LEGISLATIVE BUDGET BOARD
Austin, Texas

FISCAL NOTE, 88TH LEGISLATIVE REGULAR SESSION


March 22, 2023

TO:	Honorable Brandon Creighton, Chair, Senate Committee on Education

FROM:	Jerry McGinty, Director, Legislative Budget Board

IN RE:	SB2354 by Bettencourt (Relating to the establishment of the Education Savings Account Program to allow certain disadvantaged children and their siblings to use public money to pursue educational alternatives to public schools and an insurance premium tax credit for contributions made for purposes of that program.), As Introduced

Estimated Two-year Net Impact to General Revenue Related Funds for SB2354, As Introduced : a negative impact of ($1,128,645,146) through the biennium ending August 31, 2025.

The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.

General Revenue-Related Funds, Five- Year Impact:

All Funds, Five-Year Impact:

Fiscal Year	Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2024	($501,732,662)
2025	($626,912,484)
2026	($551,231,750)
2027	($695,547,750)
2028	($887,671,830)

Fiscal Year	Probable Savings/(Cost) from General Revenue Fund 1	Probable Savings/(Cost) from Foundation School Fund 193	Probable Revenue Gain/(Loss) from General Revenue Fund 1	Probable Revenue Gain/(Loss) from Foundation School Fund 193
2024	($1,732,662)	$0	($375,000,000)	($125,000,000)
2025	($1,912,484)	$0	($468,750,000)	($156,250,000)
2026	($1,780,750)	$231,800,000	($585,938,000)	($195,313,000)
2027	($1,780,750)	$282,796,000	($732,422,000)	($244,141,000)
2028	($1,780,750)	$334,811,920	($915,527,000)	($305,176,000)

Fiscal Year	Probable Revenue Gain from New General Revenue Dedicated	Probable Savings/(Cost) from New General Revenue Dedicated	Change in Number of State Employees from FY 2023
2024	$500,000,000	$0	10.0
2025	$625,000,000	($500,000,000)	10.0
2026	$781,250,000	($625,000,000)	10.0
2027	$976,562,500	($781,250,000)	10.0
2028	$1,220,703,125	($976,562,500)	10.0

The bill would establish the Education Savings Account program to be administered by the Comptroller.

The bill would provide for Certified Educational Assistance Organizations, approved by the Comptroller, to assist with administering the program and assisting participants in finding education service providers and vendors of educational products.

The bill would require the Comptroller to make quarterly payments to each program participant's account, and allow the Comptroller to retain an amount not to exceed three percent of each such payment to cover the cost of administering the program.

The bill would allow entities to apply for a credit against state premium tax liability for contributions made to the account. The amount of premium tax credit for a year would be limited to the lesser of an entity's contribution or 75 percent of its tax liability. For the 2024 state fiscal year, the maximum amount of premium tax credits that could be awarded would be $500 million. For subsequent years, the maximum amount would be 125 percent of the previous year's maximum amount.

An entity could apply for preliminary approval of a tax credit before making a contribution to the account.

A student would be eligible to participate in the program if they were otherwise eligible to enroll in public school and were enrolled in public school during the entire preceding school year of were enrolling in school in this state for the first time. Additionally, the student would have to be a member of a household with a total annual income that is at or below 200 percent of the income guidelines necessary to qualify for the national free or reduced-price lunch program established under 42 U.S.C. Section 1751 et seq.; be the sibling of a child who is eligible to participate in the program; was eligible to participate in the program during a previous school year; have a disability; or is covered by Section 504, Rehabilitation Act of 1973 (29 U.S.C. Section 794). The Texas Education Agency (TEA) assumes that students currently being home-schooled or enrolled in private schools would be eligible to participate in the program as long as they had not previously enrolled in a public school.

The bill would require a private school participating in the program to be accredited by the Texas Private School Accreditation Commission and require the annual administration of an assessment instrument.

Section 29.359 would provide for approved expenses including tuition and fees, the purchase of textbooks or other instructional materials, academic assessments, cocurricular activities, transportation, educational therapies, or services.

