Is the charter school bond guarantee limit a monthly cap or a cumulative cap?

Plain-English summary

Michael Williams, the Commissioner of Education, asked the Attorney General how to read a limit on guaranteeing charter school bonds. Texas backs school district and charter district bonds with the state permanent school fund through the Bond Guarantee Program, which makes the bonds cheaper to issue. Article VII, section 5(d) of the Texas Constitution authorizes that use of the fund, and chapter 45 of the Education Code sets up the program, administered by the Commissioner and the Texas Education Agency under State Board of Education rules. A general cap in section 45.053 limits the total amount of guaranteed bonds outstanding. After the program was extended to charter districts in 2011, a further limit in section 45.0532 caps the charter share: the Commissioner may not guarantee charter district bonds in a total amount exceeding the charter districts' proportional share of the program's available capacity, measured by the percentage of public-school students enrolled in charter schools.

The agency described two ways to apply that limit. The first treats section 45.0532 as a monthly allowance: each month, capacity is calculated and the charter-student percentage applied, without counting charter bonds guaranteed in earlier months. The Commissioner noted that this method could let the cumulative charter guarantees creep above the charter-student share over time. The second method treats section 45.0532 as a maximum on the cumulative amount, taking outstanding charter guarantees into account so the running total stays within the charter share.

The AG sided with the cumulative reading. Courts read a statute by its plain language in the context of the whole scheme, and the phrase "in a total amount" in section 45.0532 refers to charter district bonds and broadly caps the total the Commissioner may approve, not a per-month figure. The statute does not say how often the Commissioner must issue approvals and leaves the working methodology to State Board of Education rules. So a court would likely construe section 45.0532 as an ongoing limit on the cumulative amount of guaranteed charter district bonds. A methodology that keeps the cumulative total within the charter-student ratio fits the text; one that lets it exceed the ratio conflicts with the text. The AG noted there could be policy reasons to treat charter and other public schools alike, but said that is a matter for the Legislature.

Currency note

This opinion was issued in 2015. Subsequent statutory amendments, court decisions, or later Attorney General opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion meant for those who asked

The Commissioner of Education and TEA (as the opinion described it): The opinion described section 45.0532 as a cumulative ceiling on guaranteed charter district bonds, so the opinion read the agency's second methodology, which counts outstanding charter guarantees, as consistent with the statute and the first, monthly-only methodology as potentially in conflict if it lets the cumulative total exceed the charter-student share.

Charter districts seeking bond guarantees (as the opinion described it): The opinion described the charter share of the program as bounded by the cumulative cap tied to charter enrollment, rather than refreshed each month, which limits how much guaranteed-bond capacity is available to charter districts over time.

The State Board of Education (as the opinion described it): The opinion described the precise month-to-month methodology for complying with section 45.0532 as left to the Board's rules, as long as the rules keep the cumulative charter total within the statutory share.

The Legislature (as the opinion described it): The opinion noted policy arguments for treating charter and other public schools the same on bond guarantees but described any change to that balance as a matter for the Legislature.

Common questions

Does the charter school bond guarantee limit reset every month?
The AG concluded it does not. A court would likely read section 45.0532 as a cumulative cap on the total amount of guaranteed charter district bonds, not a fresh monthly allowance.

What sets the size of the charter share?
The cap is the charter districts' proportional share of the program's available capacity, measured by the percentage of public-school students enrolled in charter schools compared to all public-school students.

Why does the cumulative reading matter?
The AG explained that a monthly-only method could let the cumulative charter guarantees rise above the charter-student share over time, which would conflict with the statute's text. A cumulative method keeps the running total within that share.

Who decides the exact calculation each month?
The AG said the statute leaves the working methodology to State Board of Education rules, so long as it keeps the cumulative charter total within the section 45.0532 limit.

Background and statutory framework

Article VII, section 5(d) of the Texas Constitution authorizes the Legislature to use the permanent school fund to guarantee bonds issued to acquire, construct, or improve instructional facilities (Tex. Const. art. VII, § 5(d)). The Legislature implemented that authority in the Bond Guarantee Program in chapter 45, subchapter C of the Education Code, administered by the Commissioner and TEA under State Board of Education rules (Tex. Educ. Code Ann. §§ 45.051-.063; § 45.063; 19 Tex. Admin. Code §§ 33.65(a), .67(b)). A general limit caps the total amount of outstanding guaranteed bonds at a multiple of the cost value of the permanent school fund, certified annually by the state auditor (Tex. Educ. Code Ann. § 45.053(a)-(b), (d)).

