Paxton’s bill letting credit unions hold school district deposits

The text as introduced · 2,253 words

89R1059 JTZ-D

By: Paxton
S.B. No. 1842

A BILL TO BE ENTITLED

AN ACT

relating to authorizing a credit union to act as a school district

depository.

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

SECTION 1. Section 7.102(c)(34), Education Code, is amended

to read as follows:

(34) The board shall prescribe uniform bid blanks for

school districts to use in selecting a depository bank or credit

union as required under Section 45.206.

SECTION 2. Section 12.107, Education Code, is amended to

read as follows:

Sec. 12.107. STATUS AND USE OF FUNDS. (a) Funds received

under Section 12.106 after September 1, 2001, by a charter holder:

(1) are considered to be public funds for all purposes

under state law;

(2) are held in trust by the charter holder for the

benefit of the students of the open-enrollment charter school;

(3) may be used only for a purpose for which a school

may use local funds under Section 45.105(c);

(4) pending their use, must be deposited into a bank or

credit union , as defined by Section 45.201, with which the charter

holder has entered into a depository contract; and

(5) may not:

(A) be pledged or used to secure loans or bonds

for any other organization, including a non-charter operation or

out-of-state operation conducted by the charter holder or a related

party, as defined by commissioner rule adopted under Section

12.1166; or

(B) be used to support an operation or activity

not related to the educational activities of the charter holder.

(b) A charter holder shall deliver to the agency a copy of

the depository contract between the charter holder and any bank or

credit union into which state funds are deposited.

SECTION 3. Section 39A.256(c), Education Code, is amended

to read as follows:

(c) A board of managers appointed for the final closure of a

former open-enrollment charter school under Subsection (b) has the

authority to:

(1) access and manage any former charter holder's bank

or credit union account that contains funds received under Section

12.106; and

(2) subject to approval by a creditor with a security

interest in or lien on property described by Section 12.128 and in

accordance with Sections 12.1281 and 12.1282, sell or transfer to

another charter holder or school district any property titled to

the former charter holder that is identified in the former

open-enrollment charter school's annual financial report filed

under Section 44.008 as being acquired, wholly or partly, with

funds received under Section 12.106.

SECTION 4. Section 45.201, Education Code, is amended by

adding Subdivision (5) to read as follows:

(5) "Credit union" means a credit union as defined by

Section 121.002, Finance Code, or a federal credit union doing

business in this state. The term does not include any credit union

the deposits of which are not insured by the National Credit Union

Share Insurance Fund.

SECTION 5. Section 45.203, Education Code, is amended to

read as follows:

Sec. 45.203. DEPOSITORY MUST BE A BANK OR CREDIT UNION . A

school depository must be a bank or credit union located in this

state.

SECTION 6. Section 45.204, Education Code, is amended to

read as follows:

Sec. 45.204. CONFLICT OF INTEREST. (a) If a member of the

board of trustees of a school district is a stockholder, officer,

director, or employee of a bank or credit union , the bank or credit

union is not disqualified from bidding, submitting a proposal, or

becoming the depository of the district if the bank or credit union

is selected by a majority vote of the board of trustees of the

district or a majority vote of a quorum when only a quorum is

present.

(b) If a member of the board of trustees of a school district

is a stockholder, officer, director, or employee of a bank or credit

union that has bid or submitted a proposal to become a depository

for the district, the member may not vote on awarding a depository

contract to the bank or credit union , and the contract must be

awarded by a majority vote of the trustees as provided by Subsection

(a) who are not either a stockholder, officer, director, or

employee of a bank or credit union receiving a district depository

contract.

SECTION 7. Sections 45.205(a) and (b), Education Code, are

amended to read as follows:

(a) Except as provided by Subsection (b), the depository

bank or credit union when selected shall serve for a term of two

years and until its successor is selected and has qualified.

(b) A school district and the district's depository bank or

credit union may agree to extend a depository contract for three

additional two-year terms. The contract may be modified for each

two-year extension if both parties mutually agree to the terms. An

extension under this subsection is not subject to the requirements

of Section 45.206.

SECTION 8. Sections 45.206(a-1), (a-2), (b), and (d),

Education Code, are amended to read as follows:

(a-1) If a school district chooses under Subsection (a) to

use competitive bidding, the district shall, not later than the

30th day before the date the current depository contract expires,

mail to each bank or credit union located in the district and, if

desired, to other banks or credit unions , a notice stating the time

and place in which bid applications will be received for selecting a

depository or depositories. The notice must include a uniform bid

blank in the form prescribed by State Board of Education rule.

(a-2) If a school district chooses under Subsection (a) to

use requests for proposals, the district shall, not later than the

30th day before the date the current depository contract expires,

mail to each bank or credit union located in the district and, if

desired, to other banks or credit unions , a notice stating the time

and place in which proposals will be received for selecting a

depository or depositories. The notice must include a uniform

proposal blank in the form prescribed by State Board of Education

rule.

(b) The school district may add to the uniform bid or

proposal blank other terms that do not unfairly restrict

competition between banks or credit unions in or near the territory

of the district.

(d) If the school district chooses under Subsection (a) to

use requests for proposals, the district shall state the selection

criteria, including the factors specified under Section 45.207(c),

in the request for proposals and shall select the proposal that

offers the best value to the district based on the evaluation and

ranking of each submitted proposal in relation to the stated

selection criteria. A district may negotiate with the bank or

credit union that submits the highest-ranked proposal to determine

any terms of the proposed depository contract other than the

interest rates proposed.

