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 19. EDUCATION
PART II. Texas Education Agency
CHAPTER 33.Statement of Investment Objectives, Policies,
and Guidelines of the Texas Permanent School Fund
19 TAC sec.33.15, sec.33.20
The Texas Education Agency (TEA) adopts the repeal of sec.33.15 and sec.33.20, 
concerning the Texas Permanent School Fund (PSF), without changes to the 
proposed text as published in the April 4, 1997, issue of the Texas Register (22 
TexReg 3276).
The sections establish definitions, requirements, and objectives relating to the 
Texas PSF. Adopted new sec.33.15 and sec.33.20 are filed in a separate 
submission and reflect the following technical corrections: (1) renumbering 
current sec.33.20 to sec.33.15 and current sec.33.15 to sec.33.20; (2) changing 
the name of the State Board of Education (SBOE) committee that oversees the 
management of the PSF from "SBOE Committee on the Permanent School Fund" to 
"SBOE Committee on School Finance/Permanent School Fund" as is stated in the 
SBOE operating rules; and (3) correcting the statutory citation in 
sec.33.15(d)(1)(F) and sec.33.20(a).
No comments have been received regarding adoption of the repeals. 
The repeals are adopted under the Texas Education Code, sec.7.102(b)(32), which 
authorizes the State Board of Education to invest the PSF within the limits of 
the authority granted by the Texas Constitution, Article VII, sec.5(d), and the 
Texas Education Code, Chapter 43. sec.33.15. Responsible Parties and Their 
Duties. sec.33.20. Objectives. 
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 May 9, 1997.
TRD-9706215
Criss Cloudt
Associate Commissioner, Policy Planning and Research
Texas Education Agency
Effective date: September 1, 1997
Proposal publication date: April 4, 1997
For further information, please call: (512) 463-9701

The Texas Education Agency (TEA) adopts new sec.33.15 and sec.33.20, concerning 
the Texas Permanent School Fund (PSF), with changes to the proposed text as 
published in the April 4, 1997, issue of the Texas Register (22 TexReg 3276). 
The sections establish definitions, requirements, and objectives relating to the 
Texas PSF. The new sections reflect the following technical corrections: (1) 
renumbering current sec.33.20 to sec.33.15 and current sec.33.15 to sec.33.20; 
(2) changing the name of the State Board of Education (SBOE) committee that 
oversees the management of the PSF from "SBOE Committee on the Permanent School 
Fund" to "SBOE Committee on School Finance/Permanent School Fund" as is stated 
in the SBOE operating rules; and (3) correcting the statutory citation in 
sec.33.15(d)(1)(F) and sec.33.20(a). No changes are made to the content of these 
sections. The adopted repeals of sec.33.15 and sec.33.20 are filed in a separate 
submission. 
No comments have been received regarding adoption of the new sections. 
The new sections are adopted under the Texas Education Code, sec.7.102(b)(32), 
which authorizes the State Board of Education to invest the PSF within the 
limits of the authority granted by the Texas Constitution, Article VII, 
sec.5(d), and the Texas Education Code, Chapter 43 

sec.33.15.Objectives.
(a) Investment objectives. 
(1) Investment objectives have been formulated based on the following 
considerations: 
(A) the anticipated financial needs of the Texas public free school system in 
light of expected future contributions to the Texas Permanent School Fund (PSF); 
(B) the need to preserve capital; 
(C) the risk tolerance set by the State Board of Education (SBOE) and the need 
for diversity; 
(D) observations about historical rates of return on various asset classes; 
(E) assumptions about current and projected capital market and general economic 
conditions and expected levels of inflation; 
(F) the need to invest according to the prudent person rule; and 
(G) the need to document investment objectives, guidelines, and performance 
standards. 
(2) Investment objectives represent desired results and are long-term in nature, 
covering typical market cycles of three to five years. Any shortfall in meeting 
the objectives should be explainable in terms of general economic and capital 
market conditions and asset allocation. 
(3) The investment objectives are consistent with generally accepted standards 
of fiduciary responsibility. 
(4) Under the provisions of this chapter, investment managers shall have 
discretion and authority to implement security selection and timing.
(b) Goal and objectives for the PSF. 
(1) Goal. The goal of the SBOE for the PSF shall be to obtain the greatest 
amount of income and capital appreciation consistent with the safety of 
principal, in light of the strategic asset allocation plan adopted. To achieve 
this goal, PSF investment shall be carefully administered at all times. 
(2) Objectives. 
(A) The preservation and safety of principal shall be a primary consideration in 
PSF investment. 
(B) Fixed income securities shall be purchased at the highest yield consistent 
with the preservation and safety of principal, emphasizing current rather than 
deferred income. 
(C) To the extent possible, the PSF administrators shall hedge against inflation 
by purchasing equities that emphasize stability and growth of future earnings 
and dividends rather than current return. 
(D) Securities, except investments for cash management purposes as specified in 
sec.33.25 of this title (relating to Permissible and Restricted Investments and 
General Guidelines for Investment Managers), shall be selected for investment on 
the basis of long-term investment merits rather than short-term gains. 
(c) Investment rate of return and risk objectives. 
(1) Because the education needs of the future generations of Texas school 
children are long-term in nature and directly related to income growth and 
income potential, the return objective of the PSF shall also be long-term and 
focused on maintaining asset growth while preserving real capital value. 
Maintaining value under an income and capital appreciation concept encompasses a 
policy that over the long term will provide the PSF a positive return when 
adjusted for inflation and spending. 
(2) Investment rates of return shall be based on a time-weighted calculation, 
compounded and annualized over a rolling period of three to five years, and 
shall take into account all cash income plus realized and unrealized capital 
gains and losses, and calculated gross and net of fees and expenses. 
(3) The overall risk level of PSF assets in terms of potential for price 
fluctuation shall not be extreme and risk variances shall be minimal. The 
primary means of achieving such a risk profile are: 
(A) a broad diversification among asset classes that, as nearly as possible, 
react independently through varying economic and market circumstances;
(B) careful control of risk level within each asset class by avoiding over-
concentration and not taking extreme positions against the market averages; and 
(C) a degree of emphasis on stable growth. 
(4) Over time, the volatility of returns (or risk) for the total fund, as 
measured by standard deviation of investment returns, should be comparable to 
investments in market indices in the proportion in which the PSF invests. 
(5) The objective of the domestic equity fund shall be to earn, over time, an 
average annual total rate of return that exceeds that of a representative 
benchmark index, combining dividends and capital appreciation, while maintaining 
an acceptable risk level compared to that of the representative benchmark index. 
(6) The objective of the international equity fund shall be to earn, over time, 
an average annual total rate of return that exceeds that of a representative 
international benchmark index in U.S. dollars, combining dividends and capital 
appreciation, while maintaining an acceptable risk level compared to that of the 
representative benchmark index. 
(7) The objective of the domestic fixed income fund shall be to earn, over time, 
an average annual total rate of return that exceeds that of a representative 
benchmark index, combining interest income and capital appreciation, while 
maintaining an acceptable risk level compared to that of the representative 
benchmark index. 
(8) The objective of the international fixed income fund shall be to earn, over 
time, an average annual total rate of return that exceeds the return of a 
representative Non-U.S. benchmark index in U.S. dollars, combining interest 
income and capital appreciation, while maintaining an acceptable risk level 
compared to that of the representative benchmark index. 
(9) The objective of the short-term cash fund shall be to provide liquidity for 
the timely payment of security transactions, while earning a competitive return. 
The expected return, over time, shall exceed that of the representative 
benchmark index, while maintaining an acceptable risk level compared to that of 
the representative benchmark index. 
(10) Notwithstanding the risk parameters specified in paragraphs (4)-(9) of this 
subsection, consideration shall be given to marginal risk variances exceeding 
the representative benchmark indices if returns are commensurate with the risk 
levels of the respective portfolios. Additional consideration shall be given to 
meeting the projected income expectations of the PSF in each respective biennium 
as a guideline in allocating assets to the respective PSF investment managers, 
if this guideline is consistent with the prudent person mandate of the Texas 
Constitution, Article VII, sec.5(d), and the SBOE asset allocation strategy. 
(d) Asset allocation policy. 
(1) The SBOE shall adopt and implement a strategic asset allocation plan based 
on a well diversified, balanced investment approach that uses a broad range of 
asset classes indicated by the following characteristics of the PSF: 
(A) the long-term nature of the PSF; 
(B) the spending policy of the PSF; 
(C) the relatively low liquidity requirements of the PSF;
(D) the investment preferences and risk tolerance of the SBOE;
(E) the rate of return objectives; and 
(F) the diversification objectives of the PSF, specified in the Texas 
Constitution, Article VII, sec.5(d), the Texas Education Code, Chapter 43, and 
the provisions of this chapter. 
(2) The strategic asset allocation plan shall contain guideline percentages, at 
market value of the total fund's assets, to be invested in various asset 
classes. The target mix may not be attainable at a specific point in time since 
actual asset allocation will be dictated by current and anticipated market 
conditions, as well as the overall directions of the SBOE. 
(3) The SBOE Committee on School Finance/Permanent School Fund, with the advice 
of the PSF investment staff, shall review the provisions of this section at 
least annually and, as needed, rebalance the assets of the portfolio according 
to the asset allocation rebalancing procedure specified in the PSF Investment 
Procedures Manual. The SBOE Committee on School Finance/Permanent School Fund 
shall consider the industry diversification and the percentage allocation 
between fixed income and equity securities within the following asset classes: 
(A) domestic equities; 
(B) international equities; 
(C) domestic fixed income; 
(D) international fixed income; and 
(E) cash. 
(4) Investments shall not exceed the strategic ranges the SBOE establishes for 
each asset class. 
(5) Periodically, the SBOE shall allocate segments of the total fund to each 
investment manager and specify guidelines, investment objectives, and standards 
of performance that apply to those assets. 