The program was extended to charter district bonds in 2011 (Act of June 28, 2011, 82nd Leg., 1st C.S., ch. 4). Section 45.0532 adds a charter-specific cap: the Commissioner may not approve charter district bonds for guarantee in a total amount exceeding the percentage of total available capacity equal to the charter-school share of public-school enrollment (Tex. Educ. Code Ann. § 45.0532(a)), with "total available capacity" defined as the section 45.053(d) limit minus outstanding guaranteed bonds (Tex. Educ. Code Ann. § 45.0532(b)). Reading the statute by its plain language in context (Tex. Workers' Comp. Ins. Fund v. Del Indus., Inc., 35 S.W.3d 591 (Tex. 2000)), the AG concluded the phrase "in a total amount" makes section 45.0532 a cumulative limit and leaves the monthly mechanics to State Board of Education rules.

Citations

Constitutional, statutory, and regulatory provisions:

• Tex. Const. art. VII, § 5(d) (permanent school fund bond guarantees)
• Tex. Educ. Code Ann. §§ 45.051-.063 (Bond Guarantee Program)
• Tex. Educ. Code Ann. § 45.053(a)-(b), (d) (general limit; annual certification)
• Tex. Educ. Code Ann. § 45.0532(a)-(b) (charter district bond limit; available capacity)
• Tex. Educ. Code Ann. § 45.063 (rulemaking and administration)
• 19 Tex. Admin. Code §§ 33.65(a), .67(b) (program rules)

Cases:

• Tex. Workers' Comp. Ins. Fund v. Del Indus., Inc., 35 S.W.3d 591, 593 (Tex. 2000)

Legislative history referenced:

• Act of June 28, 2011, 82nd Leg., 1st C.S., ch. 4, §§ 59.01-.21, 2011 Tex. Gen. Laws 5254, 5319-23
• Senate Research Center, Bill Analysis, and Fiscal Note, Tex. S.B. 597, 82nd Leg., R.S. (2011)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0005
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2015/kp0005.pdf

Original opinion text

Best-effort transcription from the official PDF. Minor extraction artifacts were corrected; the linked PDF is authoritative.

KEN PAXTON
ATTORNEY GENERAL OF TEXAS

February 27, 2015

Mr. Michael Williams Opinion No. KP-0005
Commissioner of Education
Texas Education Agency Re: Construction of section 45.0532 of the Education
1701 North Congress Avenue Code regarding the limitation on the guarantee
Austin, Texas 78701-1494 of charter district bonds (RQ-1223-GA)

Dear Commissioner Williams:

You ask whether section 45.0532 of the Texas Education Code should be construed as a limit on each separate issuance of charter district bond guarantees or as a maximum limit on the cumulative amount of guaranteed charter district bonds. [1] Article VII, section 5(d) of the Texas Constitution authorizes the Legislature to provide for the use of the state "permanent school fund to guarantee bonds issued by school districts or by the state for the purpose of making loans to or purchasing the bonds of school districts for the purpose of acquisition, construction, or improvement of instructional facilities" and furnishings. TEX. CONST. art. VII, § 5(d). To implement this constitutional provision, the Legislature created the Bond Guarantee Program ("BGP") in chapter 45, subchapter C of the Education Code. See TEX. EDUC. CODE ANN. §§ 45.051-.063 (West 2012 & Supp. 2014). The BGP is administered by the commissioner of education and the Texas Education Agency ("TEA") pursuant to rules promulgated by the State Board of Education ("SBOE"). Id. § 45.063 (West 2012); 19 TEX. ADMIN. CODE §§ 33.65(a), .67(b) (2014).

Section 45.053 of the Texas Education Code limits the "total amount of outstanding guaranteed bonds" that the commissioner of education may approve, establishing a maximum of two-and-a-half to as much as five times "the cost value of the permanent school fund." TEX. EDUC. CODE ANN. § 45.053(a), (d) (West 2012). The state auditor is required to certify annually whether the amount of bonds guaranteed by the BGP is within this limit. Id. § 45.053(b).

In 2011, the BGP-previously available only to school district bonds-was extended to bonds issued by open enrollment charter schools that qualify as a charter district. Act of June 28, 2011, 82nd Leg., 1st C.S., ch. 4, §§ 59.01-.21, 2011 Tex. Gen. Laws 5254, 5319-23 (the "Act"). Section 45.0532 of the Texas Education Code contains a further limitation on guarantees available for charter district bonds:

In addition to the general limitation under Section 45.053, the commissioner may not approve charter district bonds for guarantee under this subchapter in a total amount that exceeds the percentage of the total available capacity of the guaranteed bond program that is equal to the percentage of the number of students enrolled in open enrollment charter schools in this state compared to the total number of students enrolled in all public schools in this state, as determined by the commissioner.

TEX. EDUC. CODE ANN. § 45.0532(a) (West Supp. 2014) (emphasis added). The statute further explains that for purposes of subsection (a), "the total available capacity of the guaranteed bond program is the limit established by the board under Sections 45.053(d) ... minus the total amount of outstanding guaranteed bonds." Id. § 45.0532(b).

