January 2026 Committee on School Finance/Permanent School Fund Item 2
Proposed Revisions to 19 TAC Chapter 109, Budgeting, Accounting, and Auditing, Subchapter B, Texas Education Agency Audit Functions, §109.25, State Compensatory Education Program Reporting and Auditing System, and Subchapter D, Uniform Bank Bid or Request for Proposal and Depository Contract
(First Reading and Filing Authorization)
January 30, 2026
COMMITTEE ON SCHOOL FINANCE/PERMANENT SCHOOL FUND: ACTION
STATE BOARD OF EDUCATION: ACTION
SUMMARY: This item presents for first reading and filing authorization proposed revisions to 19 Texas Administrative Code (TAC) Chapter 109, Budgeting, Accounting, and Auditing, Subchapter B, Texas Education Agency Audit Functions, §109.25, State Compensatory Education Program Reporting and Auditing System, and Subchapter D, Uniform Bank Bid or Request for Proposal and Depository Contract. The proposed revisions would repeal §109.25, whose statutory authority, Texas Education Code (TEC), §48.104(j-1), (k), (l), (m), (n), and (o), was removed by House Bill (HB) 2, 89th Texas Legislature, Regular Session, 2025. The proposed revisions would also align language in Subchapter D with TEC, §45.208, which no longer requires depository contracts to be submitted to the Texas Education Agency (TEA).
STATUTORY AUTHORITY: HB 2, Section 7.24, 89th Texas Legislature, Regular Session, 2025; and §45.208.
HB 2, Section 7.24, 89th Texas Legislature, Regular Session, 2025, amended TEC, §48.104, to repeal the authority of the State Board of Education (SBOE) to direct how the state compensatory education allotments funds are spent and how the expenditures are reported to TEA.
TEC, §45.208, requires that a school district use the depository contract prescribed by the SBOE and that the depository bank secure the highest daily amount of cash in the bank using a bond or other surety agreements.
The full text of statutory citations can be found in the links above.
EFFECTIVE DATE: The proposed effective date of the proposed revisions is 20 days after filing as adopted with the Texas Register. Under TEC, §7.102(f), the SBOE must approve the rule action at second reading and final adoption by a vote of two-thirds of its members to specify an effective date earlier than the beginning of the 2026-2027 school year. The earlier effective date will ensure that school districts and charter schools can adopt the proposed revisions as soon as possible.
PREVIOUS BOARD ACTION: At the November 2025 SBOE meeting, the committee discussed the proposed revisions to 19 TAC Chapter 109, Budgeting, Accounting, and Auditing, Subchapter B, Texas Education Agency Audit Functions, §109.25, State Compensatory Education Program Reporting and Auditing System, and Subchapter D, Uniform Bank Bid or Request for Proposal and Depository Contract.
BACKGROUND INFORMATION AND JUSTIFICATION: Section 109.25 requires each school district and charter school to report financial information relating to the expenditure of the state compensatory education allotment under the Foundation School Program to TEA. HB 2, 89th Texas Legislature, Regular Session, 2025, repealed the SBOE's authority to direct how the state compensatory education allotment funds are spent and how the funds are reported to TEA. Therefore, the proposed repeal of §109.25 is necessary to implement HB 2.
Section 109.52 establishes the requirement that each school district select at least one bank as a depository and enter into a depository contract with the bank, providing the completed contract to TEA. Section 109.52 also establishes the requirement that a district provide a completed surety bond form to TEA if the depository bank uses a surety bond to secure district deposits. The section includes the depository contract form and surety bond form with the content prescribed by the SBOE. Senate Bill 1376, 86th Texas Legislature, 2019, repealed the requirement for districts to submit certain depository information to TEA. Therefore, §109.52 would be amended to remove filing requirements.
Section 109.51 would be amended to make non-substantive changes to align with language in §109.52.
FISCAL IMPACT: TEA has determined that there are no additional costs to state or local government, including school districts and open-enrollment charter schools, required to comply with the proposal.
LOCAL EMPLOYMENT IMPACT: The proposal has no effect on local economy; therefore, no local employment impact statement is required under Texas Government Code, §2001.022.
SMALL BUSINESS, MICROBUSINESS, AND RURAL COMMUNITY IMPACT: The proposal has no direct adverse economic impact for small businesses, microbusinesses, or rural communities; therefore, no regulatory flexibility analysis specified in Texas Government Code, §2006.002, is required.
COST INCREASE TO REGULATED PERSONS: The proposal does not impose a cost on regulated persons, another state agency, a special district, or a local government and, therefore, is not subject to Texas Government Code, §2001.0045.
TAKINGS IMPACT ASSESSMENT: The proposal does not impose a burden on private real property and, therefore, does not constitute a taking under Texas Government Code, §2007.043.
GOVERNMENT GROWTH IMPACT: TEA staff prepared a Government Growth Impact Statement assessment for this proposed rulemaking. During the first five years the proposed rulemaking would be in effect, it would repeal an existing regulation to remove a rule whose statutory authority has been removed. The proposed rulemaking would also limit an existing regulation to remove the requirement that school districts file certain documents with TEA.
The proposed rulemaking would not create or eliminate a government program; would not require the creation of new employee positions or elimination of existing employee positions; would not require an increase or decrease in future legislative appropriations to the agency; would not require an increase or decrease in fees paid to the agency; would not create a new regulation; would not expand an existing regulation; would not increase or decrease the number of individuals subject to its applicability; and would not positively or adversely affect the state's economy.
PUBLIC BENEFIT AND COST TO PERSONS: The proposal would remove an outdated rule and clarify that the requirements and eligibility criteria for school districts and charter schools regarding the execution and management of depository contracts. This clarification promotes transparency, ensures compliance with statutory provisions, and supports sound financial practices in safeguarding public funds. There is no anticipated economic cost to persons who are required to comply with the proposal.
DATA AND REPORTING IMPACT: The proposal would have no new data and reporting impact.
PRINCIPAL AND CLASSROOM TEACHER PAPERWORK REQUIREMENTS: TEA has determined that the proposal would not require a written report or other paperwork to be completed by a principal or classroom teacher.
PUBLIC COMMENTS: The public comment period on the proposal begins February 27, 2026, and ends at 5:00 p.m. on March 30, 2026. The SBOE will take registered oral and written comments on the proposal at the appropriate committee meeting in April 2026 in accordance with the SBOE board operating policies and procedures. A request for a public hearing on the proposal submitted under the Administrative Procedure Act must be received by the commissioner of education not more than 14 calendar days after notice of the proposal has been published in the Texas Register on February 27, 2026.
MOTION TO BE CONSIDERED: The State Board of Education:
Approve for first reading and filing authorization proposed revisions to 19 TAC Chapter 109, Budgeting, Accounting, and Auditing, Subchapter B, Texas Education Agency Audit Functions, §109.25, State Compensatory Education Program Reporting and Auditing System, and Subchapter D, Uniform Bank Bid or Request for Proposal and Depository Contract.
Staff Member Responsible:
David Marx, Senior Director, Financial Compliance
Attachment I:
Text of Proposed Revisions to 19 TAC Chapter 109, Budgeting, Accounting, and Auditing, Subchapter B, Texas Education Agency Audit Functions, §109.25, State Compensatory Education Program Reporting and Auditing System, and Subchapter D, Uniform Bank Bid or Request for Proposal and Depository Contract
Attachment II:
Figure: 19 TAC §109.51(c)
Attachment III:
Figure: 19 TAC §109.51(d)
Attachment IV:
Figure: 19 TAC §109.52(b)
Attachment V:
Figure: 19 TAC §109.52(d)