sec.33.20.Responsible Parties and Their Duties.
(a) The Texas Constitution, Article VII, sec.sec.1-8, establishes the Available 
School Fund, the Texas Permanent School Fund (PSF), and the State Board of 
Education (SBOE), and specifies the standard of care SBOE members must exercise 
in managing PSF assets. In addition, the constitution directs the legislature to 
establish suitable provisions for supporting and maintaining an efficient public 
free school system, defines the composition of the PSF and the Available School 
Fund, and requires the SBOE to set aside sufficient funds to provide free 
textbooks for the use of children attending the public free schools of this 
state. The Texas Education Code, Chapter 43, regulates the use of state funds to 
support public schools, and the provisions of this chapter govern the investment 
objectives, policies, and guidelines of the PSF. 
(b) The SBOE shall be responsible for overseeing all aspects of the PSF and may 
employ any of the following parties, whose duties and responsibilities are as 
follows. 
(1) An investment manager is a person, firm, corporation, bank, or insurance 
company the SBOE retains to manage a portion of the PSF assets under specified 
guidelines. 
(2) A custodian is an organization, normally a bank, the SBOE retains to 
safekeep, and provide accurate and timely reports of, PSF assets. 
(3) A consultant is a person or firm the SBOE retains to advise the PSF based on 
professional expertise. 
(4) Investment counsel is a person or firm retained under criteria specified in 
the PSF Investment Procedures Manual to advise PSF investment staff and the SBOE 
Committee on School Finance/Permanent School Fund within the policy framework 
established by the SBOE. Counsel may advise PSF internal managers regarding 
various issues, including: selecting companies in different industries; specific 
stock or corporate bond issues or other investment instruments; and timing of 
purchases and sales. Counsel advises on the economic and market environment and 
asset allocation and provides PSF investment staff direction on diversifying 
investments between asset classes and among respective industries. 
(5) A performance measurement consultant is a person or firm retained to provide 
the SBOE Committee on School Finance/Permanent School Fund an analysis of the 
PSF portfolio performance. The outside portfolio performance measurement service 
firm shall perform the analysis on a quarterly or as-needed basis. Quarterly 
reports shall be distributed to each member of the SBOE Committee on School 
Finance/Permanent School Fund, and a representative of the firm shall be 
available as necessary to brief the committee. 
(6) The Internal Audit Division of the Texas Education Agency (TEA) reviews the 
internal control procedures of the PSF Investment Office annually at the 
direction of the SBOE. The division conducts the audit according to standards 
advocated by the Institute of Internal Auditors, Inc., and reports all findings 
to the commissioner of education. The purpose of the internal audit shall be to 
evaluate the controls over assets and test compliance with TEA rules and 
procedures. 
(7) The State Auditor's Office is an independent state agency that performs an 
annual financial audit of the TEA at the direction of the Texas Legislature. The 
financial audit, conducted according to generally accepted auditing standards, 
is designed to test compliance with generally accepted accounting principles. 
The state auditor performs tests of the transactions of the PSF Investment 
Office as part of this annual audit, including compliance with governing 
statutes and SBOE policies and directives. 
(8) The SBOE may retain independent external auditors to review the PSF accounts 
annually or on an as-needed basis. 
(c) The SBOE shall meet on a regular or as-needed basis to conduct the affairs 
of the PSF. 
(d) In case of emergency or urgent public necessity, the SBOE Committee on 
School Finance/Permanent School Fund or the SBOE, as appropriate, may hold an 
emergency meeting under the Texas Government Code, sec.551.045.
(e) The SBOE shall have the following exclusive duties: 
(1) determining the strategic asset allocation mix between asset classes based 
on the attending economic conditions and the PSF goals and objectives; 
(2) ratifying the investment transactions pertaining to the purchase, sale, or 
reinvestment of fixed income, equity, or cash securities by all internal and 
external managers for the current reporting period; 
(3) appointing members to the SBOE Investment Advisory Committee; 
(4) approving all contracts with external professional investment managers, 
financial advisors, financial consultants, or other external professionals 
employed to help the SBOE invest the PSF; 
(5) approving the performance measurement contract with a well recognized and 
reputable firm employed to evaluate and analyze PSF investment results. The 
service shall compare investment results to the written investment objectives of 
the SBOE and also compare the investment of the PSF with the investment of other 
public and private funds against market indices and by managerial style; 
(6) setting policies, objectives, and guidelines for investing PSF assets; and 
(7) representing the PSF to the state. 
(f) The SBOE may establish committees to administer the affairs of the PSF. The 
duties and responsibilities of any committee established shall be specified in 
the PSF Investment Procedures Manual. 
(g) The PSF shall have an executive administrator, with a staff to be adjusted 
as necessary, who functions directly with the SBOE through the SBOE Committee on 
School Finance/Permanent School Fund concerning investment matters, and who 
functions as part of the internal operation under the commissioner of education. 
At all times, the PSF executive administrator and staff shall invest PSF assets 
as directed by the SBOE according to the Texas Constitution and all other 
applicable Texas statutes, as amended, and SBOE rules governing the operation of 
the PSF. The PSF staff shall: 
(1) administer the PSF according to SBOE goals and objectives;
(2) execute all directives, policies, and procedures from the SBOE and the SBOE 
Committee on School Finance/Permanent School Fund;
(3) keep records and provide a continuous and accurate accounting of all PSF 
transactions, revenues, and expenses and provide reports on the status of the 
PSF portfolio; 
(4) advise any officials, investment firms, or other interested parties about 
the powers, limitations, and prohibitions regarding PSF investments that have 
been placed on the SBOE or PSF investment staff by statutes, attorney general 
opinions and court decisions, or by SBOE policies and operating procedures;
(5) continuously research all internally managed securities held by the PSF and 
report to the SBOE Committee on School Finance/Permanent School Fund and the 
SBOE any information requested, including reports and statistics on the PSF, for 
the purpose of administering the PSF; 
(6) establish and maintain a procedures manual that implements this section to 
be approved by the SBOE; 
(7) make recommendations regarding investment and policy matters to the SBOE 
Committee on School Finance/Permanent School Fund and the SBOE; and 
(8) establish and maintain accounting policies and internal control procedures 
concerning all receipts, disbursements and investments of the PSF, according to 
the procedures adopted by the SBOE. 
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 May 9, 1997.
TRD-9706216
Criss Cloudt
Associate Commissioner, Policy Planning and Research
Texas Education Agency
Effective date: May 9, 1997
Proposal publication date: April 4, 1997
For further information, please call: (512) 463-9701

