome and of limited use with regard to the financial monitoring of medium and small size insurers. The department disagrees with the comments. The exhibit can be completed efficiently by an insurer in its preparation of Schedule D. The department believes the exhibit is useful in identifying high yield investments which are not apparent in a macro-analysis of the financial condition of an insurer. Those commenting against with recommended changes were the Insurance Alliance of America, Texas Association of Insurance Officials and Texas Legal Reserve Officials Association. The new section is adopted under the Insurance Code, Articles 1.11, 1.10, 3.07, 3.20-1, 3.27-2, 6.11, 6.12, 8.07, 8.08, 8.21, 8.24, 9.22, 9.47, 10.30, 11.06, 11.19, 14.15, 14.39, 15.15, 15.16, 16.18, 16.24, 17.22, 17.25, 18.12, 19.08, 20.02, 20A.10, 20A.22, 21.39, 21.43, 21.54, 22.06, 23.02 23.26, 1.03A, 21.52F; and Government Code, sec.sec.2001.004-2001.038. The Insurance Code, Article 1.11 authorizes the commissioner to make changes in the forms of the annual statements required of insurance companies of any kind, as shall seem best adapted to elicit a true exhibit of their condition and methods of transacting business, and requires certain insurers to make filings with the National Association of Insurance Commissioners. Article 1.10(9), requires the department to furnish the statement blanks and other reporting forms necessary for companies to comply with the filing requirements. Articles 3.07, 3.20-1, 3.27-2, 6.11, 6.12, 8.07, 8.08, 8.21, 8.24, 9.22, 9.47, 10.30, 11.06, 11.19, 14.15, 14.39, 15.15, 15.16, 16.18, 16.24, 17.22, 17.25, 18.12, 19.08, 20.02, 20A.10, 20A.22, 21.54, 22.06, 23.02, and 23.26, require the filing of financial reports and other information by insurers and other regulated entities, and specify particular rule-making authority of the commissioner relating to those insurers and other regulated entities. Article 21.39 requires insurers to establish adequate reserves and provides for the adoption of each current formula for establishing reserves applicable to each line of insurance. Article 21.43 provides the conditions under which foreign insurers are permitted to do business in this state and requires foreign insurers to comply with the provisions of the Insurance Code. Article 1.03A provides that the commissioner may adopt rules for the conduct and execution of the duties and functions of the department as authorized by statute for general and uniform application. The adopted section affects the filing of the annual statement, other reporting forms, and diskettes to elicit the financial condition of insurers under the Insurance Code, Article 1.11. sec.7.65.Requirements for filing the 1995 Annual and 1996 Quarterly Statements, Other Reporting Forms, and Diskettes. (a) Scope. This section provides insurers and other regulated entities with the filing requirements for the 1995 annual statement, 1996 quarterly statements, other reporting forms, and diskettes necessary to report information concerning the financial condition and business operations and activities of insurers. This section applies to all insurers and other regulated entities authorized to do the business of insurance in this state and includes, but is not limited to, life insurers; accident insurers; life and accident insurers; life and health insurers; accident and health insurers; life, accident and health insurers; mutual life insurers; stipulated premium insurers; group hospital service corporations; fire insurers; fire and marine insurers; general casualty insurers; fire and casualty insurers; mutual insurers other than life; county mutual insurers; Lloyd's plans; reciprocal and inter-insurance exchanges; domestic risk retention groups; domestic joint underwriting associations; title insurers; fraternal benefit societies; local mutual aid associations; statewide mutual assessment companies; mutual burial associations; exempt associations; farm mutual insurers; health maintenance organizations; non-profit health corporations; and non-profit legal services corporations. The commissioner of insurance adopts by reference the 1995 annual and 1996 quarterly statement blanks, instruction manuals, and other reporting forms specified in this section. The annual and quarterly statement blanks and other reporting forms are available from the Texas Department of Insurance, Financial Monitoring Activity, Mail Code 303-1A, P.O. Box 149099, Austin, Texas 78714-9099. Insurers and other regulated entities shall properly report to the Texas Department of Insurance and the National Association of Insurance Commissioners (NAIC), using the appropriate annual and quarterly statement blanks, other reporting forms and machine-readable diskettes and following the applicable instructions as outlined in subsections (c)-(l) of this section. (b) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. Association edition-Blanks and forms promulgated by the National Association of Insurance Commissioners. Commissioner-The commissioner of insurance appointed under the Insurance Code, Article 1.09. Department-The Texas Department of Insurance. Insurer-A person or business entity legally organized in and authorized by its domiciliary jurisdiction to do the business of insurance. NAIC-The National Association of Insurance Commissioners. Texas edition-Blanks and forms promulgated by the commissioner of insurance. (c) Filing requirements for life, accident and health insurers. Each life, life and accident, life and health, accident and health, mutual life, or life, accident and health insurance company, stipulated premium insurance company, and group hospital services corporation shall complete and file the following blanks, forms, and diskettes for the 1995 calendar year and the first three quarters of the 1996 calendar year. The forms, reports and diskettes identified in paragraphs (1)(A)-(M); (2)(A)-(C); and (3)(A) of this subsection shall be completed in accordance with the current NAIC Annual Statement Instructions, Life, Accident and Health, except as provided by paragraph (4) of this subsection. The diskettes identified in paragraph (3)(B) and (C) shall be completed in accordance with the current NAIC Annual Statement Diskette Filing Specifications-Life/Health, except as provided by paragraph (4) of this subsection. (1) Reports to be filed with the department and the NAIC include the following: (A) Annual Statement (association edition, Form 1 or Form 11, with a blue colored cover made of minimum 65lb. paper), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before March 1, 1996 (stipulated premium insurance companies, April 1, 1996); (B) Annual Statement of the Separate Accounts (association edition, Form 1-S, with a green colored cover made of minimum 65lb. paper) (required of companies maintaining separate accounts), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before March 1, 1996 (stipulated premium insurance companies, April 1, 1996); (C) Trusteed Surplus Statement (association edition, Life, Accident and Health Supplement) (required of the U. S. branch of an alien insurer), 9 inch by 14 inch size to be filed on or before March 1, May 15, August 15, and November 15, 1996; (D) Management's Discussion and Analysis (a narrative document setting forth information which enables regulators to enhance their understanding of the insurer's financial position, results of operations, changes in capital and surplus accounts and cash flow), to be filed on or before April 1, 1996 (stipulated premium insurance companies, May 1, 1996); (E) Long-Term Care Insurance Exhibit (association edition) (required of companies writing long-term care business), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before March 1, 1996 (stipulated premium insurance companies, April 1, 1996), in addition to the Long-Term Care Experience Reporting Forms included in the annual statement required by subparagraph (A) of this paragraph; (F) Schedule DS (association edition) (required of companies that have included equity in the undistributed income of consolidated subsidiaries in its net gain/(loss) from operations), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before March 1, 1996 (stipulated premium insurance companies, April 1, 1996); (G) Credit Insurance Experience Exhibit (association edition) (required of companies writing credit business), 9 inch by 14 inch size, to be filed on or before April 1, 1996; (H) Interest Sensitive Life Insurance Products Report (association edition) (required of companies writing interest sensitive products), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before April 1, 1996 (stipulated premium insurance companies, May 1, 1996); (I) Life, Health and Annuity Guaranty Association Model Act Assessment Base Reconciliation Exhibit (association edition), 9 inch by 14 inch size, to be filed on or before April 1, 1996; (J) Adjustments to the Life, Health & Annuity Guaranty Association Model Act Assessment Base Reconciliation Exhibit (association edition), 9 inch by 14 inch size, to be filed on or before April 1, 1996; (K) Life and Accident and Health Quarterly Statement (association edition) (required of companies filing Form 1), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before May 15, August 15, and November 15, 1996. However, a Texas stipulated premium insurance company, unless specifically requested to do so by the department, is not required to file quarterly statements with the department or the NAIC if it meets all three of the following conditions: (i) it is authorized to write only life insurance on its certificate of authority; (ii) it collected premiums in the prior calendar year of less than $1 million; and (iii) it had a profit from operations in the prior two calendar years; (L) Actuarial Opinion (the statement of a qualified actuary, setting forth his or her opinion relating to policy reserves and other actuarial items; required