Chapter 105. Foundation School Program
Subchapter CC. Commissioner's Rules Concerning Severance Payments


Statutory Authority: The provisions of this Subchapter CC issued under the Texas Education Code,
11.201(c), unless otherwise noted.


105.1021. Definitions.

The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise.

(1)  Severance payment--Any amount paid by the board of trustees of an independent school district to or in behalf of a superintendent on early termination of the superintendent's contract that exceeds the amount earned by the superintendent under the contract as of the date of termination, including any amount that exceeds the amount of earned standard salary and benefits that is paid as a condition of termination of the contract. Payments to a former superintendent who remains employed by a school district in another capacity or contracts with a school district for services may be severance payments in whole or in part, if the payments are compensation for the early termination of a prior employment agreement.

(2)  Superintendent--The educational leader and chief executive officer of an independent school district. "Departing superintendent" means an individual no longer acting as superintendent and includes a former superintendent who is employed by or contracts with the same school district in any other capacity.

(3)  Settlement--A payment made to an employee to settle actual or threatened litigation, or to resolve an actual or disputed claim the employee may have against the employer. A settlement does not include payments for the early termination of a contract. Damages for early termination of an employment contract, including loss of benefits, are severance payments regardless of whether litigation has commenced or the form of the settlement. For a written agreement entered into on or after September 1, 2001, a severance payment includes any payment for actual or threatened litigation involving or related to the employment contract.

(4)  Foundation School Program (FSP) reduction amount--The portion of a severance payment to a superintendent that is deducted from an independent school district's FSP funds, which is calculated in accordance with provisions in 105.1022(a)(3) of this title (relating to Severance Payments to Superintendents) for payments made on or after September 1, 2001, or 105.1022(b)(3)(A) of this title for payments made prior to September 1, 2001, consistent with an independent school district's election to apply provisions of 105.1022(a) or (b) of this title.

Source: The provisions of this 105.1021 adopted to be effective November 27, 2001, 26 TexReg 9624.


105.1022. Severance Payments to Superintendents.

(a)  Severance payments to superintendents on or after September 1, 2001.

(1)  Applicability. The provisions of this subsection apply to any payments made to a superintendent based upon a written agreement entered into on or after September 1, 2001. An independent school district may elect to apply the provisions of this subsection to any agreement subject to subsection (b) of this section.

(2)  Administration. The commissioner of education shall reduce the district's Foundation School Program (FSP) funds by the FSP reduction amount, in accordance with 105.1023(c)(1) of this title (relating to Administration of Severance Payment Reporting and Payment Reduction).

(3)  FSP reduction amount. The FSP reduction amount will be equal to the severance payment in excess of one year's salary and benefits under the superintendent's terminated contract.

(b)  Severance payments to superintendents prior to September 1, 2001.

(1)  Applicability. The provisions of this subsection apply to any payments made to a superintendent based upon a written agreement entered into prior to September 1, 2001. An independent school district may elect to apply the provisions of subsection (a) of this section in lieu of the provisions of this subsection.

(2)  Identification. Identification of an independent school district subject to reductions in state funding attributable to severance payment to superintendent provisions in Texas Education Code (TEC), 11.201(c), is based on information filed by the district with the Texas Education Agency (TEA) on the Superintendent Payment Disclosure Form. No report is required to be filed for payments already earned and payable under the terms of a terminated employment contract, such as accrued vacation. The interim superintendent, new superintendent, or school board president is responsible for timely filing of the Superintendent Payment Disclosure Form. Reporting on the disclosure form is required regardless of whether the district considers the payment to be a severance payment within the meaning of TEC, 11.201(c).

(3)  Administration.

(A)  All severance payments reported under the Superintendent Payment Disclosure Form are presumed to qualify as FSP reduction amounts up to the total amount to be paid or one year's salary and benefits under the terminated contract, whichever is less. All payments in excess of one year's salary and benefits under the terminated contract are presumed to be payments in settlement of potential litigation. A school district may elect to apply the provisions of subsection (a) of this section to any agreement subject to this subsection. A school district must submit the Disclosure Form no later than March 1, 2002, to report severance payments from agreements signed between May 30, 1995, and August 31, 2001.

(B)  A school district may submit documentation with its Superintendent Payment Disclosure Form to rebut the presumptions created by this section. Such evidence must demonstrate that the value to the departing superintendent of the full remaining term of the terminated employment contract is less than the presumptive amount under this section to reduce the FSP reduction under this section. A district submitting documentation to rebut the presumptive amount must include the following items:

(i)  final signed agreement terminating the employment relationship;

(ii)  canceled check(s) for any payment(s) made to a departing superintendent beyond amounts earned under the contract at the time the employment relationship is terminated;

(iii)  Internal Revenue Service Form W-2, Wage and Tax Statement, reporting payments as supplemental wages (compensation paid in addition to the employee's regular wages) and/or special wage payments (amount paid to an employee or former employee for services performed in a prior year) that the district submits to cover in whole or in part payments made to a departing superintendent;

