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Houston ISD's $4.4 billion bond proposal: Answering your questions

Voters contacted the KHOU 11 Verify Team to find out what can and cannot be done with the HISD bond money.

HOUSTON — Several voters have expressed concerns about the Houston Independent School District superintendent's ability to access money from the HISD school bond if is approved. Voter approval of the bond will allow HISD to sell bonds to access funds that will go towards technology and construction upgrades to schools. The request is the first time HISD's unelected and state-appointed Board of Managers is requesting Houston voters since the state takeover in June 2023. 

THE QUESTIONS

1. Can school bond money be spent out-of-state?
2. Can a superintendent spend school bond money without board approval?
3. If the HISD bond is approved, can the HISD Board of Managers change how the money is spent?

THE SOURCES

Texas Association of School Boards (TASB)
Texas Permanent School Fund Corporation 
Texas Education Agency
Texas Administrative Code
Texas Education Code
Texas Election Code
Internal Revenue Service
U.S. Securities and Exchange Commission 

THE ANSWERS

This is true.

1. Can school bond money be spent out-of-state? 

This is true.

2. Can a superintendent spend school bond money without board approval? 

   

This needs context.

3. If the HISD bond is approved, can the HISD Board of Managers change how the money is spent? {NEEDS CONTEXT}

WHAT WE FOUND

School bonds are loans that the district takes out to fund major projects. According to the Texas Association of School Boards, school districts and charter schools can use bonds for specific purposes including building new schools, purchasing new sites for future campuses, buying new school buses, and making technology upgrades. 

The history of using bonds for public school education traced back to the start of Texas as a state in 1845. The Texas constitution established a perpetual fund for free public schools. Through voter approval in 1983, the Bond Guarantee Program (BGP) was created allowing the Permanent School Fund (PSF) to fully guarantee bonds through of pool of money known as the corpus fund. According to the Texas Education Agency, income from the PSF provides $765 million per year to local school districts. 

Per Texas state law, any school district looking to sell bonds is required to get the consent of voters. School districts do not get paid until the bonds are sold. 

Selling the bonds is a process that must work in accordance with several local policies, and state, and federal laws. Districts can also be held accountable by the U.S. Securities and Exchange Commission (SEC) and the Internal Revenue Service (IRS) if the bonds are not tracked and reported correctly to governmental agencies. 

Houston Independent School District operates with a state-appointed board of managers, in place of an elected board of trustees. The Board of Managers is in place until the state takeover concludes. The HISD managers have the same powers as trustees. If Houston voters approve the $4.4 billion bond, which will become the largest in school bond history, there are some allocations the board can make to the district's superintendent

RELATED: Houston ISD's $4.4 billion bond proposal: What you need to know about before casting your vote

According to the Texas Association of School Boards (TASB), "Each board delegates a certain amount of purchasing discretion to its superintendent, as stated in local policy." However there are some limits, TASB says of the superintendent spending, "Procurement using bond funds must comply with both state law and local policy."

School districts can use the money received from the bond sale to fund the projects voters agreed to. Once the bond is approved according to the TASB if districts need to adjust how the money is spent, changes have to be within the scope of what voters approved. 

TASB says school bond money, can be spent out-of-state, but there are some legal provisions. There are some mechanisms within the rules that allow in-state and local vendors to receive money. 

The Texas law outlines that school districts have between three and 40 years to repay the bonds. In the event a school district defaults on repayments according to terms laid out by the Texas Education Agency, Texas' Permanent School Fund will issue payments to bondholders. The PSF will recoup the payments issued to bondholders from the "district's next state aid payment." According to the TEA, in the history of the Bond Guarantee Program (BGP), there has never been a district that has defaulted on payments. 

School districts that receive voter approval to sell the bonds are not obligated to spend all of the money voters agreed to, but they are not allowed to exceed the amount. Bond sales can happen on an as-needed basis, if the district determines there will be unused money they are allowed to retire bonds or use them for specific purposes. If the district needs to repurpose the funds after a specific project was accomplished or abandoned, according to TASB there will be a public meeting, and the school board in separate votes determine a purpose other than to retire the bond and specify a new purpose. 

For authorized by unissued bonds, not used for a specific purpose, or if the project has been abandoned, the board may order another election to ask for voter consent to use the bond money purposes the district will outline on the ballot. 

RELATED: Why does 'this is a property tax increase' appear next to school bonds on the ballot?

All school bonds in Texas when placed on the ballot must include the language, "This is property tax increase." The disclaimer is not always true. School districts are required by Texas state law to put the notice next to school bond items, but not next to the ad valorem or property tax proposal items. 

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