of all companies), to be attached to the annual statement required by paragraph (1)(A) of this subsection; and (M) Combined Life, Accident and Health Annual Statement (association edition, Form 1 or Form 11, with a blue colored cover made of minimum 65lb. paper), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before May 1, 1996. This form is required only for those affiliated insurers that wrote more than $35 million in direct premiums, as a group, in 1995 as defined in Schedule T of the Annual Statement. (2) Reports to be filed only with the department: (A) Schedule SIS, Stockholder Information Supplement (association edition) (required of domestic stock companies which have 100 or more stockholders), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before March 1, 1996; (B) Accident and Health Policy Experience Exhibit (association edition) (required of companies writing accident and/or health business), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before May 1, 1996; (C) Supplemental Compensation Exhibit (association edition) 9 inch by 14 inch size, (required of Texas domestic companies only), to be filed on or before March 1, 1996 (stipulated premium companies, April 1, 1996); (D) Annual Statement (Texas edition, with a green colored cover made of minimum 65lb. paper) (required of companies writing prepaid legal business in 1995), 8 1/2 inch by 14 inch size, to be filed on or before March 1, 1996; (E) Affidavit in Lieu of Annual Statement (Texas edition, green) (required of companies authorized to write prepaid legal business that did not write such business in 1995), to be filed on or before March 1, 1996; (F) Texas Overhead Assessment Form (required of Texas domestic companies only), to be filed on or before March 1, 1996 (stipulated premium insurance companies, April 1, 1996); (G) Analysis of Surplus, for life, accident and health insurers, to be filed on or before March 1, 1996 (stipulated premium insurance companies, April 1, 1996); and (H) Supplemental Investment Income Exhibit (shows percent of net investment income by type of investment, as an attachment to page ten of the annual statement as required by paragraph (1)(A) of this subsection), to be filed on or before March 1, 1996 (stipulated premium companies, April 1, 1996). (3) Reports and diskettes to be filed only with the NAIC: (A) Officers and Directors Information (association edition) (required of companies upon their initial filing with the NAIC and to report any changes in previously filed information), to be filed on or before March 1, 1996 (stipulated premium insurance companies, April 1, 1996); (B) machine-readable diskettes containing computerized annual statement data (required of companies filing annual statement Form 1), to be filed on or before March 1, 1996 (stipulated premium insurance companies, April 1, 1996); (C) machine-readable diskettes containing computerized quarterly statement data (required of companies filing annual statement Form 1), to be filed on or before May 15, August 15, and November 15, 1996. However, a Texas stipulated premium insurance company, unless specifically requested to do so by the department, is not required to file diskettes with the NAIC if it meets all three of the following conditions: (i) it is authorized to write only life insurance on its certificate of authority; (ii) it collected premiums in the prior calendar year of less than $1 million; and (iii) it had a profit from operations in the prior two calendar years; and (4) The following provisions shall apply to the filings required in paragraphs (1)-(3) of this subsection. (A) Since Texas domestic companies have historically not been required to establish Asset Valuation Reserve (AVR) or Interest Maintenance Reserve (IMR), they are not required at the present time to establish an Asset Valuation Reserve (AVR) or Interest Maintenance Reserve (IMR) unless the company is licensed in a state that requires an AVR or IMR, in which case the reserve must be calculated in accordance with the instructions established by the NAIC. (B) The statement of actuarial opinion should follow the guidelines and standards for statements of actuarial opinion prescribed by regulation authorized by Section 3, Actuarial opinion of Reserves of the Standard Valuation Law as amended by the NAIC in December 1990, unless exempted. For those companies who are exempted from such regulation, instructions 1-12, established by the NAIC, must be applied. (C) In the event of a conflict between the Insurance Code, any currently existing departmental rule, form, or instruction, or any specific requirement of this subsection and the NAIC manuals listed in this subsection, then and in that event, the Insurance Code, the department's promulgated rule, form, or instruction, or the specific requirement of this subsection shall take precedence and in all respects control. It is the express intent of this subsection that it shall not repeal or otherwise modify or amend any department rule or the Insurance Code. (d) Requirements for property and casualty insurers. Each fire, fire and marine, general casualty, fire and casualty, county mutual insurance company, mutual insurance company other than life, Lloyd's plan, reciprocal or inter-insurance exchange, domestic risk retention group, life insurance company that is licensed to write workers' compensation, any farm mutual insurance company that filed on a Form 2 for the 1994 calendar year or had gross written premiums as of December 31, 1995 in excess of $5,000,000, any Mexican non-life insurer licensed under any Article of the Insurance Code other than or in addition to Article 8.24, and domestic joint underwriting associations shall complete and file the following blanks, forms, and diskettes for the 1995 calendar year and the first three quarters of the 1996 calendar year. The forms, reports, and diskettes identified in paragraphs (1)(A)-(K); (2)(A)-(C); and (3)(A) of this subsection shall be completed in accordance with the current NAIC Annual Statement Instructions, Property and Casualty, except as provided by paragraph (4) of this section. The diskettes identified in paragraph (3)(B) and (C) of this subsection shall be completed in accordance with the current NAIC Annual Statement Diskette Filing Specifications-Property/Casualty, except as provided by paragraph (4) of this subsection. (1) Reports to be filed with the department and the NAIC: (A) Annual Statement (association edition, Form 2, with a yellow colored cover made of minimum 65lb. paper), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before March 1, 1996; (B) Trusteed Surplus Statement (association edition, Property and Casualty Supplement) (required of the U. S. branch of an alien insurer), 9 inch by 14 inch size to be filed on or before March 1, May 15, August 15, and November 15, 1996; (C) Management's Discussion and Analysis (a narrative document setting forth information which enables regulators to enhance their understanding of the insurer's financial position, results of operations, changes in capital and surplus accounts and cash flow), to be filed on or before April 1, 1996; (D) Long-Term Care Experience Reporting Forms (association edition) (required of companies writing long-term care business), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before May 1, 1996; (E) Financial Guaranty Insurance Exhibit (association edition) (required of companies writing financial guaranty business), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before March 1, 1996; (F) Supplement "A" to Schedule T, Exhibit of Medical Malpractice Premiums Written (association edition) (required of companies writing medical malpractice business), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before March 1, 1996; (G) Insurance Expense Exhibit (association edition), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed in duplicate on or before April 1, 1996; (H) Credit Insurance Experience Exhibit (association edition) (required of companies writing credit accident and/or health business), 9 inch by 14 inch size, to be filed on or before April 1, 1996; (I) Property and Casualty Quarterly Statement (association edition), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before May 15, August 15, and November 15, 1996; (J) Actuarial Opinion (the statement of a qualified actuary, setting forth his or her opinion relating to policy reserves and other actuarial items; required of all companies), to be attached to the annual statement required by paragraph (1)(A) of this subsection; and (K) Combined Property/Casualty Annual Statement (association edition, Form 2, with a yellow colored cover made of minimum 65lb. paper), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before May 1, 1996, including the Insurance Expense Exhibit. This form is required only for those affiliated insurers that wrote more than $35 million in direct premiums, as a group, in 1995 as defined in Schedule T of the Annual Statement. (2) Reports to be filed only with the department: (A) Schedule SIS, Stockholder Information Supplement (association edition) (required of domestic stock companies which have 100 or more stockholders), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before March 1, 1996; (B) Accident and Health Policy Experience Exhibit (association edition) (required of companies writing accident and/or health business), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before May 1, 1996; (C) Supplemental Compensation Exhibit (association edition) 9 inch by 14 inch size, (required of Texas domestic companies only), to be filed on or before March 1, 1996; (D) Supplemental Investment Income Exhibit (shows percent of net investment income by type of investment, as an attachment to page six of the annual statement as required by paragraph (1)(A) of this subsection), to be filed on or before March 1, 1996; (E) Annual Statement (Texas edition, with a green colored