(iv)  worksheet(s) documenting calculation of earned payroll amounts through last day of employment;

(v)  general ledger detail documenting transactions involving payment(s) to a departing superintendent;

(vi)  minutes of board of trustees documenting approval of a final agreement to make payment(s) to a departing superintendent;

(vii)  employment contract for the most recent contractual period (year) of employment and for the year immediately preceding, if applicable;

(viii)  compensation plan or salary schedule for a superintendent for the most recent contractual period (year) of employment and for the year immediately preceding, if applicable;

(ix)  salary distribution records for the most recent contractual period (year) of employment and for the year immediately preceding, if applicable; and

(x)  board policy covering employee benefits including monthly allowances, deferred compensation, vacation days, personal leave days, and sick leave days in effect at the time of termination of employment.

(C)  The commissioner of education may require any additional documentation to evaluate the documentation submitted.

(D)  Failure to timely submit the Superintendent Payment Disclosure Form, failure to notify the commissioner of disagreement with the presumptive amount under this section, failure to submit required documents with the Superintendent Payment Disclosure Form, or failure to submit additional documentation within 30 days of request constitutes a waiver of a district's ability to contest the presumption under this section.

Source: The provisions of this 105.1022 adopted to be effective November 27, 2001, 26 TexReg 9624.


105.1023. Administration of Severance Payment Reporting and Payment Reduction.

(a)  Applicability. This section applies to any severance payment determined under 105.1022 of this title (relating to Severance Payments to Superintendents), with certain exceptions, as stated.

(b)  Identification.

(1)  Identification of an independent school district subject to reductions in state funding attributable to severance payment to superintendent provisions under Texas Education Code (TEC), 11.201(c), is based on information filed by the district with the Texas Education Agency (TEA) on the Superintendent Payment Disclosure Form. A district must file the Superintendent Payment Disclosure Form with the TEA not later than 60 days following execution of an agreement to make payments of any kind to a departing superintendent or any payment under such an agreement, whichever is sooner. No report is required to be filed for payments already earned and payable under the terms of a terminated employment contract, such as accrued vacation. The interim superintendent, new superintendent, or school board president is responsible for timely filing of the Superintendent Payment Disclosure Form. Reporting on the disclosure form is required regardless of whether the district considers the payment to be a severance payment within the meaning of TEC, 11.201(c).

(2)  The commissioner of education or the commissioner's designee will determine whether a payment to a departing superintendent is a severance payment for purposes of this section, based on the documentation submitted and any additional documentation required, or from agency documents that are made available to the district. The commissioner or the commissioner's designee may determine that an amount greater or less than the presumptive amount under 105.1022(b) of this title is a severance payment based upon the documentation considered. A determination by the commissioner or the commissioner's designee upon the record compiled under this section is the final agency administrative decision and may not be appealed under TEC, 7.057(a).

(c)  Reduction of Foundation School Program funds.

(1)  The commissioner shall reduce the district's Foundation School Program (FSP) funds for the school year following the school year in which the first payment is made subject to an FSP reduction amount. The commissioner shall also reduce the district's FSP funds in the school year following each school year that any additional payment(s) are made to the former superintendent requiring a FSP reduction amount under 105.1022 of this title. Districts will be subject to reductions to FSP state funding amounts in TEC, Chapter 42, for one or more school years until the liability amount(s) has (have) been liquidated in full, if the liability to the state exceeds the total flow of estimated earned revenue to a district under the FSP. The reduction in FSP state aid payments may apply to any FSP state aid sources of estimated earned revenue. The reductions in FSP state aid will be proportionately deducted from each FSP state aid payment for the school year(s).

(2)  For districts subject to the provisions of TEC, Chapter 41, any FSP reduction amounts will be deducted from the FSP Tier I allotment for the district prior to computation of weighted average daily attendance for purposes of determining the district's equalized wealth level.

(3)  FSP reduction amounts will not affect the district's requirements to comply with all provisions of TEC, Chapter 42, to provide educational services to special populations and other provisions of TEC, Chapter 42.

(d)  Audit. Accurate reporting of a district's Superintendent Payment Disclosure Form is subject to audit by the TEA division responsible for school financial audits. Compliance with the reporting requirements of this section shall be considered as part of the district's compliance with required financial accounting practices under TEC, 39.075(a)(4). Failure to comply with disclosure requirements may result in sanctions as authorized by TEC, 39.075(c).

(e)  Implementation. Notwithstanding any other subsection of this section, all payments made to a departing superintendent on or after May 30, 1995, are required to be reported to TEA on forms distributed to a district for the purpose of administering the provisions of this section. FSP funds available to a district shall be reduced in accordance with the commissioner's or the commissioner's designee's determination based upon the documentation considered for purposes of administration of provisions in TEC, 11.201(c).

Source: The provisions of this 105.1023 adopted to be effective November 27, 2001, 26 TexReg 9624.


For additional information, email rules@tea.state.tx.us.