HB 1697

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
(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
[(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
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
(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
(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
SECTION 3.  Sections 12.120(a) and (b), Education Code, are
(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:
(B)  a misdemeanor involving moral turpitude;
(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
(2)  owns more than 10 percent of the voting interest in
(3)  owns more than $25,000 of the fair market value of
(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
(7)  is an employee of the management company;
(8)  is an officer or employee of a contractor of the
(9)  is an officer or employee of a related party of a
management company, as defined by commissioner rule adopted under
SECTION 4.  Section 12.1202, Education Code, is amended to
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
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
(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
(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
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
SECTION 7.  Section 2252.908(a)(2), Government Code, is
(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
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.