cover made of minimum 65lb. paper) (required of companies writing prepaid legal business in 1995), 8 1/2 inch by 14 inch size, to be filed on or before March 1, 1996; (F) Affidavit in Lieu of Annual Statement (Texas edition, green) (required of companies authorized to write prepaid legal business that did not write such business in 1995), to be filed on or before March 1, 1996; (G) Texas Overhead Assessment Form (required of Texas domestic companies only), to be filed on or before March 1, 1996; (H) Analysis of Surplus, for property and casualty insurers (required of all licensed companies, except Texas domestic county mutual companies), to be filed on or before March 1, 1996; (I) Supplement for County Mutuals (required of Texas domestic county mutual companies, as an attachment to page seventeen of the annual statement as required by paragraph (1)(A) of this subsection), to be filed on or before March 1, 1996; (J) Texas Supplemental A for County Mutuals (required of Texas domestic county mutual companies, as an attachment to page nine of the annual statement as required by paragraph (1)(A) of this subsection), to be filed on or before March 1, 1996; and (K) Form ALT/P/WC, Application for Alternative Excess Statutory Over Statement Reserves for Workers' Compensation (required of deductible plan workers' compensation writers if applying for an alternative basis of calculating the excess statutory over statement reserves for workers' compensation business), to be filed on or before January 31, 1996. (3) Reports and diskettes to be filed only with the NAIC: (A) Officers and Directors Information (association edition) (required of companies upon their initial filing with the NAIC and to report any changes in previously filed information), to be filed on or before March 1, 1996; (B) machine-readable diskettes containing computerized annual statement data, to be filed on or before March 1, 1996; (C) machine-readable diskettes containing computerized quarterly statement data, to be filed on or before May 15, August 15, and November 15, 1996; and (4) The following provisions shall apply to all filings required by paragraphs (1)-(3) of this subsection. (A) No loss reserve discounts, other than as respects fixed and determinable payments such as those emanating from workers' compensation tabular indemnity reserves and long-term disability claims for which specific segregated investments have been established, shall be allowed; provided, however, any company that claimed loss reserve discounts, other than as respects fixed and determinable payments such as those emanating from workers' compensation tabular indemnity reserves and long-term disability claims, as of December 31, 1991, shall be allowed to claim such reserve discounts at the applicable percentage. The applicable percentage for claiming such loss reserve discounts shall be 100% for 1992, 75% for 1993, 50% for 1994, 25% for 1995, 0% for 1996 and subsequent years. In no event shall the dollar amount of discounts, other than as respects fixed and determinable payments such as those emanating from workers' compensation tabular indemnity reserves and long-term disability claims, claimed as of December 31, 1991, and subject to the applicable percentage, be increased as of December 31, 1992 and thereafter. The commissioner shall have the authority to determine the appropriateness of, and may disapprove, discounts taken as respects fixed and determinable payments such as those emanating from workers' compensation tabular indemnity reserves and long-term disability claims. (B) The commissioner shall have the authority to determine the appropriateness of, and may disapprove, anticipated salvage and subrogation. (C) Since workers' compensation legislation enacted by the 71st Texas Legislature, effective January 1, 1991, has effected the pricing and loss ratios for workers' compensation business written in the State of Texas, some insurers may be exempt from establishing the entire excess of statutory reserves over statement reserves, also known as the Schedule P penalty reserve, as would otherwise be required by the NAIC Annual Statement Instructions, Property and Casualty. Specifically, Texas domestic insurers that wrote workers' compensation in Texas, but no state other than Texas, in years 1993, 1994, and 1995 and whose loss experience prior to 1993 would require the establishment of a Schedule P penalty reserve using a loss ratio greater than 65% may calculate the reserve based on a loss ratio of 65%. The exemption herein described shall only be for the 1995 annual and 1996 interim financial statements. Reserving in this manner is intended to be consistent with the regulatory desire to attain competitive rates for workers' compensation written in Texas. (D) Insurers meeting certain eligibility criteria and not claiming the exemption provided in paragraph (4)(C) of this subsection may apply for approval of an alternative basis of calculating the Excess of Statutory Over Statement Reserve, also known as the Schedule P penalty reserve, for workers' compensation business. The application for an alternative basis for calculating this reserve applies only to workers' compensation business written pursuant to deductible plans authorized by Insurance Code, Art. 5.55C. (i) Eligibility is generally available to insurers that are domiciled or commercially domiciled in Texas and that demonstrate that their standard premium, prior to application of deductible credits, written pursuant to deductible plans was at least 80% of total standard premium for all workers' compensation business for each of the years for which an alternative calculation is requested. (ii) To apply for an alternative basis of calculating the penalty reserve, an eligible insurer must complete Form ALT/P/WC, Application for Alternative Excess of Statutory Over Statement Reserve for Worker's Compensation. Forms may be obtained by writing the Financial Monitoring Activity of the Department of Insurance, MC 303-1A, P.O. Box 149099, Austin, Texas 78714-9099, or calling (512) 322-5002. Completed applications must be filed with the department on or before January 31, 1996. (iii) The Texas Department of Insurance may grant an exception or alternative to requiring the full Schedule P penalty reserve for workers' compensation business upon finding such treatment is warranted based on the insurer's application. Insurers that do not obtain the prior written approval of the department for an alternative basis of calculating the Schedule P penalty reserve as provided in the subparagraph shall calculate the penalty reserve in accordance with the current NAIC Annual Statement Instruction, Property and Casualty. (E) In the event of a conflict between the Insurance Code, any currently existing departmental rule, form, or instruction, or any specific requirement of this section and the NAIC manuals listed in this subsection, then and in that event, the Insurance Code, the department's promulgated rule, form, or instruction, or the specific requirement of this section shall take precedence and in all respects control. It is the express intent of this subsection that it shall not repeal or otherwise modify or amend any department rule or the Insurance Code. (e) Requirements for fraternal benefit societies. Each fraternal benefit society shall complete and file the following blanks, forms, and diskettes for the 1995 calendar year and the first three quarters of the 1996 calendar year. The forms, reports, and diskettes identified in paragraphs (1)(A)-(G); (2)(A)-(C) and (H); and (3)(A) of this subsection shall be completed in accordance with the current NAIC Annual Statement Instructions, Fraternal, except as provided by paragraph (4) of this subsection. The diskettes identified in paragraph (3)(B) of this subsection shall be completed in accordance with the current NAIC Annual Statement Diskette Filing Specifications-Fraternal, except as provided by paragraph (4) of this subsection. (1) Reports to be filed with the department and the NAIC: (A) Annual Statement (association edition, Form 4, with a brown colored cover made of minimum 65lb. paper), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before March 1, 1996; (B) Annual Statement of the Separate Accounts (association edition, Form 1-S, with a green colored cover made of minimum 65lb. paper) (required of companies maintaining separate accounts), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before March 1, 1996; (C) Trusteed Surplus Statement (association edition, Fraternal Supplement) (required of the U. S. branch of an alien insurer), 9 inch by 14 inch size to be filed on or before March 1, May 15, August 15, and November 15, 1996; (D) Management's Discussion and Analysis (a narrative document setting forth information which enables regulators to enhance their understanding of the insurer's financial position, results of operations, changes in capital and surplus accounts and cash flow), to be filed on or before April 1, 1996; (E) Long-Term Care Insurance Exhibit (association edition) (required of companies writing long-term care business), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before March 1, 1996, in addition to the Long-Term Care Experience Reporting Forms included in the annual statement required in paragraph (1)(A) of this subsection; (F) Interest Sensitive Life Insurance Products Report (association edition) (required of companies writing interest sensitive products), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before April 1, 1996; and (G) Actuarial Opinion (the statement of a qualified actuary, setting forth his or her opinion relating to policy reserves and other actuarial items; to be filed by all companies), to be attached to the annual statement required by paragraph (1)(A) of this subsection. (2) Reports to be filed only with the department: (A) Accident and Health Policy Experience Exhibit (association edition) (required