The State Board of Education filed an emergency rule to implement Public Chapter 456 (2025) that sends the state share of Tennessee Investment in Student Achievement (TISA) funding directly to charter schools rather than through the local education agency that authorizes them, board staff told the joint Government Operations Committee on Oct. 15.

The rule, presented by Nathan James of the State Board of Education and Mary Ann Derske, chief financial officer for the Department of Education, outlines how the state portion of TISA will be calculated, allocated and disbursed to charter schools and describes interim “true ups” through the year. “This is the Charter Schools Emergency Rule, 05201401.03,” James said, and that a permanent version will be considered at the state board’s Nov. 21 quarterly meeting.

The change implements Public Chapter 456, which requires that the state portion of funding a charter student generated in the prior year be dispersed directly to charter schools rather than to the authorizing LEA (unless the school is authorized by the Tennessee Public Charter School Commission or the Achievement School District). Derske told members the state portion will be sent directly to charters on the same schedule the state pays LEAs, and that the amount provided at the start of the fiscal year will not change during the year.

Why it matters: Committee members pressed staff on how accountability and reporting would work when funds do not pass through local accounts. Representative Glenn asked whether a superintendent “will have no say, no access” to the state funds; Derske said the district must still account for the funds its students generate on its financial reports, even though the money is transferred by the state to the charter. “What they show as an expenditure is merely a paper transfer of that money to the charter school,” Derske said, adding that the charter must report how the funds are spent.

Members also asked about the timing and mechanics of interim true-ups. Derske described scheduled true-ups in October, December, February, April and June, with a final adjustment after the authorizing LEA files its final expenditure report. She said the state will provide both the charter and the LEA with the amounts for each true-up.

A number of lawmakers raised practical concerns. Representative Parkson asked why the district must provide accounting when the money never passes through district accounts; Derske replied the district reports that its students generated the funds and the state supplies the dollar amount to include in their ledgers. Representative Rivers asked how overpayments would be reconciled; Derske said local funds that pass from the LEA to the charter would be adjusted at the scheduled true-ups and that charters would have to repay overpayments to the LEA where appropriate.

Committee action: Committee members moved for a positive recommendation on the emergency rule. The committee’s roll-call and chamber votes yielded a positive recommendation and the rule “moves out.” The Senate vote as recorded on the floor showed six ayes and one no; the House provided a positive recommendation as well.

What was not decided or specified: The emergency rule implements the statutory direction; staff said permanent rulemaking will follow and that the state held a rule-making hearing on Oct. 9 with no public comment. Detailed guidance about reporting formats and enforcement steps will be set out in permanent rules and agency guidance, staff said.