TITLE 22. EXAMINING BOARDS
PART XIV. Texas Optometry Board
CHAPTER 275.Continuing Education
22 TAC sec.275.1, sec.275.2
The Texas Optometry Board adopts an amendment to sec.275.1 and sec.275.2 without 
changes to the proposed text as published in the February 21, 1997, issue of the 
Texas Register (22 TexReg 1872).
Section 275.1 and sec.275.2 are required in order to inform the licensees that 
ongoing education may be obtained from a number of sources, including the use of 
computer technology through on-line computer access, enabling each to maintain a 
license to practice optometry and enhance his or her practice techniques. Texas 
Optometry Act, Texas Civil Statutes, Article 4552 sec.4.01B requires each 
licensee to obtain continuing education for the renewal of a license. 
No comments were received regarding adoption of the amendments. 
The amendments are adopted under the provisions of Texas Civil Statutes, Article 
4552, sec.4.01B and sec.2.14. The Texas Optometry Board interprets sec.4.01B as 
authorizing it to interpret the continuing education requirements. The Board 
interprets sec.2.14 as authorizing the Board to adopt substantive and procedural 
rules for the regulation of the profession of optometry. 
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 May 8, 1997.
TRD-9706150
Lois Ewald
Executive Director
Texas Optometry Board
Effective date: May 28, 1997
Proposal publication date: February 21, 1997
For further information, please call: (512) 305-8500

PART XIX. Texas Polygraph Examiners Board
CHAPTER 397.General Rules of Practice and Procedure
22 TAC sec.sec.397.1-397.19, 397.21-397.23, 397.25-397.38, 397.40-397.42, 
397.44, 397.45, 397.47
The Polygraph Examiners Board repeals sec.sec.397.1-397.19, 397.21-397.23, 
397.25-397.38, 397.40-397.42, 397.44, 397.45, 397.47, concerning general rules 
of practice and procedure. The board has determined that the rules are outdated 
and will be replaced with current information. 
No comments were received regarding the adopted repeals.
The repeals are enacted under the Polygraph Examiners Act, Article 4413 (29cc), 
sec.6, which provides the board with the authority to prescribe, adopt, and 
enforce rules relating to the administration and enforcement of the provisions 
of the Polygraph Examiners Act, Article 4413 (29cc). 
The repeal implements the Polygraph Examiners Act, Article 4413 (29cc). 
sec.397.1.Definitions.
sec.397.2.Object of Rules.
sec.397.3.Scope of Rules.
sec.397.4.Filing of Documents.
sec.397.5.Computation of Time.
sec.397.6.Agreements to be in Writing.
sec.397.7.Service in Rulemaking Proceedings.
sec.397.8.Conduct and Decorum.
sec.397.9.Classification of Parties.
sec.397.10.Classification of Parties.
sec.397.11.Parties in Interest.
sec.397.12.Appearances Personally or by Representative. 
sec.397.13.Classification of Pleadings.
sec.397.14.Form and Content of Pleadings.
sec.397.15.Examination by the Secretary.
sec.397.16.Motions.
sec.397.17.Amendments.
sec.397.18.Incorporation by Reference of Board Records. 
sec.397.19.Contested Cases & semi; Notice, Hearings; Records.
sec.397.21.Prehearing Conference.
sec.397.22.Motions for Postponement, Continuance, Withdrawal, or Dismissal of 
Applications and Appeals, or Other Matters Before the Board.
sec.397.23.Place and Nature of Hearings.
sec.397.25.Order of Procedure.
sec.397.26.Reporters and Transcript.
sec.397.27.Formal Exceptions.
sec.397.28.Dismissal Without Hearing.
sec.397.29.Rules of Evidence.
sec.397.30.Documentary Evidence and Official Notice. 
sec.397.31.Prepared Testimony.
sec.397.32.Limitations on Number of Witnesses.
sec.397.33.Exhibits.
sec.397.34.Offer of Proof.
sec.397.35.Depositions.
sec.397.36.Proposals for Decision.
sec.397.37.Filing of Exceptions, Briefs, and Replies. 
sec.397.38.Form and Content of Briefs, Exceptions, and Replies.
sec.397.40.Final Decisions and Orders.
sec.397.41.Administrative Finality.
sec.397.42.Motions for Rehearing.
sec.397.44.The Record.
sec.397.45.Contents of Notice.
sec.397.47.Amendments to 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 legal authority.
Issued in Austin, Texas, on May 8, 1997.
TRD-9706102
Frank Ditucci
Executive Officer
Texas Polygraph Examiners Board
Effective date: May 28, 1997
Proposal publication date: December 6, 1996
For further information, please call: (512) 424-2058

22 TAC sec.sec.397.1-397.33
The Polygraph Examiners Board adopts new sec. 397.1-397.33, concerning 
definitions and general rules of practice and procedure with changes to the 
proposed text as published in the December 6, 1996, issue of the Texas Register 
(21 TexReg 11705). 
The board has determined that the implementation of new rules is necessary to 
reflect current information about policies and procedure of the board. This rule 
is adopted to add definitions and specify general rules of practice and 
procedure within the jurisdiction of the board. 
The rule governs the institution, conduct, and determination of all proceedings 
in which the board proposes to refuse an application for a license, to suspend a 
license, or to revoke a license pursuant to the Act, Section 22(a). The board at 
its discretion may apply these rules in other proceedings upon notice, before 
institution of the proceedings, to the parties. 
A public hearing was held in Austin on March 6, 1997. One written comment was 
submitted with suggested punctuation and grammar changes as well as two word 
changes. Grammar changes were also suggested by an attendee at the hearing and 
the board agreed with some grammar changes but not the word changes. Oral 
comments received from the representative of the Texas Association of Law 
Enforcement Polygraph Investigators (TALEPI) addressed sec.397.3 Complaints 
subsections (a), (c), and (d). The association wants (1) the complainant to 
provide a sworn affidavit explaining the accusation, which is not addressed in 
the rule; (2) clarification of Subsection (c) to know what constitutes 
"reasonable cause"; and (3) also noted the wording of Subsection (d) the board 
"may keep the identity of the complainant confidential" appears to be in 
conflict with sec.397.4 (b) wherein the notice (to the accused examiner) 
includes a copy of the complaint form. The Texas Association of Polygraph 
Examiners (TAPE) representatives, Texas Department of Criminal Justice (TDCJ), 
Van Zandt County Sheriff's Office, Lubbock Police Department, and the Smith 
County Sheriff's Department representatives voiced their concurrence with the 
TALEPI comments. The board disagreed but will consider changes at a later date. 
TALEPI addressed sec.397.4 Notice of Allegations subsections (a) and (b). The 
association states (1) it wishes the subsection (a) to define "or other 
information." The implication is that even rumor could be the basis for other 
information. It alleges this is too broad and too vague to be used as an 
allegation against an examiner and wishes the term defined. (2) Subsection (b) 
"The notice includes a copy of the complaint form" is in conflict with sec.397.3 
(d) where the Board "may keep the identity of the complainant confidential." A 
TAPE representative expressed concern over the wording "or other information" in 
sec.397.4 (a) and asked if there is to be a complaint form or not have to have a 
complaint form if we rely on "or other information."
TDCJ, Van Zandt County Sheriff's Office, Lubbock Police Department, and the 
Smith County Sheriff's Department representatives voiced their concurrence with 
the TALEPI and TAPE comments. The board disagreed but will consider changes at a 
later date. 
TALEPI addressed sec.397.5 Complaint Investigations subsections (a) and (b). The 
association states (1) it wishes the subsection (a) to define "or any other 
information." The implication is that even rumor or innuendo could be the basis 
for other information. It alleges this is too broad and too vague to be used as 
an allegation against an examiner. (2) Subsection (b) states "sufficient to 
establish reasonable cause." It feels "reasonable cause" should be defined and 
explained how it is to be determined. There is understanding in the industry of 
probable cause but what is reasonable cause. TDCJ, Van Zandt County Sheriff's 
Office, and the Lubbock Police Department representatives voiced their 
concurrence with the TALEPI comments. The board disagreed but will consider 
changes at a later date. 
TALEPI addressed sec.397.24 Service subsection (a) which state in part "all 
documents required to be served in proceedings governed by these rules must be 
sent by certified mail, return receipt requested, hand delivery, or facsimile to 
the recipient's last known address." It felt "or facsimile" should be deleted 
completely because of the lack of control of delivery. TAPE representatives, 
TDCJ, Van Zandt County Sheriff's Office, Lubbock Police Department, and the 
Smith County Sheriff's Department representatives voiced their concurrence with 
the TALEPI comments. The board agreed and "facsimile" is removed. 
Regarding sec.397.27 Limitation of Witnesses, one written comment suggested that 
the word "merely" should be changed to read "deemed." The board disagreed and 
the change was not made. 
Regarding sec.397.28 Failure to Attend Hearing, one comment suggested that the 
words: "fails to appear in person or by legal representative" should be changed 
to read: "fails to appear in person or through legal representative." The board 
disagreed with the suggested change. 
The board adopted Rule 397 as presented with minor changes since no material 
changes will be made until a thorough review has been made.
The new sections are proposed under the Polygraph Examiners Act, Article 4413 
(29cc), sec.6, which provides the board with the authority to prescribe, adopt, 
and enforce rules relating to the administration and enforcement of the 
provisions of the Polygraph Examiners Act, Article 4413 (29cc).
The new sections implements the Polygraph Examiners Act, Article 4413 (29cc). 