of companies writing accident and/or health business), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before May 1, 1996; (B) Supplemental Compensation Exhibit (association edition) 9 inch by 14 inch size, (required of Texas domestic companies only), to be filed on or before March 1, 1996; (C) Fraternal Quarterly Statement (association edition), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before May 15, August 15, and November 15, 1996; (D) Texas Overhead Assessment Form (required of Texas domestic companies only), to be filed on or before March 1, 1996; (E) Analysis of Surplus, for fraternal benefit societies, to be filed on or before March 1, 1996; (F) Fraternal Benefit Societies-Supplement to Valuation Report, to be filed on or before June 30, 1996; and (G) Supplemental Investment Income Exhibit (shows percent of net investment income by type of investment, as an attachment to page ten of the annual statement as required by paragraph (1)(A) of this subsection), to be filed on or before March 1, 1996. (3) Reports and diskettes to be filed only with the NAIC: (A) Officers and Directors Information (association edition) (required of companies upon their initial filing with the NAIC and to report any changes in previously filed information), to be filed on or before March 1, 1996; and (B) machine-readable diskettes containing computerized annual statement data, to be filed on or before March 1, 1996. (4) The following provisions shall apply to the filings required in paragraph (1)-(3) of this subsection. (A) Since Texas domestic companies have historically not been required to establish Asset Valuation Reserve (AVR) or Interest Maintenance Reserve (IMR), they are not required at the present time to establish an Asset Valuation Reserve (AVR) or Interest Maintenance Reserve (IMR) unless the company is licensed in a state that requires an AVR or IMR, in which case the reserve must be calculated in accordance with the instructions established by the NAIC. (B) Since fraternals are exempted in Texas from the requirements of Section 3 Actuarial Opinion of Reserves of the Standard Valuation Law as amended by the NAIC in December 1990, the statement of actuarial opinion for fraternals should follow instructions 1 - 12, established by the NAIC. (C) In the event of a conflict between the Insurance Code, any currently existing departmental rule, form, or instruction, or any specific requirement of this subsection and the NAIC manuals listed in this subsection, then and in that event, the Insurance Code, the department's promulgated rule, form, or instruction, or the specific requirement of this subsection shall take precedence and in all respects control. It is the express intent of this subsection that it shall not repeal or otherwise modify or amend any department rule or the Insurance Code. (f) Requirements for title insurers. Each title insurance company shall complete and file the following blanks and forms for the 1995 calendar year and the first three quarters of the 1996 calendar year. The reports and forms identified in paragraphs (1)(A), (B); (2)(A), (B), and (F); and (3) of this subsection shall be completed in accordance with the current NAIC Annual Statement Instructions, Title, except as otherwise provided by this section. In the event of a conflict between the Insurance Code, any currently existing departmental rule, form, or instruction, or any specific requirement of this subsection and the NAIC manuals listed in this subsection, then and in that event, the Insurance Code, the department's promulgated rule, form, or instruction, or the specific requirement of this subsection shall take precedence and in all respects control. It is the express intent of this subsection that it shall not repeal or otherwise modify or amend any department rule or the Insurance Code. (1) Reports to be filed with the department and the NAIC: (A) Annual Statement (association edition, Form 9, with a salmon colored cover made of minimum 65lb. paper), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before March 1, 1996; and (B) Management's Discussion and Analysis (a narrative document setting forth information which enables regulators to enhance their understanding of the insurer's financial position, results of operations, changes in capital and surplus accounts and cash flow), to be filed on or before April 1, 1996. (2) Reports to be filed only with the department: (A) Supplemental Compensation Exhibit (association edition), 9 inch by 14 inch size, (required of Texas domestic companies only), to be filed on or before March 1, 1996; (B) Title Quarterly Statement (association edition), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before May 15, August 15, and November 15, 1996; (C) Texas Overhead Assessment Form (required of Texas domestic companies only), to be filed on or before March 1, 1996; (D) Analysis of Surplus, for title insurers, to be filed on or before March 1, 1996; (E) Supplemental Investment Income Exhibit (shows percent of net investment income by type of investment, as an attachment to page six of the annual statement as required in paragraph (1)(A) of this subsection), to be filed on or before March 1, 1996; and (F) Schedule SIS, Stockholder Information Supplement (association edition) (required of domestic stock companies which have 100 or more stockholders), either the 12 inch by 19 inch size, 11 inch by 17 inch size, or 9 inch by 14 inch size, to be filed on or before March 1, 1996. (3) Reports to be filed only with the NAIC. Officers and Directors Information (association edition) (required of companies upon their initial filing with the NAIC and to report any changes in previously filed information), to be filed on or before March 1, 1996. (g) Requirements for health maintenance organizations. Each health maintenance organization and non-profit health corporation shall complete and file the following blanks and forms for the 1995 calendar year and the first three quarters of the 1996 calendar year with the department only. The forms or reports identified in paragraphs (1)-(5) of this subsection shall be completed in accordance with the current NAIC Annual Statements Instructions, Health Maintenance Organizations, except as otherwise provided by this section. In the event of a conflict between the Insurance Code, any currently existing departmental rule, form, or instruction, or any specific requirement of this subsection and the NAIC manuals listed in this subsection, then and in that event, the Insurance Code, the department's promulgated rule, form, or instruction, or the specific requirement of this subsection shall take precedence and in all respects control. It is the express intent of this subsection that it shall not repeal or otherwise modify or amend any department rule or the Insurance Code. (1) Annual Statement (association edition, HMO with an orange colored cover made of minimum 65lb. paper), 8 1/2 inch by 14 inch size, to be filed on or before March 1, 1996; (2) Management's Discussion and Analysis, (a narrative document setting forth information which enables regulators to enhance their understanding of the insurer's financial position, results of operations, changes in capital and surplus accounts and cash flow), to be filed on or before April 1, 1996; (3) Actuarial Opinion (the statement of a qualified actuary, setting forth his or her opinion relating to policy reserves and other actuarial items; to be filed by all health maintenance organizations), to be attached to the annual statement required by paragraph (1)(A) of this subsection; (4) Supplemental Compensation Exhibit (association edition), 9 inch by 14 inch size, (required of Texas domestic companies only), to be filed on or before March 1, 1996; (5) HMO Quarterly Statement (association edition), 8 1/2 inch by 14 inch size, to be filed on or before May 15, August 15 and November 15, 1996; (6) HMO Supplement, 8 1/2 inch by 14 inch size, to be filed on or before March 1, 1996; (7) Texas Overhead Assessment Form (required of Texas domestic companies only), to be filed on or before March 1, 1996; (8) Exhibit Z, 8 1/2 inch by 14 inch size, to be filed on or before March 1, May 15, August 15, and November 15, 1996; (9) Department formatted diskettes containing annual statement data (diskettes provided by the department for entering of health maintenance organization or non-profit health corporation financial statement data), to be completed according to the instructions provided by the Department and filed with the Department on or before March 1, 1996; and (10) Department formatted diskettes containing quarterly statement data (diskettes provided by the department for entering of health maintenance organization or non-profit health corporation financial statement data), to be completed according to the instructions provided by the Department and filed with the Department on or before May 15, August 15, and November 15, 1996. (h) Requirements for farm mutual insurers not subject to the provisions of subsection (d) of this section. Each farm mutual insurance company shall file the following completed blanks and forms for the 1995 calendar year with the department only: (1) Annual statement (Texas edition, with a tan colored cover made of minimum 65lb. paper), 8 1/2 inch by 14 inch size, to be filed on or before March 1, 1996; (2) Texas Overhead Assessment Form, to be filed on or before March 1, 1996; (3) Actuarial Opinion (the statement of a qualified actuary, setting forth his or her opinion relating to policy reserves and other actuarial items), to be attached to the annual statement required by paragraph (1) of this subsection, unless otherwise exempted. (i) Requirements for mutual assessment companies, mutual aid and mutual burial associations, and exempt companies. Each statewide mutual assessment company, local mutual aid association, local mutual burial association, and exempt company shall