HB 3975

relating to authorizing a credit union to act as a school district
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1.  Section 7.102(c)(34), Education Code, is amended
(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
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
(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
(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
(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
(c)  A board of managers appointed for the final closure of a
former open-enrollment charter school under Subsection (b) has the
(1)  access and manage any former charter holder's bank
or credit union account that contains funds received under Section
(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
SECTION 5.  Section 45.203, Education Code, is amended to
Sec. 45.203.  DEPOSITORY MUST BE A BANK OR CREDIT UNION. A
school depository must be a bank or credit union located in this
SECTION 6.  Section 45.204, Education Code, is amended to
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
(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
SECTION 7.  Sections 45.205(a) and (b), Education Code, are
(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
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
(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
(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
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
(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
(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
(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
(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
(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
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.