1. Financial Accountability Indicators

House Bill 5, 83rd Legislative Session, directs the Texas Education Agency (TEA) to develop a new financial accountability system for school districts and open-enrollment charter schools. We are currently in the process of evaluating potential financial accountability indicators to measure the financial stability and solvency of school districts and open-enrollment charter schools. The TEA is asking you for your input on how to determine whether a school district or open-enrollment charter school is financially stable and solvent. Thank you in advance for participating.

Please submit your input by May 18, 2014.

Text from House Bill 5

SECTION 49. (a) Section 39.082, Education Code, is amended by amending Subsections (a) and (b) and adding Subsections (d), (e), (f), (g), (h), (h-1), and (i) to read as follows:
(a) The commissioner shall, in consultation with the comptroller, develop and implement separate financial accountability rating systems for school districts and open-enrollment charter schools in this state that:
(1) distinguish among school districts and distinguish among open-enrollment charter schools, as applicable, based on levels of financial performance; [and]
(2) include procedures to:
(A) provide additional transparency to public education finance; and
(B) enable the commissioner and school district and open-enrollment charter school administrators to provide meaningful financial oversight and improvement; and
(3) include processes for anticipating the future financial solvency of each school district and open-enrollment charter school, including analysis of district and school revenues and expenditures for preceding school years.
(b) The system must include uniform indicators adopted by [the] commissioner rule by which to measure the financial management performance and future financial solvency of a district or open-enrollment charter school. In adopting indicators under this subsection, the commissioner shall assign a point value to each indicator to be used in a scoring matrix developed by the commissioner. Any reference to a teacher in an indicator adopted by the commissioner under this subsection means a classroom teacher.
(d) The commissioner shall evaluate indicators adopted under Subsection (b) at least once every three years.
(e) Under the financial accountability rating system developed under this section, each school district or open-enrollment charter school, as applicable, shall be assigned a financial accountability rating. In adopting rules under this section, the commissioner, in consultation with the comptroller, shall determine the criteria for each designated performance rating.
(f) A district or open-enrollment charter school shall receive the lowest rating under the system if the district or school fails to achieve a satisfactory rating on:
(1) an indicator adopted under Subsection (b) relating to financial management or solvency that the commissioner determines to be critical; or
(2) a category of indicators that suggest trends leading to financial distress as determined by the commissioner.
(g) Before assigning a final rating under the system, the commissioner shall assign each district or open-enrollment charter school a preliminary rating. A district or school may submit additional information to the commissioner relating to any indicator on which performance was considered unsatisfactory. The commissioner shall consider any additional information submitted by a district or school before assigning a final rating. If the commissioner determines that the additional information negates the concern raised by the indicator on which performance was considered unsatisfactory, the commissioner may not penalize the district or school on the basis of the indicator.
(h) The commissioner shall adopt rules for the implementation of this section.
(h-1) The commissioner shall adopt initial rules necessary to implement the changes to this section made by the 83rd Legislature, Regular Session, 2013, not later than March 1, 2015.
(i) Not later than August 8 of each year, the financial accountability rating of each school district and open-enrollment charter school under the financial accountability rating system developed under this section shall be made publicly available as provided by rules adopted under this section.

* 1. What three to five indicators would you use to identify whether a school district or open-enrollment charter school is well managed financially?

* 2. What three to five indicators would you use to identify whether a school district or open-enrollment charter school is financially solvent?

* 3. Are there any other financial accountability indicators that we should consider?

* 4. May we contact you if we have questions?

T