file the following completed blanks and forms for the 1995 calendar year with the department only: (1) Annual Statement (Texas edition, with an orange colored cover made of minimum 65lb. paper), 8 1/2 inch by 14 inch size, to be filed on or before April 1, 1996, provided, however, exempt companies are not required to complete lines 22, 23, 24, 25, and 26 on page 3, the special instructions at the bottom of page 3, and pages 4, 5, 6, and 7. All other pages are required; (2) Texas Overhead Assessment Form, to be filed on or before April 1, 1996; (3) Release of Contribution Form, to be filed on or before April 1, 1996; (4) 3 1/2% Chamberlain Reserve Table (Reserve Valuation), to be filed on or before April 1, 1996; (5) Reserve Summary (1956 Chamberlain Table 3 1/2%), to be filed on or before April 1, 1996; (6) Inventory of Insurance in Force by Age of Issue or Reserving Year, to be filed on or before April 1, 1996; and (7) Summary of Inventory of Insurance In Force by Age and Calculation of Net Premiums, to be filed on or before April 1, 1996. (j) Requirements for non-profit legal service corporations. Each non-profit legal service corporation shall file the following completed blanks and forms for the 1995 calendar year only with the department only; (1) Annual Statement (Texas edition, with a green colored cover made of minimum 65lb. paper), 8 1/2 inch by 14 inch size, to be filed on or before March 1, 1996; and (2) Texas Overhead Assessment Form, to be filed on or before March 1, 1996. (k) Requirements for Mexican casualty companies. Each Mexican casualty company doing business as authorized by a Certificate of Authority issued under Texas Insurance Code, Article 8.24, shall complete and file the following blanks and forms for the 1995 calendar year with the department only. All submissions shall be printed or typed in English and all monetary values shall be clearly designated in United States dollars. The form identified in paragraph (1) of this subsection shall be completed in accordance with the current NAIC Annual Statement Instructions, Property and Casualty, except as provided by this section. An actuarial opinion is not required. In the event of a conflict between the Insurance Code, any currently existing departmental rule, form, or instruction, or any specific requirement of this subsection and the NAIC manuals listed in this subsection, then and in that event, the Insurance Code, the department's promulgated rule, form, or instruction, or the specific requirement of this subsection shall take precedence and in all respects control. It is the express intent of this subsection that it shall not repeal or otherwise modify or amend any department rule or the Insurance Code. The blanks or forms are as follows: (1) Annual Statement (association edition, Form 2, with a yellow colored cover made of minimum 65lb. paper), 12 inch by 19 inch size, provided, however, only pages 1-4, 15, 17, and 137 are required to be completed, to be filed on or before March 1, 1996; (2) A copy of the balance sheet and the statement of profit and loss from the Mexican financial statement (printed or typed in English), to be filed on or before March 1, 1996; (3) A copy of the official documents issued by the COMISION NACIONAL DE SEGUROS Y FIANZAS approving the current year's annual statement, to be filed on or before June 30, 1996; and (4) A copy of the current license to operate in the Republic of Mexico, to be filed on or before March 1, 1996. (l) Other financial reports. Nothing in this section prohibits the department from requiring any insurer or other regulated entity from filing other financial reports with the department. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on March 4, 1996. TRD-9603033 Alicia M. Fechtel General Counsel and Chief Clerk Texas Department of Insurance Effective date: March 25, 1996 Proposal publication date: September 25, 1995 For further information, please call: (512) 463-6327 PART II. Texas Workers' Compensation Commission CHAPTER 134.Guidelines for Medical Services, Charges, and Payments 28 TAC sec.134.201 The repeal is adopted pursuant to the Texas Labor Code, sec.402.061 which requires the commission to adopt rules necessary for the implementation and enforcement of the Texas Workers Compensation Act; the Texas Labor Code, sec.408.021, which entitles injured employees to all health care reasonably required by the nature of the injury as and when needed; the Texas Labor Code, sec.413.007, which requires the commission to maintain a statewide database of medical charges, actual payments, and treatment protocols; the Texas Labor Code, sec.413.011, which mandates that the commission by rule establish medical policies and guidelines, and the Texas Labor Code, sec.413.012, which requires review and revision of the medical policies and fee guidelines at least every two years. sec.134.201. Medical Fee Guideline For Medical Services and Equipment Provided Under the Texas Workers' Compensation Act. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on March 4, 1996. TRD-9602988 Susan Cory General Counsel Texas Workers' Compensation Commission Effective date: April 1, 1996 Proposed publication date: October 20, 1995 For further information, please call: (512) 440-3700 TITLE 34. PUBLIC FINANCE PART I. Comptroller of Public Accounts CHAPTER 3.Tax Administration SUBCHAPTER Q.Franchise Tax 34 TAC sec.3.411 The Comptroller of Public Accounts adopts the repeal of sec.3.411, concerning banking corporations, without changes to the proposed text as published in the November 24, 1995, issue of the Texas Register (20 TexReg 9833). This section is being repealed in order that it can be adopted under the Texas Administrative Code, Title 34, Part I, Chapter 3, Subchapter V. The section will be replaced with a new 34 TAC sec.3.560, concerning banking corporations. No comments were received regarding adoption of the repeal. This repeal is adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The repeal implements the Tax Code, sec.sec.171.001 et. seq. and the repeal of the Government Code, sec.403.105. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be within the agency's authority to adopt. Issued in Austin, Texas, on February 28, 1996. TRD-9602801 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: March 20, 1996 Proposal publication date: November 24, 1995 For further information, please call: (512) 463-4028 SUBCHAPTER V.Franchise Tax 34 TAC sec.3.560 The Comptroller of Public Accounts adopts new sec.3.560, concerning banking corporations, with changes to the proposed text as published in the November 24, 1995, issue of the Texas Register (20 TexReg 9834). A correction was made to the title of the rule referred to in subsection (f)(1) of this section. The title of the rule should have been Earned Surplus: Computation. This new section replaces 34 TAC sec.3.411, concerning the same subject matter, which is being repealed in order that it can be adopted under the Texas Administrative Code, Title 34, Part I, Chapter 3, Subchapter V. This new section provides guidelines to banking corporations for computing their franchise tax. No comments were received regarding adoption of the new section. This new section is adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The new section implements the Tax Code, sec.sec.171.001 et. seq. and the repeal of the Government Code, sec.403.105. sec. 3.560. Banking Corporations. (a) Effective date. Except as otherwise provided in this section, the provisions of this section apply to franchise tax reports originally due on or after January 1, 1992. (b) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. (1) Banking corporation (bank) - Each state, national, domestic, or foreign bank, including a limited banking association, as defined by the Banking Act, sec.1.002(a), and each bank organized under the Federal Reserve Act, sec.25(a), (12 United States Code, sec.sec.611-631) (edge corporations), but does not include a bank holding company as that term is defined by the Bank Holding Company Act of 1956 (12 United States Code, sec.1841). (2) Commercial domicile - The principal place from which the trade or business of the entity is directed. (c) Banking corporations subject to tax. The following banking corporations are subject to Texas franchise tax. (1) All banking corporations that are chartered, authorized to do business, or doing business in Texas beginning May 1, 1985, unless specifically listed as not subject to tax under subsection (d) of this section. (2) Beginning January 1, 1996, the following banking corporations are subject to Texas franchise tax: (A) non-Texas banking corporations doing business in Texas solely in a fiduciary capacity and registered with the Texas Secretary of State's Office under the Probate Code, sec.105A; and (B) banking corporations doing business solely on federal enclaves in Texas. (3) For those banking corporations subject to tax pursuant to paragraph (2) of this subsection, January 1, 1996, is considered the banking corporation's beginning date for purposes of determining the banking corporation's privilege periods and for all other purposes of the Tax Code, Chapter 171. (d) Banks not subject to tax. Unincorporated private banks, other than limited banking associations, doing business in Texas are not subject to Texas franchise tax. (e) Other franchise tax provisions apply. All provisions of this subchapter concerning the Texas franchise tax are applicable to banking corporations. However, this section will control if it conflicts with another section of this subchapter. (f) Apportionment of dividends and interest. (1) If a banking corporation has its commercial domicile in Texas, all dividends and interest received, including interest from the federal government unless otherwise excluded by sec.3.555(k) of this title (relating to Earned Surplus: Computation), are considered to be Texas gross receipts and gross receipts