sec.397.1.Definitions.
The following words and terms, when used in this chapter, shall have the 
following meanings, unless the context clearly indicates otherwise.
Act-Polygraph Examiners Act; Texas Civil Statutes article 4413(29cc).
Administrative hearing-a hearing before an ALJ.
ALJ-Administrative Law Judge; an individual appointed by the chief 
administrative law judge of the State Office of Administrative Hearings in 
accordance with Texas Government Code sec.2003.041.
APA-Administrative Procedure Act; Texas Government Code, Chapter 2001.
Applicant-A person who seeks to obtain a license from the board.
Board-Texas Polygraph Examiners Board; the governmental body consisting of six 
members appointed pursuant to Texas Civil Statutes article 4413(29cc).
Complainant-A person who submits a complaint to the board alleging violations of 
the Act or the board's rules, or challenging a determination of ineligibility 
for licensure.
Complaint Officer-Cognizant board member; a board member assigned to review the 
documentation in a file for completeness and sufficiency. 
Executive Officer-The administrative head of the board.
License-The whole or part of any board permit, approval, or similar form of 
permission required by law to practice polygraphy.
Party-Any individual or entity, including an applicant, respondent, and the 
board, who has legal standing to participate in a proceeding governed by these 
rules.
Person-Any individual, partnership, corporation, association, governmental 
subdivision, or public or private organization of any character. 
Respondent-Any party against whom a complaint has been received by the board; 
any party who challenges in writing a board decision governed by these rules.
SOAH-State Office of Administrative Hearings, authorized by Texas Government 
Code, Chapter 2003.

sec.397.2.Applicability of Chapter.
(a) This chapter provides a procedure by which to obtain a fair determination of 
certain regulatory matters within the jurisdiction of the board. The rules in 
this chapter govern the institution, conduct, and determination of all 
proceedings in which the board proposes to refuse an application for a license, 
to suspend a license, or to revoke a license pursuant to the Act, sec.22(a) The 
board at its discretion may apply these rules in other proceedings upon notice, 
before institution of the proceedings, to the parties. 
(b) The provisions of this chapter should be construed liberally in order to 
attain this objective expeditiously and efficiently. 
(c) These rules do not modify or alter the board's jurisdiction, powers, or 
authority or the substantive rights of any person. A provision of this chapter 
does not apply if it is contrary to or otherwise precluded by statutory or other 
controlling law, including but not limited to the APA. The administrative rules 
of SOAH, Title 1, TAC, Chapter 155, supplement the provisions of this chapter to 
the extent that the SOAH rules are consistent with the provisions of this 
chapter.

sec.397.3.Complaints.
(a) A person who alleges a violation of the Act or board rules must complete a 
standard complaint form. Blank standard complaint forms are available at the 
board office and are provided to interested persons upon request. A complainant 
may attach to the complaint form additional relevant written information. 
Complaints alleging violations of the Act or board rules must be made in good 
faith and include information or factual evidence that establishes reasonable 
cause to believe a violation of the Act or board rules has occurred. 
(b) The board acts on a complaint only when the basis of the complaint, if 
substantiated, would be a violation of the Act or board rules. 
(c) If a complaint includes sufficient information or factual evidence to 
establish reasonable cause that a violation of the Act or board rules has 
occurred, the board acts on the complaint without regard to any further action 
or statement by the complainant. 
(d) The board may, upon request, keep the identity of the complainant 
confidential to the extent permitted by law. 

sec.397.4.Notice of Allegations and Opportunity to Respond.
(a) If a complaint or other information alleges or reveals violations of the Act 
or board rules, the Executive Officer notifies the respondent of the complaint 
or other information. 
(b) The notice includes a copy of the complaint form, if any, and a request that 
the respondent reply in writing within ten days. The Executive Officer has the 
discretion to grant the respondent additional time to respond if the respondent 
so requests. This procedure is intended to give a respondent an opportunity to 
show compliance with all requirements of the law for the retention of a license, 
as required by the APA.  

sec.397.5.Complaint Investigations.
(a) The board may initiate an investigation based on a complaint or any other 
information that establishes reasonable cause to believe a violation of the Act 
or board rules has occurred. 
(b) The Executive Officer investigates all complaints that include information 
or factual evidence sufficient to establish reasonable cause to believe 
violations of the Act or board rules have occurred. 
(c) The Executive Officer assigns each complaint that alleges violations of the 
Act or board rules to a complaint officer; reference sec.397.7 of this title 
(relating to complaint officers). 
(d) Upon completion of an investigation, the Executive Officer presents the 
documentation of the investigation to the appropriate complaint officer for 
review; reference sec. 397.7 of this title (relating to complaint officers). 
(e) After an investigation is approved by a complaint officer, the Executive 
Officer may either dismiss the complaint or recommend further appropriate action 
to the board. 

sec.397.6.Respondents Denied Licensure.
(a) A respondent who is denied licensure and who challenges the determination on 
any basis must state the challenge and its basis in writing to the Executive 
Officer. 
(b) The Executive Officer assigns the matter a file number, notifies the 
respondent of the file number, and notifies the respondent of the board's basis 
for its licensure determination. 
(c) The notice includes a request that the respondent reply in writing within 
ten days. The Executive Officer has the discretion to grant the respondent 
additional time to respond if the respondent so requests. This procedure is 
intended to give a respondent an opportunity to show compliance with all 
requirements of the law for the acquisition of a license, as required by the 
Administrative Procedure Act.
(d) The Executive Officer assigns the matter to a complaint officer in 
accordance with sec.397.7 of this title (relating to complaint officers). 
(e) The Executive Officer presents the documentation of a respondent's challenge 
to the appropriate complaint officer for review; reference sec.397.7 of this 
title (relating to complaint officers). 
(f) After the documentation is deemed complete by a complaint officer, the 
Executive Officer makes a recommendation to the board regarding appropriate 
further action. 

sec.397.7. Complaint Officers.
(a) All board members act as complaint officers on a rotating basis. The 
Executive Officer maintains a list of complaint officers and the complaints and 
other files assigned to each complaint officer. Each new complaint that alleges 
violations of the Act or board rules and any other file appropriate for 
assignment is assigned to the next available complaint officer on the list. The 
Executive Officer assigns related complaints to the same complaint officer. The 
Executive Officer has the discretion to skip the next complaint officer on the 
list if that complaint officer has a workload that is disproportionately higher 
than the workload of other complaint officers. If a complaint officer leaves the 
board, the Executive Officer has the discretion to assign that person's pending 
complaints and files to either the remaining complaint officers or the new 
complaint officer who replaces the departed person. Under no circumstances shall 
the complaint officer be a party to the complaint. 
(b) The details of a particular complaint are known only to the Executive 
Officer and the complaint officer assigned to the complaint.
(c) When the Executive Officer has questions of a technical nature about an 
individual complaint or file, the Executive Officer may consult with the 
complaint officer assigned to that complaint or file.
(d) Before the Executive Officer makes recommendations to the board concerning a 
complaint or file, the assigned complaint officer reviews the documentation in 
the file. If the complaint officer determines the investigation or documentation 
is not complete, the Executive Officer conducts further investigation or gathers 
more complete documentation. 
(e) A complaint officer does not participate in the rendering of any final 
decision concerning a complaint or file assigned to him or her.