From funds available, the bill would provide for 90 percent of the state average maintenance and operations revenue per student in average daily attendance for the preceding fiscal year. TEA assumes this amount is $10,355.

The comptroller assumes that ten additional FTEs would be needed to implement and administer the taxpayer savings grant program outlined in the bill. This would include one Project Manager V and one Administrative Assistant V to oversee implementation and administration, one Contract Administration Manager II to develop and manage contracts with the auditor and software development team, and one Accountant V to review and process requests for reimbursements.

Additionally, six Attorneys V would be needed to manage the workload of increased complaints and expected litigation resulting form the implementation of the bill, as well as to handle administrative appeals and assist in combating fraud.

The agency estimates that the cost of the FTEs, and other associated administrative costs would be $1,695,000 for fiscal year 2024, $1,807,000 for fiscal year 2025, and $1,777,000 for fiscal years 2026-28.

The bill would have fiscal implications for the Foundation School Program (FSP). The eligibility requirements would allow any school-age child to enroll in the program if they would be enrolling in a public school for the first time. This would appear to allow children currently being home-schooled or in private schools to enroll as long as they had not previously enrolled in a public school. Thus, this analysis assumes that the number of students able to participate in the program would be limited by funds available for the program.

For the 2024 state fiscal year, the maximum amount of premium tax credits that could be awarded would be $500 million. For subsequent years, the maximum amount would be 125 percent of the previous year's maximum amount. This amount is reflected in the table above as a decrease in revenue to General Revenue Fund 1 and Foundation School Fund 193 starting in fiscal year 2025, and an increase in revenue to New General Revenue Dedicated. This analysis assumes total participation in the program would be limited by the revenue collected. To the extent that a student would have otherwise been enrolled in a public school, there would be a savings to the Foundation School Program (FSP). The savings to the FSP is estimated to be $231.8 million in fiscal year 2026, $282.8 million in fiscal year 2027, and $334.8 million in fiscal year 2028. This analysis assumes that the savings related to the FSP would be realized in the following fiscal year as a part of the TEA settle-up process. To the extent that additional funds would be available, the cost of the program and the number of participants that the program could serve would be greater.

This legislation would do one or more of the following: create or recreate a dedicated account in the General Revenue Fund, create or recreate a special or trust fund either in, with, or outside of the Treasury, or create a dedicated revenue source. Legislative policy, implemented as Government Code 403.095, consolidated special funds (except those affected by constitutional, federal, or other restrictions) into the General Revenue Fund as of August 31, 1993 and eliminated all applicable statutory revenue dedications as of August 31, 1995. Each subsequent Legislature has reviewed bills that affect funds consolidation. The fund, account, or revenue dedication included in this bill would be subject to funds consolidation review by the current Legislature.

TEA assumes there would be administrative costs associated with implementing this bill as it would require changes to existing data reporting requirements. These costs are reflected in the Technology section below.

Although the bill creates a new civil cause of action and other legal remedies, the Office of Court Administration anticipates that case volume driven by the bill could be absorbed by existing resources. No significant fiscal impact is expected.

This analysis assumes that the technology cost for TEA to develop and implement the requirements of the bill in the Texas Student Data Systems application would be $15,162 in fiscal year 2024 and $45,484 in fiscal year 2025, for a total biennial cost of $60,646 for contracted professional services. Additional technology costs for Data Center Service (DCS) would include a onetime hardware and software cost of $75,000, distributed with 25.0 percent of this cost in fiscal year 2024 and 75.0 percent of this cost in fiscal year 2025, and an annual ongoing cost of $3,750.

This analysis assumed that additional agencies involved in implementation of the bill would not have an impact to technology costs.

Local Government Impact

As a result of this bill, Local Education Agencies (LEAs) would see a decrease in the number of students in average daily attendance. As school districts generate funding based primarily on student counts, LEAs would see a decrease in overall FSP funding as funding would follow the students choosing to participate in the program and the district would not generate entitlement for those students.