everywhere. (2) If a banking corporation's commercial domicile is not in Texas, no dividends or interest received are considered to be Texas gross receipts but all are considered to be gross receipts everywhere. (g) Earned surplus. Regarding the add-back of compensation of executive officers and directors of banking corporations and directors, managers, and participants of a limited banking association, see sec.3.558 of this title (relating to Earned Surplus: Officer and Director Compensation). (h) Enforcement. (1) All taxes, penalties, and interest due by a banking corporation are secured by a lien on all of the bank's property that is subject to execution. The lien attaches to all of the property of the bank liable for the taxes. (2) The attorney general may bring suit in the name of the state to recover delinquent taxes, penalties, and interest. (3) The comptroller may ask that the Banking Department of Texas issue a cease and desist order requiring a bank to pay all taxes, penalties, and interest. To the extent not preempted by federal law, the Texas Department of Banking is required to appoint a conservator under the Banking Act, Chapter 6, Subchapter B, to pay the franchise tax of any banking corporation certified by the comptroller as being delinquent in the payment of its franchise tax. (4) Except as provided in paragraph (3) of this subsection, no banking corporation will have its corporate privileges or charter forfeited by the comptroller for not paying its franchise tax. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on February 28, 1996. TRD-9602800 Martin E. Cherry Chief, General Law Section Comptroller of Public Accounts Effective date: March 20, 1996 Proposal publication date: November 24, 1995 TITLE 43. TRANSPORTATION PART I. Texas Department of Transportation CHAPTER 4.Employment Practices SUBCHAPTER E.Sick Leave Pool Program 43 TAC sec.4.54, sec.4,56 The Texas Department of Transportation adopts amendments to sec.4.54 and sec.4.56 concerning contributions and withdrawal to the department's sick leave pool program, without changes to the proposed text as published in the December 15, 1995, issue of the Texas Register (20 TexReg 10750). Government Code, Chapter 661 authorizes the department to establish a sick leave pool program and to adopt rules and prescribe procedures to provide additional sick leave for an employee when the employee or the employee's immediate family member has a catastrophic illness or injury which causes the employee to exhaust all leave time earned and lose compensation from the state. The General Appropriations Act, Fiscal Years 1996-1997, Article IX, sec.8(2) defines family members and provides conditions when sick leave may be taken by an employee for illness of the employee or a family member. The commission on May 25, 1995, proposed the adoption of new sec.;4.50-4.56, concerning the department's employee sick leave pool program. The commission on September 28, 1995, adopted those sections with changes to sec.4.54 and sec.4.56. The final adoption computer diskette as filed with the Texas Register did not reflect the changes to sec.4.54 and sec.4.56. Title 1, Texas Administrative Code, sec.91.135(d), prohibits the Texas Register from making corrections to adopted rules after the effective date of the rules. The amendments to sec.4.54 and sec.4.56 are technical amendments which accurately reflect the changes previously adopted by the commission. Adoption of these amendments will allow the accurate version of sec.4.54 and sec.4.56 to be published in the Texas Register. The amendments to sec.4.54 provide that the health care provider certification is confidential, unless otherwise required by law, and may only be released to the human resources officer if he or she can demonstrate a legitimate business necessity for this information. The amendments to sec.4.56 clarify that hours from the sick leave pool may be granted in a block of time and used on an as needed basis and that the pool administrator may require the unused hours to be returned to the pool after such time has expired unless an immediate need for such leave still exists. The amendments also provide that the pool administrator may require the patient's condition to be recertified by a health care provider on a monthly basis when the necessary information to make a definite determination of the employee's need for pool hours is changed, uncertain, or not available. The amendments are adopted under the Transportation Code, sec.201.101, which provides the Texas Transportation Commission with the authority to establish rules for the conduct of the work of the Texas Department of Transportation and Government Code, Chapter 661, which authorizes the department to adopt rules administering a sick leave pool program. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on March 1, 1996. TRD-9602912 Robert E. Shaddock General Counsel Texas Department of Transportation Effective date: March 22, 1996 Proposal publication date: December 15, 1995 For further information, please call: (512) 463-8630 CHAPTER 21.Right of Way SUBCHAPTER Control of Signs Along Rural Roads 43 TAC sec.21.411, sec.21.421 The Texas Department of Transportation adopts amendments to sec.21.411 and sec.21.421, concerning definitions and exemptions which relate to control of outdoor signs on rural roads, without changes to the proposed text as published in the January 2, 1996, issue of the Texas Register (21 TexReg 44). Senate Bill 971, 74th Legislature, 1995, re-codified the statutes relating to transportation into the Transportation Code. Transportation Code, Chapter 394, previously codified at Texas Civil Statutes, Article 6674v-3 (the "Rural Road Act"), provides the department with authority to control outdoor signs on rural roads. Senate Bill 888, 74th Legislature, 1995, amended the Rural Road Act to extend the period of time during which a political sign may be erected from 60 to 90 days before an election. The amendments to sec.21.411 and sec.21.421 extend the period of time which a political sign may be erected from 60 to 90 days before an election. The signs must still be removed ten days after an election. The amendments also provide for minor corrections to statutory citations. A comment deadline of February 2, 1996, was published and no comments were received regarding adoption of the amendments. The amendments are adopted under the Transportation Code, sec.201.101, which provides the Texas Transportation Commission with the authority to establish rules for the conduct of the work of the Texas Department of Transportation, and more specifically Texas Transportation Code, sec.394.004, which authorizes the commission to adopt rules to regulate the erection and maintenance of signs along rural roads. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on March 1, 1996. TRD-9602913 Robert E. Shaddock General Counsel Texas Department of Transportation Effective date: March 22, 1996 Proposal publication date: January 2, 1996 For further information, please call: (512) 463-8630 CHAPTER 25.Traffic Operations Traffic Safety Program 43 TAC sec.sec.25.901-25.903, 25.905-25.907, 25.909-25.911, 25.913 The Texas Department of Transportation adopts amendments to sec.sec.25.901- 25.903, 25.905-25.907, 25.909-25.911; and new sec.25.913, concerning the Texas Traffic Safety Program. Section 25.906 is adopted with changes to the proposed text as published in the December 15, 1995, issue of the Texas Register (20 TexReg 10751). Sections 25.901-25.903, 25.905, 25.907, 25.909-25.911, and 25.913 are adopted without changes and will not be republished. The Texas Traffic Safety Program consists of a coordinated program planned and administered by the department under Title 23, United States Code, sec.402 (Federal Highway Safety Act of 1966) and Transportation Code, Chapter 723 (Texas Traffic Safety Act of 1967). Each federal fiscal year, the department solicits highway safety plans from its districts and project proposals from other state agencies and other organizations with interests in traffic safety in order to develop an annual highway safety plan. Projects are selected based on specified criteria and awarded funding through grant agreements or interagency cooperation contracts and then monitored to ensure project performance. To clarify certain terms and provisions, sec.25.906 is adopted with changes. As proposed this section stated that subgrantees or any local government may have its project considered. "Any local government" has been removed because a local government is also a subgrantee. Section 25.906(2) has been changed to include that all subgrantees, not just state agencies, may contact the department. Sections 25.901-25.903 are amended to define and further clarify department procedures for conducting the Texas Traffic Safety Program. Sections 25.905-25.907 are amended to provide for the procedures for the traffic safety program, delineate criteria for grant or contract funding, and reflect changes in the federal regulations concerning the types of eligible traffic safety projects. Sections 25.909-25.911 are amended to outline grant agreement content and add the Federal Highway Administration as a participant in federal oversight of the traffic safety program. New Section 25.913 stipulates the department's responsibility to monitor and report on project performance. On January 4, 1996, the department conducted a public hearing on the proposed amendments and new section and no oral or written comments were received. The amendments and new section are adopted under the Transportation Code, sec.201.101, which provides the Texas Transportation Commission with the authority to promulgate rules for the conduct of the work of the Texas Department of Transportation and more specifically the Transportation Code, Chapter 723, which requires the department to design a highway traffic safety program to reduce traffic crashes, deaths, injuries, and