sec.397.8.Informal Conference.
(a) At any time during proceedings governed by these rules, the Executive 
Officer may hold an informal conference with a respondent for the purpose of 
doing any act that may simplify the proceedings, including but not limited to: 
(1) clarifying the issues; 
(2) gathering factual information; 
(3) giving a respondent an opportunity to show compliance with the Act and board 
rules; 
(4) reviewing the procedure to govern an administrative hearing; 
(5) making admissions of fact or stipulations concerning the use by either or 
both parties of matters of public record, to the end of avoiding the unnecessary 
introduction of proof; or 
(6) reaching an agreement limiting the number of witnesses at an administrative 
hearing. 
(b) A respondent may request an informal conference; however, the decision of 
whether to hold a conference is within the discretion of the Executive Officer. 
(c) A respondent's participation in an informal conference is not mandatory nor 
is it a prerequisite to an administrative hearing. 
(d) The Executive Officer decides upon the time, date, and place of the informal 
conference. A respondent will receive written notice of the time, date, and 
place of the conference as well as the nature of the alleged violations. The 
notice is provided no less than ten days prior to the date of the conference by 
certified mail, return receipt requested, to the last known address of the 
respondent. The ten days begin on the date of mailing. The respondent may waive 
the ten-day notice requirement. 
(e) Before the informal conference begins, the respondent will be informed of 
the following: 
(1) the respondent may be represented by legal counsel; 
(2) during the informal conference, the respondent will be asked questions and 
is under no obligation to answer questions posed during the conference; 
(3) the respondent may offer the testimony of witnesses and present other 
evidence as may be appropriate; 
(4) the Executive Officer and the board's attorney general representative may be 
present at the conference; 
(5) the respondent's attendance and participation are strictly voluntary; 
(6) the complainant and any client involved in the alleged violations may be 
present; and, 
(7) a verbatim transcript of the conference is not kept, but outline notes may 
be made and may be subsequently used if the matter results in SOAH proceedings.  

sec.397.9.Informal Disposition of Complaints.
(a) The Executive Officer may at any time during proceedings governed by these 
rules negotiate a proposed informal disposition of a complaint with a 
respondent. 
(b) To accept a proposed informal disposition, a respondent must sign an order 
memorializing the disposition in the presence of a notary and return it to the 
board office within ten days of receipt. Inaction by the respondent constitutes 
rejection. If the respondent rejects the proposed informal disposition, the 
Executive Officer may take further appropriate action against the respondent. 
(c) The Executive Officer presents an order memorializing a proposed informal 
disposition with a notarized signature of a respondent to the full board. A 
proposed informal disposition has no effect until the board, at a regularly 
scheduled meeting, approves the informal disposition. 
(d) Consideration by the Board 
(1) The complaint officer assigned to the complaint does not participate in the 
board review of the informal disposition. 
(2) The board does not have access to the name and license number of the 
respondent until after the board has approved the informal disposition or if the 
board does not approve the informal disposition, until the matter is before the 
board for a final determination. 
(3) An affirmative majority vote constitutes board approval of the informal 
disposition. The chairperson of the board signs approved informal disposition 
orders. A copy of a board-approved informal disposition order is provided to the 
respondent. 
(4) If the board does not approve the informal disposition, the matter is 
referred to the Executive Officer for other appropriate action. The Executive 
Officer informs respondents of the board action. 

sec.397.10.Classification of Parties and Pleadings. 
Regardless of errors as to designations of pleadings, pleadings are accorded 
their true status in proceedings governed by these rules. Regardless of errors 
as to designations in their pleadings, the parties are accorded their true 
status in proceedings governed by these rules.

sec.397.11.Appearances Personally or by Representative. 
(a) A respondent may represent himself or herself. 
(b) A corporation, partnership, or association may appear and be represented by 
any bona fide officer, partner, or full-time employee.
(c) A respondent may be represented by an attorney authorized to practice law in 
the State of Texas, or other representative when authorized by law. When a 
person is not specifically authorized by law to represent a respondent, the 
board has discretion to permit or disallow the representative from appearing on 
behalf of the respondent in any proceeding governed by these rules. 
(d) If a person is not specifically authorized by law to represent a respondent 
and the board allows the person to represent the respondent, the representative 
must adhere to all applicable law regarding representation before state 
agencies.  

sec.397.12.Conduct and Decorum.
All parties, witnesses, attorneys, and other representatives must comport 
themselves in all proceedings with proper dignity, courtesy, and respect for the 
board, the ALJ, and all other parties. Disorderly conduct will not be tolerated. 
Attorneys and other representatives of parties must observe and practice the 
standards of ethical behavior prescribed for attorneys at law by the Texas State 
Bar.

sec.397.13.Agreements to be in Writing.
(a) No stipulation of agreement between the parties, with regard to any matter 
involved in proceedings governed by these rules, will be enforced unless it has 
been reduced to writing and signed by the parties or their authorized 
representatives, or unless it has been dictated into the record during the 
course of an administrative hearing. 
(b) This rule does not limit a party's ability to waive, modify, or stipulate 
any right or privilege afforded by these rules, unless precluded by law. 

sec.397.14.Computation of Time.
Unless otherwise required by statute or these rules, any period of time 
prescribed by these rules or by any applicable statute begins on the day after 
the act, event, or default in controversy and concludes on the last day of the 
computed period, unless the last day is a Saturday, Sunday, or legal holiday. If 
the last day of the period is a Saturday, Sunday, or legal holiday, the period 
runs until the end of the next day which is neither a Saturday, Sunday, nor a 
legal holiday.

sec.397.15.State Office of Administrative Hearings. 
When a proceeding governed by these rules is not resolved through an informal 
disposition, the board may refer it to the SOAH for an administrative hearing. 
The SOAH conducts administrative hearings for the board, as authorized by Texas 
Government Code, Chapter 2003. ALJ's conduct administrative hearings in 
accordance with the APA, the board rules, and SOAH rules; reference sec.397.2 of 
this title (relating to the applicability of chapter).

sec.397.16.Availability of Administrative Hearing. 
(a) An administrative hearing is available to all parties to a proceeding in 
which the board proposes to deny an application for a license, revoke a license, 
or suspend a license, pursuant to the Act, sec.22(a).
(b) In other types of proceedings, the board may at its discretion afford an 
administrative hearing in accordance with these rules. 
(c) If a party wishes to avail itself of a right to an administrative hearing, 
it must inform the Executive Officer of that fact in writing. The board files 
with SOAH either a Request for a Setting of Hearing or a Request for Assignment 
of Administrative Law Judge. 
(d) All parties to an administrative hearing will receive an opportunity to 
respond and present evidence and argument on all issues involved.

sec.397.17.Notice of Administrative Hearing.
(a) A party will be afforded notice of an administrative hearing not less than 
ten days before the hearing. 
(b) The notice will include the following statements in boldface type: 
(1) Failure to appear at the hearing will result in the allegations against you 
set out in the board's pleadings as being admitted as true. 
(2) Failure to enter an appearance by filing in writing an answer or other 
responsive pleading to the allegations contained in the board's pleadings within 
15 days of the date this notice was mailed will entitle the board to a 
continuance at the time of the administrative hearing for a reasonable period of 
time as determined by the Administrative Law Judge.

sec.397.18.Answer or Response.
(a) The respondent or the representative of the respondent must file a written 
answer or other responsive pleading within 15 days of the date on which the 
Notice of Hearing or Notice of Assignment of ALJ is mailed to the respondent. 
(b) The failure of a party to timely file an answer or other responsive pleading 
as required by this rule entitles the board to a continuance at the time of the 
administrative hearing for a reasonable period of time as determined by the ALJ. 

sec.397.19.Location of Administrative Hearings.
All administrative hearings are conducted at the SOAH office in Austin, Texas, 
unless for good cause the ALJ designates another place of hearing in the 
interest of the public.

sec.397.20.Filing of Documents.
(a) Documents relating to a proceeding which is governed by these rules but 
which is not within the jurisdiction of SOAH must be filed with the Executive 
Officer. 
(b) When SOAH has jurisdiction over a dispute proceeding, all pleadings and 
motions must be filed with SOAH. A Request for Setting of Hearing or for 
Assignment of Administrative Law Judge is considered filed on the date the 
request form is received by SOAH. Any other document is not deemed filed until 
SOAH affixes its file stamp to the document.  

