bill tightening charter school rules on interest clashes

The text as introduced · 1,464 words

89R6047 BCH-F

By: Canales
H.B. No. 1697

A BILL TO BE ENTITLED

AN ACT

relating to the management, operation, and contract authority of

open-enrollment charter schools.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 12.1054(a), Education Code, is amended

to read as follows:

(a) A member of the governing body of a charter holder, a

member of the governing body of an open-enrollment charter school,

or an officer of an open-enrollment charter school is considered to

be a local public official for purposes of Chapter 171, Local

Government Code. For purposes of that chapter , [ :

[ (1) ] a member of the governing body of a charter

holder or a member of the governing body or officer of an

open-enrollment charter school is considered to have a substantial

interest in a business entity if a person related to the member or

officer in the third degree by consanguinity or affinity, as

determined under Chapter 573, Government Code, has a substantial

interest in the business entity under Section 171.002, Local

Government Code[ ;

[ (2) notwithstanding any provision of Section

12.1054(1), an employee of an open-enrollment charter school rated

acceptable or higher under Section 39.054 for at least two of the

preceding three school years may serve as a member of the governing

body of the charter holder of the governing body of the school if

the employees do not constitute a quorum of the governing body or

any committee of the governing body; however, all members shall

comply with the requirements of Sections 171.003-171.007, Local

Government Code ].

SECTION 2. Subchapter D, Chapter 12, Education Code, is

amended by adding Section 12.1169 to read as follows:

Sec. 12.1169. TRANSACTIONS INVOLVING RELATED PARTY OF

MANAGEMENT COMPANY. (a) The commissioner shall adopt a rule

defining "related party of a management company" for purposes of

this subchapter. The definition of "related party of a management

company" must include:

(1) a party with a current or former board member,

administrator, or officer who is:

(A) a board member, administrator, or officer of

a management company that provides management services for an

open-enrollment charter school; or

(B) related within the third degree of

consanguinity or affinity, as determined under Chapter 573,

Government Code, to a board member, administrator, or officer of a

management company that provides management services for an

open-enrollment charter school;

(2) any organizations, joint ventures, and jointly

governed organizations related to a management company that

provides management services for an open-enrollment charter

school;

(3) any board members, administrators, or officers of

a management company that provides services for an open-enrollment

charter school, including a person related to a board member,

administrator, or officer of the management company within the

third degree of consanguinity or affinity, as determined under

Chapter 573, Government Code; and

(4) any other disqualified person, as that term is

defined by 26 U.S.C. Section 4958(f).

(b) For purposes of Subsection (a)(1), a person is a former

board member, administrator, or officer if the person served in

that capacity within one year of the date on which a financial

transaction between a management company and a related party of a

management company occurred.

SECTION 3. Sections 12.120(a) and (b), Education Code, are

amended to read as follows:

(a) A person may not serve as a member of the governing body

of a charter holder, as a member of the governing body of an

open-enrollment charter school, or as an officer or employee of an

open-enrollment charter school if the person:

(1) has been convicted of :

(A) a felony ; or

(B) a misdemeanor involving moral turpitude;

(2) has been convicted of :

(A) an offense listed in Section 37.007(a) or [ ;

[ (3) has been convicted of an offense listed ] in

Article 62.001(5), Code of Criminal Procedure; or

(B) an offense under the laws of another state or

federal law that contains elements that are substantially similar

to the elements of an offense listed in Section 37.007(a) or in

Article 62.001(5), Code of Criminal Procedure; or

(3) is being paid directly or indirectly by or [ (4) ]

has a substantial interest in a management company.

(b) For purposes of Subsection (a)(3) [ (a)(4) ], a person has

a substantial interest in a management company if the person:

(1) has a controlling interest in the management

company;

(2) owns more than 10 percent of the voting interest in

the management company;

(3) owns more than $25,000 of the fair market value of

the management company;

(4) has a direct or indirect participating interest by

shares, stock, or otherwise, regardless of whether voting rights

are included, in more than 10 percent of the profits, proceeds, or

capital gains of the management company;

(5) is a member of the board of directors or other

governing body of the management company;

(6) serves as an [ elected ] officer of the management

company; [ or ]

(7) is an employee of the management company ;

(8) is an officer or employee of a contractor of the

management company; or

(9) is an officer or employee of a related party of a

management company, as defined by commissioner rule adopted under

Section 12.1169 .

SECTION 4. Section 12.1202, Education Code, is amended to

read as follows:

Sec. 12.1202. REQUIREMENT FOR [ MAJORITY OF ] MEMBERS OF

GOVERNING BODY. (a) In this section, "qualified voter" has the

meaning assigned by Section 11.002, Election Code.

(b) A person must be a qualified voter to serve as a member

[ majority of the members ] of the governing body of an

open-enrollment charter school or the governing body of a charter

holder [ must be qualified voters ].

SECTION 5. Section 12.125, Education Code, is amended to

read as follows:

Sec. 12.125. CONTRACT FOR MANAGEMENT SERVICES ; PUBLIC

INFORMATION . (a) Any contract, including a contract renewal,

between an open-enrollment charter school and a management company

proposing to provide management services to the school must require

the management company to maintain all records related to the

management services separately from any other records of the

management company.

(b) A contract or proposed contract for management services

and any record related to the management services is public

information under Chapter 552, Government Code, and may not be

excepted from required disclosure under Subchapter C of that

chapter.

(c) A member of the governing body of a charter holder, a

member of the governing body of an open-enrollment charter school,

or an officer or employee of an open-enrollment charter school may

not accept a direct or indirect payment from a management company

under any contract or arrangement.

(d) A contract for management services must include a

provision affirming that the management company is not making any

direct or indirect payments to a member of the governing body of the

charter holder, a member of the governing body of the

open-enrollment charter school, or an officer or employee of the

open-enrollment charter school.

(e) A contract entered into or an arrangement made in

violation of Subsection (c) is void as against public policy and

subject to applicable commissioner action under Section 12.126, and

no fees may be paid to any person under the contract or under any

theory of recovery for work performed in connection with a void

contract.

SECTION 6. Subchapter D, Chapter 12, Education Code, is

amended by adding Section 12.1251 to read as follows:

Sec. 12.1251. FINANCIAL BENEFIT FROM MANAGEMENT COMPANY

PROHIBITED. A superintendent or administrator serving as

educational leader or chief executive officer of an open-enrollment

charter school may not receive any financial benefit for personal

services performed by the superintendent or administrator serving

as educational leader or chief executive officer for a management

company or business entity that conducts or solicits business with

the school. For purposes of this section, the receipt of

reimbursement for a reasonable expense is not considered a

financial benefit.

SECTION 7. Section 2252.908(a)(2), Government Code, is

amended to read as follows:

(2) "Governmental entity" means a municipality,

county, public school district, open-enrollment charter school

established under Subchapter D, Chapter 12, Education Code, or

special-purpose district or authority.

SECTION 8. (a) Except as provided by Subsection (b) of this

section, this Act applies beginning with the 2025-2026 school year.

(b) Section 2252.908, Government Code, as amended by this

Act, applies only to a contract subject to that section that is

entered into, amended, or renewed on or after the effective date of

this Act.

SECTION 9. This Act takes effect immediately if it receives

a vote of two-thirds of all the members elected to each house, as

provided by Section 39, Article III, Texas Constitution. If this

Act does not receive the vote necessary for immediate effect, this

Act takes effect September 1, 2025.