property damage. sec.25.906.Participation. Any prospective subgrantee with traffic safety responsibility may have its project proposal considered for inclusion in the Texas highway safety plan. (1) Local governments wishing to submit a project proposal should contact the district office responsible for the geographic area in which they are located. (2) Other subgrantees may contact the traffic safety section of the traffic operations division regarding their project proposals. (3) These proposals will be considered for inclusion in the Texas highway safety plan during the planning period which generally begins a year or more prior to the projected date of implementation for the project proposals. (4) Approval of federal funding for the Texas highway safety plan is normally not received by the department until just prior to the beginning of each federal fiscal year, which begins on October 1. In some instances the full amount of funding available for a given fiscal year is not known until after October 1 of that year. For this reason, the department may be unable to determine if a particular project proposal will be funded until after the beginning of the fiscal year in which it is to be implemented. (5) Except for those projects funded according to legislative or regulatory requirements, grant funding will be awarded according to the following criteria: (A) potential for impact on traffic safety; (B) quality of problem identification, supported by verifiable information or statistical data; (C) demonstration of a reasonable and logical solution for improving traffic safety; and (D) cost effectiveness. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on March 1, 1996. TRD-9602914 Robert E. Shaddock General Counsel Texas Department of Transportation Effective date: March 22, 1996 Proposal publication date: December 15, 1995 For further information, please call: (512) 463-8630 CHAPTER 29.Maintenance SUBCHAPTER A.General 43 TAC sec.29.3 The Texas Department of Transportation adopts new sec.29.3, concerning distribution of roadway material to counties, with changes to the proposed text as published in the January 2, 1996, issue of the Texas Register (21 TexReg 46). House Bill 1, 74th Legislature, 1995, the General Appropriations Bill for Fiscal Years 1996-1997 requires that the department supply the counties with surplus materials on hand, not to exceed a maximum amount of $12 million over two years. The materials will be used to repair county roads that have been damaged by legally permitted overweight truck traffic. New sec.29.3 explains the purpose of the section, defines words, explains the amount of material that will be distributed, provides the formula for distribution of materials, and provides procedures for application for materials and selection of projects. This section provides that any projects not selected will be forwarded to the construction and maintenance division and the division director will prioritize those projects and may use funds which are still available. This section also provides that any remaining funds will be distributed in a subsequent program and requires a county to haul the material from the district storage site. On January 17, 1996, a public hearing was held to receive comments, views, or testimony concerning the proposed new sec.29.3. No comments were received at the hearing. One individual submitted written comments. The commenter recommended including provisions that expedite assistance to counties through a prequalification process, and suggested counties pre-qualify based on their share of House Bill 2060 permitted truck traffic on county roads. The commenter also recommended a provision to reimburse counties for materials already used to repair road damage from House Bill 2060 truck traffic. In response, the department does not have adequate information on the use of House Bill 2060 permits on county roads and this information would be costly to obtain, and would result in a delay in the implementation of the section, and a consequent delay in assisting the counties. A provision to reimburse counties for materials already used to repair road damage is not provided for in the appropriations bill. Regarding the requirement in subsection (d)(3)(E), which states that counties must identify the House Bill 2060 permittee responsible for road damage, the commenter suggested that it is probably impossible to provide the information. The department's agrees that the counties may not be able to comply with this requirement, therefore paragraph (3)(E) of subsection (d) is deleted. Regarding the requirement in subsections (e)(3) and (4) concerning redistribution of funds, the commenter questioned the use of the term "funds" in both paragraphs. The department agrees that the word "funds" is not accurate. The department will not redistribute funds; it will redistribute the material allocation. The paragraphs, therefore, are revised to replace the word "funds" with the term "material allocation." In addition, as a grammatical change, subsection (e)(3) is revised by deleting the words, "to fund" in the last sentence, and inserting the word "for." The commenter stated that the proposed section makes no mention of the requirement in the department's legislative appropriations that the department, along with counties, undertake cooperative and joint procurement of road materials under General Services Commission procedures. In response, the proposed section was intended to only implement the provisions of the appropriations bill requiring an allocation of surplus materials to counties. The department is currently working with the General Services Commission to implement the joint procurement provision of the appropriations bill, and will notify the commenter of the department's progress. Regarding subsection (c)(1), the commenter stated that this paragraph should make it clear that unused material in fiscal 1996 may carry over to fiscal 1997, provided that total biennial assistance does not exceed $12 million. The department concurs with this comment and paragraph (1) is revised to read, "Any unused material allocation remaining in FY 1996 will carry over to FY 1997." Regarding sec.29.3(f), the commenter said that in order to satisfy legislative intent, the section should include a requirement that the department make a good faith effort to ensure material availability in the counties of use. In response, sec.29.3(d)(1) is revised by adding the following sentence: "The department will make an effort to insure materials are available in all counties." The new section is adopted under Transportation Code, sec.201.101, which provides the Texas Transportation Commission with the authority to establish rules for the conduct of the work of the Texas Department of Transportation; and House Bill 1, 74th Legislature, 1995, the General Appropriations Bill for Fiscal Years 1996-1997 which requires that the department supply the counties with surplus materials on hand, not to exceed a maximum amount of $12 million over two years. sec.29.3.Distribution of Roadway Material to Counties. (a) Purpose. Rider 42 to the department's appropriations for fiscal years 1996- 1997 requires the department to assist counties with materials on hand to repair county roads that are damaged as a result of vehicles operating with a permit issued under Transportation Code, sec.623.011. This section prescribes the policies and procedures for the implementation of Rider 42. (b) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. (1) Commission - The Texas Transportation Commission. (2) Condition score - A measure of the condition of the pavement of a segment of the state highway system, including surface distress and ride quality, as determined by the department's annual pavement survey. (3) Construction and maintenance division - A division of the department responsible for oversight of the department's statewide construction and maintenance operations. (4) Cost of materials - A statewide average cost of roadway maintenance material available to the counties, such cost to include indirect costs in an amount prescribed by the department's Indirect Cost Recovery Program. (5) County - One of the 254 geographical political subdivisions of the state. (6) County road - A public road under the jurisdiction of a county. (7) Department - The Texas Department of Transportation. (8) District - A subdivision of the department responsible for the day-to-day operations of the department in a specific geographically defined area. (9) District engineer - The chief administrative officer of a district of the department. (10) House Bill 2060 Permit - A permit issued by the department under Transportation Code, sec.623.011 authorizing a vehicle to exceed maximum legal weight limitations. (11) Materials on hand - Roadway maintenance materials previously acquired by the department which are currently in department stock accounts. (12) State highway system - The system of highways in the state included in a comprehensive plan prepared by the department's executive director under the direction and with the approval of the commission in accordance with Transportation Code, sec.221.001. (c) Distribution of material. (1) Amount. In fiscal years 1996 and 1997 the department will distribute up to $6 million worth of material on hand per year to repair county roads that are damaged as a result of vehicles operating with a House Bill 2060 permit. Any unused material allocation remaining in fiscal year 1996 will carry over to fiscal year 1997. (2) Distribution formula. The materials will be distributed to department districts by giving equal weight to the following factors: (A) lane miles of county roads in each district divided by the total lane miles of county roads in the state; and (B) lane miles of farm-to-market and ranch-to-market roads in the district with a condition score of less than 35 divided by the total lane miles