sec.397.21.Form and Content of Pleadings.
(a) Pleadings must be typewritten or printed upon paper 8« inches wide and 
11 inches long with an inside margin at least one inch wide.
(b) Pleadings must state 
(1) the name of the party requesting relief; 
(2) a prayer stating the type of relief, action, or order desired by the 
pleader; 
(3) a concise statement of the facts relied upon by the pleader; 
(4) a certificate of service, as required by sec. 397.24 of this title (relating 
to service); and 
(5) any other matter required by statute. 
(c) The original of every pleading must be signed in ink by the party filing the 
paper, or by his or her authorized representative. Pleadings must contain the 
address of the party filing the document or the name, telephone number, 
telefacsimile number, and business address of the representative.
(d) Each pleading, motion, notice, or other document related to an 
administrative hearing must be accompanied by any filing fee prescribed by law.  

sec.397.22.Exhibits.
(a) Exhibits annexed to pleadings must be folded to the size required by 
sec.397.21 of this title (relating to form and content of pleadings). 
Reproductions are acceptable, provided all copies are clear and permanently 
legible. 
(b) Exhibits must be limited to facts material and relevant to the issues 
involved in a particular proceeding. 
(c) The original or a properly authenticated copy of each exhibit offered must 
be tendered to the reporter for identification. One copy must be furnished to 
the board and the parties of record, or their attorneys or representatives. 
(d) In the event an exhibit has been identified, objected to, and excluded, the 
ALJ determines whether or not the party offering the exhibit withdraws the 
offer, and if so, permits the return of the exhibit to the withdrawing party. If 
the excluded exhibit is not withdrawn, it is given an exhibit number for 
identification and it is included in the record for the purpose only of 
preserving the exception. 
(e) Unless specifically directed by the ALJ, no exhibit will be permitted to be 
filed in any proceeding after the conclusion of the administrative hearing. In 
the event the ALJ allows an exhibit to be filed after the conclusion of the 
administrative hearing, copies of the late-filed exhibit will be served on all 
parties of record in accordance with sec. 397.24 of this title (relating to 
service).  

sec.397.23.Amendments.
Any pleading or motion may be amended at any time not less than five days before 
the administrative hearing, provided that the application, complaint, or 
petition upon which notice has been issued shall not be amended so as to broaden 
the scope thereof.

sec.397.24.Service.
(a) Unless otherwise required by board rule or other controlling law, all 
documents required to be served in proceedings governed by these rules must be 
sent by certified mail, return receipt requested, or hand delivery to the 
recipient's last known address. 
(b) The party filing a pleading, motion, notice, or other document in a 
proceeding within the jurisdiction of SOAH must serve a copy of the document on 
every other party of record. If any party has appeared in the proceeding by a 
representative authorized under these rules to make appearances, service shall 
be made upon the representative. The willful failure to any party to make 
service according to this rule is sufficient grounds for the entry of an order 
by an ALJ striking from the record the pleading, motion, notice, or other 
document. 
(c) A certificate by the party, attorney, or representative who files a 
pleading, stating that it has been served on the other parties, is prima facie 
evidence of adequate service.  

sec.397.25.Texas Rules of Civil Procedure.
The Texas Rules of Civil Procedure apply to a proceeding within SOAH's 
jurisdiction, except to the extent they are inconsistent with other law, 
including but not limited to the APA.

sec.397.26.Prefiled Testimony.
In accordance with the APA, if a hearing will be expedited and the interests of 
the parties will not be prejudiced substantially, any part of the evidence may 
be received in written form. For purposes of this rule, evidence includes but is 
not limited to written direct and rebuttal testimony. 

sec.397.27.Limitations on the Number of Witnesses in Administrative Proceedings.
The ALJ has the right to limit the number of witnesses whose testimony is merely 
cumulative.

sec.397.28.Failure to Attend Hearing; Default Judgment. 
(a) If a respondent fails to appear in person or by legal representative at an 
administrative hearing, regardless of whether an appearance has been entered as 
required by sec.397.18 of this title (relating to answer or response), the ALJ, 
upon motion by the board, must enter a default judgment in the matter adverse to 
the respondent who has failed to attend the hearing. 
(b) For purposes of this rule, default judgment means the issuance of a proposal 
for decision against the respondent in which the factual allegations against the 
respondent contained in the board's pleadings are admitted as prima facie 
evidence and deemed admitted as true, without any requirement for additional 
proof to be submitted by the board. 
(c) Any default judgment granted under this rule will be entered on the basis of 
the factual allegations contained in the board's pleadings, and upon the proof 
of proper notice to the defaulting party opponent. For purposes of this rule, 
proper notice means notice sufficient to meet the provisions of Texas Government 
Code Annotated, sec.sec.2001.051, 2001.052, and 2001.054 and sec.397.17 of this 
title (relating to notice of administrative hearing).  

sec.397.29.Dismissal Without Hearing.
An ALJ may entertain motions for dismissal without a hearing for the following 
reasons: failure to prosecute; unnecessary duplication of proceedings or res 
judicata; withdrawal; moot questions or stale petitions; or lack of 
jurisdiction.

sec.397.30.Proposals for Decision.
(a) The ALJ in an administrative proceeding prepares a proposal for decision in 
accordance with the SOAH rules and the APA. 
(b) After the proposal for decision is prepared, the ALJ serves a copy of the 
proposal on each party. 
(c) Any party of record may, within 20 days after the date of service of a 
proposal for decision, file exceptions and briefs to the proposal for decision. 
Replies to exceptions and briefs may be filed within 15 days after the date for 
filing exceptions and briefs. A party requesting an extension of time within 
which to file exceptions, briefs, or replies must file a request with the ALJ 
and must serve a copy thereof on all other parties of record. The ALJ allows 
additional time only in extraordinary circumstances where the interests of 
justice so require. Upon making a decision, the ALJ promptly notifies the 
parties of that decision. 
(d) The judge submits the final proposal for decision to the final decision 
maker with a copy to each party. 
(e) When no exceptions to the proposal for decision are filed, the board may 
adopt the decision upon the expiration of the 20th day following the time 
provided for filing exceptions and briefs. If exceptions to the proposal for 
decision are filed, the board may adopt the decision upon the expiration of the 
20th day following the time provided for filing exceptions, briefs, and replies.  

sec.397.31.Form and Content of Briefs, Exceptions, and Replies.
(a) Briefs, exceptions, and replies must conform to the form set forth in 
sec.397.21 of this title (relating to form and content of pleadings). 
(b) The party filing a brief, exception, or reply must concisely state the 
points involved. The party must either summarized the evidence in support of 
each point, briefly state the evidence in support of each point in the form of 
proposed findings of fact, or both. When referring to evidence, parties must 
include complete citations to the page number of the record or exhibit. Parties 
must state the specific purpose for which the evidence is relied upon. Parties 
must organize their argument and authorities and must direct it to each point 
properly proposed as a finding of fact in a concise and logical manner. 
(c) Briefs must contain a table of contents and authorities.
(d) Parties may file briefs prior to the issuance of a proposal for decision 
only when requested or permitted by the ALJ. 

sec.397.32.Final Decisions and Orders.
All final decisions and orders of the board are in writing and are signed by a 
majority of the board.

sec.397.33.Reporters and Transcript.
(a) The board arranges to have administrative hearings recorded. However, the 
cost of preparing the original transcript is borne by the party appealing the 
board's decision or by any other party or parties requesting the transcription. 
A written request to have the proceedings transcribed must be addressed to the 
board, stating the full name and address of the appealing party or parties 
requesting the transcript. The board forwards the request to the court reporter. 
(b) The court reporter furnishes the party requesting the transcription with the 
original transcript upon payment of its cost. Upon notice of an appeal, the 
board at its own expense obtains a certified copy of the transcript for 
submission to the reviewing court.  
(d) This rule does not prevent any party from taking notes either individually 
or by using a private secretary, nor does it prevent any party from recording 
the proceedings. 
(c) Suggested corrections to the transcript of the record may be offered within 
ten days after the transcript is filed in the proceeding, unless the board 
permits suggested corrections to be offered thereafter. Suggested corrections 
must be served in writing upon each party of record, the official reporter, and 
the board. If suggested corrections are not objected to, the board will direct 
the corrections to be made and the manner of making them. In case the parties 
disagree on suggested corrections, they may be heard by the board, which then 
determines the manner in which the record must be changed, if at all.
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 May 8, 1997.
TRD-9706101
Frank Ditucci
Executive Officer
Texas Polygraph Examiners Board
Effective date: May 28, 1997
Proposal publication date: December 6, 1996
For further information, please call: (512) 424-2058