SECTION 9. Sections 45.207(a), (a-1), (b), and (c),

Education Code, are amended to read as follows:

(a) A school district shall award the depository contract to

the bank or credit union that submits the highest bid or the

highest-ranked proposal, as determined under Subsection (c),

except that the district may award the contract as provided by

Subsection (a-1) if:

(1) the district:

(A) receives tying bids for the contract; or

(B) after evaluating the proposals for the

contract, ranks two or more proposals equally;

(2) each bank or credit union submitting a tying bid or

proposal has bid or proposed to pay the district the maximum

interest rates allowed by law by the Board of Governors of the

Federal Reserve System and the Board of Directors of the Federal

Deposit Insurance Corporation or the National Credit Union

Administration Board, as applicable ; and

(3) the tying bids or proposals are otherwise equal in

the judgment and discretion of the board of trustees of the

district.

(a-1) In the case of tying bids or proposals, the board of

trustees may award the depository contract by:

(1) determining by lot which of the banks or credit

unions submitting the tying bids or proposals will receive the

contract; or

(2) awarding a contract to each of the banks or credit

unions submitting the tying bids or proposals.

(b) The board of trustees may, during the period of the

contract, determine the amount of funds to be deposited in each

depository bank or credit union and determine the account services

offered in the bid or proposal form that are to be provided by each

bank or credit union in its capacity as school district depository.

All funds received by the district from or through the agency shall

be deposited, at the district's option, in one depository bank or

credit union or invested in a public funds investment pool created

under Chapter 791, Government Code, to be designated by the

district.

(c) The board of trustees of the school district shall at a

regular or special meeting consider in accordance with this

subsection each bid or proposal received. In determining the

highest and best bid or the highest-ranked proposal, or in case of

tying bids or proposals the highest and best tying bids or

proposals, the board of trustees shall consider:

(1) the interest rate bid or proposed on time

deposits;

(2) charges for keeping district accounts, records,

and reports and furnishing checks;

(3) the ability of the bank or credit union submitting

the bid or proposal to provide the necessary services and perform

the duties as school district depository; and

(4) any other matter that in the judgment of the board

of trustees would be to the best interest of the school district.

SECTION 10. Sections 45.208(a), (b), and (f), Education

Code, are amended to read as follows:

(a) Each [ The ] bank or credit union [ banks ] selected as a

[ the ] depository [ or depositories ] and the school district shall

enter into a depository contract [ or contracts ], bond [ or bonds ],

or other necessary instrument [ instruments ] setting forth the

duties and agreements pertaining to the depository, in a form and

with the content prescribed by the State Board of Education. The

parties shall attach to the contract and incorporate by reference

the bid or proposal of the depository.

(b) Each [ The ] depository bank or credit union shall attach

to the contract and file with the school district a bond in an

initial amount equal to the estimated highest daily balance,

determined by the board of trustees of the district, of all deposits

that the school district will have in the depository during the term

of the contract, less any applicable Federal Deposit Insurance

Corporation or National Credit Union Share Insurance Fund

insurance. The bond must be payable to the school district and must

be signed by the depository bank or credit union and by some surety

company authorized to do business in this state. The depository

bank or credit union shall increase the amount of the bond if the

board of trustees determines it to be necessary to adequately

protect the funds of the school district deposited with the

depository bank or credit union .

(f) In lieu of the bond required under Subsection (b), a

[ the ] depository bank or credit union may deposit or pledge, with

the school district or with a trustee designated by the school

district, approved securities in an amount sufficient to adequately

protect the funds of the school district deposited with the

depository bank or credit union . A depository bank or credit union

may give a bond and deposit or pledge approved securities in an

aggregate amount sufficient to adequately protect the funds of the

school district deposited with the depository bank or credit union .

The school district shall designate from time to time the amount of

approved securities or the aggregate amount of the bond and

approved securities to adequately protect the district. The

district may not designate an amount less than the balance of school

district funds on deposit with a [ the ] depository bank or credit

union from day to day, less any applicable Federal Deposit

Insurance Corporation or National Credit Union Share Insurance Fund

insurance. A [ The ] depository bank or credit union may substitute

approved securities on obtaining the approval of the school

district. For purposes of this subsection, the approved securities

are valued at their market value.

SECTION 11. Section 45.209, Education Code, is amended to

read as follows:

Sec. 45.209. INVESTMENT OF DISTRICT FUNDS. The school

district may provide in its bid or proposal blank for the right to

place on time deposits with a bank or credit union [ savings and loan

institutions ] located in this state only funds that are fully

insured by the Federal Deposit Insurance Corporation or the

National Credit Union Share Insurance Fund . A district may not

place on deposit with any bank or credit union [ savings and loan

institution ] any bond or certificate of indebtedness proceeds as

provided by Section 45.102. A depository bank or credit union may

not be compelled without its consent to accept on time deposit any

bond proceeds under Section 45.102, but a depository bank or credit

union may offer a bid or proposal of interest equaling the highest

bid or proposal of interest for the time deposit of the bond

proceeds tendered by another bank or credit union . If the

depository bank or credit union equals the bid or proposal, it is

entitled to receive the bond proceeds on time deposit.

SECTION 12. This Act takes effect September 1, 2025.