of farm-to- market and ranch-to-market roads in the state with a condition score of less than 35. (d) Application for materials. (1) Material list. Each district will make available to the counties within the district a list of material on hand available for county use, such list to include the cost of materials. The department will make an effort to insure materials are available in all counties. (2) Program call. The department will periodically mail applications for the purpose of requesting material on hand to the county judge of each county. A county judge desiring to obtain materials under this section must submit a completed application to the local district engineer prior to the deadline indicated on the application. (3) Form of application. The application shall be in a form prescribed by the department and shall contain at a minimum the following information pertinent to each county road for which material is requested: (A) county road number, location, and project limits; (B) description of damage; (C) average daily traffic (ADT); (D) type and quantity of material requested; (E) the relative priority of each project, if the county requests materials for more than one project; and (F) the projected date the work is to be completed. (e) Selection of projects. (1) Except as provided in paragraph (2) of this subsection, the district will provide the material requested to each county submitting a completed application. (2) If the total dollar value of requests exceeds the district's allocation, the district engineer will prioritize projects based on an engineering analysis. The engineering analysis will take into account: (A) ADT, as provided in the county's application; (B) the impact of the damage on the serviceability of the road; and (C) continued deterioration anticipated by delaying the proposed work. (3) Any projects not selected under paragraph (2) of this subsection will be forwarded to the construction and maintenance division. The division director will prioritize those projects in accordance with paragraph (2) of this subsection. Any district material allocation distributed under subsection (c)(2) of this section which are not needed to satisfy county requests in a district will be made available to the construction and maintenance division and will be used for the projects with top state-wide priority as those available material allocations permit. (4) Any material allocation remaining after the distribution provided for in paragraph (3) of this subsection will be distributed in a subsequent program call in accordance with subsection (d) of this section until a total of $12 million has been expended or until the end of fiscal year 1997. (f) County requirements. A county whose project was selected under subsection (e) of this section shall be responsible for the hauling of the material from the site where the material is stored. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on March 1, 1996. TRD-9602915 Robert E. Shaddock General Counsel Texas Department of Transportation Effective date: March 22, 1996 Proposal publication date: January 2, 1996 For further information, please call: (512) 463-8630 CHAPTER 31.Public Transportation General 43 TAC sec.31.1, sec.31.3 The Texas Department of Transportation adopts amendments to sec.31.1, concerning the scope and purpose of the department's public transportation programs, and to sec.31.3, concerning related definitions without changes to the text as published in the December 12, 1995, issue of the Texas Register (20 TexReg 10587). These actions are necessary to update terms to conform to statutory and organizational changes. House Bill 2588, 74th Legislature, 1995, established rural and urban transit districts. House Bill 2496, 74th Legislature, 1995, amended Texas Civil Statutes, Article 6663c, by revising the distribution of the state formula transportation program. In sec.31.1, the department's name is updated along with federal enabling legislation that includes codification of the Federal Transit Act, 49 United States Code sec.5301 et seq. In sec.31.3, the definition for "assistant executive director" replaces the entry for associate executive director, reflecting the department's current organization. Similarly, the "district" definition revises the number of regional offices from 24 to 25. The "state data center" entry shows the location of that resource is now at Texas A & M University. The definition of "designated recipient" is revised to conform to language contained in House Bill 2496, 74th Legislature, 1995. New definitions for "rural transit district" and "urban transit district" are added to conform to House Bill 2588, 74th Legislature, 1995. The department is adopting contemporaneous amendments to sec.31.11, sec.31.13, and sec.31.36 that also address provisions of House Bill 2496, 74th Legislature, 1995, and House Bill 2588, 74th Legislature, 1995. On January 8, 1996, the department conducted a public hearing on the proposed amendments and no oral or written comments were received. The amendments are adopted under Transportation Code, sec.201.101, which provides the Texas Transportation Commission with the authority to promulgate rules for the conduct of the work of the Texas Department of Transportation, and more specifically Transportation Code, Chapters 455 and 456, as amended, which administer the state public transportation fund and state and federal public transportation programs. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on March 1, 1996. TRD-9602916 Robert E. Shaddock General Counsel Texas Department of Transportation Effective date: March 22, 1996 Proposal publication date: December 12, 1995 For further information, please call: (512) 463-8630 State Programs 43 TAC sec.31.11, sec.31.13 The Texas Department of Transportation adopts amendments to sec.31.11, concerning the state formula public transportation program, and to sec.31.13, concerning the discretionary program, without changes to the proposed text as published in the December 12, 1995, issue of the Texas Register (20 TexReg 10588). These actions are necessary to conform to statutory changes. House Bill 2496, 74th Legislature, 1995, amended Texas Civil Statutes, Article 6663c, by revising the distribution of the state formula transportation program. In both sec.31.11 and sec.31.13, the name of federal enabling legislation is updated along with references to the codification of the Federal Transit Act, 49 United States Code, sec.sec.5301 et seq. In sec.31.11, changes are made to conform to the provisions of House Bill 2496, 74th Legislature, 1995. These include the addition of state funded projects as qualifying a recipient under the formula allocation system in subsections (b)(1)(A)(i) and (b)(1)(B)(i), the revision of match requirements in subsection (b)(2), and the revision of application requirements in subsection (d). Similar changes to conform to House Bill 2496, 74th Legislature, 1995, are made in sec.31.13. The specific revisions is in the match provisions described in subsection (c)(3)(A). The department is adopting contemporaneous amendments to sec.31.1, sec.31.3, and sec.31.36 that also address provisions of HB 2496 and House Bill 2588, 74th Legislature, 1995. On January 8, 1996, the department conducted a public hearing on the proposed amendments and no oral or written comments were received. The amendments are adopted under the Transportation Code, sec.201.101, which provides the Texas Transportation Commission with the authority to promulgate rules for the conduct of the work of the Texas Department of Transportation, and more specifically Transportation Code, Chapters 455 and 456, as amended, which administer the state public transportation fund and state and federal public transportation programs. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on March 1, 1996. TRD-9602917 Robert E. Shaddock General Counsel Texas Department of Transportation Effective date: March 22, 1996 Proposal publication date: December 12, 1995 For further information, please call: (512) 463-8630 Federal Programs 43 TAC sec.31.36 The Texas Department of Transportation adopts an amendment to sec.31.36, concerning the Section 18 grant program, without changes to the proposed text as published in the December 12, 1995, issue of the Texas Register (20 TexReg 10590). This action is necessary to conform to statutory changes and update a reference to federal enabling legislation. House Bill 2588, 74th Legislature, 1995, established rural and urban transit districts. Subsection (a) is being updated to be consistent with the codification of the Federal Transit Act, 49 United States Code, sec.sec.5301 et seq. The requirement that an entity must be a rural transit district to receive Section 18 funds is added to subsection (d) to conform to the provisions of House Bill 2588, 74th Legislature, 1995, establishing rural transit districts. The department is adopting contemporaneous amendments to sec.sec.31.1, 31.3, 31.11, and 31.13 that also address provisions of House Bill 2496, 74th Legislature, 1995 and HB 2588, 74th Legislature, 1995. On January 8, 1996, the department conducted a public hearing on the proposed amendments and no oral or written comments were received. The amendment is adopted under the Transportation Code, sec.201.101, which provides the Texas Transportation Commission with the authority to promulgate rules for the conduct of the work of the Texas Department of Transportation, and more specifically Transportation Code, Chapter 455, and Chapter 456, as amended, which administer the state public transportation fund and state and federal public transportation programs. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on March 1, 1996. TRD-9602918 Robert E. Shaddock General Counsel Texas Department of Transportation Effective date: March 22, 1996 Proposal publication date: December 12, 1995 For further information, please call: (512) 463-8630