You inform us that pursuant to SBOE rules, the TEA receives BGP applications and recalculates the BGP capacity monthly. Request Letter at 2; 19 TEX. ADMIN. CODE §§ 33.65(a), (e)(1), (f)(2)(A); .67 (2014). You state that two different methodologies have been proposed to ascertain the limit on charter district bond guarantees in section 45.0532, depending on how the phrase "in a total amount" in that section is construed. Request Letter at 2-4. The first method assumes that section 45.0532 is a limitation on the total amount of charter district bonds that the commissioner may approve each month, not a limitation on the total amount of charter district bonds that the commissioner may approve for guarantee in the cumulative amount. Id. at 3. Under the first method, each month the total available capacity for the BGP would be determined by deducting all outstanding guaranteed bonds, whether school district bonds or charter district bonds. Id. Then, the percentage based on the number of open-enrollment charter school students compared to all public school students ("charter student ratio") would be applied to the total available capacity to determine the total amount of charter district bonds the commissioner may approve for guarantee that month. Id. Using this methodology, charter district bond capacity is calculated for the month without regard to outstanding charter district bond guarantees that were approved in prior months. Id. at 3-4. You state that because this method does not establish a cumulative limit for the total amount of charter district bonds that may be guaranteed, over time the cumulative BGP guarantees allocated to charter district bonds could exceed the charter student ratio limitation in section 45.0532. Id. at 3.

You state that the second methodology construes section 45.0532 as establishing the maximum limit of BGP capacity available for charter district guarantees. Id. This method begins by subtracting all outstanding bonds to determine the total available capacity for the BGP and applies the charter student ratio, but also considers outstanding charter district guarantees to determine the total amount of charter district bonds that may be guaranteed under section 45.0532. Id. at 3-4. You ask which methodology is allowable under section 45.0532, specifically whether section 45.0532 should be construed as "a limit on each separate issuance of charter district bond guarantees or whether it represents a maximum limit on the cumulative amount of guaranteed charter district bonds." Id. at 1, 5.

Courts construe statutes according to the plain language read in the context of the statutory scheme. See Tex. Workers' Comp. Ins. Fund v. Del Indus., Inc., 35 S.W.3d 591, 593 (Tex. 2000). In subsection 45.0532(a), the phrase "in a total amount" refers to "charter district bonds." See TEX. EDUC. CODE ANN. § 45.0532(a) (West Supp. 2014). The statute establishes a maximum by broadly prohibiting the commissioner from approving charter district bonds for guarantee in excess of the charter districts' share of the BGP's total available capacity based on the charter student ratio. See id. § 45.0532(a). The statute does not specify how often the commissioner must issue approvals and leaves the methodology for complying with the statute to be determined according to SBOE rules. See id. § 45.0532(b); id. §§ 45.053(d), .0531, .063 (West 2012); 19 TEX. ADMIN. CODE §§ 33.65, .67 (2014). Because the plain language of section 45.0532 broadly limits the "total amount" of charter district bond guarantees that may be approved, not the amount of bond guarantees that may be approved each month, a court would likely construe section 45.0532 as an ongoing limitation on the cumulative amount of charter district bonds that the commissioner may approve for guarantee. [2] A methodology that prevents the commissioner from approving charter district bonds in an amount that would cause the cumulative amount of guaranteed charter district bonds to exceed the charter student ratio would be consistent with the legislative text contained in section 45.0532. Conversely, a methodology that allows the cumulative amount of charter district bonds to exceed the charter student ratio would conflict with the legislative text. There are any number of good policy reasons for the Legislature to treat charter schools the same as other public schools with regard to the bond guarantees. But this matter is one for the Legislature to resolve.

SUMMARY

A court would likely conclude that section 45.0532 of the Texas Education Code establishes a maximum limit on the cumulative amount of charter district bonds that may be guaranteed under article VII, section 5(d) of the Texas Constitution.

Very truly yours,

KEN PAXTON
Attorney General of Texas

CHARLES E. ROY
First Assistant Attorney General

BRANTLEY STARR
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

WILLIAM A. HILL
Assistant Attorney General, Opinion Committee

[1] See Letter from Mr. Michael Williams, Comm'r of Educ., Tex. Educ. Agency, to Honorable Greg Abbott, Tex. Att'y Gen. at 1 (Sept. 16, 2014), https://www.texasattorneygeneral.gov/opinion/requests-for-opinion-rqs ("Request Letter").

[2] A construction of section 45.0532 as a limitation on the cumulative amount of charter district bonds that may be approved would be consistent with the legislative history of the statute. See Senate Research Center, Bill Analysis, Tex. S.B. 597, 82nd Leg., R.S. (2011) at 1 (as filed) (stating that "[t]his bill provides that the amount of the guarantee for eligible charters corresponds to the percent of public students enrolled in charters compared to the total number of public school students"); Fiscal Note, Tex. S.B. 597, 82nd Leg., R.S. (2011) at 1 (stating that "[t]he bill would limit the total amount of charter school bonds to be guaranteed to the portion of total available capacity in the PSF school bond guarantee program that is equal to the proportion of charter school enrollment to total enrollment").