TITLE 25. HEALTH SERVICES
PART I. Texas Department of Health
CHAPTER 36.Medicaid Program Appeals Procedures
On behalf of the State Medicaid Director, the Texas Department of Health 
(department) submits adopted new sec.sec.36.1-36.2, and sec.sec.36.21-36.23, 
concerning Medicaid recipient notice and fair hearing procedures, with changes 
to the proposed text as published in the November 11, 1996, issue of the Texas 
Register (21 TexReg 11056). Sections 36.11 and 36.12, which were simultaneously 
proposed, are not being submitted for adoption due to public comment. 
The new sections provide for standardized procedures for informing recipients of 
their right to notice and appeal of department actions affecting Medicaid-
covered services, and recipients' right to fair hearing before the department. 
Specifically, the sections provide definitions of terms to be used throughout 
the chapter; establish the department's procedure for providing notice to a 
recipient when the department takes an action; set out the required content of 
the notice; and provide a recipient the right to a fair hearing before the 
department to appeal an action. These rules apply to all Medicaid recipients 
including those enrolled in the STAR Managed Care Program. These rules implement 
federal notice and fair hearing requirements found at 42 Code of Federal 
Regulations, sec.sec.431.200-431.245. 
The new sections establish and standardize the department's policy for providing 
recipients with notice of an action, notice of their right to fair hearing, and 
procedures to request a fair hearing, which department rules apply to the fair 
hearing, and when a final decision must be made following a fair hearing. 
A summary of the comments and the department's responses follow. As a result of 
the number of comments received disagreeing with the reconsideration procedures 
in Subchapter B, the department has withdrawn sec.36.11 and sec.36.12 from 
consideration for final adoption. 
COMMENT: Concerning sec.36.21, a commenter commended the department for 
developing new processes for Medicaid recipients. The commenter especially 
commended the department for retaining ultimate discretion over decisions about 
the delivery of care. 
COMMENT: One commenter suggested that the definition of "action" in sec.36.1 
should be revised to include the failure of the department to act with 
reasonable promptness as a basis for fair hearing, as required by federal 
regulation. The commenter questioned the scope of the limitation, concerning, 
"...provider action for which a recipient could be held financially 
responsible." 
RESPONSE: The department agrees with the comment and has revised the language to 
reflect the change. "Provider action," is included to distinguish an action 
which the department takes from one which a provider takes. 
COMMENT: Concerning sec.36.1 a commenter stated that the definition of "final 
decision" was vague in its reference to the decision-making authority in all 
hearings conducted by the department. 
RESPONSE: The decision-making authority is the commissioner of health. Decision 
making may be delegated to the hearing officers by the commissioner. The 
department agrees with this comment and has clarified the definition.
COMMENT: Concerning sec.36.1, a commenter stated that the language regarding 
"prior authorized services being limited in amount, duration, and scope" in the 
definition of "prior authorized services" is misapplied according to federal 
regulation. The commenter further stated that the definition of "provider 
action" appears to be irrelevant, and that it does not appear anywhere except in 
the definition section. 
RESPONSE: The department agrees in part with the comment regarding "amount, 
duration, and scope" and has clarified the definition. However, the department 
disagrees that the definition of "provider action" is irrelevant because it 
distinguishes the difference between " an action" which the department takes 
from "an action" which a provider takes. 
COMMENT: Concerning sec.36.2, a commenter supported the department's effort to 
make the fair hearing process accessible to individuals with disabilities. 
However, the commenter suggested that the department clarify the department's 
obligation to provide reasonable accommodations to individuals with disabilities 
beyond the example listed. 
RESPONSE: The department disagrees with this suggestion. These rules relate only 
to notice and fair hearing procedures. The language in sec.36.2 accurately 
describes the department's obligation to make reasonable accommodations to 
assist recipients in understanding these procedures. Further accommodations are 
beyond the scope of these rules. 
COMMENT: Concerning sec.36.2, a commenter stated that given the large number of 
recipients who are unable to provide information in writing, the rules should 
include a provision for the recipient to be provided the information orally and 
the information must be reduced to writing by the MCO or the department.
RESPONSE: The department agrees and directs the commenter to sec.36.21 (c) (5) 
where appropriate provisions were made in the rules. A toll-free number is 
included in the notice letter to the recipient. When the recipient calls the 
toll-free number, staff will explain the information included in the letter.  
COMMENT: Concerning sec.36.21, a commenter offered a suggestion of informing 
recipients about the fair hearing process. The suggestion required each MCO to 
ensure that a poster about fair hearings be prominently displayed in the office 
of each contracting provider. 
RESPONSE: The rules state that MCOs are required to inform recipients about the 
fair hearing process at the same time and in the same manner as the department; 
and that additional means through which the HMO may inform recipients of their 
right is left to the MCO's discretion. 
COMMENT: A commenter requested provisions for expedited proceedings in cases of 
life and death and emergency or urgent matters affecting the recipient's health. 
RESPONSE: The department agrees with the comment. Life and death and emergency 
cases are handled as priorities, and therefore, will be handled on an expedited 
basis. The department has added a new subsection (d) to sec.36.21 relating to 
emergency procedures as a result of this comment. In an emergency, notice will 
be given by the most expeditious means available, including by telephone.
COMMENT: Concerning sec.36.21, a commenter suggested that MCOs pay for a second 
opinion when the recipient wishes one. 
RESPONSE: The department disagrees as the comment is beyond the scope of these 
rules. 
COMMENT: Concerning sec.36.21, a commenter stated that MCOs, NHIC, and the 
department rely on protocols or standards to deny coverage of services that 
result in arbitrary denials based on obsolete or incomplete medical information.  
RESPONSE: The department disagrees. The department reviews standards to ensure 
that they are current and complete as an ongoing process. Development of 
standards is beyond the scope these rules. 
COMMENT: Concerning sec.36.21, a commenter advised that recipients should be 
informed about local agencies that can provide representation services.
RESPONSE: The department disagrees as this is beyond the scope of the rules.
COMMENT: Concerning the rules in general, a commenter stated a concern about 
potentially high levels of inconsistency in procedures and time frames for fair 
hearings across Medicaid operating agencies. 
RESPONSE: The department agrees with this comment and supports the 
standardization of Medicaid rules on fair hearings. 
COMMENT: A commenter stated disagreement with holding hearings outside Austin 
only in exceptional circumstances. Commenter suggested that the department 
devise a regional system by which to conduct fair hearings in specified areas 
outside Austin. 
RESPONSE: The department disagrees as these rules do not address where hearings 
are conducted. Fair hearing rules allow the hearing officers discretion in where 
and how a hearing should be conducted. Telephone hearings are available to all 
recipients. If a hearing officer believes a recipient's or the department's 
needs would best be served by conducting a local hearing, that choice is 
available. The department is dedicated to providing Medicaid recipients with 
reasonable access to their remedies under the rules. Requiring hearing officers 
to hold local hearings could also result in delays in scheduling hearings. The 
fiscal implication to the state may also be increased without a corresponding 
benefit to the recipient. 
COMMENT: Concerning sec.36.23, a commenter stated that the reference to 
"informal hearing procedures" in sec.36.23(a) should be corrected to read "fair 
hearing procedures" in accordance with recent amendments to 25 TAC sec.1.51-
1.55. 
RESPONSE: The department agrees with this comment and has revised the section to 
reflect the change. 
The department received written comments from one individual and the following 
groups: Advocacy, Incorporated, the Center for Public Policy Priorities, and 
Texas Legal Services Center. The commenters were generally in favor of the 
proposed rules; however, they expressed concerns and asked questions as 
described in the summary of contents. 

SUBCHAPTER A.General
25 TACsec. 36.1, sec.36.2
These new sections are adopted under the Human Resources Code, sec.32.021 and 
the Government Code, sec.531.021, 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).  

sec.36.1.Definitions.
The following words and terms, when used in this chapter, shall have the 
following meanings unless the context clearly indicates otherwise. 
Action - A denial, termination, suspension, or reduction of Medicaid-covered 
services; a denial of a prior authorization request for covered services 
affecting a recipient; the failure of the department to act upon a recipient 
request for Medicaid covered services within a reasonable time; or a lock-in. 
This term does not include reaching the date on which a time limited prior 
authorized service ends. This term does not include a provider action for which 
the recipient may be held financially liable by the provider.  
Day - A calendar day.  
Department - The Texas Department of Health. 
Designee - The department's contractor who administers the Medicaid program. 
Final decision - A decision that is reached by the commissioner of health or an 
individual delegated the authority to make a final decision by the commissioner 
of health after conducting a fair hearing under this chapter.  
Lock-in - An action taken by the department to restrict the recipient's choice 
of providers.  
Managed care organization (MCO) - A managed care organization under contract 
with the department to provide services to Medicaid recipients.
Prior authorized services - Services that are reimbursable only when 
authorization or approval is obtained before services are rendered. Prior 
authorized services may be limited in duration, scope, and amount. Services 
provided beyond those authorized are not reimbursable. If a prior authorization 
is limited in duration, scope or amount, a separate request and approval must be 
obtained for each prior authorized service.  
Provider action - A denial or reduction of a provider claim for payment for 
services rendered to a Medicaid recipient.  

sec.36.2.Recipients with Special Needs or Disabilities. 
The department will make reasonable accommodations to assist recipients in 
reading and understanding notices and procedures under this chapter. The 
department will also provide assistance to recipients who require language 
translations or have hearing or speech communication needs. 
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 May 9, 1997.
TRD-9706203
Susan K. Steeg
General Counsel
Texas Department of Health
Effective date: May 29, 1997
Proposal publication date: November 12, 1996
For further information, please call: (512) 458-7236

SUBCHAPTER C.Recipient Notice and Fair Hearing
25 TAC sec.sec.36.21-36.23
These new sections are adopted under the Human Resources Code, sec.32.021 and 
the Government Code, sec.531.021, 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).   

sec.36.21.Recipient Notice and Fair Hearing Request. 
(a) When notice is required. A Medicaid-eligible recipient is entitled to a 
notice under this subchapter any time the department, its designee, or an 
managed care organization (MCO) intends to take an action. An MCO is responsible 
for sending the notice to recipients enrolled in the MCO. The department is 
responsible for sending notices to all other recipients.
(b) Time of notice. A notice of intent to take action must be mailed to the 
recipient by the department, its designee or MCO no less than 30 days before the 
department, its designee, or MCO intends to take an action. 
(c) Content of notice. The notice required by subsection (a) of this section 
must contain the following information: 
(1) a statement of the action the department, its designee, or MCO will take; 
(2) an explanation of the reasons the department, its designee, or MCO will take 
an action; 
(3) a reference to the state or federal regulations which support the action the 
department, its designee, or MCO will take; 
(4) an explanation of the recipient's right to request a fair hearing from the 
department; 
(5) the procedure by which the recipient may request a fair hearing from the 
department or through the MCO, including the address where written requests must 
be submitted and any toll-free or local phone number the recipient may call to 
request assistance or a fair hearing; 
(6) an explanation that recipients may represent themselves or have legal 
counsel, a relative, a friend, or another spokesperson represent them; 
(7) an explanation of whether and under what circumstances services may be 
continued if a fair hearing is requested; 
(8) a statement that the recipient must make a request for a fair hearing within 
30 days from the date on the notice, and that if the recipient does not request 
a fair hearing within this time period, the recipient's right to a fair hearing 
will be waived. The notice is presumed to be received by the recipient five days 
from the date of the notice; 
(9) an explanation that the recipient may request the fair hearing be conducted 
based on written information without the necessity of taking oral testimony. The 
written information may consist of the department's records, the medical 
information submitted by the recipient, and any additional written information 
the recipient may wish to submit; and 
(10) a notice from an MCO informing recipients of their right to access the 
department's fair hearing process under sec.36.23 of this title (relating to 
Fair Hearings). 
(d) Resolution prior to fair hearing. The department will make every effort to 
informally resolve the action before the fair hearing date.
(e) Emergency Procedure. 
(1) Actions relating to emergencies will be handled by the department on an 
expedited basis. 
(2) The department, its designee or the MCO will give the recipient notice of 
their right to a fair hearing as required by this section by the most expedient 
means available to the recipient, including by telephone. 
(3) The recipient may request a fair hearing by the most expedient means 
available to the recipient, including by telephone. 

sec.36.22.Maintaining Benefits or Services.
(a) Except as otherwise specified in subsection (e) of this section, if the 
recipient is currently receiving a service upon which an action is taken and 
requests a fair hearing within the time allowed, the service will be continued 
until a final decision is rendered following a fair hearing.  
(b) The department may terminate or reduce services before rendering a decision 
only if: 
(1) the department informs the recipient in writing of its intent to reduce or 
terminate services at least five days before the termination or reduction would 
be effective; and 
(2) it is determined at the fair hearing that the sole issue is one of state or 
federal law or policy. 
(c) The department may deny, terminate, suspend, or reduce services after an 
adverse decision is rendered following a fair hearing.
(d) The department may recover or recoup the cost of any services provided as a 
result of this section, if the fair hearing decision supports the department's 
action. 
(e) The department has no obligation to begin services requiring prior 
authorization pending a final decision.

sec.36.23.Fair Hearing.
(a) A fair hearing will be conducted under the department's fair hearing 
procedures found at sec.sec.1.51-1.55 of this title (relating to Fair Hearing 
Procedures). 
(b) A final decision must be made by the department within 90 days from the date 
the recipient makes a request for a fair hearing, unless waived in writing by 
the recipient. 
(c) The department will send a written notice of its decision to the recipient. 
(d) If the recipient is enrolled in a managed care organization (MCO), the 
department shall also notify the MCO of its decision. The decision of the 
department is binding on the MCO. 
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 May 9, 1997.
TRD-9706201
Susan K. Steeg
General Counsel
Texas Department of Health
Effective date: May 29, 1997
Proposal publication date: November 12, 1996
For further information, please call: (512) 458-7236

TITLE 40. SOCIAL SERVICES AND ASSISTANCE
PART I. Texas Department of Human Services
CHAPTER 12.Special Nutrition Programs
Child and Adult Care Food Program
40 TAC sec.sec.12.3, 12.5, 12.6, 12.14, 12.15, 12.19, 12.20, 12.24-12.26. 
The Texas Department of Human Services (DHS) adopts amendments to sec.sec.12.3, 
12.5, 12.6, 12.14, 12.15, 12.19, 12.20, and 12.24-12.26. The amendment to 
sec.12.14 is adopted with changes to the proposed text published in the February 
11, 1997, issue of the Texas Register (22 TexReg 1596). The amendments to 
sec.sec.12.3, 12.5, 12.6, 12.15, 12.19, 12.20, and 12.24-12.26 are adopted 
without changes to the proposed text and will not be republished. 
The justification for the amendments is to mandate program training for Child 
and Adult Care Food Program (CACFP) contractors who sponsor child and adult care 
centers, as well as those who sponsor day care homes; require all food service 
management companies (FSMCs) to register with DHS prior to contracting for meal 
service with CACFP child and adult care centers to provide meals; and require 
private non-profit CACFP contractors who sponsor day care homes to obtain a 
performance bond if they have less than three years administrative and financial 
history. 
The amendments will function by increasing efficiency and increasing 
accountability for public funds. The mandated training will enhance service to 
child and adult care center clients and reduce errors found during program 
audits and reviews. Registering FSMCs will enhance the meal service to CACFP 
clients, ensure that FSMCs are able to meet CACFP regulations and state and 
local health standards, and reduce adverse findings during program reviews and 
audits. Requiring day care home sponsors with limited experience to obtain 
performance bonds will safeguard public funds. 
No comments were received regarding adoption of the amendments. DHS, however, 
has included in the adoption of sec.12.14(a) a federal mandate that was 
effective April 21, 1997. 
The amendments are adopted under the Human Resources Code, Title 2, Chapters 22 
and 33, which provides the department with the authority to administer public 
and nutritional assistance programs. 
The amendments implement sec.sec.22.001-22.030 and sec.sec.33.001-33.024 of the 
Human Resources Code. 

sec.12.14.Meal Requirements.
(a) Contractors must ensure that all program meals served and claimed for 
reimbursement fulfill the requirements of 7 Code of Federal Regulations 
sec.sec.226.2, 226.6, 226.13, 226.15-226.20, and 226, Appendix A, Alternate 
Foods for Meals, including meals purchased from a food service management 
company. 
(b)-(c) (No change.)
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 May 8, 1997.
TRD-9706144
Glenn Scott
General Counsel, Legal Services
Texas Department of Human Services
Effective date: May 28, 1997
Proposal publication date: February 11, 1997
For further information, please call: (512) 438-3765